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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: 12/31/07
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Date of reporting period: : 06/30/08
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ITEM 1. REPORTS TO STOCKHOLDERS.
GE Investments Funds, Inc.
U.S. Equity Fund
Semi-Annual Report
JUNE 30, 2008
[GE LOGO OMITTED]
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GE Investments Funds, Inc.
U.S. Equity Fund
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Contents
NOTES TO PERFORMANCE .................................................... 1
MANAGER REVIEW AND SCHEDULE OF INVESTMENTS .............................. 2
NOTES TO SCHEDULE OF INVESTMENTS ........................................ 10
FINANCIAL STATEMENTS
Financial Highlights ............................................... 11
Statement of Assets and Liabilities ................................ 12
Statement of Operations ............................................ 13
Statements of Changes in Net Assets ................................ 14
Notes to Financial Statements ...................................... 15
ADDITIONAL INFORMATION .................................................. 20
INVESTMENT TEAM ......................................................... 23
This report is prepared for Policyholders of certain variable contracts and may
be distributed to others only if preceded or accompanied by the variable
contract's current prospectus and the current prospectus of the Funds available
for investments thereunder.
<page>
Notes to Performance June 30, 2008 (unaudited)
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Total returns take into account changes in share price and assume reinvestment
of all dividends and capital gains distributions, if any.
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 shown are net of Fund expenses but do not reflect fees and charges
associated with the variable contracts such as administrative fees, account
charges and surrender charges, which, if reflected, would reduce the Fund's
total returns for all periods shown.
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.
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GE INVESTMENT DISTRIBUTORS, INC., MEMBER OF FINRA & SIPC, IS THE PRINCIPAL
UNDERWRITER AND DISTRIBUTOR OF THE GE INVESTMENT FUNDS, INC. AND A WHOLLY OWNED
SUBSIDIARY OF GE ASSET MANAGEMENT INCORPORATED, THE INVESTMENT ADVISER OF
THE FUNDS.
1
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U.S. Equity Fund
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THE U.S. EQUITY FUND IS MANAGED BY A TEAM OF PORTFOLIO MANAGERS THAT INCLUDES
THOMAS R. LINCOLN, PAUL C. REINHARDT, STEPHEN V. GELHAUS AND GEORGE A. BICHER
(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 SIX-MONTH
PERIOD ENDED JUNE 30, 2008?
A. For the six-month period ended June 30, 2008, the U.S. Equity Fund returned
-9.70% for the Class 1 shares and -6.96% for the Class 4 shares. The S&P 500
Index, the Fund's benchmark, returned -11.91% and the Fund's Lipper peer
group of 207 Large-Cap Core funds returned an average of -11.56% for the
same period.
[PHOTO OMITTED]
2
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Q&A
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Q. WHAT MARKET CONDITIONS IMPACTED FUND PERFORMANCE?
A. The six-month period proved challenging for U.S. equity investors, as the
housing recession, skyrocketing commodity prices and tight credit conditions
threatened the outlook for economic growth and corporate profits.
Policymaker response was significant during the period as the Federal
Reserve lowered interest rates and opened up its discount window to
investment banks. Despite these actions, credit remained scarce, impeding
economic growth and contributing to stock market volatility. Consumers began
to receive the government's fiscal stimulus checks, but investors feared
that the windfall might be consumed at the gas pump in an environment of
$140 per barrel of oil.
Only the inflationary energy (+9%) and materials (+1%) sectors had positive
returns during the period. Financials (-30%) was by far the worst performing
sector, followed by telecommunications (-17%), industrials (-14%), consumer
discretionary (-13%) and technology (-13%). Healthcare (-13%), traditionally
a defensive sector, has also lagged as it has exhibited some discretionary
characteristics, and suffered regulatory uncertainty stemming from the
upcoming presidential elections.
Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE?
A. Both information technology and financials have suffered double-digit
declines year-to-date. Fortunately, strong stock selection in these volatile
sectors has benefited performance. Within technology, Qualcomm (+13.5%)
raised earnings estimates due in part to an accelerated forecast for 3G
licenses as China opens its wireless market to this new technology. Google
(+18.4%) has benefitted returns since we added it to the Fund upon a severe
pullback earlier in the year. Western Union (+2%) also contributed to
outperformance as the largest money-transfer business raised its long-term
profit target and authorized an additional $1 billion stock buyback. Our
sector underweight in financials was also a key contributor to
outperformance. Despite exceptional weakness in global insurer AIG (-54%)
amid the continuing fallout from the sub-prime mortgage situation, the Fund
avoided most of the other credit-sensitive banks and brokers that swooned
during the period. Relative strength among our media holdings -- exemplified
by Comcast (+4%) -- also buffered the Fund during a tough environment for
consumer spending.
Slightly offsetting the sources of relative strength were pockets of
weakness coming from an underweight in energy and some underperforming
holdings within industrials. Taking profits within energy this year has
resulted in an underweight, yet oil prices have continued to soar.
Underexposure to energy offset our positive stock selection, as the Fund's
energy holdings returned +12% versus +9% for the S&P 500 sector. In 2008,
the rising cost of fuel and commodity inputs have punished aircraft-related
stocks, and most global cyclicals. Textron (-32%) is a leading manufacturer
of business jets, and Allegheny Technologies (-31%) is a maker of light
specialty metals used in aircraft manufacturing. Both of these stocks have
lagged along with other aerospace companies. While we have trimmed Textron
-- the stock was one of 2007's top performers (+15%) -- we have maintained
conviction in Allegheny, as it leverages the secular trend towards lighter,
more fuel-efficient aircraft.
Q. WERE THERE ANY SIGNIFICANT CHANGES TO THE FUND OVER THE PERIOD?
A. No. We have remained committed to investing in high quality large-cap stocks
with predictable and steady earnings growth at compelling valuations. We
continued to be relatively defensively positioned, although at June 30, 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. Our tech holdings tend to be less economically sensitive, with
high recurring revenues and ample free cash flow.
3
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U.S. Equity Fund
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Q&A
In the continuing fallout from the subprime situation, the Fund's
underweight in financials benefited performance. The odds of a recession
continued to increase during the period, and we remained comfortable with
our positioning in this environment. We have expected our large cap, high
quality companies to demonstrate the financial flexibility and balance sheet
strength to weather an economic slowdown, and to benefit from a flight to
quality in skittish markets. Valuations of many of our holdings remain below
historical averages, despite strong relative earnings performance. In
addition, we believe many of our multinationals will likely benefit from
better growth prospects outside of North America, although global growth is
clearly slowing. We remain focused on a long-term investment horizon and
continue to utilize a bottom-up, research-driven, fundamental approach to
stock selection.
4
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U.S. Equity Fund
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Understanding Your Fund's Expenses
As a shareholder of the Fund you incur ongoing expenses, which include portfolio
management fees, professional fees, administrative fees and other Fund expenses.
The following example is intended to help you understand your ongoing costs (in
dollars) of investing in the Fund and to compare these costs with the ongoing
costs of investing in other mutual funds.
To illustrate these ongoing costs, we have provided an example and calculated
the expenses paid by investors during the period. The information in the
following table is based on an investment of $1,000, which is invested at the
beginning of the period and held for the entire six-month period ended June 30,
2008.
ACTUAL EXPENSES
The first section of the table provides information about actual account values
and actual expenses. You may use the information in this section, together with
the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JANUARY 1, 2008 - JUNE 30, 2008
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ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID
BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($)*
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ACTUAL FUND RETURN**
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Class 1 1,000.00 903.05 3.18
Class 4 1,000.00 930.35 5.31
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HYPOTHETICAL 5% RETURN (2.5% FOR THE PERIOD)
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Class 1 1,000.00 1,021.25 3.42
Class 4 1,000.00 1,019.31 5.51
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* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.68% FOR CLASS
1 AND 1.09% FOR CLASS 4, (FROM PERIOD JANUARY 1, 2008 - JUNE 30, 2008),
MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY
182/366 (TO REFLECT THE ONE-HALF YEAR PERIOD).
** ACTUAL FUND RETURNS FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2008 WERE AS
FOLLOWS: (9.70)% FOR CLASS 1 SHARES, AND SINCE INCEPTION (6.96)% FOR CLASS 4
SHARES.
5
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U.S. Equity Fund (unaudited)
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CHANGE IN VALUE OF A $10,000 INVESTMENT
CLASS 1 SHARES
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[Line chart omitted -- plot points are as follows:]
GEI U.S. EQUITY S&P 500 INDEX
06/98 10,000.00 10,000.00
12/98 10,769.06 10,930.80
12/99 12,880.53 13,233.69
12/00 12,804.54 12,018.37
12/01 11,719.60 10,586.75
12/02 9,462.07 8,246.88
12/03 11,664.44 10,616.05
12/04 12,616.99 11,771.22
12/05 12,933.54 12,350.19
12/06 15,018.67 14,300.58
12/07 16,221.66 15,086.47
06/08 14,648.94 13,289.09
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2008
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CLASS 1 SHARES (Inception date: 1/3/95)
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SIX ONE FIVE TEN ENDING VALUE OF A
MONTHS YEAR YEAR YEAR $10,000 INVESTMENT
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U.S. Equity Fund -9.70% -8.73% 7.08% 3.89% $14,649
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S&P 500 Index -11.91% -13.12% 7.59% 2.88% $13,289
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Lipper peer group average* -11.56% -12.51% 7.31% 2.49%
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CLASS 4 SHARES
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[Line chart omitted -- plot points are as follows:]
GEI U.S. EQUITY S&P 500 INDEX
05/08 10,000.00 10,000.00
06/08 9,303.51 9,275.57
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2008
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CLASS 4 SHARES (Inception date: 5/1/08)
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ONE SINCE ENDING VALUE OF A
MONTH INCEPTION $10,000 INVESTMENT
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U.S. Equity Fund -7.51% -6.96% $9,304
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S&P 500 Index -8.43% -7.24% $9,276
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Lipper peer group average** -8.12% N/A
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INVESTMENT PROFILE
A fund designed for investors who seek long-term growth of capital by investing
at least 80% of its net assets in equity securities of issuers that are tied
economically to the U.S. under normal circumstances.
PORTFOLIO COMPOSITION AS OF JUNE 30, 2008 as a % of Market Value
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Market Value of $62,509 (in thousands)
[Pie chart omitted -- plot points are as follows:]
Information Technology 23.5%
Healthcare 13.3%
Energy 12.0%
Financials 11.5%
Consumer Staples 9.9%
Consumer Discretionary 9.6%
Industrials 7.5%
Materials 4.1%
Short-Term 3.1%
Utilities 2.8%
Telecommunication Services 2.7%
Other Investments 0.0%***
TOP TEN EQUITY HOLDINGS AS OF JUNE 30, 2008
as a % of Market Value
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Cisco Systems, Inc. 2.89%
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Microsoft Corp. 2.72%
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PepsiCo, Inc. 2.50%
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Exxon Mobil Corp. 2.34%
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Amgen, Inc. 2.28%
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Intel Corp. 2.17%
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QUALCOMM, Inc. 2.14%
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Schlumberger Ltd. 2.06%
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Transocean, Inc. 1.97%
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Industrial Select Sector SPDR Fund 1.90%
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* LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR
THE SIX MONTHS, ONE YEAR, FIVE-YEAR, AND TEN-YEAR PERIODS INDICATED IN THE
LARGE-CAP CORE FUNDS PEER GROUP CONSISTING OF 207, 207, 166 AND 79
UNDERLYING ANNUITY FUNDS, RESPECTIVELY.
** LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR
THE ONE MONTH PERIOD INDICATED IN THE LARGE-CAP CORE FUNDS PEER GROUP
CONSISTING OF 210 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.
6
<page>
U.S. EQUITY FUND
Schedule of Investments June 30, 2008 (unaudited)
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U.S. EQUITY FUND
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NUMBER
OF SHARES VALUE
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COMMON STOCK -- 94.8% +
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CONSUMER DISCRETIONARY -- 9.7%
Bed Bath & Beyond, Inc. 23,062 $ 648,042(a)
Cablevision Systems Corp. 5,554 125,520(a)
Carnival Corp. 11,033 363,648
Comcast Corp. (Class A) 61,577 1,155,185(d)
Darden Restaurants, Inc. 2,777 88,697
Kohl's Corp. 3,332 133,413(a)
Liberty Global, Inc. (Series C) 5,656 171,716(a)
Liberty Media Entertainment Corp.
(Series A) 11,952 289,597(a)
Lowe's Companies, Inc. 23,902 495,967
News Corp. (Class A) 11,108 167,064
Omnicom Group, Inc. 24,413 1,095,655
O'Reilly Automotive, Inc. 811 18,126(a)
Staples, Inc. 6,738 160,028
Target Corp. 4,832 224,640
The Walt Disney Co. 5,721 178,495
Time Warner, Inc. 32,491 480,867
Viacom Inc. (Class B) 7,388 225,630(a)
6,022,290
CONSUMER STAPLES -- 10.0%
Alberto-Culver Co. 8,589 225,633
Altria Group, Inc. 7,777 159,895
Clorox Co. 5,722 298,688
Diageo PLC ADR 2,556 188,812
General Mills, Inc. 8,328 506,093
Kimberly-Clark Corp. 16,766 1,002,271
McCormick & Company, Inc. 12,038 429,275
Nestle S.A. ADR 1,976 222,992
Pepsi Bottling Group, Inc. 4,611 128,739
PepsiCo, Inc. 24,534 1,560,117(d)
Procter & Gamble Co. 7,664 466,048(d)
Sara Lee Corp. 7,497 91,838
The Estee Lauder Companies Inc.
(Class A) 5,832 270,896
Wal-Mart Stores, Inc. 11,698 657,428
6,208,725
ENERGY -- 12.1%
Apache Corp. 2,110 293,290
Devon Energy Corp. 1,959 235,393
Exxon Mobil Corp. 16,598 1,462,782(d)
Halliburton Co. 8,109 430,345
Hess Corp. 5,388 679,912
Marathon Oil Corp. 14,415 747,706
Nabors Industries Ltd. 4,849 238,716(a)
NUMBER
OF SHARES VALUE
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National Oilwell Varco, Inc. 2,222 $ 197,136(a)
Schlumberger Ltd. 11,994 1,288,515
Suncor Energy, Inc. 9,251 537,668
Transocean, Inc. 8,063 1,228,721
Valero Energy Corp. 4,444 183,004
7,523,188
FINANCIALS -- 11.0%
ACE Ltd. 6,365 350,648
Allstate Corp. 2,499 113,929
American Express Co. 9,166 345,283
Ameriprise Financial, Inc. 9,957 404,951
AON Corp. 6,054 278,121
Bank of New York Mellon Corp. 8,609 325,678
Berkshire Hathaway, Inc. (Class B) 11 44,132(a)
BlackRock, Inc. 555 98,235
CB Richard Ellis Group, Inc.
(Class A) 14,629 280,877(a)
Chubb Corp. 5,721 280,386
Citigroup, Inc. 23,922 400,933
CME Group Inc. 579 221,867
Federal National Mortgage Assoc. 7,766 151,515
Goldman Sachs Group, Inc. 3,733 652,902
HCC Insurance Holdings, Inc. 3,796 80,247
JP Morgan Chase & Co. 16,350 560,969
Marsh & McLennan Companies, Inc. 3,888 103,226
Metlife, Inc. 13,554 715,245
Prudential Financial, Inc. 1,123 67,088
State Street Corp. 13,683 875,575(c)
SunTrust Banks, Inc. 6,019 218,008
US Bancorp. 6,943 193,640
Wachovia Corp. 7,089 110,092
6,873,547
HEALTHCARE -- 13.3%
Abbott Laboratories 12,238 648,247(d)
Aetna, Inc. 8,925 361,730
Amgen, Inc. 30,255 1,426,826(a)
Baxter International, Inc. 6,491 415,034
Boston Scientific Corp. 33,196 407,979(a)
Bristol-Myers Squibb Co. 12,386 254,285
Covidien Ltd. 8,080 386,951
Genentech Inc. 10,111 767,425(a)
Gilead Sciences, Inc. 7,156 378,910(a)
Hologic, Inc. 15,475 337,355(a)
Johnson & Johnson 2,221 142,899
McKesson Corp. 4,998 279,438
Medtronic, Inc. 10,225 529,144
Merck & Company, Inc. 11,801 444,780
Resmed, Inc. 6,984 249,608(a)
Thermo Fisher Scientific, Inc. 1,700 94,741(a)
UnitedHealth Group, Inc. 20,416 535,920
Wyeth 13,482 646,597
8,307,869
See Notes to Schedule of Investments on page 10 and Notes to Financial
Statements.
7
<page>
U.S. EQUITY FUND
Schedule of Investments June 30, 2008 (unaudited)
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NUMBER
OF SHARES VALUE
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INDUSTRIALS -- 5.6%
ABB Ltd. ADR 7,352 $ 208,209(a)
CAE, Inc. 31,047 352,532
Cooper Industries Ltd. 4,998 197,421
Deere & Co. 2,055 148,227
Dover Corp. 1,006 48,660(d)
Eaton Corp. 2,333 198,235
Emerson Electric Co. 3,523 174,212
General Dynamics Corp. 3,913 329,475
Hexcel Corp. 8,043 155,230(a)
ITT Corp. 2,999 189,927
Koninklijke Philips Electronics N.V. 2,220 75,036
Monster Worldwide, Inc. 8,413 173,392(a)
Rockwell Collins, Inc. 1,388 66,568
Siemens AG ADR 669 73,677
Suntech Power Holdings Company Ltd.
ADR 2,271 85,072(a)
Textron, Inc. 15,701 752,549
United Technologies Corp. 3,969 244,887
3,473,309
INFORMATION TECHNOLOGY -- 23.5%
Affiliated Computer Services, Inc.
(Class A) 3,610 193,099(a)
Analog Devices, Inc. 5,832 185,283
Automatic Data Processing, Inc. 6,958 291,540
Cisco Systems, Inc. 77,671 1,806,627(a)
Cognizant Technology Solutions Corp.
(Class A) 1,399 45,482(a)
Corning Incorporated 13,506 311,313
Dell, Inc. 6,276 137,319(a)
Fidelity National Information
Services, Inc. 8,311 306,759
Google, Inc. (Class A) 888 467,461(a)
Hewlett-Packard Co. 15,961 705,636
Intel Corp. 63,224 1,358,052(d)
International Business Machines
Corp. 3,166 375,266
Intuit Inc. 19,914 549,029(a)
Iron Mountain Incorporated 12,398 329,167(a)
Lam Research Corp. 3,943 142,539(a)
Maxim Integrated Products, Inc. 8,547 180,769
Microchip Technology Inc. 1,144 34,938
Microsoft Corp. 61,735 1,698,330(d)
Molex, Inc. (Class A) 12,127 277,830
National Semiconductor Corp. 6,332 130,059
Oracle Corp. 52,822 1,109,262(a)
Paychex, Inc. 18,380 574,926
QUALCOMM, Inc. 30,096 1,335,360
Research In Motion Ltd. 4,538 530,492(a)
Taiwan Semiconductor Manufacturing
Company Ltd. ADR 16,107 175,725(a)
Texas Instruments Incorporated 10,219 287,767
Western Union Co. 43,088 1,065,135
Yahoo! Inc. 3,581 73,983(a)
14,679,148
NUMBER
OF SHARES VALUE
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MATERIALS -- 4.1%
Alcoa, Inc. 4,915 $ 175,072
Allegheny Technologies Incorporated 9,135 541,523
Barrick Gold Corp. 7,554 343,707
Dow Chemical Co. 2,610 91,115
Freeport-McMoRan Copper & Gold, Inc. 2,900 339,851
Monsanto Co. 5,313 671,776
Praxair, Inc. 2,699 254,354
Vulcan Materials Co. 2,222 132,831
2,550,229
TELECOMMUNICATION SERVICES -- 2.7%
American Tower Corp. (Class A) 2,625 110,906(a)
AT&T, Inc. 3,499 117,881
NII Holdings Inc. (Class B) 17,541 833,022(a)
Verizon Communications, Inc. 14,908 527,743(d)
Vodafone Group, PLC ADR 3,332 98,161
1,687,713
UTILITIES -- 2.8%
American Electric Power Company, Inc. 5,722 230,196
Dominion Resources, Inc. 14,523 689,697
Edison International 5,999 308,229
Entergy Corp. 1,555 187,346
FPL Group, Inc. 3,008 197,265
PG&E Corp. 3,729 148,004
1,760,737
TOTAL COMMON STOCK
(COST $59,667,293) 59,086,755
- --------------------------------------------------------------------------------
EXCHANGE TRADED FUNDS -- 2.4%
- --------------------------------------------------------------------------------
Financial Select Sector SPDR Fund 14,174 287,165(f)
Industrial Select Sector SPDR Fund 34,908 1,187,221(f)
TOTAL EXCHANGE TRADED FUNDS
(COST $1,449,759) 1,474,386
- --------------------------------------------------------------------------------
OTHER INVESTMENTS -- 0.0%*
- --------------------------------------------------------------------------------
GEI Investment Fund
(COST $19,077) 14,498(e)
TOTAL INVESTMENTS IN SECURITIES
(COST $61,136,129) 60,575,639
See Notes to Schedule of Investments on page 10 and Notes to Financial
Statements.
8
<page>
U.S. EQUITY FUND
Schedule of Investments June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
VALUE
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 3.1%
- --------------------------------------------------------------------------------
GE Money Market Fund Institutional Class
1.93% $ 1,932,964(b,g)
(COST $1,932,964)
TOTAL INVESTMENTS
(COST $63,069,093) 62,508,603
LIABILITIES IN EXCESS OF OTHER ASSETS,
NET -- (0.3)% (217,094)
-----------
NET ASSETS -- 100.0% $62,291,509
===========
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
The GEI U.S. Equity had the following long futures contracts open at June 30,
2008 (unaudited):
NUMBER CURRENT
EXPIRATION OF NOTIONAL UNREALIZEDD
DESCRIPTION DATE CONTRACTS VALUE DEPRECIATION
- --------------------------------------------------------------------------------
S&P 500 Index Futures September 2008 1 $320,275 $(19,645)
See Notes to Schedule of Investments on page 10 and Notes to Financial
Statements.
9
<page>
Notes to Schedule of Investments June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
The views expressed in this document reflect our judgment as of the publication
date and are subject to change at any time without notice. The securities cited
may not represent current or future holdings and should not be considered as a
recommendation to purchase or sell a particular security. See the prospectus for
complete descriptions of investment objectives, policies, risks and permissible
investments.
(a) Non-income producing security.
(b) Coupon amount represents effective yield.
(c) State Street Corp. is the parent company of State Street Bank & Trust Co.,
the Fund's custodian and accounting agent.
(d) At June 30, 2008, 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 adviser of the Fund, also
serves as the investment adviser of the GEI Investment Fund.
(f) Sponsored by SSgA Funds Management, Inc., an affiliate of State Street Bank
& Trust Co., the Fund's custodian and accounting agent.
(g) GEAM, the investment adviser of the Fund, also serves as investment adviser
of the GE Money Market Fund.
* Less than 0.1%.
+ Percentages are based on net assets as of June 30, 2008.
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
--------------------------------------------------------------------- ------------
CLASS 1 CLASS 4
--------------------------------------------------------------------- ------------
6/30/08+ 12/31/07 12/31/06 12/31/05 12/31/04 12/31/03 6/30/08+
--------------------------------------------------------------------- ------------
INCEPTION DATE -- -- -- -- -- 1/3/95 5/1/08
Net asset value, beginning of period .......... $36.41 $39.02 $34.06 $33.61 $31.48 $25.75 $35.32
INCOME/(LOSS) FROM INVESTMENT OPERATIONS:
Net investment income ...................... 0.14 0.45 0.53 0.39 0.44 0.26 0.03
Net realized and unrealized
gains/(losses) on investments ........... (3.67) 2.70 4.96 0.46 2.13 5.73 (2.49)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM INVESTMENT
OPERATIONS ................................. (3.53) 3.15 5.49 0.85 2.57 5.99 (2.46)
- ------------------------------------------------------------------------------------------------------------------------------------
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 ................ $32.88 $36.41 $39.02 $34.06 $33.61 $31.48 $32.86
====================================================================================================================================
TOTAL RETURN (A) .............................. (9.70)% 8.01% 16.12% 2.51% 8.17% 23.28% (6.96)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ... $62,282 $77,777 $101,885 $98,883 $112,545 $114,123 $9
Ratios to average net assets:
Net investment income* .................. 0.84% 0.94% 1.43% 1.06% 1.30% 0.95% 0.45%
Expenses* ............................... 0.68% 0.66% 0.63% 0.63% 0.63% 0.61% 1.09%
Portfolio turnover rate .................... 27% 55% 45% 40% 30% 39% 27%
NOTES TO FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(a) Total returns are historical and assume changes in share price and
reinvestment of dividends and capital gains and do not include the effect of
insurance contract charges.
* Annualized for periods less than one year.
+ Unaudited
See Notes to Financial Statements.
11
<page>
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2008 (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------------
U.S.
EQUITY
FUND
- --------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments in securities, at market (cost $61,117,052) ....................................... $60,561,141
Investments in affiliated securities, at market (cost $19,077) ................................ 14,498
Short-term affiliated investments (at amortized cost) ......................................... 1,932,964
Income receivables ............................................................................ 65,810
Variation margin receivable ................................................................... 275
- --------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS .............................................................................. 62,574,688
- --------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased ............................................................. 145,311
Payable for fund shares redeemed .............................................................. 32,963
Payable to GEAM ............................................................................... 28,670
Accrued other expenses ........................................................................ 75,792
Other liabilities ............................................................................. 443
- --------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES ......................................................................... 283,179
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS ....................................................................................... $62,291,509
==========================================================================================================================
NET ASSETS CONSIST OF:
Capital paid in ............................................................................... 62,196,534
Undistributed (distribution in excess of)net investment income ................................ 292,436
Accumulated net realized gain (loss) .......................................................... 382,673
Net unrealized appreciation/(depreciation) on:
Investments ............................................................................... (560,490)
Futures ................................................................................... (19,645)
Foreign currency related transactions ..................................................... 1
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS ....................................................................................... $62,291,509
==========================================================================================================================
CLASS 1:
NET ASSETS ....................................................................................... 62,282,206
Shares outstanding ($0.01 par value; unlimited shares authorized) ................................ 1,894,487
Net asset value per share ........................................................................ $32.88
CLASS 4:
NET ASSETS ....................................................................................... 9,303
Shares outstanding ($0.01 par value; unlimited shares authorized) ................................ 283
Net asset value per share ........................................................................ $32.86
See Notes to Financial Statements.
12
<page>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2008 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------
U.S.
EQUITY
FUND
- ------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividend ...................................................................... $ 495,423
Interest ...................................................................... 4,075
Interest from affiliated investments .......................................... 15,683
Less: Foreign taxes withheld .................................................. (1,846)
- ------------------------------------------------------------------------------------------------------------------
TOTAL INCOME .................................................................... 513,335
- ------------------------------------------------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees .............................................. 187,286
Distributors Fees (Note 4)
Class 4 .................................................................... 7
Transfer agent ................................................................ 36
Trustee's fees ................................................................ 933
Custody and accounting expenses ............................................... 27,157
Professional fees ............................................................. 9,495
Registration expenses ......................................................... 2,136
Other expenses ................................................................ 2,727
- ------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES BEFORE WAIVER AND REIMBURSEMENT .................................. 229,777
- ------------------------------------------------------------------------------------------------------------------
Less: Expenses waived or borne by the adviser
(waiver related to Fund of Fund Investment) ............................. (932)
- ------------------------------------------------------------------------------------------------------------------
Net expenses .................................................................. 228,845
- ------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) .................................................... 284,490
==================================================================================================================
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments ................................................................ 504,171
Futures .................................................................... (32,800)
Foreign currency transactions .............................................. (146)
INCREASE (DECREASE) IN UNREALIZED APPRECIATION/(DEPRECIATION) ON:
Investments ................................................................ (7,990,722)
Futures .................................................................... (24,750)
Foreign currency transactions .............................................. 4
- ------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments ........................ (7,544,243)
- ------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ................. $(7,259,753)
==================================================================================================================
See Notes to Financial Statements.
13
<page>
Statements of Changes in Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
U.S.
EQUITY
FUND
- ------------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2008 DECEMBER 31,
(UNAUDITED) 2007
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income (loss) ....................................................... $ 284,490 $ 826,681
Net realized gain (loss) on investments, futures, written options, and foreign
currency transactions ........................................................... 471,225 12,445,211
Net increase (decrease) in unrealized appreciation/(depreciation) on investments,
futures, written options, and foreign currency translation ...................... (8,015,468) (6,234,931)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations ............................................. (7,259,753) 7,036,961
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class 1 ........................................................................... -- (821,468)
Class 4 ........................................................................... -- --
Net realized gains
Class 1 ........................................................................... -- (9,856,050)
Class 4 ........................................................................... -- --
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ................................................................... -- (10,677,518)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations and distributions ................... (7,259,753) (3,640,557)
- ------------------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares
Class 1 ........................................................................... 425,961 831,344
Class 4 ........................................................................... 10,000 --
Value of distributions reinvested
Class 1 ........................................................................... -- 10,677,532
Class 4 ........................................................................... -- --
Cost of shares redeemed
Class 1 ........................................................................... (8,661,521) (31,976,001)
Class 4 ........................................................................... -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from share transactions ..................................... (8,225,560) (20,467,125)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ............................................... (8,225,560) (24,107,682)
NET ASSETS
Beginning of period ................................................................... 77,776,822 101,884,504
- ------------------------------------------------------------------------------------------------------------------------------------
End of period ......................................................................... $62,291,509 $ 77,776,822
====================================================================================================================================
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD ........... $ 292,436 $ 7,946
- ------------------------------------------------------------------------------------------------------------------------------------
CHANGES IN FUND SHARES
CLASS 1
Shares sold .............................................................................. 12,511 20,172
Issued for distributions reinvested ...................................................... -- 291,815
Shares redeemed .......................................................................... (253,889) (787,114)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares ................................................... (241,378) (475,127)
====================================================================================================================================
CLASS 4
Shares sold .............................................................................. 283 --
Issued for distributions reinvested ...................................................... -- --
Shares redeemed .......................................................................... -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares ................................................... 283 --
====================================================================================================================================
See Notes to Financial Statements.
14
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
1. ORGANIZATION OF THE COMPANY
GE Investments Funds, Inc. (the "Company") was incorporated under the laws of
the Commonwealth of Virginia on May 14, 1984 and is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company. The Company is composed of thirteen investment
portfolios (collectively the "Funds"), although only the following eleven are
currently being offered: U.S. Equity Fund, (the "Fund") S&P 500 Index Fund,
Premier Growth Equity Fund, Core Value Equity Fund, Mid-Cap Equity Fund,
Small-Cap Equity Fund, International Equity Fund, Total Return Fund, Income
Fund, Money Market Fund and Real Estate Securities Fund.
Shares of the Funds of the Company are offered only to insurance company
separate accounts that fund certain variable life insurance contracts and
variable annuity contracts. These insurance companies may include insurance
companies affiliated with GE Asset Management Incorporated ("GEAM"), the
investment adviser and administrator of each of the Funds.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the reporting period. Actual results may differ from
those estimates.
The following summarizes the significant accounting policies of the Fund:
SECURITY VALUATION AND TRANSACTIONS
The Fund's portfolio securities are valued generally on the basis of market
quotations. Equity securities generally are valued at the last reported sales
price on the primary market in which they are traded. Portfolio securities
listed on NASDAQ are valued using the NASDAQ Official Closing Price, which may
not necessarily represent the last sale price. If no sales occurred on the
exchange or NASDAQ that day, the portfolio security generally is valued using
the last reported bid price.
Debt securities (other than short-term securities described below) generally are
valued at an evaluated bid as reported by an independent pricing service. Values
obtained from pricing services are based on various factors such as market
transactions, dealer supplied valuations, security characteristics and other
market data. In the absence of a reliable price from such a pricing service,
debt securities may be valued based on dealer supplied valuations or quotations.
The Fund's written or purchased options are valued at the last sales price, or
if no sales occurred that day, at the last reported bid price. Short-term
investments with remaining maturities of sixty days or less at the time of
purchase are valued on the basis of amortized cost, which approximates market
value.
All assets and liabilities of the Fund initially expressed in foreign currency
values will be converted into U.S. dollars at the WM/Reuters exchange rate
computed at 11:00 a.m., Eastern time.
If prices are not readily available for a portfolio security, or if it is
believed that a price for a portfolio security does not represent its fair
value, the security may be valued using procedures approved by the Fund's Board
of Directors that are designed to establish its "fair" value. Those procedures
require that the fair value of a security be established by the fair valuation
committee. The fair valuation committee follows different protocols for
different types of investments and circumstances. The fair value procedures may
be used to value any investment by the Fund in the appropriate circumstances.
Examples of the types of securities that may be fair valued include: thinly
traded or illiquid investments, high-yield securities or foreign securities.
Foreign securities may be valued with the assistance of an independent fair
value pricing service in circumstances where it is believed that they have been
or would be materially affected by events occurring after the close of the
portfolio security's primary market and before the close of regular trading on
the NYSE. This independent fair value pricing service uses a computerized system
to appraise affected securities and portfolios taking into consideration various
factors and the fair value of such securities may be something other than the
last available quotation or other market price.
GEAM may also separately monitor portfolio securities and, consistent with the
Fund's fair value procedures, apply a different value to a portfolio security
than would be applied had it been priced using market quotations or by an
independent fair value pricing service.
15
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
Determining the fair value of securities involves the application of both
subjective and objective considerations. Security values may differ depending on
the methodology used to determine their values, and may differ from the last
quoted sale or closing price. No assurance can be given that use of these fair
value procedures will always better represent the price at which the Fund could
sell the affected portfolio security.
Security transactions are accounted for as of the trade date. Realized gains and
losses on investments sold are recorded on the basis of identified cost for both
financial statement and federal tax purposes.
The Fund adopted FASB Statement No. 157, FAIR VALUE MEASUREMENTS (FAS 157). FAS
157 establishes a single definition of fair value, a framework for measuring
fair value, and expanded disclosures about fair value measurements.
Various inputs are used in determining the value of the Fund's investments.
These inputs are classified into three broad levels:
Level 1 includes quoted prices in active markets of securities identical to
those of the Fund.
Level 2 includes: 1) quoted prices in active markets for similar securities to
those of the Fund; 2) quoted prices for identical or similar securities to those
of the Fund that trade in markets in which there are few transactions or the
quoted prices are not current; 3) prices based on observable market data such as
interest rates and yield curves, volatilities, bond prepayment speeds, and
credit risk and; 4) prices based principally on observable market data by use of
correlation techniques or other means.
Level 3 includes unobservable market inputs used to fair value securities. These
inputs are based on assumptions that market participants would use to price
securities and may include the adviser's own assumptions.
Other financial instruments are derivative instruments that are not reflected in
TOTAL INVESTMENTS, such as futures, forwards, swaps, and written options
contracts, which are valued based on the unrealized appreciation/depreciation of
the instrument.
Level 1 Level 2 Level 3 Total
- ------------------------------------------------------------------------------------------------------------------------------------
Investments in Securities $ 62,494,105 $ 14,498 $-- $ 62,508,603
Other Financial Instruments $ (19,645) $ -- $-- $ (19,645)
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.
16
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
The Fund does not isolate the portion of the results of operations resulting
from changes in foreign exchange rates from the fluctuations arising from
changes in the market prices of securities during the period. Such fluctuations
are included in the net realized or unrealized gain or loss from investments.
Net realized gains or losses on foreign currency transactions represent net
gains or losses on sales and maturities of foreign currency contracts,
disposition of foreign currencies, the difference between the amount of net
investment income and withholding taxes accrued and the U.S. dollar amount
actually received or paid, and gains or losses between the trade and settlement
date on purchases and sales of securities. Net unrealized foreign exchange gains
and losses arising from changes in the value of other assets and liabilities as
a result of changes in foreign exchange rates are included as increases or
decreases in unrealized appreciation/depreciation on foreign currency related
transactions.
FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or
bond index futures contracts subject to certain limitations. The Fund may invest
in futures contracts to manage its exposure to the stock and bond markets and
fluctuations in currency values. Buying futures tends to increase the Fund's
exposure to the underlying instrument while selling futures tends to decrease
the Fund's exposure to the underlying instrument, or hedge other Fund
investments. The Fund will not enter into a transaction involving futures for
speculative purposes. The Fund's risks in using these contracts include changes
in the value of the underlying instruments, non-performance of the
counterparties under the contracts' terms and changes in the liquidity of the
secondary market for the contracts. Futures contracts are valued at the
settlement price established each day by the board of trade or exchange on which
they principally trade.
Upon entering into a futures contract, the Fund is required to pledge to the
broker an amount of cash and/or other assets equal to a certain percentage of
the contract amount, known as initial margin deposit. Subsequent payments, known
as variation margin, are made or received by the Fund each day, depending on the
daily fluctuation in the fair value of the underlying security. The Fund records
an unrealized gain or loss equal to the daily variation margin. Should market
conditions move unexpectedly, the Fund may not achieve the anticipated benefits
of the futures contracts and may incur a loss. The Fund recognizes a realized
gain or loss on the expiration or closing of a futures contract.
OPTIONS The Fund may purchase and write options, subject to certain limitations.
The Fund may invest in options contracts to manage its exposure to the stock and
bond markets and fluctuations in foreign currency values. Writing puts and
buying calls tend to increase 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.
17
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
INCOME TAXES The Fund intends to comply with all sections of the Internal
Revenue Code applicable to regulated investment companies including the
distribution of substantially all of its taxable net investment income and net
realized capital gains to its shareholders. Therefore, no provision for federal
income tax has been made. The Fund is treated as a separate taxpayer for federal
income tax purposes.
At June 30, 2008, 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
- ------------------------------------------------------------------------------------------------------------------------------------
$63,890,916 $4,955,861 $(6,357,251) $(1,401,390)
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.
18
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
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 $150 million with a
number of its affiliates. The credit facility is with its custodian bank, State
Street Bank and Trust Company. The revolving credit facility requires the
payment of a commitment fee equal to 0.09% per annum on the daily unused portion
of the credit facility, payable quarterly. The portion borne by the Funds
generally is borne proportionally based upon net assets. In addition, the
Company has a $100 million uncommitted, unsecured line of credit with State
Street. 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 June 30,
2008.
4. AMOUNTS PAID TO AFFILIATES
GEAM, a registered investment adviser, was retained by the Company's Board of
Directors effective May 1, 1997 to act as investment adviser and administrator
of the Fund. GEAM's compensation for investment advisory and administrative
services is paid monthly based on the average daily net assets of the Fund at an
annualized rate of 0.55%.
GENPACT performs certain accounting and certain administration services not
provided by GEAM. For the period ending June 30, 2008, $573 was charged to the
Fund
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 the Class 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 rate applicable is
0.45% for the Class 4 shares. Currently, Class 1 shares are not subject to a
Rule 12b-1 fee.
DIRECTORS' COMPENSATION The Fund pays no compensation to its directors who are
officers or employees of GEAM or its affiliates. Directors who are not such
officers or employees also serve in a similar capacity for other funds advised
by GEAM. Compensation paid to unaffiliated directors are reflected on the
Statement of Operations. These fees are allocated pro rata across all of the
mutual fund platforms and share classes served by the directors, including the
Fund, and are based upon the relative net assets of each Fund within such
platforms. (For additional information about directors compensation please refer
to the Statement of Additional Information.)
5. INVESTMENT TRANSACTIONS
PURCHASES AND SALES OF SECURITIES The cost of purchases and the proceeds from
sales of investments, other than short-term securities and options, for the
period ended June 30, 2008 were as follows:
Purchases Sales
- --------------------------------------------------------------------------------
$18,033,387 $26,301,280
SECURITY LENDING At June 30, 2008, the Fund did not participate in securities
lending.
19
<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 59
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 47
POSITION(S) HELD WITH FUND Executive Vice President
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - less than one year
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General
Counsel and Secretary of GEAM since July 2007; Senior Vice President and General
Counsel - Marketing and Client Services (formerly Asset Management Services), at
GEAM and Senior Vice President and General Counsel of GEAMS from February 1997
to June 2007; Vice President and Associate General Counsel of GEAM from October
1992 to February 1997; Secretary of Fund from 1997 to June 2007; Vice President
of Fund from September 2003 to June 2007; Vice President of GE Institutional
Funds and GE LifeStyle Funds from September 2003 to June 2007; Secretary of GE
Institutional Funds and GE LifeStyle Funds from 1997 to June 2007; Vice
President of Elfun Funds and GE Savings & Security Funds from October 2003 to
June 2007; Assistant Secretary of Elfun Funds and GE Savings & Security Funds
from 1998 to June 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional
Funds, GE LifeStyle Funds, Elfun Funds and GE Savings & Security Funds since
July 2007.
20
<page>
Additional Information (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCOTT H. RHODES
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 49
POSITION(S) HELD WITH FUND Treasurer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 2 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds Operations
Manager since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle
Funds and GE Investments Funds since November 2005 and Elfun Funds and GE
Savings & Security Funds since September 2005; from August 2004 to September
2005 Vice President, U.S. Trust Company, N.A. and Assistant Treasurer of
Excelsior Funds, Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds,
Inc.; from January 2004 to August 2004, Vice President BlackRock Financial
Management, Inc.; from December 1996 to November 2003, Controller - Mutual
Funds, American Skandia Investment Services, Inc. and Assistant Treasurer of
American Skandia Trust and American Skandia Advisor Funds, Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
- --------------------------------------------------------------------------------
JEANNE M. LAPORTA
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 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
21
<page>
Additional Information (unaudited)
- --------------------------------------------------------------------------------
NON-INTERESTED DIRECTORS
- --------------------------------------------------------------------------------
JOHN R. COSTANTINO
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 62
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 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 60
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 72
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 9 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon
Brothers Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds and GE LifeStyle Funds since their inception.
- --------------------------------------------------------------------------------
The Statement of Additional Information for the Fund includes additional
information about the Directors and Officers and is available, without charge,
upon request by calling 1-800-242-0134.
22
<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
Daniel O. Colao, EVP, CHIEF FINANCIAL OFFICER (AS OF JULY 28, 2008)
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)
David Wiederecht, EVP, PRESIDENT - INVESTMENT STRATEGIES
23
<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.
S&P 500 Index Fund
Semi-Annual Report
JUNE 30, 2008
[GE logo omitted]
<page>
GE Investments Funds, Inc.
S&P 500 Index Fund
- --------------------------------------------------------------------------------
Contents
NOTES TO PERFORMANCE................................................ 1
MANAGER REVIEW AND SCHEDULE OF INVESTMENTS.......................... 2
NOTES TO SCHEDULE OF INVESTMENTS.................................... 11
FINANCIAL STATEMENTS
Financial Highlights........................................... 12
Statement of Assets and Liabilities............................ 13
Statement of Operations........................................ 14
Statements of Changes in Net Assets............................ 15
Notes to Financial Statements.................................. 16
ADDITIONAL INFORMATION.............................................. 21
INVESTMENT TEAM..................................................... 24
This report is prepared for Policyholders of certain variable contracts and may
be distributed to others only if preceded or accompanied by the variable
contract's current prospectus and the current prospectus of the Funds available
for investments thereunder.
<page>
Notes to Performance June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
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 shown are net of Fund expenses but do not reflect fees and charges
associated with the variable contracts such as administrative fees, account
charges and surrender charges, which, if reflected, would reduce the Fund's
total returns for all periods shown.
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 SIX-MONTH PERIOD ENDED JUNE 30, 2008?
A. For the six-month period ended June 30, 2008, the S&P 500 Index Fund
returned -12.14%. The S&P 500 Index, the Fund's benchmark, returned -11.91%
and the Fund's Lipper peer group of 59 S&P 500 Index Objective funds
returned an average of -12.07% for the same period.
Q. WHAT MARKET CONDITIONS IMPACTED FUND PERFORMANCE?
A. The credit crisis continued in the first half of 2008, as troubled mortgage
paper continued to fall in value, and corporate bonds worried about eroding
profits and rising default potential. The inexorable upward march of crude
oil prices, which saw double-digit gains in both April and May, exacerbated
inflation concerns as summer approached. As consumers realized elevated
energy costs might be more than just a temporary phenomenon, a deep chill
was cast over the tentative spring recovery in investor sentiment. Many
broad equity averages, having come within hailing distance of their 2007
closing levels in mid-May, soon found themselves flirting with the lows that
they had plumbed in January and March.
Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE?
A. By utilizing a passive, full replication investment style, the Fund owned
the same stocks and sectors in approximately the same weights as the S&P 500
Index. As of June 30th, 2008, the four largest sectors in the S&P 500 Index
were Information Technology (16.4%), Energy (16.2%), Financials (14.3%) and
Healthcare (11.9%). The highest returning sector for the last six months was
Energy (+8%) followed by Materials (+0.2%). The lowest returning sectors
were Financials (-30%) and Telecommunication Services (-18%).
Q. WERE THERE ANY SIGNIFICANT CHANGES TO THE FUND DURING THE PERIOD?
A. Over the past six months, there were 10 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 Index 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 June 30,
2008.
ACTUAL EXPENSES
The first section of the table provides information about actual account values
and actual expenses. You may use the information in this section, together with
the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JANUARY 1, 2008 - JUNE 30, 2008
- ------------------------------------------------------------------------------------------------------------------------------------
ACCOUNT VALUE AT ACCOUNT VALUE EXPENSES
THE BEGINNING OF AT THE END OF PAID DURING
THE PERIOD ($) THE PERIOD ($) THE PERIOD ($)*
- ------------------------------------------------------------------------------------------------------------------------------------
Actual Fund Return** 1,000.00 878.58 1.86
- ------------------------------------------------------------------------------------------------------------------------------------
Hypothetical 5% Return
(2.5% for the period) 1,000.00 1,022.62 2.01
- ------------------------------------------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.40% (FROM
PERIOD JANUARY 1, 2008 - JUNE 30, 2008), MULTIPLIED BY THE AVERAGE ACCOUNT
VALUE OVER THE PERIOD, MULTIPLIED BY 182/366 (TO REFLECT THE SIX MONTH
PERIOD).
** ACTUAL FUND RETURN FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2008 WAS:
(12.14)%.
3
<page>
S&P 500 Index Fund (unaudited)
- --------------------------------------------------------------------------------
CHANGE IN VALUE
OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
[Line chart omitted -- plot points are as follows:]
GEI S&P 500 INDEX S&P 500 INDEX
06/98 10,000.00 10,000.00
12/98 10,911.87 10,930.83
12/99 13,160.94 13,233.67
12/00 11,920.41 12,016.74
12/01 10,458.24 10,586.04
12/02 8,119.08 8,246.81
12/03 10,414.64 10,617.04
12/04 11,504.13 11,771.36
12/05 12,022.61 12,348.39
12/06 13,877.60 14,298.67
12/07 14,584.73 15,084.63
06/08 12,813.88 13,287.88
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED JUNE 30, 2008
- --------------------------------------------------------------------------------
SIX ONE FIVE TEN
MONTHS YEAR YEAR YEAR
- --------------------------------------------------------------------------------
S&P 500 Index Fund -12.14% -13.51% 7.19% 2.51%
- --------------------------------------------------------------------------------
S&P 500 Index -11.91% -13.12% 7.59% 2.88%
- --------------------------------------------------------------------------------
Lipper peer group average* -12.07% -13.40% 7.18% 2.57%
- --------------------------------------------------------------------------------
Inception date 4/15/85
- --------------------------------------------------------------------------------
INVESTMENT PROFILE
A fund designed for investors who seek growth of capital and accumulation of
income that corresponds to the investment return of the Standard & Poor's 500
Composite Stock Index by investing at least 80% of its net assets in equity
securities of companies contained in that Index.
TOP TEN LARGEST HOLDINGS
(EXCLUDES SHORT-TERM INVESTMENTS)
AS OF JUNE 30, 2008
as a % of Market Value
- --------------------------------------------------------------------------------
Exxon Mobil Corp. 4.10%
- --------------------------------------------------------------------------------
General Electric Co. 2.34%
- --------------------------------------------------------------------------------
Microsoft Corp. 1.93%
- --------------------------------------------------------------------------------
Chevron Corp. 1.81%
- --------------------------------------------------------------------------------
AT&T, Inc. 1.76%
- --------------------------------------------------------------------------------
Procter & Gamble Co. 1.64%
- --------------------------------------------------------------------------------
Johnson & Johnson 1.60%
- --------------------------------------------------------------------------------
International Business Machines Corp. 1.43%
- --------------------------------------------------------------------------------
Apple Computer, Inc. 1.29%
- --------------------------------------------------------------------------------
ConocoPhillips 1.28%
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
AS OF JUNE 30, 2008
as a % of Market Value
- --------------------------------------------------------------------------------
Market Value of $369,869 (in thousands)
[Pie chart omitted -- plot points are as follows:]
Information Technology 16.1%
Energy 15.9%
Financials 14.0%
Healthcare 11.7%
Industrials 11.0%
Consumer Staples 10.6%
Consumer Discretionary 8.0%
Utilities 3.9%
Materials 3.9%
Telecommunication Services 3.3%
Short-Term 1.6%
Other Investments 0.0%**
* LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR
THE SIX MONTHS, ONE YEAR, FIVE-YEAR, AND TEN-YEAR PERIODS INDICATED IN THE
S&P 500 INDEX OBJECTIVE FUNDS PEER GROUP CONSISTING OF 59, 58, 51 AND 27
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.
4
<page>
S&P 500 INDEX FUND
Schedule of Investments June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
S&P 500 INDEX FUND
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK -- 98.8% +
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 8.0%
Abercrombie & Fitch Co.
(Class A) ................... 2,800 $ 175,504
Amazon.Com, Inc................ 10,100 740,633(a)
Apollo Group, Inc. (Class A)... 4,400 194,744(a)
Autonation, Inc................ 4,772 47,815(a)
Autozone, Inc.................. 1,444 174,738(a)
Bed Bath & Beyond, Inc......... 8,600 241,660(a)
Best Buy Company, Inc.......... 11,500 455,400
Big Lots, Inc.................. 2,500 78,100(a)
Black & Decker Corp............ 2,007 115,423
Carnival Corp.................. 14,400 474,624
CBS Corp....................... 22,409 436,751
Centex Corp.................... 4,120 55,084
Clear Channel Communications,
Inc. ........................ 16,000 563,200
Coach, Inc..................... 11,300 326,344(a)
Comcast Corp. (Class A)........ 96,458 1,829,808
D.R. Horton, Inc............... 9,700 105,245
Darden Restaurants, Inc........ 4,429 141,462
Dillard's, Inc. (Class A)...... 2,295 26,553
DIRECTV Group, Inc............. 23,400 606,294(a)
Eastman Kodak Co............... 9,175 132,395
Expedia, Inc................... 7,100 130,498(a)
Family Dollar Stores, Inc...... 5,000 99,700
Ford Motor Co.................. 70,527 339,235(a)
Fortune Brands, Inc............ 5,141 320,850
GameStop Corp. (Class A)....... 5,400 218,160(a)
Gannett Company, Inc........... 7,408 160,531
General Motors Corp............ 18,547 213,291
Genuine Parts Co............... 5,596 222,049
Goodyear Tire & Rubber Co...... 7,319 130,498(a)
H&R Block, Inc................. 10,408 222,731
Harley-Davidson, Inc........... 8,000 290,080
Harman International
Industries Inc............... 1,900 78,641
Hasbro, Inc.................... 4,696 167,741
Home Depot, Inc................ 55,118 1,290,864
IAC/InterActiveCorp............ 6,300 121,464(a)
International Game Technology.. 10,000 249,800
Interpublic Group of
Companies, Inc............... 14,530 124,958(a)
J.C. Penney Company, Inc....... 7,187 260,816
Johnson Controls, Inc.......... 19,246 551,975
Jones Apparel Group, Inc....... 2,400 33,000
KB Home........................ 2,860 48,420
Kohl's Corp.................... 10,400 416,416(a)
Leggett & Platt, Incorporated.. 5,100 85,527
Lennar Corp. (Class A)......... 4,800 59,232
Limited Brands, Inc............ 9,888 166,613
Liz Claiborne Inc.............. 3,830 54,194
Lowe's Companies, Inc.......... 47,356 982,637
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Macy's, Inc.................... 14,030 $ 272,463
Marriott International Inc.
(Class A) ................... 9,544 250,435
Mattel, Inc.................... 11,551 197,753
McDonald's Corp................ 37,390 2,102,066
McGraw-Hill Companies Inc...... 10,621 426,115
Meredith Corp.................. 1,298 36,720
New York Times Co. (Class A)... 5,188 79,843
Newell Rubbermaid, Inc......... 8,756 147,013
News Corp. (Class A)........... 74,600 1,121,984
Nike Inc. (Class B)............ 12,510 745,721
Nordstrom, Inc................. 5,792 175,498
Office Depot, Inc.............. 8,400 91,896(a)
Omnicom Group, Inc............. 10,300 462,264
Polo Ralph Lauren Corp.
(Class A) ................... 1,800 113,004
Pulte Homes, Inc............... 7,388 71,146
RadioShack Corp................ 4,656 57,129
Sears Holdings Corp............ 2,419 178,184(a)
Snap-On Incorporated........... 2,009 104,488
Staples, Inc................... 22,450 533,187
Starbucks Corp................. 23,798 374,581(a)
Starwood Hotels & Resorts
Worldwide, Inc............... 6,100 244,427
Target Corp.................... 25,349 1,178,475
The E.W. Scripps Co. (Class A). 2,900 120,466
The Gap, Inc................... 14,379 239,698
The Sherwin-Williams Co........ 3,163 145,277
The Stanley Works.............. 2,426 108,758
The Walt Disney Co............. 61,079 1,905,665
Tiffany & Co................... 4,000 163,000
Time Warner, Inc............... 115,914 1,715,527(d)
TJX Companies, Inc............. 14,480 455,686
VF Corp........................ 2,802 199,446
Viacom Inc. (Class B).......... 20,813 635,629(a)
Washington Post Co. (Class B).. 190 111,511
Wendy's International, Inc..... 2,731 74,338
Whirlpool Corp................. 2,443 150,806
Wyndham Worldwide Corp......... 5,949 106,547
Yum! Brands, Inc............... 15,329 537,895
29,596,339
CONSUMER STAPLES -- 10.7%
Altria Group, Inc.............. 68,579 1,409,984
Anheuser-Busch Companies, Inc.. 23,142 1,437,581(d)
Archer-Daniels-Midland Co...... 21,086 711,653
Avon Products, Inc............. 13,628 490,881
Brown-Forman Corp. (Class B)... 2,758 208,422
Campbell Soup Co............... 7,176 240,109
Clorox Co...................... 4,684 244,505
Coca-Cola Enterprises, Inc..... 9,100 157,430
Colgate-Palmolive Co........... 16,672 1,152,035
ConAgra Foods, Inc............. 15,868 305,935
Constellation Brands, Inc.
(Class A) ................... 6,100 121,146(a)
Costco Wholesale Corp.......... 14,266 1,000,617
CVS Caremark Corp.............. 46,727 1,848,987
Dean Foods Co.................. 4,700 92,214(a)
General Mills, Inc............. 11,003 668,652
HJ Heinz Co.................... 10,397 497,496
See Notes to Schedule of Investments on page 11 and Notes to Financial
Statements.
5
<page>
S&P 500 INDEX FUND
Schedule of Investments June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Kellogg Co..................... 8,390 $ 402,888
Kimberly-Clark Corp............ 13,636 815,160
Kraft Foods, Inc. (Class A).... 50,098 1,425,288
Lorillard, Inc................. 5,711 394,973(a)
McCormick & Company, Inc....... 4,300 153,338
Molson Coors Brewing Co.
(Class B) 4,398 238,943
Pepsi Bottling Group, Inc...... 4,700 131,224
PepsiCo, Inc................... 51,974 3,305,027
Philip Morris International
Inc. 68,479 3,382,178
Procter & Gamble Co............ 99,449 6,047,494
Reynolds American, Inc......... 5,700 266,019
Safeway Inc.................... 14,300 408,265
Sara Lee Corp.................. 23,157 283,673
Supervalu Inc.................. 6,713 207,365
SYSCO Corp..................... 19,444 534,904
The Coca-Cola Co............... 65,002 3,378,804(d)
The Estee Lauder Companies Inc.
(Class A).................... 3,600 167,220
The Hershey Co................. 5,284 173,210
The Kroger Co.................. 21,566 622,610
Tyson Foods, Inc. (Class A).... 8,900 132,966
UST Inc........................ 4,779 260,981
Walgreen Co.................... 32,200 1,046,822
Wal-Mart Stores, Inc........... 75,787 4,259,229
Whole Foods Market, Inc........ 4,400 104,236
WM Wrigley Jr. Co.............. 6,985 543,293
39,273,757
ENERGY -- 16.0%
Anadarko Petroleum Corp........ 15,256 1,141,759
Apache Corp.................... 10,848 1,507,872
Baker Hughes Incorporated...... 10,150 886,501
BJ Services Co................. 9,700 309,818
Cabot Oil & Gas Corp........... 3,100 209,963
Cameron International Corp..... 7,000 387,450(a)
Chesapeake Energy Corp......... 15,700 1,035,572
Chevron Corp................... 67,558 6,697,025
ConocoPhillips................. 50,219 4,740,171
Consol Energy, Inc............. 6,000 674,220
Devon Energy Corp.............. 14,392 1,729,343
El Paso Corp................... 22,882 497,455
ENSCO International Inc........ 4,700 379,478
EOG Resources, Inc............. 8,100 1,062,720
Exxon Mobil Corp............... 172,102 15,167,349(d)
Halliburton Co................. 28,591 1,517,324
Hess Corp...................... 9,070 1,144,543(d)
Marathon Oil Corp.............. 23,042 1,195,189
Massey Energy Co............... 2,600 243,750
Murphy Oil Corp................ 6,100 598,105
Nabors Industries Ltd.......... 9,300 457,839(a)
National Oilwell Varco, Inc.... 13,400 1,188,848(a)
Noble Corp..................... 8,700 565,152
Noble Energy, Inc.............. 5,600 563,136
Occidental Petroleum Corp...... 26,720 2,401,059
Peabody Energy Corp............ 8,700 766,035
Range Resources Corp........... 5,000 327,700
Rowan Companies, Inc........... 3,577 167,225
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Schlumberger Ltd............... 38,933 $ 4,182,572
Smith International, Inc....... 6,500 540,410
Southwestern Energy Co......... 11,100 528,471(a)
Spectra Energy Corp............ 20,677 594,257
Sunoco, Inc.................... 3,976 161,783
Tesoro Corp.................... 4,800 94,896
Transocean, Inc................ 10,310 1,571,141
Valero Energy Corp............. 17,500 720,650
Weatherford International Ltd.. 22,000 1,090,980(a)
Williams Companies, Inc........ 18,786 757,264
XTO Energy, Inc................ 16,441 1,126,373
58,931,398
FINANCIALS -- 14.0%
ACE Ltd........................ 10,700 589,463
AFLAC Incorporated............. 15,400 967,120
Allstate Corp.................. 18,311 834,798(d)
American Capital Strategies Ltd. 6,200 147,374
American Express Co............ 37,796 1,423,775(d)
American International Group,
Inc. 87,517 2,315,700(d)
Ameriprise Financial, Inc...... 7,304 297,054
AON Corp....................... 9,636 442,678
Apartment Investment &
Management Co. (Class A)
(REIT) 2,920 99,455
Assurant, Inc.................. 3,200 211,072
AvalonBay Communities, Inc.
(REIT) 2,500 222,900
Bank of America Corp........... 144,441 3,447,807
Bank of New York Mellon Corp... 37,003 1,399,823
BB&T Corp...................... 18,000 409,860
Boston Properties, Inc. (REIT). 3,900 351,858
Capital One Financial Corp..... 12,225 464,672
CB Richard Ellis Group, Inc.
(Class A).................... 5,500 105,600(a)
Charles Schwab Corp............ 30,111 618,480
Chubb Corp..................... 12,094 592,727
Cincinnati Financial Corp...... 5,592 142,037
CIT Group, Inc................. 6,600 44,946
Citigroup, Inc................. 177,306 2,971,649(d)
CME Group Inc.................. 1,721 659,470
Comerica Incorporated.......... 5,156 132,148
Countrywide Financial Corp..... 19,698 83,716
Developers Diversified Realty
Corp. (REIT)................. 3,900 135,369
Discover Financial Services.... 15,298 201,475
E*Trade Financial Corp......... 15,100 47,414(a)
Equity Residential (REIT)...... 8,800 336,776
Federal Home Loan
Mortgage Corp................ 20,765 340,546
Federal National Mortgage
Assoc. 34,176 666,774
Federated Investors Inc.
(Class B) 2,700 92,934
Fifth Third Bancorp............ 17,516 178,313
First Horizon National Corp.... 4,400 32,692
Franklin Resources, Inc........ 5,100 467,415
General Growth Properties, Inc.
(REIT)....................... 7,900 276,737
Genworth Financial, Inc.
(Class A) 14,100 251,121
Goldman Sachs Group, Inc....... 12,841 2,245,891
See Notes to Schedule of Investments on page 11 and Notes to Financial
Statements.
6
<page>
S&P 500 INDEX FUND
Schedule of Investments June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Hartford Financial Services
Group, Inc................... 10,204 $ 658,872
HCP, Inc. (REIT)............... 7,500 238,575
Host Hotels & Resorts Inc.
(REIT) 16,700 227,955
Hudson City Bancorp, Inc....... 16,600 276,888
Huntington Bancshares
Incorporated................ 11,434 65,974
IntercontinentalExchange, Inc.. 2,300 262,200(a)
Janus Capital Group, Inc....... 5,100 134,997
JP Morgan Chase & Co........... 112,450 3,858,159(d)
Keycorp........................ 15,828 173,791
Kimco Realty Corp. (REIT)...... 8,100 279,612
Legg Mason, Inc................ 4,300 187,351
Lehman Brothers Holdings, Inc.. 22,000 435,820
Leucadia National Corp......... 5,500 258,170
Lincoln National Corp.......... 8,542 387,123
Loews Corp..................... 12,766 598,725
M&T Bank Corp.................. 2,400 169,296
Marsh & McLennan
Companies, Inc.............. 16,969 450,527
Marshall & Ilsley Corp......... 8,298 127,208
MBIA Inc....................... 4,535 19,909
Merrill Lynch & Company, Inc... 31,634 1,003,114
Metlife, Inc................... 23,171 1,222,734
MGIC Investment Corp........... 2,959 18,079
Moody's Corp................... 6,884 237,085
Morgan Stanley................. 35,996 1,298,376
National City Corp............. 21,291 101,558
Northern Trust Corp............ 6,200 425,134
NYSE Euronext.................. 8,700 440,742
Plum Creek Timber Company, Inc.
(REIT)...................... 5,700 243,447
PNC Financial Services Group,
Inc. 11,208 639,977
Principal Financial Group,
Inc. 8,300 348,351
Prologis (REIT)................ 8,400 456,540
Prudential Financial, Inc...... 14,600 872,204
Public Storage (REIT).......... 4,000 323,160
Regions Financial Corp......... 23,068 251,672
Safeco Corp.................... 2,881 193,488
Simon Property Group, Inc.
(REIT) 7,200 647,208
SLM Corp....................... 14,200 274,770(a)
Sovereign Bancorp, Inc......... 15,650 115,184
State Street Corp.............. 13,800 883,062(c)
SunTrust Banks, Inc............ 11,429 413,958
T Rowe Price Group, Inc........ 8,700 491,289
The Progressive Corp........... 22,473 420,695
Torchmark Corp................. 3,072 180,173
Travelers Companies, Inc....... 19,999 867,957
Unum Group..................... 10,989 224,725
US Bancorp..................... 56,199 1,567,390
Vornado Realty Trust (REIT).... 4,400 387,200
Wachovia Corp.................. 69,288 1,076,043
Washington Mutual, Inc......... 33,181 163,582
Wells Fargo & Co............... 107,036 2,542,105
XL Capital Ltd................. 5,700 117,192
Zions Bancorporation........... 3,700 116,513
51,625,498
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
HEALTHCARE -- 11.8%
Abbott Laboratories............ 50,204 $ 2,659,306(d)
Aetna, Inc..................... 16,008 648,804
Allergan, Inc.................. 9,804 510,298
AmerisourceBergen Corp......... 5,142 205,629
Amgen, Inc..................... 35,248 1,662,296(a,d)
Barr Pharmaceuticals, Inc...... 3,500 157,780(a)
Baxter International, Inc...... 20,729 1,325,412
Becton Dickinson & Co.......... 7,970 647,961
Biogen Idec, Inc............... 9,800 547,722(a)
Boston Scientific Corp......... 44,260 543,955(a)
Bristol-Myers Squibb Co........ 64,008 1,314,084(d)
C.R. Bard, Inc................. 3,302 290,411
Cardinal Health, Inc........... 11,651 600,959
Celgene Corp................... 14,000 894,180(a)
Cigna Corp..................... 9,289 328,738
Coventry Healthcare, Inc....... 5,100 155,142(a)
Covidien Ltd................... 16,259 778,644
Eli Lilly & Co................. 32,216 1,487,091
Express Scripts, Inc........... 8,200 514,304(a)
Forest Laboratories, Inc....... 10,300 357,822(a)
Genzyme Corp................... 8,700 626,574(a)
Gilead Sciences, Inc........... 30,349 1,606,980(a)
Hospira, Inc................... 5,039 202,114(a)
Humana Inc..................... 5,627 223,786(a)
IMS Health Inc................. 6,057 141,128
Intuitive Surgical, Inc........ 1,260 339,444(a)
Johnson & Johnson.............. 92,127 5,927,451
King Pharmaceuticals, Inc...... 8,833 92,482(a)
Laboratory Corporation of
America Holdings............ 3,700 257,631(a)
McKesson Corp.................. 9,402 525,666
Medco Health Solutions, Inc.... 17,166 810,235(a)
Medtronic, Inc................. 36,632 1,895,706
Merck & Company, Inc........... 70,350 2,651,492
Millipore Corp................. 1,745 118,416(a)
Mylan, Inc..................... 8,800 106,216
Patterson Companies, Inc....... 4,100 120,499(a)
PerkinElmer, Inc............... 3,610 100,538
Pfizer, Inc.................... 219,821 3,840,273
Quest Diagnostics
Incorporated, ............... 5,100 247,197
Schering-Plough Corp........... 52,602 1,035,733(d)
St. Jude Medical, Inc.......... 11,092 453,441(a)
Stryker Corp................... 7,852 493,734
Tenet Healthcare Corp.......... 16,695 92,824(a)
Thermo Fisher Scientific, Inc.. 13,528 753,915(a)
UnitedHealth Group, Inc........ 40,676 1,067,745
Varian Medical Systems, Inc.... 4,100 212,585(a)
Waters Corp.................... 3,300 212,850(a)
Watson Pharmaceuticals, Inc.... 3,600 97,812(a)
WellPoint, Inc................. 17,100 814,986(a)
Wyeth.......................... 43,354 2,079,258(d)
Zimmer Holdings, Inc........... 7,600 517,180(a)
43,296,429
See Notes to Schedule of Investments on page 11 and Notes to Financial
Statements.
7
<page>
S&P 500 INDEX FUND
Schedule of Investments June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
INDUSTRIALS -- 11.1%
Allied Waste Industries, Inc... 9,000 $ 113,580(a)
Applied Biosystems Inc......... 5,603 187,588
Avery Dennison Corp............ 3,655 160,564
Boeing Co...................... 24,882 1,635,245(d)
Burlington Northern
Santa Fe Corp............... 9,674 966,336
Caterpillar, Inc............... 20,232 1,493,526
CH Robinson Worldwide, Inc..... 5,700 312,588
Cintas Corp.................... 4,200 111,342
Cooper Industries Ltd.......... 5,759 227,481
CSX Corp....................... 13,239 831,542
Cummins, Inc................... 6,556 429,549
Danaher Corp................... 8,400 649,320
Deere & Co..................... 14,140 1,019,918
Dover Corp..................... 6,058 293,025
Eaton Corp..................... 5,200 441,844
Emerson Electric Co............ 25,548 1,263,349
Equifax, Inc................... 4,300 144,566
Expeditors International
Washington, Inc............. 6,900 296,700
FedEx Corp..................... 10,111 796,646
Fluor Corp..................... 2,852 530,700
General Dynamics Corp.......... 13,164 1,108,409
General Electric Co............ 324,362 8,657,222(f)
Goodrich Corp.................. 4,101 194,633
Honeywell International Inc.... 24,343 1,223,966
Illinois Tool Works Inc........ 13,117 623,189
Ingersoll-Rand Company Ltd.
(Class A)................... 10,061 376,583
ITT Corp....................... 5,926 375,294
Jacobs Engineering Group, Inc.. 3,800 306,660(a)
L-3 Communications Holdings,
Inc. ........................ 4,000 363,480
Lockheed Martin Corp........... 11,152 1,100,256
Masco Corp..................... 11,590 182,311
Monster Worldwide, Inc......... 4,400 90,684(a)
Norfolk Southern Corp.......... 12,318 771,969
Northrop Grumman Corp.......... 11,022 737,372
PACCAR, Inc.................... 12,022 502,880
Pall Corp...................... 3,878 153,879
Parker Hannifin Corp........... 5,572 397,395
Pitney Bowes, Inc.............. 7,132 243,201
Precision Castparts Corp....... 4,500 433,665
Raytheon Co.................... 13,869 780,547
Robert Half International,
Inc. ........................ 5,000 119,850
Rockwell Automation, Inc....... 4,768 208,505
Rockwell Collins, Inc.......... 5,268 252,653
RR Donnelley & Sons Co......... 7,199 213,738
Ryder System, Inc.............. 1,731 119,231
Southwest Airlines Co.......... 23,749 309,687
Terex Corp..................... 3,300 169,521(a)
Textron, Inc................... 8,125 389,431
The Manitowoc Company, Inc..... 4,300 139,879
3M Co.......................... 22,980 1,599,178
Tyco International Ltd......... 15,659 626,986
Union Pacific Corp............. 16,908 1,276,554
United Parcel Service Inc.
(Class B) ................... 33,596 2,065,146
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
United Technologies Corp....... 31,872 $ 1,966,502
W.W. Grainger, Inc............. 2,182 178,488
Waste Management, Inc.......... 15,903 599,702
40,764,055
INFORMATION TECHNOLOGY -- 16.2%
Adobe Systems Incorporated..... 17,284 680,817(a,d)
Advanced Micro Devices, Inc.... 19,574 114,116(a,d)
Affiliated Computer Services, Inc.
(Class A)................... 3,100 165,819(a)
Agilent Technologies, Inc...... 11,785 418,839(a)
Akamai Technologies, Inc....... 5,200 180,908(a)
Altera Corp.................... 9,900 204,930
Analog Devices, Inc............ 9,800 311,346
Apple Computer, Inc............ 28,535 4,777,900(a)
Applied Materials, Inc......... 44,400 847,596(d)
Autodesk, Inc.................. 7,348 248,436(a)
Automatic Data Processing, Inc. 17,080 715,652
BMC Software, Inc.............. 6,000 216,000(a)
Broadcom Corp. (Class A)....... 14,950 407,985(a)
CA, Inc........................ 12,300 284,007
Ciena Corp..................... 2,742 63,532(a)
Cisco Systems, Inc............. 192,464 4,476,713(a,d)
Citrix Systems, Inc............ 5,800 170,578(a)
Cognizant Technology Solutions
Corp. (Class A)............. 9,500 308,845(a)
Computer Sciences Corp......... 4,682 219,305(a)
Compuware Corp................. 8,800 83,952(a)
Convergys Corp................. 3,600 53,496(a)
Corning Incorporated........... 51,239 1,181,059
Dell, Inc...................... 66,728 1,460,009(a,d)
eBay, Inc...................... 36,200 989,346(a)
Electronic Arts, Inc........... 10,200 453,186(a)
Electronic Data Systems Corp... 16,400 404,096
EMC Corp....................... 68,314 1,003,533(a)
Fidelity National Information
Services, Inc............... 5,800 214,078
Fiserv, Inc.................... 5,350 242,729(a)
Google, Inc. (Class A)......... 7,529 3,963,416(a)
Hewlett-Packard Co............. 80,149 3,543,387
Intel Corp..................... 186,565 4,007,416
International Business
Machines Corp............... 44,730 5,301,847
Intuit Inc..................... 10,800 297,756(a)
Jabil Circuit, Inc............. 6,300 103,383
JDS Uniphase Corp.............. 7,250 82,360(a)
Juniper Networks, Inc.......... 16,800 372,624(a)
Kla-Tencor Corp................ 5,400 219,834
Lexmark International Inc.
(Class A).................... 3,300 110,319(a)
Linear Technology Corp......... 7,000 227,990
LSI Corp....................... 21,092 129,505(a)
MEMC Electronic Materials, Inc. 7,500 461,550(a)
Microchip Technology Inc....... 5,900 180,186
Micron Technology, Inc......... 23,954 143,724(a)
Microsoft Corp................. 259,954 7,151,335(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 June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Molex, Inc..................... 4,350 $ 106,183
Motorola, Inc.................. 72,950 535,453
National Semiconductor Corp.... 7,366 151,298
NetApp, Inc.................... 11,100 240,426(a)
Novell, Inc.................... 12,866 75,781(a)
Novellus Systems, Inc.......... 3,600 76,284(a)
Nvidia Corp.................... 17,700 331,344(a)
Oracle Corp.................... 128,452 2,697,492(a)
Paychex, Inc................... 10,425 326,094
QLogic Corp.................... 4,100 59,819(a)
QUALCOMM, Inc.................. 52,278 2,319,575
SanDisk Corp................... 7,300 136,510(a)
Sun Microsystems, Inc.......... 25,090 272,979(a)
Symantec Corp.................. 27,408 530,345(a)
Tellabs, Inc................... 12,652 58,832(a)
Teradata Corp.................. 5,800 134,212(a)
Teradyne, Inc.................. 5,400 59,778(a)
Texas Instruments Incorporated. 43,151 1,215,132
Total System Services, Inc..... 5,202 115,588
Tyco Electronics Ltd........... 15,925 570,434
Unisys Corp.................... 10,709 42,301(a)
VeriSign, Inc.................. 6,362 240,484(a)
Western Union Co............... 24,424 603,761
Xerox Corp..................... 30,290 410,732
Xilinx, Inc.................... 9,600 242,400
Yahoo! Inc..................... 43,689 902,615(a)
59,651,292
MATERIALS -- 3.8%
Air Products & Chemicals, Inc.. 7,032 695,184(d)
AK Steel Holding Corp.......... 3,600 248,400
Alcoa, Inc..................... 26,340 938,231(d)
Allegheny Technologies
Incorporated................. 3,251 192,719
Ashland, Inc................... 2,007 96,737
Ball Corp...................... 3,116 148,758
Bemis Company Inc.............. 3,062 68,650
Dow Chemical Co................ 30,394 1,061,055
E.I. du Pont de Nemours and Co. 29,161 1,250,715
Eastman Chemical Co............ 2,559 176,213
Ecolab Inc..................... 5,852 251,577
Freeport-McMoRan Copper &
Gold, Inc.................... 12,455 1,459,601
Hercules, Inc.................. 4,228 71,580
International Flavors &
Fragrances Inc............... 2,747 107,298
International Paper Co......... 14,075 327,947
MeadWestvaco Corp.............. 5,800 138,272
Monsanto Co.................... 17,805 2,251,264
Newmont Mining Corp............ 14,828 773,428
Nucor Corp..................... 10,036 749,388
Pactiv Corp.................... 4,248 90,185(a)
PPG Industries, Inc............ 5,137 294,710
Praxair, Inc................... 10,125 954,180
Rohm & Haas Co................. 4,214 195,698
Sealed Air Corp................ 5,114 97,217
Sigma-Aldrich Corp............. 4,282 230,629
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Titanium Metals Corp........... 3,000 $ 41,970
United States Steel Corp....... 3,865 714,175
Vulcan Materials Co............ 3,400 203,252
Weyerhaeuser Co................ 6,894 352,559
14,181,592
TELECOMMUNICATION SERVICES -- 3.3%
American Tower Corp. (Class A). 13,000 549,250(a)
AT&T, Inc...................... 193,515 6,519,520
CenturyTel, Inc................ 3,484 123,996
Citizens Communications Co..... 10,300 116,802
Embarq Corp.................... 4,870 230,205
Qwest Communications
International, Inc.......... 51,548 202,584
Sprint Nextel Corp. (Series 1). 92,300 876,850
Verizon Communications, Inc.... 93,367 3,305,192
Windstream Corp................ 14,943 184,397
12,108,796
UTILITIES -- 3.9%
Allegheny Energy, Inc.......... 5,300 265,583
Ameren Corp.................... 6,842 288,938
American Electric Power
Company, Inc................ 13,125 528,019(d)
Centerpoint Energy, Inc........ 10,618 170,419
CMS Energy Corp................ 7,900 117,710
Consolidated Edison, Inc....... 8,707 340,357
Constellation Energy Group, Inc. 5,803 476,426
Dominion Resources, Inc........ 18,600 883,314
DTE Energy Co.................. 5,266 223,489
Duke Energy Corp............... 41,454 720,471
Dynegy, Inc. (Class A)......... 17,100 146,205(a)
Edison International........... 10,742 551,924
Entergy Corp................... 6,147 740,591
Exelon Corp.................... 21,552 1,938,818
FirstEnergy Corp............... 9,920 816,714
FPL Group, Inc................. 13,362 876,280
Integrys Energy Group, Inc..... 2,631 133,734
Nicor Inc...................... 1,543 65,716
NiSource, Inc.................. 8,715 156,173
Pepco Holdings, Inc............ 6,700 171,855
PG&E Corp...................... 11,554 458,578
Pinnacle West Capital Corp..... 3,500 107,695
PPL Corp....................... 11,944 624,313
Progress Energy, Inc........... 8,456 353,714
Public Service Enterprise
Group, Inc.................. 16,618 763,265
Questar Corp................... 5,600 397,824
Sempra Energy.................. 8,375 472,769
Southern Co.................... 24,658 861,057
TECO Energy, Inc............... 6,700 143,983
The AES Corp................... 21,600 414,936(a)
Xcel Energy, Inc............... 13,780 276,565
14,487,435
TOTAL COMMON STOCK
(COST $346,871,485)........... 363,916,591
See Notes to Schedule of Investments on page 11 and Notes to Financial
Statements.
9
<page>
S&P 500 INDEX FUND
Schedule of Investments June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
OTHER INVESTMENTS -- 0.0%*
- --------------------------------------------------------------------------------
GEI Investment Fund
(COST $170,628)............. $ 129,677(e)
TOTAL INVESTMENTS IN SECURITIES
(COST $347,042,113).......... 364,046,268
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 1.6%
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 1.5%
GE Money Market Fund
Institutional Class
1.93%...................... 5,367,815(b,g)
Money Market Obligation Trust
2.55% 12/31/30........... 456 456(h)
2.64% 12/31/30........... 9 9(h)
465
PRINCIPAL
AMOUNT
- -------------------------------------------
U.S. GOVERNMENT-- 0.1%
U. S. Treasury Bill
1.90% 09/11/08........... $456,000 454,468
TOTAL SHORT-TERM INVESTMENTS
(COST $5,822,547)............ 5,822,748
TOTAL INVESTMENTS
(COST $352,864,660).......... 369,869,016
LIABILITIES IN EXCESS OF OTHER ASSETS,
NET-- (0.4)%............... (1,648,878)
------------
NET ASSETS-- 100.0% .......... $368,220,138
============
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
The GEI S&P 500 Fund Index had the following long futures contracts open at
June 30, 2008 (unaudited):
NUMBER CURRENT
EXPIRATION OF NOTIONAL UNREALIZED
DESCRIPTION DATE CONTRACTS VALUE DEPRECIATION
- --------------------------------------------------------------------------------
S&P Mini
500 Index
Futures September 2008 123 $7,878,765 $(349,997)
* Less than 0.1%
See Notes to Schedule of Investments on page 11 and Notes to Financial
Statements.
10
<page>
Notes to Schedule of Investments June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
The views expressed in this document reflect our judgment as of the publication
date and are subject to change at any time without notice. The securities cited
may not represent current or future holdings and should not be considered as a
recommendation to purchase or sell a particular security. See the prospectus for
complete descriptions of investment objectives, policies, risks and permissible
investments.
(a) Non-income producing security.
(b) Coupon amount represents effective yield.
(c) State Street Corp. is the parent company of State Street Bank & Trust Co.,
the Fund's custodian and accounting agent.
(d) At June 30, 2008, 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"), is the investment adviser of the Fund, also
serves as investment adviser of the GEI Invetment Fund.
(f) General Electric Co. is the parent company of GE Asset Management
Incorporated, the Fund's investment Advisor.
(g) GEAM, the investment adviser of the Fund, also serves as investment adviser
of the GE Money Market Fund.
(h) Managed by SSgA Funds Management, Inc., the Fund's sub-adviser.
* Less than 0.1%.
+ Percentages are based on net assets as of June 30, 2008.
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
6/30/08+ 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......... $26.52 $26.06 $22.94 $22.30 $20.51 $16.18
INCOME/(LOSS) FROM INVESTMENT OPERATIONS:
Net investment income .................... 0.21 0.47 0.42 0.36 0.36 0.24
Net realized and unrealized
gains/(losses) on investments.......... (3.43) 0.86 3.12 0.65 1.79 4.33
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM INVESTMENT
OPERATIONS ................................ (3.22) 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............... $23.30 $26.52 $26.06 $22.94 $22.30 $20.51
====================================================================================================================================
TOTAL RETURN (a)............................. (12.14)% 5.10% 15.43% 4.51% 10.46% 28.27%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands).. $368,220 $447,426 $497,105 $531,015 $601,008 $597,185
Ratios to average net assets:
Net investment income*................. 1.72% 1.62% 1.58% 1.47% 1.62% 1.41%
Expenses*.............................. 0.40% 0.39% 0.40% 0.40% 0.40% 0.37%
Portfolio turnover rate................... 6% 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.
* Annualized for periods less than one year.
+ Unaudited
See Notes to Financial Statements.
12
<page>
Statement of Assets
and Liabilities JUNE 30, 2008 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------
S&P 500
INDEX FUND
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments in securities, at market (cost $334,028,365)............................................... $355,259,369
Investments in affiliated securities, at market (cost $13,013,748)..................................... 8,786,899
Short-term Investments (at amortized cost)............................................................. 454,933
Short-term affiliated investments (at amortized cost).................................................. 5,367,815
Income receivables..................................................................................... 497,685
Variation margin receivable............................................................................ 6,578
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS....................................................................................... 370,373,279
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased...................................................................... 248,354
Payable for fund shares redeemed....................................................................... 1,617,798
Payable to GEAM........................................................................................ 214,486
Accrued other expenses................................................................................. 70,731
Other liabilities...................................................................................... 1,772
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES.................................................................................. 2,153,141
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS................................................................................................ $368,220,138
====================================================================================================================================
NET ASSETS CONSIST OF:
Capital paid in........................................................................................ 355,536,791
Undistributed (distribution in excess of) net investment income........................................ 3,446,845
Accumulated net realized gain (loss)................................................................... (7,417,677)
Net unrealized appreciation/(depreciation) on:
Investments......................................................................................... 17,004,155
Futures............................................................................................. (349,997)
Foreign currency related transactions............................................................... 21
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS................................................................................................ $368,220,138
====================================================================================================================================
NET ASSETS................................................................................................ 368,220,138
Shares outstanding ($0.01 par value; unlimited shares authorized)......................................... 15,800,803
Net asset value per share................................................................................. $23.30
See Notes to Financial Statements.
13
<page>
Statement of Operations
FOR THE SIX MONTHS ENDED JUNE 30, 2008 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------
S&P 500
INDEX FUND
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividend ............................................................................... $ 3,898,645
Dividend from affiliated investments ................................................... 204,565
Interest ............................................................................... 39,378
Interest from affiliated investments ................................................... 82,879
Less: Foreign taxes withheld ........................................................... (224)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME ............................................................................. 4,225,243
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees ....................................................... 702,252
Transfer agent ......................................................................... 23
Trustee's fees ......................................................................... 5,449
Custody and accounting expenses ........................................................ 27,560
Professional fees ...................................................................... 19,287
Registration expenses .................................................................. 30,089
Other expenses ......................................................................... 13,203
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES BEFORE WAIVER AND REIMBURSEMENT ........................................... 797,863
- ------------------------------------------------------------------------------------------------------------------------------------
Less: Expenses reimbursed by the adviser (waiver related to Fund of Fund Investment) ... (4,772)
- ------------------------------------------------------------------------------------------------------------------------------------
Net expenses ........................................................................... 793,091
- ------------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) ............................................................. 3,432,152
====================================================================================================================================
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments ......................................................................... 132,312
Futures ............................................................................. (973,424)
INCREASE (DECREASE) IN UNREALIZED APPRECIATION/
(DEPRECIATION) ON:
Investments ......................................................................... (55,257,726)
Futures ............................................................................. (341,950)
Foreign currency transactions ....................................................... 21
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments ................................. (56,440,767)
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .......................... $(53,008,615)
====================================================================================================================================
See Notes to Financial Statements.
14
<page>
Statements of
Changes in Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
S&P 500
INDEX FUND
- ------------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2008 DECEMBER 31,
(UNAUDITED) 2007
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income (loss)..................................................... $ 3,432,152 $ 7,754,470
Net realized gain (loss) on investments, futures, written options,
and foreign currency transactions............................................... (841,112) 9,156,721
Net increase (decrease) in unrealized appreciation/(depreciation)
on investments, futures, written options, and foreign
currency translation............................................................ (55,599,655) 8,030,021
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations........................................... (53,008,615) 24,941,212
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income............................................................. -- (7,752,640)
Net realized gains................................................................ -- (6,536,642)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS................................................................. -- (14,289,282)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations and distributions................. (53,008,615) 10,651,930
- ------------------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares...................................................... 3,706,201 19,505,679
Value of distributions reinvested................................................. -- 14,289,211
Cost of shares redeemed........................................................... (29,903,177) (94,126,068)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from share transactions................................... (26,196,976) (60,331,178)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS............................................. (79,205,591) (49,679,248)
NET ASSETS
Beginning of period................................................................. 447,425,729 497,104,977
- ------------------------------------------------------------------------------------------------------------------------------------
End of period ...................................................................... $368,220,138 $447,425,729
====================================================================================================================================
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF)
NET INVESTMENT INCOME, END OF PERIOD................................................ $ 3,446,845 $ 14,693
- ------------------------------------------------------------------------------------------------------------------------------------
CHANGES IN FUND SHARES
Shares sold....................................................................... 150,806 718,872
Issued for distributions reinvested............................................... -- 535,778
Shares redeemed................................................................... (1,221,291) (3,460,599)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares................................................. (1,070,485) (2,205,949)
====================================================================================================================================
See Notes to Financial Statements.
15
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
1. ORGANIZATION OF THE COMPANY
GE Investments Funds, Inc. (the "Company") was incorporated under the laws of
the Commonwealth of Virginia on May 14, 1984 and is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company. The Company is composed of thirteen investment
portfolios (collectively the "Funds"), although only the following eleven are
currently being offered: U.S. Equity Fund, S&P 500 Index Fund (the "Fund"),
Premier Growth Equity Fund, Core Value Equity Fund, Mid-Cap Equity Fund,
Small-Cap Equity Fund, International Equity Fund, Total Return Fund, Income
Fund, Money Market Fund and Real Estate Securities Fund.
Shares of the Funds of the Company are offered only to insurance company
separate accounts that fund certain variable life insurance contracts and
variable annuity contracts. These insurance companies may include insurance
companies affiliated with GE Asset Management Incorporated ("GEAM"), the
investment adviser and administrator of each of the Funds.
2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the reporting period. Actual results may differ from
those estimates.
The following summarizes the significant accounting policies of the Fund:
SECURITY VALUATION AND TRANSACTIONS
The Fund's portfolio securities are valued generally on the basis of market
quotations. Equity securities generally are valued at the last reported sales
price on the primary market in which they are traded. Portfolio securities
listed on NASDAQ are valued using the NASDAQ Official Closing Price, which may
not necessarily represent the last sale price. If no sales occurred on the
exchange or NASDAQ that day, the portfolio security generally is valued using
the last reported bid price.
Debt securities (other than short-term securities described below) generally are
valued at an evaluated bid as reported by an independent pricing service. Values
obtained from pricing services are based on various factors such as market
transactions, dealer supplied valuations, security characteristics and other
market data. In the absence of a reliable price from such a pricing service,
debt securities may be valued based on dealer supplied valuations or quotations.
The Fund's written or purchased options are valued at the last sales price, or
if no sales occurred that day, at the last reported bid price. Short-term
investments with remaining maturities of sixty days or less at the time of
purchase are valued on the basis of amortized cost, which approximates market
value.
All assets and liabilities of the Fund initially expressed in foreign currency
values will be converted into U.S. dollars at the WM/Reuters exchange rate
computed at 11:00 a.m., Eastern time.
If prices are not readily available for a portfolio security, or if it is
believed that a price for a portfolio security does not represent its fair
value, the security may be valued using procedures approved by the Fund's Board
of Directors that are designed to establish its "fair" value. Those procedures
require that the fair value of a security be established by the fair valuation
committee. The fair valuation committee follows different protocols for
different types of investments and circumstances. The fair value procedures may
be used to value any investment by the Fund in the appropriate circumstances.
Examples of the types of securities that may be fair valued include: thinly
traded or illiquid investments, high-yield securities or foreign securities.
Foreign securities may be valued with the assistance of an independent fair
value pricing service in circumstances where it is believed that they have been
or would be materially affected by events occurring after the close of the
portfolio security's primary market and before the close of regular trading on
the NYSE. This independent fair value pricing service uses a computerized system
to appraise affected securities and portfolios taking into consideration various
factors and the fair value of such securities may be something other than the
last available quotation or other market price.
GEAM may also separately monitor portfolio securities and, consistent with the
Fund's fair value procedures, apply a different value to a portfolio security
than would be applied had it been priced using market quotations or by an
independent fair value pricing service.
16
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
Determining the fair value of securities involves the application of both
subjective and objective considerations. Security values may differ depending on
the methodology used to determine their values, and may differ from the last
quoted sale or closing price. No assurance can be given that use of these fair
value procedures will always better represent the price at which the Fund could
sell the affected portfolio security.
Security transactions are accounted for as of the trade date. Realized gains and
losses on investments sold are recorded on the basis of identified cost for both
financial statement and federal tax purposes.
The Fund adopted FASB Statement No. 157, FAIR VALUE MEASUREMENTS (FAS 157). FAS
157 establishes a single definition of fair value, a framework for measuring
fair value, and expanded disclosures about fair value measurements.
Various inputs are used in determining the value of the Fund's investments.
These inputs are classified into three broad levels:
Level 1 includes quoted prices in active markets of securities identical to
those of the Fund.
Level 2 includes: 1) quoted prices in active markets for similar securities to
those of the Fund; 2) quoted prices for identical or similar securities to those
of the Fund that trade in markets in which there are few transactions or the
quoted prices are not current; 3) prices based on observable market data such as
interest rates and yield curves, volatilities, bond prepayment speeds, and
credit risk and; 4) prices based principally on observable market data by use of
correlation techniques or other means.
Level 3 includes unobservable market inputs used to fair value securities. These
inputs are based on assumptions that market participants would use to price
securities and may include the adviser's own assumptions.
Other financial instruments are derivative instruments that are not reflected in
TOTAL INVESTMENTS, such as futures, forwards, swaps, and written options
contracts, which are valued based on the unrealized appreciation/depreciation of
the instrument.
Level 1 Level 2 Level 3 Total
- -----------------------------------------------------------------------------------------------------------------------------
Investments in Securities $369,739,339 $129,677 $-- $369,869,016
Other Financial Instruments $ (349,997) $ -- $-- $ (349,997)
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.
17
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
The Fund does not isolate the portion of the results of operations resulting
from changes in foreign exchange rates from the fluctuations arising from
changes in the market prices of securities during the period. Such fluctuations
are included in the net realized or unrealized gain or loss from investments.
Net realized gains or losses on foreign currency transactions represent net
gains or losses on sales and maturities of foreign currency contracts,
disposition of foreign currencies, the difference between the amount of net
investment income and withholding taxes accrued and the U.S. dollar amount
actually received or paid, and gains or losses between the trade and settlement
date on purchases and sales of securities. Net unrealized foreign exchange gains
and losses arising from changes in the value of other assets and liabilities as
a result of changes in foreign exchange rates are included as increases or
decreases in unrealized appreciation/depreciation on foreign currency related
transactions.
FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or
bond index futures contracts subject to certain limitations. The Fund may invest
in futures contracts to manage its exposure to the stock and bond markets and
fluctuations in currency values. Buying futures tends to increase the Fund's
exposure to the underlying instrument while selling futures tends to decrease
the Fund's exposure to the underlying instrument, or hedge other Fund
investments. The Fund will not enter into a transaction involving futures for
speculative purposes. The Fund's risks in using these contracts include changes
in the value of the underlying instruments, non-performance of the
counterparties under the contracts' terms and changes in the liquidity of the
secondary market for the contracts. Futures contracts are valued at the
settlement price established each day by the board of trade or exchange on which
they principally trade.
Upon entering into a futures contract, the Fund is required to pledge to the
broker an amount of cash and/or other assets equal to a certain percentage of
the contract amount, known as initial margin deposit. Subsequent payments, known
as variation margin, are made or received by the Fund each day, depending on the
daily fluctuation in the fair value of the underlying security. The Fund records
an unrealized gain or loss equal to the daily variation margin. Should market
conditions move unexpectedly, the Fund may not achieve the anticipated benefits
of the futures contracts and may incur a loss. The Fund recognizes a realized
gain or loss on the expiration or closing of a futures contract.
OPTIONS The Fund may purchase and write options, subject to certain limitations.
The Fund may invest in options contracts to manage its exposure to the stock and
bond markets and fluctuations in foreign currency values. Writing puts and
buying calls tend to increase 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.
18
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
INCOME TAXES The Fund intends to comply with all sections of the Internal
Revenue Code applicable to regulated investment companies including the
distribution of substantially all of its taxable net investment income and net
realized capital gains to its shareholders. Therefore, no provision for federal
income tax has been made. The Fund is treated as a separate taxpayer for federal
income tax purposes.
At June 30, 2008, 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
- -------------------------------------------------------------------------------------------------------------------------------
$347,584,053 $97,551,182 $(88,279,967) $9,271,215
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.
19
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
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. AMOUNTS PAID TO AFFILIATES
GEAM, a registered investment adviser, was retained by the Company's Board of
Directors effective May 1, 1997 to act as investment adviser and administrator
of the Fund. GEAM's compensation for investment advisory and administrative
services is paid monthly based on the average daily net assets of the Fund at an
annualized rate of 0.35%.
GENPACT performs certain accounting and certain administration services not
provided by GEAM. For the period ending June 30, 2008, $3,276 was charged to the
Fund.
DIRECTORS' COMPENSATION The Fund pays no compensation to its directors who are
officers or employees of GEAM or its affiliates. Directors who are not such
officers or employees also serve in a similar capacity for other funds advised
by GEAM. Compensation paid to unaffiliated directors are reflected on the
Statement of Operations. These fees are allocated pro rata across all of the
mutual fund platforms and share classes served by the directors, including the
Fund, and are based upon the relative net assets of each fund within such
platforms. (For additional information about directors compensation please refer
to the Statement of Additional Information).
4. SUB-ADVISORY FEES
Pursuant to an investment sub-advisory agreement with GEAM, SSgA Funds
Management, Inc. ("SSgA") is the Sub-Adviser to the S&P 500 Index Fund. SSgA is
responsible for the day-to-day portfolio management of the assets of the Fund,
including the responsibility for making decisions to buy, sell or hold a
particular security, under the general supervision of GEAM and the Board.
For its services, GEAM pays SSgA monthly sub-advisory fees which are calculated
as a percentage of the average daily net assets of the Fund.
5. INVESTMENT TRANSACTIONS
PURCHASES AND SALES OF SECURITIES The cost of purchases and the proceeds from
sales of investments, other than short-term securities and options, for the
period ended June 30, 2008 were as follows:
Purchases Sales
- ------------------------------------------------------------------
$4,830,540 $24,554,012
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 59
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 47
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 49
POSITION(S) HELD WITH FUND Treasurer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 2 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds Operations
Manager since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle
Funds and GE Investments Funds since November 2005 and Elfun Funds and GE
Savings & Security Funds since September 2005; from August 2004 to September
2005 Vice President, U.S. Trust Company, N.A. and Assistant Treasurer of
Excelsior Funds, Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds,
Inc.; from January 2004 to August 2004, Vice President BlackRock Financial
Management, Inc.; from December 1996 to November 2003, Controller - Mutual
Funds, American Skandia Investment Services, Inc. and Assistant Treasurer of
American Skandia Trust and American Skandia Advisor Funds, Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
- --------------------------------------------------------------------------------
JEANNE M. LAPORTA
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 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 62
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 60
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 72
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
Daniel O. Colao, EVP, CHIEF FINANCIAL OFFICER (AS OF JULY 28, 2008)
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)
David Wiederecht, EVP, PRESIDENT - INVESTMENT STRATEGIES
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.
Premier Growth Equity Fund
Semi-Annual Report
JUNE 30, 2008
[GE logo omitted]
<page>
GE Investments Funds, Inc.
Premier Growth Equity Fund
Contents
- --------------------------------------------------------------------------------
NOTES TO PERFORMANCE..................................................... 1
MANAGER REVIEW AND SCHEDULE OF INVESTMENTS............................... 2
NOTES TO SCHEDULE OF INVESTMENTS......................................... 7
FINANCIAL STATEMENTS
Financial Highlights................................................ 8
Statement of Assets and Liabilities................................. 9
Statement of Operations............................................. 10
Statements of Changes in Net Assets................................. 11
Notes to Financial Statements....................................... 12
ADDITIONAL INFORMATION................................................... 17
INVESTMENT TEAM.......................................................... 20
This report is prepared for Policyholders of certain variable contracts and may
be distributed to others only if preceded or accompanied by the variable
contract's current prospectus and the current prospectus of the Funds available
for investments thereunder.
<page>
Notes to Performance June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
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 shown are net of Fund expenses but do not reflect fees and charges
associated with the variable contracts such as administrative fees, account
charges and surrender charges, which, if reflected, would reduce the Fund's
total returns for all periods shown.
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 SIX-MONTH PERIOD ENDED JUNE 30, 2008?
A. For the six-month period ended June 30, 2008, the Premier Growth Equity Fund
returned -6.93% for the Class 1 shares and -6.48% for the Class 4 shares.
The S&P 500 Index, the Fund's benchmark, returned -11.91% and the Fund's
Lipper peer group of 207 Large-Cap Growth funds returned an average of
-10.06% for the same period.
Q. WHAT MARKET CONDITIONS IMPACTED FUND PERFORMANCE?
A. The six-month period proved challenging for U.S. equity investors, as the
housing recession, skyrocketing commodity prices and tight credit conditions
threatened the outlook for economic growth and corporate profits.
Policymaker response was significant during the period as the Federal
Reserve lowered interest rates and opened up its discount window to
investment banks. Despite these actions, credit remained scarce, impeding
economic growth and contributing to stock market volatility. Consumers began
to receive the government's fiscal stimulus checks, but investors feared
that the windfall might be consumed at the gas pump in an environment of
$140 per barrel of oil.
Only the inflationary energy (+9%) and materials (+1%) sectors had positive
returns during the period. Financials (-30%) was by far the worst performing
sector, followed by telecommunications (-17%), industrials (-14%), consumer
discretionary (-13%) and technology (-13%). Health care (-13%),
traditionally a defensive sector, has also lagged as it has exhibited some
discretionary characteristics, and suffered regulatory uncertainty stemming
from the upcoming presidential elections.
Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE?
A. Financials, information technology and industrials have each suffered
double-digit declines year-to-date. Fortunately, strong stock selection in
these volatile sectors has benefited the Fund's relative performance. We
have dodged many of the credit-related land mines within financials with an
underweight positioning, and the Fund's financials returned approximately
-9% versus a decline of almost 30% for the benchmark sector. AFLAC (+1%) and
Liberty Media Capital (-6%) -- the Liberty Entertainment tracking stock that
falls within the financial sector -- have been key contributors. Qualcomm
(+13.5%) led our tech stocks higher in part because China announced it was
opening its wireless telephony market to 3G-technology. Western Union (+2%)
also demonstrated resilience amid strengthening fundamentals. The S&P 500
industrials
{photo omitted]
2
<page>
Q&A
- --------------------------------------------------------------------------------
sector also lagged due to commodity cost pressures and slowing global
economic growth. In this environment, our sole industrials holding, Dover
(+6%) exhibited strength in its energy-related businesses and as a result of
its multi-year restructuring initiatives.
The two key factors that worked against performance during the period were
1) an underweight in energy as oil hurtled towards $140 a barrel and 2)
underperformance within consumer oriented names. In 2008, the rising cost of
energy and commodity inputs has punished many consumer stocks, including
PepsiCo (-15%). However we have added to Pepsi on the pullback, continuing
to like its brand leadership and its potential for global growth. Carnival
Corp. (-24%) has also lagged amid high fuel costs, but we believe the
company is well positioned to flourish as baby boomers seek economical
travel options. During the year-to-date period, not owning defensive
utilities has also weighed on returns, but we continued to believe the
sector lacks sustainable double-digit earnings growth. UnitedHealth (-40%)
has pressured results, and we eliminated the position during the period.
Q. WERE THERE ANY SIGNIFICANT CHANGES TO THE FUND OVER THE PERIOD?
A. There were no significant changes in the Fund during the period, and we
ended the period with 37 holdings in the portfolio. We continued to favor
companies we believe can weather an economic slowdown -- high quality
leaders with double-digit earnings growth prospects. Our bottom-up process
has led us to overweight's in technology, consumer discretionary (with a
focus in media and specialty retail) and healthcare. Technology stocks make
up about 35% of the portfolio, with consumer discretionary and health care
at about 15% each. In the past six months we initiated positions in two
healthcare companies, Genentech in the biotech space and VCA Antech in the
area of animal health. We also initiated a position in specialty metals
company, Allegheny Technologies -- a company that stands to benefit from the
trend towards lighter, more fuel-efficient aircraft.
With economic growth slowing, the forecast for corporate profits has slowed
significantly. This deterioration 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 June 30,
2008.
ACTUAL EXPENSES
The first section of the table provides information about actual account values
and actual expenses. You may use the information in this section, together with
the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JANUARY 1, 2008 - JUNE 30, 2008
- ------------------------------------------------------------------------------------------------------------------------------------
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID
BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($)*
- ------------------------------------------------------------------------------------------------------------------------------------
ACTUAL FUND RETURN**
- ------------------------------------------------------------------------------------------------------------------------------------
Class 1 1,000.00 930.72 3.48
Class 4 1,000.00 935.18 5.56
- ------------------------------------------------------------------------------------------------------------------------------------
HYPOTHETICAL 5% RETURN (2.5% FOR THE PERIOD)
- ------------------------------------------------------------------------------------------------------------------------------------
Class 1 1,000.00 1,021.01 3.67
Class 4 1,000.00 1,019.06 5.76
- ------------------------------------------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.73% FOR CLASS
1 AND 1.14% FOR CLASS 4, (FROM PERIOD JANUARY 1, 2008 - JUNE 30, 2008),
MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY
182/366 (TO REFLECT THE ONE-HALF YEAR PERIOD).
** ACTUAL FUND RETURNS FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2008 WERE AS
FOLLOWS: (6.93)% FOR CLASS 1 SHARES, AND SINCE INCEPTION (6.48)% FOR CLASS 4
SHARES.
4
<page>
Premier Growth Equity Fund (unaudited)
- --------------------------------------------------------------------------------
CHANGE IN VALUE OF A $10,000 INVESTMENT
CLASS 1 SHARES
- --------------------------------------------------------------------------------
[Line chart omitted -- plot points are as follows:]
GEI PREMIER GROWTH EQUITY S&P 500 INDEX
06/98 10,000.00 10,000.00
12/98 11,585.08 10,930.80
12/99 15,785.94 13,233.69
12/00 14,960.44 12,018.37
12/01 13,593.26 10,586.75
12/02 10,736.62 8,246.88
12/03 13,841.02 10,616.05
12/04 14,814.25 11,771.22
12/05 15,005.68 12,350.19
12/06 16,366.52 14,300.58
12/07 17,239.87 15,086.47
06/08 16,045.41 13,289.09
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED JUNE 30, 2008
- --------------------------------------------------------------------------------
CLASS 1 SHARES (Inception date: 12/12/97)
- --------------------------------------------------------------------------------
SIX ONE FIVE TEN ENDING VALUE OF A
MONTHS YEAR YEAR YEAR $10,000 INVESTMENT
- --------------------------------------------------------------------------------
Premier Growth Equity Fund -6.93% -7.32% 5.77% 4.84% $16,045
- --------------------------------------------------------------------------------
S&P 500 Index -11.91% -13.12% 7.59% 2.88% $13,289
- --------------------------------------------------------------------------------
Lipper peer group average* -10.06% -5.21% 7.53% 2.35%
- --------------------------------------------------------------------------------
CLASS 4 SHARES
- --------------------------------------------------------------------------------
[Line chart omitted -- plot points are as follows:]
GEI PREMIER GROWTH EQUITY S&P 500 INDEX
05/08 10,000.00 10,000.00
06/08 9,351.76 9,275.57
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED JUNE 30, 2008
- --------------------------------------------------------------------------------
CLASS 4 SHARES (Inception date: 5/1/08)
- --------------------------------------------------------------------------------
ONE SINCE ENDING VALUE OF A
MONTH INCEPTION $10,000 INVESTMENT
- --------------------------------------------------------------------------------
Premier Growth Equity Fund -7.12% -6.48% $9,352
- --------------------------------------------------------------------------------
S&P 500 Index -8.43% -7.24% $9,276
- --------------------------------------------------------------------------------
Lipper peer group average** -7.07% N/A
- --------------------------------------------------------------------------------
INVESTMENT PROFILE
A fund designed for investors who seek long-term growth of capital and future
income rather than current income by investing at least 80% of its net assets in
equity securities under normal circumstances. The Fund invests primarily in a
limited number of large- and medium-sized companies that the portfolio manager
believes have above-average growth histories and/or growth potential.
PORTFOLIO COMPOSITION AS OF JUNE 30, 2008
as a % of Market Value
- --------------------------------------------------------------------------------
Market Value of $80,081 (in thousands)
[Pie chart omitted -- plot points are as follows:]
Information Technology 35.1%
Consumer Discretionary 16.5%
Healthcare 12.7%
Financials 10.7%
Energy 8.6%
Materials 3.9%
Industrials 3.8%
Consumer Staples 3.7%
Short-Term 2.8%
Telecommunication Services 2.2%
Other Investments 0.0%***
TOP TEN LARGEST HOLDINGS AS OF JUNE 30, 2008
as a % of Market Value
- --------------------------------------------------------------------------------
Western Union Co. 4.39%
- --------------------------------------------------------------------------------
Schlumberger Ltd. 4.31%
- --------------------------------------------------------------------------------
Transocean, Inc. 4.30%
- --------------------------------------------------------------------------------
QUALCOMM, Inc. 4.27%
- --------------------------------------------------------------------------------
Intuit Inc. 3.82%
- --------------------------------------------------------------------------------
Dover Corp. 3.78%
- --------------------------------------------------------------------------------
PepsiCo, Inc. 3.71%
- --------------------------------------------------------------------------------
Liberty Media Entertainment Corp. (Series A) 3.63%
- --------------------------------------------------------------------------------
Cisco Systems, Inc. 3.57%
- --------------------------------------------------------------------------------
AFLAC Incorporated 3.21%
- --------------------------------------------------------------------------------
* LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR
THE SIX MONTHS, ONE YEAR, FIVE-YEAR, AND TEN-YEAR PERIODS INDICATED IN THE
LARGE-CAP GROWTH FUNDS PEER GROUP CONSISTING OF 207, 205, 173 AND 59
UNDERLYING ANNUITY FUNDS, RESPECTIVELY.
** LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR
THE ONE MONTH PERIOD INDICATED IN THE LARGE-CAP GROWTH FUNDS PEER GROUP
CONSISTING OF 219 UNDERLYING ANNUITY FUND, 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
<page>
PREMIER GROWTH EQUITY FUND
Schedule of Investments June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
PREMIER GROWTH EQUITY FUND
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK -- 97.7% +
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 16.6%
Bed Bath & Beyond, Inc......... 76,004 $ 2,135,712(a)
Carnival Corp.................. 69,183 2,280,272
Comcast Corp. (Class A)........ 133,493 2,504,329
Liberty Global, Inc. (Series C) 67,039 2,035,304(a)
Liberty Media Entertainment Corp.
(Series A)................... 119,852 2,904,014(a)
Lowe's Companies, Inc.......... 65,285 1,354,664
13,214,295
CONSUMER STAPLES -- 3.7%
PepsiCo, Inc................... 46,771 2,974,168
ENERGY -- 8.7%
Schlumberger Ltd............... 32,155 3,454,412
Transocean, Inc................ 22,606 3,444,928
6,899,340
FINANCIALS -- 10.7%
AFLAC Incorporated............. 40,925 2,570,090
CB Richard Ellis Group, Inc.
(Class A) 97,440 1,870,848(a)
Goldman Sachs Group, Inc....... 9,354 1,636,015
State Street Corp.............. 38,976 2,494,074(c)
8,571,027
HEALTHCARE -- 12.8%
Amgen, Inc..................... 39,951 1,884,089(a)
Genentech Inc.................. 18,514 1,405,213(a)
Johnson & Johnson.............. 27,283 1,755,388
Lincare Holdings Inc........... 46,771 1,328,296(a)
Medtronic, Inc................. 47,746 2,470,855
VCA Antech, Inc................ 17,929 498,068(a)
Zimmer Holdings, Inc........... 12,667 861,989(a)
10,203,898
INDUSTRIALS -- 3.8%
Dover Corp..................... 62,557 3,025,882
INFORMATION TECHNOLOGY -- 35.3%
Analog Devices, Inc............ 43,458 1,380,661
Cisco Systems, Inc............. 122,775 2,855,747(a,d)
Corning Incorporated........... 75,614 1,742,903
eBay, Inc...................... 67,234 1,837,505(a)
Intuit Inc..................... 111,082 3,062,531(a,d)
Iron Mountain Incorporated..... 49,695 1,319,402(a)
Microsoft Corp................. 86,722 2,385,722
Molex, Inc. (Class A).......... 79,316 1,817,130(d)
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Paychex, Inc................... 76,004 $ 2,377,405
QUALCOMM, Inc.................. 76,978 3,415,514
Research In Motion Ltd......... 14,616 1,708,610(a)
Western Union Co............... 142,263 3,516,741
Yahoo! Inc..................... 33,130 684,466(a)
28,104,337
MATERIALS -- 3.9%
Allegheny Technologies
Incorporated................. 14,811 877,996
Monsanto Co.................... 17,539 2,217,631
3,095,627
TELECOMMUNICATION SERVICES -- 2.2%
American Tower Corp. (Class A). 41,899 1,770,233(a)
TOTAL COMMAN STOCK
(COST $74,947,148)........... 77,858,807
- --------------------------------------------------------------------------------
OTHER INVESTMENTS -- 0.0%*
- --------------------------------------------------------------------------------
GEI Investment Fund
(COST $6,520)................ 4,955(e)
TOTAL INVESTMENTS IN SECURITIES
(COST $74,953,668)........... 77,863,762
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 2.8%
- --------------------------------------------------------------------------------
GE Money Market Fund
Institutional Class
1.93%........................ 2,217,111(b,f)
(COST $2,217,111)
TOTAL INVESTMENTS
(COST $77,170,779)........... 80,080,873
LIABILITIES IN EXCESS OF OTHER ASSETS,
NET-- (0.5)%................. (433,323)
-----------
NET ASSETS-- 100.0% ........... $79,647,550
===========
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
The GEI Premier Growth Equity had the following long futures contracts open at
June 30, 2008 (unaudited):
NUMBER CURRENT
EXPIRATION OF NOTIONAL UNREALIZED
DESCRIPTION DATE CONTRACTS VALUE DEPRECIATION
- --------------------------------------------------------------------------------
S&P 500 Index
Futures September 2008 2 $640,550 $(22,949)
See Notes to Schedule of Investments on page 7 and Notes to Financial
Statements.
6
<page>
Notes to Schedule of Investments June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
The views expressed in this document reflect our judgment as of the publication
date and are subject to change at any time without notice. The securities cited
may not represent current or future holdings and should not be considered as a
recommendation to purchase or sell a particular security. See the prospectus for
complete descriptions of investment objectives, policies, risks and permissible
investments.
(a) Non-income producing security.
(b) Coupon amount represents effective yield.
(c) State Street Corp. is the parent company of State Street Bank & Trust Co.,
the Fund's custodian and accounting agent.
(d) At June 30, 2008, 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 adviser of the Fund, also
serves as investment adviser of the GEI Investment Fund.
(f) GEAM, the investment adviser of the Fund, also serves as investment adviser
of the GE Money Market Fund.
* Less than 0.1%.
+ Percentages are based on net assets as of June 30, 2008.
7
<page>
Financial Highlights
Selected data based on a share outstanding throughout the periods indicated
- ------------------------------------------------------------------------------------------------------------------------------------
PREMIER GROWTH EQUITY FUND
--------------------------------------------------------------------- -------------
CLASS 1 CLASS 4
--------------------------------------------------------------------- -------------
6/30/08+ 12/31/07 12/31/06 12/31/05 12/31/04 12/31/03 6/30/08+
--------------------------------------------------------------------- -------------
INCEPTION DATE -- -- -- -- -- 12/12/97 5/1/08
Net asset value, beginning of period.... $78.95 $82.17 $75.65 $74.95 $70.46 $54.74 $78.52
INCOME/(LOSS) FROM INVESTMENT OPERATIONS:
Net investment income................ 0.09 0.23 0.35 0.24 0.47 0.11 (0.01)
Net realized and unrealized
gains/(losses) on investments..... (5.56) 4.19 6.51 0.73 4.48 15.72 (5.08)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM
INVESTMENT OPERATIONS................ (5.47) 4.42 6.86 0.97 4.95 15.83 (5.09)
- ------------------------------------------------------------------------------------------------------------------------------------
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.......... $73.48 $78.95 $82.17 $75.65 $74.95 $70.46 $73.43
====================================================================================================================================
TOTAL RETURN (A)........................ (6.93)% 5.34% 9.07% 1.29% 7.03% 28.91% (6.48)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $79,638 $94,720 $110,538 $126,682 $137,801 $143,202 $9
Ratios to average net assets:
Net investment income*............ 0.24% 0.24% 0.41% 0.30% 0.62% 0.20% (0.06)%
Expenses*......................... 0.73% 0.72% 0.71% 0.71% 0.71% 0.70% 1.14%
Portfolio turnover rate.............. 11% 29% 27% 34% 22% 24% 11%
NOTES TO FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(a) Total returns are historical and assume changes in share price and
reinvestment of dividends and capital gains and do not include the effect of
insurance contract charges.
* Annualized for periods less than one year.
+ Unaudited
See Notes to Financial Statements.
8
<page>
Statement of Assets
and Liabilities JUNE 30, 2008 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------
PREMIER
GROWTH
EQUITY FUND
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments in securities, at market (cost $74,947,148)................................................ $77,858,807
Investments in affiliated securities, at market (cost $6,520).......................................... 4,955
Short-term affiliated investments (at amortized cost).................................................. 2,217,111
Income receivables..................................................................................... 26,441
Variation margin receivable............................................................................ 2,615
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS....................................................................................... 80,109,929
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable for fund shares redeemed....................................................................... 362,728
Payable to GEAM........................................................................................ 52,429
Accrued other expenses................................................................................. 46,749
Other liabilities...................................................................................... 473
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES................................................................................. 462,379
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS................................................................................................ $79,647,550
====================================================================================================================================
NET ASSETS CONSIST OF:
Capital paid in........................................................................................ 73,841,191
Undistributed (distribution in excess of)
net investment income............................................................................... 111,709
Accumulated net realized gain (loss)................................................................... 2,807,505
Net unrealized appreciation/(depreciation) on:
Investments......................................................................................... 2,910,094
Futures............................................................................................. (22,949)
NET ASSETS................................................................................................ $79,647,550
CLASS 1:
NET ASSETS................................................................................................ 79,638,198
Shares outstanding ($0.01 par value; unlimited shares authorized)......................................... 1,083,819
Net asset value per share................................................................................. $73.48
CLASS 4:
NET ASSETS................................................................................................ 9,352
Shares outstanding ($0.01 par value; unlimited shares authorized)......................................... 127
Net asset value per share................................................................................. $73.43
See Notes to Financial Statements.
9
<page>
Statement of Operations
FOR THE SIX MONTHS ENDED JUNE 30, 2008 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------
PREMIER
GROWTH
EQUITY FUND
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividend ............................................................................... $ 393,326
Interest ............................................................................... 355
Interest from affiliated investments ................................................... 17,401
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME ............................................................................. 411,082
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees ....................................................... 278,683
Distributors Fees (Note 4)
Class 4 ............................................................................. 7
Transfer agent ......................................................................... 59
Trustee's fees ......................................................................... 1,152
Custody and accounting expenses ........................................................ 16,698
Professional fees ...................................................................... 9,752
Registration expenses 2,312
Other expenses ......................................................................... 3,085
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES BEFORE WAIVER AND REIMBURSEMENT ........................................... 311,748
- ------------------------------------------------------------------------------------------------------------------------------------
Less: Expenses reimbursed by the adviser (waiver related to Fund of Fund Investment) ... (1,006)
- ------------------------------------------------------------------------------------------------------------------------------------
Net expenses ........................................................................... 310,742
- ------------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) ............................................................. 100,340
====================================================================================================================================
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments ......................................................................... 2,655,471
Futures ............................................................................. 144,906
INCREASE (DECREASE) IN UNREALIZED APPRECIATION/
(DEPRECIATION) ON:
Investments ......................................................................... (9,263,547)
Futures ............................................................................. (26,236)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments ................................. (6,489,406)
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .......................... $(6,389,066)
====================================================================================================================================
See Notes to Financial Statements.
10
<page>
Statements of
Changes in Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
PREMIER
GROWTH
EQUITY FUND
- ------------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2008 DECEMBER 31,
(UNAUDITED) 2007
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income (loss).................................................... $ 100,340 $ 249,761
Net realized gain (loss) on investments, futures, written options,
and foreign currency transactions............................................... 2,800,377 10,488,507
Net increase (decrease) in unrealized appreciation/(depreciation)
on investments, futures, written options, and foreign currency translation...... (9,289,783) (5,067,710)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations........................................... (6,389,066) 5,670,558
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class 1......................................................................... -- (256,356)
Class 4......................................................................... -- --
Net realized gains
Class 1......................................................................... -- (8,134,986)
Class 4......................................................................... -- --
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS................................................................. -- (8,391,342)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations and distributions................. (6,389,066) (2,720,784)
- ------------------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares
Class 1......................................................................... 1,312,868 1,994,787
Class 4......................................................................... 10,000
Value of distributions reinvested
Class 1......................................................................... -- 8,391,337
Class 4......................................................................... -- --
Cost of shares redeemed
Class 1......................................................................... (10,006,695) (23,483,075)
Class 4......................................................................... -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from share transactions................................... (8,683,827) (13,096,951)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS............................................. (15,072,893) (15,817,735)
NET ASSETS
Beginning of period................................................................. 94,720,443 110,538,178
- ------------------------------------------------------------------------------------------------------------------------------------
End of period....................................................................... $ 79,647,550 $ 94,720,443
====================================================================================================================================
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD......... $ 111,709 $ 11,369
- ------------------------------------------------------------------------------------------------------------------------------------
CHANGES IN FUND SHARES
CLASS 1
Shares sold............................................................................ 17,508 23,508
Issued for distributions reinvested.................................................... -- 105,818
Shares redeemed........................................................................ (133,414) (274,777)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares................................................. (115,906) (145,451)
====================================================================================================================================
CLASS 4
Shares sold............................................................................ 127 --
Issued for distributions reinvested.................................................... -- --
Shares redeemed........................................................................ -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares................................................. 127 --
====================================================================================================================================
See Notes to Financial Statements.
11
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
1. ORGANIZATION OF THE COMPANY
GE Investments Funds, Inc. (the "Company") was incorporated under the laws of
the Commonwealth of Virginia on May 14, 1984 and is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company. The Company is composed of thirteen investment
portfolios (collectively the "Funds"), although only the following eleven are
currently being offered: U.S. Equity Fund, S&P 500 Index Fund, Premier Growth
Equity Fund (the "Fund"), Core Value Equity Fund, Mid-Cap Equity Fund, Small-Cap
Equity Fund, International Equity Fund, Total Return Fund, Income Fund, Money
Market Fund and Real Estate Securities Fund.
Shares of the Funds of the Company are offered only to insurance company
separate accounts that fund certain variable life insurance contracts and
variable annuity contracts. These insurance companies may include insurance
companies affiliated with GE Asset Management Incorporated ("GEAM"), the
investment adviser and administrator of each of the Funds.
2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the reporting period. Actual results may differ from
those estimates.
The following summarizes the significant accounting policies of the Fund:
SECURITY VALUATION AND 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 cost, which approximates market
value.
All assets and liabilities of the Fund initially expressed in foreign currency
values will be converted into U.S. dollars at the WM/Reuters exchange rate
computed at 11:00 a.m., Eastern time.
If prices are not readily available for a portfolio security, or if it is
believed that a price for a portfolio security does not represent its fair
value, the security may be valued using procedures approved by the Fund's Board
of Directors that are designed to establish its "fair" value. Those procedures
require that the fair value of a security be established by the fair valuation
committee. The fair valuation committee follows different protocols for
different types of investments and circumstances. The fair value procedures may
be used to value any investment by the Fund in the appropriate circumstances.
Examples of the types of securities that may be fair valued include: thinly
traded or illiquid investments, high-yield securities or foreign securities.
Foreign securities may be valued with the assistance of an independent fair
value pricing service in circumstances where it is believed that they have been
or would be materially affected by events occurring after the close of the
portfolio security's primary market and before the close of regular trading on
the NYSE. This independent fair value pricing service uses a computerized system
to appraise affected securities and portfolios taking into consideration various
factors and the fair value of such securities may be something other than the
last available quotation or other market price.
GEAM may also separately monitor portfolio securities and, consistent with the
Fund's fair value procedures, apply a different value to a portfolio security
than would be applied had it been priced using market quotations or by an
independent fair value pricing service.
12
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
Determining the fair value of securities involves the application of both
subjective and objective considerations. Security values may differ depending on
the methodology used to determine their values, and may differ from the last
quoted sale or closing price. No assurance can be given that use of these fair
value procedures will always better represent the price at which the Fund could
sell the affected portfolio security.
Security transactions are accounted for as of the trade date. Realized gains and
losses on investments sold are recorded on the basis of identified cost for both
financial statement and federal tax purposes.
The Fund adopted FASB Statement No. 157, FAIR VALUE MEASUREMENTS (FAS 157). FAS
157 establishes a single definition of fair value, a framework for measuring
fair value, and expanded disclosures about fair value measurements.
Various inputs are used in determining the value of the Fund's investments.
These inputs are classified into three broad levels:
Level 1 includes quoted prices in active markets of securities identical to
those of the Fund.
Level 2 includes: 1) quoted prices in active markets for similar securities to
those of the Fund; 2) quoted prices for identical or similar securities to those
of the Fund that trade in markets in which there are few transactions or the
quoted prices are not current; 3) prices based on observable market data such as
interest rates and yield curves, volatilities, bond prepayment speeds, and
credit risk and; 4) prices based principally on observable market data by use of
correlation techniques or other means.
Level 3 includes unobservable market inputs used to fair value securities. These
inputs are based on assumptions that market participants would use to price
securities and may include the adviser's own assumptions.
Other financial instruments are derivative instruments that are not reflected in
TOTAL INVESTMENTS, such as futures, forwards, swaps, and written options
contracts, which are valued based on the unrealized appreciation/depreciation of
the instrument.
Level 1 Level 2 Level 3 Total
- ---------------------------------------------------------------------------------------------------------------------------
Investments in Securities $ 80,075,918 $4,955 $ -- $80,080,873
Other Financial Instruments $ (22,949) $ -- $ -- $ (22,949)
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.
13
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
The Fund does not isolate the portion of the results of operations resulting
from changes in foreign exchange rates from the fluctuations arising from
changes in the market prices of securities during the period. Such fluctuations
are included in the net realized or unrealized gain or loss from investments.
Net realized gains or losses on foreign currency transactions represent net
gains or losses on sales and maturities of foreign currency contracts,
disposition of foreign currencies, the difference between the amount of net
investment income and withholding taxes accrued and the U.S. dollar amount
actually received or paid, and gains or losses between the trade and settlement
date on purchases and sales of securities. Net unrealized foreign exchange gains
and losses arising from changes in the value of other assets and liabilities as
a result of changes in foreign exchange rates are included as increases or
decreases in unrealized appreciation/depreciation on foreign currency related
transactions.
FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or
bond index futures contracts subject to certain limitations. The Fund may invest
in futures contracts to manage its exposure to the stock and bond markets and
fluctuations in currency values. Buying futures tends to increase the Fund's
exposure to the underlying instrument while selling futures tends to decrease
the Fund's exposure to the underlying instrument, or hedge other Fund
investments. The Fund will not enter into a transaction involving futures for
speculative purposes. The Fund's risks in using these contracts include changes
in the value of the underlying instruments, non-performance of the
counterparties r 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.
14
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
INCOME TAXES The Fund intends to comply with all sections of the Internal
Revenue Code applicable to regulated investment companies including the
distribution of substantially all of its taxable net investment income and net
realized capital gains to its shareholders. Therefore, no provision for federal
income tax has been made. The Fund is treated as a separate taxpayer for federal
income tax purposes.
At June 30, 2008, 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
- ---------------------------------------------------------------------------------------------------------------------------
$78,576,474 $9,905,986 $(8,381,666) $1,524,320
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.
15
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
3. LINE OF CREDIT
The Company shares a revolving credit facility of up to $150 million with a
number of its affiliates. The credit facility is with its custodian bank, State
Street Bank and Trust Company. The revolving credit facility requires the
payment of a commitment fee equal to 0.09% per annum on the daily unused portion
of the credit facility, payable quarterly. The portion borne by the Funds
generally is borne proportionally based upon net assets. In addition, the
Company has a $100 million uncommitted, unsecured line of credit with State
Street. 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 June 30,
2008.
4. AMOUNTS PAID TO AFFILIATES
GEAM, a registered investment adviser, was retained by the Company's Board of
Directors effective May 1, 1997 to act as investment adviser and administrator
of the Fund. GEAM's compensation for investment advisory and administrative
services is paid monthly based on the average daily net assets of the Fund at an
annualized rate of 0.65%.
GENPACT performs certain accounting and certain administration services not
provided by GEAM. For the period ending June 30, 2008, $696 was charged to the
Fund.
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 the Class 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 rate applicable is
0.45% for the Class 4 shares. Currently, Class 1 shares are not subject to a
Rule 12b-1 fee.
DIRECTORS' COMPENSATION The Fund pays no compensation to its directors who are
officers or employees of GEAM or its affiliates. Directors who are not such
officers or employees also serve in a similar capacity for other funds advised
by GEAM. Compensation paid to unaffiliated directors are reflected on the
Statement of Operations. These fees are allocated pro rata across all of the
mutual fund platforms and share classes served by the directors, including the
Fund, and are based upon the relative net assets of each fund within such
platforms. (For additional information about directors compensation please refer
to the Statement of Additional Information.)
5. INVESTMENT TRANSACTIONS
PURCHASES AND SALES OF SECURITIES The cost of purchases and the proceeds from
sales of investments, other than short-term securities and options, for the
period ended June 30, 2008 were as follows:
Purchases Sales
- -----------------------------------------------------------------
$9,490,641 $17,852,289
SECURITY LENDING At June 30, 2008, the Fund did not participate in securities
lending.
16
<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 59
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 47
POSITION(S) HELD WITH FUND Executive Vice President
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - less than one year
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General
Counsel and Secretary of GEAM since July 2007; Senior Vice President and General
Counsel - Marketing and Client Services (formerly Asset Management Services), at
GEAM and Senior Vice President and General Counsel of GEAMS from February 1997
to June 2007; Vice President and Associate General Counsel of GEAM from October
1992 to February 1997; Secretary of Fund from 1997 to June 2007; Vice President
of Fund from September 2003 to June 2007; Vice President of GE Institutional
Funds and GE LifeStyle Funds from September 2003 to June 2007; Secretary of GE
Institutional Funds and GE LifeStyle Funds from 1997 to June 2007; Vice
President of Elfun Funds and GE Savings & Security Funds from October 2003 to
June 2007; Assistant Secretary of Elfun Funds and GE Savings & Security Funds
from 1998 to June 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional
Funds, GE LifeStyle Funds, Elfun Funds and GE Savings & Security Funds since
July 2007.
17
<page>
Additional Information (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCOTT H. RHODES
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 49
POSITION(S) HELD WITH FUND Treasurer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 2 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds Operations
Manager since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle
Funds and GE Investments Funds since November 2005 and Elfun Funds and GE
Savings & Security Funds since September 2005; from August 2004 to September
2005 Vice President, U.S. Trust Company, N.A. and Assistant Treasurer of
Excelsior Funds, Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds,
Inc.; from January 2004 to August 2004, Vice President BlackRock Financial
Management, Inc.; from December 1996 to November 2003, Controller - Mutual
Funds, American Skandia Investment Services, Inc. and Assistant Treasurer of
American Skandia Trust and American Skandia Advisor Funds, Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
- --------------------------------------------------------------------------------
JEANNE M. LAPORTA
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 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
18
<page>
Additional Information (unaudited)
- --------------------------------------------------------------------------------
NON-INTERESTED DIRECTORS
- --------------------------------------------------------------------------------
JOHN R. COSTANTINO
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 62
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 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 60
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 72
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 9 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon
Brothers Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds and GE LifeStyle Funds since their inception.
- --------------------------------------------------------------------------------
The Statement of Additional Information for the Fund includes additional
information about the Directors and Officers and is available, without charge,
upon request by calling 1-800-242-0134.
19
<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
Daniel O. Colao, EVP, CHIEF FINANCIAL OFFICER (AS OF JULY 28, 2008)
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)
David Wiederecht, EVP, PRESIDENT - INVESTMENT STRATEGIES
20
<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.
Core Value Equity Fund
Semi-Annual Report
JUNE 30, 2008
[GE LOGO OMITTED]
GE Investments Funds, Inc.
Core Value Equity Fund
- --------------------------------------------------------------------------------
Contents
NOTES TO PERFORMANCE................................................... 1
MANAGER REVIEW AND SCHEDULE OF INVESTMENTS............................. 2
NOTES TO SCHEDULE OF INVESTMENTS....................................... 8
FINANCIAL STATEMENTS
Financial Highlights............................................. 9
Statement of Assets and Liabilities............................... 10
Statement of Operations........................................... 11
Statements of Changes in Net Assets............................... 12
Notes to Financial Statements..................................... 13
ADDITIONAL INFORMATION................................................. 18
INVESTMENT TEAM........................................................ 21
This report is prepared for Policyholders of certain variable contracts and may
be distributed to others only if preceded or accompanied by the variable
contract's current prospectus and the current prospectus of the Funds available
for investments thereunder.
<page>
Notes to Performance June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
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 shown are net of Fund expenses but do not reflect fees and charges
associated with the variable contracts such as administrative fees, account
charges and surrender charges, which, if reflected, would reduce the Fund's
total returns for all periods shown.
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>
Core Value Equity Fund
- --------------------------------------------------------------------------------
THE CORE VALUE EQUITY FUND IS CO-MANAGED BY PAUL C. REINHARDT AND STEPHEN V.
GELHAUS. MESSRS. REINHARDT AND GELHAUS BOTH MANAGE THE FUND AS A COLLABORATIVE
TEAM. BOTH PORTFOLIO MANAGERS HAVE THE AUTHORITY TO INCREASE OR DECREASE
EXISTING POSITIONS IN THE FUND; HOWEVER, MR. REINHARDT, AS LEAD MANAGER, IS
VESTED WITH THE AUTHORITY TO PURCHASE SECURITIES THAT ARE NEW TO THE FUND OR TO
DIVEST THE FUND OF ITS ENTIRE POSITION IN A SECURITY. MR. REINHARDT ALSO HAS
VETO AUTHORITY OVER MR. GELHAUS' TRADE DECISIONS.
PAUL REINHARDT (PICTURED BELOW) IS A SENIOR VICE PRESIDENT OF GE ASSET
MANAGEMENT AND LEAD PORTFOLIO MANAGER OF THE CORE VALUE EQUITY FUND. HE HAS
SERVED IN THIS CAPACITY SINCE APRIL 2002. MR. REINHARDT JOINED GE ASSET
MANAGEMENT IN 1982 AS AN EQUITY ANALYST AND HAS BEEN A PORTFOLIO MANAGER SINCE
1987.
STEPHEN V. GELHAUS IS A VICE PRESIDENT OF GE ASSET MANAGEMENT. HE HAS BEEN A
MEMBER OF THE PORTFOLIO MANAGEMENT TEAM FOR THE CORE VALUE EQUITY FUND SINCE
JANUARY 2002. MR. GELHAUS JOINED GE ASSET MANAGEMENT IN JUNE 1991 AND WAS A
RESEARCH ANALYST IN U.S. EQUITIES GROUP FROM 1995 THROUGH 2001 AND BECAME AN
ASSOCIATE PORTFOLIO MANAGER FOR THE CORE VALUE EQUITY FUND IN AUGUST 1999.
Q. HOW DID THE CORE VALUE EQUITY FUND PERFORM COMPARED TO ITS BENCHMARK AND
LIPPER PEER GROUP FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2008?
A. For the six-month period ended June 30, 2008, the Core Value Equity Fund
returned -8.96% for the Class 1 shares and -5.80% for the Class 4 shares.
The S&P 500 Index, the Fund's benchmark, returned -11.91% and the Fund's
Lipper peer group of 207 Large-Cap Core funds returned an average of -11.56%
for the same period.
Q. WHAT MARKET CONDITIONS IMPACTED FUND PERFORMANCE?
A. The first half of the year proved challenging for
U.S. equity investors, as the housing recession, skyrocketing commodity
prices and tight credit conditions threatened the outlook for economic
growth and corporate profits. Policymaker response was significant during
the period as the Federal Reserve lowered interest rates and opened up its
discount window to investment banks. Despite these actions, credit remained
scarce, impeding economic growth and contributing to stock market
volatility. Consumers began to receive the government's fiscal stimulus
checks, but investors feared that the windfall might be consumed at the gas
pump in a $140 per barrel of oil environment.
Only the inflationary energy (+9%) and materials (+1%) sectors had positive
returns during the period. Financials (-30%) was by far the worst performing
sector, followed by telecommunications (-17%), industrials (-14%), consumer
discretionary (-13%) and technology (-13%). Healthcare (-13%), traditionally
a defensive sector, also lagged as it exhibited some discretionary
characteristics, and suffered regulatory uncertainty stemming from the
upcoming presidential elections.
Q. WHAT WERE THE PRIMARY DRIVERS FUND PERFORMANCE?
A. The most significant contributions to Fund performance came from the
financials and technology sectors. Underweighting credit-sensitive banks and
capital markets companies during the continuing fallout from the subprime
collapse benefited Fund
[PHOTO OMITTED]
2
<page>
Q&A
- --------------------------------------------------------------------------------
performance in financials. Exiting AIG also aided returns during the period,
and AON (-3%) was a strong relative performer. Within technology, a new
position in Apple helped Fund performance as the company rallied +40% on its
announcement of its new iPhone product since we initiated our position in
the stock. Many large technology companies have fared relatively well year
to date, as they tend to spend less on fuel as a percentage of costs and
benefit from overseas economic growth as well as a weak dollar, some of the
same factors that have pushed up oil prices in 2008. Some of our technology
holdings that have benefited from these tailwinds included IBM (+11%),
Affiliated Computer Services (+19%), Taiwan Semiconductor (+10%), and
Western Union (+2%).
During a strong period of relative performance, there were a number of
detractors in the Fund. First of all, underweighting road and rail companies
that rallied 26% year-to-date weighed negatively on returns. Our underweight
in the energy sector also hurt Fund performance. Although the Fund had
profited from the energy sector year-to-date as oil prices have continued to
soar, our underweight in this sector more than offset our positive stock
selection in the sector, i.e. the Fund's energy holdings returned +15%
versus +9% for the benchmark sector. Weakness in individual holdings,
including Microsoft and Viacom (both down 22%) and Freddie Mac (-20%) was
more than offset by strength among other holdings in their sectors
(technology, media and financials, respectively).
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 an
economic slowdown.
As of the end of the second quarter, we were positioned with overweight's in
both consumer nondiscretionary and technology. At the same time, we have
underweighted energy and financials for valuation and fundamental reasons.
We remain focused on a long-term investment horizon and continue to utilize
a bottom-up, research-driven, fundamental approach to stock selection. The
Fund also continues to emphasize larger companies that can compete globally.
Over the past six months, many of these holdings were selling at discounts
or on par with smaller, more U.S.-centric companies. Our objective for many
of our holdings is for both valuation improvement and earnings growth to
drive relative stock appreciation.
3
<page>
Core Value Equity Fund
- --------------------------------------------------------------------------------
Understanding Your Fund's Expenses
As a shareholder of the Fund you incur ongoing expenses, which include portfolio
management fees, professional fees, administrative fees and other Fund expenses.
The following example is intended to help you understand your ongoing costs (in
dollars) of investing in the Fund and to compare these costs with the ongoing
costs of investing in other mutual funds.
To illustrate these ongoing costs, we have provided an example and calculated
the expenses paid by investors during the period. The information in the
following table is based on an investment of $1,000, which is invested at the
beginning of the period and held for the entire six-month period ended June 30,
2008.
ACTUAL EXPENSES
The first section of the table provides information about actual account values
and actual expenses. You may use the information in this section, together with
the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JANUARY 1, 2008 - JUNE 30, 2008
- ------------------------------------------------------------------------------------------------------------------------------------
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID
BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($)*
- ------------------------------------------------------------------------------------------------------------------------------------
ACTUAL FUND RETURN**
- ------------------------------------------------------------------------------------------------------------------------------------
Class 1 1,000.00 910.43 3.93
Class 4 1,000.00 941.96 6.07
- ------------------------------------------------------------------------------------------------------------------------------------
HYPOTHETICAL 5% RETURN (2.5% FOR THE PERIOD)
- ------------------------------------------------------------------------------------------------------------------------------------
Class 1 1,000.00 1,020.47 4.22
Class 4 1,000.00 1,018.58 6.26
- ------------------------------------------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.84% FOR CLASS
1 AND 1.24% FOR CLASS 4, (FROM PERIOD JANUARY 1, 2008 - JUNE 30, 2008),
MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY
182/366 (TO REFLECT THE ONE-HALF YEAR PERIOD).
** ACTUAL FUND RETURNS FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2008 WERE AS
FOLLOWS: (8.96)% FOR CLASS 1 SHARES, AND SINCE INCEPTION (5.80)% FOR CLASS 4
SHARES.
4
<page>
Core Value Equity Fund (unaudited)
- --------------------------------------------------------------------------------
CHANGE IN VALUE OF A $10,000 INVESTMENT
CLASS 1 SHARES
[Line chart omitted -- plot points are as follows:]
GEI CORE VALUE EQUITY FUND S&P 500 INDEX
04/28/00 10,000.00 10,000.00
12/00 9,978.58 9,215.42
12/01 9,105.15 8,118.23
12/02 7,505.73 6,324.32
12/03 9,310.99 8,142.00
12/04 10,202.12 9,027.22
12/05 10,616.30 9,469.75
12/06 12,511.41 10,965.42
12/07 13,774.88 11,568.17
06/08 12,541.12 10,190.27
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED JUNE 30, 2008
- ---------------------------------------------------------------------------------------------
CLASS 1 SHARES (Inception date: 4/28/00)
- ---------------------------------------------------------------------------------------------
SIX ONE FIVE SINCE ENDING VALUE OF A
MONTHS YEAR YEAR INCEPTION $10,000 INVESTMENT
- ---------------------------------------------------------------------------------------------
Core Value Equity Fund -8.96% -7.06% 8.82% 2.81% $12,541
- ---------------------------------------------------------------------------------------------
S&P 500 Index -11.91% -13.12% 7.59% 0.15% $10,190
- ---------------------------------------------------------------------------------------------
Lipper peer group average* -11.56% -12.51% 7.31% N/A
- ---------------------------------------------------------------------------------------------
CLASS 4 SHARES (Inception date: 5/1/08)
[Line chart omitted -- plot points are as follows:]
GEI CORE VALUE EQUITY FUND S&P 500 INDEX
04/28/00 10,000.00 10,000.00
05/08 10,000.00 10,000.00
06/08 9,419.55 9,275.57
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED JUNE 30, 2008
- --------------------------------------------------------------------------------
CLASS 4 SHARES (Inception date: 5/1/08)
- --------------------------------------------------------------------------------
ONE SINCE ENDING VALUE OF A
MONTH INCEPTION $10,000 INVESTMENT
- --------------------------------------------------------------------------------
Core Value Equity Fund -6.75% -5.80% $9,420
- --------------------------------------------------------------------------------
S&P 500 Index -8.43% -7.24% $9,276
- --------------------------------------------------------------------------------
Lipper peer group average** -8.12% N/A
- --------------------------------------------------------------------------------
INVESTMENT PROFILE
A fund designed for investors who seek long-term growth of capital and future
income by investing at least 80% of its net assets in equity securities under
normal circumstances. The Fund invests primarily in U.S. companies that the
portfolio manager believes are undervalued by the market but have solid growth
prospects.
PORTFOLIO COMPOSITION AS OF JUNE 30, 2008
as a % of Market Value
- --------------------------------------------------------------------------------
Market Value of $31,179 (in thousands)
[Pie chart omitted -- plot points are as follows:]
Information Technology 20.0%
Consumer Staples 15.0%
Energy 12.3%
Financials 12.0%
Healthcare 11.3%
Consumer Discretionary 9.1%
Industrials 7.4%
Utilities 4.9%
Materials 4.4%
Telecommunication Services 2.2%
Short-Term 1.4%
Other Investments 0.0%
TOP TEN LARGEST HOLDINGS AS OF JUNE 30, 2008
as a % of Market Value
- --------------------------------------------------------------------------------
Exxon Mobil Corp. 3.41%
- --------------------------------------------------------------------------------
Microsoft Corp. 2.96%
- --------------------------------------------------------------------------------
PepsiCo, Inc. 2.49%
- --------------------------------------------------------------------------------
Kimberly-Clark Corp. 2.44%
- --------------------------------------------------------------------------------
Omnicom Group, Inc. 2.31%
- --------------------------------------------------------------------------------
Oracle Corp. 2.06%
- --------------------------------------------------------------------------------
Cisco Systems, Inc. 2.06%
- --------------------------------------------------------------------------------
Dominion Resources, Inc. 2.04%
- --------------------------------------------------------------------------------
Hess Corp. 1.93%
- --------------------------------------------------------------------------------
Amgen, Inc. 1.92%
- --------------------------------------------------------------------------------
* LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR
THE SIX MONTHS, ONE YEAR AND FIVE-YEAR PERIODS INDICATED IN THE LARGE-CAP
CORE FUNDS PEER GROUP CONSISTING OF 207, 207 AND 166 UNDERLYING ANNUITY
FUNDS, RESPECTIVELY.
** LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR
THE ONE MONTH PERIOD INDICATED IN THE LARGE-CAP CORE FUNDS PEER GROUP
CONSISTING OF 210 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
<page>
CORE VALUE EQUITY FUND
Schedule of Investments June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
CORE VALUE EQUITY FUND
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK -- 96.7% +
CONSUMER DISCRETIONARY -- 9.1%
Bed Bath & Beyond, Inc......... 7,836 $ 220,192(a)
Cablevision Systems Corp....... 6,813 153,974(a)
Comcast Corp. (Class A)........ 15,670 293,969
Darden Restaurants, Inc........ 3,417 109,139
Lowe's Companies, Inc.......... 2,085 43,264
News Corp. (Class A)........... 13,626 204,935
Omnicom Group, Inc............. 16,079 721,626
The Walt Disney Co............. 7,018 218,962
Time Warner, Inc............... 39,857 589,884(c)
Viacom Inc. (Class B).......... 9,061 276,723(a)
2,832,668
CONSUMER STAPLES -- 15.1%
Altria Group, Inc.............. 9,585 197,068
Clorox Co...................... 7,017 366,287
Diageo PLC ADR................. 3,133 231,435
General Mills, Inc............. 6,133 372,702
Kimberly-Clark Corp............ 12,740 761,597
McCormick & Company, Inc....... 10,084 359,595
Nestle S.A. ADR................ 2,424 273,548
Pepsi Bottling Group, Inc...... 5,655 157,888
PepsiCo, Inc................... 12,196 775,544
Procter & Gamble Co............ 9,401 571,675
Sara Lee Corp.................. 9,197 112,663
The Estee Lauder Companies Inc.
(Class A).................... 4,769 221,520
Wal-Mart Stores, Inc........... 4,974 279,539
4,681,061
ENERGY -- 12.4%
Apache Corp.................... 1,636 227,404
Exxon Mobil Corp............... 12,059 1,062,760(c)
Halliburton Co................. 9,948 527,940
Hess Corp...................... 4,769 601,800
Marathon Oil Corp.............. 6,541 339,282
Nabors Industries Ltd.......... 4,088 201,252(a)
National Oilwell Varco, Inc.... 2,725 241,762(a)
Suncor Energy, Inc............. 1,362 79,159
Transocean, Inc................ 2,248 342,573
Valero Energy Corp............. 5,451 224,472
3,848,404
FINANCIALS -- 11.6%
ACE Ltd........................ 4,633 255,232
Allstate Corp.................. 3,066 139,779
American Express Co............ 11,244 423,561
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Ameriprise Financial, Inc...... 6,541 $ 266,022
AON Corp....................... 7,426 341,150
Bank of New York Mellon Corp... 10,560 399,485
BlackRock, Inc................. 681 120,537
Chubb Corp..................... 7,018 343,952
JP Morgan Chase & Co........... 12,945 444,143
Marsh & McLennan
Companies, Inc............... 4,769 126,617
Metlife, Inc................... 8,176 431,448
Prudential Financial, Inc...... 1,372 81,963
US Bancorp..................... 8,516 237,511
3,611,400
HEALTHCARE -- 11.4%
Abbott Laboratories............ 3,551 188,096
Aetna, Inc..................... 3,134 127,021
Amgen, Inc..................... 12,683 598,130(a)
Baxter International, Inc...... 4,088 261,387
Boston Scientific Corp......... 27,254 334,952(a)
Bristol-Myers Squibb Co........ 15,194 311,933
Covidien Ltd................... 2,520 120,683
Johnson & Johnson.............. 2,725 175,326
McKesson Corp.................. 6,133 342,896
Merck & Company, Inc........... 6,473 243,967
Thermo Fisher Scientific, Inc.. 2,086 116,253(a)
UnitedHealth Group, Inc........ 5,042 132,352
Wyeth.......................... 12,059 578,350
3,531,346
INDUSTRIALS -- 5.5%
ABB Ltd. ADR................... 9,019 255,418(a)
Cooper Industries Ltd.......... 6,131 242,174
Deere & Co..................... 2,521 181,840
Eaton Corp..................... 2,862 243,184
General Dynamics Corp.......... 3,406 286,785
ITT Corp....................... 3,680 233,054
Koninklijke Philips
Electronics N.V. 2,656 89,773
Rockwell Collins, Inc.......... 1,704 81,724
Siemens AG ADR................. 937 103,192
1,717,144
INFORMATION TECHNOLOGY -- 20.1%
Affiliated Computer Services, Inc.
(Class A).................... 4,429 236,907(a)
Analog Devices, Inc............ 7,154 227,283(c)
Cisco Systems, Inc............. 27,593 641,813(a,c)
Corning Incorporated........... 6,813 157,040
Dell, Inc...................... 7,699 168,454(a)
Fidelity National Information
Services, Inc................ 4,292 158,418
Hewlett-Packard Co............. 10,424 460,845
Intel Corp..................... 25,549 548,793
International Business
Machines Corp................ 3,884 460,371
Intuit Inc..................... 4,633 127,732(a)
See Notes to Schedule of Investments on page 8 and Notes to Financial
Statements.
6
<page>
CORE VALUE EQUITY FUND
Schedule of Investments June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Lam Research Corp............... 4,837 $ 174,858(a)
Maxim Integrated Products, Inc. 10,484 221,737
Microchip Technology Inc....... 1,390 42,451
Microsoft Corp................. 33,539 922,658(c)
National Semiconductor Corp.... 7,766 159,514
Oracle Corp.................... 30,656 643,776(a,c)
Taiwan Semiconductor
Manufacturing
Company Ltd. ADR............. 19,758 215,559(a)
Texas Instruments Incorporated. 12,537 353,042
Western Union Co............... 12,263 303,141
6,224,392
MATERIALS -- 4.4%
Alcoa, Inc..................... 6,030 214,789
Allegheny Technologies
Incorporated................. 2,725 161,538
Barrick Gold Corp.............. 9,266 421,603
Dow Chemical Co................ 3,202 111,782
Freeport-McMoRan Copper &
Gold, Inc.................... 2,180 255,474
Praxair, Inc................... 487 45,895
Vulcan Materials Co............ 2,725 162,900
1,373,981
TELECOMMUNICATION SERVICES -- 2.2%
AT&T, Inc...................... 4,292 144,597
Verizon Communications, Inc.... 11,542 408,587
Vodafone Group, PLC ADR........ 4,088 120,432
673,616
UTILITIES -- 4.9%
American Electric Power
Company, Inc................. 7,018 282,334
Dominion Resources, Inc........ 13,423 637,458
Edison International........... 7,358 378,054
Entergy Corp................... 1,908 229,876
1,527,722
TOTAL COMMON STOCK
(COST $28,792,566)........... 30,021,734
EXCHANGE TRADED FUNDS -- 2.3%
Financial Select Sector
SPDR Fund.................... 6,686 135,458(e)
Industrial Select Sector
SPDR Fund.................... 17,051 579,904(c,e)
TOTAL EXCHANGE TRADED FUNDS
(COST $719,059).............. 715,362
VALUE
- --------------------------------------------------------------------------------
OTHER INVESTMENTS -- 0.0%*
- --------------------------------------------------------------------------------
GEI Investment Fund
(COST $19,083)............... $ 14,503(d)
TOTAL INVESTMENTS IN SECURITIES
(COST $29,530,708)........... 30,751,599
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 1.4%
- --------------------------------------------------------------------------------
GE Money Market Fund
Institutional Class
1.93%........................ 426,963(b,f)
(COST $426,963)
TOTAL INVESTMENTS
(COST $29,957,671)........... 31,178,562
LIABILITIES IN EXCESS OF OTHER ASSETS,
NET-- (0.4)%................. (130,268)
-----------
NET ASSETS-- 100.0% ........... $31,048,294
===========
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
The GEI Core Value Equity Fund had the following long futures contracts open at
June 30, 2008 (unaudited):
NUMBER CURRENT
EXPIRATION OF NOTIONAL UNREALIZED
DESCRIPTION DATE CONTRACTS VALUE DEPRECIATION
- --------------------------------------------------------------------------------
S&P 500 Index
Futures September 2008 1 $320,275 $(19,645)
See Notes to Schedule of Investments on page 8 and Notes to Financial
Statements.
7
<page>
Notes to Schedule of Investments June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
The views expressed in this document reflect our judgment as of the publication
date and are subject to change at any time without notice. The securities cited
may not represent current or future holdings and should not be considered as a
recommendation to purchase or sell a particular security. See the prospectus for
complete descriptions of investment objectives, policies, risks and permissible
investments.
(a) Non-income producing security.
(b) Coupon amount represents effective yield.
(c) At June 30, 2008, all or a portion of this security was pledged to cover
collateral requirements for futures, options, forward foreign currency
contracts and/or TBA's.
(d) GE Asset Management ("GEAM"), the investment adviser of the Fund, also
serves as investment adviser of the GEI Invstment Fund.
(e) Sponsored by SSgA Funds Management, Inc., an affiliate of State Street Bank
& Trust Co., the Fund's custodian and accounting agent.
(f) GEAM, the investment adviser of the Fund, also serves as investment adviser
of the GE Money Market Fund.
* Less than 0.1%.
+ Percentages are based on net assets as of June 30, 2008.
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
- ------------------------------------------------------------------------------------------------------------------------------------
CORE VALUE EQUITY FUND
------------------------------------------------------------------------------------
CLASS 1 CLASS 4
-------------------------------------------------------------------- --------------
6/30/08+ 12/31/07 12/31/06 12/31/05 12/31/04 12/31/03 6/30/08+
-------------------------------------------------------------------- --------------
INCEPTION DATE -- -- -- -- -- 4/28/00 5/1/08
Net asset value, beginning of period.... $10.16 $10.70 $10.01 $9.77 $9.02 $7.36 $9.82
INCOME/(LOSS) FROM INVESTMENT OPERATIONS:
Net investment income................ 0.04 0.12 0.17 0.11 0.11 0.11 0.01
Net realized and unrealized
gains/(losses) on investments..... (0.95) 0.97 1.62 0.29 0.75 1.66 (0.58)
TOTAL INCOME/(LOSS) FROM
INVESTMENT OPERATIONS................ (0.91) 1.09 1.79 0.40 0.86 1.77 (0.57)
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.......... $9.25 $10.16 $10.70 $10.01 $9.77 $9.02 $9.25
TOTAL RETURN (A)........................ (8.96)% 10.10% 17.85% 4.06% 9.57% 24.05% (5.80)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $31,039 $37,765 $39,683 $37,115 $37,128 $29,989 $9
Ratios to average net assets:
Net investment income*............ 0.90% 0.96% 1.55% 1.13% 1.26% 1.16% 0.53%
Expenses*......................... 0.84% 0.81% 0.81% 0.80% 0.80% 0.73% 1.24%
Portfolio turnover rate.............. 30% 45% 42% 36% 53% 78% 30%
NOTES TO FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(a) Total returns are historical and assume changes in share price and
reinvestment of dividends and capital gains and do not include the effect of
insurance contract charges.
* Annualized for periods less than one year.
+ Unaudited
See Notes to Financial Statements.
9
<page>
Statement of Assets
and Liabilities JUNE 30, 2008 (UNAUDITED)
- -------------------------------------------------------------------------------------------------------------------------------
CORE VALUE
EQUITY
FUND
- -------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments in securities, at market (cost $29,511,625).............................................. $30,737,096
Investments in affiliated securities, at market (cost $19,083)........................................ 14,503
Short-term affiliated investments (at amortized cost).................................................. 426,963
Income receivables..................................................................................... 40,647
Variation margin receivable............................................................................ 280
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS....................................................................................... 31,219,489
- -------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased...................................................................... 98,311
Payable for fund shares redeemed....................................................................... 11,389
Payable to GEAM........................................................................................ 8,676
Accrued other expenses................................................................................. 52,615
Other liabilities...................................................................................... 204
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES.................................................................................. 171,195
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSETS................................................................................................ $31,048,294
===============================================================================================================================
NET ASSETS CONSIST OF:
Capital paid in........................................................................................ 28,745,846
Undistributed (distribution in excess of)
net investment income............................................................................... 154,516
Accumulated net realized gain (loss)................................................................... 946,686
Net unrealized appreciation/(depreciation) on:
Investments......................................................................................... 1,220,891
Futures............................................................................................. (19,645)
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSETS................................................................................................ $31,048,294
===============================================================================================================================
CLASS 1:
NET ASSETS................................................................................................ 31,038,874
Shares outstanding ($0.01 par value; unlimited shares authorized)......................................... 3,354,421
Net asset value per share................................................................................. $9.25
CLASS 4:
NET ASSETS................................................................................................ 9,420
Shares outstanding ($0.01 par value; unlimited shares authorized)......................................... 1,018
Net asset value per share................................................................................. $9.25
See Notes to Financial Statements.
10
<page>
Statement of Operations
FOR THE SIX MONTHS ENDED JUNE 30, 2008 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------
CORE VALUE
EQUITY
FUND
- ------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividend .............................................................................. $ 284,854
Interest .............................................................................. 1,557
Interest from affiliated investments .................................................. 6,047
Less: Foreign taxes withheld .......................................................... (3,307)
- ------------------------------------------------------------------------------------------------------------------
TOTAL INCOME ............................................................................ 289,151
- ------------------------------------------------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees ...................................................... 108,422
Distributors Fees (Note 4)
Class 4 ............................................................................ 7
Transfer agent ........................................................................ 23
Trustee's fees ........................................................................ 457
Custody and accounting expenses ....................................................... 19,603
Professional fees ..................................................................... 8,662
Registration expenses ................................................................. 1,727
Other expenses ........................................................................ 1,281
- ------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES BEFORE WAIVER AND REIMBURSEMENT .......................................... 140,182
- ------------------------------------------------------------------------------------------------------------------
Less: Expenses reimbursed by the adviser (waiver related to Fund of Fund Investment) .. (350)
- ------------------------------------------------------------------------------------------------------------------
Net expenses .......................................................................... 139,832
- ------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) ............................................................ 149,319
==================================================================================================================
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments ........................................................................ 699,813
Futures ............................................................................ 22,215
Foreign currency transactions ...................................................... (2)
INCREASE (DECREASE) IN UNREALIZED APPRECIATION/
(DEPRECIATION) ON:
Investments ........................................................................ (4,136,238)
Futures ............................................................................ (19,610)
- ------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments ................................ (3,433,862)
- ------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ......................... $(3,284,543)
==================================================================================================================
See Notes to Financial Statements.
11
<page>
Statements of
Changes in Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
CORE VALUE
EQUITY
FUND
- ------------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2008 DECEMBER 31,
(UNAUDITED) 2007
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income (loss).................................................... $ 149,319 $ 380,874
Net realized gain (loss) on investments, futures, written options,
and foreign currency transactions............................................... 722,026 4,802,982
Net increase (decrease) in unrealized appreciation/(depreciation)
on investments, futures, written options, and foreign
currency translation............................................................ (4,155,888) (1,343,366)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations........................................... (3,284,543) 3,840,490
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class 1......................................................................... -- (375,677)
Class 4......................................................................... --
Net realized gains
Class 1......................................................................... -- (4,867,273)
Class 4......................................................................... --
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS................................................................. -- (5,242,950)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations and distributions................. (3,284,543) (1,402,460)
- ------------------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares
Class 1......................................................................... 293,138 1,494,210
Class 4......................................................................... 10,000
Value of distributions reinvested
Class 1......................................................................... -- 5,242,950
Class 4......................................................................... -- --
Cost of shares redeemed
Class 1......................................................................... (3,735,732) (7,251,969)
Class 4......................................................................... -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from share transactions................................... (3,432,594) (514,809)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS............................................. (6,717,137) (1,917,269)
NET ASSETS
Beginning of period................................................................. 37,765,431 39,682,700
- ------------------------------------------------------------------------------------------------------------------------------------
End of period....................................................................... $31,048,294 $37,765,431
====================================================================================================================================
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD......... $ 154,516 $ 5,197
- ------------------------------------------------------------------------------------------------------------------------------------
CHANGES IN FUND SHARES
CLASS 1
Shares sold............................................................................ 30,576 133,227
Issued for distributions reinvested.................................................... -- 513,512
Shares redeemed........................................................................ (393,992) (638,176)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares................................................. (363,416) 8,563
====================================================================================================================================
CLASS 4
Shares sold............................................................................ 1,018 --
Issued for distributions reinvested.................................................... -- --
Shares redeemed........................................................................ -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares................................................. 1,018 --
====================================================================================================================================
See Notes to Financial Statements.
12
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
1. ORGANIZATION OF THE COMPANY
GE Investments Funds, Inc. (the "Company") was incorporated under the laws of
the Commonwealth of Virginia on May 14, 1984 and is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company. The Company is composed of thirteen investment
portfolios (collectively the "Funds"), although only the following eleven are
currently being offered: U.S. Equity Fund, S&P 500 Index Fund, Premier Growth
Equity Fund, Core Value Equity Fund (the "Fund"), Mid-Cap Equity Fund, Small-Cap
Equity Fund, International Equity Fund, Total Return Fund, Income Fund, Money
Market Fund and Real Estate Securities Fund.
Shares of the Funds of the Company are offered only to insurance company
separate accounts that fund certain variable life insurance contracts and
variable annuity contracts. These insurance companies may include insurance
companies affiliated with GE Asset Management Incorporated ("GEAM"), the
investment adviser and administrator of each of the Funds.
2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the reporting period. Actual results may differ from
those estimates.
The following summarizes the significant accounting policies of the Fund:
SECURITY VALUATION AND TRANSACTIONS
The Fund's portfolio securities are valued generally on the basis of market
quotations. Equity securities generally are valued at the last reported sales
price on the primary market in which they are traded. Portfolio securities
listed on NASDAQ are valued using the NASDAQ Official Closing Price, which may
not necessarily represent the last sale price. If no sales occurred on the
exchange or NASDAQ that day, the portfolio security generally is valued using
the last reported bid price.
Debt securities (other than short-term securities described below) generally are
valued at an evaluated bid as reported by an independent pricing service. Values
obtained from pricing services are based on various factors such as market
transactions, dealer supplied valuations, security characteristics and other
market data. In the absence of a reliable price from such a pricing service,
debt securities may be valued based on dealer supplied valuations or quotations.
The Fund's written or purchased options are valued at the last sales price, or
if no sales occurred that day, at the last reported bid price. Short-term
investments with remaining maturities of sixty days or less at the time of
purchase are valued on the basis of amortized cost, which approximates market
value.
All assets and liabilities of the Fund initially expressed in foreign currency
values will be converted into U.S. dollars at the WM/Reuters exchange rate
computed at 11:00 a.m., Eastern time.
If prices are not readily available for a portfolio security, or if it is
believed that a price for a portfolio security does not represent its fair
value, the security may be valued using procedures approved by the Fund's Board
of Directors that are designed to establish its "fair" value. Those procedures
require that the fair value of a security be established by the fair valuation
committee. The fair valuation committee follows different protocols for
different types of investments and circumstances. The fair value procedures may
be used to value any investment by the Fund in the appropriate circumstances.
Examples of the types of securities that may be fair valued include: thinly
traded or illiquid investments, high-yield securities or foreign securities.
Foreign securities may be valued with the assistance of an independent fair
value pricing service in circumstances where it is believed that they have been
or would be materially affected by events occurring after the close of the
portfolio security's primary market and before the close of regular trading on
the NYSE. This independent fair value pricing service uses a computerized system
to appraise affected securities and portfolios taking into consideration various
factors and the fair value of such securities may be something other than the
last available quotation or other market price.
GEAM may also separately monitor portfolio securities and, consistent with the
Fund's fair value procedures, apply a different value to a portfolio security
than would be applied had it been priced using market quotations or by an
independent fair value pricing service.
13
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
Determining the fair value of securities involves the application of both
subjective and objective considerations. Security values may differ depending on
the methodology used to determine their values, and may differ from the last
quoted sale or closing price. No assurance can be given that use of these fair
value procedures will always better represent the price at which the Fund could
sell the affected portfolio security.
Security transactions are accounted for as of the trade date. Realized gains and
losses on investments sold are recorded on the basis of identified cost for both
financial statement and federal tax purposes.
The Fund adopted FASB Statement No. 157, FAIR VALUE MEASUREMENTS (FAS 157). FAS
157 establishes a single definition of fair value, a framework for measuring
fair value, and expanded disclosures about fair value measurements.
Various inputs are used in determining the value of the Fund's investments.
These inputs are classified into three broad levels:
Level 1 includes quoted prices in active markets of securities identical to
those of the Fund.
Level 2 includes: 1) quoted prices in active markets for similar securities to
those of the Fund; 2) quoted prices for identical or similar securities to those
of the Fund that trade in markets in which there are few transactions or the
quoted prices are not current; 3) prices based on observable market data such as
interest rates and yield curves, volatilities, bond prepayment speeds, and
credit risk and; 4) prices based principally on observable market data by use of
correlation techniques or other means.
Level 3 includes unobservable market inputs used to fair value securities. These
inputs are based on assumptions that market participants would use to price
securities and may include the adviser's own assumptions.
Other financial instruments are derivative instruments that are not reflected in
TOTAL INVESTMENTS, such as futures, forwards, swaps, and written options
contracts, which are valued based on the unrealized appreciation/depreciation of
the instrument.
Level 1 Level 2 Level 3 Total
- --------------------------------------------------------------------------------------------------------------------------
Investments in Securities $31,164,059 $14,503 $-- $31,178,562
Other Financial Instruments $ -- $ -- $-- $ --
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.
14
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
The Fund does not isolate the portion of the results of operations resulting
from changes in foreign exchange rates from the fluctuations arising from
changes in the market prices of securities during the period. Such fluctuations
are included in the net realized or unrealized gain or loss from investments.
Net realized gains or losses on foreign currency transactions represent net
gains or losses on sales and maturities of foreign currency contracts,
disposition of foreign currencies, the difference between the amount of net
investment income and withholding taxes accrued and the U.S. dollar amount
actually received or paid, and gains or losses between the trade and settlement
date on purchases and sales of securities. Net unrealized foreign exchange gains
and losses arising from changes in the value of other assets and liabilities as
a result of changes in foreign exchange rates are included as increases or
decreases in unrealized appreciation/depreciation on foreign currency related
transactions.
FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or
bond index futures contracts subject to certain limitations. The Fund may invest
in futures contracts to manage its exposure to the stock and bond markets and
fluctuations in currency values. Buying futures tends to increase the Fund's
exposure to the underlying instrument while selling futures tends to decrease
the Fund's exposure to the underlying instrument, or hedge other Fund
investments. The Fund will not enter into a transaction involving futures for
speculative purposes. The Fund's risks in using these contracts include changes
in the value of the underlying instruments, non-performance of the
counterparties under the contracts' terms and changes in the liquidity of the
secondary market for the contracts. Futures contracts are valued at the
settlement price established each day by the board of trade or exchange on which
they principally trade.
Upon entering into a futures contract, the Fund is required to pledge to the
broker an amount of cash and/or other assets equal to a certain percentage of
the contract amount, known as initial margin deposit. Subsequent payments, known
as variation margin, are made or received by the Fund each day, depending on the
daily fluctuation in the fair value of the underlying security. The Fund records
an unrealized gain or loss equal to the daily variation margin. Should market
conditions move unexpectedly, the Fund may not achieve the anticipated benefits
of the futures contracts and may incur a loss. The Fund recognizes a realized
gain or loss on the expiration or closing of a futures contract.
OPTIONS The Fund may purchase and write options, subject to certain limitations.
The Fund may invest in options contracts to manage its exposure to the stock and
bond markets and fluctuations in foreign currency values. Writing puts and
buying calls tend to increase 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.
15
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
INCOME TAXES The Fund intends to comply with all sections of the Internal
Revenue Code applicable to regulated investment companies including the
distribution of substantially all of its taxable net investment income and net
realized capital gains to its shareholders. Therefore, no provision for federal
income tax has been made. The Fund is treated as a separate taxpayer for federal
income tax purposes.
At June 30, 2008, information on the tax cost of investments is as follows:
Cost of Gross Tax Gross Tax
Investments for Unrealized Unrealized Net Tax Appreciation
Tax Purposes Appreciation Depreciation on Investments
- -----------------------------------------------------------------------------------------------------------------------
$30,052,243 $3,316,097 $(2,208,861) $1,107,236
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.
16
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
3. LINE OF CREDIT
The Company shares a revolving credit facility of up to $150 million with a
number of its affiliates. The credit facility is with its custodian bank, State
Street Bank and Trust Company. The revolving credit facility requires the
payment of a commitment fee equal to 0.09% per annum on the daily unused portion
of the credit facility, payable quarterly. The portion borne by the Funds
generally is borne proportionally based upon net assets. In addition, the
Company has a $100 million uncommitted, unsecured line of credit with State
Street. 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 June 30,
2008.
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 0.65%.
GENPACT performs certain accounting and certain administration services not
provided by GEAM. For the period ending June 30, 2008, $281 was charged to the
Fund.
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 the Class 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 rate applicable is
0.45% for the Class 4 shares. Currently, Class 1 shares are not subject to a
Rule 12b-1 fee.
DIRECTORS' COMPENSATION The Fund pays no compensation to its directors who are
officers or employees of GEAM or its affiliates. Directors who are not such
officers or employees also serve in a similar capacity for other funds advised
by GEAM. Compensation paid to unaffiliated directors are reflected on the
Statement of Operations. These fees are allocated pro rata across all of the
mutual fund platforms and share classes served by the directors, including the
Fund, and are based upon the relative net assets of each fund within such
platforms. (For additional information about directors compensation please refer
to the Statement of Additional Information.)
5. INVESTMENT TRANSACTIONS
PURCHASES AND SALES OF SECURITIES The cost of purchases and the proceeds from
sales of investments, other than short-term securities and options, for the
period ended June 30, 2008 were as follows:
Purchases Sales
- -------------------------------------------------------------------------------
$9,961,550 $13,418,291
SECURITY LENDING At June 30, 2008, the Fund did not participate in securities
lending.
17
<page>
Additional Information (unaudited)
- --------------------------------------------------------------------------------
INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS:
The business and affairs of the Company are managed under the direction of the
Company's Board of Directors. Information pertaining to the Directors and
officers of the Company is set forth below.
INTERESTED DIRECTORS AND EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
MICHAEL J. COSGROVE
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 59
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 47
POSITION(S) HELD WITH FUND Executive Vice President
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - less than one year
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General
Counsel and Secretary of GEAM since July 2007; Senior Vice President and General
Counsel - Marketing and Client Services (formerly Asset Management Services), at
GEAM and Senior Vice President and General Counsel of GEAMS from February 1997
to June 2007; Vice President and Associate General Counsel of GEAM from October
1992 to February 1997; Secretary of Fund from 1997 to June 2007; Vice President
of Fund from September 2003 to June 2007; Vice President of GE Institutional
Funds and GE LifeStyle Funds from September 2003 to June 2007; Secretary of GE
Institutional Funds and GE LifeStyle Funds from 1997 to June 2007; Vice
President of Elfun Funds and GE Savings & Security Funds from October 2003 to
June 2007; Assistant Secretary of Elfun Funds and GE Savings & Security Funds
from 1998 to June 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional
Funds, GE LifeStyle Funds, Elfun Funds and GE Savings & Security Funds since
July 2007.
18
<page>
Additional Information (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCOTT H. RHODES
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 49
POSITION(S) HELD WITH FUND Treasurer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 2 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds Operations
Manager since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle
Funds and GE Investments Funds since November 2005 and Elfun Funds and GE
Savings & Security Funds since September 2005; from August 2004 to September
2005 Vice President, U.S. Trust Company, N.A. and Assistant Treasurer of
Excelsior Funds, Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds,
Inc.; from January 2004 to August 2004, Vice President BlackRock Financial
Management, Inc.; from December 1996 to November 2003, Controller - Mutual
Funds, American Skandia Investment Services, Inc. and Assistant Treasurer of
American Skandia Trust and American Skandia Advisor Funds, Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
- --------------------------------------------------------------------------------
JEANNE M. LAPORTA
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 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
19
<page>
Additional Information (unaudited)
- --------------------------------------------------------------------------------
NON-INTERESTED DIRECTORS
- --------------------------------------------------------------------------------
JOHN R. COSTANTINO
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 62
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 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 60
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 72
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 9 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon
Brothers Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds and GE LifeStyle Funds since their inception.
The Statement of Additional Information for the Fund includes additional
information about the Directors and Officers and is available, without charge,
upon request by calling 1-800-242-0134.
20
<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
Daniel O. Colao, EVP, CHIEF FINANCIAL OFFICER (AS OF JULY 28, 2008)
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)
David Wiederecht, EVP, PRESIDENT - INVESTMENT STRATEGIES
21
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INVESTMENT ADVISER
GE ASSET MANAGEMENT INCORPORATED
3001 SUMMER STREET
PO BOX 7900
STAMFORD, CT 06904-7900
DISTRIBUTOR
GE INVESTMENT DISTRIBUTORS, INC.
MEMBER 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
Semi-Annual Report
JUNE 30, 2008
[GE logo omitted]
<page>
GE Investments Funds, Inc.
Mid-Cap Equity Fund
- --------------------------------------------------------------------------------
Contents
NOTES TO PERFORMANCE.................................................... 1
MANAGER REVIEW AND SCHEDULE OF INVESTMENTS.............................. 2
NOTES TO SCHEDULE OF INVESTMENTS........................................ 8
FINANCIAL STATEMENTS
Financial Highlights.............................................. 9
Statement of Assets and Liabilities................................ 10
Statement of Operations............................................ 11
Statements of Changes in Net Assets................................ 12
Notes to Financial Statements...................................... 13
ADDITIONAL INFORMATION.................................................. 18
INVESTMENT TEAM......................................................... 21
This report is prepared for Policyholders of certain variable contracts and may
be distributed to others only if preceded or accompanied by the variable
contract's current prospectus and the current prospectus of the Funds available
for investments thereunder.
<page>
Notes to Performance June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
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 shown are net of Fund expenses but do not reflect fees and charges
associated with the variable contracts such as administrative fees, account
charges and surrender charges, which, if reflected, would reduce the Fund's
total returns for all periods shown.
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 SIX-MONTH PERIOD ENDED JUNE 30, 2008?
A. For the six-month period ended June 30, 2008, the Mid-Cap Equity Fund
returned -6.47% for the Class 1 shares and -4.04% for the Class 4 shares.
The Russell Mid-Cap Index, the Fund's benchmark, returned -7.57% and the
Fund's Lipper peer group of 146 Mid-Cap Growth funds returned an average of
-8.57% for the same period.
Q. WHAT MARKET CONDITIONS IMPACTED FUND PERFORMANCE?
A. During the first half of 2008, the Fund's growth-at-a-reasonable-price
approach benefited performance as the growth style of investing outperformed
value. Soaring energy prices, continued credit concerns at financial
institutions and generally negative economic news resulted in increased
market volatility and lower stock prices. In this environment, the Fund's
overweight in consumer staples, healthcare and energy contributed positively
to performance. Within the consumer staples sector, our exposure to these
defensive companies (companies which generally offer products that are less
discretionary and therefore can deliver continued earnings growth in a
difficult macroeconomic environment) was additive to performance. Moreover,
healthcare companies with their defensive growth qualities and good earnings
visibility enhanced performance for the Fund. The rise in oil and natural
gas prices resulted in strong performance within the energy sector.
The Fund benefited from an underweight in financial companies, which
continued to be weak. More specifically, the Fund maintained an underweight
in regional banks, which are experiencing earnings pressure from
deteriorating credit quality, and the need for additions to reserves for
non-performing loans. We maintained the Fund's underweight in the consumer
discretionary sector, which had a positive impact on performance. Higher
food and energy prices are squeezing out consumer discretionary purchases.
In addition, increasing foreclosure rates, declining home prices and higher
unemployment continues to weigh on consumer confidence and spending.
Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE?
A. Relative to the Russell Mid-Cap Index, the Fund outperformed during the
six-month period, largely due to solid stock selection within the energy,
materials, and healthcare sectors. Specifically Southwestern Energy (+71%),
gained from a strong natural gas pricing environment, while Weatherford
International (+45%) benefited from robust demand for oil exploration and
technology services. Within the materials sector, Intrepid Potash (+31%), a
recent IPO, performed well due to continued supply/demand imbalances in the
booming fertilizer market. Meanwhile, healthcare services company
Psychiatric Solutions (+16%) benefited from increased occupancy and
favorable pricing. Lifecell (+17%) was acquired by Kinetic Concepts.
The Fund's overweight and stock selection in the information technology
sector detracted from
[photo omitted]
2
<page>
Q&A
- --------------------------------------------------------------------------------
relative performance. Specifically, Juniper Networks (-33%) suffered in part
due to concerns about slowing in the U.S. carrier business. Neustar, a
telecom services and software company (-25%) slightly reduced its 2008
revenue forecast due to the slower ramp of a new service offering. Within
healthcare, detracting from performance was Hologic (-36%) as concerns arose
about the benefits of their recent Cytec acquisition. Life Time Fitness
(-41%) fell due to financing concerns and slower membership growth rates.
Q. WERE THERE ANY SIGNIFICANT CHANGES TO THE FUND OVER THE PERIOD?
A. During the period we increased the Fund's exposure in the consumer
discretionary, financials and materials sectors where we find attractively
valued growth companies. We took profits and reduced our exposure to the
healthcare and energy sectors. We are focused on investing in attractively
valued companies with solid earnings prospects, strong market share and
superior long-term fundamentals. With an emphasis on growth, we continue to
look to invest in innovative companies that provide prospects for
above-average earnings growth. Therefore, healthcare and information
technology companies represent a meaningful percentage of the Fund's
portfolio.
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 June 30,
2008.
ACTUAL EXPENSES
The first section of the table provides information about actual account values
and actual expenses. You may use the information in this section, together with
the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JANUARY 1, 2008 - JUNE 30, 2008
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID
BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($)*
- ------------------------------------------------------------------------------------------------------------------------------------
ACTUAL FUND RETURN**
- ------------------------------------------------------------------------------------------------------------------------------------
Class 1 1,000.00 935.26 3.29
Class 4 1,000.00 959.64 5.55
- ------------------------------------------------------------------------------------------------------------------------------------
HYPOTHETICAL 5% RETURN (2.5% FOR THE PERIOD)
- ------------------------------------------------------------------------------------------------------------------------------------
Class 1 1,000.00 1,021.16 3.52
Class 4 1,000.00 1,019.16 5.66
- ------------------------------------------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.70% FOR CLASS
1 AND 1.12% FOR CLASS 4, (FROM PERIOD JANUARY 1, 2008 - JUNE 30, 2008),
MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY
182/366 (TO REFLECT THE ONE-HALF YEAR PERIOD).
** ACTUAL FUND RETURNS FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2008 WERE AS
FOLLOWS: (6.47)% FOR CLASS 1 SHARES, AND SINCE INCEPTION (4.04)% FOR CLASS 4
SHARES.
4
<page>
Mid-Cap Equity Fund (unaudited)
- --------------------------------------------------------------------------------
CHANGE IN VALUE OF A $10,000 INVESTMENT
CLASS 1 SHARES
- --------------------------------------------------------------------------------
[Line chart omitted -- plot points are as follows:]
GEI MID-CAP EQUITY RUSSELL MIDCAP INDEX
06/98 10,000.00 10,000.00
12/98 9,444.01 10,084.35
12/99 11,074.42 11,918.98
12/00 11,992.30 12,902.74
12/01 12,031.39 12,175.48
12/02 10,375.33 10,205.28
12/03 13,792.80 14,296.76
12/04 16,002.81 17,178.64
12/05 17,881.47 19,351.42
12/06 19,383.25 22,308.54
12/07 21,826.51 23,560.43
06/08 20,413.48 21,776.19
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED JUNE 30, 2008
- --------------------------------------------------------------------------------
CLASS 1 SHARES (Inception date: 5/1//97)
- --------------------------------------------------------------------------------
SIX ONE FIVE TEN ENDING VALUE OF A
MONTHS YEAR YEAR YEAR $10,000 INVESTMENT
- -------------------------------------------------------------------------------
Mid-Cap Equity Fund -6.47% -5.12% 11.83% 7.40% $20,413
- -------------------------------------------------------------------------------
Russell Midcap Index -7.57% -11.19% 13.07% 8.10% $21,776
- -------------------------------------------------------------------------------
Lipper peer group average* -8.57% -5.01% 11.74% 5.21%
- -------------------------------------------------------------------------------
CLASS 4 SHARES
- -------------------------------------------------------------------------------
[Line chart omitted -- plot points are as follows:]
GEI MID-CAP EQUITY RUSSELL MIDCAP INDEX
05/08 10,000.00 10,000.00
06/08 9,596.44 9,617.28
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED JUNE 30, 2008
- -------------------------------------------------------------------------------
CLASS 4 SHARES (Inception date: 5/1/08)
- -------------------------------------------------------------------------------
ONE SINCE ENDING VALUE OF A
MONTH INCEPTION $10,000 INVESTMENT
- -------------------------------------------------------------------------------
Mid-Cap Equity Fund -6.91% -4.04% $9,596
- -------------------------------------------------------------------------------
Russell Midcap Index -7.99% -3.83% $9,617
- -------------------------------------------------------------------------------
Lipper peer group average** -6.36% N/A
- -------------------------------------------------------------------------------
INVESTMENT PROFILE
A fund designed for investors who seek long-term growth of capital and future
income by investing at least 80% of its net assets in equity securities of
mid-cap companies under normal circumstances. The Fund invests primarily in
mid-cap companies that the portfolio manager believes are undervalued by the
market and have above-average growth potential.
PORTFOLIO COMPOSITION AS OF JUNE 30, 2008
as a % of Market Value
- -------------------------------------------------------------------------------
Market Value of $166,964 (in thousands)
[Pie chart omitted -- plot points are as follows:]
Information Technology 16.6%
Healthcare 16.4%
Consumer Discretionary 11.5%
Energy 11.1%
Financials 10.7%
Industrials 9.6%
Materials 7.0%
Consumer Staples 6.0%
Utilities 5.7%
Telecommunication Services 3.2%
Short-Term 2.2%
Other Investments 0.0%***
TOP TEN LARGEST HOLDINGS AS OF JUNE 30, 2008
as a % of Market Value
- -------------------------------------------------------------------------------
Masimo Corp. 2.50%
- -------------------------------------------------------------------------------
Thermo Fisher Scientific, Inc. 2.30%
- -------------------------------------------------------------------------------
Harsco Corp. 2.15%
- -------------------------------------------------------------------------------
McCormick & Company, Inc. 2.11%
- -------------------------------------------------------------------------------
ITC Holdings Corp. 2.08%
- -------------------------------------------------------------------------------
Weatherford International Ltd. 2.06%
- -------------------------------------------------------------------------------
Psychiatric Solutions, Inc 2.04%
- -------------------------------------------------------------------------------
Activision, Inc. 1.98%
- -------------------------------------------------------------------------------
Alberto-Culver Co. 1.86%
- -------------------------------------------------------------------------------
HCC Insurance Holdings, Inc. 1.75%
- -------------------------------------------------------------------------------
* LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR
THE SIX MONTHS, ONE YEAR, FIVE-YEAR, AND TEN-YEAR PERIODS INDICATED IN THE
MID-CAP GROWTH FUNDS PEER GROUP CONSISTING OF 146, 145, 120 AND 38
UNDERLYING ANNUITY FUNDS, RESPECTIVELY.
** LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR
THE ONE MONTH PERIOD INDICATED IN THE MID-CAP GROWTH FUNDS PEER GROUP
CONSISTING OF 155 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
MID-CAP EQUITY FUND
Schedule of Investments June 30, 2008 (unaudited)
- -------------------------------------------------------------------------------
MID-CAP EQUITY FUND
- -------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- -------------------------------------------------------------------------------
COMMON STOCK -- 98.1% +
- -------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 11.5%
Bed Bath & Beyond, Inc......... 70,836 $ 1,990,492(a,c)
Coach, Inc..................... 52,754 1,523,536(a)
Focus Media Holding Ltd. ADR... 56,863 1,576,242(a)
Kohl's Corp.................... 22,453 899,018(a)
Liberty Global, Inc.
(Series C) 77,070 2,339,845(a)
Liberty Media Entertainment Corp.
(Series A).................. 54,636 1,323,830(a)
Life Time Fitness, Inc......... 53,146 1,570,464(a)
Mercadolibre, Inc.............. 50,063 1,726,673(a)
O'Reilly Automotive, Inc....... 84,540 1,889,469(a)
Penn National Gaming, Inc...... 34,156 1,098,115(a)
Regal Entertainment Group,
(Class A)................... 138,921 2,122,713
The Cheesecake Factory......... 71,901 1,143,945(a)
19,204,342
CONSUMER STAPLES -- 6.0%
Alberto-Culver Co.............. 118,133 3,103,354
General Mills, Inc............. 44,158 2,683,482
McCormick & Company, Inc....... 98,793 3,522,958
The Estee Lauder Companies Inc.
(Class A)................... 14,969 695,310
10,005,104
ENERGY -- 11.1%
Dresser-Rand Group, Inc........ 60,668 2,372,119(a)
Hess Corp...................... 17,978 2,268,644
HIS, Inc. (Class A)............ 4,491 312,574
Noble Corp..................... 31,364 2,037,405
Peabody Energy Corp............ 31,504 2,773,927
Southwestern Energy Co......... 46,229 2,200,963(a)
Sunoco, Inc.................... 23,950 974,526
Tesco Corp..................... 66,797 2,134,164(a)
Weatherford International Ltd.. 69,237 3,433,463(a)
18,507,785
FINANCIALS -- 10.7%
Affiliated Managers Group, Inc. 21,980 1,979,519(a)
CB Richard Ellis Group, Inc.
(Class A)................... 117,815 2,262,048(a,c)
CVB Financial Corp............. 96,060 906,806
Douglas Emmett, Inc. (REIT).... 46,764 1,027,405
DuPont Fabros Technology, Inc.
(REIT)...................... 77,231 1,439,586
Fortress Investment Group LLC
(Class A)................... 110,757 1,364,526
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Greenhill & Company, Inc....... 24,895 $ 1,340,845
HCC Insurance Holdings, Inc.... 138,369 2,925,121
Legg Mason, Inc................ 24,422 1,064,067
Nymex Holdings, Inc............ 16,466 1,391,048
Prologis (REIT)................ 18,711 1,016,943
SunTrust Banks, Inc............ 10,478 379,513
Zions Bancorporation........... 23,148 728,931
17,826,358
HEALTHCARE -- 16.5%
Alcon, Inc..................... 12,274 1,998,084
Amylin Pharmaceuticals, Inc.... 69,544 1,765,722(a)
Arthrocare Corp................ 43,393 1,770,868(a)
Barr Pharmaceuticals, Inc...... 41,490 1,870,369(a)
DENTSPLY International, Inc.... 59,912 2,204,762
Gen-Probe Incorporated......... 39,907 1,894,784(a)
Hologic, Inc................... 125,802 2,742,484(a)
Masimo Corp.................... 121,575 4,176,101(a)
Psychiatric Solutions, Inc..... 90,133 3,410,633(a)
Thermo Fisher Scientific, Inc.. 68,844 3,836,676(a,c)
Vertex Pharmaceuticals Inc..... 52,390 1,753,493(a)
27,423,976
INDUSTRIALS -- 9.7%
Alliant Techsystems, Inc....... 729 74,125(a)
Cooper Industries Ltd.......... 20,855 823,773
Corrections Corporation
of America.................. 84,396 2,318,358(a)
Harsco Corp.................... 65,847 3,582,735
Hexcel Corp.................... 97,087 1,873,779(a)
ITT Corp....................... 34,428 2,180,325
Joy Global, Inc................ 36,497 2,767,568
Textron, Inc................... 50,893 2,439,302
16,059,965
INFORMATION TECHNOLOGY -- 16.6%
Activision, Inc................ 96,906 3,301,587(a,c)
Affiliated Computer Services, Inc.
(Class A)................... 32,931 1,761,479(a)
Alibaba.com Ltd................ 287,759 405,947(a)
Blackboard, Inc................ 38,376 1,467,115(a)
Citrix Systems, Inc............ 71,101 2,091,080(a)
Cogent, Inc.................... 103,894 1,181,275(a)
DST Systems, Inc............... 26,677 1,468,569(a)
Fidelity National Information
Services, Inc............... 51,642 1,906,106
Harris Corp.................... 17,670 892,158(c)
Hittite Microwave Corp......... 62,868 2,239,358(a)
Juniper Networks, Inc.......... 94,278 2,091,086(a)
Macrovision Solutions Corp..... 173,767 2,599,554(a)
Marvell Technology Group Ltd... 106,614 1,882,803(a)
Mettler Toledo International
Inc. 17,597 1,669,251(a)
Neustar, Inc. (Class A)........ 125,523 2,706,276(a)
27,663,644
See Notes to Schedule of Investments on page 8 and Notes to Financial
Statements.
6
<page>
MID-CAP EQUITY FUND
Schedule of Investments June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
MATERIALS -- 7.1%
Allegheny Technologies
Incorporated................ 33,680 $ 1,996,550
Intrepid Potash, Inc........... 40,285 2,649,947(a)
Martin Marietta Materials, Inc. 15,567 1,612,586
Monsanto Co.................... 21,044 2,660,803(c)
Praxair, Inc................... 29,833 2,811,462
11,731,348
TELECOMMUNICATION SERVICES -- 3.2%
American Tower Corp. (Class A). 42,823 1,809,272(a)
NII Holdings Inc. (Class B).... 46,435 2,205,198(a)
Syniverse Holdings, Inc........ 82,862 1,342,364(a)
5,356,834
UTILITIES -- 5.7%
American Water Works
Company, Inc................ 79,521 1,763,776(a)
DTE Energy Co.................. 29,587 1,255,672
ITC Holdings Corp.............. 68,112 3,481,204
PPL Corp....................... 31,128 1,627,061
SCANA Corp..................... 36,094 1,335,478
9,463,191
TOTAL COMMON STOCK
(COST $150,108,500) ......... 163,242,547
- --------------------------------------------------------------------------------
OTHER INVESTMENTS -- 0.0%*
- --------------------------------------------------------------------------------
GEI Investment Fund
(COST $48,839).............. 37,118(d)
TOTAL INVESTMENTS IN SECURITIES
(COST $150,157,339).......... 163,279,665
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 2.2%
- --------------------------------------------------------------------------------
GE Money Market Fund
Institutional Class
1.93% ..................... 3,684,810(b,e)
(COST $3,684,810)
TOTAL INVESTMENTS
(COST $153,842,149).......... 166,964,475
LIABILITIES IN EXCESS OF OTHER ASSETS,
NET-- (0.3)%............... (495,906)
------------
NET ASSETS-- 100.0% .......... $166,468,569
============
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
The GEI Mid-Cap Equity had the following long futures contracts open at June
30, 2008 (unaudited):
NUMBER CURRENT
EXPIRATION OF NOTIONAL UNREALIZED
DESCRIPTION DATE CONTRACTS VALUE DEPRECIATION
- --------------------------------------------------------------------------------
S&P 400 Midcap
Futures September 2008 3 $1,231,800 $(49,991)
See Notes to Schedule of Investments on page 8 and Notes to Financial
Statements.
7
<page>
Notes to Schedule of Investments June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
The views expressed in this document reflect our judgment as of the publication
date and are subject to change at any time without notice. The securities cited
may not represent current or future holdings and should not be considered as a
recommendation to purchase or sell a particular security. See the prospectus for
complete descriptions of investment objectives, policies, risks and permissible
investments.
(a) Non-income producing security.
(b) Coupon amount represents effective yield.
(c) At June 30, 2008, all or a portion of this security was pledged to cover
collateral requirements for futures, options, forward foreign currency
contracts and/or TBA's.
(d) GE Asset Management ("GEAM"), the investment adviser of the Fund, also
serves as investment adviser of the GEI Investment Fund.
(e) GEAM, the investment adviser of the Fund, also serves as investment adviser
of the GE Money Market Fund.
* Less than 0.1%.
+ Percentages are based on net assets as of June 30, 2008.
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
--------------------------------------------------------------------- -------------
CLASS 1 CLASS 4
--------------------------------------------------------------------- -------------
6/30/08+ 12/31/07 12/31/06 12/31/05 12/31/04 12/31/03 6/30/08+
--------------------------------------------------------------------- -------------
INCEPTION DATE -- -- -- -- -- 5/1/97 5/1/08
Net asset value, beginning of period.... $17.30 $18.19 $19.22 $18.33 $17.48 $13.30 $16.85
INCOME/(LOSS) FROM INVESTMENT OPERATIONS:
Net investment income................ 0.06 0.08 0.23 0.05 0.17 0.19 --
Net realized and unrealized
gains/(losses) on investments..... (1.18) 2.23 1.40 2.11 2.63 4.19 (0.68)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM
INVESTMENT OPERATIONS................ (1.12) 2.31 1.63 2.16 2.80 4.38 (0.68)
- ------------------------------------------------------------------------------------------------------------------------------------
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.......... $16.18 $17.30 $18.19 $19.22 $18.33 $17.48 $16.17
====================================================================================================================================
TOTAL RETURN (A)........................ (6.47)% 12.60%(B) 8.40% 11.74% 16.02% 32.94% (4.04)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $166,459 $191,339 $199,311 $229,097 $239,831 $226,929 $10
Ratios to average net assets:
Net investment income*............ 0.27% 0.35% 1.01% 0.24% 0.89% 1.36% 0.04%
Expenses*......................... 0.70% 0.70% 0.69% 0.70% 0.70% 0.69% 1.12%
Portfolio turnover rate.............. 25% 65% 29% 27% 78% 28% 25%
NOTES TO FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(a) Total returns are historical and assume changes in share price and
reinvestment of dividends and capital gains and do not include the effect of
insurance contract charges.
* Annualized for periods less than one year.
+ Unaudited
See Notes to Financial Statements.
9
<page>
Statement of Assets
and Liabilities JUNE 30, 2008 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------
MID-CAP
EQUITY
FUND
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments in securities, at market (cost $150,108,500)............................................... $163,242,547
Investments in affiliated securities, at market (cost $48,839)......................................... 37,118
Short-term affiliated investments (at amortized cost).................................................. 3,684,810
Income receivables..................................................................................... 161,060
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS....................................................................................... 167,125,535
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased...................................................................... 459,072
Payable for fund shares redeemed....................................................................... 31,784
Payable to GEAM........................................................................................ 106,386
Accrued other expenses................................................................................. 56,247
Variation margin payable............................................................................... 2,700
Other liabilities...................................................................................... 777
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES.................................................................................. 656,966
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS................................................................................................ $166,468,569
====================================================================================================================================
NET ASSETS CONSIST OF:
Capital paid in........................................................................................ 141,885,644
Undistributed (distribution in excess of)
net investment income............................................................................... 251,042
Accumulated net realized gain (loss)................................................................... 11,259,548
Net unrealized appreciation/(depreciation) on:
Investments......................................................................................... 13,122,326
Futures............................................................................................. (49,991)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS................................................................................................ $166,468,569
====================================================================================================================================
CLASS 1:
NET ASSETS................................................................................................ 166,458,974
Shares outstanding ($0.01 par value; unlimited shares authorized)......................................... 10,290,298
Net asset value per share................................................................................. $16.18
CLASS 4:
NET ASSETS................................................................................................ 9,595
Shares outstanding ($0.01 par value; unlimited shares authorized)......................................... 593
Net asset value per share................................................................................. $16.17
See Notes to Financial Statements.
10
<page>
Statement of Operations
FOR THE SIX MONTHS ENDED JUNE 30, 2008 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------
MID-CAP
EQUITY
FUND
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividend ............................................................................... $ 795,843
Interest ............................................................................... 1,251
Interest from affliated investments .................................................... 39,267
Less: Foreign taxes withheld ........................................................... (4,176)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME ............................................................................. 832,185
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees ....................................................... 561,212
Distributors Fees (Note 4)
Class 4 ............................................................................. 7
Transfer agent ......................................................................... 36
Trustee's fees ......................................................................... 2,308
Custody and accounting expenses ........................................................ 20,647
Professional fees ...................................................................... 11,153
Registration expenses .................................................................. 3,064
Other expenses ......................................................................... 7,772
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES BEFORE WAIVER AND REIMBURSEMENT ........................................... 606,199
- ------------------------------------------------------------------------------------------------------------------------------------
Less: Expenses reimbursed by the adviser (waiver related to Fund of Fund Investment) ... (2,496)
- ------------------------------------------------------------------------------------------------------------------------------------
Net expenses ........................................................................... 603,703
- ------------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) ............................................................. 228,482
====================================================================================================================================
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments ......................................................................... 10,301,191
Futures ............................................................................. (246,232)
Foreign currency transactions ....................................................... 90
INCREASE (DECREASE) IN UNREALIZED APPRECIATION/
(DEPRECIATION) ON:
Investments ......................................................................... (22,525,766)
Futures ............................................................................. (50,030)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments ................................. (12,520,747)
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .......................... $(12,292,265)
====================================================================================================================================
See Notes to Financial Statements.
11
<page>
Statements of
Changes in Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
MID-CAP
EQUITY
FUND
- ------------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2008 DECEMBER 31,
(UNAUDITED) 2007
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income (loss)..................................................... $ 228,482 $ 653,690
Net realized gain (loss) on investments, futures, written options,
and foreign currency transactions............................................... 10,055,049 27,316,305
Net increase (decrease) in unrealized appreciation/(depreciation)
on investments, futures, written options, and foreign
currency translation............................................................ (22,575,796) (4,058,715)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations........................................... (12,292,265) 23,911,280
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class 1......................................................................... -- (620,613)
Class 4......................................................................... -- --
Net realized gains
Class 1......................................................................... -- (29,362,977)
Class 4......................................................................... -- --
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS................................................................... -- (29,983,590)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations and distributions................. (12,292,265) (6,072,310)
- ------------------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares
Class 1........................................................................ 2,962,211 11,021,978
Class 4......................................................................... 10,000 --
Value of distributions reinvested
Class 1......................................................................... -- 29,983,527
Class 4......................................................................... -- --
Cost of shares redeemed
Class 1......................................................................... (15,550,832) (42,904,477)
Class 4......................................................................... -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from share transactions................................... (12,578,621) (1,898,972)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS............................................. (24,870,886) (7,971,282)
NET ASSETS
Beginning of period................................................................. 191,339,455 199,310,737
- ------------------------------------------------------------------------------------------------------------------------------------
End of period....................................................................... $166,468,569 $191,339,455
====================================================================================================================================
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD........ $ 251,042 $ 22,560
- ------------------------------------------------------------------------------------------------------------------------------------
CHANGES IN FUND SHARES
CLASS 1
Shares sold............................................................................ 188,631 561,616
Issued for distributions reinvested.................................................... -- 1,725,174
Shares redeemed........................................................................ (956,403) (2,184,057)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares................................................ (767,772) 102,733
====================================================================================================================================
CLASS 4
Shares sold............................................................................ 593 --
Issued for distributions reinvested.................................................... -- --
Shares redeemed........................................................................ -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares................................................. 593 --
====================================================================================================================================
See Notes to Financial Statements.
12
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
1. ORGANIZATION OF THE COMPANY
GE Investments Funds, Inc. (the "Company") was incorporated under the laws of
the Commonwealth of Virginia on May 14, 1984 and is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company. The Company is composed of thirteen investment
portfolios (collectively the "Funds"), although only the following eleven are
currently being offered: U.S. Equity Fund, S&P 500 Index Fund, Premier Growth
Equity Fund, Core Value Equity Fund, Mid-Cap Equity Fund (the "Fund"), Small-Cap
Equity Fund, International Equity Fund, Total Return Fund, Income Fund, Money
Market Fund and Real Estate Securities Fund.
Shares of the Funds of the Company are offered only to insurance company
separate accounts that fund certain variable life insurance contracts and
variable annuity contracts. These insurance companies may include insurance
companies affiliated with GE Asset Management Incorporated ("GEAM"), the
investment adviser and administrator of each of the Funds.
2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the reporting period. Actual results may differ from
those estimates.
The following summarizes the significant accounting policies of the Fund:
SECURITY VALUATION AND TRANSACTIONS
The Fund's portfolio securities are valued generally on the basis of market
quotations. Equity securities generally are valued at the last reported sales
price on the primary market in which they are traded. Portfolio securities
listed on NASDAQ are valued using the NASDAQ Official Closing Price, which may
not necessarily represent the last sale price. If no sales occurred on the
exchange or NASDAQ that day, the portfolio security generally is valued using
the last reported bid price.
Debt securities (other than short-term securities described below) generally are
valued at an evaluated bid as reported by an independent pricing service. Values
obtained from pricing services are based on various factors such as market
transactions, dealer supplied valuations, security characteristics and other
market data. In the absence of a reliable price from such a pricing service,
debt securities may be valued based on dealer supplied valuations or quotations.
The Fund's written or purchased options are valued at the last sales price, or
if no sales occurred that day, at the last reported bid price. Short-term
investments with remaining maturities of sixty days or less at the time of
purchase are valued on the basis of amortized cost, which approximates market
value.
All assets and liabilities of the Fund initially expressed in foreign currency
values will be converted into U.S. dollars at the WM/Reuters exchange rate
computed at 11:00 a.m., Eastern time.
If prices are not readily available for a portfolio security, or if it is
believed that a price for a portfolio security does not represent its fair
value, the security may be valued using procedures approved by the Fund's Board
of Directors that are designed to establish its "fair" value. Those procedures
require that the fair value of a security be established by the fair valuation
committee. The fair valuation committee follows different protocols for
different types of investments and circumstances. The fair value procedures may
be used to value any investment by the Fund in the appropriate circumstances.
Examples of the types of securities that may be fair valued include: thinly
traded or illiquid investments, high-yield securities or foreign securities.
Foreign securities may be valued with the assistance of an independent fair
value pricing service in circumstances where it is believed that they have been
or would be materially affected by events occurring after the close of the
portfolio security's primary market and before the close of regular trading on
the NYSE. This independent fair value pricing service uses a computerized system
to appraise affected securities and portfolios taking into consideration various
factors and the fair value of such securities may be something other than the
last available quotation or other market price.
GEAM may also separately monitor portfolio securities and, consistent with the
Fund's fair value procedures, apply a different value to a portfolio security
than would be applied had it been priced using market quotations or by an
independent fair value pricing service.
13
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
Determining the fair value of securities involves the application of both
subjective and objective considerations. Security values may differ depending on
the methodology used to determine their values, and may differ from the last
quoted sale or closing price. No assurance can be given that use of these fair
value procedures will always better represent the price at which the Fund could
sell the affected portfolio security.
Security transactions are accounted for as of the trade date. Realized gains and
losses on investments sold are recorded on the basis of identified cost for both
financial statement and federal tax purposes.
The Fund adopted FASB Statement No. 157, FAIR VALUE MEASUREMENTS (FAS 157). FAS
157 establishes a single definition of fair value, a framework for measuring
fair value, and expanded disclosures about fair value measurements.
Various inputs are used in determining the value of the Fund's investments.
These inputs are classified into three broad levels:
Level 1 includes quoted prices in active markets of securities identical to
those of the Fund.
Level 2 includes: 1) quoted prices in active markets for similar securities to
those of the Fund; 2) quoted prices for identical or similar securities to those
of the Fund that trade in markets in which there are few transactions or the
quoted prices are not current; 3) prices based on observable market data such as
interest rates and yield curves, volatilities, bond prepayment speeds, and
credit risk and; 4) prices based principally on observable market data by use of
correlation techniques or other means.
Level 3 includes unobservable market inputs used to fair value securities. These
inputs are based on assumptions that market participants would use to price
securities and may include the adviser's own assumptions.
Other financial instruments are derivative instruments that are not reflected in
TOTAL INVESTMENTS, such as futures, forwards, swaps, and written options
contracts, which are valued based on the unrealized appreciation/depreciation of
the instrument.
Level 1 Level 2 Level 3 Total
- ------------------------------------------------------------------------------------------------------------------------------------
Investments in Securities $166,521,411 $443,064 $-- $166,964,475
Other Financial Instruments $ (49,991) $ -- $-- $ (49,991)
REPURCHASE AGREEMENTS The Fund may enter into repurchase agreement transactions
with respect to instruments that are consistent with the Fund's investment
objectives or policies. The Fund's or a third party custodian takes possession
of the collateral pledged for investments in repurchase agreements on behalf of
the Fund. The Fund values the underlying collateral daily on a mark-to-market
basis to determine that the value, including accrued interest, is at least equal
to 102% of the repurchase price. In the event the seller defaults and the value
of the security declines, or if the seller enters an insolvency proceeding,
realization of the collateral by the Fund may be delayed or limited.
SECURITY LENDING The Fund may loan securities to brokers, dealers, and financial
institutions determined by GEAM to be creditworthy, subject to certain
limitations. The Fund continues to receive the interest and dividends on the
loaned securities during the term of the loan. The loans of securities are
secured by collateral in the form of cash or other liquid assets, which are
segregated and maintained with the custodian in an amount at least equal to 102%
of the current market value of the loaned securities. During the term of the
loan, the Fund will record any gain or loss in the market value of its loaned
securities and of securities in which cash collateral is invested. The Fund will
also earn interest, net of any rebate, from securities in which cash collateral
is invested. In the event the counterparty (borrower) does not meet its
contracted obligation to return the securities, the Fund may be exposed to the
risk of loss of reacquiring the loaned securities at prevailing market prices
using the proceeds of the sale of the collateral.
FOREIGN CURRENCY Accounting records of the Fund are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in a foreign
currency are translated into U.S. dollars at the prevailing rates of exchange 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
14
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
market prices of securities during the period. Such fluctuations are included in
the net realized or unrealized gain or loss from investments. Net realized gains
or losses on foreign currency transactions represent net gains or losses on
sales and maturities of foreign currency contracts, disposition of foreign
currencies, the difference between the amount of net investment income and
withholding taxes accrued and the U.S. dollar amount actually received or paid,
and gains or losses between the trade and settlement date on purchases and sales
of securities. Net unrealized foreign exchange gains and losses arising from
changes in the value of other assets and liabilities as a result of changes in
foreign exchange rates are included as increases or decreases in unrealized
appreciation/depreciation on foreign currency related transactions.
FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or
bond index futures contracts subject to certain limitations. The Fund may invest
in futures contracts to manage its exposure to the stock and bond markets and
fluctuations in currency values. Buying futures tends to increase the Fund's
exposure to the underlying instrument while selling futures tends to decrease
the Fund's exposure to the underlying instrument, or hedge other Fund
investments. The Fund will not enter into a transaction involving futures for
speculative purposes. The Fund's risks in using these contracts include changes
in the value of the underlying instruments, non-performance of the
counterparties under the contracts' terms and changes in the liquidity of the
secondary market for the contracts. Futures contracts are valued at the
settlement price established each day by the board of trade or exchange on which
they principally trade.
Upon entering into a futures contract, the Fund is required to pledge to the
broker an amount of cash and/or other assets equal to a certain percentage of
the contract amount, known as initial margin deposit. Subsequent payments, known
as variation margin, are made or received by the Fund each day, depending on the
daily fluctuation in the fair value of the underlying security. The Fund records
an unrealized gain or loss equal to the daily variation margin. Should market
conditions move unexpectedly, the Fund may not achieve the anticipated benefits
of the futures contracts and may incur a loss. The Fund recognizes a realized
gain or loss on the expiration or closing of a futures contract.
OPTIONS The Fund may purchase and write options, subject to certain limitations.
The Fund may invest in options contracts to manage its exposure to the stock and
bond markets and fluctuations in foreign currency values. Writing puts and
buying calls tend to increase 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.
15
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
INCOME TAXES The Fund intends to comply with all sections of the Internal
Revenue Code applicable to regulated investment companies including the
distribution of substantially all of its taxable net investment income and net
realized capital gains to its shareholders. Therefore, no provision for federal
income tax has been made. The Fund is treated as a separate taxpayer for federal
income tax purposes.
At June 30, 2008, 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
- ------------------------------------------------------------------------------------------------------------------------------------
$154,140,034 $30,537,387 $(17,761,785) $12,775,602
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
16
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
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 $150 million with a
number of its affiliates. The credit facility is with its custodian bank, State
Street Bank and Trust Company. The revolving credit facility requires the
payment of a commitment fee equal to 0.09% per annum on the daily unused portion
of the credit facility, payable quarterly. The portion borne by the Funds
generally is borne proportionally based upon net assets. In addition, the
Company has a $100 million uncommitted, unsecured line of credit with State
Street. 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 June 30,
2008.
4. AMOUNTS PAID TO AFFILIATES
GEAM, a registered investment adviser, was retained by the Company's Board of
Directors effective May 1, 1997 to act as investment adviser and administrator
of the Fund. GEAM's compensation for investment advisory and administrative
services is paid monthly based on the average daily net assets of the Fund at an
annualized rate of 0.65%.
GENPACT performs certain accounting and certain administration services not
provided by GEAM. For the period ending June 30, 2008, $1,376 was charged to the
Fund.
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 the Class 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 rate applicable is
0.45% for the Class 4 shares. Currently, Class 1 shares are not subject to a
Rule 12b-1 fee.
DIRECTORS' COMPENSATION The Fund pays no compensation to its directors who are
officers or employees of GEAM or its affiliates. Directors who are not such
officers or employees also serve in a similar capacity for other funds advised
by GEAM. Compensation paid to unaffiliated directors are reflected on the
Statement of Operations. These fees are allocated pro rata across all of the
mutual fund platforms and share classes served by the directors, including the
Fund, and are based upon the relative net assets of each fund within such
platforms. (For additional information about directors compensation please refer
to the Statement of Additional Information.)
5. INVESTMENT TRANSACTIONS
PURCHASES AND SALES OF SECURITIES The cost of purchases and the proceeds from
sales of investments, other than short-term securities and options, for the
period ended June 30, 2008 were as follows:
Purchases Sales
- --------------------------------------------------------------------------------
$42,105,016 $56,624,807
SECURITY LENDING At June 30, 2008 the Fund did not participate in securities
lending.
17
<page>
Additional Information (unaudited)
- --------------------------------------------------------------------------------
INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS:
The business and affairs of the Company are managed under the direction of the
Company's Board of Directors. Information pertaining to the Directors and
officers of the Company is set forth below.
INTERESTED DIRECTORS AND EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
MICHAEL J. COSGROVE
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 59
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 47
POSITION(S) HELD WITH FUND Executive Vice President
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - less than one year
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General
Counsel and Secretary of GEAM since July 2007; Senior Vice President and General
Counsel - Marketing and Client Services (formerly Asset Management Services), at
GEAM and Senior Vice President and General Counsel of GEAMS from February 1997
to June 2007; Vice President and Associate General Counsel of GEAM from October
1992 to February 1997; Secretary of Fund from 1997 to June 2007; Vice President
of Fund from September 2003 to June 2007; Vice President of GE Institutional
Funds and GE LifeStyle Funds from September 2003 to June 2007; Secretary of GE
Institutional Funds and GE LifeStyle Funds from 1997 to June 2007; Vice
President of Elfun Funds and GE Savings & Security Funds from October 2003 to
June 2007; Assistant Secretary of Elfun Funds and GE Savings & Security Funds
from 1998 to June 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional
Funds, GE LifeStyle Funds, Elfun Funds and GE Savings & Security Funds since
July 2007.
18
<page>
Additional Information (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCOTT H. RHODES
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 49
POSITION(S) HELD WITH FUND Treasurer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 2 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds Operations
Manager since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle
Funds and GE Investments Funds since November 2005 and Elfun Funds and GE
Savings & Security Funds since September 2005; from August 2004 to September
2005 Vice President, U.S. Trust Company, N.A. and Assistant Treasurer of
Excelsior Funds, Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds,
Inc.; from January 2004 to August 2004, Vice President BlackRock Financial
Management, Inc.; from December 1996 to November 2003, Controller - Mutual
Funds, American Skandia Investment Services, Inc. and Assistant Treasurer of
American Skandia Trust and American Skandia Advisor Funds, Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
- --------------------------------------------------------------------------------
JEANNE M. LAPORTA
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 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
19
<page>
Additional Information (unaudited)
- --------------------------------------------------------------------------------
NON-INTERESTED DIRECTORS
- --------------------------------------------------------------------------------
JOHN R. COSTANTINO
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 62
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 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 60
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 72
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 9 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon
Brothers Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds and GE LifeStyle Funds since their inception.
The Statement of Additional Information for the Fund includes additional
information about the Directors and Officers and is available, without charge,
upon request by calling 1-800-242-0134.
20
<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
Daniel O. Colao, EVP, CHIEF FINANCIAL OFFICER (AS OF JULY 28, 2008)
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)
David Wiederecht, EVP, PRESIDENT - INVESTMENT STRATEGIES
21
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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.
Small-Cap Equity Fund
Semi-Annual Report
JUNE 30, 2008
[GE logo omitted]
<page>
GE Investments Funds, Inc.
Small-Cap Equity Fund
- --------------------------------------------------------------------------------
Contents
NOTES TO PERFORMANCE..................................................... 1
MANAGER REVIEW AND SCHEDULE OF INVESTMENTS............................... 2
NOTES TO SCHEDULE OF INVESTMENTS......................................... 8
FINANCIAL STATEMENTS
Financial Highlights................................................ 9
Statement of Assets and Liabilities................................. 10
Statement of Operations............................................. 11
Statements of Changes in Net Assets................................. 12
Notes to Financial Statements....................................... 13
ADDITIONAL INFORMATION................................................... 18
INVESTMENT TEAM.......................................................... 21
This report is prepared for Policyholders of certain variable contracts and may
be distributed to others only if preceded or accompanied by the variable
contract's current prospectus and the current prospectus of the Funds available
for investments thereunder.
<page>
Notes to Performance June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
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 shown are net of Fund expenses but do not reflect fees and charges
associated with the variable contracts such as administrative fees, account
charges and surrender charges, which, if reflected, would reduce the Fund's
total returns for all periods shown.
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 does not
reflect the actual cost of investing in the instruments that comprise the index.
The Russell 2000 Index is a market capitalization-weighted index consisting of
2,000 of the smallest U.S.-domiciled publicly traded common stocks that are
included in the Russell 3000(R) Index. The Russell 3000(R) Index is comprised of
the 3,000 largest U.S. domiciled companies. The results shown for the foregoing
index assume the reinvestment of net dividends or interest.
The peer universe of the underlying annuity funds used in our peer 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
SIX-MONTH PERIOD ENDED JUNE 30, 2008?
A. For the six-month period ended June 30, 2008, the Small-Cap Equity Fund
returned -5.42% for the Class 1 shares and -4.64% for the Class 4 shares.
The Russell 2000 Index, the Fund's benchmark, returned -9.37% and the Fund's
Lipper peer group of 141 Small-Cap Core Funds returned an average of -8.67%
for the same period.
Q. WHAT MARKET CONDITIONS IMPACTED FUND PERFORMANCE?
A. Over the past six months, U.S. financial markets continued to face
significant challenges due to ever-higher commodity prices, housing market
problems, and slowing domestic economic growth. Energy was the only sector
in the Russell 2000 Index that registered a gain over the past six-month
period. All other sectors posted losses with the worst performers being
Consumer Discretionary (-19%), Financials (-17%), and Healthcare (-17%).
Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE?
A. The main contributor to the Fund's relative outperformance was a strong
stock selection in the Consumer Discretionary sector. Despite being the
worst performing sector in the Russell 2000 Index, good decision making in
the sector helped to overcome the weakness in the Index. The top performers
were Aeropostale (+18%), Bright Horizons Family Solutions (+24%), and
Arbitron (+15%). The Fund also received solid results from its selection of
stocks in the Industrials sector. The key name was DRS Technologies (+46%),
which rose following the news that it will be acquired by a foreign
competitor.
The main area of weakness came from the Fund's holdings in the Healthcare
sector. Much of the weakness came from healthcare providers Healthways
(-49%) and Molina Healthcare (-37%). Additionally, disposable medical
products concern Medical Action Industries (-50%) detracted notably from
relative results.
2
<page>
Q&A
- --------------------------------------------------------------------------------
Q. WERE THERE ANY SIGNIFICANT CHANGES TO THE FUND DURING THE PERIOD?
A. There were no significant changes to the Fund during the most recent
six-month period. We have slightly reduced our holdings in the Consumer
Discretionary, Financials, Healthcare and Industrials sectors, and have
increased our Energy exposure.
Many of our holdings benefit from the weaker dollar as they have significant
international exposure. This should bode well for the Fund as we enter
earnings season in the next few weeks. We remain focused on companies with
strong fundamentals whose earnings visibility and consistency are paramount.
Although earnings estimates have been pared for 2008, earnings expectations
for smaller stocks have held up better than for those of large caps.
We believe positive employment data is the key factor keeping the economy
intact. However, economic news remains challenging. The unemployment rate is
at 5.5%, the economy has registered six straight months of job losses, and
employment numbers turned negative on a year-over-year basis for the first
time since November 2003. Additionally, headwinds created by the
hyperinflationary rise in oil prices and other commodities pose further
threats to an already fragile economy.
We believe price volatility will continue to characterize the current market
uncertainty and that the Federal Reserve will continue to act as a catalyst
for market action. The current environment shares similarities to the
recession of 1990, where banks and brokerage firms were under intense
pressure, oil prices were rising, and a consumer-led recession took place
leaving retailers struggling. Despite this backdrop, 1991 proved to be a
very strong year for small caps with the Russell 2000 Index soaring 46%.
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 invested capital. As a result of our quality focus, we believe the
portfolio is well positioned for periods where economic activity slows and
earnings growth becomes more challenging.
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 June 30,
2008.
ACTUAL EXPENSES
The first section of the table provides information about actual account values
and actual expenses. You may use the information in this section, together with
the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JANUARY 1, 2008 - JUNE 30, 2008
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID
BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($)*
- ------------------------------------------------------------------------------------------------------------------------------------
ACTUAL FUND RETURN**
- ------------------------------------------------------------------------------------------------------------------------------------
Class 1 1,000.00 945.77 4.21
Class 4 1,000.00 953.57 6.33
- ------------------------------------------------------------------------------------------------------------------------------------
HYPOTHETICAL 5% RETURN (2.5% FOR THE PERIOD)
- ------------------------------------------------------------------------------------------------------------------------------------
Class 1 1,000.00 1,020.28 4.42
Class 4 1,000.00 1,018.38 6.46
- ------------------------------------------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.88% FOR CLASS
1 AND 1.28% FOR CLASS 4, (FROM PERIOD JANUARY 1, 2008 - JUNE 30, 2008),
MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY
182/366 (TO REFLECT THE ONE-HALF YEAR PERIOD).
** ACTUAL FUND RETURNS FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2008 WERE AS
FOLLOWS: (5.42)% FOR CLASS 1 SHARES, AND SINCE INCEPTION (4.64)% FOR CLASS 4
SHARES.
4
<page>
Small-Cap Equity Fund (unaudited)
- --------------------------------------------------------------------------------
CHANGE IN VALUE OF A $10,000 INVESTMENT
CLASS 1 SHARES
- --------------------------------------------------------------------------------
[Line chart omitted -- plot points are as follows:]
GEI SMALL-CAP EQUITY RUSSELL 2000 INDEX
04/28/00 10,000.00 10,000.00
12/00 11,325.90 9,649.74
12/01 12,455.21 9,896.04
12/02 10,729.52 7,876.02
12/03 13,316.93 11,602.26
12/04 15,334.17 13,729.45
12/05 16,795.59 14,350.16
12/06 19,023.86 16,983.06
12/07 19,478.46 16,712.35
06/08 18,422.11 15,145.36
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED JUNE 30, 2008
- --------------------------------------------------------------------------------
CLASS 1 SHARES (Inception date: 4/28/00)
- --------------------------------------------------------------------------------
SIX ONE FIVE SINCE ENDING VALUE OF A
MONTHS YEAR YEAR INCEPTION $10,000 INVESTMENT
- --------------------------------------------------------------------------------
Small-Cap Equity Fund -5.42% -11.19% 10.63% 7.76% $18,422
- --------------------------------------------------------------------------------
Russell 2000 Index -9.37% -16.20% 10.27% 5.21% $15,145
- --------------------------------------------------------------------------------
Lipper peer group average* -8.67% -16.78% 9.98% N/A
- --------------------------------------------------------------------------------
CLASS 4 SHARES
- --------------------------------------------------------------------------------
[Line chart omitted -- plot points are as follows:]
GEI SMALL-CAP EQUITY RUSSELL 2000 INDEX
05/08 10,000.00 10,000.00
06/08 9,535.65 9,654.09
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED JUNE 30, 2008
- --------------------------------------------------------------------------------
CLASS 4 SHARES (Inception date: 5/1/08)
- --------------------------------------------------------------------------------
ONE SINCE ENDING VALUE OF A
MONTH INCEPTION $10,000 INVESTMENT
- --------------------------------------------------------------------------------
Small-Cap Equity Fund -7.56% -4.64% $9,536
- --------------------------------------------------------------------------------
Russell 2000 Index -7.70% -3.46% $9,654
- --------------------------------------------------------------------------------
Lipper peer group average** -7.87% N/A
- --------------------------------------------------------------------------------
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.
PORTFOLIO COMPOSITION AS OF JUNE 30, 2008
as a % of Market Value
Market Value of $85,903 (in thousands)
- --------------------------------------------------------------------------------
[Pie chart omitted -- plot points are as follows:]
Industrials 22.7%
Financials 17.6%
Consumer Discretionary 14.1%
Information Technology 11.8%
Healthcare 11.8%
Energy 9.4%
Materials 5.5%
Consumer Staples 4.6%
Utilities 1.7%
Short-Term 0.8%
Other Investments 0.0%***
TOP TEN LARGEST HOLDINGS AS OF JUNE 30, 2008
as a % of Market Value
- --------------------------------------------------------------------------------
Oil States International, Inc. 3.56%
- --------------------------------------------------------------------------------
Central European Distribution Corp. 3.56%
- --------------------------------------------------------------------------------
Arbitron, Inc. 2.94%
- --------------------------------------------------------------------------------
Harsco Corp. 2.93%
- --------------------------------------------------------------------------------
Teledyne Technologies Inc. 2.66%
- --------------------------------------------------------------------------------
Quanta Services, Inc. 2.61%
- --------------------------------------------------------------------------------
Dril-Quip Inc. 2.57%
- --------------------------------------------------------------------------------
Varian, Inc. 2.49%
- --------------------------------------------------------------------------------
Interactive Data Corp. 2.48%
- --------------------------------------------------------------------------------
Aeropostale, Inc. 2.46%
- --------------------------------------------------------------------------------
* LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS
FOR THE SIX MONTHS, ONE YEAR AND FIVE-YEAR PERIODS INDICATED IN THE
SMALL-CAP CORE FUNDS PEER GROUP CONSISTING OF 141, 140 AND 99 UNDERLYING
ANNUITY FUNDS, RESPECTIVELY.
** LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS
FOR THE ONE MONTH PERIOD INDICATED IN THE SMALL-CAP CORE FUNDS PEER GROUP
CONSISTING OF 144 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
<page>
SMALL-CAP EQUITY FUND
Schedule of Investments June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
SMALL-CAP EQUITY FUND
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK -- 98.9% +
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 14.1%
Aaron Rents, Inc............... 71,700 $ 1,601,061
Aeropostale, Inc............... 67,500 2,114,775(a)
American Eagle Outfitters, Inc. 19,000 258,970
Arbitron, Inc.................. 53,100 2,522,250
CBRL Group, Inc................ 26,700 654,417
Interactive Data Corp.......... 84,900 2,133,537
Jarden Corp.................... 41,600 758,784(a)
LKQ Corp....................... 95,200 1,720,264(a)
Triarc Companies, Inc. (Class B)
(Series 1).................. 59,800 378,534
12,142,592
CONSUMER STAPLES -- 4.6%
Central European
Distribution Corp........... 41,200 3,054,980(a)
Smithfield Foods, Inc.......... 45,300 900,564(a)
3,955,544
ENERGY -- 9.4%
Dril-Quip Inc.................. 35,000 2,205,000(a)
NATCO Group, Inc. (Class A).... 22,800 1,243,284(a)
Oil States International, Inc.. 48,200 3,057,808(a)
St. Mary Land & Exploration Co. 25,200 1,628,928
8,135,020
FINANCIALS -- 17.5%
BioMed Realty Trust, Inc. (REIT) 85,300 2,092,409
Cullen/Frost Bankers, Inc...... 17,900 892,315
DCT Industrial Trust, Inc. (REIT) 72,300 598,644
Digital Realty Trust, Inc. (REIT) 28,100 1,149,571
Federal Realty Investment Trust
(REIT)...................... 15,200 1,048,800
GFI Group, Inc................. 75,700 682,057
Global Cash Access Holdings,
Inc. 108,200 742,252(a)
HCC Insurance Holdings, Inc.... 73,800 1,560,132
Hilb Rogal & Hobbs Co.......... 15,600 677,976
Jones Lang LaSalle Inc......... 8,100 487,539
Omega Healthcare Investors, Inc.
(REIT)...................... 115,300 1,919,745
Raymond James Financial, Inc... 75,000 1,979,250
Sandy Spring Bancorp, Inc...... 14,400 238,752
Sterling Bancorp............... 24,200 289,190
Westamerica Bancorporation..... 13,900 731,001
15,089,633
HEALTHCARE -- 11.7%
AMN Healthcare Services, Inc... 47,900 810,468(a)
Computer Programs and
Systems, Inc................ 31,600 547,628
Cubist Pharmaceuticals, Inc.... 27,100 484,006(a)
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Healthways, Inc................ 28,000 $ 828,800(a)
HMS Holdings Corp.............. 24,100 517,427(a)
inVentiv Health, Inc........... 39,100 1,086,589(a)
KV Pharmaceutical Co.
(Class A) 67,500 1,304,775(a)
Medical Action Industries Inc.. 84,700 878,339(a)
Molina Healthcare, Inc......... 48,800 1,187,792(a)
Thoratec Corp.................. 18,800 326,932(a)
Varian, Inc.................... 41,900 2,139,414(a)
10,112,170
INDUSTRIALS -- 22.6%
Applied Industrial Technologies,
Inc. 35,400 855,618
Baldor Electric Co............. 36,900 1,290,762
Comfort Systems USA, Inc....... 55,200 741,888
Genesee & Wyoming Inc.
(Class A) 54,500 1,854,090(a)
Harsco Corp.................... 46,300 2,519,183
Healthcare Services Group...... 32,800 498,888
Herman Miller Inc.............. 37,200 925,908
Mueller Industries, Inc........ 52,000 1,674,400
NCI Building Systems, Inc...... 14,300 525,239(a)
Old Dominion Freight Line, Inc. 33,100 993,662(a)
Oshkosh Corp................... 44,200 914,498
Quanta Services, Inc........... 67,400 2,242,398(a)
Teledyne Technologies Inc...... 46,900 2,288,251(a)
Universal Technical Institute,
Inc. 3,300 41,118(a)
Woodward Governor Co........... 59,000 2,103,940
19,469,843
INFORMATION TECHNOLOGY -- 11.8%
ACI Worldwide, Inc............. 21,900 385,221(a)
BigBand Networks, Inc.......... 34,000 160,820(a)
Blackbaud, Inc................. 72,000 1,540,800
CommScope, Inc................. 35,000 1,846,950(a)
Micros Systems, Inc............ 59,700 1,820,253(a)
Microsemi Corp................. 17,200 433,096(a)
Parametric Technology Corp..... 81,400 1,356,938(a)
Rudolph Technologies, Inc...... 66,000 508,200(a)
Semtech Corp................... 69,600 979,272(a)
SRA International, Inc.
(Class A) 8,200 184,172(a)
Varian Semiconductor Equipment
Associates, Inc............. 7,400 257,668(a)
Zebra Technologies Corp.
(Class A) 21,200 691,968(a)
10,165,358
MATERIALS -- 5.5%
Commercial Metals Co........... 55,500 2,092,350
Compass Minerals
International, Inc.......... 11,400 918,384
Packaging Corporation of
America 64,200 1,380,942
Pioneer Drilling Co............ 19,100 359,271(a)
4,750,947
UTILITIES -- 1.7%
IDACORP, Inc................... 49,500 1,430,055
TOTAL INVESTMENTS IN SECURITIES
(COST $84,730,336)........... 85,251,162
See Notes to Schedule of Investments on page 8 and Notes to Financial
Statements.
6
<page>
SMALL-CAP EQUITY FUND
Schedule of Investments June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
VALUE
- --------------------------------------------------------------------------------
OTHER INVESTMENTS -- 0.0%*
- --------------------------------------------------------------------------------
GEI Investment Fund
(COST $24)................... $ 19 (c)
TOTAL INVESTMENTS IN SECURITIES
(COST $84,730,360)........... 85,251,181
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 0.7%
- --------------------------------------------------------------------------------
GE Money Market Fund
Institutional Class
1.93%....................... 651,607(b,d)
(COST $651,607)
TOTAL INVESTMENTS
(COST $85,381,967)........... 85,902,788
OTHER ASSETS AND LIABILITIES,
NET-- 0.4%.................. 318,747
-----------
NET ASSETS-- 100.0% ........... $86,221,535
===========
See Notes to Schedule of Investments on page 8 and Notes to Financial
Statements.
7
<page>
Notes to Schedule of Investments June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
The views expressed in this document reflect our judgment as of the publication
date and are subject to change at any time without notice. The securities cited
may not represent current or future holdings and should not be considered as a
recommendation to purchase or sell a particular security. See the prospectus for
complete descriptions of investment objectives, policies, risks and permissible
investments.
(a) Non-income producing security.
(b) Coupon amount represents effective yield.
(c) GE Asset Management ("GEAM") the investment adviser of the Fund, also serves
as investment adviser of the GEI Investment Fund.
(d) GEAM, the investment adviser of the Fund, also serves as investment adviser
of the GE Money Market Fund.
+ Percentages are based on net assets as of June 30, 2008.
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
---------------------------------------------------------------------- --------------
CLASS 1 CLASS 4
---------------------------------------------------------------------- --------------
6/30/08+ 12/31/07 12/31/06 12/31/05 12/31/04 12/31/03 6/30/08+
---------------------------------------------------------------------- --------------
INCEPTION DATE -- -- -- -- -- 4/28/00 5/1/08
Net asset value, beginning of period.... $ 12.17 $ 14.39 $ 14.44 $ 13.62 $ 12.74 $ 10.27 $12.06
INCOME/(LOSS) FROM INVESTMENT OPERATIONS:
Net investment income................ 0.06 0.06 0.05 0.02 0.08 0.02 0.02
Net realized and unrealized
gains/(losses) on investments..... (0.72) 0.31 1.87 1.28 1.85 2.46 (0.58)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM
INVESTMENT OPERATIONS................ (0.66) 0.36 1.92 1.30 1.93 2.48 (0.56)
- ------------------------------------------------------------------------------------------------------------------------------------
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.......... $ 11.51 $ 12.17 $ 14.39 $ 14.44 $ 13.62 $ 12.74 $11.50
====================================================================================================================================
TOTAL RETURN (A)........................ (5.42)% 2.39% 13.27% 9.53% 15.15% 24.11% (4.64)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $86,212 $104,010 $127,381 $128,142 $117,158 $86,330 $ 10
Ratios to average net assets:
Net investment income*............ 0.47% 0.31% 0.31% 0.11% 0.67% 0.17% (0.06)%
Expenses*......................... 0.88% 0.87% 0.86% 0.86% 0.88% 0.86% 1.28%
Portfolio turnover rate.............. 9% 25% 52% 33% 101% 119% 9%
NOTES TO FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(a) Total returns are historical and assume changes in share price and
reinvestment of dividends and capital gains and do not include the effect of
insurance contract charges.
* Annualized for periods less than one year.
+ Unaudited.
See Notes to Financial Statements.
9
<page>
Statement of Assets
and Liabilities JUNE 30, 2008 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------
SMALL-CAP
EQUITY
FUND
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments in securities, at market (cost $84,730,336)................................................ $85,251,162
Investments in affiliated securities, at market (cost $24)............................................. 19
Short-term affiliated investments (at amortized cost).................................................. 651,607
Receivable for investments sold........................................................................ 593,729
Income receivables..................................................................................... 86,848
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS....................................................................................... 86,583,365
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable for fund shares redeemed....................................................................... 243,623
Payable to GEAM........................................................................................ 69,994
Accrued other expenses................................................................................. 47,686
Other liabilities...................................................................................... 527
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES.................................................................................. 361,830
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS................................................................................................ $86,221,535
====================================================================================================================================
NET ASSETS CONSIST OF:
Capital paid in........................................................................................ 81,818,435
Undistributed (distribution in excess of)
net investment income............................................................................... 253,290
Accumulated net realized gain (loss)................................................................... 3,628,989
Net unrealized appreciation/(depreciation) on:
Investments......................................................................................... 520,821
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS................................................................................................ $86,221,535
====================================================================================================================================
CLASS 1:
NET ASSETS................................................................................................ 86,211,995
Shares outstanding ($0.01 par value; unlimited shares authorized)......................................... 7,487,008
Net asset value per share................................................................................. $11.51
CLASS 4:
NET ASSETS................................................................................................ 9,540
Shares outstanding ($0.01 par value; unlimited shares authorized)......................................... 829
Net asset value per share................................................................................. $11.50
See Notes to Financial Statements.
10
<page>
Statement of Operations
FOR THE SIX MONTHS ENDED JUNE 30, 2008 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------
SMALL-CAP
EQUITY
FUND
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividend .................................................................................. $ 609,977
Interest .................................................................................. (40)
Interest from affliated investments ....................................................... 10,668
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME ................................................................................ 620,605
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees .......................................................... 369,718
Distributors Fees (Note 4)
Class 4 ................................................................................ 7
Transfer agent ............................................................................ 23
Trustee's fees ............................................................................ 1,297
Custody and accounting expenses ........................................................... 17,005
Professional fees ......................................................................... 10,169
Registration expenses ..................................................................... 2,403
Other expenses ............................................................................ 4,287
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES BEFORE WAIVER AND REIMBURSEMENT .............................................. 404,909
- ------------------------------------------------------------------------------------------------------------------------------------
Less: Expenses reimbursed by the adviser (waiver related to Fund of Fund Investment) ...... (1,134)
- ------------------------------------------------------------------------------------------------------------------------------------
Net expenses .............................................................................. 403,775
- ------------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) ................................................................ 216,830
====================================================================================================================================
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments ............................................................................ 3,307,240
INCREASE (DECREASE) IN UNREALIZED APPRECIATION/
(DEPRECIATION) ON:
Investments ............................................................................ (9,059,794)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments .................................... (5,752,554)
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ............................. $(5,535,724)
====================================================================================================================================
See Notes to Financial Statements.
11
<page>
Statements of
Changes in Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
SMALL-CAP
EQUITY
FUND
- ------------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2008 DECEMBER 31,
(UNAUDITED) 2007
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income (loss)..................................................... $ 216,830 $ 284,288
Net realized gain (loss) on investments, futures, written options,
and foreign currency transactions............................................... 3,307,240 10,756,527
Net increase (decrease) in unrealized appreciation/(depreciation)
on investments, futures, written options, and foreign
currency translation............................................................ (9,059,794) (7,235,808)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations........................................... (5,535,724) 3,805,007
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class 1......................................................................... -- (410,572)
Class 4......................................................................... -- --
Net realized gains
Class 1......................................................................... -- (17,923,908)
Class 4......................................................................... -- --
Return of Capital................................................................. -- --
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS................................................................. -- (18,334,480)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations and distributions................. (5,535,724) (14,529,473)
- ------------------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares
Class 1......................................................................... 2,359,892 2,430,205
Class 4......................................................................... 10,000 --
Value of distributions reinvested
Class 1......................................................................... -- 18,334,520
Class 4......................................................................... -- --
Cost of shares redeemed
Class 1......................................................................... (14,622,790) (29,605,821)
Class 4......................................................................... -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from share transactions................................... (12,252,898) (8,841,096)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS............................................. (17,788,622) (23,370,569)
NET ASSETS
Beginning of period................................................................ 104,010,157 127,380,726
- ------------------------------------------------------------------------------------------------------------------------------------
End of period...................................................................... $ 86,221,535 $104,010,157
====================================================================================================================================
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD........ $ 253,290 $ 36,460
- ------------------------------------------------------------------------------------------------------------------------------------
CHANGES IN FUND SHARES
CLASS 1
Shares sold............................................................................ 207,808 159,845
Issued for distributions reinvested.................................................... -- 1,494,256
Shares redeemed........................................................................ (1,266,759) (1,960,515)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares................................................. (1,058,951) (306,414)
====================================================================================================================================
CLASS 4
Shares sold............................................................................ 829 --
Issued for distributions reinvested.................................................... -- --
Shares redeemed........................................................................ -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares................................................. 829 --
====================================================================================================================================
See Notes to Financial Statements.
12
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
1. ORGANIZATION OF THE COMPANY
GE Investments Funds, Inc. (the "Company") was incorporated under the laws of
the Commonwealth of Virginia on May 14, 1984 and is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company. The Company is composed of thirteen investment
portfolios (collectively the "Funds"), although only the following eleven are
currently being offered: U.S. Equity Fund, S&P 500 Index Fund, Premier Growth
Equity Fund, Value Equity Fund, Mid-Cap Equity Fund, Small-Cap Equity Fund (the
"Fund"), International Equity Fund, Total Return Fund, Income Fund, Money Market
Fund and Real Estate Securities Fund.
Shares of the Funds of the Company are offered only to insurance company
separate accounts that fund certain variable life insurance contracts and
variable annuity contracts. These insurance companies may include insurance
companies affiliated with GE Asset Management Incorporated ("GEAM"), the
investment adviser and administrator of each of the Funds.
2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the reporting period. Actual results may differ from
those estimates.
The following summarizes the significant accounting policies of the Fund:
SECURITY VALUATION AND TRANSACTIONS
The Fund's portfolio securities are valued generally on the basis of market
quotations. Equity securities generally are valued at the last reported sales
price on the primary market in which they are traded. Portfolio securities
listed on NASDAQ are valued using the NASDAQ Official Closing Price, which may
not necessarily represent the last sale price. If no sales occurred on the
exchange or NASDAQ that day, the portfolio security generally is valued using
the last reported bid price.
Debt securities (other than short-term securities described below) generally are
valued at an evaluated bid as reported by an independent pricing service. Values
obtained from pricing services are based on various factors such as market
transactions, dealer supplied valuations, security characteristics and other
market data. In the absence of a reliable price from such a pricing service,
debt securities may be valued based on dealer supplied valuations or quotations.
The Fund's written or purchased options are valued at the last sales price, or
if no sales occurred that day, at the last reported bid price. Short-term
investments with remaining maturities of sixty days or less at the time of
purchase are valued on the basis of amortized cost, which approximates market
value.
All assets and liabilities of the Fund initially expressed in foreign currency
values will be converted into U.S. dollars at the WM/Reuters exchange rate
computed at 11:00 a.m., Eastern time.
If prices are not readily available for a portfolio security, or if it is
believed that a price for a portfolio security does not represent its fair
value, the security may be valued using procedures approved by the Fund's Board
of Directors that are designed to establish its "fair" value. Those procedures
require that the fair value of a security be established by the fair valuation
committee. The fair valuation committee follows different protocols for
different types of investments and circumstances. The fair value procedures may
be used to value any investment by the Fund in the appropriate circumstances.
Examples of the types of securities that may be fair valued include: thinly
traded or illiquid investments, high-yield securities or foreign securities.
Foreign securities may be valued with the assistance of an independent fair
value pricing service in circumstances where it is believed that they have been
or would be materially affected by events occurring after the close of the
portfolio security's primary market and before the close of regular trading on
the NYSE. This independent fair value pricing service uses a computerized system
to appraise affected securities and portfolios taking into consideration various
factors and the fair value of such securities may be something other than the
last available quotation or other market price.
GEAM may also separately monitor portfolio securities and, consistent with the
Fund's fair value procedures, apply a different value to a portfolio security
than would be applied had it been priced using market quotations or by an
independent fair value pricing service.
13
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
Determining the fair value of securities involves the application of both
subjective and objective considerations. Security values may differ depending on
the methodology used to determine their values, and may differ from the last
quoted sale or closing price. No assurance can be given that use of these fair
value procedures will always better represent the price at which the Fund could
sell the affected portfolio security.
Security transactions are accounted for as of the trade date. Realized gains and
losses on investments sold are recorded on the basis of identified cost for both
financial statement and federal tax purposes.
The Fund adopted FASB Statement No. 157, FAIR VALUE MEASUREMENTS (FAS 157). FAS
157 establishes a single definition of fair value, a framework for measuring
fair value, and expanded disclosures about fair value measurements.
Various inputs are used in determining the value of the Fund's investments.
These inputs are classified into three broad levels:
Level 1 includes quoted prices in active markets of securities identical to
those of the Funs.
Level 2 includes: 1) quoted prices in active markets for similar securities to
those of the Fund; 2) quoted prices for identical or similar securities to those
of the Fund that trade in markets in which there are few transactions or the
quoted prices are not current; 3) prices based on observable market data such as
interest rates and yield curves, volatilities, bond prepayment speeds, and
credit risk and; 4) prices based principally on observable market data by use of
correlation techniques or other means.
Level 3 includes unobservable market inputs used to fair value securities. These
inputs are based on assumptions that market participants would use to price
securities and may include the adviser's own assumptions.
Other financial instruments are derivative instruments that are not reflected in
TOTAL INVESTMENTS, such as futures, forwards, swaps, and written options
contracts, which are valued based on the unrealized appreciation/depreciation of
the instrument.
Level 1 Level 2 Level 3 Total
- ------------------------------------------------------------------------------------------------------------------------------------
Investments in Securities $85,902,769 $19 $-- $85,902,788
Other Financial Instruments $ -- $-- $-- $ --
REPURCHASE AGREEMENTS The Fund may enter into 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
14
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
market prices of securities during the period. Such fluctuations are included in
the net realized or unrealized gain or loss from investments. Net realized gains
or losses on foreign currency transactions represent net gains or losses on
sales and maturities of foreign currency contracts, disposition of foreign
currencies, the difference between the amount of net investment income and
withholding taxes accrued and the U.S. dollar amount actually received or paid,
and gains or losses between the trade and settlement date on purchases and sales
of securities. Net unrealized foreign exchange gains and losses arising from
changes in the value of other assets and liabilities as a result of changes in
foreign exchange rates are included as increases or decreases in unrealized
appreciation/depreciation on foreign currency related transactions.
INVESTMENTS IN FOREIGN MARKETS Investments in foreign markets may involve
special risks and considerations not typically associated with investing in the
United States. These risks include revaluation of currencies, high rates of
inflation, repatriation on income and capital, and adverse political and
economic developments. Moreover, securities issued in these markets may be less
liquid, subject to government ownership controls, tariffs and taxes, subject to
delays in settlements, and their prices may be more volatile.
The Fund may be subject to capital gains and repatriation taxes imposed by
certain countries in which it invests. Such taxes are generally based on income
and/or capital gains earned or repatriated. Taxes are accrued based upon net
investment income, net realized gains and net unrealized appreciation as income
and/or capital gains are earned.
INCOME TAXES The Fund intends to comply with all sections of the Internal
Revenue Code applicable to regulated investment companies including the
distribution of substantially all of its taxable net investment income and net
realized capital gains to its shareholders. Therefore, no provision for federal
income tax has been made. The Fund is treated as a separate taxpayer for federal
income tax purposes.
At June 30, 2008, 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
- ------------------------------------------------------------------------------------------------------------------------------------
$85,439,279 $13,745,459 $(13,281,974) $463,485
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
15
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
$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 $150 million with a
number of its affiliates. The credit facility is with its custodian bank, State
Street Bank and Trust Company. The revolving credit facility requires the
payment of a commitment fee equal to 0.09% per annum on the daily unused portion
of the credit facility, payable quarterly. The portion borne by the Funds
generally is borne proportionally based upon net assets. In addition, the
Company has a $100 million uncommitted, unsecured line of credit with State
Street. 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 June 30,
2008.
4. AMOUNTS PAID TO AFFILIATES
GEAM, a registered investment adviser, was retained by the Company's Board of
Directors effective May 1, 1997 to act as investment adviser and administrator
of the Fund. GEAM's compensation for investment advisory and administrative
services is paid monthly based on the average daily net assets of the Fund at an
annualized rate of 0.80%.
GENPACT performs certain accounting and certain administration services not
provided by GEAM. For the period ending June 30, 2008, $795 was charged to the
Fund.
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 the Class 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 rate applicable is
0.45% for the Class 4 shares. Currently, Class 1 shares are not subject to a
Rule 12b-1 fee.
16
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
DIRECTORS' COMPENSATION The Fund pays no compensation to its directors who are
officers or employees of GEAM or its affiliates. Directors who are not such
officers or employees also serve in a similar capacity for other funds advised
by GEAM. Compensation paid to unaffiliated directors are reflected on the
Statement of Operations. These fees are allocated pro rata across all of the
mutual fund platforms and share classes served by the directors, including the
Fund, and are based upon the relative net assets of each fund within such
platforms. (For additional information about directors compensation please refer
to the Statement of Additional Information.)
5. SUB-ADVISORY FEES
Pursuant to an investment sub-advisory agreement with GEAM, Palisade Capital
Management, LLC ("Palisade") is the sub-adviser to the Small-Cap Equity Fund.
Palisade is responsible for the day-to-day portfolio management of the assets of
the Fund, including the responsibility for making decisions to buy, sell or hold
a particular security, under the general supervision of GEAM and the Board.
For their services, GEAM pays Palisade monthly sub-advisory fees which are
calculated as a percentage of the average daily net assets of the Fund.
6. INVESTMENT TRANSACTIONS
PURCHASES AND SALES OF SECURITIES The cost of purchases and the proceeds from
sales of investments, other than short-term securities and options, for the
period ended June 30, 2008 were as follows:
Purchases Sales
- --------------------------------------------------------------------------------
$8,386,751 $21,412,180
SECURITY LENDING At June 30, 2008, the Fund did not participate in securities
lending.
17
Additional Information (unaudited)
- --------------------------------------------------------------------------------
INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS:
The business and affairs of the Company are managed under the direction of the
Company's Board of Directors. Information pertaining to the Directors and
officers of the Company is set forth below.
INTERESTED DIRECTORS AND EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
MICHAEL J. COSGROVE
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 59
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 47
POSITION(S) HELD WITH FUND Executive Vice President
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - less than one year
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General
Counsel and Secretary of GEAM since July 2007; Senior Vice President and General
Counsel - Marketing and Client Services (formerly Asset Management Services), at
GEAM and Senior Vice President and General Counsel of GEAMS from February 1997
to June 2007; Vice President and Associate General Counsel of GEAM from October
1992 to February 1997; Secretary of Fund from 1997 to June 2007; Vice President
of Fund from September 2003 to June 2007; Vice President of GE Institutional
Funds and GE LifeStyle Funds from September 2003 to June 2007; Secretary of GE
Institutional Funds and GE LifeStyle Funds from 1997 to June 2007; Vice
President of Elfun Funds and GE Savings & Security Funds from October 2003 to
June 2007; Assistant Secretary of Elfun Funds and GE Savings & Security Funds
from 1998 to June 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional
Funds, GE LifeStyle Funds, Elfun Funds and GE Savings & Security Funds since
July 2007.
18
Additional Information (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCOTT H. RHODES
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 49
POSITION(S) HELD WITH FUND Treasurer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 2 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds Operations
Manager since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle
Funds and GE Investments Funds since November 2005 and Elfun Funds and GE
Savings & Security Funds since September 2005; from August 2004 to September
2005 Vice President, U.S. Trust Company, N.A. and Assistant Treasurer of
Excelsior Funds, Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds,
Inc.; from January 2004 to August 2004, Vice President BlackRock Financial
Management, Inc.; from December 1996 to November 2003, Controller - Mutual
Funds, American Skandia Investment Services, Inc. and Assistant Treasurer of
American Skandia Trust and American Skandia Advisor Funds, Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
- --------------------------------------------------------------------------------
JEANNE M. LAPORTA
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 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
19
Additional Information (unaudited)
- --------------------------------------------------------------------------------
NON-INTERESTED DIRECTORS
- --------------------------------------------------------------------------------
JOHN R. COSTANTINO
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 62
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 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 60
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 72
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 9 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon
Brothers Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds and GE LifeStyle Funds since their inception.
The Statement of Additional Information for the Fund includes additional
information about the Directors and Officers and is available, without charge,
upon request by calling 1-800-242-0134.
20
Investment Team
- --------------------------------------------------------------------------------
INVESTMENT ADVISER AND ADMINISTRATOR
GE Asset Management Incorporated
BOARD OF DIRECTORS
Michael J. Cosgrove, CHAIRMAN
John R. Costantino
William J. Lucas
Robert P. Quinn
Matthew J. Simpson
SECRETARY
Jeanne M. LaPorta
ASSISTANT SECRETARIES
Joseph A. Carucci
Joon Won Choe
TREASURER
Scott H. Rhodes
ASSISTANT TREASURERS
Scott R. Fuchs
Christopher M. Isaacs
DISTRIBUTOR
GE Investment Distributors, Inc.
Member 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
Daniel O. Colao, EVP, CHIEF FINANCIAL OFFICER (AS OF JULY 28, 2008)
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)
David Wiederecht, EVP, PRESIDENT - INVESTMENT STRATEGIES
21
[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.
International Equity Fund
Semi-Annual Report
JUNE 30, 2008
[GE logo omitted]
<page>
GE Investments Funds, Inc.
International Equity Fund
- --------------------------------------------------------------------------------
Contents
NOTES TO PERFORMANCE................................................ 1
MANAGER REVIEW AND SCHEDULE OF INVESTMENTS.......................... 2
NOTES TO SCHEDULE OF INVESTMENTS.................................... 9
FINANCIAL STATEMENTS
Financial Highlights........................................... 10
Statement of Assets and Liabilities............................ 11
Statement of Operations........................................ 12
Statements of Changes in Net Assets............................ 13
Notes to Financial Statements.................................. 14
ADDITIONAL INFORMATION.............................................. 20
INVESTMENT TEAM..................................................... 23
This report is prepared for Policyholders of certain variable contracts and may
be distributed to others only if preceded or accompanied by the variable
contract's current prospectus and the current prospectus of the Funds available
for investments thereunder.
<page>
Notes to Performance June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
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 shown are net of Fund expenses but do not reflect fees and charges
associated with the variable contracts such as administrative fees, account
charges and surrender charges, which, if reflected, would reduce the Fund's
total returns for all periods shown.
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 SIX-MONTH PERIOD ENDED JUNE 30, 2008?
A. For the six-month period ended June 30, 2008, the International Equity Fund
returned -9.61% for the Class 1 shares and -7.66% for the Class 4 shares.
The MSCI EAFE Index, the Fund's benchmark, returned -10.96% and the Fund's
Lipper peer group of 139 International Core funds returned an average of
-10.69% for the same period.
[photo omitted]
2
<page>
Q&A
- --------------------------------------------------------------------------------
Q. WHAT MARKET CONDITIONS IMPACTED FUND PERFORMANCE?
A. Growing concerns about the sustainability of earnings for companies around
the world: contributing factors include rising input costs caused by higher
raw materials prices, for example, combined with lower consumption
expectations caused by a slowing global economy and diminishing disposable
income. In addition, the difficulties for individuals and businesses to
access credit from an over-stressed banking system are exacerbating a
slowdown in the U.S. economy, with ripple effects overseas.
Q. WHAT DOMESTIC OR WORLD EVENTS HAD A MAJOR IMPACT ON THE FINANCIAL MARKETS?
A. In addition to the credit crisis referred to above, a disturbing rise in
inflation, worldwide, is having a dampening effect on economic activity,
severe enough to change behaviors in some countries. Gasoline at almost
$5/gallon in the United States is compelling users to look for alternative
means of transportation. In the developing world, especially in Asia, the
removal of expensive subsidies from energy prices might give rise to a
substantial drop in demand growth, at least in the short run.
Q. WHICH STOCKS AND SECTORS SIGNIFICANTLY AFFECTED FUND PERFORMANCE?
A. Holdings in materials and energy made strong contributions while the
absence of specific banking stocks and a general underweight in the
challenged consumer discretionary sector also proved positive. Specifically,
agricultural chemicals and basic resources continue to offer good returns
while oil and oil service companies continue to benefit from strong demand.
Some negative contribution came from holdings in IT and telecom services
where competition in an increasingly difficult economic environment has
anecdotally proved costly.
Q. DID THE WEIGHTINGS/COUNTRY ALLOCATIONS OF THE FUND CHANGE? WHY?
A. When market conditions were appropriate, modest additions to existing
holdings in the financial sector were executed, reducing the extent of the
underweight. Modest additions were also made to the energy holdings although
these were more focused on oil sands and uranium than conventional E&P
stocks. Holdings in industrials were slightly reduced, notably in
construction related stocks and our already underweight posture in consumer
discretionary was enhanced by the sale of hotel, media and retail holdings.
Q. WHAT WERE THE MAJOR BUYS AND SELLS FOR THE PERIOD AND WHY?
A. Existing positions in BNP Paribas, Royal Bank of Scotland and Lloyds TSB
were increased to take advantage of distressed valuations in the banking
sector while new positions were established in Suncor (Canada - oil sands),
Cameco (Canada - uranium) and Essilor (France - healthcare equipment). Oil
sands represent a major source of energy while uranium assets are gaining
popularity as nuclear power generation comes back as a potential power
source. Reed (UK - media) and Esprit (Hong Kong) were eliminated for
valuation and outlook reasons while Schneider (France - electrical
equipment) was sold for its proximity to the U.S. housing market.
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 June 30,
2008.
ACTUAL EXPENSES
The first section of the table provides information about actual account values
and actual expenses. You may use the information in this section, together with
the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JANUARY 1, 2008 - JUNE 30, 2008
- ------------------------------------------------------------------------------------------------------------------------------------
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID
BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($)*
- ------------------------------------------------------------------------------------------------------------------------------------
ACTUAL FUND RETURN**
- ------------------------------------------------------------------------------------------------------------------------------------
Class 1 1,000.00 903.89 5.61
Class 4 1,000.00 923.40 7.81
- ------------------------------------------------------------------------------------------------------------------------------------
HYPOTHETICAL 5% RETURN (2.5% FOR THE PERIOD)
- ------------------------------------------------------------------------------------------------------------------------------------
Class 1 1,000.00 1,018.77 5.97
Class 4 1,000.00 1,016.76 8.12
- ------------------------------------------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 1.19% FOR CLASS
1 AND 1.61% FOR CLASS 4, (FROM PERIOD JANUARY 1, 2008 - JUNE 30, 2008),
MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY
182/366 (TO REFLECT THE ONE-HALF YEAR PERIOD).
** ACTUAL FUND RETURNS FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2008 WERE AS
FOLLOWS: (9.61)% FOR CLASS 1 SHARES, AND SINCE INCEPTION (7.66)% FOR CLASS 4
SHARES.
4
<page>
International Equity Fund (unaudited)
- --------------------------------------------------------------------------------
CHANGE IN VALUE OF A $10,000 INVESTMENT
CLASS 1 SHARES
- --------------------------------------------------------------------------------
[Line chart omitted -- plot points are as follows:]
GEI INTERNATIONAL EQUITY MSCI EAFE INDEX
06/98 10,000.00 10,000.00
12/98 9,784.05 10,350.66
12/99 12,751.47 13,141.70
12/00 11,129.56 11,279.88
12/01 8,808.12 8,841.85
12/02 6,709.13 7,432.46
12/03 9,252.39 10,300.33
12/04 10,718.78 12,385.86
12/05 12,669.04 14,062.35
12/06 15,797.24 17,766.45
12/07 19,426.75 19,752.83
06/08 17,559.56 17,588.35
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED JUNE 30, 2008
- --------------------------------------------------------------------------------
CLASS 1 SHARES (Inception date: 5/1/95)
- --------------------------------------------------------------------------------
SIX ONE FIVE TEN ENDING VALUE OF A
MONTHS YEAR YEAR YEAR $10,000 INVESTMENT
- --------------------------------------------------------------------------------
International Equity Fund -9.61% -1.13% 18.87% 5.79% $17,560
- --------------------------------------------------------------------------------
MSCI EAFE Index -10.96% -10.60% 16.66% 5.81% $17,588
- --------------------------------------------------------------------------------
Lipper peer group average* -10.69% -9.06% 16.13% 6.13%
- --------------------------------------------------------------------------------
CLASS 4 SHARES
- --------------------------------------------------------------------------------
[Line chart omitted -- plot points are as follows:]
GEI INTERNATIONAL EQUITY MSCI EAFE INDEX
05/08 10,000.00 10,000.00
06/08 9,233.98 9,271.53
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED JUNE 30, 2008
- --------------------------------------------------------------------------------
CLASS 4 SHARES (Inception date: 5/1/08)
- --------------------------------------------------------------------------------
ONE SINCE ENDING VALUE OF A
MONTH INCEPTION $10,000 INVESTMENT
- --------------------------------------------------------------------------------
International Equity Fund -8.11% -7.66% $9,234
- --------------------------------------------------------------------------------
MSCI EAFE Index -8.18% -7.28% $9,272
- --------------------------------------------------------------------------------
Lipper peer group average** -8.23% N/A
- --------------------------------------------------------------------------------
INVESTMENT PROFILE
A fund designed for investors who seek long-term growth of capital by investing
at least 80% of its net assets in equity securities under normal circumstances.
The Fund invests primarily in developed and developing countries outside the
United States.
PORTFOLIO COMPOSITION AS OF JUNE 30, 2008
as a % of Market Value
- --------------------------------------------------------------------------------
Market Value of $50,162 (in thousands)
[Pie chart omitted -- plot points are as follows:]
Continental Europe 47.1%
Japan 17.7%
United Kingdom 15.6%
Latin America 4.3%
Pacific Rim 3.6%
Emerging Asia 3.2%
Canada 3.2%
Emerging Europe 2.7%
United States 2.6%
TOP TEN LARGEST HOLDINGS AS OF JUNE 30, 2008
as a % of Market Value
- --------------------------------------------------------------------------------
Roche Holding AG 3.11%
- --------------------------------------------------------------------------------
Nestle S.A. (Regd.) 2.98%
- --------------------------------------------------------------------------------
Potash Corporation of Saskatchewan 2.56%
- --------------------------------------------------------------------------------
BHP Billiton PLC 2.41%
- --------------------------------------------------------------------------------
Telenor ASA 2.30%
- --------------------------------------------------------------------------------
Saipem S.p.A. 2.20%
- --------------------------------------------------------------------------------
Nomura Holdings, Inc. 2.13%
- --------------------------------------------------------------------------------
E.ON AG 2.07%
- --------------------------------------------------------------------------------
Vodafone Group Public Limited Co. 2.05%
- --------------------------------------------------------------------------------
Mitsubishi UFJ Financial Group, Inc. 1.99%
- --------------------------------------------------------------------------------
* LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR
THE SIX MONTHS, ONE YEAR, FIVE-YEAR, AND TEN-YEAR PERIODS INDICATED IN THE
INTERNATIONAL CORE PEER GROUP CONSISTING OF 139, 137, 117 AND 49 UNDERLYING
ANNUITY FUNDS, RESPECTIVELY.
** LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR
THE ONE MONTH PERIOD INDICATED IN THE INTERNATIONAL CORE PEER GROUP
CONSISTING OF 150 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>
INTERNATIONAL EQUITY FUND
Schedule of Investments June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK -- 95.6% +
- --------------------------------------------------------------------------------
AUSTRALIA -- 1.9%
Brambles Ltd................... 50,501 $ 423,130
Paladin Energy Ltd............. 84,675 517,526(a)
940,656
BRAZIL -- 1.0%
Petroleo Brasileiro S.A. ADR... 8,522 493,850(d)
CANADA -- 3.2%
Cameco Corp.................... 3,775 162,974
Potash Corporation of
Saskatchewan................. 5,504 1,283,270
Suncor Energy, Inc............. 2,513 146,636
1,592,880
CHINA -- 0.5%
China COSCO Holdings
Company Ltd................. 96,500 236,169
DENMARK -- 0.5%
Group 4 Securicor PLC.......... 51,275 204,151
Novozymes (Series B)........... 417 37,566
241,717
FINLAND -- 1.7%
Nokia Oyj...................... 34,817 851,622
FRANCE -- 13.5%
Alstom......................... 2,503 574,352
AXA S.A........................ 12,157 358,466
BNP Paribas.................... 10,911 982,859(d)
Cie Generale d'Optique Essilor
International S.A........... 5,788 353,310
Credit Agricole S.A............ 24,085 490,002
Groupe Danone.................. 13,042 913,238
LVMH Moet Hennessy
Louis Vuitton S.A........... 2,158 225,272
Renault S.A.................... 1,584 129,006
Suez S.A....................... 8,726 591,926
Total S.A...................... 9,745 830,057
Unibail-Rodamco (REIT)......... 1,264 291,273
Veolia Environnement........... 11,839 661,399
Vinci S.A...................... 5,722 349,651
6,750,811
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
GERMANY -- 8.7%
Allianz AG (Regd.)............. 465 $ 81,852
Bayer AG....................... 10,898 917,578
Daimler AG (Regd.)............. 3,231 200,545
E.ON AG........................ 5,146 1,037,869
Linde AG....................... 5,300 744,959
Metro AG....................... 4,425 282,488
RWE AG......................... 1,352 170,817
Siemens AG (Regd.)............. 8,234 913,458
4,349,566
GREECE -- 0.9%
Hellenic Telecommunications
Organization S.A............. 18,868 475,640(a)
HONG KONG -- 0.3%
Sun Hung Kai Properties Ltd.... 12,930 175,767
INDIA -- 0.3%
Larsen & Toubro Ltd............ 3,490 176,232
ITALY -- 4.5%
Banca Intesa S.p.A............. 85,096 484,095
Saipem S.p.A................... 23,514 1,099,754
UniCredit S.p.A................ 109,762 668,131(d)
2,251,980
JAPAN -- 17.8%
Asahi Glass Company Ltd........ 27,003 327,479
Bank of Yokohama Ltd........... 39,506 273,659
East Japan Railway Co.......... 80 652,731
Ibiden Company Ltd............. 8,899 324,618
Komatsu Ltd.................... 15,811 442,289
Mitsubishi Estate Company Ltd.. 36,982 848,126
Mitsubishi Heavy Industries Ltd. 97,000 464,085
Mitsubishi UFJ Financial Group,
Inc. 112,564 996,467
Nidec Corp..................... 3,567 237,999
Nintendo Company Ltd........... 600 340,821
Nomura Holdings, Inc........... 71,999 1,067,998
Shiseido Company Ltd........... 32,000 734,588
Sony Financial Holdings, Inc... 184 742,026
Sumitomo Realty & Development
Company Ltd................. 6,000 119,561
Toray Industries Inc........... 138,999 747,270
Toyota Motor Corp.............. 11,804 558,142
8,877,859
MEXICO -- 1.0%
America Movil S.A. de C.V.
ADR (Series L).............. 9,633 508,141(d)
See Notes to Schedule of Investments on page 9 and Notes to Financial
Statements.
6
<page>
INTERNATIONAL EQUITY FUND
Schedule of Investments June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
NETHERLANDS -- 1.7%
Koninklijke Philips Electronics
N.V. ........................ 24,659 $ 835,668
NORWAY -- 3.9%
Acergy S.A..................... 25,093 559,098
Orkla ASA...................... 16,903 216,575
Telenor ASA.................... 61,442 1,153,342
1,929,015
RUSSIA -- 1.3%
Gazprom OAO ADR................ 11,065 641,770(d)
SINGAPORE -- 1.4%
CapitaLand Ltd................. 63,000 265,101
Singapore Telecommunications
Ltd. 156,314 417,274
682,375
SOUTH AFRICA -- 1.4%
Anglo Platinum Ltd............. 1,534 255,175
MTN Group Limited.............. 29,088 460,542
715,717
SOUTH KOREA -- 1.3%
Kookmin Bank................... 2,290 134,589
Kookmin Bank ADR............... 2,899 169,620(d)
Samsung Electronics
Company Ltd................. 90 53,769
Samsung Electronics
Company Ltd. GDR............ 1,075 316,856(b,d)
674,834
SPAIN -- 2.0%
ACS Actividades de Construccion y
Servicios S.A............... 2,760 138,205
Banco Santander S.A. (Regd.)... 45,872 837,476(d)
975,681
SWEDEN -- 0.6%
Sandvik AB..................... 20,986 285,463
SWITZERLAND -- 9.4%
ABB Ltd. (Regd.)............... 28,637 812,942(a)
Nestle S.A. (Regd.)............ 32,920 1,491,839
Roche Holding AG............... 8,644 1,558,452
Swatch Group AG................ 1,422 354,614
Syngenta AG.................... 1,532 497,763
4,715,610
TAIWAN -- 1.1%
Taiwan Semiconductor
Manufacturing Company Ltd... 250,061 531,344(a)
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
UNITED KINGDOM -- 15.7%
BG Group PLC................... 30,704 $ 797,243
BHP Billiton PLC............... 31,518 1,207,692(d)
Diageo PLC..................... 49,296 902,395
Group 4 Securicor PLC.......... 51,792 207,852
Lloyds TSB Group, PLC.......... 118,947 729,152(d)
National Grid PLC.............. 26,005 340,595
Prudential PLC................. 49,206 518,573(d)
Rio Tinto PLC (Regd.).......... 5,722 688,499
Royal Bank of Scotland
Group PLC................... 202,519 861,420(d)
Tesco PLC...................... 72,317 528,500
Vodafone Group Public
Limited Co.................. 349,185 1,027,936
7,809,857
TOTAL COMMON STOCK
(COST $42,945,439)........... 47,720,224
- --------------------------------------------------------------------------------
PREFERRED STOCK -- 2.3%
- --------------------------------------------------------------------------------
All America Latina Logistica
S.A. 17,600 228,285
Cia Vale do Rio Doce ADR....... 30,734 917,104(d)
TOTAL PREFERRED STOCK
(COST $605,899).............. 1,145,389
- --------------------------------------------------------------------------------
OTHER INVESTMENTS -- 0.0%*
- --------------------------------------------------------------------------------
GEI Investment Fund
(COST $24,361)............... 18,514(e)
TOTAL INVESTMENTS IN SECURITIES
(COST $43,575,699)........... 48,884,127
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 2.6%
- --------------------------------------------------------------------------------
GE Money Market Fund
Institutional Class
1.93%........................ 1,277,963(c,f)
(COST $1,277,963)
TOTAL INVESTMENTS
(COST $44,853,663)........... 50,162,090
LIABILITIES IN EXCESS OF OTHER ASSETS,
NET-- (0.5)%................. (274,262)
-----------
NET ASSETS-- 100.0% ........... $49,887,828
===========
See Notes to Schedule of Investments on page 9 and Notes to Financial
Statements.
7
<page>
INTERNATIONAL EQUITY FUND
Schedule of Investments June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
The GEI International Equity Fund had the following short futures contracts
open at June 30, 2008 (unaudited):
NUMBER CURRENT
EXPIRATION OF NOTIONAL UNREALIZED
DESCRIPTION DATE CONTRACTS VALUE APPRECIATION
- --------------------------------------------------------------------------------
DJ Euro Stoxx
50 Index
Futures September 2008 10 $(532,536) $17,639
FTSE 100 Index
Futures September 2008 2 (224,807) 3,712
Topix Index
Futures September 2008 2 (248,762) 9,028
-------
$30,379
=======
GEI International Equity was invested in the following sectors at June 30, 2008
(unaudited):
SECTOR PERCENTAGE (BASED ON MARKET VALUE)
- --------------------------------------------------------------------------------
Financials 21.96%
Materials 14.90%
Industrials 13.29%
Energy 10.16%
Consumer Staples 9.69%
Telecommunication Services 8.08%
Utilities 5.60%
Information Technology 5.31%
Consumer Discretionary 4.60%
Healthcare 3.82%
Short-Term 2.55%
Other Investments 0.04%
------
100.00%
======
See Notes to Schedule of Investments on page 9 and Notes to Financial
Statements.
8
<page>
Notes to Schedule of Investments June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
The views expressed in this document reflect our judgment as of the publication
date and are subject to change at any time without notice. The securities cited
may not represent current or future holdings and should not be considered as a
recommendation to purchase or sell a particular security. See the prospectus for
complete descriptions of investment objectives, policies, risks and permissible
investments.
(a) Non-income producing security.
(b) Pursuant to Rule 144A of the Securities Act of 1933, these securities may be
resold in transactions exempt from registration, normally to qualified
institutional buyers. At June 30, 2008, these securities amounted to
$316,856; or 0.64% of net assets for the GE Investments International Equity
Fund. These securities have been determined to be liquid using procedures
established by the Board of Trustees.
(c) Coupon amount represents effective yield.
(d) At June 30, 2008, 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 adviser of the Fund, also
serves as investment adviser of the GEI Investment Fund.
(f) GEAM, the investment adviser of the Fund, also serves as investment adviser
of the GE Money Market Fund.
* Less than 0.1%.
+ Percentages are based on net assets as of June 30, 2008.
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
--------------------------------------------------------------------- -------------
CLASS 1 CLASS 4
--------------------------------------------------------------------- -------------
6/30/08+ 12/31/07 12/31/06 12/31/05 12/31/04 12/31/03 6/30/08+
--------------------------------------------------------------------- -------------
INCEPTION DATE -- -- -- -- -- 5/1/95 5/1/08
Net asset value, beginning of period.... $14.67 $14.08 $11.42 $9.76 $8.52 $6.23 $14.36
INCOME/(LOSS) FROM INVESTMENT OPERATIONS:
Net investment income................ 0.23 0.23 0.15 0.13 0.11 0.07 0.09
Net realized and unrealized
gains/(losses) on investments..... (1.64) 2.98 2.67 1.65 1.24 2.29 (1.19)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM
INVESTMENT OPERATIONS................ (1.41) 3.21 2.82 1.78 1.35 2.36 (1.10)
- ------------------------------------------------------------------------------------------------------------------------------------
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.......... $13.26 $14.67 $14.08 $11.42 $9.76 $8.52 $13.26
====================================================================================================================================
TOTAL RETURN (A)........................ (9.61)% 22.98% 24.69% 18.19% 15.85% 37.91% (7.66)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $49,879 $84,272 $80,648 $65,450 $55,714 $45,198 $9
Ratios to average net assets:
Net investment income*............ 3.32% 1.30% 1.16% 1.19% 1.31% 1.13% 4.07%
Expenses*......................... 1.19% 1.13% 1.13% 1.25% 1.15% 1.07% 1.61%
Portfolio turnover rate.............. 18% 32% 34% 53% 38% 35% 18%
NOTES TO FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(a) Total returns are historical and assume changes in share price and
reinvestment of dividends and capital gains and do not include the effect of
insurance contract charges.
* Annualized for periods less than one year.
+ Unaudited
See Notes to Financial Statements.
10
<page>
Statement of Assets
and Liabilities JUNE 30, 2008 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL
EQUITY FUND
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments in securities, at market (cost $43,551,338)................................................ $48,865,613
Investments in affiliated securities, at market (cost $24,361)......................................... 18,514
Short-term affiliated investments (at amortized cost).................................................. 1,277,963
Foreign cash (cost $174,528).......................................................................... 175,366
Income receivables..................................................................................... 127,370
Variation margin receivable............................................................................ 3,640
Other assets........................................................................................... 65,659
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS....................................................................................... 50,534,125
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased...................................................................... 467,378
Payable for fund shares redeemed....................................................................... 36,116
Payable to GEAM........................................................................................ 46,886
Accrued other expenses................................................................................. 95,917
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES.................................................................................. 646,297
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS................................................................................................ $49,887,828
====================================================================================================================================
NET ASSETS CONSIST OF:
Capital paid in........................................................................................ 28,471,464
Undistributed (distribution in excess of)
net investment income .............................................................................. 979,842
Accumulated net realized gain (loss)................................................................... 15,091,002
Net unrealized appreciation/(depreciation) on:
Investments......................................................................................... 5,308,428
Futures............................................................................................. 30,379
Foreign currency related transactions............................................................... 6,713
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS................................................................................................ $49,887,828
====================================================================================================================================
CLASS 1:
NET ASSETS................................................................................................ 49,878,595
Shares outstanding ($0.01 par value; unlimited shares authorized)......................................... 3,760,728
Net asset value per share................................................................................. $13.26
CLASS 4:
NET ASSETS................................................................................................ 9,233
Shares outstanding ($0.01 par value; unlimited shares authorized)......................................... 696
Net asset value per share................................................................................. $13.26
See Notes to Financial Statements.
11
<page>
Statement of Operations
FOR THE SIX MONTHS ENDED JUNE 30, 2008 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL
EQUITY FUND
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividend .............................................................................. $1,456,323
Interest .............................................................................. 20,801
Interest from affliated investments ................................................... 12,131
Less: Foreign taxes withheld .......................................................... (123,295)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME ............................................................................ 1,365,960
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees ...................................................... 304,722
Distributors Fees (Note 4) .
Class 4 ............................................................................ 7
Transfer agent ........................................................................ 48
Director's fees ....................................................................... 1,015
Custody and accounting expenses ....................................................... 36,202
Professional fees ..................................................................... 9,666
Registration expenses ................................................................. 2,039
Other expenses 5,966
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES BEFORE WAIVER AND REIMBURSEMENT .......................................... 359,665
- ------------------------------------------------------------------------------------------------------------------------------------
Less: Expenses reimbursed by the adviser (waiver related to Fund of Fund Investment) .. (594)
- ------------------------------------------------------------------------------------------------------------------------------------
Net expenses .......................................................................... 359,071
- ------------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) ............................................................ 1,006,889
====================================================================================================================================
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments ........................................................................ 12,153,211
Futures ............................................................................ (310,329)
Foreign currency transactions ...................................................... 84,818
INCREASE (DECREASE) IN UNREALIZED APPRECIATION/
(DEPRECIATION) ON:
Investments ........................................................................ (19,876,600)
Futures ............................................................................ 32,809
Foreign currency transactions (2,646)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments ................................ (7,918,737)
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ......................... $(6,911,848)
====================================================================================================================================
See Notes to Financial Statements.
12
<page>
Statements of
Changes in Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL
EQUITY FUND
- ------------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2008 DECEMBER 31,
(UNAUDITED) 2007
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income (loss)..................................................... $ 1,006,889 $ 1,114,623
Net realized gain (loss) on investments, futures, written options,
and foreign currency transactions............................................... 11,927,700 14,671,900
Net increase (decrease) in unrealized appreciation/(depreciation)
on investments, futures, written options, and foreign
currency translation............................................................ (19,846,437) 2,248,768
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations........................................... (6,911,848) 18,035,291
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class 1......................................................................... -- (1,127,887)
Class 4......................................................................... -- --
Net realized gains
Class 1......................................................................... -- (11,637,475)
Class 4......................................................................... -- --
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS................................................................. -- (12,765,362)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations and distributions................. (6,911,848) 5,269,929
- ------------------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares
Class 1......................................................................... 11,970,478 21,702,440
Class 4......................................................................... 10,000 --
Value of distributions reinvested
Class 1......................................................................... -- 12,765,354
Class 4......................................................................... -- --
Cost of shares redeemed
Class 1......................................................................... (39,453,163) (36,113,216)
Class 4......................................................................... -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from share transactions................................... (27,472,685) (1,645,422)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS............................................. (34,384,533) 3,624,507
NET ASSETS
Beginning of period................................................................. 84,272,361 80,647,854
- ------------------------------------------------------------------------------------------------------------------------------------
End of period....................................................................... $ 49,887,828 $ 84,272,361
====================================================================================================================================
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD........ $ 979,842 $ (27,047)
- ------------------------------------------------------------------------------------------------------------------------------------
CHANGES IN FUND SHARES
CLASS 1
Shares sold............................................................................ 868,981 1,420,389
Issued for distributions reinvested.................................................... -- 877,947
Shares redeemed........................................................................ (2,854,514) (2,280,758)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares................................................. (1,985,533) 17,578
====================================================================================================================================
CLASS 4
Shares sold............................................................................ 696 --
Issued for distributions reinvested.................................................... -- --
Shares redeemed........................................................................ -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares................................................. 696 --
====================================================================================================================================
See Notes to Financial Statements.
13
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
1. ORGANIZATION OF THE COMPANY
GE Investments Funds, Inc. (the "Company") was incorporated under the laws of
the Commonwealth of Virginia on May 14, 1984 and is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company. The Company is composed of thirteen investment
portfolios (collectively the "Funds"), although only the following eleven are
currently being offered: U.S. Equity Fund, S&P 500 Index Fund, Premier Growth
Equity Fund, Core Value Equity Fund, Mid-Cap Equity Fund, Small-Cap Equity Fund,
International Equity Fund (the "Fund"), Total Return Fund, Income Fund, Money
Market Fund and Real Estate Securities Fund.
Shares of the Funds of the Company are offered only to insurance company
separate accounts that fund certain variable life insurance contracts and
variable annuity contracts. These insurance companies may include insurance
companies affiliated with GE Asset Management Incorporated ("GEAM"), the
investment adviser and administrator of each of the Funds.
2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the reporting period. Actual results may differ from
those estimates.
The following summarizes the significant accounting policies of the Fund:
SECURITY VALUATION AND TRANSACTIONS
The Fund's portfolio securities are valued generally on the basis of market
quotations. Equity securities generally are valued at the last reported sales
price on the primary market in which they are traded. Portfolio securities
listed on NASDAQ are valued using the NASDAQ Official Closing Price, which may
not necessarily represent the last sale price. If no sales occurred on the
exchange or NASDAQ that day, the portfolio security generally is valued using
the last reported bid price.
Debt securities (other than short-term securities described below) generally are
valued at an evaluated bid as reported by an independent pricing service. Values
obtained from pricing services are based on various factors such as market
transactions, dealer supplied valuations, security characteristics and other
market data. In the absence of a reliable price from such a pricing service,
debt securities may be valued based on dealer supplied valuations or quotations.
The Fund's written or purchased options are valued at the last sales price, or
if no sales occurred that day, at the last reported bid price. Short-term
investments with remaining maturities of sixty days or less at the time of
purchase are valued on the basis of amortized cost, which approximates market
value.
All assets and liabilities of the Fund initially expressed in foreign currency
values will be converted into U.S. dollars at the WM/Reuters exchange rate
computed at 11:00 a.m., Eastern time.
If prices are not readily available for a portfolio security, or if it is
believed that a price for a portfolio security does not represent its fair
value, the security may be valued using procedures approved by the Fund's Board
of Directors that are designed to establish its "fair" value. Those procedures
require that the fair value of a security be established by the fair valuation
committee. The fair valuation committee follows different protocols for
different types of investments and circumstances. The fair value procedures may
be used to value any investment by the Fund in the appropriate circumstances.
Examples of the types of securities that may be fair valued include: thinly
traded or illiquid investments, high-yield securities or foreign securities.
Foreign securities may be valued with the assistance of an independent fair
value pricing service in circumstances where it is believed that they have been
or would be materially affected by events occurring after the close of the
portfolio security's primary market and before the close of regular trading on
the NYSE. This independent fair value pricing service uses a computerized system
to appraise affected securities and portfolios taking into consideration various
factors and the fair value of such securities may be something other than the
last available quotation or other market price.
GEAM may also separately monitor portfolio securities and, consistent with the
Fund's fair value procedures, apply a different value to a portfolio security
than would be applied had it been priced using market quotations or by an
independent fair value pricing service.
14
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
Determining the fair value of securities involves the application of both
subjective and objective considerations. Security values may differ depending on
the methodology used to determine their values, and may differ from the last
quoted sale or closing price. No assurance can be given that use of these fair
value procedures will always better represent the price at which the Fund could
sell the affected portfolio security.
Security transactions are accounted for as of the trade date. Realized gains and
losses on investments sold are recorded on the basis of identified cost for both
financial statement and federal tax purposes.
The Fund adopted FASB Statement No. 157, FAIR VALUE MEASUREMENTS (FAS 157). FAS
157 establishes a single definition of fair value, a framework for measuring
fair value, and expanded disclosures about fair value measurements.
Various inputs are used in determining the value of the Fund's investments.
These inputs are classified into three broad levels:
Level 1 includes quoted prices in active markets of securities identical to
those of the Fund.
Level 2 includes: 1) quoted prices in active markets for similar securities to
those of the Fund; 2) quoted prices for identical or similar securities to those
of the Fund that trade in markets in which there are few transactions or the
quoted prices are not current; 3) prices based on observable market data such as
interest rates and yield curves, volatilities, bond prepayment speeds, and
credit risk and; 4) prices based principally on observable market data by use of
correlation techniques or other means.
Level 3 includes unobservable market inputs used to fair value securities. These
inputs are based on assumptions that market participants would use to price
securities and may include the adviser's own assumptions.
Other financial instruments are derivative instruments that are not reflected in
TOTAL INVESTMENTS, such as futures, forwards, swaps, and written options
contracts, which are valued based on the unrealized appreciation/depreciation of
the instrument.
Level 1 Level 2 Level 3 Total
- ---------------------------------------------------------------------------------------------------------------------------------
Investments in Securities $8,586,638 $ 41,575,452 $ -- $50,162,090
Other Financial Instruments $ 30,379 $ -- $ -- $ 30,379
REPURCHASE AGREEMENTS The Fund may enter into 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.
15
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
The Fund does not isolate the portion of the results of operations resulting
from changes in foreign exchange rates from the fluctuations arising from
changes in the market prices of securities during the period. Such fluctuations
are included in the net realized or unrealized gain or loss from investments.
Net realized gains or losses on foreign currency transactions represent net
gains or losses on sales and maturities of foreign currency contracts,
disposition of foreign currencies, the difference between the amount of net
investment income and withholding taxes accrued and the U.S. dollar amount
actually received or paid, and gains or losses between the trade and settlement
date on purchases and sales of securities. Net unrealized foreign exchange gains
and losses arising from changes in the value of other assets and liabilities as
a result of changes in foreign exchange rates are included as increases or
decreases in unrealized appreciation/depreciation on foreign currency related
transactions.
FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or
bond index futures contracts subject to certain limitations. The Fund may invest
in futures contracts to manage its exposure to the stock and bond markets and
fluctuations in currency values. Buying futures tends to increase the Fund's
exposure to the underlying instrument while selling futures tends to decrease
the Fund's exposure to the underlying instrument, or hedge other Fund
investments. The Fund will not enter into a transaction involving futures for
speculative purposes. The Fund's risks in using these contracts include changes
in the value of the underlying instruments, non-performance of the
counterparties under the contracts' terms and changes in the liquidity of the
secondary market for the contracts. Futures contracts are valued at the
settlement price established each day by the board of trade or exchange on which
they principally trade.
Upon entering into a futures contract, the Fund is required to pledge to the
broker an amount of cash and/or other assets equal to a certain percentage of
the contract amount, known as initial margin deposit. Subsequent payments, known
as variation margin, are made or received by the Fund each day, depending on the
daily fluctuation in the fair value of the underlying security. The Fund records
an unrealized gain or loss equal to the daily variation margin. Should market
conditions move unexpectedly, the Fund may not achieve the anticipated benefits
of the futures contracts and may incur a loss. The Fund recognizes a realized
gain or loss on the expiration or closing of a futures contract.
OPTIONS The Fund may purchase and write options, subject to certain limitations.
The Fund may invest in options contracts to manage its exposure to the stock and
bond markets and fluctuations in foreign currency values. Writing puts and
buying calls tend to increase 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,
16
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
when they are recorded as realized gains or losses on foreign currency related
transactions. The Fund's risks in using these contracts include changes in the
value of foreign currency or the possibility that the counterparties do not
perform under the contracts' terms. When the Fund enters into a forward foreign
currency exchange contract, it is required to segregate cash or liquid
securities with its custodian in an amount equal to the value of the Fund's
total assets committed to the consummation of the forward contract. If the value
of the segregated securities declines, additional cash or securities is
segregated so that the value of the account will equal the amount of the Fund's
commitment with respect to the contract.
INVESTMENTS IN FOREIGN MARKETS Investments in foreign markets may involve
special risks and considerations not typically associated with investing in the
United States. These risks include revaluation of currencies, high rates of
inflation, repatriation on income and capital, and adverse political and
economic developments. Moreover, securities issued in these markets may be less
liquid, subject to government ownership controls, tariffs and taxes, subject to
delays in settlements, and their prices may be more volatile.
The Fund may be subject to capital gains and repatriation taxes imposed by
certain countries in which it invests. Such taxes are generally based on income
and/or capital gains earned or repatriated. Taxes are accrued based upon net
investment income, net realized gains and net unrealized appreciation as income
and/or capital gains are earned.
INCOME TAXES The Fund intends to comply with all sections of the Internal
Revenue Code applicable to regulated investment companies including the
distribution of substantially all of its taxable net investment income and net
realized capital gains to its shareholders. Therefore, no provision for federal
income tax has been made. The Fund is treated as a separate taxpayer for federal
income tax purposes.
At June 30, 2008, information on the tax cost of investments is as follows:
Cost of Gross Tax Gross Tax Net Tax
Investments for Unrealized Unrealized Appreciation
Tax Purposes Appreciation Depreciation on Investments
- -----------------------------------------------------------------------------------------------------------------------------
$44,934,906 $8,747,235 $(3,544,412) $5,202,823
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
17
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
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
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 $150 million with a
number of its affiliates. The credit facility is with its custodian bank, State
Street Bank and Trust Company. The revolving credit facility requires the
payment of a commitment fee equal to 0.09% per annum on the daily unused portion
of the credit facility, payable quarterly. The portion borne by the Funds
generally is borne proportionally based upon net assets. In addition, the
Company has a $100 million uncommitted, unsecured line of credit with State
Street. 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 June 30,
2008.
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 0.95%
Over $200 million 0.90%
GENPACT performs certain accounting and certain administration services not
provided by GEAM. For the period ending June 30, 2008, $630 was charged to the
Fund.
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 the Class 4 shares of the Fund. The Fund
18
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
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 rate applicable is
0.45% for the Class 4 shares. Currently, Class 1 shares are not subject to a
Rule 12b-1 fee.
DIRECTORS' COMPENSATION The Fund pays no compensation to its directors who are
officers or employees of GEAM or its affiliates. Directors who are not such
officers or employees also serve in a similar capacity for other funds advised
by GEAM. Compensation paid to unaffiliated directors are reflected on the
Statement of Operations. These fees are allocated pro rata across all of the
mutual fund platforms and share classes served by the directors, including the
Fund, and are based upon the relative net assets of each fund within such
platforms. (For additional information about directors compensation please refer
to the Statement of Additional Information.)
5. INVESTMENT TRANSACTIONS
PURCHASES AND SALES OF SECURITIES The cost of purchases and the proceeds from
sales of investments, other than short-term securities and options, for the
period ended June 30, 2008 were as follows:
Purchases Sales
- --------------------------------------------------------------
$11,009,932 $36,570,783
SECURITY LENDING At June 30, 2008, the Fund did not participate in securities
lending.
19
<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 59
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 47
POSITION(S) HELD WITH FUND Executive Vice President
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - less than one year
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General
Counsel and Secretary of GEAM since July 2007; Senior Vice President and General
Counsel - Marketing and Client Services (formerly Asset Management Services), at
GEAM and Senior Vice President and General Counsel of GEAMS from February 1997
to June 2007; Vice President and Associate General Counsel of GEAM from October
1992 to February 1997; Secretary of Fund from 1997 to June 2007; Vice President
of Fund from September 2003 to June 2007; Vice President of GE Institutional
Funds and GE LifeStyle Funds from September 2003 to June 2007; Secretary of GE
Institutional Funds and GE LifeStyle Funds from 1997 to June 2007; Vice
President of Elfun Funds and GE Savings & Security Funds from October 2003 to
June 2007; Assistant Secretary of Elfun Funds and GE Savings & Security Funds
from 1998 to June 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional
Funds, GE LifeStyle Funds, Elfun Funds and GE Savings & Security Funds since
July 2007.
20
<page>
Additional Information (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCOTT H. RHODES
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 49
POSITION(S) HELD WITH FUND Treasurer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 2 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds Operations
Manager since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle
Funds and GE Investments Funds since November 2005 and Elfun Funds and GE
Savings & Security Funds since September 2005; from August 2004 to September
2005 Vice President, U.S. Trust Company, N.A. and Assistant Treasurer of
Excelsior Funds, Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds,
Inc.; from January 2004 to August 2004, Vice President BlackRock Financial
Management, Inc.; from December 1996 to November 2003, Controller - Mutual
Funds, American Skandia Investment Services, Inc. and Assistant Treasurer of
American Skandia Trust and American Skandia Advisor Funds, Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
- --------------------------------------------------------------------------------
JEANNE M. LAPORTA
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 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
21
<page>
Additional Information (unaudited)
- --------------------------------------------------------------------------------
NON-INTERESTED DIRECTORS
- --------------------------------------------------------------------------------
JOHN R. COSTANTINO
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 62
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 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 60
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 72
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 9 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon
Brothers Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds and GE LifeStyle Funds since their inception.
The Statement of Additional Information for the Fund includes additional
information about the Directors and Officers and is available, without charge,
upon request by calling 1-800-242-0134.
22
<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
Daniel O. Colao, EVP, CHIEF FINANCIAL OFFICER (AS OF JULY 28, 2008)
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)
David Wiederecht, EVP, PRESIDENT - INVESTMENT STRATEGIES
23
<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
Semi-Annual Report
JUNE 30, 2008
[GE logo omitted]
<page>
GE Investments Funds, Inc.
Total Return Fund
- --------------------------------------------------------------------------------
Contents
NOTES TO PERFORMANCE.................................................... 1
MANAGER REVIEW AND SCHEDULE OF INVESTMENTS.............................. 2
NOTES TO SCHEDULE OF INVESTMENTS........................................ 19
FINANCIAL STATEMENTS
Financial Highlights............................................... 20
Statement of Assets and Liabilities................................ 22
Statement of Operations............................................ 23
Statements of Changes in Net Assets................................ 24
Notes to Financial Statements...................................... 26
ADDITIONAL INFORMATION.................................................. 33
INVESTMENT TEAM......................................................... 36
This report is prepared for Policyholders of certain variable contracts and may
be distributed to others only if preceded or accompanied by the variable
contract's current prospectus and the current prospectus of the Funds available
for investments thereunder.
<page>
Notes to Performance June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
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 shown are net of Fund expenses but do not reflect fees and charges
associated with the variable contracts such as administrative fees, account
charges and surrender charges, which, if reflected, would reduce the Fund's
total returns for all periods shown.
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
<page>
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: RALPH R. LAYMAN, JUDITH A. STUDER,
DIANE M. WEHNER, PAUL M. COLONNA AND THOMAS R. LINCOLN.
[photo omitted]
2
<page>
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 SIX-MONTH PERIOD ENDED JUNE 30, 2008?
A. For the six-month period ended June 30, 2008, the Total Return Fund
returned -6.93% for the Class 1 shares, -7.00% for Class 2 shares, -6.99%
for Class 3 shares and -7.04% for Class 4 shares. The Fund's broad based
benchmarks, the S&P 500 Index and the Lehman Brothers Aggregate Bond Index
returned -11.91% and 1.13% respectively. The Fund's Lipper peer group of 198
Mixed-Asset Target Allocation Growth funds returned an average of -7.66% for
the same period.
Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE AND WHAT MARKET CONDITIONS
IMPACTED THE PERFORMANCE OF THE FUND?
A. The performance of the Total Return Fund for the six-month period ended
June 30, 2008 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 to reduce domestic
equity exposure and to continue to increase the Fund's cash position during
the equity market weakness.
The six-month period proved challenging for U.S. equity investors, as the
housing recession, skyrocketing commodity prices and tight credit
conditions threatened the outlook for economic growth and corporate
profits. Policymaker response was significant during the period as the
Federal Reserve lowered interest rates and opened up its discount window to
investment banks. Despite these actions, credit remained scarce, impeding
economic growth and contributing to stock market volatility. Consumers
began to receive the government's fiscal stimulus checks, but investors
feared that the windfall might be consumed at the gas pump in an
environment of $140 per barrel of oil. The U.S. equity markets ended this
period on the brink of a bear market, with the Dow Jones Industrial Average
and the S&P 500 Index down 18% and 17%, respectively, from their October
2007 highs. U.S. equity performance suffered due to oil price shocks,
housing prices in free-fall, a weak dollar, and negative consumer
sentiment. The credit crisis also persisted, contributing to fears that
deepening mortgage losses will force more banks to cut dividends or sell
shares at a discount to shore up their balance sheets. Year-to-date U.S.
equity performance is negative across the board, although small and
mid-caps have outperformed large-caps, and growth has outperformed value
due to the larger weighting of financial stocks within the value indices.
The Fund's U.S. equity performance generally tracked its benchmark in the
large-cap space and exceeded its benchmark in the mid-cap segment. The
large-cap equity portfolio benefited from strong stock selection in the
information technology sector, positive positioning within financials, and
strong telecom and media stock selection. The key factors detracting from
relative performance during the period were lagging stock selections within
industrials, poor performing healthcare services companies, and
underweighting energy. The mid-cap equity portfolio outperformed its
relevant benchmark as well as the large-cap equity portfolio. Mid-cap equity
benefited from an overweight in consumer staples, healthcare, and energy.
The underweight in financials and in the consumer discretionary sector also
had a positive impact on performance.
The international equity markets were down during the first half of this
year as the MSCI EAFE Index returned -10.96%. Concerns about global economic
growth slowing led to the questions about the sustainability of earnings for
companies around the
3
<page>
Total Return Fund
- --------------------------------------------------------------------------------
Q&A
world. Contributing factors included rising input costs caused by higher raw
materials prices and lower consumption expectations caused by slowing growth
and diminishing disposable income. Additionally, the difficulties for
individuals and businesses to access credit from an overstressed banking
system are exacerbating a slowdown in the U.S. economy with ripple effects
overseas. The credit crisis, along with a disturbing rise in inflation
worldwide, is having a dampening effect on economic activity, which is
severe enough to change behaviors in some countries. The international
equity portfolio exceeded its benchmark. Holdings in materials and energy
made strong contributions while the absence of specific banking stocks and a
general underweight in the challenged consumer discretionary sector also
proved positive. Specifically, agricultural chemicals and basic resources
continued to offer good returns while oil and oil service companies
benefited from strong demand. Some negative contribution came from holdings
in information technology and telecom services where competition in an
increasingly difficult economic environment has proved costly.
In the fixed income market, the credit crisis born in 2007 deepened this
year, threatening the existence of an 85-year old investment
bank/broker-dealer. The Federal Reserve moved aggressively to provide
liquidity through typical means such as reducing the fed funds rate target
by 225 basis points to 2.00%, and introducing certain new measures including
allowing investment banks access to discount window borrowing. Consumer
spending was crimped by higher gas prices, lower home prices, and job
losses. The rise in energy prices along with other commodities pushed
inflation fears higher, especially at the Federal Reserve. Interest rates at
the longer end of the maturity spectrum were little changed from the end of
last year. Shorter maturity note yields dropped significantly more,
especially during the first quarter, as the Federal Reserve was reducing
rates. The decline in interest rates translated to positive returns for
Treasury securities for the first six months. Credit sensitive sectors,
however, posted negative returns in the same period as credit concerns
deepened. In general, higher quality paper performed better than lower
quality. Declining valuations in sub-prime and alt-a asset-backed securities
held in the fixed income portfolio dragged performance below that of the
benchmark. Although the market value of these securities is small as a
percentage of the total portfolio, the continued price dislocation in this
market had a large impact. Portfolio performance was enhanced by yield curve
positioning throughout the period and the underweight to high-grade
corporate bonds where there was general credit spread widening.
Q. WERE THERE ANY SIGNIFICANT CHANGES TO THE FUND DURING THE PERIOD?
A. During the first six months of this year we continued to lower the Fund's
exposure to equity and increase its exposure to cash. This defensive
positioning helped to reduce volatility and preserve capital. Within U.S.
equities we reduced exposure to large-cap growth and increased our
allocation to core value to increase diversification. In the mid-cap equity
portfolio we increased exposure to the consumer discretionary, financials,
and materials sectors where we found attractively valued growth companies,
and we took profits and reduced our exposure to the healthcare and energy
sectors. Within international equities, modest additions to existing
holdings in the financial sector were executed, reducing the extent of the
underweight. Modest additions were also made to the energy holdings.
Holdings in industrials were slightly reduced and our already underweight
posture in consumer discretionary was enhanced by the sale of hotel, media,
and retail holdings.
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 June 30,
2008.
ACTUAL EXPENSES
The first section of the table provides information about actual account values
and actual expenses. You may use the information in this section, together with
the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JANUARY 1, 2008 - JUNE 30, 2008
- ------------------------------------------------------------------------------------------------------------------------------------
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID
BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING PERIOD ($)*
- ------------------------------------------------------------------------------------------------------------------------------------
ACTUAL FUND RETURN**
- ------------------------------------------------------------------------------------------------------------------------------------
Class 1 1,000.00 930.68 2.44
Class 2 1,000.00 929.96 2.68
Class 3 1,000.00 930.07 2.92
Class 4 1,000.00 929.61 3.64
- ------------------------------------------------------------------------------------------------------------------------------------
HYPOTHETICAL 5% RETURN (2.5% FOR THE PERIOD)
- ------------------------------------------------------------------------------------------------------------------------------------
Class 1 1,000.00 1,022.08 2.57
Class 2 1,000.00 1,021.84 2.82
Class 3 1,000.00 1,021.59 3.07
Class 4 1,000.00 1,020.86 3.83
- ------------------------------------------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.51% FOR CLASS
1, 0.56% FOR CLASS 2, 0.61% FOR CLASS 3, AND 0.76% FOR CLASS 4 (FROM PERIOD
JANUARY 1, 2008 - JUNE 30, 2008), MULTIPLIED BY THE AVERAGE ACCOUNT VALUE
OVER THE PERIOD, MULTIPLIED BY 181/366 (TO REFLECT THE SIX MONTH PERIOD).
** ACTUAL FUND RETURNS FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2008 WERE AS
FOLLOWS: (6.93)% FOR CLASS 1 SHARES, (7.00)% FOR CLASS 2 SHARES, (6.99)% FOR
CLASS 3 SHARES, AND (7.04)% FOR CLASS 4 SHARES.
5
<page>
Total Return Fund (unaudited)
- --------------------------------------------------------------------------------
INVESTMENT PROFILE
A fund designed for investors who seek the highest total return, composed of
current income and capital appreciation, as is consistent with prudent
investment risk by investing primarily in a combination of equity securities
and investment grade debt securities.
TOP TEN LARGEST
HOLDINGS (EXCLUDING SHORT-TERM HOLDINGS)
AS OF JUNE 30, 2008
as a % of Market Value
- --------------------------------------------------------------------------------
Federal National Mortgage
Assoc. 5.50% TBA 4.05%
- --------------------------------------------------------------------------------
U.S. Treasury Notes 3.63%
10/31/09 - 12/31/12 2.72%
- --------------------------------------------------------------------------------
Federal National Mortgage
Assoc. 6.00% TBA 1.19%
- --------------------------------------------------------------------------------
U.S. Treasury Notes 2.63%
05/31/10 1.09%
- --------------------------------------------------------------------------------
Cisco Systems, Inc. 1.01%
- --------------------------------------------------------------------------------
QUALCOMM, Inc. 0.94%
- --------------------------------------------------------------------------------
Schlumberger Ltd. 0.91%
- --------------------------------------------------------------------------------
NII Holdings Inc. (Class B) 0.88%
-------------------------------------------------------------------------------
Amgen, Inc. 0.86%
- --------------------------------------------------------------------------------
Transocean, Inc. 0.82%
- --------------------------------------------------------------------------------
LIPPER PERFORMANCE COMPARISON
Mixed-Asset Target Allocation
Growth Funds
Based on average annual
total returns for the periods ended 6/30/08
SIX ONE FIVE TEN
MONTHS YEAR YEAR YEAR
------ ---- ---- ----
Number of
Funds in
peer group: 198 191 89 49
- ------------------------------------------------
Peer group
average
annual total
return: -7.66% -7.19% 7.14% 4.26%
- ------------------------------------------------
CHANGE IN VALUE OF A $10,000 INVESTMENT
CLASS 1 SHARES
- --------------------------------------------------------------------------------
[Line chart omitted -- plot points are as follows:]
GEI TOTAL RETURN S&P 500 INDEX LB AGGREGATE BOND INDEX
06/98 10,000.00 10,000.00 10,000.00
12/98 10,551.83 10,930.80 10,457.85
12/99 11,949.95 13,233.69 10,371.95
12/00 12,540.72 12,018.37 11,577.80
12/01 12,178.34 10,586.75 12,555.37
12/02 11,044.28 8,246.88 13,842.93
12/03 13,287.78 10,616.05 14,411.11
12/04 14,375.82 11,771.22 15,036.38
12/05 14,903.35 12,350.19 15,401.54
12/06 16,952.15 14,300.58 16,069.01
12/07 18,931.67 15,086.47 17,188.47
06/08 17,619.37 13,289.09 17,382.00
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2008
ENDING
VALUE OF A
SIX ONE FIVE TEN $10,000
MONTHS YEAR YEAR YEAR INVESTMENT
------ ---- ---- ---- -----------
Total Return Fund -6.93% -3.18% 7.81% 5.83% $17,619
S&P 500 Index -11.91% -13.12% 7.59% 2.88% $13,289
LB Aggregate
Bond Index 1.13% 7.12% 3.85% 5.68% $17,382
Inception date 7/1/85
- --------------------------------------------------------------------------------
CLASS 2 SHARES
- --------------------------------------------------------------------------------
[Line chart omitted -- plot points are as follows:]
GEI TOTAL RETURN S&P 500 INDEX LB AGGREGATE BOND INDEX
05/06 10,000.00 10,000.00 10,000.00
06/06 9,700.53 9,725.39 10,010.49
09/06 10,099.82 10,276.45 10,391.65
12/06 10,704.55 10,964.86 10,520.34
03/07 10,874.08 11,035.19 10,678.50
06/07 11,491.65 11,728.19 10,623.19
09/07 11,988.13 11,966.13 10,925.35
12/07 11,949.89 11,567.44 11,253.25
03/08 11,196.58 10,474.94 11,497.24
06/08 11,112.88 10,189.31 11,379.95
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2008
ENDING
VALUE OF A
SIX ONE SINCE $10,000
MONTHS YEAR INCEPTION INVESTMENT
------ ---- --------- -----------
Total Return Fund -7.00% -3.30% 4.98% $11,113
S&P 500 Index -11.91% -13.12% 0.87% $10,189
LB Aggregate
Bond Index 1.13% 7.12% 6.15% $11,380
Inception date 5/1/06
- --------------------------------------------------------------------------------
CLASS 3 SHARES
- --------------------------------------------------------------------------------
[Line chart omitted -- plot points are as follows:]
GEI TOTAL RETURN S&P 500 INDEX LB AGGREGATE BOND INDEX
05/06 10,000.00 10,000.00 10,000.00
06/06 9,700.53 9,725.39 10,010.49
09/06 10,105.70 10,276.45 10,391.65
12/06 10,717.44 10,964.86 10,520.34
03/07 10,874.96 11,035.19 10,678.50
06/07 11,498.98 11,728.19 10,623.19
09/07 11,995.78 11,966.13 10,925.35
12/07 11,956.45 11,567.44 11,253.25
03/08 11,197.51 10,474.94 11,497.24
06/08 11,120.33 10,189.31 11,379.95
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2008
ENDING
VALUE OF A
SIX ONE SINCE $10,000
MONTHS YEAR INCEPTION INVESTMENT
------ ---- --------- -----------
Total Return Fund -6.99% -3.29% 5.02% $11,120
S&P 500 Index -11.91% -13.12% 0.87% $10,189
LB Aggregate
Bond Index 1.13% 7.12% 6.15% $11,380
Inception date 5/1/06
- --------------------------------------------------------------------------------
CLASS 4 SHARES
- --------------------------------------------------------------------------------
[Line chart omitted -- plot points are as follows:]
GEI TOTAL RETURN S&P 500 INDEX LB AGGREGATE BOND INDEX
05/06 10,000.00 10,000.00 10,000.00
06/06 9,688.78 9,725.39 10,010.49
09/06 10,088.08 10,276.45 10,391.65
12/06 10,688.52 10,964.86 10,520.34
03/07 10,845.80 11,035.19 10,678.50
06/07 11,468.84 11,728.19 10,623.19
09/07 11,970.90 11,966.13 10,925.35
12/07 11,936.60 11,567.44 11,253.25
03/08 11,179.74 10,474.94 11,497.24
06/08 11,096.35 10,189.31 11,379.95
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2008
ENDING
VALUE OF A
SIX ONE SINCE $10,000
MONTHS YEAR INCEPTION INVESTMENT
------ ---- --------- -----------
Total Return Fund -7.04% -3.25% 4.91% $11,096
S&P 500 Index -11.91% -13.12% 0.87% $10,189
LB Aggregate
Bond Index 1.13% 7.12% 6.15% $11,380
Inception date 5/1/06
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
<page>
TOTAL RETURN FUND
Schedule of Investments June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
TOTAL RETURN FUND
- --------------------------------------------------------------------------------
Portfolio Composition as a % of the Market Value of $3,019,389
(in thousands) as of June 30, 2008
[Pie chart omitted -- plot points are as follows:]
Domestic Equity 35.6%
Foreign Equity 25.2%
Bonds & Notes 22.7%
Other Investements 0.3%
Short-Term & Others 16.2%
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
DOMESTIC EQUITY -- 38.1% +
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 4.6%
Bed Bath & Beyond, Inc......... 576,417 $ 16,197,317(a,h)
Cablevision Systems Corp....... 55,600 1,256,560(a)
Carnival Corp.................. 312,241 10,291,463
Coach, Inc..................... 69,954 2,020,271(a)
Comcast Corp. (Class A)........ 1,210,416 22,707,406
Darden Restaurants, Inc........ 27,800 887,932
Kohl's Corp.................... 124,080 4,968,163(a)
Liberty Global, Inc.
(Series C) 262,269 7,962,486(a)
Liberty Media Entertainment
Corp. (Series A)............ 410,698 9,951,212(a)
Life Time Fitness, Inc......... 70,474 2,082,507(a)
Lowe's Companies, Inc.......... 476,293 9,883,080
Mercadolibre, Inc.............. 80,529 2,777,445(a)
News Corp. (Class A)........... 111,201 1,672,463
Omnicom Group, Inc............. 285,931 12,832,583
O'Reilly Automotive, Inc....... 112,104 2,505,524(a)
Penn National Gaming, Inc...... 45,293 1,456,170(a)
Regal Entertainment Group,
(Class A).................... 184,215 2,814,805
Target Corp.................... 136,744 6,357,228
The Cheesecake Factory......... 95,344 1,516,923(a)
The Walt Disney Co............. 57,268 1,786,762
Time Warner, Inc............... 325,262 4,813,878
Viacom Inc. (Class B).......... 73,948 2,258,372(a)
129,000,550
CONSUMER STAPLES -- 2.7%
Alberto-Culver Co.............. 330,185 8,673,960
Altria Group, Inc.............. 77,840 1,600,390
Clorox Co...................... 57,268 2,989,390
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
General Mills, Inc............. 108,595 $ 6,599,318
Kimberly-Clark Corp............ 136,322 8,149,329
McCormick & Company, Inc....... 213,292 7,605,993
Pepsi Bottling Group, Inc...... 46,148 1,288,452
PepsiCo, Inc................... 365,105 23,217,027
Procter & Gamble Co............ 76,729 4,665,890
Sara Lee Corp.................. 75,061 919,497
The Estee Lauder Companies Inc.
(Class A)................... 113,781 5,285,127
Wal-Mart Stores, Inc........... 40,588 2,281,046
73,275,419
ENERGY -- 4.3%
Apache Corp.................... 35,349 4,913,511
Dresser-Rand Group, Inc........ 80,448 3,145,517(a)
Exxon Mobil Corp............... 192,719 16,984,326(h)
Halliburton Co................. 81,177 4,308,063
Hess Corp...................... 62,760 7,919,685
HIS, Inc. (Class A)............ 5,955 414,468(a)
Marathon Oil Corp.............. 179,118 9,290,850
Nabors Industries Ltd.......... 33,360 1,642,313(a)
National Oilwell Varco, Inc.... 22,240 1,973,133(a)
Noble Corp..................... 41,589 2,701,621
Peabody Energy Corp............ 41,775 3,678,289
Schlumberger Ltd............... 255,980 27,499,931
Southwestern Energy Co......... 61,301 2,918,541(a)
Sunoco, Inc.................... 31,759 1,292,274
Transocean, Inc................ 162,168 24,712,782
Valero Energy Corp............. 44,480 1,831,686
Weatherford International Ltd.. 91,811 4,552,907(a)
119,779,897
FINANCIALS -- 4.3%
ACE Ltd........................ 37,808 2,082,843
Affiliated Managers Group, Inc. 29,146 2,624,889(a)
Allstate Corp.................. 25,020 1,140,662
American Express Co............ 91,740 3,455,846
Ameriprise Financial, Inc...... 53,376 2,170,802
AON Corp....................... 60,604 2,784,148
Bank of New York Mellon Corp... 86,181 3,260,227
BlackRock, Inc................. 5,560 984,120
CB Richard Ellis Group, Inc.
(Class A)................... 570,229 10,948,397(a)
Chubb Corp..................... 57,268 2,806,705
Citigroup, Inc................. 439,959 7,373,713
CME Group Inc.................. 16,384 6,278,185
CVB Financial Corp............. 127,379 1,202,458
Douglas Emmett, Inc. (REIT).... 62,011 1,362,382
DuPont Fabros Technology, Inc.
(REIT)...................... 102,412 1,908,960
Federal National Mortgage
Assoc. 219,780 4,287,908
Fortress Investment Group LLC
(Class A)................... 146,869 1,809,426
Goldman Sachs Group, Inc....... 70,090 12,258,741
Greenhill & Company, Inc....... 33,012 1,778,026
HCC Insurance Holdings, Inc.... 290,918 6,150,007
JP Morgan Chase & Co........... 105,641 3,624,543
See Notes to Schedule of Investments on page 19 and Notes to Financial
Statements.
7
<page>
TOTAL RETURN FUND
Schedule of Investments June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Legg Mason, Inc................ 32,385 $ 1,411,014
Marsh & McLennan
Companies, Inc.............. 38,920 1,033,326
Metlife, Inc................... 134,231 7,083,369
Nymex Holdings, Inc............ 21,834 1,844,536
Prologis (REIT)................ 24,811 1,348,478
Prudential Financial, Inc...... 11,120 664,309
State Street Corp.............. 313,400 20,054,466(e)
SunTrust Banks, Inc............ 95,470 3,457,924
US Bancorp..................... 69,500 1,938,355
Zions Bancorporation........... 30,695 966,585
120,095,350
HEALTHCARE -- 6.4%
Abbott Laboratories............ 293,400 15,541,398(h)
Aetna, Inc..................... 205,851 8,343,141
Alcon, Inc..................... 16,276 2,649,570
Amgen, Inc..................... 549,761 25,926,729(a)
Amylin Pharmaceuticals, Inc.... 92,219 2,341,440(a)
Arthrocare Corp................ 57,542 2,348,289(a)
Barr Pharmaceuticals, Inc...... 55,017 2,480,166(a)
Baxter International, Inc...... 33,360 2,133,038
Boston Scientific Corp......... 222,401 2,733,308(a)
Bristol-Myers Squibb Co........ 123,989 2,545,494
Covidien Ltd................... 20,331 973,652
DENTSPLY International, Inc.... 79,445 2,923,576
Genentech Inc.................. 210,246 15,957,671(a)
Gen-Probe Incorporated......... 52,918 2,512,547(a)
Gilead Sciences, Inc........... 202,509 10,722,851(a)
Hologic, Inc................... 506,322 11,037,819(a)
Johnson & Johnson.............. 22,240 1,430,922
Masimo Corp.................... 161,213 5,537,668(a)
McKesson Corp.................. 50,040 2,797,736
Medtronic, Inc................. 289,373 14,975,053
Merck & Company, Inc........... 52,820 1,990,786
Psychiatric Solutions, Inc..... 119,521 4,522,675(a)
Resmed, Inc.................... 197,632 7,063,368(a)
Thermo Fisher Scientific, Inc.. 108,311 6,036,172(a)
UnitedHealth Group, Inc........ 502,606 13,193,408
Vertex Pharmaceuticals Inc..... 69,472 2,325,228(a)
Wyeth.......................... 98,413 4,719,887
175,763,592
INDUSTRIALS -- 2.1%
Alliant Techsystems, Inc....... 966 98,223(a)
Cooper Industries Ltd.......... 77,695 3,068,952
Corrections Corporation
of America.................. 111,913 3,074,250(a)
Deere & Co..................... 20,572 1,483,858
Dover Corp..................... 28,476 1,377,384
Eaton Corp..................... 23,352 1,984,219
General Dynamics Corp.......... 27,800 2,340,760
Harsco Corp.................... 87,317 4,750,918
Hexcel Corp.................... 356,340 6,877,362(a)
ITT Corp....................... 75,677 4,792,624
Joy Global, Inc................ 48,396 3,669,869
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Monster Worldwide, Inc......... 159,108 $ 3,279,216(a)
Rockwell Collins, Inc.......... 13,900 666,644
Textron, Inc................... 411,944 19,744,476
57,208,755
INFORMATION TECHNOLOGY -- 9.8%
Activision, Inc................ 128,502 4,378,063(a)
Affiliated Computer Services, Inc.
(Class A)................... 79,808 4,268,930(a)
Analog Devices, Inc............ 58,380 1,854,733
Apple Computer, Inc............ 450 75,348(a)
Automatic Data Processing, Inc. 196,908 8,250,445
Blackboard, Inc................ 50,888 1,945,448(a)
Cisco Systems, Inc............. 1,309,738 30,464,506(a,h)
Citrix Systems, Inc............ 94,283 2,772,863(a)
Cogent, Inc.................... 137,768 1,566,422(a)
Cognizant Technology Solutions
Corp. (Class A)............. 39,586 1,286,941(a)
Corning Incorporated........... 280,638 6,468,706
Dell, Inc...................... 62,828 1,374,677(a)
DST Systems, Inc............... 35,375 1,947,394(a)
Fidelity National Information
Services, Inc............... 103,508 3,820,480
Google, Inc. (Class A)......... 25,149 13,238,937(a)
Harris Corp.................... 23,432 1,183,082
Hewlett-Packard Co............. 85,069 3,760,900
Hittite Microwave Corp......... 83,366 2,969,497(a)
Intel Corp..................... 930,101 19,978,569(h)
International Business
Machines Corp............... 31,692 3,756,453
Intuit Inc..................... 494,495 13,633,227(a)
Iron Mountain Incorporated..... 220,048 5,842,274(a)
Juniper Networks, Inc.......... 125,017 2,772,877(a)
Lam Research Corp.............. 39,476 1,427,057(a)
Macrovision Solutions Corp..... 230,093 3,442,191(a)
Marvell Technology Group Ltd... 141,349 2,496,223(a)
Maxim Integrated Products, Inc. 85,560 1,809,594
Mettler Toledo International
Inc. 23,335 2,213,558(a)
Microchip Technology Inc....... 11,120 339,605
Microsoft Corp................. 808,164 22,232,591(h)
Molex, Inc. (Class A).......... 343,183 7,862,322
National Semiconductor Corp.... 63,384 1,301,907
Neustar, Inc. (Class A)........ 166,449 3,588,640(a)
Oracle Corp.................... 1,037,835 21,794,535(a,h)
Paychex, Inc................... 401,760 12,567,053
QUALCOMM, Inc.................. 642,696 28,516,421
Texas Instruments Incorporated. 102,305 2,880,909
Western Union Co............... 785,040 19,406,188
269,489,566
MATERIALS -- 1.7%
Alcoa, Inc..................... 49,206 1,752,718
Allegheny Technologies
Incorporated................ 207,203 12,282,994
Dow Chemical Co................ 26,132 912,268
Freeport-McMoRan Copper &
Gold, Inc................... 17,792 2,085,044
See Notes to Schedule of Investments on page 19 and Notes to Financial
Statements.
8
<page>
TOTAL RETURN FUND
Schedule of Investments June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Intrepid Potash, Inc........... 53,420 $ 3,513,968(a)
Martin Marietta Materials, Inc. 20,642 2,138,305
Monsanto Co.................... 140,178 17,724,106
Praxair, Inc................... 43,452 4,094,916
Vulcan Materials Co............ 22,240 1,329,507
45,833,826
TELECOMMUNICATION SERVICES -- 1.3%
American Tower Corp. (Class A). 56,785 2,399,166(a)
AT&T, Inc...................... 35,028 1,180,093
NII Holdings Inc. (Class B).... 557,986 26,498,755(a)
Syniverse Holdings, Inc........ 109,879 1,780,040(a)
Verizon Communications, Inc.... 94,187 3,334,220
35,192,274
UTILITIES -- 0.9%
American Electric Power
Company, Inc................. 57,268 2,303,892
American Water Works
Company, Inc................ 105,449 2,338,859(a)
Dominion Resources, Inc........ 109,533 5,201,722
DTE Energy Co.................. 39,233 1,665,048
Edison International........... 60,048 3,085,266
Entergy Corp................... 15,568 1,875,633
ITC Holdings Corp.............. 90,320 4,616,255
PPL Corp....................... 41,277 2,157,549
SCANA Corp..................... 47,862 1,770,894
25,015,118
TOTAL DOMESTIC EQUITY
(COST $1,104,819,689)........ 1,050,654,347
- --------------------------------------------------------------------------------
FOREIGN EQUITY -- 27.6%
- --------------------------------------------------------------------------------
COMMON STOCK -- 26.9%
CONSUMER DISCRETIONARY -- 1.2%
AGTech Holdings Ltd............ 2,421,779 249,898(a)
Alsea SAB de C.V............... 376,203 474,281(a)
China Travel International Inv. 1,260,063 341,540
Daimler AG (Regd.)............. 41,345 2,566,245
Focus Media Holding Ltd. ADR... 75,402 2,090,143(a)
Gafisa S.A..................... 38,575 670,848
Koninklijke Philips Electronics
N.V. 315,592 10,695,089
LVMH Moet Hennessy
Louis Vuitton S.A........... 27,618 2,883,028
Prajay Engineers Syndicate Ltd. 75,862 178,422
Renault S.A.................... 20,268 1,650,692
Swatch Group AG................ 18,195 4,537,418
Toyota Motor Corp.............. 150,588 7,120,423
Urbi Desarrollos Urbanos
S.A. de C.V................. 190,237 658,202(a)
34,116,229
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
CONSUMER STAPLES -- 2.5%
China Mengniu Dairy
Company Ltd................. 308,000 $ 871,888
Diageo PLC..................... 630,855 11,548,213
Diageo PLC ADR................. 25,576 1,889,299
Groupe Danone.................. 166,920 11,688,220
IOI Corp....................... 427,550 976,708
ITC Ltd........................ 200,977 868,186
Metro AG....................... 56,637 3,615,653
Nestle S.A. (Regd.)............ 421,380 19,095,720
Nestle S.A. ADR................ 19,780 2,232,173
Shinsegae Company Ltd.......... 640 344,200
Shiseido Company Ltd........... 408,000 9,366,000
Tesco PLC...................... 925,498 6,763,638
Uni-President Enterprises Corp. 633,000 759,394
70,019,292
ENERGY -- 3.4%
Acergy S.A..................... 307,910 6,860,554
BG Group PLC................... 392,983 10,203,975
CAT Oil AG..................... 30,890 437,738(a)
China Shenhua Energy
Company Ltd................. 140,500 552,949
Gazprom OAO ADR................ 251,298 14,575,284
LUKOIL ADR..................... 16,248 1,602,053
Paladin Energy Ltd............. 1,083,705 6,623,509(a)
PetroChina Company Ltd......... 66,000 85,318
Petroleo Brasileiro S.A. ADR... 206,723 11,979,598
Saipem S.p.A................... 300,961 14,076,005
Suncor Energy, Inc............. 11,120 646,294
Suncor Energy, Inc............. 32,178 1,877,618
Suncor Energy, Inc............. 157,177 9,135,127
Tesco Corp..................... 88,576 2,830,003(a)
Total S.A...................... 124,732 10,624,389
92,110,414
FINANCIALS -- 5.5%
Akbank TAS..................... 102,833 357,234
Allianz AG (Regd.)............. 5,951 1,047,530
AXA S.A........................ 155,589 4,587,759
Banca Intesa S.p.A............. 1,089,097 6,195,661
Banco do Brasil S.A............ 46,992 772,613
Banco Santander S.A. (Regd.)... 587,082 10,718,240
Bank of Yokohama Ltd........... 498,012 3,449,735
BNP Paribas.................... 139,649 12,579,534
CapitaLand Ltd................. 786,000 3,307,457
Chinatrust Financial Holding
Company Ltd................. 1,775,000 1,712,202(a)
Credit Agricole S.A............ 308,258 6,271,401
Dubai Islamic Bank............. 338,777 743,035
Egyptian Financial Group-
Hermes Holding.............. 74,047 669,792
Emaar Properties............... 290,601 861,092
Hung Poo Real Estate
Development Corp............. 502,860 687,285
See Notes to Schedule of Investments on page 19 and Notes to Financial
Statements.
9
<page>
TOTAL RETURN FUND
Schedule of Investments June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Industrial & Commercial
Bank of China............... 587,382 $ 401,598
Kookmin Bank................... 84,251 4,951,635
Kotak Mahindra Bank Ltd........ 35,169 373,919(a)
Lloyds TSB Group, PLC.......... 1,522,175 9,331,018
Metropolitan Bank & Trust...... 523,700 383,527
Mitsubishi Estate Company Ltd.. 473,982 10,870,060
Mitsubishi UFJ Financial Group,
Inc. 1,441,503 12,760,831
Nomura Holdings, Inc........... 922,095 13,677,902
Plaza Centers N.V.............. 106,632 339,542
Prudential PLC................. 629,759 6,636,910
Royal Bank of Scotland Group
PLC 2,524,526 10,738,140
Samsung Fire & Marine Insurance
Company Ltd................. 5,780 1,207,202
Shenzhen Investment Ltd........ 883,957 319,038
Siam Commercial Bank PCL....... 389,700 903,297
Sony Financial Holdings, Inc... 2,360 9,517,295
Standard Bank Group Ltd........ 41,899 406,764
State Bank of India Ltd........ 7,444 192,038
State Bank of India Ltd. GDR... 5,284 284,279
Sumitomo Realty & Development
Company Ltd................. 78,000 1,554,295
Sun Hung Kai Properties Ltd.... 168,476 2,290,213
Tisco Bank PCL................. 510,830 311,409
Tisco Bank PCL NVDR............ 6,193 3,708
Unibail-Rodamco (REIT)......... 16,177 3,727,790
UniCredit S.p.A................ 1,404,773 8,550,973
Woori Investment & Securities
Company Ltd................. 34,590 627,329
154,321,282
HEALTHCARE -- 1.0%
Cie Generale d'Optique Essilor
International S.A........... 74,053 4,520,324
Roche Holding AG............... 110,635 19,946,705
Teva Pharmaceutical Industries
Ltd. ADR.................... 34,325 1,572,085
WuXi PharmaTech Cayman,
Inc. ADR.................... 21,906 444,692(a)
Yuhan Corp..................... 3,189 667,446
27,151,252
INDUSTRIALS -- 4.0%
ABB Ltd. (Regd.)............... 366,501 10,404,164(a)
ABB Ltd. ADR................... 73,600 2,084,352(a)
ACS Actividades de Construccion
y Servicios S.A............. 35,325 1,768,855
Alstom......................... 32,039 7,351,846
Asahi Glass Company Ltd........ 353,005 4,281,068
Brambles Ltd................... 646,184 5,414,141
CAE, Inc....................... 878,622 9,976,566
China Communications
Construction Company Ltd.... 545,080 934,441
China COSCO Holdings
Company Ltd................. 1,382,500 3,383,454
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
China High Speed Transmission
Equipment Group Company Ltd. 375,000 $ 769,620
Doosan Heavy Industries and
Construction Company Ltd.... 14,180 1,340,101
East Japan Railway Co.......... 1,028 8,387,591
Elbit Systems Ltd.............. 12,002 711,821
Empresas ICA Sociedad
Controladora S.A. de C.V.... 175,756 1,101,572(a)
Enka Insaat ve Sanayi AS....... 96,786 1,117,279
Group 4 Securicor PLC.......... 656,234 2,612,795
Group 4 Securicor PLC.......... 662,854 2,660,174
Hyundai Development Co......... 12,364 626,008
Hyunjin Materials Company Ltd.. 22,560 1,011,500
Italian-Thai Development PCL... 3,151,765 544,406
IVRCL Infrastructures &
Projects Ltd................ 53,140 365,533
Komatsu Ltd.................... 206,075 5,764,645
Koninklijke Philips Electronics
N.V. 21,736 734,677
Larsen & Toubro Ltd............ 45,342 2,289,598
Mitsubishi Heavy Industries Ltd. 1,248,000 5,970,914
Murray & Roberts Holdings Ltd.. 108,214 1,197,487
Orascom Construction
Industries 419 29,043
Orkla ASA...................... 216,325 2,771,734
Pacific Basin Shipping Ltd..... 454,618 650,485
Sandvik AB..................... 268,794 3,656,283
Siemens AG (Regd.)............. 105,385 11,691,132
Siemens AG ADR................. 7,223 795,469
Suntech Power Holdings
Company Ltd. ADR............ 66,043 2,473,971(a)
United Tractors Tbk PT......... 608,000 802,464
Vinci S.A...................... 73,212 4,473,727
110,148,916
INFORMATION TECHNOLOGY -- 2.1%
Delta Electronics Inc.......... 289,207 803,441
HON HAI Precision Industry
Company Ltd................. 136,240 669,973
Ibiden Company Ltd............. 114,095 4,161,942
Kingdee International Software
Group Company Ltd........... 1,332 274
MediaTek Inc................... 71,245 820,182
Nidec Corp..................... 46,671 3,114,000
Nintendo Company Ltd........... 8,500 4,828,306
Nokia Oyj...................... 445,740 10,902,772
Research In Motion Ltd......... 128,393 15,009,142(a)
Samsung Electronics
Company Ltd................. 11,420 6,822,742
Sohu.com Inc................... 6,441 453,704(a)
Taiwan Semiconductor
Manufacturing Company Ltd... 3,383,914 7,190,334(a)
Taiwan Semiconductor
Manufacturing
Company Ltd. ADR............ 161,241 1,759,139(a)
Unimicron Technology Corp...... 506,000 574,272
57,110,223
See Notes to Schedule of Investments on page 19 and Notes to Financial
Statements.
10
<page>
TOTAL RETURN FUND
Schedule of Investments June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
MATERIALS -- 3.6%
Anglo American PLC............. 10,122 $ 705,205
Anglo Platinum Ltd............. 24,977 4,154,827
Barrick Gold Corp.............. 75,616 3,440,528
Bayer AG....................... 139,479 11,743,699
BHP Billiton PLC............... 403,408 15,457,602
Cameco Corp.................... 48,318 2,085,977
China Grand Forestry
Resources Group Ltd......... 4,151,153 361,764(a)
China Molybdenum Company Ltd... 313,000 267,589
Eurasian Natural Resources
Corp. 40,691 1,071,204(a)
Impala Platinum Holdings Ltd... 11,967 470,407
Israel Chemicals Ltd........... 85,233 1,981,821
Linde AG....................... 67,830 9,534,070
Makhteshim-Agan Industries Ltd. 104,586 972,031
New World Resources N.V.
(Class A) 47,463 1,681,360(a)
Novozymes (Series B)........... 5,341 481,153
POSCO.......................... 3,500 1,822,652
Potash Corporation of
Saskatchewan................ 70,425 16,421,505
Rio Tinto PLC (Regd.).......... 73,226 8,810,914
Sinofert Holdings Ltd.......... 1,315,469 1,021,788
Syngenta AG.................... 19,607 6,370,528
Taiwan Fertilizer Company Ltd.. 185,000 693,568
Toray Industries Inc........... 1,784,998 9,596,296
99,146,488
TELECOMMUNICATION SERVICES -- 2.2%
America Movil S.A. de C.V.
ADR (Series L).............. 152,235 8,030,397
Bharti Airtel Ltd.............. 59,850 1,005,906(a)
China Mobile Ltd............... 85,474 1,147,274
Hellenic Telecommunications
Organization S.A............ 241,475 6,087,295(a)
Mobile Telesystems OJSC ADR.... 7,555 578,788
MTN Group Limited.............. 475,884 7,534,543
Orascom Telecom Holding SAE.... 55,555 722,324
Philippine Long Distance
Telephone Co................ 3,240 173,221
Singapore Telecommunications
Ltd. 1,928,003 5,146,728
Telekomunikasi Indonesia
Tbk PT (Series B)........... 696,000 555,858
Telenor ASA.................... 785,624 14,747,128
Turkcell Iletisim Hizmet AS
ADR 20,382 296,558
Vodafone Group Public Limited
Co. 4,469,007 13,155,926
Vodafone Group, PLC ADR........ 33,360 982,786
60,164,732
UTILITIES -- 1.4%
CEZ............................ 16,349 1,450,733
E.ON AG........................ 65,863 13,283,555
Huaneng Power International
Inc. 143,887 99,839
National Grid PLC.............. 332,816 4,358,941
Pan Asia Environmental Protection
Group Ltd.................... 1,316,000 470,877
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
PNOC Energy Development Corp... 3,935,985 $ 454,793
RWE AG......................... 17,303 2,186,129
Suez S.A....................... 111,638 7,572,933
Veolia Environnement........... 151,517 8,464,663
38,342,463
TOTAL COMMON STOCK
(COST $693,130,623).......... 742,631,291
- --------------------------------------------------------------------------------
PREFERRED STOCK -- 0.7%
- --------------------------------------------------------------------------------
All America Latina Logistica
S.A. 285,000 3,696,668
Cia Vale do Rio Doce........... 99,103 2,972,155
Cia Vale do Rio Doce ADR....... 415,802 12,407,531
NET Servicos de Comunicacao
S.A. 43,632 556,887(a)
Petroleo Brasileiro S.A........ 11,796 342,718
TOTAL PREFERRED STOCK
(COST $11,169,123)........... 19,975,959
TOTAL FOREIGN EQUITY
(COST $704,299,746).......... 762,607,250
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
BONDS AND NOTES -- 23.6%
- --------------------------------------------------------------------------------
U.S. TREASURIES -- 6.4%
U.S. Treasury Bonds
4.38% 02/15/38............ $ 6,935,400 6,759,851
4.50% 02/15/36............ 265,000 263,116
4.75% 02/15/37............ 5,185,600 5,354,941
U.S. Treasury Notes
2.63% 05/31/10............ 32,824,000 32,844,515(h,j)
2.75% 02/28/13............ 9,092,100 8,876,163
3.50% 02/15/18............ 23,434,200 22,557,245(j)
3.63% 10/31/09 - 12/31/12. 80,749,700 81,991,727(j)
4.63% 11/15/09 - 10/31/11. 17,235,000 17,774,972
176,422,530
FEDERAL AGENCIES -- 0.3%
Federal Home Loan Mortgage Corp.
4.13% 12/21/12............ 6,725,000 6,748,221
4.88% 02/09/10............ 610,000 627,622
7,375,843
See Notes to Schedule of Investments on page 19 and Notes to Financial
Statements.
11
<page>
TOTAL RETURN FUND
Schedule of Investments June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
AGENCY MORTGAGE BACKED -- 9.5%
Federal Home Loan Mortgage Corp.
4.50% 06/01/33 - 02/01/35. $ 260,024 $ 241,477 (h)
5.00% 07/01/35 - 10/01/35. 7,436,860 7,151,239 (h)
5.50% 05/01/20 - 03/01/38. 5,855,454 5,788,642 (h)
6.00% 04/01/17 - 11/01/37. 5,316,599 5,378,021 (h)
6.50% 01/01/27 - 08/01/36. 851,800 880,840 (h)
7.00% 10/01/25 - 08/01/36. 261,654 275,189 (h)
7.50% 11/01/09 - 09/01/33. 35,320 38,138 (h)
8.00% 01/01/30 - 11/01/30. 16,026 17,353 (h)
9.00% 10/01/25............ 614 683 (h)
Federal National Mortgage Assoc.
4.00% 05/01/19 - 06/01/19. 226,108 214,266 (h)
4.50% 05/01/18 - 02/01/35. 1,645,770 1,574,639 (h)
5.00% 07/01/20 - 08/01/35. 4,293,406 4,134,971 (h)
5.26% 04/01/37............ 554,014 561,286 (i)
5.47% 04/01/37............ 41,693 42,364 (i)
5.50% 04/01/14 - 04/01/38. 13,754,782 13,601,739 (h)
5.52% 04/01/37............ 486,438 495,680 (i)
5.53% 04/01/37............ 219,511 223,844 (i)
5.55% 04/01/37............ 526,192 536,372 (i)
5.59% 04/01/37............ 615,849 628,948 (i)
5.62% 03/01/37............ 45,035 45,866 (i)
5.68% 04/01/37 - 05/01/37. 827,043 845,190 (i)
5.70% 04/01/37............ 725,112 741,063 (i)
5.71% 04/01/37............ 232,998 238,313 (i)
5.84% 06/01/37............ 1,178,376 1,202,519 (i)
6.00% 09/01/19 - 03/01/38. 17,187,694 17,371,129 (h)
6.03% 10/01/37............ 990,520 1,017,308 (i)
6.50% 09/01/17 - 08/01/36. 2,097,599 2,169,771 (h)
7.00% 04/01/17 - 06/01/36. 357,695 377,144 (h)
7.50% 12/01/09 - 03/01/34. 84,496 90,204 (h)
8.00% 12/01/11 - 11/01/33. 29,632 31,820 (h)
8.50% 06/01/30............ 211 232 (h)
9.00% 06/01/09 - 12/01/22. 9,495 10,123 (h)
5.00% TBA................. 20,865,000 20,302,899 (c)
5.50% TBA................. 123,859,000 122,279,522 (c)
6.00% TBA................. 35,532,000 35,858,456 (c)
6.50% TBA................. 15,044,000 15,485,918 (c)
Government National
Mortgage Assoc.
4.50% 08/15/33 - 09/15/34. 416,123 389,037 (h)
6.00% 04/15/27 - 09/15/36. 599,631 611,099 (h)
6.50% 04/15/24 - 09/15/36. 569,331 589,873 (h)
7.00% 03/15/12 - 10/15/36. 521,460 549,371 (h)
8.00% 03/15/30............ 3,324 3,642 (h)
9.00% 11/15/16 - 12/15/21. 16,944 18,461 (h)
262,014,651
AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.5%
Federal Home Loan Mortgage Corp.
3.53% 11/15/37............ 3,150,087 216,591(d,g,i)
4.18% 05/15/36 - 11/15/36. 5,811,921 516,615(d,g,i)
4.33% 04/15/38............ 2,820,097 247,894(d,g,i)
4.50% 04/15/13 - 03/15/19. 318,221 23,677(d,g,h)
4.83% 09/15/35............ 2,204,149 242,241(d,g,i)
5.00% 04/15/14 - 12/01/34. 6,025,565 1,305,168(d,g,h)
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
5.00% 07/15/28............ $ 400,000 $ 404,207
5.50% 04/15/17 - 06/15/33. 175,530 24,546(d,g,h)
6.91% 11/15/37............ 1,335,589 926,018(d,f)
7.14% 12/15/33............ 45,000 40,018(h,i)
7.50% 01/15/16............ 6,401 6,671 (h)
7.50% 07/15/27............ 5,356 1,327(d,g,h)
8.00% 02/01/23 - 07/01/24. 3,716 995(d,g,h)
35.45% 09/25/43............ 368,556 2,703(d,g,h)
Federal Home Loan Mortgage STRIPS
5.39% 08/01/27............ 864 717(d,f,h)
Federal National Mortgage Assoc.
1.18% 12/25/42............ 198,358 7,134(d,g,h)
3.97% 05/25/37 - 06/25/37. 16,536,918 1,461,213(d,g,i)
4.27% 10/25/35............ 5,501,222 510,373(d,g,i)
4.50% 05/25/18............ 95,441 6,740(d,g,h)
4.50% 03/25/38............ 2,744,836 279,069(d,g,i)
4.72% 07/25/37............ 4,984,166 571,769(d,g,i)
4.75% 11/25/14............ 18,029 779(d,g,h)
5.00% 02/25/32............ 2,034,028 283,953(d,g,h)
5.00% 10/25/35............ 423,718 370,439
5.12% 09/25/42............ 198,849 20,879(d,g,h,i)
5.22% 08/25/16............ 54,476 3,048(d,g,h,i)
5.50% 01/25/33............ 609,696 580,340
8.00% 07/25/14............ 7,997 8,056 (h)
31.49% 04/25/38............ 3,261,990 264,267(d,g,i)
40.07% 05/25/38............ 4,978,514 427,114(d,g,i)
Federal National Mortgage
Assoc. (Class 1)
4.50% 09/01/35 - 01/01/36. 4,617,506 1,087,014(d,g)
5.00% 05/25/38............ 1,480,000 462,745(d,g)
Federal National Mortgage
Assoc. (Class 2)
5.00% 09/01/33 - 03/25/38. 2,864,044 820,564(d,g)
5.50% 12/01/33............ 368,143 92,602(d,g)
Federal National Mortgage
Assoc. REMIC
4.50% 11/25/13............ 41,000 749(d,g,h)
5.00% 10/25/22............ 93,964 14,650(d,g,h)
11.15% 03/25/31............ 65,465 67,153(h,i)
Federal National Mortgage Assoc.
REMIC (Class J)
1080.91%03/25/22............ 1 2(d,g,h)
Federal National Mortgage Assoc.
REMIC (Class K)
1008.00%05/25/22............ 5 100(d,g,h)
Federal National Mortgage Assoc.
STRIPS (Class 2)
5.00% 08/01/34............ 10,661,906 2,760,434(d,g)
7.50% 11/01/23............ 17,259 3,810(d,g,h)
8.00% 08/01/23 - 07/01/24. 8,057 2,220(d,g,h)
14,066,604
ASSET BACKED -- 1.8%
American Express Credit Account
Master Trust (Class A)
2.46% 12/17/12............ 5,000,000 4,944,356(h,i)
BA Credit Card Trust
2.47% 08/15/12............ 9,500,000 9,343,398(h,i)
See Notes to Schedule of Investments on page 19 and Notes to Financial
Statements.
12
<page>
TOTAL RETURN FUND
Schedule of Investments June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Bear Stearns Asset Backed
Securities Trust (Class A)
2.85% 01/25/34............ $ 14,031 $ 11,864 (h,i)
Capital Auto Receivables Asset Trust
2.53% 05/15/11............ 7,351,730 7,301,187(h,i)
Capital One Auto Finance Trust
2.47% 04/15/12............ 3,000,000 2,844,450(h,i)
Capital One Multi-Asset Execution
Trust (Class A)
2.50% 03/16/15............ 490,000 473,585(h,i)
Carmax Auto Owner Trust
4.35% 03/15/10............ 90,310 90,636 (h)
Ford Credit Auto Owner Trust
(Class A)
2.51% 02/15/12............ 7,125,000 7,020,089(h,i)
Ford Credit Floorplan Master Owner
Trust (Class A)
5.03% 06/15/11............ 3,600,000 3,520,485(d,i)
Honda Auto Receivables Owner
Trust (Class A)
4.15% 10/15/10............ 94,265 94,557 (h)
Indymac Residential Asset
Backed Trust
2.65% 10/25/35............ 1,249,492 1,242,407(h,i)
Indymac Residential Asset Backed
Trust (Class M)
4.48% 04/25/37............ 189,000 18,548(h,i,n)
JP Morgan Mortgage
Acquisition Corp.
2.63% 03/01/37............ 1,500,000 1,260,000 (i)
Long Beach Mortgage Loan Trust
2.76% 09/25/35............ 530,700 516,826(h,i)
Mid-State Trust
7.54% 07/01/35............ 4,679 4,590(h,n)
Option One Mortgage Loan Trust
2.61% 07/25/37............ 4,000,000 3,068,922(h,i)
Peco Energy Transition Trust
6.52% 12/31/10............ 50,000 52,385 (h)
Residential Asset Mortgage
Products, Inc.
2.72% 03/25/34............ 4,006 3,925(h,i)
Residential Asset Securities Corp.
2.73% 01/25/36............ 1,624,337 1,274,850(h,i)
2.98% 07/25/32............ 6,654 5,783(h,i)
Residential Asset Securities
Corp. (Class A)
4.16% 07/25/30............ 58,670 57,752 (h)
SLM Student Loan Trust (Class A)
2.83% 06/15/18............ 172,260 170,147(h,i)
Swift Master Auto Receivables
Trust (Class A)
2.57% 06/15/12............ 4,250,000 3,988,359 (i)
Triad Auto Receivables Owner
Trust (Class A)
2.54% 02/12/14............ 2,000,000 1,898,459 (i)
Wells Fargo Home Equity Trust
3.97% 05/25/34............ 35,424 34,540 (h)
49,242,100
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
CORPORATE NOTES -- 2.9%
Abbey National PLC
7.95% 10/26/29............ $ 219,000 $ 222,737(h)
American Electric Power
Company, Inc. (Series C)
5.38% 03/15/10............ 2,125,000 2,147,323 (h)
American International Group, Inc.
5.85% 01/16/18............ 686,000 642,681
Archer-Daniels-Midland Co.
6.45% 01/15/38............ 687,000 688,777
Arizona Public Service Co.
6.25% 08/01/16............ 370,000 352,459 (h)
AT&T, Inc.
4.13% 09/15/09............ 1,800,000 1,802,104 (h)
BAC Capital Trust VI
5.63% 03/08/35............ 925,000 753,203 (h)
Bank of America Corp.
8.00% 12/29/49............ 744,000 697,031
Bank of America Corp. (Series L)
5.65% 05/01/18............ 2,250,000 2,100,571 (h)
Bear Stearns Companies Inc.
5.85% 07/19/10............ 688,000 698,676 (h)
6.95% 08/10/12............ 1,330,000 1,382,897 (h)
BellSouth Corp.
4.20% 09/15/09............ 735,000 736,498 (h)
6.55% 06/15/34............ 510,000 492,547 (h)
Bristol-Myers Squibb Co.
5.45% 05/01/18............ 800,000 789,175
5.88% 11/15/36............ 420,000 391,797 (h)
British Telecommunications PLC
8.63% 12/15/10............ 170,000 182,538 (h)
Burlington Northern Santa Fe Corp.
6.75% 07/15/11............ 1,000,000 1,048,725 (h)
Cardinal Health, Inc.
5.50% 06/15/13............ 552,000 550,774 (h)
Carolina Power & Light Co.
5.15% 04/01/15............ 810,000 807,745 (h)
5.70% 04/01/35............ 155,000 144,486 (h)
6.13% 09/15/33............ 190,000 186,913 (h)
Chubb Corp.
6.50% 05/15/38............ 159,000 151,939 (h)
Citigroup, Inc.
5.50% 04/11/13............ 1,092,000 1,066,993 (h)
6.13% 11/21/17............ 2,820,000 2,706,362 (h)
8.40% 04/29/49............ 810,000 769,994 (h)
Consolidated Edison Co of
New York, Inc.
5.85% 04/01/18............ 770,000 772,869
COX Communications, Inc.
7.13% 10/01/12............ 240,000 250,502 (h)
7.75% 11/01/10............ 375,000 395,132 (h)
Credit Suisse
6.00% 02/15/18............ 764,000 735,669
CSX Transportation, Inc.
9.75% 06/15/20............ 1,021,000 1,229,257 (h)
CVS Caremark Corp.
5.75% 06/01/17............ 1,474,000 1,449,754 (h)
See Notes to Schedule of Investments on page 19 and Notes to Financial
Statements.
13
<page>
TOTAL RETURN FUND
Schedule of Investments June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Diageo Capital PLC
5.20% 01/30/13............ $ 454,000 $ 454,519
Dominion Resources, Inc. (Series B)
6.30% 09/30/66............ 1,505,000 1,377,456 (h)
Dover Corp.
6.50% 02/15/11............ 375,000 393,359 (h)
Duke Energy Carolinas LLC
5.38% 01/01/09............ 160,000 161,207 (h)
Duke Realty LP
6.25% 05/15/13............ 530,000 519,822
EI Du Pont de Nemours & Co.
4.88% 04/30/14............ 325,000 325,688 (h)
El Paso Electric Co.
6.00% 05/15/35............ 270,000 227,704 (h)
GlaxoSmithKline Capital Inc.
4.85% 05/15/13............ 529,000 528,287
6.38% 05/15/38............ 265,000 263,047
Goldman Sachs Group, Inc.
5.95% 01/18/18............ 246,000 236,149
6.60% 01/15/12............ 3,195,000 3,285,361 (h)
6.88% 01/15/11............ 900,000 934,277 (h)
GTE Corp.
7.51% 04/01/09............ 165,000 169,412 (h)
Hewlett-Packard Co.
5.50% 03/01/18............ 721,000 706,154
Honeywell International, Inc.
5.30% 03/01/18............ 682,000 671,827
HSBC Bank USA N.A.
3.88% 09/15/09............ 1,175,000 1,160,611 (h)
4.63% 04/01/14............ 585,000 555,595
7.00% 01/15/39............ 1,500,000 1,467,634
HSBC Finance Corp.
6.75% 05/15/11............ 405,000 420,887 (h)
HSBC Holdings PLC
6.50% 05/02/36............ 100,000 92,977 (h)
Hydro Quebec
8.05% 07/07/24............ 820,000 1,078,990 (h)
8.50% 12/01/29............ 1,585,000 2,241,788 (h)
ING Capital Funding TR III
8.44% 12/29/49............ 960,000 969,983 (h)
ING Groep N.V.
5.78% 12/29/49............ 528,000 438,228 (h)
International Business
Machines Corp.
4.75% 11/29/12............ 1,300,000 1,317,992 (h)
International Steel Group Inc.
6.50% 04/15/14............ 415,000 420,732
John Deere Capital Corp.
4.50% 04/03/13............ 1,029,000 1,016,151
JP Morgan Chase & Co.
6.40% 05/15/38............ 827,000 767,072
7.00% 11/15/09............ 1,130,000 1,155,041 (h)
JP Morgan Chase Bank
5.88% 06/13/16............ 825,000 805,588
Kroger Co.
6.15% 01/15/20............ 820,000 811,320
Lehman Brothers Holdings, Inc.
2.85% 12/23/08............ 133,000 130,454 (i)
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
3.00% 10/22/08............ $ 292,000 $ 290,899 (i)
5.00% 01/14/11............ 1,150,000 1,115,091 (h)
5.63% 01/24/13............ 451,000 426,874
6.20% 09/26/14............ 375,000 357,926
6.88% 05/02/18............ 1,091,000 1,056,203
Markel Corp.
7.35% 08/15/34............ 312,000 305,481 (h)
McDonald's Corp.
5.80% 10/15/17............ 450,000 459,341
6.30% 03/01/38............ 725,000 718,192
Merck & Company, Inc.
5.75% 11/15/36............ 445,000 425,226 (h)
Mizuho Financial Group Cayman Ltd.
8.38% 12/29/49............ 595,000 596,196
Morgan Stanley
6.00% 04/28/15............ 800,000 764,815
Morgan Stanley (Series F)
6.63% 04/01/18............ 700,000 663,268
Munich Re America Corp. (Series B)
7.45% 12/15/26............ 315,000 315,514 (h)
Nevada Power Company (Series I)
6.50% 04/15/12............ 515,000 531,683 (h)
Norfolk Southern Corp.
8.63% 05/15/10............ 485,000 519,616 (h)
Norfolk Southern Railway Co.
9.75% 06/15/20............ 64,000 78,218 (h)
NorthWestern Corp.
5.88% 11/01/14............ 200,000 196,845 (h)
Pacific Bell Telephone Co.
7.13% 03/15/26............ 39,000 39,354 (h)
Pacific Gas & Electric Co.
5.80% 03/01/37............ 500,000 466,162
Pacificorp
6.25% 10/15/37............ 375,000 370,832
Parker Hannifin Corp.
5.50% 05/15/18............ 554,000 555,742
Pemex Finance Ltd.
9.03% 02/15/11............ 145,750 155,588 (h)
Pemex Project Funding Master Trust
7.88% 02/01/09............ 158,000 162,235
PepsiCo, Inc.
5.00% 06/01/18............ 1,352,000 1,319,094
Pitney Bowes, Inc.
3.88% 06/15/13............ 618,000 582,393
Prudential Financial, Inc.
5.70% 12/14/36............ 485,000 411,291 (h)
6.10% 06/15/17............ 415,000 413,348
Public Service Company of Colorado
7.88% 10/01/12............ 520,000 579,926 (h)
Puget Sound Energy, Inc.
5.48% 06/01/35............ 130,000 109,215 (h)
Puget Sound Energy, Inc. (Series A)
6.97% 06/01/67............ 830,000 713,131
Royal Bank of Scotland Group PLC
5.00% 10/01/14............ 375,000 359,367 (h)
Sprint Capital Corp.
7.63% 01/30/11............ 296,000 290,820
See Notes to Schedule of Investments on page 19 and Notes to Financial
Statements.
14
<page>
TOTAL RETURN FUND
Schedule of Investments June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Standard Chartered Bank
Hong Kong Ltd.
4.38% 12/03/14............ $ 380,000 $ 373,882
Suncor Energy, Inc.
6.10% 06/01/18............ 550,000 551,666
Telecom Italia Capital S.A.
6.20% 07/18/11............ 989,000 1,008,505
Telefonica Emisiones SAU
5.86% 02/04/13............ 600,000 604,008
The Travelers Companies Inc.
5.80% 05/15/18............ 820,000 797,824
Time Warner Cable, Inc.
6.20% 07/01/13............ 792,000 805,359
6.75% 07/01/18............ 792,000 797,252
Transocean, Inc.
6.00% 03/15/18............ 701,000 702,049
UBS Preferred Funding Trust I
8.62% 10/29/49............ 495,000 497,396
United Technologies Corp.
6.13% 07/15/38............ 554,000 556,501
Verizon Global Funding Corp.
7.25% 12/01/10............ 788,000 836,580
Verizon Pennsylvania, Inc.
8.35% 12/15/30............ 210,000 235,837 (h)
8.75% 08/15/31............ 165,000 192,887 (h)
Wachovia Corp. (Series K)
7.98% 12/31/49............ 500,000 459,200
Wal-Mart Stores, Inc.
5.80% 02/15/18............ 496,000 513,555
6.20% 04/15/38............ 524,000 513,822
6.88% 08/10/09............ 1,000,000 1,036,761 (h)
Wells Fargo & Co.
5.63% 12/11/17............ 240,000 232,210
Westar Energy, Inc.
7.13% 08/01/09............ 420,000 430,996 (h)
Xerox Corp.
6.35% 05/15/18............ 810,000 799,551
XTO Energy, Inc.
6.38% 06/15/38............ 523,000 495,507
79,244,674
NON-AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 2.1%
Banc of America Commercial
Mortgage Inc.
5.32% 09/10/47............ 1,300,000 1,279,132 (h)
Banc of America Commercial
Mortgage Inc. (Class A)
5.49% 02/10/51............ 2,750,000 2,553,741
6.48% 06/10/49............ 2,480,000 2,344,384(d,i)
Banc of America Commercial
Mortgage Inc. (Class C)
5.88% 04/10/17............ 400,000 288,200(h,n)
Banc of America Funding Corp.
5.73% 03/20/36............ 193,524 78,545(h,i,n)
5.80% 02/20/36............ 345,189 144,421(h,n)
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Banc of America Mortgage
Securities Inc. (Class B)
5.38% 01/25/36............ $ 198,238 $ 116,008(h,i)
5.55% 02/25/36............ 158,350 94,602(h,i)
Bear Stearns Asset Backed
Securities Trust (Class A)
2.64% 07/25/36............ 6,844,324 6,018,282(h,i)
Bear Stearns Commercial
Mortgage Securities
5.48% 10/12/41............ 1,500,000 1,482,349 (h)
5.53% 10/12/41............ 1,500,000 1,450,382 (h)
5.58% 03/11/39............ 1,000,000 997,759 (h)
6.02% 02/14/31............ 68,275 68,546 (h)
Bear Stearns Commercial
Mortgage Securities (Class A)
5.63% 04/12/38............ 700,000 699,617 (h)
Citigroup Commercial
Mortgage Trust
5.89% 12/10/49............ 2,100,000 1,995,548
Countrywide Alternative Loan Trust
5.98% 05/25/36............ 73,190 1,464(h,n)
6.00% 03/25/36 - 08/25/36. 422,046 36,340(h,n)
Countrywide Alternative Loan
Trust (Class B)
6.00% 05/25/36 - 08/25/36. 226,128 24,319(h,n)
Credit Suisse Mortgage
Capital Certificates
5.47% 09/15/39............ 682,000 648,288 (h)
Credit Suisse Mortgage
Capital Certificates (Class C)
5.65% 02/25/36............ 111,931 31,838(h,n)
Crusade Global Trust (Class A)
2.92% 01/17/34............ 1,887,307 1,790,565(h,i)
CS First Boston Mortgage
Securities Corp.
5.25% 08/25/34............ 207,089 194,355 (h)
5.34% 10/25/35............ 166,566 66,626(h,n)
6.13% 04/15/37............ 50,000 51,026 (h)
DLJ Commercial Mortgage
Corp. (Class A)
7.62% 06/10/33............ 2,892,701 3,006,445 (h)
GMAC Commercial Mortgage
Securities, Inc.
6.42% 05/15/35............ 73,879 73,766 (h)
6.47% 04/15/34............ 395,244 405,106 (h)
GMAC Commercial Mortgage
Securities, Inc. (Class X)
6.68% 12/10/41............ 3,076,059 47,846(d,h,n)
Greenwich Capital Commercial
Funding Corp.
5.12% 04/10/37............ 500,000 498,973 (h)
GS Mortgage Securities Corp II
(Class A)
5.99% 08/10/45............ 2,570,000 2,457,451
Impac CMB Trust
2.74% 04/25/35............ 305,586 243,678(h,i)
Indymac INDA Mortgage Loan Trust
5.16% 01/25/36............ 99,700 62,233(h,n)
See Notes to Schedule of Investments on page 19 and Notes to Financial
Statements.
15
<page>
TOTAL RETURN FUND
Schedule of Investments June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Indymac INDA Mortgage Loan
Trust (Class B)
5.16% 01/25/36........... $ 107,676 $ 71,601(h,n)
JP Morgan Chase Commercial
Mortgage Securities Corp.
6.26% 02/15/51........... 1,830,000 1,700,191
6.47% 11/15/35........... 40,000 41,094 (h)
LB-UBS Commercial Mortgage Trust
4.06% 09/15/27........... 71,273 70,682 (h)
5.42% 02/15/40........... 359,000 333,942
5.66% 03/15/39........... 1,000,000 969,249 (h)
6.23% 03/15/26........... 53,000 53,459 (h)
6.62% 01/18/12........... 4,222,223 80,157(d,h,n)
LB-UBS Commercial Mortgage
Trust (Class F)
6.45% 07/15/40........... 475,000 315,333 (n)
LB-UBS Commercial Mortgage
Trust (Class X)
7.07% 09/15/39........... 20,981,588 530,427(d,h,n)
MASTR Alternative Loans Trust
5.00% 08/25/18........... 44,734 6,934(d,g,h)
Medallion Trust (Class A)
2.70% 08/22/36........... 1,199,816 1,138,936(h,i)
Merrill Lynch Mortgage Trust
(Class A)
5.80% 05/12/39........... 1,000,000 1,000,439 (h)
Merrill Lynch/Countrywide
Commercial Mortgage Trust
5.42% 08/12/48........... 850,000 753,929
5.81% 06/12/50........... 1,900,000 1,801,641
Merrill Lynch/Countrywide
Commercial Mortgage
Trust (Class A)
5.49% 03/12/51........... 2,700,000 2,514,452
MLCC Mortgage Investors, Inc.
5.37% 02/25/36........... 164,986 137,499 (h)
Morgan Stanley Capital I
5.28% 12/15/43........... 1,500,000 1,475,776 (h)
5.33% 12/15/43........... 1,500,000 1,410,706 (h)
5.39% 11/12/41........... 2,000,000 1,607,843 (h)
5.44% 02/12/44........... 1,000,000 957,481 (b)
5.45% 02/12/44........... 1,000,000 928,740
5.69% 04/15/49........... 1,850,000 1,744,539
5.71% 07/12/44........... 300,000 295,626 (h)
6.53% 03/15/31........... 174,569 175,477 (h)
7.11% 04/15/33........... 64,399 65,599 (h)
Morgan Stanley Capital I (Class A)
5.36% 02/12/44........... 1,000,000 976,678
Morgan Stanley Dean Witter
Capital I
7.20% 10/15/33........... 39,288 40,654 (h)
MortgageIT Trust (Class A)
2.78% 08/25/35........... 2,175,085 1,813,850(h,i)
Nomura Asset Securities Corp.
(Class A)
6.59% 03/15/30........... 34,088 34,247 (h)
Opteum Mortgage Acceptance Corp.
2.78% 02/25/35........... 190,010 167,148(h,i)
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Residential Accredit Loans, Inc.
6.00% 01/25/36............ $ 241,367 $ 129,801(h,n)
6.04% 01/25/36............ 108,186 11,984(h,n)
Residential Asset Securitization
Trust (Class A)
2.88% 05/25/35............ 696,397 505,935(h,i)
Residential Funding Mortgage
Securities I
5.75% 01/25/36............ 97,498 57,726 (h)
5.75% 01/25/36............ 129,673 91,181(h,n)
Wachovia Bank Commercial
Mortgage Trust
5.93% 06/15/49............ 2,570,000 2,438,558
Wachovia Bank Commercial
Mortgage Trust (Class A)
6.22% 01/15/45............ 1,380,000 1,317,744(d,i)
Wachovia Bank Commercial
Mortgage Trust (Class E)
6.10% 02/15/51............ 1,485,000 987,585 (n)
WaMu Mortgage Pass
Through Certificates
2.82% 01/25/45............ 110,548 89,640(h,i)
Wells Fargo Mortgage Backed
Securities Trust
5.39% 08/25/35............ 471,091 406,746(h,i)
5.50% 01/25/36 - 03/25/36. 568,968 346,154 (h)
Wells Fargo Mortgage Backed
Securities Trust (Class B)
5.50% 03/25/36............ 969,950 674,907 (h)
59,524,125
SOVEREIGN BONDS -- 0.1%
Government of Brazil
8.00% 01/15/18............ 530,000 588,565 (h)
Government of Canada
7.50% 09/15/29............ 495,000 632,405
Government of Manitoba Canada
4.90% 12/06/16............ 330,000 337,811 (h)
1,558,781
TOTAL BONDS AND NOTES
(COST $658,780,209).......... 649,449,308
NUMBER
OF SHARES
- --------------------------------------------------------------------------------
EXCHANGE TRADED FUNDS -- 0.8%
- --------------------------------------------------------------------------------
Financial Select Sector
SPDR Fund.................... 203,363 4,120,135 (l)
Industrial Select Sector
SPDR Fund.................... 514,848 17,509,981 (l)
iShares MSCI Emerging Markets
Index Fund................... 9,890 1,340,886 (o)
TOTAL EXCHANGE TRADED FUNDS
(COST $25,663,869)........... 22,971,002
See Notes to Schedule of Investments on page 19 and Notes to Financial
Statements.
16
<page>
TOTAL RETURN FUND
Schedule of Investments June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
SECURITIES PURCHASED WITH COLLATERAL
FROM SECURITIES ON LOAN -- 1.3%
ASSET BACKED -- 1.0%
Bear Stearns Asset Backed
Securities Trust
2.70% 11/25/35.......... $3,515,276 $ 3,393,115(h,i)
Countrywide Asset-Backed
Certificates
2.59% 06/25/35.......... 954,941 890,306(h,i)
Countrywide Asset-Backed
Certificates (Class M)
3.53% 06/26/33.......... 605,665 401,803(h,i)
Discover Card Master Trust I
2.48% 04/15/10.......... 3,000,000 2,954,483(h,i)
GSAA Trust
2.54% 10/25/36.......... 5,323,069 4,742,989(h,i)
GSAMP Trust
2.59% 05/25/36.......... 923,808 831,428(b,h,i)
GSR Mortgage Loan Trust
2.68% 11/25/30.......... 1,697,938 912,357(h,i)
Indymac Residential Asset
Backed Trust
2.60% 06/25/36.......... 4,275,362 4,200,360(h,i)
Indymac Seconds Asset Backed
Trust (Class A)
2.64% 02/25/37.......... 4,138,984 2,959,708(h,i)
Nissan Auto Lease Trust
2.54% 02/15/13.......... 6,310,000 6,189,163 (i)
27,475,712
CORPORATE NOTES -- 0.2%
Countrywide Financial Corp.
7.30% 09/02/08.......... 4,000,000 3,969,400(d,h,i)
Morgan Stanley
2.82% 05/07/09.......... 1,100,000 1,082,843 (i)
5,052,243
NON-AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.1%
JP Morgan Alternative Loan Trust
2.54% 08/25/36.......... 610,781 606,261(h,i)
Residential Accredit Loans, Inc.
2.66% 07/25/36.......... 3,040,068 2,077,358(h,i)
2,683,619
TOTAL SECURITIES PURCHASED WITH
COLLATERAL FROM SECURITIES ON LOAN
(COST $39,497,999)........... 35,211,574
- --------------------------------------------------------------------------------
OTHER INVESTMENTS -- 0.3%
- --------------------------------------------------------------------------------
GEI Investment Fund
(COST $11,874,019)........... 9,024,255 (k)
TOTAL INVESTMENTS IN SECURITIES
(COST $2,544,935,531)........ 2,529,917,735
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 17.8% *
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 1.6%
GE Money Market Fund
Institutional Class
1.93%........................ $44,541,662(d,m)
U.S. GOVERNMENTS -- 13.1%
Federal Home Loan Bank
Discount Notes
1.99% 07/02/08............ $ 4,137,000 4,136,772 (d)
2.08% 07/23/08............ 50,800,000 50,733,518 (d)
2.09% 10/03/08............ 5,000,000 4,968,405 (d)
2.10% 07/25/08 - 10/17/08. 25,000,000 24,876,100 (d)
2.13% 09/22/08............ 10,602,000 10,544,802 (d)
2.16% 08/22/08............ 16,000,000 15,949,105 (d)
2.20% 08/06/08............ 5,000,000 4,989,025 (d)
2.25% 07/21/08............ 7,000,000 6,991,250 (d)
Federal Home Loan Mortgage Corp.
Discount Notes
2.10% 08/18/08 - 11/03/08. 44,760,000 44,460,771 (d)
2.12% 08/25/08............ 41,668,000 41,534,723 (d)
2.24% 08/04/08............ 39,983,000 39,905,637 (d)
Federal National Mortgage Assoc.
2.06% 07/09/08............ 16,400,000 16,392,784 (d)
2.12% 08/06/08............ 15,000,000 14,967,000 (d)
Federal National Mortgage Assoc.
Discount Notes
2.08% 10/03/08............ 26,700,000 26,531,283 (d)
2.09% 07/16/08............ 5,000,000 4,995,677 (d)
2.13% 10/22/08............ 35,500,000 35,230,342 (d)
2.20% 07/25/08............ 14,000,000 13,979,560 (d)
361,186,754
U.S. TREASURIES -- 1.9%
U.S. Treasury Bill
1.88% 07/10/08............ 52,000,000 51,975,664 (d)
SHORT-TERM SECURITIES PURCHASED WITH
COLLATERAL FROM SECURITIES ON LOAN -- 1.2%
GE Money Market Fund
Institutional Class
1.93%....................... 33,053,787(d,m)
TOTAL SHORT-TERM INVESTMENTS
(COST $490,882,576)........... 490,757,867
TOTAL INVESTMENTS
(COST $3,035,818,107)......... 3,020,675,602
LIABILITIES IN EXCESS OF OTHER ASSETS,
NET-- (9.5)%................. (262,981,548)
NET ASSETS-- 100.0% ........... $2,757,694,054
See Notes to Schedule of Investments on page 19 and Notes to Financial
Statements.
17
<page>
TOTAL RETURN FUND
Schedule of Investments June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
The GEI Total Return Fund had the following long futures contracts open at June
30, 2008 (unaudited):
NUMBER CURRENT UNREALIZED
EXPIRATION OF NOTIONAL APPRECIATION/
DESCRIPTION DATE CONTRACTS VALUE DEPRECIATION
- --------------------------------------------------------------------------------
DJ Euro Stoxx 50
Index Futures September 2008 55 $ 2,928,947 $ (87,459)
Euro Schatz
Futures September 2008 51 8,222,126 (52,726)
FTSE 100 Index
Futures September 2008 12 1,348,843 (18,168)
S&P 500 Index
Futures September 2008 15 4,804,125 (141,210)
S&P 500 Index
Futures September 2008 5 1,601,375 (44,800)
Topix Index
Futures September 2008 12 1,492,571 (49,007)
U.S.Treasury
Notes 2 Yr.
Futures September 2008 621 131,157,140 687,370
U.S.Treasury
Notes 5 Yr.
Futures September 2008 8 884,438 369
The GEI Total Return Fund had the following short futures contracts open at
June 30, 2008 (unaudited):
NUMBER CURRENT UNREALIZED
EXPIRATION OF NOTIONAL APPRECIATION/
DESCRIPTION DATE CONTRACTS VALUE DEPRECIATION
- --------------------------------------------------------------------------------
S&P 400 Midcap
Index Futures September 2008 2 $ (821,200) $ 28,482
U.S.Treasury
Notes 10 Yr.
Futures September 2008 93 (10,594,734) (161,365)
-----------
$ 161,486
============
* 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 19 and Notes to Financial
Statements.
18
<page>
Notes to Schedule of Investments June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
The views expressed in this document reflect our judgment as of the publication
date and are subject to change at any time without notice. The securities cited
may not represent current or future holdings and should not be considered as a
recommendation to purchase or sell a particular security. See the prospectus for
complete descriptions of investment objectives, policies, risks and permissible
investments.
(a) Non-income producing security.
(b) Pursuant to Rule 144A of the Securities Act of 1933, these securities may be
resold in transactions exempt from registration, normally to qualified
institutional buyers. At June 30, 2008, these securities amounted to
$1,788,909 or 0.06% of net assets for the GE Investments Total Return Fund.
These securities have been determined to be liquid using procedures
established by the Board of Trustees.
(c) Settlement is on a delayed delivery or when-issued basis with final maturity
to be announced (TBA) in the future.
(d) Coupon amount represents effective yield.
(e) State Street Corp. is the parent company of State Street Bank & Trust Co.,
the Fund's custodian and accounting agent.
(f) Principal only securities represent the right to receive the monthly
principal payments on an underlying pool of mortgages. No payments of
interest on the pool are passed through to the "principal only" holder.
(g) Interest only securities represent the right to receive the monthly interest
payments on an underlying pool of mortgages. Payments of principal on the
pool reduce the value of the "interest only" holding.
(h) At June 30, 2008, all or a portion of this security was pledged to cover
collateral requirements for futures, options, forward foreign currency
contracts and/or TBA's.
(i) Variable or floating rate security. The stated rate represents the rate at
June 30, 2008.
(j) All or a portion of the security is out on loan.
(k) GE Asset Management ("GEAM"), the investment adviser of the Fund, also
serves as the investment adviser of the GEI Investment Fund.
(l) Sponsored by SSgA Funds Management, Inc., an affiliate of State Street Bank
& Trust Co., the Fund's custodian and accounting agent.
(m) GEAM, the investment adviser of the Fund, also serves as investment adviser
of the GE Money Market Fund.
(n) Illiquid securities.
(o) Sponsored by Barclay's Global Investors, an affiliate of State Street Bank &
Trust Co., the Fund's custodian and accounting agent.
* Less than 0.1%.
+ Percentages are based on net assets as of June 30, 2008.
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 & Poor's Depository Receipts
STRIPS Separate Trading of Registered Interest and Principal of Security
TBA To be Announced
19
<page>
Financial Highlights
Selected data based on a share outstanding throughout the periods indicated
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN FUND
-------------------------------------------------------------------------
CLASS 1
-------------------------------------------------------------------------
6/30/08+ 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.................. $18.61 $17.69 $16.04 $15.97 $15.09 $12.68
INCOME/(LOSS) FROM INVESTMENT OPERATIONS:
Net investment income............................... 0.21 0.35 0.36 0.23 0.20 0.16
Net realized and unrealized gains/(losses) on
investments (1.50) 1.71 1.84 0.36 1.04 2.41
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM INVESTMENT OPERATIONS........ (1.29) 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........................ $17.32 $18.61 $17.69 $16.04 $15.97 $15.09
====================================================================================================================================
TOTAL RETURN (A)...................................... (6.93)% 11.68%(b) 13.75% 3.67% 8.19% 20.31%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)............ $1,376,005 1,525,002 $1,390,230 $959,531 $515,506 $225,867
Ratios to average net assets:
Net investment income............................. 2.36% 2.20% 2.33% 1.89% 1.81% 1.58%
Net Expenses...................................... 0.51% 0.52% 0.48% 0.45% 0.49% 0.53%
Gross Expenses.................................... 0.54% 0.56% 0.53% 0.45% 0.49% 0.53%
Portfolio turnover rate............................. 93% 176% 138% 146% 141% 115%
------------------------------------ --------------------------------
CLASS 2 CLASS 3
------------------------------------ --------------------------------
6/30/08+ 12/31/07 12/31/06 6/30/08+ 12/31/07 12/31/06
------------------------------------ --------------------------------
INCEPTION DATE -- -- 5/1/06 -- -- 5/1/06
Net asset value, beginning of period................. $18.56 $17.68 $17.03 $18.59 $17.69 $17.03
INCOME/(LOSS) FROM INVESTMENT OPERATIONS:
Net investment income.............................. 0.22 0.38 0.26 0.21 0.35 0.12
Net realized and unrealized gains/(losses) on
investments (1.52) 1.67 0.94 (1.52) 1.69 1.10
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM INVESTMENT OPERATIONS....... (1.30) 2.05 1.20 (1.31) 2.04 1.22
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income.............................. -- 0.38 0.31 -- 0.35 0.32
Net realized gains................................. -- 0.79 0.24 -- 0.79 0.24
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS.................................. -- 1.17 0.55 -- 1.14 0.56
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD....................... $17.26 $18.56 $17.68 $17.28 $18.59 $17.69
====================================================================================================================================
TOTAL RETURN (A)..................................... (7.00)% 11.63%(b) 7.05% (6.99)% 11.56%(b) 7.17%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)........... $16,392 $15,281 $1 $1,365,287 $1,173,708 $396,349
Ratios to average net assets:
Net investment income*........................... 2.34% 1.75% 2.33% 2.28% 2.04% 2.09%
Net Expenses*.................................... 0.56% 0.56% 0.57% 0.61% 0.61% 0.62%
Gross Expenses*.................................. 0.58% 0.59% 0.64% 0.63% 0.65% 0.69%
Portfolio turnover rate............................ 93% 176% 138% 93% 176% 138%
See Notes to Financial Statements.
20
<page>
Financial Highlights
Selected data based on a share outstanding throughout the periods indicated
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN FUND
----------------------------------------
CLASS 4
----------------------------------------
6/30/08+ 12/31/07 12/31/06
-------------- -------- --------
INCEPTION DATE -- -- 5/1/06
Net asset value, beginning of period................................................ $18.62 $17.68 $17.03
INCOME/(LOSS) FROM INVESTMENT OPERATIONS:
Net investment income............................................................. 0.22 0.33 0.26
Net realized and unrealized gains/(losses) on investments......................... (1.54) 1.73 0.92
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM INVESTMENT OPERATIONS...................................... (1.32) 2.06 1.18
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income............................................................. -- 0.33 0.29
Net realized gains................................................................ -- 0.79 0.24
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS................................................................. -- 1.12 0.53
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD...................................................... $17.30 $18.62 $17.68
====================================================================================================================================
TOTAL RETURN (A).................................................................... (7.04)% 11.68%(b) 6.89%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands).......................................... $10 $1 $1
Ratios to average net assets:
Net investment income*.......................................................... 2.20% 2.06% 2.17%
Net Expenses*................................................................... 0.76% 0.67% 0.77%
Gross Expenses*................................................................. 0.79% 0.73% 0.84%
Portfolio turnover rate........................................................... 93% 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 0.07% related to the purchases and sales of
initial public offerings.
* Annualized for periods less than one year.
+ Unaudited
See Notes to Financial Statements.
21
<page>
Statement of Assets
and Liabilities JUNE 30, 2008 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL
RETURN
FUND
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments in securities, at market* (cost $2,533,061,512)............................................ $2,520,893,480
Investments in affiliated securities, at market (cost $11,874,019)..................................... 9,024,255
Short-term Investments (at amortized cost)............................................................. 413,162,419
Short-term affiliated investments (at amortized cost).................................................. 77,595,448
Foreign cash (cost $1,975,650)......................................................................... 1,990,578
Income receivables..................................................................................... 6,616,243
Receivable for fund shares sold........................................................................ 2,896,624
Variation margin receivable............................................................................ 26,718
Other assets........................................................................................... 697,029
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS....................................................................................... 3,032,902,794
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable upon return of securities loaned............................................................... 68,265,361
Payable for investments purchased...................................................................... 205,670,299
Payable to GEAM........................................................................................ 1,273,080
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES.................................................................................. 275,208,740
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS................................................................................................ $2,757,694,054
====================================================================================================================================
NET ASSETS CONSIST OF:
Capital paid in........................................................................................ 2,697,882,934
Undistributed (distribution in excess of)
net investment income............................................................................... 31,546,496
Accumulated net realized gain (loss)................................................................... 43,082,212
Net unrealized appreciation/(depreciation) on:
Investments......................................................................................... (15,017,796)
Futures............................................................................................. 161,486
Foreign currency related transactions............................................................... 38,722
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS................................................................................................ $2,757,694,054
====================================================================================================================================
CLASS 1:
NET ASSETS................................................................................................ 1,376,004,922
Shares outstanding ($0.01 par value; unlimited shares authorized)......................................... 79,468,918
Net asset value per share................................................................................. $17.32
CLASS 2:
NET ASSETS................................................................................................ 16,392,413
Shares outstanding ($0.01 par value; unlimited shares authorized)......................................... 949,496
Net asset value per share................................................................................. $17.26
CLASS 3:
NET ASSETS................................................................................................ 1,365,286,743
Shares outstanding ($0.01 par value; unlimited shares authorized)......................................... 78,987,430
Net asset value per share................................................................................. $17.28
CLASS 4:
NET ASSETS................................................................................................ 9,976
Shares outstanding ($0.01 par value; unlimited shares authorized)......................................... 577
Net asset value per share................................................................................. $17.30
* Includes $66,634,057 of securities on loan.
See Notes to Financial Statements.
22
<page>
Statement of Operations
FOR THE SIX MONTHS ENDED JUNE 30, 2008 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL
RETURN
FUND
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividend ............................................................................................. $ 24,475,488
Interest ............................................................................................. 11,705,781
Interest from affiliated investments* ................................................................ 4,366,554
Less: Foreign taxes withheld ......................................................................... (1,600,531)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME ........................................................................................... 38,947,292
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees ..................................................................... 4,319,286
Distributors Fees (Note 4)
Service Class
Class 1 ........................................................................................... 1,430,387
Class 2 ........................................................................................... 20,147
Class 3 ........................................................................................... 1,881,259
Class 4 ........................................................................................... 20
Transfer agent ....................................................................................... 17,952
Director's fees 31,188
Custody and accounting expenses ...................................................................... 240,139
Professional fees .................................................................................... 34,666
Registration expenses ................................................................................ 15,780
Other expenses ....................................................................................... 58,320
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES BEFORE WAIVER AND REIMBURSEMENT ......................................................... 8,049,144
- ------------------------------------------------------------------------------------------------------------------------------------
Less: Expenses waived or borne by the adviser (waiver related to Fund of Fund Investment) ............ (173,179)
Less: Expenses reimbursed by the adviser ............................................................. (396,106)
- ------------------------------------------------------------------------------------------------------------------------------------
Net expenses ......................................................................................... 7,479,859
- ------------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) ........................................................................... 31,467,433
====================================================================================================================================
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments ....................................................................................... 37,802,280
Futures ........................................................................................... (3,958,519)
Foreign currency transactions ..................................................................... (190,961)
INCREASE (DECREASE) IN UNREALIZED APPRECIATION/
(DEPRECIATION) ON:
Investments ....................................................................................... (261,374,604)
Futures 220,474
Foreign currency transactions ..................................................................... 6,366
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments ............................................... (227,494,964)
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ........................................ $(196,027,531)
====================================================================================================================================
* Income attributable to security lending, net of rebate expenses, for the Total
Return Fund was $574,808.
See Notes to Financial Statements.
23
<page>
Statements of
Changes in Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL
RETURN
FUND
- ------------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2008 DECEMBER 31,
(UNAUDITED) 2007
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income (loss)..................................................... $ 31,467,433 $ 48,294,960
Net realized gain (loss) on investments, futures, written options,
and foreign currency transactions.............................................. 33,652,800 102,937,090
Net increase (decrease) in unrealized appreciation/(depreciation)
on investments, futures, written options, and foreign
currency translation............................................................ (261,184,855) 88,839,192
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations........................................... (196,027,531) 240,071,242
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class 1......................................................................... -- (27,215,414)
Class 2......................................................................... -- (294,066)
Class 3......................................................................... -- (20,800,343)
Class 4......................................................................... -- (20)
Net realized gains
Class 1......................................................................... -- (60,978,922)
Class 2......................................................................... -- (605,496)
Class 3......................................................................... -- (46,682,897)
Class 4......................................................................... -- (48)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS................................................................. -- (156,577,206)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations and distributions................. (196,242,537) 83,494,036
- ------------------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares
Class 1......................................................................... 8,337,752 46,393,598
Class 2......................................................................... 4,993,572 15,917,245
Class 3......................................................................... 282,836,122 702,792,548
Class 4......................................................................... 9,000 --
Value of distributions reinvested
Class 1......................................................................... -- 88,194,336
Class 2......................................................................... -- 899,559
Class 3......................................................................... -- 67,483,240
Class 4......................................................................... -- 68
Cost of shares redeemed
Class 1......................................................................... (51,900,026) (73,733,321)
Class 2......................................................................... (2,784,566) (941,263)
Class 3......................................................................... (1,761,853) (3,089,360)
Class 4......................................................................... -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from share transactions................................... 239,730,001 843,916,650
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS............................................. 43,702,470 927,410,686
NET ASSETS
Beginning of period................................................................. 2,713,991,584 1,786,580,898
- ------------------------------------------------------------------------------------------------------------------------------------
End of period....................................................................... $2,757,694,054 $2,713,991,584
====================================================================================================================================
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD........ $ 31,546,496 $ 79,063
- ------------------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
24
<page>
Statements of Changes in Net Assets (continued)
Changes in Fund Shares
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL
RETURN
FUND
- ------------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2008 DECEMBER 31,
(UNAUDITED) 2007
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS 1
Shares sold............................................................................ 473,123 2,467,981
Issued for distributions reinvested.................................................... -- 4,749,306
Shares redeemed........................................................................ (2,931,153) (3,869,587)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares................................................. (2,458,030) 3,347,700
====================================================================================================================================
CLASS 2
Shares sold............................................................................ 281,247 822,308
Issued for distributions reinvested.................................................... -- 48,572
Shares redeemed........................................................................ (154,940) (47,752)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares................................................. 126,307 823,128
====================================================================================================================================
CLASS 3
Shares sold............................................................................ 15,950,124 37,246,423
Issued for distributions reinvested.................................................... -- 3,637,911
Shares redeemed....................................................................... (97,809) (158,444)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares................................................. 15,852,315 40,725,890
====================================================================================================================================
CLASS 4
Shares sold............................................................................ 513 --
Issued for distributions reinvested.................................................... -- 4
Shares redeemed........................................................................ -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares................................................. 513 4
====================================================================================================================================
See Notes to Financial Statements.
25
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
1. ORGANIZATION OF THE COMPANY
GE Investments Funds, Inc. (the "Company") was incorporated under the laws of
the Commonwealth of Virginia on May 14, 1984 and is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company. The Company is composed of thirteen investment
portfolios (collectively the "Funds"), although only the following eleven are
currently being offered: U.S. Equity Fund, S&P 500 Index Fund, Premier Growth
Equity Fund, Core Value Equity Fund, Mid-Cap Equity Fund, Small-Cap Equity Fund,
International Equity Fund, Total Return Fund (the "Fund"), Income Fund, Money
Market Fund and Real Estate Securities Fund. The Fund presently offers four
classes of shares.
Shares of the Funds of the Company are offered only to insurance company
separate accounts that fund certain variable life insurance contracts and
variable annuity contracts. These insurance companies may include insurance
companies affiliated with GE Asset Management Incorporated ("GEAM"), the
investment adviser and administrator of each of the Funds.
2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the reporting period. Actual results may differ from
those estimates.
The following summarizes the significant accounting policies of the Fund:
SECURITY VALUATION AND TRANSACTIONS
The Fund's portfolio securities are valued generally on the basis of market
quotations. Equity securities generally are valued at the last reported sales
price on the primary market in which they are traded. Portfolio securities
listed on NASDAQ are valued using the NASDAQ Official Closing Price, which may
not necessarily represent the last sale price. If no sales occurred on the
exchange or NASDAQ that day, the portfolio security generally is valued using
the last reported bid price.
Debt securities (other than short-term securities described below) generally are
valued at an evaluated bid as reported by an independent pricing service. Values
obtained from pricing services are based on various factors such as market
transactions, dealer supplied valuations, security characteristics and other
market data. In the absence of a reliable price from such a pricing service,
debt securities may be valued based on dealer supplied valuations or quotations.
The Fund's written or purchased options are valued at the last sales price, or
if no sales occurred that day, at the last reported bid price. Short-term
investments with remaining maturities of sixty days or less at the time of
purchase are valued on the basis of amortized cost, which approximates market
value.
All assets and liabilities of the Fund initially expressed in foreign currency
values will be converted into U.S. dollars at the WM/Reuters exchange rate
computed at 11:00 a.m., Eastern time.
If prices are not readily available for a portfolio security, or if it is
believed that a price for a portfolio security does not represent its fair
value, the security may be valued using procedures approved by the Fund's Board
of Directors that are designed to establish its "fair" value. Those procedures
require that the fair value of a security be established by the fair valuation
committee. The fair valuation committee follows different protocols for
different types of investments and circumstances. The fair value procedures may
be used to value any investment by the Fund in the appropriate circumstances.
Examples of the types of securities that may be fair valued include: thinly
traded or illiquid investments, high-yield securities or foreign securities.
Foreign securities may be valued with the assistance of an independent fair
value pricing service in circumstances where it is believed that they have been
or would be materially affected by events occurring after the close of the
portfolio security's primary market and before the close of regular trading on
the NYSE. This independent fair value pricing service uses a computerized system
to appraise affected securities and portfolios taking into consideration various
factors and the fair value of such securities may be something other than the
last available quotation or other market price.
GEAM may also separately monitor portfolio securities and, consistent with the
Fund's fair value procedures, apply a different value to a portfolio security
than would be applied had it been priced using market quotations or by an
independent fair value pricing service.
26
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
Determining the fair value of securities involves the application of both
subjective and objective considerations. Security values may differ depending on
the methodology used to determine their values, and may differ from the last
quoted sale or closing price. No assurance can be given that use of these fair
value procedures will always better represent the price at which the Fund could
sell the affected portfolio security.
Security transactions are accounted for as of the trade date. Realized gains and
losses on investments sold are recorded on the basis of identified cost for both
financial statement and federal tax purposes.
The Fund adopted FASB Statement No. 157, FAIR VALUE MEASUREMENTS (FAS 157). FAS
157 establishes a single definition of fair value, a framework for measuring
fair value, and expanded disclosures about fair value measurements.
Various inputs are used in determining the value of the Fund's investments.
These inputs are classified into three broad levels:
Level 1 includes quoted prices in active markets of securities identical to
those of the Fund.
Level 2 includes: 1) quoted prices in active markets for similar securities to
those of the Fund; 2) quoted prices for identical or similar securities to those
of the Fund that trade in markets in which there are few transactions or the
quoted prices are not current; 3) prices based on observable market data such as
interest rates and yield curves, volatilities, bond prepayment speeds, and
credit risk and; 4) prices based principally on observable market data by use of
correlation techniques or other means.
Level 3 includes unobservable market inputs used to fair value securities. These
inputs are based on assumptions that market participants would use to price
securities and may include the adviser's own assumptions.
Other financial instruments are derivative instruments that are not reflected in
TOTAL INVESTMENTS, such as futures, forwards, swaps, and written options
contracts, which are valued based on the unrealized appreciation/depreciation of
the instrument.
Level 1 Level 2 Level 3 Total
- ------------------------------------------------------------------------------------------------------------------------------------
Investments in Securities $1,514,176,033 $1,476,023,922 $29,188,614 $ 3,019,388,569
Other Financial Instruments $ 161,486 $ -- $ -- $ 161,486
Following is a reconciliation of securities activity based on Level 3 inputs for
which unobservable market inputs were used to determine fair value.
Investments Other Financial
in Securities Instruments
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at 12/31/07 $ 34,124,210 $--
Accrued discounts/premiums (262,197) --
Realized gain (loss) 1,080,929 --
Change in unrealized
appreciation (depreciation) (806,534) --
Net purchases (sales) (3,042,148) --
Net transfers in and out of Level 3 (1,905,646) --
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at 6/30/08 $ 29,188,614 $--
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
27
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
on the loaned securities during the term of the loan. The loans of securities
are secured by collateral in the form of cash or other liquid assets, which are
segregated and maintained with the custodian in an amount at least equal to 102%
of the current market value of the loaned securities. During the term of the
loan, the Fund will record any gain or loss in the market value of its loaned
securities and of securities in which cash collateral is invested. The Fund will
also earn interest, net of any rebate, from securities in which cash collateral
is invested. In the event the counterparty (borrower) does not meet its
contracted obligation to return the securities, the Fund may be exposed to the
risk of loss of reacquiring the loaned securities at prevailing market prices
using the proceeds of the sale of the collateral.
FOREIGN CURRENCY Accounting records of the Fund are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in a foreign
currency are translated into U.S. dollars at the prevailing rates of exchange on
a daily basis (on days the New York Stock Exchange is open). Purchases and sales
of securities, income receipts and expense payments denominated in foreign
currencies are translated into U.S. dollars at the prevailing exchange rate on
the respective dates of such transactions.
The Fund does not isolate the portion of the results of operations resulting
from changes in foreign exchange rates from the fluctuations arising from
changes in the market prices of securities during the period. Such fluctuations
are included in the net realized or unrealized gain or loss from investments.
Net realized gains or losses on foreign currency transactions represent net
gains or losses on sales and maturities of foreign currency contracts,
disposition of foreign currencies, the difference between the amount of net
investment income and withholding taxes accrued and the U.S. dollar amount
actually received or paid, and gains or losses between the trade and settlement
date on purchases and sales of securities. Net unrealized foreign exchange gains
and losses arising from changes in the value of other assets and liabilities as
a result of changes in foreign exchange rates are included as increases or
decreases in unrealized appreciation/depreciation on foreign currency related
transactions.
FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or
bond index futures contracts subject to certain limitations. The Fund may invest
in futures contracts to manage its exposure to the stock and bond markets and
fluctuations in currency values. Buying futures tends to increase the Fund's
exposure to the underlying instrument while selling futures tends to decrease
the Fund's exposure to the underlying instrument, or hedge other Fund
investments. The Fund will not enter into a transaction involving futures for
speculative purposes. The Fund's risks in using these contracts include changes
in the value of the underlying instruments, non-performance of the
counterparties under the contracts' terms and changes in the liquidity of the
secondary market for the contracts. Futures contracts are valued at the
settlement price established each day by the board of trade or exchange on which
they principally trade.
Upon entering into a futures contract, the Fund is required to pledge to the
broker an amount of cash and/or other assets equal to a certain percentage of
the contract amount, known as initial margin deposit. Subsequent payments, known
as variation margin, are made or received by the Fund each day, depending on the
daily fluctuation in the fair value of the underlying security. The Fund records
an unrealized gain or loss equal to the daily variation margin. Should market
conditions move unexpectedly, the Fund may not achieve the anticipated benefits
of the futures contracts and may incur a loss. The Fund recognizes a realized
gain or loss on the expiration or closing of a futures contract.
OPTIONS The Fund may purchase and write options, subject to certain limitations.
The Fund may invest in options contracts to manage its exposure to the stock and
bond markets and fluctuations in foreign currency values. Writing puts and
buying calls tend to increase 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
28
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
effecting a closing purchase transaction, including brokerage commissions, is
also treated as a realized gain, or if the premium is less than the amount paid
for the closing purchase, as a realized loss. When an option is exercised, the
proceeds from the sale of the underlying security or the cost basis of the
securities purchased is adjusted by the original premium received or paid.
SWAP CONTRACTS As part of the investment strategy, the Fund may invest in swap
agreements, which are agreements to exchange the return generated by one
instrument for the return generated by another instrument. Total return swap
agreements involve commitments to pay interest in exchange for a market linked
return based upon a notional principal amount. To the extent the total return of
the security or index underlying the agreement exceeds or falls short of the
offsetting interest rate obligation, the Fund will receive a payment from or
make a payment to the counterparty. Swaps are marked to market daily based upon
the underlying security or index. Payments received or made are recorded as
realized gain or loss in the Statement of Operations. Entering into swap
agreements involves, to varying degrees, elements of credit and market risk in
excess of the amounts recognized on the Statement of Assets and Liabilities.
Such risks involve the possibility that there will be no liquid market for these
agreements, that the counterparty to the agreements may default on its
obligation to perform and that there may be unfavorable changes in the value of
the index or securities underlying the agreement. Notional principal amounts are
used to express the extent of involvement in these transactions, but the amounts
potentially subject to credit risk are much smaller.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS The Fund may purchase or sell
securities on a when-issued or forward commitment basis. These transactions are
arrangements in which the Fund purchases and sells securities with payment and
delivery scheduled a month or more after entering into the transactions. The
price of the underlying securities and the date when these securities will be
delivered and paid for are fixed at the time the transaction is negotiated.
Losses may arise due to changes in the market value of the underlying securities
or if the counterparty does not perform under the contracts. In connection with
such purchases, the Fund maintains cash or liquid assets in an amount equal to
purchase commitments for such underlying securities until settlement date and
for sales commitments, the Fund maintains equivalent deliverable securities as
"cover" for the transaction. Unsettled commitments are valued at the current
market value of the underlying security. Daily fluctuations in the value of such
contracts are recorded as unrealized gains or losses. The Fund will not enter
into such commitments for the purpose of investment leverage.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS The Fund may enter into forward
foreign currency exchange contracts to facilitate transactions in foreign
denominated securities and to manage the Fund's currency exposure. Forward
foreign currency exchange contracts are valued at the mean between the bid and
the offered forward rates as last quoted by a recognized dealer. The aggregate
principal amounts of the contracts are not recorded in the Fund's financial
statements. Such amounts appear under the caption forward foreign currency
contracts in the Schedule of Investments. Fluctuations in the value of the
contracts are recorded in the Statement of Assets and Liabilities as an asset
(or liability) and in the Statement of Operations as unrealized appreciation
(depreciation) until the contracts are closed, when they are recorded as
realized gains or losses on foreign currency related transactions. The Fund's
risks in using these contracts include changes in the value of foreign currency
or the possibility that the counterparties do not perform under the contracts'
terms. When the Fund enters into a forward foreign currency exchange contract,
it is required to segregate cash or liquid securities with its custodian in an
amount equal to the value of the Fund's total assets committed to the
consummation of the forward contract. If the value of the segregated securities
declines, additional cash or securities is segregated so that the value of the
account will equal the amount of the Fund's commitment with respect to the
contract.
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.
29
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
INCOME TAXES The Fund intends to comply with all sections of the Internal
Revenue Code applicable to regulated investment companies including the
distribution of substantially all of its taxable net investment income and net
realized capital gains to its shareholders. Therefore, no provision for federal
income tax has been made. The Fund is treated as a separate taxpayer for federal
income tax purposes. At June 30, 2008, 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
- ------------------------------------------------------------------------------------------------------------------------------------
$3,025,811,736 $189,828,134 $(206,838,287) $(17,010,153)
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.
30
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
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 $150 million with a
number of its affiliates. The credit facility is with its custodian bank, State
Street Bank and Trust Company. The revolving credit facility requires the
payment of a commitment fee equal to 0.09% per annum on the daily unused portion
of the credit facility, payable quarterly. The portion borne by the Funds
generally is borne proportionally based upon net assets. In addition, the
Company has a $100 million uncommitted, unsecured line of credit with State
Street. 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 June 30,
2008.
4. AMOUNTS PAID TO AFFILIATES
GEAM, a registered investment adviser, was retained by the Company's Board of
Directors effective May 1, 1997 to act as investment adviser and administrator
of the Fund. GEAM's compensation for investment advisory and administrative
services is paid monthly based on the average daily net assets of the Fund. The
advisory and administrative fee is stated in the following schedule:
Annualized based on
average daily net assets
- --------------------------------------------------------------------------------
Average Daily Advisory and
Net Assets Administration
of Fund Fees
- --------------------------------------------------------------------------------
First $100 million 0.50%
Next $100 million 0.45%
Next $100 million 0.40%
Next $100 million 0.35%
Over $400 million 0.30%
Pursuant to an expense limitation agreement with the Fund, GEAM has agreed to
limit total operating expenses charged to Fund assets attributable to each class
of shares (excluding class specific expenses such as Investor Service Plan Fees
(for Class 1 shares), Distribution and Service (12b-1) Fees, and excluding
interest, taxes, brokerage commissions, other expenditures that are capitalized
in accordance with generally accepted accounting principles, and other
extraordinary expenses not incurred in the ordinary course of the Fund's
business) to 0.32% of the average daily net assets of the Fund attributable to
such shares, in each case on an annual basis. Under the agreement, this expense
limitation will continue until April 30, 2009, unless extended. The expense
limitation agreement will terminate upon termination of the management
agreement, or by the Fund without payment of penalty upon sixty (60) days
written notice to GEAM. The agreement can only be changed with the approval of
both the Fund's Board of Directors and GEAM.
GENPACT performs certain accounting and certain administration services not
provided by GEAM. For the period ending June 30, 2008, $19,494 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 Rule 12b-1 fee.
31
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
DIRECTORS' COMPENSATION The Fund pays no compensation to its Directors who are
officers or employees of GEAM or its affiliates. Directors who are not such
officers or employees also serve in a similar capacity for other funds advised
by GEAM. Compensation paid to unaffiliated directors are reflected on the
Statement of Operations. These fees are allocated pro rata across all of the
mutual Fund platforms and share classes served by the directors, including the
Fund, and are based upon the relative net assets of each fund within such
platforms. (For additional information about directors compensation please refer
to the Statement of Additional Information.)
5. INVESTMENT TRANSACTIONS
PURCHASES AND SALES OF SECURITIES The cost of purchases and the proceeds from
sales of investments, other than short-term securities and options, for the
period ended June 30, 2008, were as follows:
Purchases Sales
- --------------------------------------------------------------------------------
$2,520,482,603 $2,346,635,878
SECURITY LENDING At June 30, 2008, the Fund participated in securities lending:
Loaned
securities at Cash
market value collateral
- --------------------------------------------------------------------------------
$66,634,057 $68,265,361
32
<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 59
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 47
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.
33
<page>
Additional Information (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCOTT H. RHODES
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 49
POSITION(S) HELD WITH FUND Treasurer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 2 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds Operations
Manager since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle
Funds and GE Investments Funds since November 2005 and Elfun Funds and GE
Savings & Security Funds since September 2005; from August 2004 to September
2005 Vice President, U.S. Trust Company, N.A. and Assistant Treasurer of
Excelsior Funds, Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds,
Inc.; from January 2004 to August 2004, Vice President BlackRock Financial
Management, Inc.; from December 1996 to November 2003, Controller - Mutual
Funds, American Skandia Investment Services, Inc. and Assistant Treasurer of
American Skandia Trust and American Skandia Advisor Funds, Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
- --------------------------------------------------------------------------------
JEANNE M. LAPORTA
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 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
34
<page>
Additional Information (unaudited)
- --------------------------------------------------------------------------------
NON-INTERESTED DIRECTORS
- --------------------------------------------------------------------------------
JOHN R. COSTANTINO
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 62
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 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 60
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 72
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.
35
<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
Daniel O. Colao, EVP, CHIEF FINANCIAL OFFICER (AS OF JULY 28, 2008)
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)
David Wiederecht, EVP, PRESIDENT - INVESTMENT STRATEGIES
36
<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.~
Income Fund
Semi-Annual Report
JUNE 30, 2008
[GE logo omitted]
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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
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.
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Notes to Performance June 30, 2008 (unaudited)
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Total returns take into account changes in share price and assume reinvestment
of all dividends and capital gains distributions, if any.
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 shown are net of Fund expenses but do not reflect fees and charges
associated with the variable contracts such as administrative fees, account
charges and surrender charges, which, if reflected, would reduce the Fund's
total returns for all periods shown.
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.
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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.
Q. HOW DID THE INCOME FUND PERFORM COMPARED TO ITS BENCHMARK AND LIPPER PEER
GROUP FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2008?
A. For the six-month period ended June 30, 2008, the Income Fund returned
-0.43% for the Class 1 shares and -1.04% for the Class 4 shares. The Lehman
[photo omitted]
2
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Q&A
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Brothers Aggregate Bond Index, the Fund's benchmark, returned 1.13% and the
Fund's Lipper peer group of 64 Intermediate Investment Grade Debt Funds
returned an average of -0.14% for the same period.
Q. DESCRIBE WHAT HAPPENED IN THE U.S. ECONOMY DURING THE SIX-MONTH PERIOD
ENDING JUNE 30, 2008.
A. About the only positive thing that can be said for the first half of 2008 is
that it is over. The credit crisis born in 2007 deepened in the first
quarter of this year, threatening the existence of an 85-year old investment
bank/broker-dealer. The Federal Reserve moved aggressively to provide
liquidity through typical means such as reducing the federal funds rate
target by 225 basis points to 2.00%, and introducing certain new measures
including allowing investment banks access to discount window borrowing. The
U.S. economy, similar to the global economy, showed little growth. 438,000
jobs were lost in the first six months as reported by the Bureau of Labor
Statistics (change in non-farm payrolls). Consumer spending ability have
been reduced by higher gas prices, lower home prices and job losses. The
rise in energy prices along with other commodities has pushed inflation
fears higher, especially at the Federal Reserve. Interest rates at the
longer end of the maturity spectrum were little changed from the end of last
year. The U.S. Treasury 10-year note yield fell 5 bps to 3.97%. Shorter
maturity note yields dropped significantly more, especially during the first
quarter, as the Federal Reserve was reducing rates. The yield on the U.S.
Treasury 2-year note fell 43 bps to 2.62%. The decline in interest rates
translated to positive returns for treasury securities for the first six
months. Credit sensitive sectors, however, posted negative returns in the
same period as credit concerns deepened. In general, higher quality paper
performed better than lower quality.
Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE?
A. Declining valuations in sub-prime and Alt-A asset-backed securities held in
the Fund portfolio dragged performance below that of the benchmark. Although
the market value of these securities constituted a small percentage of the
Fund's total portfolio, the continued price dislocation in the market
resulted in a large adverse impact to Fund performance. The negative impact
to Fund performance was partially offset by timely yield curve positioning
throughout the period and the underweight to high-grade corporate bonds,
which benefited from general credit spread widening.
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 June 30,
2008.
ACTUAL EXPENSES
The first section of the table provides information about actual account values
and actual expenses. You may use the information in this section, together with
the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JANUARY 1, 2008 - JUNE 30, 2008
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ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID
BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($)*
- ------------------------------------------------------------------------------------------------------------------------------------
ACTUAL FUND RETURN**
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Class 1 1,000.00 995.65 3.00
Class 4 1,000.00 989.62 4.85
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HYPOTHETICAL 5% RETURN (2.5% FOR THE PERIOD)
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Class 1 1,000.00 1,021.64 3.02
Class 4 1,000.00 1,019.85 4.95
- ------------------------------------------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.60% FOR CLASS
1 AND 0.98% FOR CLASS 4, (FROM PERIOD JANUARY 1, 2008 - JUNE 30, 2008),
MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY
182/366 (TO REFLECT THE ONE-HALF YEAR PERIOD).
** ACTUAL FUND RETURNS FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2008 WERE AS
FOLLOWS: (0.43)% FOR CLASS 1 SHARES, AND SINCE INCEPTION (1.04)% FOR CLASS 4
SHARES.
4
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Income Fund (unaudited)
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CHANGE IN VALUE OF A $10,000 INVESTMENT
CLASS 1 SHARES
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[Line chart omitted -- plot points are as follows:]
GEI INCOME LB AGGREGATE BOND INDEX
06/98 10,000.00 10,000.00
12/98 10,383.23 10,457.85
12/99 10,235.20 10,371.95
12/00 11,334.44 11,577.80
12/01 12,176.27 12,555.37
12/02 13,379.92 13,842.93
12/03 13,861.59 14,411.11
12/04 14,335.65 15,036.38
12/05 14,627.72 15,401.54
12/06 15,267.12 16,069.01
12/07 16,004.07 17,188.47
06/08 15,934.49 17,382.00
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED JUNE 30, 2008
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CLASS 1 SHARES (Inception date: 1/3/95)
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SIX ONE FIVE TEN ENDING VALUE OF A
MONTHS YEAR YEAR YEAR $10,000 INVESTMENT
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Income Fund -0.43% 3.32% 2.79% 4.77% $15,934
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LB Aggregate Bond Index 1.13% 7.12% 3.85% 5.68% $17,382
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Lipper peer group average* -0.14% 5.35% 3.47% 5.09%
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CLASS 4 SHARES
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[Line chart omitted -- plot points are as follows:]
GEI INCOME LB AGGREGATE BOND INDEX
05/08 10,000.00 10,000.00
06/08 9,896.19 9,918.70
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED JUNE 30, 2008
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CLASS 4 SHARES (Inception date: 5/1/08)
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ONE SINCE ENDING VALUE OF A
MONTH INCEPTION $10,000 INVESTMENT
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Income Fund -0.35% -1.04% $9,896
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LB Aggregate Bond Index -0.08% -0.81% $9,919
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Lipper peer group average** -0.58% N/A
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INVESTMENT PROFILE
A fund designed for investors who seek maximum income consistent with prudent
investment management and the preservation of capital by investing at least 80%
of its net assets in debt securities under normal circumstances.
PORTFOLIO COMPOSITION AS OF JUNE 30, 2008
as a % of Market Value
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Market Value of $113,275 (in thousands)
[Pie chart omitted -- plot points are as follows:]
Mortgage-Backed 39.8%
Asset-Backed and Other 21.8%
Corporate Notes 17.8%
U.S. Treasuries 17.5%
Federal Agencies 2.7%
Other Investments 0.4%
QUALITY RATINGS AS OF JUNE 30, 2008
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 80.35%
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Aa / AA 4.42%
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A / A 4.65%
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Baa / BBB 4.36%
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Ba / BB and lower 6.22%
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* LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS
FOR THE SIX MONTHS, ONE YEAR, FIVE-YEAR, AND TEN-YEAR PERIODS INDICATED IN
THE INTERMEDIATE INVESTMENT GRADE DEBT FUNDS PEER GROUP CONSISTING OF 64,
64, 52 AND 22 UNDERLYING ANNUITY FUNDS, RESPECTIVELY.
** LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS
FOR THE ONE MONTH PERIOD INDICATED IN THE INTERMEDIATE INVESTMENT GRADE
DEBT FUNDS PEER GROUP CONSISTING OF 68 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
<page>
INCOME FUND
Schedule of Investments June 30, 2008 (unaudited)
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INCOME FUND
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PRINCIPAL
AMOUNT VALUE
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BONDS AND NOTES -- 102.0% +
U.S. TREASURIES -- 22.4%
U.S. Treasury Bonds
4.38% 02/15/38............ $ 617,700 $ 602,065 (f)
4.50% 02/15/36............ 135,000 134,040
4.75% 02/15/37............ 711,800 735,045
U.S. Treasury Notes
2.63% 05/31/10............ 1,847,000 1,848,154 (h)
2.75% 02/28/13............ 1,161,900 1,134,305
3.50% 02/15/18............ 4,858,100 4,676,300 (h)
3.63% 10/31/09 - 12/31/12. 7,483,400 7,597,527 (h)
4.50% 11/15/10 - 05/15/17. 95,000 98,937
4.63% 11/15/09 - 10/31/11. 2,880,000 2,976,932 (f)
19,803,305
FEDERAL AGENCIES -- 3.4%
Federal Home Loan Mortgage Corp.
4.13% 12/21/12............ 1,070,000 1,073,695
4.88% 02/09/10............ 1,805,000 1,857,145
8.25% 06/01/26............ 60,000 77,342 (f,i)
3,008,182
AGENCY MORTGAGE BACKED -- 36.0%
Federal Home Loan Mortgage Corp.
4.50% 06/01/33 - 02/01/35. 260,024 241,477 (f)
5.00% 07/01/35 - 10/01/35. 401,823 386,443 (f)
5.50% 05/01/20 - 03/01/38. 852,055 843,390 (f)
6.00% 04/01/17 - 11/01/37. 1,480,294 1,500,847 (f)
6.50% 01/01/27 - 08/01/36. 498,338 516,230 (f)
7.00% 10/01/16 - 08/01/36. 173,390 182,836 (f)
7.50% 11/01/09 - 09/01/33. 21,685 23,218 (f)
8.00% 11/01/30............ 22,573 24,438 (f)
8.50% 04/01/30 - 05/01/30. 26,517 29,400 (f)
Federal National Mortgage Assoc.
4.00% 05/01/19 - 06/01/19. 241,274 228,637 (f)
4.50% 05/01/18 - 12/01/34. 1,014,595 977,995 (f)
5.00% 03/01/34 - 08/01/35. 533,576 513,508 (f)
5.26% 04/01/37............ 147,220 149,153 (g)
5.47% 04/01/37............ 11,209 11,390 (g)
5.50% 12/01/13 - 04/01/38. 2,350,680 2,331,682 (f)
5.52% 04/01/37............ 129,265 131,721 (g)
5.53% 04/01/37............ 59,010 60,174 (g)
5.55% 04/01/37............ 139,829 142,534 (g)
5.59% 04/01/37............ 163,654 167,135 (g)
5.62% 03/01/37............ 12,108 12,332 (g)
5.68% 04/01/37 - 05/01/37. 217,771 222,552 (g)
5.70% 04/01/37............ 195,648 199,952 (g)
5.71% 04/01/37............ 62,637 64,065 (g)
5.84% 06/01/37............ 311,637 318,021 (g)
6.00% 06/01/14 - 03/01/38. 3,321,507 3,361,302 (f)
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
6.03% 10/01/37............ $ 149,078 $ 153,110 (g)
6.50% 07/01/17 - 02/01/35. 1,788,144 1,851,184 (f)
7.00% 03/01/15 - 06/01/36. 600,073 633,279 (f)
7.50% 12/01/09 - 03/01/34. 154,325 165,703 (f)
8.00% 12/01/12 - 11/01/33. 111,956 121,263 (f)
8.50% 05/01/31............ 5,554 6,113 (f)
9.00% 04/01/16 - 12/01/22. 15,461 16,690 (f)
5.00% TBA................. 5,336,000 5,148,023 (b)
5.50% TBA................. 8,825,000 8,698,141 (b)
6.00% TBA................. 745,000 751,519 (b)
Government National
Mortgage Assoc.
4.50% 08/15/33 - 09/15/34. 455,745 426,083 (f)
5.13% 11/20/22 - 12/20/24. 4,935 4,958 (f,g)
5.38% 02/20/23 - 02/20/26. 12,729 12,772 (f,g)
6.00% 04/15/27 - 09/15/36. 446,165 454,696 (f)
6.50% 04/15/19 - 08/15/36. 404,310 419,690 (f)
7.00% 03/15/12 - 10/15/36. 249,678 264,660 (f)
7.50% 11/15/31 - 10/15/33. 9,927 10,656 (f)
8.00% 12/15/29............ 3,653 4,000 (f)
8.50% 10/15/17............ 19,432 21,198 (f)
9.00% 11/15/16 - 12/15/21. 47,960 52,256 (f)
31,856,426
AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 4.9%
Federal Home Loan Mortgage Corp.
3.53% 11/15/37............ 426,328 29,313 (c,e,g)
4.18% 05/15/36 - 11/15/36. 801,938 71,287 (c,e,g)
4.33% 04/15/38............ 363,723 31,972 (c,e,g)
4.50% 04/15/13 - 03/15/19. 541,350 49,635 (c,e,f)
4.83% 09/15/35............ 303,439 33,349 (c,e,g)
5.00% 04/15/14 - 06/15/28. 4,280,119 904,155 (c,e,f)
5.00% 07/15/28............ 275,000 277,892
5.50% 04/15/17 - 06/15/33. 501,227 94,013 (c,e,f)
6.91% 11/15/37............ 210,145 145,702 (c,d)
7.14% 12/15/33............ 150,000 133,395 (f,g)
7.50% 01/15/16............ 35,207 36,689 (f)
7.50% 07/15/27............ 12,486 3,093 (c,e,f)
8.00% 02/01/23 - 07/01/24. 6,077 1,628 (c,e,f)
35.45% 09/25/43............ 1,517,585 11,130 (c,e,f)
Federal Home Loan Mortgage STRIPS
5.39% 08/01/27............ 1,522 1,263 (c,d,f)
Federal National Mortgage Assoc.
1.18% 12/25/42............ 99,179 3,567 (c,e,f)
3.97% 05/25/37 - 06/25/37. 2,174,575 192,190 (c,e,g)
4.00% 02/25/28............ 14,979 14,973 (f)
4.27% 10/25/35............ 755,146 70,058 (c,e,g)
4.41% 05/25/38............ 670,089 57,488 (c,e,g)
4.50% 05/25/18............ 104,117 7,353 (c,e,f)
4.50% 03/25/38............ 371,593 37,780 (c,e,g)
4.52% 10/25/29............ 439,243 37,914(c,e,f,g)
4.72% 07/25/37............ 646,249 74,136 (c,e,g)
4.75% 11/25/14............ 54,087 2,336 (c,e,f)
5.00% 08/25/17 - 02/25/32. 425,983 51,957 (c,e,f)
5.00% 10/25/35............ 66,090 57,780
5.11% 05/25/18............ 704,363 66,681(c,e,f,g)
5.12% 09/25/42............ 1,046,571 109,890(c,e,f,g)
See Notes to Schedule of Investments on page 13 and Notes to Financial
Statements.
6
<page>
INCOME FUND
Schedule of Investments June 30, 2008 (unaudited)
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PRINCIPAL
AMOUNT VALUE
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5.22% 08/25/16............ $ 235,639 $ 13,184(c,e,f,g)
5.50% 01/25/33............ 140,699 133,925 (f)
8.00% 07/25/14............ 37,021 37,296 (f)
31.49% 04/25/38............ 432,200 35,014 (c,e,g)
Federal National Mortgage
Assoc. (Class 1)
4.50% 09/01/35 - 01/01/36. 644,098 151,629 (c,e)
5.00% 05/25/38............ 197,565 61,772 (c,e)
5.48% 11/01/34............ 336,788 246,156 (c,d,f)
Federal National Mortgage
Assoc. (Class 2)
5.00% 09/01/33 - 03/25/38. 394,090 112,488 (c,e)
5.50% 12/01/33............ 89,313 22,466 (c,e,f)
Federal National Mortgage
Assoc. REMIC
4.50% 11/25/13............ 76,092 1,390 (c,e,f)
5.00% 10/25/22............ 111,049 17,313 (c,e,f)
7.00% 09/25/20............ 812 839 (f)
11.15% 03/25/31............ 358,130 367,364 (f,g)
Federal National Mortgage Assoc.
REMIC (Class B)
4.23% 12/25/22............ 394 346 (c,d,f)
Federal National Mortgage Assoc.
REMIC (Class J)
1080.91%03/25/22............ 1 2 (c,e,f)
Federal National Mortgage Assoc.
REMIC (Class K)
1008.00%05/25/22............ 9 199 (c,e,f)
Federal National Mortgage Assoc.
STRIPS (Class 2)
5.00% 08/01/34............ 2,098,513 543,318 (c,e,f)
7.50% 11/01/23............ 38,530 8,507 (c,e,f)
8.00% 08/01/23 - 07/01/24. 13,505 3,716 (c,e,f)
8.50% 07/25/22............ 633 147 (c,e,f)
9.00% 05/25/22............ 413 129 (c,e,f)
4,365,819
ASSET BACKED -- 4.5%
Capital Auto Receivables Asset
Trust (Class A)
3.25% 01/15/10............ 215,000 213,690 (a,g)
Capital One Master Trust (Class C)
6.70% 06/15/11............ 200,000 200,698 (a,f,i)
Carmax Auto Owner Trust
4.35% 03/15/10............ 76,822 77,100 (f)
Chase Funding Mortgage Loan
Asset-Backed Certificates
3.04% 02/25/33............ 47,476 47,078 (f,g)
5.75% 05/25/32............ 28,126 16,876 (f)
Countrywide Asset-Backed
Certificates
3.34% 05/25/33............ 14,089 13,913 (f,g)
Ford Credit Floorplan Master Owner
Trust (Class A)
5.03% 06/15/11............ 500,000 488,956 (c,g)
GSAA Trust
2.54% 10/25/36............ 1,064,614 948,598 (f,g)
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Honda Auto Receivables Owner
Trust (Class A)
4.15% 10/15/10............ $ 99,730 $ 100,039 (f)
JP Morgan Mortgage
Acquisition Corp.
2.63% 03/01/37............ 1,000,000 840,000 (f,g)
Mid-State Trust
7.54% 07/01/35............ 2,339 2,295 (f,i)
Option One Mortgage Loan Trust
2.61% 07/25/37............ 1,000,000 767,231 (f,g)
Peco Energy Transition Trust
6.52% 12/31/10............ 192,000 201,158 (f)
Residential Asset Securities Corp.
2.98% 07/25/32............ 6,049 5,257 (f,g)
Wells Fargo Home Equity Trust
3.97% 05/25/34............ 50,095 48,845 (f)
3,971,734
CORPORATE NOTES -- 22.3%
Abbey National PLC
7.95% 10/26/29............ 65,000 66,109 (f)
AES Ironwood LLC
8.86% 11/30/25............ 250,443 259,835 (f)
Air Jamaica Ltd.
9.38% 07/08/15............ 130,000 132,600 (a,f)
American International Group, Inc.
5.85% 01/16/18............ 111,000 103,991
American Railcar Industries, Inc.
7.50% 03/01/14............ 60,000 55,800 (f)
ARAMARK Corp.
8.50% 02/01/15............ 194,000 190,120
Archer-Daniels-Midland Co.
6.45% 01/15/38............ 109,000 109,282
Arizona Public Service Co.
6.25% 08/01/16............ 165,000 157,178 (f)
BAC Capital Trust VI
5.63% 03/08/35............ 180,000 146,569 (f)
Bank of America Corp.
8.00% 12/29/49............ 116,000 108,677
Bank of America Corp. (Series L)
5.65% 05/01/18............ 250,000 233,397
Bear Stearns Companies Inc.
5.85% 07/19/10............ 153,000 155,374 (f)
6.95% 08/10/12............ 175,000 181,960 (f)
BellSouth Corp.
4.20% 09/15/09............ 100,000 100,204 (f)
6.55% 06/15/34............ 85,000 82,091 (f)
Bertin LTDA
10.25% 10/05/16............ 100,000 103,000 (a,f)
Bristol-Myers Squibb Co.
5.45% 05/01/18............ 118,000 116,403
5.88% 11/15/36............ 100,000 93,285 (f)
British Telecommunications PLC
8.63% 12/15/10............ 65,000 69,794 (f)
Cardinal Health, Inc.
5.50% 06/15/13............ 78,000 77,827
See Notes to Schedule of Investments on page 13 and Notes to Financial
Statements.
7
<page>
INCOME FUND
Schedule of Investments June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Cargill Inc.
5.20% 01/22/13............ $162,000 $ 160,445 (a,f)
6.00% 11/27/17............ 191,000 189,904 (a)
Carolina Power & Light Co.
5.15% 04/01/15............ 80,000 79,777 (f)
5.70% 04/01/35............ 45,000 41,948 (f)
6.13% 09/15/33............ 135,000 132,807 (f)
Chesapeake Energy Corp.
7.25% 12/15/18............ 194,000 188,665
Chubb Corp.
6.50% 05/15/38............ 22,000 21,023
Citigroup, Inc.
5.50% 04/11/13............ 161,000 157,313
8.40% 04/29/49............ 118,000 112,172
Clarendon Alumina Production Ltd.
8.50% 11/16/21............ 255,000 257,550 (a,f)
Community Health Systems, Inc.
8.88% 07/15/15............ 194,000 195,213
Consolidated Edison Co of
New York, Inc.
5.85% 04/01/18............ 113,000 113,421
Constellation Brands, Inc.
7.25% 05/15/17............ 194,000 181,390
COX Communications, Inc.
6.25% 06/01/18............ 165,000 161,072 (a)
7.13% 10/01/12............ 57,000 59,494 (f)
7.75% 11/01/10............ 130,000 136,979 (f)
Credit Suisse
6.00% 02/15/18............ 116,000 111,698
CSC Holdings, Inc.
8.50% 06/15/15............ 194,000 190,605 (a)
CSX Transportation, Inc.
9.75% 06/15/20............ 105,000 126,417 (f)
CVS Caremark Corp.
5.75% 06/01/17............ 214,000 210,480
Dominion Resources, Inc. (Series B)
6.30% 09/30/66............ 395,000 361,525 (f)
Dover Corp.
6.50% 02/15/11............ 90,000 94,406 (f)
DP World Ltd.
6.85% 07/02/37............ 100,000 85,807 (a,f)
Duke Energy Carolinas LLC
5.38% 01/01/09............ 50,000 50,377 (f)
Duke Realty LP
6.25% 05/15/13............ 76,000 74,541
Dynegy Holdings, Inc.
7.50% 06/01/15............ 194,000 178,965
Echostar DBS Corp.
7.75% 05/31/15............ 194,000 188,665 (a)
EI Du Pont de Nemours & Co.
4.88% 04/30/14............ 110,000 110,233 (f)
El Paso Electric Co.
6.00% 05/15/35............ 90,000 75,901 (f)
Empresa Energetica de Sergipe and
Sociedade Anonima de
Eletrificaao da Paraiba
10.50% 07/19/13............ 57,000 63,555 (a,f)
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Ford Motor Credit Company LLC
7.88% 06/15/10............ $194,000 $ 167,452
Galaxy Entertainment Finance
Company Ltd.
9.88% 12/15/12............ 100,000 97,000 (f)
GlaxoSmithKline Capital Inc.
4.85% 05/15/13............ 76,000 75,898
6.38% 05/15/38............ 38,000 37,720
Globo Comunicacoe e
Participacoes S.A.
7.25% 04/26/22............ 100,000 99,000 (a)
GMAC LLC
6.88% 09/15/11............ 194,000 139,403
Goldman Sachs Group, Inc.
5.95% 01/18/18............ 38,000 36,478
6.15% 04/01/18............ 42,000 40,747
6.60% 01/15/12............ 200,000 205,656 (f)
6.88% 01/15/11............ 100,000 103,808
Harrah's Operating Company Inc.
10.75% 02/01/16............ 194,000 161,020 (a)
HCA Inc.
9.25% 11/15/16............ 194,000 199,820
Hewlett-Packard Co.
5.50% 03/01/18............ 108,000 105,776
Hexion US Finance Corp/Hexion
Nova Scotia Finance ULC
9.75% 11/15/14............ 260,000 235,300 (f)
Honeywell International, Inc.
5.30% 03/01/18............ 98,000 96,538
HSBC Bank USA N.A.
4.63% 04/01/14............ 50,000 47,487
7.00% 01/15/39............ 250,000 244,606
HSBC Capital Funding LP (Series 1)
9.55% 12/29/49............ 44,000 45,909 (a,f)
HSBC Finance Corp.
6.75% 05/15/11............ 95,000 98,727
HSBC Holdings PLC
6.50% 05/02/36............ 100,000 92,977 (f)
Hydro Quebec
8.50% 12/01/29............ 75,000 106,078 (f)
IIRSA Norte Finance Ltd.
8.75% 05/30/24............ 156,388 173,591 (a,f)
ING Capital Funding TR III
8.44% 12/29/49............ 175,000 176,820
ING Groep N.V.
5.78% 12/29/49............ 35,000 29,049
Intergen N.V.
9.00% 06/30/17............ 197,000 203,895 (a)
International Steel Group Inc.
6.50% 04/15/14............ 145,000 147,003
Interoceanica IV Finance Ltd.
4.31% 11/30/18............ 150,000 96,165 (a,c)
4.53% 11/30/25............ 147,635 67,661 (a,c)
Iron Mountain Inc.
8.00% 06/15/20............ 195,000 192,075
John Deere Capital Corp.
4.50% 04/03/13............ 148,000 146,152
See Notes to Schedule of Investments on page 13 and Notes to Financial
Statements.
8
<page>
INCOME FUND
Schedule of Investments June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
JP Morgan Chase Bank
5.88% 06/13/16............ $ 25,000 $ 24,412
JPMorgan Chase & Co.
6.40% 05/15/38............ 117,000 108,522
Kroger Co.
6.15% 01/15/20............ 118,000 116,751
Lehman Brothers Holdings, Inc.
2.85% 12/23/08............ 20,000 19,617 (g)
3.00% 10/22/08............ 43,000 42,838 (g)
5.63% 01/24/13............ 71,000 67,202
6.88% 05/02/18............ 155,000 150,056
Lippo Karawaci Finance BV
8.88% 03/09/11............ 150,000 145,595
LyondellBasell Industries AF SCA
8.38% 08/15/15............ 300,000 190,500 (a)
Marfrig Overseas Ltd.
9.63% 11/16/16............ 140,000 134,400 (a)
Markel Corp.
7.35% 08/15/34............ 55,000 53,851 (f)
McDonald's Corp.
5.80% 10/15/17............ 80,000 81,661
6.30% 03/01/38............ 109,000 107,976
Mediacom LLC/Mediacom
Capital Corp.
9.50% 01/15/13............ 230,000 216,775 (f)
Merck & Company, Inc.
5.75% 11/15/36............ 70,000 66,890 (f)
Merrill Lynch & Company, Inc.
6.88% 04/25/18............ 82,000 78,042
Midamerican Energy Holdings Co.
6.13% 04/01/36............ 115,000 110,430 (f)
Mizuho Financial Group Cayman Ltd.
8.38% 12/29/49............ 75,000 75,151
Morgan Stanley
6.00% 04/28/15............ 100,000 95,602
Morgan Stanley (Series F)
6.63% 04/01/18............ 100,000 94,753
Munich Re America Corp. (Series B)
7.45% 12/15/26............ 105,000 105,171 (f)
NAK Naftogaz Ukrainy
8.13% 09/30/09............ 100,000 97,500
Nakilat Inc.
6.07% 12/31/33............ 215,000 190,152 (a,f)
6.27% 12/31/33............ 130,000 115,479 (a,f)
Nelnet, Inc.
5.13% 06/01/10............ 205,000 186,912 (f)
NGPL PipeCo LLC
7.12% 12/15/17............ 81,000 82,787 (a)
Norfolk Southern Corp.
8.63% 05/15/10............ 155,000 166,063 (f)
Norfolk Southern Railway Co.
9.75% 06/15/20............ 170,000 207,766 (f)
Northern States Power
6.25% 06/01/36............ 65,000 66,445 (f)
NorthWestern Corp.
5.88% 11/01/14............ 85,000 83,659 (f)
NRG Energy, Inc.
7.38% 02/01/16............ 195,000 183,544
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
OPTI Canada Inc.
8.25% 12/15/14............ $132,000 $ 131,340
Pacific Bell Telephone Co.
7.13% 03/15/26............ 60,000 60,545 (f)
Pacific Gas & Electric Co.
5.80% 03/01/37............ 105,000 97,894
Parker Hannifin Corp.
5.50% 05/15/18............ 78,000 78,245
Pemex Finance Ltd.
9.03% 02/15/11............ 35,750 38,163 (f)
Pemex Project Funding Master Trust
5.75% 03/01/18............ 30,000 29,625 (a)
7.88% 02/01/09............ 53,000 54,421
PepsiCo, Inc.
5.00% 06/01/18............ 194,000 189,278
Pitney Bowes, Inc.
3.88% 06/15/13............ 89,000 83,872
PNC Preferred Funding Trust I
6.52% 12/31/49............ 125,000 99,666 (a)
Potomac Edison Co.
5.35% 11/15/14............ 95,000 93,100 (f)
Puget Sound Energy, Inc.
5.48% 06/01/35............ 110,000 92,413 (f)
Puget Sound Energy, Inc. (Series A)
6.97% 06/01/67............ 210,000 180,431
Rock-Tenn Co.
8.20% 08/15/11............ 285,000 293,550
Royal Bank of Scotland Group PLC
5.00% 10/01/14............ 115,000 110,206 (f)
Sabine Pass LNG LP
7.25% 11/30/13............ 185,000 168,350
7.50% 11/30/16............ 265,000 238,500
Security Benefit Life Insurance
8.75% 05/15/16............ 120,000 125,317 (a)
Sierra Pacific Resources
8.63% 03/15/14............ 150,000 157,247
Skandinaviska Enskilda Banken AB
7.50% 03/29/49............ 250,000 250,518 (a,f)
Southern Copper Corp.
7.50% 07/27/35............ 29,000 28,397
Sprint Capital Corp.
7.63% 01/30/11............ 54,000 53,055
Standard Chartered Bank
Hong Kong Ltd.
4.38% 12/03/14............ 210,000 206,619
Stewart Enterprises, Inc.
6.25% 02/15/13............ 135,000 128,250 (f)
Suncor Energy, Inc.
6.10% 06/01/18............ 78,000 78,236
Telecom Italia Capital S.A.
6.20% 07/18/11............ 81,000 82,597
Telefonica Emisiones SAU
5.86% 02/04/13............ 150,000 151,002
Tenneco, Inc.
8.63% 11/15/14............ 194,000 171,205
Tesco PLC
5.50% 11/15/17............ 100,000 97,299 (a)
See Notes to Schedule of Investments on page 13 and Notes to Financial
Statements.
9
<page>
INCOME FUND
Schedule of Investments June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
The Travelers Companies Inc.
5.80% 05/15/18............ $116,000 $ 112,863
Time Warner Cable, Inc.
6.20% 07/01/13............ 116,000 117,957
6.75% 07/01/18............ 116,000 116,769
Titan Petrochemicals Group Ltd.
8.50% 03/18/12............ 35,000 18,550 (a)
TNK-BP Finance S.A.
6.63% 03/20/17............ 100,000 88,500 (a)
Transocean, Inc.
6.00% 03/15/18............ 109,000 109,163
Tronox Worldwide LLC
9.50% 12/01/12............ 180,000 146,700 (f)
UBS Preferred Funding Trust I
8.62% 10/29/49............ 125,000 125,605
United Technologies Corp.
6.13% 07/15/38............ 79,000 79,357
Verizon Global Funding Corp.
7.25% 12/01/10............ 193,000 204,898
Verizon Pennsylvania, Inc.
8.35% 12/15/30............ 70,000 78,612 (f)
8.75% 08/15/31............ 110,000 128,591 (f)
VTB Capital S.A.
3.38% 08/01/08............ 115,000 113,850 (a,f,g)
Wachovia Corp. (Series K)
7.98% 12/31/49............ 76,000 69,798
Wal-Mart Stores, Inc.
5.80% 02/15/18............ 78,000 80,761
6.20% 04/15/38............ 120,000 117,669
Weatherford International, Inc.
5.95% 06/15/12............ 70,000 71,383
Wells Fargo & Co.
5.63% 12/11/17............ 40,000 38,702
Westar Energy, Inc.
7.13% 08/01/09............ 100,000 102,618 (f)
Westlake Chemical Corp.
6.63% 01/15/16............ 250,000 210,000 (f)
Xerox Corp.
6.35% 05/15/18............ 116,000 114,504
XTO Energy, Inc.
6.38% 06/15/38............ 76,000 72,005
19,680,353
NON-AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 8.0%
Banc of America Commercial
Mortgage Inc.
5.32% 09/10/47............ 148,000 145,624 (f)
Banc of America Commercial
Mortgage Inc. (Class A)
5.49% 02/10/51............ 360,000 334,308
6.48% 06/10/49............ 320,000 302,501 (c,g)
Banc of America Commercial
Mortgage Inc. (Class C)
5.88% 04/10/17............ 100,000 72,050 (f,i)
Banc of America Funding Corp.
5.73% 03/20/36............ 69,470 28,196 (f,g,i)
5.80% 02/20/36............ 174,087 79,004 (f,i)
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Banc of America Mortgage
Securities Inc. (Class B)
5.38% 01/25/36............ $ 74,340 $ 43,489 (f,g)
Bear Stearns Commercial
Mortgage Securities
5.48% 10/12/41............ 245,000 242,117 (f)
5.53% 10/12/41............ 245,000 236,896 (f)
6.02% 02/14/31............ 273,100 274,183 (f)
Bear Stearns Commercial
Mortgage Securities (Class D)
6.18% 09/11/42............ 20,000 12,292 (a,i)
Countrywide Alternative Loan Trust
5.98% 05/25/36............ 24,397 488 (f,i)
6.00% 03/25/36 - 08/25/36. 131,676 11,164 (f,i)
Countrywide Alternative Loan
Trust (Class B)
6.00% 05/25/36 - 08/25/36. 63,895 6,311 (f,i)
Credit Suisse Mortgage
Capital Certificates
5.47% 09/15/39............ 217,000 206,273 (f)
Credit Suisse Mortgage
Capital Certificates (Class C)
5.65% 02/25/36............ 38,932 11,074 (f,i)
Crusade Global Trust (Class A)
3.00% 09/18/34............ 80,002 78,677 (f,g)
CS First Boston Mortgage
Securities Corp.
1.57% 03/15/35............ 2,982,484 64,926 (a,f,i)
5.25% 08/25/34............ 57,865 54,307 (f)
5.34% 10/25/35............ 73,485 29,394 (f,i)
6.13% 04/15/37............ 175,000 178,592 (f)
6.79% 07/15/37............ 2,378,726 46,615(a,c,f,i)
First Union-Lehman Brothers-
Bank of America
6.56% 11/18/35............ 1 1
GMAC Commercial Mortgage
Securities, Inc.
6.42% 05/15/35............ 53,341 53,259 (f)
6.47% 04/15/34............ 157,110 161,030 (f)
GMAC Commercial Mortgage
Securities, Inc. (Class X)
6.68% 12/10/41............ 3,518,652 54,730 (c,f,i)
Greenwich Capital Commercial
Funding Corp.
5.12% 04/10/37............ 301,000 300,382 (f)
Indymac INDA Mortgage Loan Trust
5.16% 01/25/36............ 99,700 62,233 (f,i)
Indymac INDA Mortgage Loan
Trust (Class B)
5.16% 01/25/36............ 99,700 66,297 (f,i)
JP Morgan Chase Commercial
Mortgage Securities Corp.
1.27% 01/12/39............ 2,252,534 53,276 (a,f,i)
6.40% 02/12/51............ 40,000 26,298 (a,i)
6.47% 11/15/35............ 190,000 195,198 (f)
LB-UBS Commercial Mortgage Trust
4.06% 09/15/27............ 326,666 323,959 (f)
6.23% 03/15/26............ 130,000 131,126 (f)
6.62% 01/18/12............ 2,978,356 56,543 (c,f,i)
See Notes to Schedule of Investments on page 13 and Notes to Financial
Statements.
10
<page>
INCOME FUND
Schedule of Investments June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
11.40% 10/15/35............ $ 754,533 $ 27,179(a,c,f,i)
12.31% 03/15/36............ 3,164,794 71,218(a,c,f,i)
12.51% 02/15/40............ 2,685,261 46,464(a,c,f,i)
LB-UBS Commercial Mortgage
Trust (Class A)
6.13% 12/15/30............ 172,000 175,352 (f)
LB-UBS Commercial Mortgage
Trust (Class B)
6.65% 07/14/16............ 34,000 35,144 (a,f)
LB-UBS Commercial Mortgage
Trust (Class F)
6.45% 07/15/40............ 70,000 46,470 (i)
LB-UBS Commercial Mortgage
Trust (Class X)
7.07% 09/15/39............ 6,676,493 168,786 (c,f,i)
MASTR Alternative Loans Trust
5.00% 08/25/18............ 148,499 23,017 (c,e,f)
MLCC Mortgage Investors, Inc.
5.37% 02/25/36............ 59,995 50,000 (f)
Morgan Stanley Capital I
5.28% 12/15/43............ 102,000 100,353 (f)
5.33% 12/15/43............ 102,000 95,928 (f)
5.39% 11/12/41............ 280,000 225,098 (f)
5.44% 02/12/44............ 250,000 239,370 (a)
5.69% 04/15/49............ 600,000 565,796 (f)
5.71% 07/12/44............ 100,000 98,542 (f)
7.11% 04/15/33............ 452,560 460,987 (f)
Morgan Stanley Capital I (Class A)
5.36% 02/12/44............ 175,000 170,919
Morgan Stanley Dean Witter Capital I
7.20% 10/15/33............ 156,367 161,801 (f)
Morgan Stanley Dean Witter
Capital I (Class A)
6.54% 02/15/31............ 10,192 10,440 (f)
Nomura Asset Securities Corp.
(Class A)
6.59% 03/15/30............ 34,088 34,247 (f)
Residential Funding Mortgage
Securities I
5.75% 01/25/36............ 97,498 68,557 (f,i)
5.75% 01/25/36............ 97,498 57,726 (f)
Wells Fargo Mortgage Backed
Securities Trust
5.39% 08/25/35............ 105,897 104,325 (f,g)
5.50% 01/25/36............ 149,991 100,457 (f)
7,080,989
SOVEREIGN BONDS -- 0.5%
Banco Nacional de Desenvolvimento
Economico e Social
6.37% 06/16/18............ 100,000 99,500 (a)
Government of Brazil
8.00% 01/15/18............ 76,000 84,398
Government of Jamaica
8.00% 06/24/19............ 100,000 91,000
Government of Korea Railroad Corp.
5.38% 05/15/13............ 100,000 99,063 (a)
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Government of Panama
6.70% 01/26/36............ $ 105,000 $ 106,575
480,536
TOTAL BONDS AND NOTES
(COST $92,785,618)........... 90,247,344
- --------------------------------------------------------------------------------
SECURITIES PURCHASED WITH COLLATERAL
FROM SECURITIES ON LOAN -- 13.5%
- --------------------------------------------------------------------------------
ASSET BACKED -- 10.9%
Bear Stearns Asset Backed
Securities Trust
2.70% 11/25/35............ 1,406,110 1,357,246 (f,g)
Countrywide Asset-Backed
Certificates
2.59% 06/25/35............ 318,314 296,769 (f,g)
Fleet Home Equity Loan Trust
(Class A)
2.73% 01/20/33............ 223,217 155,438 (f,g)
Nissan Auto Lease Trust
2.54% 02/15/13............ 1,340,000 1,314,339 (f,g)
RAAC Series (Class A)
2.65% 08/25/36............ 4,353,000 3,769,984 (f,g)
Residential Asset Mortgage
Products, Inc.
2.68% 04/25/35............ 2,878,816 2,673,019 (f,g)
3.14% 12/25/33............ 3,725 3,722 (f,g)
Residential Asset Mortgage
Products, Inc. (Class A)
3.04% 06/25/32............ 30,339 25,956 (f,g)
9,596,473
CORPORATE NOTES -- 0.6%
Morgan Stanley
2.82% 05/07/09............ 550,000 541,422 (g)
NON-AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 2.0%
JP Morgan Alternative Loan Trust
2.54% 08/25/36............ 458,085 454,695 (f,g)
Puma Finance Ltd. (Class A)
2.91% 10/11/34............ 112,505 108,726 (f,g)
Residential Accredit Loans, Inc.
2.66% 07/25/36............ 1,824,041 1,246,415 (f,g)
1,809,836
TOTAL SECURITIES PURCHASED WITH
COLLATERAL FROM SECURITIES ON LOAN
(COST $13,498,165)............ 11,947,731
See Notes to Schedule of Investments on page 13 and Notes to Financial
Statements.
11
<page>
INCOME FUND
Schedule of Investments June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
VALUE
- --------------------------------------------------------------------------------
OTHER INVESTMENTS -- 0.5%
- --------------------------------------------------------------------------------
GEI Investment Fund
(COST $554,067).............. $ 421,091(j)
TOTAL INVESTMENT IN SECURITIES
(COST $106,837,850).......... 102,616,166
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 12.1% *
- --------------------------------------------------------------------------------
GE Money Market Fund
Institutional Class
1.93%........................ 10,658,729(c,k)
(COST $10,658,729)
TOTAL INVESTMENTS
(COST $117,496,579).......... 113,274,895
LIABILITIES IN EXCESS OF OTHER ASSETS,
NET-- (28.1)%................ (24,830,421)
------------
NET ASSETS-- 100.0% ........... $ 88,444,474
============
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
The GEI Income Fund had the following long futures contracts open at June
30,2008 (unaudited):
NUMBER CURRENT UNREALIZED
EXPIRATION OF NOTIONAL APPRECIATION/
DESCRIPTION DATE CONTRACTS VALUE (DEPRECIATION)
- --------------------------------------------------------------------------------
Euro Schatz
Futures September 2008 8 $ 1,289,745 $ (1,933)
U.S. Treasury
Notes 2 Yr.
Futures September 2008 63 13,305,797 72,030
U.S. Treasury
Notes 5 Yr.
Futures September 2008 19 2,100,539 823
The GEI Income Fund had the following short futures contracts open at June
30,2008 (unaudited):
NUMBER CURRENT
EXPIRATION OF NOTIONAL UNREALIZED
DESCRIPTION DATE CONTRACTS VALUE DEPRECIATION
- --------------------------------------------------------------------------------
U.S. Treasury
Notes 10 Yr.
Futures September 2008 40 $(4,556,875) $(38,884)
--------
$ 32,131
========
* 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
<page>
Notes to Schedule of Investments June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
The views expressed in this document reflect our judgment as of the publication
date and are subject to change at any time without notice. The securities cited
may not represent current or future holdings and should not be considered as a
recommendation to purchase or sell a particular security. See the prospectus for
complete descriptions of investment objectives, policies, risks and permissible
investments.
(a) Pursuant to Rule 144A of the Securities Act of 1933, these securities may be
resold in transactions exempt from registration, normally to qualified
institutional buyers. At June 30, 2008, these securities amounted to
$5,152,820 or 5.83% of net assets for the GE Investments Income Fund. These
securities have been determined to be liquid using procedures established by
the Board of Trustees.
(b) Settlement is on a delayed delivery or when-issued basis with final maturity
to be announced (TBA) in the future.
(c) Coupon amount represents effective yield.
(d) Principal only securities represent the right to receive the monthly
principal payments on an underlying pool of mortgages. No payments of
interest on the pool are passed through to the "principal only" holder.
(e) Interest only securities represent the right to receive the monthly interest
payments on an underlying pool of mortgages. Payments of principal on the
pool reduce the value of the "interest only" holding.
(f) At June 30, 2008, all or a portion of this security was pledged to cover
collateral requirements for futures, options, forward foreign currency
contracts and/or TBA's.
(g) Variable or floating rate security. The stated rate represents the rate at
June 30, 2008.
(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 adviser of the Fund, also
serves as investment adviser of the GEI Investment Fund.
(k) GEAM, the investment adviser of the Fund, also serves as investment adviser
of the GE Money Market Fund.
(l) Illiquid securities.
* Less than 0.1%.
+ Percentages are based on net assets as of June 30, 2008.
Abbreviations:
REMIC Real Estate Mortgage Investment Conduit
STRIPS Separate Trading of Registered Interest and Principal of Security
TBA To be Announced
13
<page>
Financial Highlights
Selected data based on a share outstanding throughout the periods indicated
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FUND
CLASS 1 CLASS 4
---------------------------------------------------------------------- ------------
6/30/08+ 12/31/07 12/31/06 12/31/05 12/31/04 12/31/03 6/30/08+
---------------------------------------------------------------------- ------------
INCEPTION DATE -- -- -- -- -- 1/3/95 5/1/08
Net asset value, beginning of period.... $11.50 $11.80 $11.84 $12.25 $12.61 $12.93 $11.56
INCOME/(LOSS) FROM INVESTMENT OPERATIONS:
Net investment income................ 0.20 0.81 0.56 0.61 0.55 0.51 0.12
Net realized and unrealized
gains/(losses) on investments..... (0.25) (0.25) (0.04) (0.36) (0.12) (0.04) (0.24)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME FROM INVESTMENT OPERATIONS. (0.05) 0.56 0.52 0.25 0.43 0.47 (0.12)
- ------------------------------------------------------------------------------------------------------------------------------------
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.......... $11.45 $11.50 $11.80 $11.84 $12.25 $12.61 $11.44
====================================================================================================================================
TOTAL RETURN (a)........................ (0.43)% 4.83% 4.37% 2.04% 3.42% 3.60% (1.04)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $88,435 $93,480 $126,732 $116,558 $135,172 $189,318 $10
Ratios to average net assets:
Net investment income*............ 4.55% 5.07% 5.07% 4.49% 3.82% 3.24% 4.04%
Expenses*......................... 0.60% 0.61% 0.61% 0.60% 0.59% 0.55% 0.98%
Portfolio turnover rate.............. 181% 448% 270% 311% 343% 419% 181%
NOTES TO FINANCIAL HIGHLIGHTS
(a) Total returns are historical and assume changes in share price and
reinvestment of dividends and capital gains and do not include the effect of
insurance contract charges.
(b) Less than $0.01 per share.
* Annualized for periods less than one year
+ Unaudited
See Notes to Financial Statements.
14
<page>
Statement of Assets
and Liabilities JUNE 30, 2008 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME
FUND
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments in securities, at market* (cost $106,283,783).............................................. $102,195,075
Investments in affiliated securities, at market (cost $554,067)........................................ 421,091
Short-term affiliated investments (at amortized cost).................................................. 10,658,729
Cash................................................................................................... 4,067
Foreign cash (cost $14,519)............................................................................ 14,684
Income receivables..................................................................................... 831,574
Variation margin receivable............................................................................ 2,239
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS....................................................................................... 114,127,459
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable upon return of securities loaned............................................................... 11,350,437
Payable for investments purchased...................................................................... 14,120,679
Payable for fund shares redeemed....................................................................... 150,789
Payable to GEAM........................................................................................ 43,473
Accrued other expenses................................................................................. 17,090
Other liabilities...................................................................................... 517
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES.................................................................................. 25,682,985
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS................................................................................................ $ 88,444,474
====================================================================================================================================
NET ASSETS CONSIST OF:
Capital paid in........................................................................................ 94,913,077
Undistributed (distribution in excess of)
net investment income............................................................................... 2,078,490
Accumulated net realized gain (loss)................................................................... (4,357,705)
Net unrealized appreciation/(depreciation) on:
Investments......................................................................................... (4,221,684)
Futures............................................................................................. 32,131
Foreign currency related transactions............................................................... 165
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS................................................................................................ $ 88,444,474
====================================================================================================================================
CLASS 1:
NET ASSETS................................................................................................ 88,434,579
Shares outstanding ($0.01 par value; unlimited shares authorized)......................................... 7,724,220
Net asset value per share................................................................................. $11.45
CLASS 4:
NET ASSETS................................................................................................ 9,895
Shares outstanding ($0.01 par value; unlimited shares authorized)......................................... 865
Net asset value per share................................................................................. $11.44
* Includes $11,066,993 of securities on loan.
See Notes to Financial Statements.
15
<page>
Statement of Operations
FOR THE SIX MONTHS ENDED JUNE 30, 2008 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME
FUND
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Interest ............................................................................. $ 2,122,829
Interest from affliated investments* ................................................. 231,871
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME ........................................................................... 2,354,700
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees ..................................................... 229,225
Distributors Fees (Note 4)
Class 4 ........................................................................... 7
Transfer agent ....................................................................... 36
Director's fees ...................................................................... 1,140
Custody and accounting expenses ...................................................... 38,034
Professional fees .................................................................... 9,970
Registration expenses ................................................................ 2,250
Other expenses ....................................................................... 3,692
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES BEFORE WAIVER AND REIMBURSEMENT ......................................... 284,354
- ------------------------------------------------------------------------------------------------------------------------------------
Less: Expenses reimbursed by the adviser (waiver related to Fund of Fund Investment) . (8,476)
- ------------------------------------------------------------------------------------------------------------------------------------
Net expenses ......................................................................... 275,878
- ------------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) ........................................................... 2,078,822
====================================================================================================================================
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments ....................................................................... 191,378
Futures ........................................................................... (106,425)
Foreign currency transactions ..................................................... 19,947
INCREASE (DECREASE) IN UNREALIZED APPRECIATION/
(DEPRECIATION) ON:
Investments ....................................................................... (2,517,173)
Futures ........................................................................... 12,683
Foreign currency transactions ..................................................... (11,544)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments ............................... (2,411,134)
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ........................ $ (332,312)
====================================================================================================================================
* Income attributable to security lending, net of rebate expenses, for the
Income Fund was $116,219.
See Notes to Financial Statements.
16
<page>
Statements of
Changes in Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME
FUND
- ------------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2008 DECEMBER 31,
(UNAUDITED) 2007
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income (loss)..................................................... $ 2,078,822 $ 6,063,136
Net realized gain (loss) on investments, futures, written options,
and foreign currency transactions............................................... 104,900 (1,836,297)
Net increase (decrease) in unrealized appreciation/(depreciation)
on investments, futures, written options, and foreign
currency translation............................................................ (2,516,034) 869,126
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations........................................... (332,312) 5,095,965
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class 1......................................................................... -- (6,474,080)
Class 4......................................................................... -- --
Net realized gains
Class 1......................................................................... -- --
Class 4......................................................................... -- --
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS................................................................. -- (6,474,080)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations and distributions................. (332,312) (1,378,115)
- ------------------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares
Class 1......................................................................... 5,531,231 17,556,568
Class 4......................................................................... 10,000 --
Value of distributions reinvested
Class 1......................................................................... -- 6,474,080
Class 4......................................................................... -- --
Cost of shares redeemed
Class 1......................................................................... (10,244,543) (55,904,876)
Class 4......................................................................... -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from share transactions................................... (4,703,312) (31,874,228)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS............................................. (5,035,624) (33,252,343)
NET ASSETS
Beginning of period................................................................. 93,480,098 126,732,441
- ------------------------------------------------------------------------------------------------------------------------------------
End of period ...................................................................... $ 88,444,474 $ 93,480,098
====================================================================================================================================
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD........ $ 2,078,490 $ (332)
- ------------------------------------------------------------------------------------------------------------------------------------
CHANGES IN FUND SHARES
CLASS 1
Shares sold............................................................................ 477,494 1,471,130
Issued for distributions reinvested.................................................... -- 567,904
Shares redeemed........................................................................ (885,396) (4,649,537)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares................................................. (407,902) (2,610,503)
====================================================================================================================================
CLASS 4
Shares sold............................................................................ 865 --
Issued for distributions reinvested.................................................... -- --
Shares redeemed........................................................................ -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares................................................. 865 --
====================================================================================================================================
See Notes to Financial Statements.
17
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
1. ORGANIZATION OF THE COMPANY
GE Investments Funds, Inc. (the "Company") was incorporated under the laws of
the Commonwealth of Virginia on May 14, 1984 and is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company. The Company is composed of thirteen investment
portfolios (collectively the "Funds"), although only the following eleven are
currently being offered: U.S. Equity Fund, S&P 500 Index Fund, Premier Growth
Equity Fund, Core Value Equity Fund, Mid-Cap Equity Fund, Small-Cap Equity Fund,
International Equity Fund, Total Return Fund, Income Fund (the "Fund"), Money
Market Fund and Real Estate Securities Fund.
Shares of the Funds of the Company are offered only to insurance company
separate accounts that fund certain variable life insurance contracts and
variable annuity contracts. These insurance companies may include insurance
companies affiliated with GE Asset Management Incorporated ("GEAM"), the
investment adviser and administrator of each of the Funds.
2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the reporting period. Actual results may differ from
those estimates.
The following summarizes the significant accounting policies of the Fund:
SECURITY VALUATION AND TRANSACTIONS
The Fund's portfolio securities are valued generally on the basis of market
quotations. Equity securities generally are valued at the last reported sales
price on the primary market in which they are traded. Portfolio securities
listed on NASDAQ are valued using the NASDAQ Official Closing Price, which may
not necessarily represent the last sale price. If no sales occurred on the
exchange or NASDAQ that day, the portfolio security generally is valued using
the last reported bid price.
Debt securities (other than short-term securities described below) generally are
valued at an evaluated bid as reported by an independent pricing service. Values
obtained from pricing services are based on various factors such as market
transactions, dealer supplied valuations, security characteristics and other
market data. In the absence of a reliable price from such a pricing service,
debt securities may be valued based on dealer supplied valuations or quotations.
The Fund's written or purchased options are valued at the last sales price, or
if no sales occurred that day, at the last reported bid price. Any short-term
securities held by the Fund with remaining maturities of sixty days or less at
the time of purchase are valued on the basis of amortized cost, which
approximates market value.
All assets and liabilities of the Fund initially expressed in foreign currency
values will be converted into U.S. dollars at the WM/Reuters exchange rate
computed at 11:00 a.m., Eastern time.
If prices are not readily available for a portfolio security, or if it is
believed that a price for a portfolio security does not represent its fair
value, the security may be valued using procedures approved by the Fund's Board
of Directors that are designed to establish its "fair" value. Those procedures
require that the fair value of a security be established by the fair valuation
committee. The fair valuation committee follows different protocols for
different types of investments and circumstances. The fair value procedures may
be used to value any investment by the Fund in the appropriate circumstances.
Examples of the types of securities that may be fair valued include: thinly
traded or illiquid investments, high-yield securities or foreign securities.
Foreign securities may be valued with the assistance of an independent fair
value pricing service in circumstances where it is believed that they have been
or would be materially affected by events occurring after the close of the
portfolio security's primary market and before the close of regular trading on
the NYSE. This independent fair value pricing service uses a computerized system
to appraise affected securities and portfolios taking into consideration various
factors and the fair value of such securities may be something other than the
last available quotation or other market price.
GEAM may also separately monitor portfolio securities and, consistent with the
Fund's fair value procedures, apply a different value to a portfolio security
than would be applied had it been priced using market quotations or by an
independent fair value pricing service.
18
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
Determining the fair value of securities involves the application of both
subjective and objective considerations. Security values may differ depending on
the methodology used to determine their values, and may differ from the last
quoted sale or closing price. No assurance can be given that use of these fair
value procedures will always better represent the price at which the Fund could
sell the affected portfolio security.
Security transactions are accounted for as of the trade date. Realized gains and
losses on investments sold are recorded on the basis of identified cost for both
financial statement and federal tax purposes.
The Fund adopted FASB Statement No. 157, FAIR VALUE MEASUREMENTS (FAS 157). FAS
157 establishes a single definition of fair value, a framework for measuring
fair value, and expanded disclosures about fair value measurements.
Various inputs are used in determining the value of the Funds' investments.
These inputs are classified into three broad levels:
Level 1 includes quoted prices in active markets of securities identical to
those of the Fund.
Level 2 includes: 1) quoted prices in active markets for similar securities to
those of the Fund; 2) quoted prices for identical or similar securities to those
of the Fund that trade in markets in which there are few transactions or the
quoted prices are not current; 3) prices based on observable market data such as
interest rates and yield curves, volatilities, bond prepayment speeds, and
credit risk and; 4) prices based principally on observable market data by use of
correlation techniques or other means.
Level 3 includes unobservable market inputs used to fair value securities. These
inputs are based on assumptions that market participants would use to price
securities and may include the adviser's own assumptions.
Other financial instruments are derivative instruments that are not reflected in
TOTAL INVESTMENTS, such as futures, forwards, swaps, and written options
contracts, which are valued based on the unrealized appreciation/depreciation of
the instrument.
Level 1 Level 2 Level 3 Total
- ----------------------------------------------------------------------------------------------------------------------------------
Investments in Securities $33,957,331 $ 75,199,116 $4,118,448 $ 113,274,895
Other Financial Instruments $ 32,131 $ -- $ -- $ 32,131
Following is a reconciliation of securities activity based on Level 3 inputs for
which unobservable market inputs were used to determine fair value.
Investments Other Financial
in Securities Instruments
- --------------------------------------------------------------------------------------------------------
Balance at 12/31/07 $ 5,928,445 $ --
Accrued discounts/premiums (291,687) --
Realized gain (loss) (106,327) --
Change in unrealized
appreciation (depreciation) 755,113 --
Net purchases (sales) (1,956,528) --
Net transfers in and out of Level 3 (210,568) --
- --------------------------------------------------------------------------------------------------------
Balance at 6/30/08 $ 4,118,448 $ --
REPURCHASE AGREEMENTS The Fund may enter into 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
19
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
cash or other liquid assets, which are segregated and maintained with the
custodian in an amount at least equal to 102% of the current market value of the
loaned securities. During the term of the loan, the Fund will record any gain or
loss in the market value of its loaned securities and of securities in which
cash collateral is invested. The Fund will also earn interest, net of any
rebate, from securities in which cash collateral is invested. In the event the
counterparty (borrower) does not meet its contracted obligation to return the
securities, the Fund may be exposed to the risk of loss of reacquiring the
loaned securities at prevailing market prices using the proceeds of the sale of
the collateral.
FOREIGN CURRENCY Accounting records of the Fund are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in a foreign
currency are translated into U.S. dollars at the prevailing rates of exchange on
a daily basis (on days the New York Stock Exchange is open). Purchases and sales
of securities, income receipts and expense payments denominated in foreign
currencies are translated into U.S. dollars at the prevailing exchange rate on
the respective dates of such transactions.
The Fund does not isolate the portion of the results of operations resulting
from changes in foreign exchange rates from the fluctuations arising from
changes in the market prices of securities during the period. Such fluctuations
are included in the net realized or unrealized gain or loss from investments.
Net realized gains or losses on foreign currency transactions represent net
gains or losses on sales and maturities of foreign currency contracts,
disposition of foreign currencies, the difference between the amount of net
investment income and withholding taxes accrued and the U.S. dollar amount
actually received or paid, and gains or losses between the trade and settlement
date on purchases and sales of securities. Net unrealized foreign exchange gains
and losses arising from changes in the value of other assets and liabilities as
a result of changes in foreign exchange rates are included as increases or
decreases in unrealized appreciation/depreciation on foreign currency related
transactions.
FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or
bond index futures contracts subject to certain limitations. The Fund may invest
in futures contracts to manage its exposure to the stock and bond markets and
fluctuations in currency values. Buying futures tends to increase the Fund's
exposure to the underlying instrument while selling futures tends to decrease
the Fund's exposure to the underlying instrument, or hedge other Fund
investments. The Fund will not enter into a transaction involving futures for
speculative purposes. The Fund's risks in using these contracts include changes
in the value of the underlying instruments, non-performance of the
counterparties under the contracts' terms and changes in the liquidity of the
secondary market for the contracts. Futures contracts are valued at the
settlement price established each day by the board of trade or exchange on which
they principally trade.
Upon entering into a futures contract, the Fund is required to pledge to the
broker an amount of cash and/or other assets equal to a certain percentage of
the contract amount, known as initial margin deposit. Subsequent payments, known
as variation margin, are made or received by the Fund each day, depending on the
daily fluctuation in the fair value of the underlying security. The Fund records
an unrealized gain or loss equal to the daily variation margin. Should market
conditions move unexpectedly, the Fund may not achieve the anticipated benefits
of the futures contracts and may incur a loss. The Fund recognizes a realized
gain or loss on the expiration or closing of a futures contract.
OPTIONS The Fund may purchase and write options, subject to certain limitations.
The Fund may invest in options contracts to manage its exposure to the stock and
bond markets and fluctuations in foreign currency values. Writing puts and
buying calls tend to increase 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,
20
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
or if the premium is less than the amount paid for the closing purchase, as a
realized loss. When an option is exercised, the proceeds from the sale of the
underlying security or the cost basis of the securities purchased is adjusted by
the original premium received or paid.
SWAP CONTRACTS As part of the investment strategy, the Fund may invest in swap
agreements, which are agreements to exchange the return generated by one
instrument for the return generated by another instrument. Total return swap
agreements involve commitments to pay interest in exchange for a market linked
return based upon a notional principal amount. To the extent the total return of
the security or index underlying the agreement exceeds or falls short of the
offsetting interest rate obligation, the Fund will receive a payment from or
make a payment to the counterparty. Swaps are marked to market daily based upon
the underlying security or index. Payments received or made are recorded as
realized gain or loss in the Statement of Operations. Entering into swap
agreements involves, to varying degrees, elements of credit and market risk in
excess of the amounts recognized on the Statement of Assets and Liabilities.
Such risks involve the possibility that there will be no liquid market for these
agreements, that the counterparty to the agreements may default on its
obligation to perform and that there may be unfavorable changes in the value of
the index or securities underlying the agreement. Notional principal amounts are
used to express the extent of involvement in these transactions, but the amounts
potentially subject to credit risk are much smaller.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS
The Fund may purchase or sell securities on a when-issued or forward commitment
basis. These transactions are arrangements in which the Fund purchases and sells
securities with payment and delivery scheduled a month or more after entering
into the transactions. The price of the underlying securities and the date when
these securities will be delivered and paid for are fixed at the time the
transaction is negotiated. Losses may arise due to changes in the market value
of the underlying securities or if the counterparty does not perform under the
contracts. In connection with such purchases, the Fund maintains cash or liquid
assets in an amount equal to purchase commitments for such underlying securities
until settlement date and for sales commitments, the Fund maintains equivalent
deliverable securities as "cover" for the transaction. Unsettled commitments are
valued at the current market value of the underlying security. Daily
fluctuations in the value of such contracts are recorded as unrealized gains or
losses. The Fund will not enter into such commitments for the purpose of
investment leverage.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS The Fund may enter into forward
foreign currency exchange contracts to facilitate transactions in foreign
denominated securities and to manage the Fund's currency exposure. Forward
foreign currency exchange contracts are valued at the mean between the bid and
the offered forward rates as last quoted by a recognized dealer. The aggregate
principal amounts of the contracts are not recorded in the Fund's financial
statements. Such amounts appear under the caption forward foreign currency
contracts in the Schedule of Investments. Fluctuations in the value of the
contracts are recorded in the Statement of Assets and Liabilities as an asset
(or liability) and in the Statement of Operations as unrealized appreciation
(depreciation) until the contracts are closed, when they are recorded as
realized gains or losses on foreign currency related transactions. The Fund's
risks in using these contracts include changes in the value of foreign currency
or the possibility that the counterparties do not perform under the contracts'
terms. When the Fund enters into a forward foreign currency exchange contract,
it is required to segregate cash or liquid securities with its custodian in an
amount equal to the value of the Fund's total assets committed to the
consummation of the forward contract. If the value of the segregated securities
declines, additional cash or securities is segregated so that the value of the
account will equal the amount of the Fund's commitment with respect to the
contract.
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.
21
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
INCOME TAXES The Fund intends to comply with all sections of the Internal
Revenue Code applicable to regulated investment companies including the
distribution of substantially all of its taxable net investment income and net
realized capital gains to its shareholders. Therefore, no provision for federal
income tax has been made. The Fund is treated as a separate taxpayer for federal
income tax purposes.
At June 30, 2008, information on the tax cost of investments is as follows:
Cost of Gross Tax Gross Tax Net Tax
Investments for Unrealized Unrealized Depreciation
Tax Purposes Appreciation Depreciation on Investments
- ------------------------------------------------------------------------------------------------------------------------
$117,045,518 $905,596 $(5,230,286) $(4,324,690)
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
22
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
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 $150 million with a
number of its affiliates. The credit facility is with its custodian bank, State
Street Bank and Trust Company. The revolving credit facility requires the
payment of a commitment fee equal to 0.09% per annum on the daily unused portion
of the credit facility, payable quarterly. The portion borne by the Funds
generally is borne proportionally based upon net assets. In addition, the
Company has a $100 million uncommitted, unsecured line of credit with State
Street. 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 June 30,
2008.
4. AMOUNTS PAID TO AFFILIATES
ADVISORY AND ADMINISTRATION FEES GEAM, a registered investment adviser, was
retained by the Company's Board of Directors effective May 1, 1997 to act as
investment adviser and administrator of the Fund. Compensation of GEAM for
investment advisory and administrative services is paid monthly based on the
average daily net assets of the Fund at an annualized rate of .50%.
GENPACT performs certain accounting and certain administration services not
provided by GEAM. For the period ended June 30, 2008, $730 was charged to the
Fund.
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 the Class 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 rate applicable is
0.45% for the Class 4 shares. Currently, Class 1 shares are not subject to a
Rule 12b-1 fee.
DIRECTORS' COMPENSATION The Fund pays no compensation to its directors who are
officers or employees of GEAM or its affiliates. Directors who are not such
officers or employees also serve in a similar capacity for other funds advised
by GEAM. Compensation paid to unaffiliated directors are reflected on the
Statement of Operations. These fees are allocated pro rata across all of the
mutual fund platforms and share classes served by the directors, including the
Fund, and are based upon the relative net assets of each fund within such
platforms. (For additional information about directors compensation please refer
to the Statement of Additional Information.)
5. INVESTMENT TRANSACTIONS
PURCHASES AND SALES OF SECURITIES The cost of purchases and the proceeds from
sales of investments, other than short-term securities and options, for the
period ended June 30, 2008 were as follows:
Purchases Sales
- --------------------------------------------------------------------------------
$192,362,312 $187,018,544
SECURITY LENDING At June 30, 2008, the Fund participated in securities lending:
Loaned
securities at Cash
market value collateral
- --------------------------------------------------------------------------------
$11.066,993 $11,350,437
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 59
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 47
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 49
POSITION(S) HELD WITH FUND Treasurer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 2 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds Operations
Manager since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle
Funds and GE Investments Funds since November 2005 and Elfun Funds and GE
Savings & Security Funds since September 2005; from August 2004 to September
2005 Vice President, U.S. Trust Company, N.A. and Assistant Treasurer of
Excelsior Funds, Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds,
Inc.; from January 2004 to August 2004, Vice President BlackRock Financial
Management, Inc.; from December 1996 to November 2003, Controller - Mutual
Funds, American Skandia Investment Services, Inc. and Assistant Treasurer of
American Skandia Trust and American Skandia Advisor Funds, Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
- --------------------------------------------------------------------------------
JEANNE M. LAPORTA
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 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 62
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 60
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 72
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
<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
Daniel O. Colao, EVP, CHIEF FINANCIAL OFFICER (AS OF JULY 28, 2008)
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)
David Wiederecht, EVP, PRESIDENT - INVESTMENT STRATEGIES
27
<page>
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<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.
Money Market Fund
Semi-Annual Report
JUNE 30, 2008
[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
ADDITIONAL INFORMATION .................................................. 17
INVESTMENT TEAM ......................................................... 20
This report is prepared for Policyholders of certain variable contracts and may
be distributed to others only if preceded or accompanied by the variable
contract's current prospectus and the current prospectus of the Funds available
for investments thereunder.
<page>
Notes to Performance June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
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 shown are net of Fund expenses but do not reflect fees and charges
associated with the variable contracts such as administrative fees, account
charges and surrender charges, which, if reflected, would reduce the Fund's
total returns for all periods shown.
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, MICHAEL E. MARTINI AND ANDREW A. MASELLI. AS LEAD PORTFOLIO
MANAGER FOR THE MONEY MARKET FUND, MR. MARTINI (PICTURED BELOW) HAS OVERSIGHT
RESPONSIBILITIES OVER THE FUND.
MICHAEL E. MARTINI IS A PORTFOLIO MANAGER AT GE ASSET MANAGEMENT. HE HAS SERVED
ON THE PORTFOLIO MANAGEMENT TEAM FOR THE MONEY MARKET FUND SINCE JOINING GE
ASSET MANAGEMENT IN MARCH OF 2008. PRIOR TO JOINING GE ASSET MANAGEMENT, MR.
MARTINI WAS A VICE PRESIDENT AT CERES CAPITAL PARTNERS LLC, WHERE HE WORKED AT
THE FIRM'S TREASURY DESK FROM MARCH 2006 TO JANUARY 2008, AND A SENIOR VICE
PRESIDENT AT PACIFIC INVESTMENT MANAGEMENT COMPANY (PIMCO) FROM 1996 TO 2004,
WHERE HE WAS A PORTFOLIO MANAGER AT THE FIRM'S MONEY MARKET/SHORT-TERM DESK.
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 SIX-MONTH PERIOD ENDED JUNE 30, 2008?
A. For the six-month period ended June 30, 2008, the Money Market Fund returned
1.38%. The 90-day Treasury Bill, the Fund's benchmark, returned 0.94% and
the Fund's Lipper peer group of 108 Money Market funds returned an average
of 1.35% for the same period.
Q. DESCRIBE WHAT HAPPENED IN THE U.S. ECONOMY DURING THE SIX-MONTH PERIOD
ENDING JUNE 30, 2008.
A. About the only positive thing that can be said for the first half of 2008 is
that it is over. The credit crisis born in 2007 deepened in the first
quarter of this year, threatening the existence of an 85-year old investment
bank/broker-dealer. The Federal Reserve moved aggressively to provide
liquidity through typical means such as reducing the federal funds rate
target by 225 basis points to 2.00%, and introducing
[PHOTO OMITTED]
2
<page>
Q&A
- --------------------------------------------------------------------------------
certain new measures including allowing investment banks access to discount
window borrowing. The U.S. economy, similar to that of the global economy,
showed little growth. 438,000 jobs were lost in the first six months as
reported by the Bureau of Labor Statistics (change in non-farm payrolls).
Consumer spending ability have been reduced by higher gas prices, lower home
prices and job losses. The rise in energy prices along with other
commodities has pushed inflation fears higher, especially at the Federal
Reserve. Interest rates at the longer end of the maturity spectrum were
little changed from the end of last year. The U.S. Treasury 10-year note
yield fell 5 bps to 3.97%. Shorter maturity note yields dropped
significantly more, especially during the first quarter, as the Federal
Reserve was reducing rates. The yield on the U.S. Treasury 2-year note fell
43 bps to 2.62%. The decline in interest rates translated to positive
returns for treasury securities for the first six months. Credit sensitive
sectors, however, posted negative returns in the same period as credit
concerns deepened. In general, higher quality paper performed better than
lower quality.
Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE?
A. Positioning along the short end of the maturity spectrum was the primary
driver of the Fund's return. The average portfolio maturity was extended to
take advantage of falling short-term yields as the Federal Reserve continued
its aggressive monetary policy of lowering the fed funds rate target.
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 June 30,
2008.
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 $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides infor mation about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JANUARY 1, 2008 - JUNE 30, 2008
- ------------------------------------------------------------------------------------------------------------------------------------
ACCOUNT VALUE AT ACCOUNT VALUE EXPENSES
THE BEGINNING OF AT THE END OF PAID DURING
THE PERIOD ($) THE PERIOD ($) THE PERIOD ($)*
- ------------------------------------------------------------------------------------------------------------------------------------
Actual Fund Return** 1,000.00 1,013.84 2.26
- ------------------------------------------------------------------------------------------------------------------------------------
Hypothetical 5% Return
(2.5% for the period) 1,000.00 1,022.37 2.27
- ------------------------------------------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.45% (FROM
PERIOD JANUARY 1, 2008 - JUNE 30, 2008), MULTIPLIED BY THE AVERAGE ACCOUNT
VALUE OVER THE PERIOD, MULTIPLIED BY 182/366 (TO REFLECT THE SIX MONTH
PERIOD).
** ACTUAL FUND RETURN FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2008 WAS: 1.38%.
4
<page>
Money Market Fund (unaudited)
- --------------------------------------------------------------------------------
CHANGE IN VALUE OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
[Line chart omitted -- plot points are as follows:]
GEI MONEY MARKET 90 DAY T-BILL
06/98 10,000.00 10,000.00
12/98 10,256.75 10,231.96
12/99 10,769.84 10,720.51
12/00 11,441.41 11,364.30
12/01 11,897.49 11,757.74
12/02 12,074.14 11,949.45
12/03 12,168.41 12,072.17
12/04 12,283.44 12,240.90
12/05 12,626.61 12,634.66
12/06 13,213.44 13,243.53
12/07 13,864.11 13,832.61
06/08 14,056.01 13,964.54
Money Market Fund (ending value $14,056)
90-Day T-Bill (ending value $13,965)
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2008
- ----------------------------------------------------------------------------------------------
SIX ONE FIVE TEN
MONTHS YEAR YEAR YEAR
- ----------------------------------------------------------------------------------------------
Money Market Fund 1.38% 3.84% 2.99% 3.46%
- ----------------------------------------------------------------------------------------------
90 Day T-Bill 0.94% 2.93% 3.05% 3.40%
- ----------------------------------------------------------------------------------------------
Lipper peer group average* 1.35% 3.72% 2.87% 3.34%
- ----------------------------------------------------------------------------------------------
Inception date 7/1/85
- ----------------------------------------------------------------------------------------------
FUND YIELD AT JUNE 30, 2008
- --------------------------------------------------------------------------------
FUND IBC'S MONEY FUND**
- --------------------------------------------------------------------------------
7-DAY CURRENT 1.78%+ 1.84%
- --------------------------------------------------------------------------------
7-DAY EFFECTIVE 1.80% 1.86%
- --------------------------------------------------------------------------------
CURRENT YIELD REPRESENTS INCOME EARNED ON AN INVESTMENT IN THE MONEY MARKET FUND
FOR A SEVEN DAY PERIOD AND THEN ANNUALIZED.
EFFECTIVE YIELD IS CALCULATED SIMILARLY BUT COULD BE SLIGHTLY HIGHER BECAUSE IT
REFLECTS THE COMPOUNDING EFFECT OF EARNINGS ON REINVESTED DIVIDENDS.
+ THE SEVEN DAY CURRENT YIELD, RATHER THAN THE TOTAL RETURN, MORE CLOSELY
REFLECTS THE CURRENT EARNINGS OF THE MONEY MARKET FUND AT JUNE 30, 2008.
** 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.
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.
* LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR
THE SIX MONTHS, ONE YEAR, FIVE-YEAR, AND TEN-YEAR PERIODS INDICATED IN THE
MONEY MARKET FUNDS PEER GROUP CONSISTING OF 108, 108, 99 AND 70 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 June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
MONEY MARKET FUND
- --------------------------------------------------------------------------------
Portfolio Composition based on a Market Value of $398,885
(in thousands) as of June 30, 2008
[Pie chart omitted -- plot points are as follows:]
U.S. Governments 63.9%
Repurchase Agreements 26.9%
Corporate Notes 6.5%
Certificates Of Deposit 2.7%
Time Deposit 0.0%*
* less than 0.1%
PRINCIPAL AMORTIZED
AMOUNT COST
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 98.7% +
- --------------------------------------------------------------------------------
U.S. GOVERNMENTS -- 63.0%
U.S. AGENCIES
Federal Home Loan Bank Discount Notes
2.08% 07/23/08 $ 8,660,000 $ 8,649,072(a)
2.10% 07/25/08 6,450,000 6,441,034(a)
2.15% 08/15/08 7,810,000 7,789,108(a)
2.18% 11/14/08 2,840,000 2,816,826(a)
2.19% 07/11/08 11,900,000 11,892,761(a)
2.19% 07/16/08 13,060,000 13,048,083(a)
2.21% 07/18/08 4,000,000 3,995,826(a)
2.22% 07/30/08 11,810,000 11,788,975(a)
2.23% 08/29/08 11,520,000 11,478,086(a)
Federal Home Loan Bank
2.03% 04/23/09 9,350,000 9,350,000
2.52% 04/21/09 6,000,000 5,999,400
Federal Home Loan Mortgage Discount Notes
2.06% 07/01/08 16,020,000 16,020,000(a)
2.10% 11/03/08 9,920,000 9,848,140(a)
2.14% 07/17/08 16,000,000 15,984,818(a)
2.20% 07/03/08 13,860,000 13,858,306(a)
2.25% 07/23/08 9,620,000 9,606,784(a)
2.26% 07/31/08 9,530,000 9,512,052(a)
Federal Home Loan Mortgage
2.06% 03/24/09 13,850,000 13,850,000
PRINCIPAL AMORTIZED
AMOUNT COST
- --------------------------------------------------------------------------------
Federal National Mortgage Assoc. Discount Notes
2.06% 07/09/08 $ 9,000,000 $ 8,995,900(a)
2.09% 09/10/08 15,150,000 15,088,150(a)
2.12% 08/06/08 4,210,000 4,201,159(a)
2.13% 10/22/08 5,000,000 4,966,963(a)
2.14% 09/24/08 6,500,000 6,467,541(a)
2.14% 10/08/08 5,530,000 5,497,760(a)
2.18% 11/12/08 3,000,000 2,975,880(a)
2.20% 07/25/08 18,610,000 18,582,829(a)
2.31% 11/05/08 6,090,000 6,040,909(a)
254,746,362
REPURCHASE AGREEMENTS -- 26.5%
Goldman Sachs
2.40% dated 06/30/08, to be
repurchased at $33,902,260 on
07/01/08 collateralized by
$34,578,043 U.S. Government
Agency Bonds, 6.00%,
maturing 02/15/26
07/01/08 33,900,000 33,900,000
HSBC
2.50% dated 06/30/08, to be
repurchased at $22,002,082 on
07/01/08 collateralized by
$22,442,122 U.S. Government
Agency Bonds, 4.50% and 4.75%,
maturing 10/09/09 and 11/19/12
07/01/08 22,000,000 22,000,000
Morgan Stanley
2.40% dated 06/30/08, to be
repurchased at $13,870,925 on
07/01/08 collateralized by
$14,166,435 U.S. Government
Agency Bonds, 0.00%,
maturing 10/31/2008
07/01/08 13,870,000 13,870,000
Barclays Bank
2.50% dated 06/30/08, to be
repurchased at $11,600,806 on
07/01/08 collateralized by
$11,832,482 U.S. Government
Agency Bonds, 5.51%,
maturing 01/23/23
07/01/08 11,600,000 11,600,000
Deutsche Bank
2.50% dated 06/30/08, to be
repurchased at $25,901,799 on
07/01/08 collateralized by
$26,418,662 U.S. Government
Agency Bonds, 5.75%,
maturing 01/24/23
07/01/08 25,900,000 25,900,000
107,270,000
See Notes to Schedule of Investments on page 8 and Notes to Financial
Statements.
6
<page>
MONEY MARKET FUND
Schedule of Investments June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
PRINCIPAL AMORTIZED
AMOUNT COST
- --------------------------------------------------------------------------------
CORPORATE NOTES -- 6.5%
Merrill Lynch & Company, Inc.
2.64% 08/22/08 $15,000,000 $ 15,000,000(c)
Morgan Stanley Group Inc.
(Series F)
2.61% 03/02/09 11,130,000 11,130,000(c)
26,130,000
TIME DEPOSIT -- 0.1%
State Street Corp.
1.40% 07/01/08 158,922 158,922(b)
CERTIFICATES OF DEPOSIT -- 2.6%
Canadian Imperial Bank
2.49% 10/22/08 10,580,000 10,580,000(c)
TOTAL SHORT-TERM INVESTMENTS
(COST $398,885,284) 398,885,284
OTHER ASSETS AND LIABILITIES, NET-- 1.3% 5,451,361
------------
NET ASSETS-- 100.0% $404,336,645
============
See Notes to Schedule of Investments on page 8 and Notes to Financial
Statements.
7
<page>
Notes to Schedule of Investments June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
The views expressed in this document reflect our judgment as of the publication
date and are subject to change at any time without notice. The securities cited
may not represent current or future holdings and should not be considered as a
recommendation to purchase or sell a particular security. See the prospectus for
complete descriptions of investment objectives, policies, risks and permissible
investments.
(a) 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
June 30, 2008.
* Less than 0.1%.
+ Percentages are based on net assets as of June 30, 2008.
8
Financial Highlights
Selected data based on a share outstanding throughout the periods indicated
- ------------------------------------------------------------------------------------------------------
MONEY MARKET FUND
6/30/08+ 12/31/07 12/31/06
- ------------------------------------------------------------------------------------------------------
INCEPTION DATE -- -- --
Net asset value, beginning of period ........... 1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ....................... 0.01 0.05 0.05
Net realized and unrealized
gains on investments ..................... -- -- --
- ------------------------------------------------------------------------------------------------------
TOTAL INCOME FROM INVESTMENT OPERATIONS ........ 0.01 0.05 0.05
- ------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ....................... 0.01 0.05 0.05
Return of capital ........................... -- -- --
- ------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ............................ 0.01 0.05 0.05
- ------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ................. $1.00 $1.00 $1.00
======================================================================================================
TOTAL RETURN (A) ............................... 1.38% 4.92% 4.65%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) .... $404,337 $340,690 $279,622
Ratios to average net assets:
Net investment income* ................... 2.76% 4.81% 4.58%
Net expenses* ............................ 0.45% 0.48% 0.49%
Gross expenses* .......................... 0.45% 0.48% 0.49%
Financial Highlights
Selected data based on a share outstanding throughout the periods indicated
- ------------------------------------------------------------------------------------------------------
MONEY MARKET FUND
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
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ....................... 0.03 0.01 0.01
Net realized and unrealized
gains on investments ..................... -- -- 0.00(b)
- --------------------------------------------------------------------------------------------------
TOTAL INCOME FROM INVESTMENT OPERATIONS ........ 0.03 0.01 0.01
- --------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ....................... 0.03 0.01 0.01
Return of capital ........................... 0.00(b) -- --
- --------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ............................ 0.03 0.01 0.01
- --------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ................. $1.00 $1.00 $1.00
==================================================================================================
TOTAL RETURN (A) ............................... 2.79% 0.95% 0.78%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) .... $250,149 $278,703 $392,533
Ratios to average net assets:
Net investment income* ................... 2.74% 0.92% 0.80%
Net expenses* ............................ 0.49% 0.47% 0.43%
Gross expenses* .......................... 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.
* Annualized for periods less than one year.
+ Unaudited
See Notes to Financial Statements.
9
<page>
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2008 (UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------
MONEY
MARKET
FUND
- ----------------------------------------------------------------------------------------------------------------------
ASSETS
Short-term Investments (at amortized cost) ..................................................... $398,885,284
Income receivables ............................................................................. 236,864
Receivable for fund shares sold ................................................................ 5,423,347
- ----------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS ............................................................................... 404,545,495
- ----------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable to GEAM ................................................................................ 153,283
Accrued other expenses ......................................................................... 54,556
Other liabilities .............................................................................. 1,011
- ----------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES .......................................................................... 208,850
- ----------------------------------------------------------------------------------------------------------------------
NET ASSETS ........................................................................................ $404,336,645
======================================================================================================================
NET ASSETS CONSIST OF:
Capital paid in ................................................................................ 404,400,366
Undistributed (distribution in excess of) net investment income ................................ 148
Accumulated net realized gain (loss) ........................................................... (63,869)
- ----------------------------------------------------------------------------------------------------------------------
NET ASSETS ........................................................................................ $404,336,645
======================================================================================================================
NET ASSETS ........................................................................................ 404,336,645
Shares outstanding ($0.01 par value; unlimited shares authorized) ................................. 404,390,200
Net asset value per share ......................................................................... $1.00
See Notes to Financial Statements.
10
<page>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2008 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------
MONEY
MARKET
FUND
- ------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Interest ......................................................................... $ 6,447,487
- ------------------------------------------------------------------------------------------------------------------
TOTAL INCOME ....................................................................... 6,447,487
- ------------------------------------------------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees ................................................. 850,698
Transfer agent ................................................................... 36
Trustee's fees ................................................................... 4,090
Custody and accounting expenses .................................................. 19,992
Professional fees ................................................................ 12,139
Registration expenses ............................................................ 3,736
Other expenses ................................................................... 8,306
- ------------------------------------------------------------------------------------------------------------------
NET EXPENSES .................................................................... 898,997
- ------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) ....................................................... 5,548,490
==================================================================================================================
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .................... $5,548,490
==================================================================================================================
See Notes to Financial Statements.
11
<page>
Statements of Changes in Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
MONEY
MARKET
FUND
- ------------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2008 DECEMBER 31,
(UNAUDITED) 2007
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income (loss) .................................................... $ 5,548,490 $ 15,052,575
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations .......................................... 5,548,490 15,052,575
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ............................................................ (5,548,490) (15,052,427)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ................................................................ (5,548,490) (15,052,427)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations and distributions ................ -- 148
- ------------------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares ..................................................... 178,687,317 248,224,006
Value of distributions reinvested ................................................ 5,548,490 15,052,427
Cost of shares redeemed .......................................................... (120,589,578) (202,208,593)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from share transactions .................................. 63,646,229 61,067,840
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ............................................ 63,646,229 61,067,988
NET ASSETS
Beginning of period ................................................................ 340,690,416 279,622,428
- ------------------------------------------------------------------------------------------------------------------------------------
End of period ...................................................................... $ 404,336,645 $ 340,690,416
====================================================================================================================================
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD ........ $ 148 $ 148
CHANGES IN FUND SHARES
Shares sold ...................................................................... 178,687,317 248,224,004
Issued for distributions reinvested .............................................. 5,548,490 15,052,426
Shares redeemed .................................................................. (120,589,578) (202,208,593)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares ................................................ 63,646,229 61,067,837
====================================================================================================================================
See Notes to Financial Statements.
12
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
1. ORGANIZATION OF THE COMPANY
GE Investments Funds, Inc. (the "Company") was incorporated under the laws of
the Commonwealth of Virginia on May 14, 1984 and is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company. The Company is composed of thirteen investment
portfolios (collectively the "Funds"), although only the following eleven are
currently being offered: U.S. Equity Fund, S&P 500 Index Fund, Premier Growth
Equity Fund, Core Value Equity Fund, Mid-Cap Equity Fund, Small-Cap Equity Fund,
International Equity Fund, Total Return Fund, Income Fund, Money Market Fund
(the "Fund") and Real Estate Securities Fund.
Shares of the Funds of the Company are offered only to insurance company
separate accounts that fund certain variable life insurance contracts and
variable annuity contracts. These insurance companies may include insurance
companies affiliated with GE Asset Management Incorporated ("GEAM"), the
investment adviser and administrator of each of the Funds.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the reporting period. Actual results may differ from
those estimates.
The following summarizes the significant accounting policies of the Fund:
SECURITY VALUATION AND TRANSACTIONS
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 cost, which approximates market
value.
All assets and liabilities of the Fund initially expressed in foreign currency
values will be converted into U.S. dollars at the WM/Reuters exchange rate
computed at 11:00 a.m., Eastern time.
If prices are not readily available for a portfolio security, or if it is
believed that a price for a portfolio security does not represent its fair
value, the security may be valued using procedures approved by the Fund's Board
of Directors that are designed to establish its "fair" value. Those procedures
require that the fair value of a security be established by the fair valuation
committee. The fair valuation committee follows different protocols for
different types of investments and circumstances. The fair value procedures may
be used to value any investment by the Fund in the appropriate circumstances.
Examples of the types of securities that may be fair valued include: thinly
traded or illiquid investments, high-yield securities or foreign securities.
Foreign securities may be valued with the assistance of an independent fair
value pricing service in circumstances where it is believed that they have been
or would be materially affected by events occurring after the close of the
portfolio security's primary market and before the close of regular trading on
the NYSE. This independent fair value pricing service uses a computerized system
to appraise affected securities and portfolios taking into consideration various
factors and the fair value of such securities may be something other than the
last available quotation or other market price.
GEAM may also separately monitor portfolio securities and, consistent with the
Fund's fair value procedures, apply a different value to a portfolio security
than would
13
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
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.
The Fund adopted FASB Statement No. 157, FAIR VALUE MEASUREMENTS (FAS 157). FAS
157 establishes a single definition of fair value, a framework for measuring
fair value, and expanded disclosures about fair value measurements.
Various inputs are used in determining the value of the Fund's investments.
These inputs are classified into three broad levels:
Level 1 includes quoted prices in active markets of securities identical to
those of the Fund.
Level 2 includes: 1) quoted prices in active markets for similar securities to
those of the Fund; 2) quoted prices for identical or similar securities to those
of the Fund that trade in markets in which there are few transactions or the
quoted prices are not current; 3) prices based on observable market data such as
interest rates and yield curves, volatilities, bond prepayment speeds, and
credit risk and; 4) prices based principally on observable market data by use of
correlation techniques or other means.
Level 3 includes unobservable market inputs used to fair value securities. These
inputs are based on assumptions that market participants would use to price
securities and may include the adviser's own assumptions.
Other financial instruments are derivative instruments that are not reflected in
TOTAL INVESTMENTS, such as futures, forwards, swaps, and written options
contracts, which are valued based on the unrealized appreciation/depreciation of
the instrument.
Level 1 Level 2 Level 3 Total
- ------------------------------------------------------------------------------------------------------------------------------------
Investments in Securities $-- $ 398,885,284 $-- $ 398,885,284
Other Financial Instruments $-- $ -- $-- $ --
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.
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
14
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
securities. Net unrealized foreign exchange gains and losses arising from
changes in the value of other assets and liabilities as a result of changes in
foreign exchange rates are included as increases or decreases in unrealized
appreciation/depreciation on foreign currency related transactions.
INVESTMENTS IN FOREIGN MARKETS Investments in foreign markets may involve
special risks and considerations not typically associated with investing in the
United States. These risks include revaluation of currencies, high rates of
inflation, repatriation on income and capital, and adverse political and
economic developments. Moreover, securities issued in these markets may be less
liquid, subject to government ownership controls, tariffs and taxes, subject to
delays in settlements, and their prices may be more volatile.
The Fund may be subject to capital gains and repatriation taxes imposed by
certain countries in which it invests. Such taxes are generally based on income
and/or capital gains earned or repatriated. Taxes are accrued based upon net
investment income, net realized gains and net unrealized appreciation as income
and/or capital gains are earned.
INCOME TAXES The Fund intends to comply with all sections of the Internal
Revenue Code applicable to regulated investment companies including the
distribution of substantially all of its taxable net investment income and net
realized capital gains to its shareholders. Therefore, no provision for federal
income tax has been made. The Fund is treated as a separate taxpayer for federal
income tax purposes.
At June 30, 2008, 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
- ------------------------------------------------------------------------------------------------------------------------------------
$398,885,284 $-- $-- $--
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.
15
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
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 $150 million with a
number of its affiliates. The credit facility is with its custodian bank, State
Street Bank and Trust Company. The revolving credit facility requires the
payment of a commitment fee equal to 0.09% per annum on the daily unused portion
of the credit facility, payable quarterly. The portion borne by the Funds
generally is borne proportionally based upon net assets. In addition, the
Company has a $100 million uncommitted, unsecured line of credit with State
Street. 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 June 30,
2008.
4. AMOUNTS PAID TO AFFILIATES
ADVISORY AND ADMINISTRATION FEES GEAM, a registered investment adviser, was
retained by the Company's Board of Directors effective May 1, 1997 to act as
investment adviser and administrator of the Fund. Compensation of GEAM for
investment advisory and administrative services is paid monthly based on the
average daily net assets of the Fund. The advisory and administrative fee is
stated in the following schedule:
Annualized based on
average daily net assets
-----------------------------------------
Average Daily Advisory and
Net Assets Administration
of Fund Fees
- ----------------------------------------------------------------
Money Market Fund First $100 million .50%
Next $100 million .45%
Next $100 million .40%
Next $100 million .35%
Over $400 million .30%
GENPACT performs certain accounting and certain administration services not
provided by GEAM. For the period ending June 30, 2008, $2,427 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>
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 59
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 47
POSITION(S) HELD WITH FUND Executive Vice President
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - less than one year
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General
Counsel and Secretary of GEAM since July 2007; Senior Vice President and General
Counsel - Marketing and Client Services (formerly Asset Management Services), at
GEAM and Senior Vice President and General Counsel of GEAMS from February 1997
to June 2007; Vice President and Associate General Counsel of GEAM from October
1992 to February 1997; Secretary of Fund from 1997 to June 2007; Vice President
of Fund from September 2003 to June 2007; Vice President of GE Institutional
Funds and GE LifeStyle Funds from September 2003 to June 2007; Secretary of GE
Institutional Funds and GE LifeStyle Funds from 1997 to June 2007; Vice
President of Elfun Funds and GE Savings & Security Funds from October 2003 to
June 2007; Assistant Secretary of Elfun Funds and GE Savings & Security Funds
from 1998 to June 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional
Funds, GE LifeStyle Funds, Elfun Funds and GE Savings & Security Funds since
July 2007.
17
<page>
Additional Information (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCOTT H. RHODES
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 49
POSITION(S) HELD WITH FUND Treasurer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 2 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds Operations
Manager since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle
Funds and GE Investments Funds since November 2005 and Elfun Funds and GE
Savings & Security Funds since September 2005; from August 2004 to September
2005 Vice President, U.S. Trust Company, N.A. and Assistant Treasurer of
Excelsior Funds, Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds,
Inc.; from January 2004 to August 2004, Vice President BlackRock Financial
Management, Inc.; from December 1996 to November 2003, Controller - Mutual
Funds, American Skandia Investment Services, Inc. and Assistant Treasurer of
American Skandia Trust and American Skandia Advisor Funds, Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
- --------------------------------------------------------------------------------
JEANNE M. LAPORTA
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 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
18
<page>
Additional Information (unaudited)
- --------------------------------------------------------------------------------
NON-INTERESTED DIRECTORS
- --------------------------------------------------------------------------------
JOHN R. COSTANTINO
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 62
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 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 60
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 72
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 9 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon
Brothers Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds and GE LifeStyle Funds since their inception.
- --------------------------------------------------------------------------------
The Statement of Additional Information for the Fund includes additional
information about the Directors and Officers and is available, without charge,
upon request by calling 1-800-242-0134.
19
<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
Daniel O. Colao, EVP, CHIEF FINANCIAL OFFICER (AS OF JULY 28, 2008)
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)
David Wiederecht, EVP, PRESIDENT - INVESTMENT STRATEGIES
20
<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
Semi-Annual Report
JUNE 30, 2008
[GE LOGO OMITTED]
GE Investments Funds, Inc.
Real Estate Securities Fund
- --------------------------------------------------------------------------------
Contents
NOTES TO PERFORMANCE ..................................................... 1
MANAGER REVIEW AND SCHEDULE OF INVESTMENTS ............................... 2
NOTES TO SCHEDULE OF INVESTMENTS ......................................... 7
FINANCIAL STATEMENTS
Financial Highlights ................................................ 8
Statement of Assets and Liabilities ................................. 9
Statement of Operations ............................................. 10
Statements of Changes in Net Assets ................................. 11
Notes to Financial Statements ....................................... 12
ADDITIONAL INFORMATION ................................................... 17
INVESTMENT TEAM .......................................................... 20
This report is prepared for Policyholders of certain variable contracts and may
be distributed to others only if preceded or accompanied by the variable
contract's current prospectus and the current prospectus of the Funds available
for investments thereunder.
Notes to Performance June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
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 shown are net of Fund expenses but do not reflect fees and charges
associated with the variable contracts such as administrative fees, account
charges and surrender charges, which, if reflected, would reduce the Fund's
total returns for all periods shown.
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
Real Estate Securities Fund
- --------------------------------------------------------------------------------
Q&A
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 PEER GROUP FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2008?
A. For the six-month period ended June 30, 2008, the Real Estate Securities
Fund returned -1.84% for the Class 1 shares and -12.35% for the Class 4
shares. The NAREIT Equity Index, the Fund's benchmark, returned -3.59% and
the Fund's Lipper peer group of 63 Real Estate funds returned an average of
-6.26% for the same period.
Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE?
A. The Fund outperformed the benchmark by 175 basis points (bps) for the
reporting period (net of fees without load). Stock selection generated the
majority of the relative outperformance, while sector selection contributed
21bps to the outperformance. Cash drag reduced relative outperformance by
48bps but the effect of intraday trading profits and losses, the timing of
cash flows, rounding, and other items not directly captured by our
attribution measurement system added approximately 34bps.
An underweight to the hotel and industrial sectors, and overweight to the
apartment sector generated the majority of sector selection outperformance
(combining for 59bps). However, the sector selection alpha was offset by an
overweight to the triple net lease sector and an underweight to the
self-storage sector (combined reduction of 38bps).
Stock selection within the apartment sector generated half of the Fund's
total outperformance (87bps), and stock selection within the hotel and
healthcare sectors also made positive contributions. Our weakest area was
within our shopping center holdings, which negatively impacted Fund
performance.
Q. WERE THERE ANY SIGNIFICANT CHANGES TO THE FUND OVER THE PERIOD?
A. Reflecting continuing concern about a worsening economy and diminished
outlook for consumer spending we reduced the allocation to the shopping
center sector from an overweight to an underweight during the period and
increased our overweight to the healthcare sector, a traditional defensive
sector.
2
Real Estate Securities Fund
- --------------------------------------------------------------------------------
Understanding Your Fund's Expenses
As a shareholder of the Fund you incur ongoing expenses, which include portfolio
management fees, professional fees, administrative fees and other Fund expenses.
The following example is intended to help you understand your ongoing costs (in
dollars) of investing in the Fund and to compare these costs with the ongoing
costs of investing in other mutual funds.
To illustrate these ongoing costs, we have provided an example and calculated
the expenses paid by investors during the period. The information in the
following table is based on an investment of $1,000, which is invested at the
beginning of the period and held for the entire six-month period ended June 30,
2008.
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 $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides infor mation about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
START
JANUARY 1, 2008 - JUNE 30, 2008
- ------------------------------------------------------------------------------------------------------------------------------------
ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID
BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($)*
- ------------------------------------------------------------------------------------------------------------------------------------
ACTUAL FUND RETURN**
- ------------------------------------------------------------------------------------------------------------------------------------
Class 1 1,000.00 981.58 4.72
Class 4 1,000.00 876.54 6.30
- ------------------------------------------------------------------------------------------------------------------------------------
HYPOTHETICAL 5% RETURN (2.5% FOR THE PERIOD)
- ------------------------------------------------------------------------------------------------------------------------------------
Class 1 1,000.00 1,020.04 4.67
Class 4 1,000.00 1,018.08 6.71
- ------------------------------------------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.93% FOR CLASS
1 AND 1.33% FOR CLASS 4, (FROM PERIOD JANUARY 1, 2008 - JUNE 30, 2008),
MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY
182/366 (TO REFLECT THE ONE-HALF YEAR PERIOD).
** ACTUAL FUND RETURNS FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2008 WERE AS
FOLLOWS: (1.84)% FOR CLASS 1 SHARES, AND SINCE INCEPTION (12.35)% FOR CLASS 4
SHARES.
3
<page>
Real Estate Securities Fund (unaudited)
- --------------------------------------------------------------------------------
CHANGE IN VALUE OF A $10,000 INVESTMENT
CLASS 1 SHARES
- --------------------------------------------------------------------------------
[Line chart omitted -- plot points are as follows:]
GEI REAL ESTATE SECURITIES NAREIT EQUITY INDEX
06/98 10,000.00 10,000.00
12/98 8,704.34 8,686.58
12/99 8,685.43 8,285.32
12/00 11,511.76 10,469.61
12/01 12,874.45 11,928.31
12/02 12,701.19 12,383.09
12/03 17,458.75 16,982.67
12/04 23,096.15 22,347.01
12/05 25,817.15 25,064.93
12/06 34,343.85 33,852.86
12/07 29,240.61 28,540.75
06/08 28,702.11 27,514.80
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2008
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS 1 SHARES (Inception date: 5/1/95)
- ------------------------------------------------------------------------------------------------------------------------------------
SIX ONE FIVE TEN ENDING VALUE OF A
MONTHS YEAR YEAR YEAR $10,000 INVESTMENT
- ------------------------------------------------------------------------------------------------------------------------------------
Real Estate Securities Fund -1.84% -10.83% 13.84% 11.12% $28,702
- ------------------------------------------------------------------------------------------------------------------------------------
NAREIT Equity Index -3.59% -13.64% 14.30% 10.65% $27,515
- ------------------------------------------------------------------------------------------------------------------------------------
Lipper peer group average* -6.27% -15.90% 14.48% 10.78%
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS 4 SHARES
- --------------------------------------------------------------------------------
[Line chart omitted -- plot points are as follows:]
GEI REAL ESTATE SECURITIES NAREIT EQUITY INDEX
05/08 10,000.00 10,000.00
06/08 8,765.43 8,981.15
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2008
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS 4 SHARES (Inception date: 5/1/08)
- ------------------------------------------------------------------------------------------------------------------------------------
ONE SINCE ENDING VALUE OF A
MONTH INCEPTION $10,000 INVESTMENT
- ------------------------------------------------------------------------------------------------------------------------------------
Real Estate Securities Fund -10.80% -12.35% $ 8,765
- ------------------------------------------------------------------------------------------------------------------------------------
NAREIT Equity Index -10.88% -10.19% $ 8,912
- ------------------------------------------------------------------------------------------------------------------------------------
Lipper peer group average** -11.07% N/A
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT PROFILE
A fund designed for investors who seek maximum total return through current
income and capital appreciation by investing at least 80% of its net assets in
equity securities and debt securities of U.S. issuers that are principally
engaged in or related to the real estate industry, including those that own
significant real estate assets, under normal circumstances.
PORTFOLIO COMPOSITION AS OF JUNE 30, 2008
as a % of Market Value
- --------------------------------------------------------------------------------
Market Value of $81,996 (in thousands)
[Pie chart omitted -- plot points are as follows:]
Multifamily 15.0%
Office 14.8%
Regional Malls 14.2%
Healthcare 12.1%
Shopping Centers 11.3%
Diversified 8.0%
Industrial 7.5%
Self Storage 4.4%
Hotel 4.0%
Freestanding 3.2%
Office/Industrial 2.3%
Man. Homes 1.3%
Specialty 1.3%
Short-Term 0.6%
Other Investments 0.0%
TOP TEN LARGEST HOLDINGS AS OF JUNE 30, 2008
as a % of Market Value
- --------------------------------------------------------------------------------
Simon Property Group, Inc. 7.35%
- --------------------------------------------------------------------------------
Vornado Realty Trust 6.65%
- --------------------------------------------------------------------------------
General Growth Properties, Inc. 5.28%
- --------------------------------------------------------------------------------
Prologis 4.60%
- --------------------------------------------------------------------------------
Public Storage 4.40%
- --------------------------------------------------------------------------------
Equity Residential 4.06%
- --------------------------------------------------------------------------------
Nationwide Health Properties Inc. 3.90%
- --------------------------------------------------------------------------------
BRE Properties, Inc. 3.28%
- --------------------------------------------------------------------------------
Kilroy Realty Corp. 3.26%
- --------------------------------------------------------------------------------
Federal Realty Investment Trust 3.26%
- --------------------------------------------------------------------------------
* LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR
THE SIX MONTHS, ONE YEAR, FIVE-YEAR, AND TEN-YEAR PERIODS INDICATED IN THE
REAL ESTATE FUNDS PEER GROUP CONSISTING OF 63, 61, 41 AND 17 UNDERLYING
ANNUITY FUNDS, RESPECTIVELY.
** LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR
THE ONE MONTH PERIOD INDICATED IN THE REAL ESTATE FUNDS PEER GROUP
CONSISTING OF 68 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.
4
<page>
REAL ESTATE SECURITIES FUND
Schedule of Investments June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
REAL ESTATE SECURITIES FUND
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK (REIT) -- 97.3% +
- --------------------------------------------------------------------------------
DIVERSIFIED -- 8.0%
Cousins Properties Inc. 16,040 $ 370,524
Lexington Realty Trust 53,130 724,162
Vornado Realty Trust 61,930 5,449,840
6,544,526
FREESTANDING -- 3.2%
National Retail Properties, Inc. 94,720 1,979,648
Realty Income Corp. 30,710 698,960
2,678,608
HEALTHCARE -- 12.1%
HCP, Inc. 55,540 1,766,727
Health Care REIT Inc. 27,230 1,211,735
Nationwide Health Properties Inc. 101,490 3,195,920
Senior Housing Properties Trust 74,430 1,453,618
Ventas, Inc. 53,790 2,289,840
9,917,840
HOTEL -- 2.1%
Host Hotels & Resorts Inc. 111,080 1,516,242
Sunstone Hotel Investors, Inc. 14,660 243,356
1,759,598
INDUSTRIAL -- 7.5%
AMB Property Corp. 47,210 2,378,440
Prologis 69,410 3,772,434
6,150,874
MAN. HOMES -- 1.3%
Equity Lifestyle Properties, Inc. 24,010 1,056,440
MULTIFAMILY -- 14.9%
AvalonBay Communities, Inc. 22,260 1,984,702
BRE Properties, Inc. 62,190 2,691,583
Camden Property Trust 27,510 1,217,593
Education Realty Trust, Inc. 58,360 679,894
Equity Residential 86,920 3,326,428
Essex Property Trust, Inc. 11,490 1,223,685
Home Properties Inc. 23,900 1,148,634
12,272,519
OFFICE -- 14.8%
Alexandria Real Estate Equities, Inc. 16,660 1,621,684
Boston Properties, Inc. 21,050 1,899,131
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Brandywine Realty Trust 47,470 $ 748,127
Highwoods Properties, Inc. 17,210 540,738
HRPT Properties Trust 148,820 1,007,511
Kilroy Realty Corp. 56,800 2,671,304(b)
Mack-Cali Realty Corp. 21,850 746,615
Maguire Properties, Inc. 46,220 562,498
Parkway Properties, Inc. 16,910 570,374
SL Green Realty Corp. 21,680 1,793,370
12,161,352
OFFICE/INDUSTRIAL -- 2.3%
Duke Realty Corp. 83,360 1,871,432
REGIONAL MALLS -- 14.1%
General Growth Properties, Inc. 123,480 4,325,504
Pennsylvania Real Estate Investment
Trust 22,420 518,799
Simon Property Group, Inc. 67,070 6,028,922
Taubman Centers, Inc. 15,380 748,237
11,621,462
SELF STORAGE -- 4.4%
Public Storage 44,620 3,604,850
SHOPPING CENTERS -- 11.3%
Acadia Realty Trust 20,980 485,687
Developers Diversified Realty Corp. 12,570 436,305
Federal Realty Investment Trust 38,690 2,669,610
Kimco Realty Corp. 73,670 2,543,088
Regency Centers Corp. 40,910 2,418,599
Tanger Factory Outlet Centers 19,930 716,085
9,269,374
SPECIALTY -- 1.3%
Digital Realty Trust, Inc. 25,510 1,043,614
TOTAL COMMON STOCK (REIT)
(COST $87,259,371) 79,952,489
- --------------------------------------------------------------------------------
COMMON STOCK -- 1.8%
- --------------------------------------------------------------------------------
HOTEL -- 1.8%
Starwood Hotels & Resorts
Worldwide, Inc.
(COST $2,150,081) 37,800 1,514,646
TOTAL INVESTMENTS IN SECURITIES
(COST $89,409,452) 81,467,135
See Notes to Schedule of Investments on page 7 and Notes to Financial
Statements.
5
REAL ESTATE SECURITIES FUND
Schedule of Investments June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
VALUE
- --------------------------------------------------------------------------------
OTHER INVESTMENTS -- 0.0%*
- --------------------------------------------------------------------------------
GEI Investment Fund
(COST $6,312) $ 4,797(c)
TOTAL INVESTMENTS IN SECURITIES
(COST $89,415,764) 81,471,932
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 0.6%
- --------------------------------------------------------------------------------
GE Money Market Fund Institutional Class
1.93% 524,057(a,d)
(COST $524,057)
TOTAL INVESTMENTS
(COST $89,939,821) 81,995,989
OTHER ASSETS AND LIABILITIES, NET-- 0.3% 213,520
-----------
NET ASSETS-- 100.0% $82,209,509
===========
See Notes to Schedule of Investments on page 7 and Notes to Financial
Statements.
6
<page>
Notes to Schedule of Investments June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
The views expressed in this document reflect our judgment as of the publication
date and are subject to change at any time without notice. The securities cited
may not represent current or future holdings and should not be considered as a
recommendation to purchase or sell a particular security. See the prospectus for
complete descriptions of investment objectives, policies, risks and permissible
investments.
(a) Coupon amount represents effective yield.
(b) At June 30, 2008, all or a portion of this security was pledged to cover
collateral requirements for futures, options, forward foreign currency
contracts and/or TBA's.
(c) GE Asset Management ("GEAM"), the investment adviser of the Fund, also
serves as investment adviser of the GEI Investment Fund.
(d) GEAM, the investment adviser of the Fund, also serves as investment adviser
of the GE Money Market Fund.
* Less than 0.1%.
+ Percentages are based on net assets as of June 30, 2008.
Abbreviations:
REIT Real Estate Investment Trust
7
<page>
Financial Highlights
Selected data based on a share outstanding throughout the periods indicated
- --------------------------------------------------------------------------------
REAL ESTATE SECURITIES FUND
-----------------------------------------------------------------------------
CLASS 1
-----------------------------------------------------------------------------
6/30/08+ 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 ................. $10.87 $21.49 $19.20 $19.54 $16.78 $13.14
INCOME/(LOSS) FROM INVESTMENT OPERATIONS:
Net investment income ............................. 0.89 0.72 0.65 0.70 0.65 0.50
Net realized and unrealized
gains/(losses) on investments ................. (1.10) (3.87) 5.68 1.62 4.76 0.42
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM
INVESTMENT OPERATIONS ............................. (0.21) (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 ....................... $10.66 $10.87 $21.49 $19.20 $19.54 $16.78
====================================================================================================================================
TOTAL RETURN (A) ..................................... (1.84)% (14.86)% 33.03% 11.78% 32.29% 37.38%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) .......... $82,201 $96,650 $178,317 $143,801 $146,221 $98,294
Ratios to average net assets:
Net investment income* ......................... 3.61% 2.59% 3.08% 3.21% 4.15% 4.65%
Expenses* ...................................... 0.93% 0.90% 0.88% 0.89% 0.90% 0.89%
Portfolio turnover rate ........................... 53% 106% 92% 52% 78% 52%
-----------------
CLASS 4
-----------------
6/30/08+
-----------------
INCEPTION DATE 5/1/08
Net asset value, beginning of period ................. $12.15
INCOME/(LOSS) FROM INVESTMENT OPERATIONS:
Net investment income ............................. 0.15
Net realized and unrealized
gains/(losses) on investments ................. (1.65)
- ------------------------------------------------------------------------
TOTAL INCOME/(LOSS) FROM
INVESTMENT OPERATIONS ............................. (1.50)
- ------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ............................. --
Net realized gains ................................ --
- ------------------------------------------------------------------------
TOTAL DISTRIBUTIONS .................................. --
- ------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ....................... $10.65
========================================================================
TOTAL RETURN (A) ..................................... (12.35)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) .......... $9
Ratios to average net assets:
Net investment income* ......................... 3.25%
Expenses* ...................................... 1.33%
Portfolio turnover rate ........................... 53%
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.
* Annualize for periods less than one year.
+ Unaudited
See Notes to Financial Statements.
8
<page>
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2008 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------
REAL ESATE
SECURITIES
FUND
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments in securities, at market (cost $89,409,452) ........................................... $81,467,135
Investments in affiliated securities, at market (cost $6,312) ..................................... 4,797
Short-term affiliated investments (at amortized cost) ............................................. 524,057
Income receivables ................................................................................ 256,056
Receivable for fund shares sold ................................................................... 94,041
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS .................................................................................. 82,346,086
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased ................................................................. 10,364
Payable to GEAM ................................................................................... 74,423
Accrued other expenses ............................................................................ 51,081
Other liabilities ................................................................................. 709
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES ............................................................................. 136,577
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS ........................................................................................... $82,209,509
====================================================================================================================================
NET ASSETS CONSIST OF:
Capital paid in ................................................................................... 96,852,013
Undistributed (distribution in excess of) net investment income ................................... 1,919,979
Accumulated net realized gain (loss) .............................................................. (8,618,651)
Net unrealized appreciation/(depreciation) on:
Investments ................................................................................... (7,943,832)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS ........................................................................................... $82,209,509
====================================================================================================================================
CLASS 1:
NET ASSETS ........................................................................................... 82,200,741
Shares outstanding ($0.01 par value; unlimited shares authorized) .................................... 7,708,846
Net asset value per share ............................................................................ $10.66
CLASS 4:
NET ASSETS ........................................................................................... 8,768
Shares outstanding ($0.01 par value; unlimited shares authorized) .................................... 823
Net asset value per share ............................................................................ $10.65
See Notes to Financial Statements.
9
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2008 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------
REAL ESATE
SECURITIES
FUND
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividend ........................................................................... $ 1,992,773
Interest ........................................................................... 48,048
Interest from affliated investments ................................................ 12,500
Less: Foreign taxes withheld ....................................................... (968)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME ......................................................................... 2,052,353
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Advisory and administrative fees ................................................... 381,654
Distributors Fees (Note 4)
Class 1 ......................................................................... 7
Transfer agent ..................................................................... 23
Trustee's fees ..................................................................... 1,169
Custody and accounting expenses .................................................... 18,993
Professional fees .................................................................. 10,944
Registration expenses .............................................................. 2,489
Other expenses ..................................................................... 4,887
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES BEFORE WAIVER AND REIMBURSEMENT ....................................... 420,166
- ------------------------------------------------------------------------------------------------------------------------------------
Less: Expenses reimbursed by the adviser
(waiver related to Fund of Fund Investment) .................................. (939)
- ------------------------------------------------------------------------------------------------------------------------------------
Net expenses ....................................................................... 419,227
- ------------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) ......................................................... 1,633,126
====================================================================================================================================
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments ..................................................................... (6,537,363)
INCREASE (DECREASE) IN UNREALIZED APPRECIATION/(DEPRECIATION) ON:
Investments ..................................................................... 3,167,956
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments ............................. (3,369,407)
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ...................... $(1,736,281)
====================================================================================================================================
See Notes to Financial Statements.
10
<page>
STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE
SECURITIES
FUND
- ------------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2008 DECEMBER 31,
(UNAUDITED) 2007
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investments income (loss) ................................................ $ 1,633,126 $ 3,256,939
Net realized gain (loss) on investments, futures, written options,
and foreign currency transactions .......................................... (6,537,363) 29,837,725
Net increase (decrease) in unrealized appreciation/(depreciation)
on investments, futures, written options, and foreign currency
translation ................................................................ 3,167,956 (51,608,095)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations ...................................... (1,736,281) (18,513,431)
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class 1 .................................................................... -- (3,999,441)
Class 4 .................................................................... -- --
Net realized gains
Class 1 .................................................................... -- (35,719,010)
Class 4 .................................................................... -- --
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ............................................................ -- (39,718,451)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations and distributions ............ (1,736,281) (58,231,882)
- ------------------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares
Class 1 .................................................................... 3,109,370 4,445,242
Class 4 .................................................................... 10,000 --
Value of distributions reinvested
Class 1 .................................................................... -- 39,718,451
Class 4 .................................................................... -- --
Cost of shares redeemed
Class 1 .................................................................... (15,823,792) (67,599,080)
Class 4 .................................................................... -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from share transactions .............................. (12,704,422) (23,435,387)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ........................................ (14,440,703) (81,667,269)
NET ASSETS
Beginning of period ............................................................ 96,650,212 178,317,481
- ------------------------------------------------------------------------------------------------------------------------------------
End of period .................................................................. $ 82,209,509 $ 96,650,212
====================================================================================================================================
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD .... $ 1,919,979 $ 286,853
- ------------------------------------------------------------------------------------------------------------------------------------
CHANGES IN FUND SHARES
CLASS 1
Shares sold ....................................................................... 271,115 197,070
Issued for distributions reinvested ............................................... -- 3,637,222
Shares redeemed ................................................................... (1,457,591) (3,235,096)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares ............................................ (1,186,476) 599,196
====================================================================================================================================
CLASS 4
Shares sold ....................................................................... 823 --
Issued for distributions reinvested ............................................... -- --
Shares redeemed ................................................................... -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares ............................................ 823 --
====================================================================================================================================
See Notes to Financial Statements.
11
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
1. ORGANIZATION OF THE COMPANY
GE Investments Funds, Inc. (the "Company") was incorporated under the laws of
the Commonwealth of Virginia on May 14, 1984 and is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company. The Company is composed of thirteen investment
portfolios (collectively the "Funds"), although only the following eleven are
currently being offered: U.S. Equity Fund, S&P 500 Index Fund, Premier Growth
Equity Fund, Core Value Equity Fund, Mid-Cap Equity Fund, Small-Cap Equity Fund,
International Equity Fund, Total Return Fund, Income Fund, Money Market Fund and
Real Estate Securities Fund (the "Fund").
Shares of the Funds of the Company are offered only to insurance company
separate accounts that fund certain variable life insurance contracts and
variable annuity contracts. These insurance companies may include insurance
companies affiliated with GE Asset Management Incorporated ("GEAM"), the
investment adviser and administrator of each of the Funds.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the reporting period. Actual results may differ from
those estimates.
The following summarizes the significant accounting policies of the Fund:
SECURITY VALUATION AND TRANSACTIONS
The Fund's portfolio securities are valued generally on the basis of market
quotations. Equity securities generally are valued at the last reported sales
price on the primary market in which they are traded. Portfolio securities
listed on NASDAQ are valued using the NASDAQ Official Closing Price, which may
not necessarily represent the last sale price. If no sales occurred on the
exchange or NASDAQ that day, the portfolio security generally is valued using
the last reported bid price.
Debt securities (other than short-term securities described below) generally are
valued at an evaluated bid as reported by an independent pricing service. Values
obtained from pricing services are based on various factors such as market
transactions, dealer supplied valuations, security characteristics and other
market data. In the absence of a reliable price from such a pricing service,
debt securities may be valued based on dealer supplied valuations or quotations.
The Fund's written or purchased options are valued at the last sales price, or
if no sales occurred that day, at the last reported bid price. Short-term
investments with remaining maturities of sixty days or less at the time of
purchase are valued on the basis of amortized cost, which approximates market
value.
All assets and liabilities of the Fund initially expressed in foreign currency
values will be converted into U.S. dollars at the WM/Reuters exchange rate
computed at 11:00 a.m., Eastern time.
If prices are not readily available for a portfolio security, or if it is
believed that a price for a portfolio security does not represent its fair
value, the security may be valued using procedures approved by the Fund's Board
of Directors that are designed to establish its "fair" value. Those procedures
require that the fair value of a security be established by the fair valuation
committee. The fair valuation committee follows different protocols for
different types of investments and circumstances. The fair value procedures may
be used to value any investment by the Fund in the appropriate circumstances.
Examples of the types of securities that may be fair valued include: thinly
traded or illiquid investments, high-yield securities or foreign securities.
Foreign securities may be valued with the assistance of an independent fair
value pricing service in circumstances where it is believed that they have been
or would be materially affected by events occurring after the close of the
portfolio security's primary market and before the close of regular trading on
the NYSE. This independent fair value pricing service uses a computerized system
to appraise affected securities and portfolios taking into consideration various
factors and the fair value of such securities may be something other than the
last available quotation or other market price.
GEAM may also separately monitor portfolio securities and, consistent with the
Fund's fair value procedures, apply a different value to a portfolio security
than would be applied had it been priced using market quotations or by an
independent fair value pricing service.
12
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
Determining the fair value of securities involves the application of both
subjective and objective considerations. Security values may differ depending on
the methodology used to determine their values, and may differ from the last
quoted sale or closing price. No assurance can be given that use of these fair
value procedures will always better represent the price at which the Fund could
sell the affected portfolio security.
Security transactions are accounted for as of the trade date. Realized gains and
losses on investments sold are recorded on the basis of identified cost for both
financial statement and federal tax purposes.
The Fund adopted FASB Statement No. 157, FAIR VALUE MEASUREMENTS (FAS 157). FAS
157 establishes a single definition of fair value, a framework for measuring
fair value, and expanded disclosures about fair value measurements.
Various inputs are used in determining the value of the Fund's investments.
These inputs are classified into three broad levels:
Level 1 includes quoted prices in active markets of securities identical to
those of the Fund.
Level 2 includes: 1) quoted prices in active markets for similar securities to
those of the Fund; 2) quoted prices for identical or similar securities to those
of the Fund that trade in markets in which there are few transactions or the
quoted prices are not current; 3) prices based on observable market data such as
interest rates and yield curves, volatilities, bond prepayment speeds, and
credit risk and; 4) prices based principally on observable market data by use of
correlation techniques or other means.
Level 3 includes unobservable market inputs used to fair value securities. These
inputs are based on assumptions that market participants would use to price
securities and may include the adviser's own assumptions.
Other financial instruments are derivative instruments that are not reflected in
TOTAL INVESTMENTS, such as futures, forwards, swaps, and written options
contracts, which are valued based on the unrealized appreciation/depreciation of
the instrument.
Level 1 Level 2 Level 3 Total
- ------------------------------------------------------------------------------------------------------------------------------------
Investments in Securities $ 81,991,192 $4,797 $-- $81,995,989
Other Financial Instruments $ -- $ -- $-- $ --
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.
13
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
The Fund does not isolate the portion of the results of operations resulting
from changes in foreign exchange rates from the fluctuations arising from
changes in the market prices of securities during the period. Such fluctuations
are included in the net unrealized gain or loss from investments. Net realized
gains or losses on foreign currency transactions represent net gains or losses
on sales and maturities of foreign currency contracts, disposition of foreign
currencies, the difference between the amount of net investment income and
withholding taxes accrued and the U.S. dollar amount actually received or paid,
and gains or losses between the trade and settlement date on purchases and sales
of securities. Net unrealized foreign exchange gains and losses arising from
changes in the value of other assets and liabilities as a result of changes in
foreign exchange rates are included as increases or decreases in unrealized
appreciation/depreciation on foreign currency related transactions.
FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or
bond index futures contracts subject to certain limitations. The Fund may invest
in futures contracts to manage its exposure to the stock and bond markets and
fluctuations in currency values. Buying futures tends to increase the Fund's
exposure to the underlying instrument while selling futures tends to decrease
the Fund's exposure to the underlying instrument, or hedge other Fund
investments. The Fund will not enter into a transaction involving futures for
speculative purposes. The Fund's risks in using these contracts include changes
in the value of the underlying instruments, non-performance of the
counterparties under the contracts' terms and changes in the liquidity of the
secondary market for the contracts. Futures contracts are valued at the
settlement price established each day by the board of trade or exchange on which
they principally trade.
Upon entering into a futures contract, the Fund is required to pledge to the
broker an amount of cash and/or other assets equal to a certain percentage of
the contract amount, known as initial margin deposit. Subsequent payments, known
as variation margin, are made or received by the Fund each day, depending on the
daily fluctuation in the fair value of the underlying security. The Fund records
an unrealized gain or loss equal to the daily variation margin. Should market
conditions move unexpectedly, the Fund may not achieve the anticipated benefits
of the futures contracts and may incur a loss. The Fund recognizes a realized
gain or loss on the expiration or closing of a futures contract.
OPTIONS The Fund may purchase and write options, subject to certain limitations.
The Fund may invest in options contracts to manage its exposure to the stock and
bond markets and fluctuations in foreign currency values. Writing puts and
buying calls tend to increase the Fund's exposure to the underlying instrument
while buying puts and writing calls tend to decrease the Fund's exposure to the
underlying instrument, or hedge other Fund 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.
14
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
The Fund may be subject to capital gains and repatriation taxes imposed by
certain countries in which it invests. Such taxes are generally based on income
and/or capital gains earned or repatriated. Taxes are accrued based upon net
investment income, net realized gains and net unrealized appreciation as income
and/or capital gains are earned.
INCOME TAXES The Fund intends to comply with all sections of the Internal
Revenue Code applicable to regulated investment companies including the
distribution of substantially all of its taxable net investment income and net
realized capital gains to its shareholders. Therefore, no provision for federal
income tax has been made. The Fund is treated as a separate taxpayer for federal
income tax purposes.
At June 30, 2008, 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
- -----------------------------------------------------------------------------------------------------------------------
$91,346,229 $1,132,678 $(10,489,230) $(9,356,552)
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.
15
<page>
Notes to Financial Statements June 30, 2008 (unaudited)
- --------------------------------------------------------------------------------
INVESTMENT INCOME Corporate actions (including cash dividends) are recorded on
the ex-dividend date, net of applicable withholding taxes, except for certain
foreign corporate actions, which are recorded as soon after ex-dividend date as
such information becomes available. Interest income is recorded on the accrual
basis. All discounts and premiums on bonds are accreted and amortized,
respectively, to call or maturity date, whichever is shorter, using the
effective yield method.
EXPENSES 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 $150 million with a
number of its affiliates. The credit facility is with its custodian bank, State
Street Bank and Trust Company. The revolving credit facility requires the
payment of a commitment fee equal to 0.09% per annum on the daily unused portion
of the credit facility, payable quarterly. The portion borne by the Funds
generally is borne proportionally based upon net assets. In addition, the
Company has a $100 million uncommitted, unsecured line of credit with State
Street. 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 June 30,
2008.
4. AMOUNTS PAID TO AFFILIATES
GEAM, a registered investment adviser, was retained by the Company's Board of
Directors effective May 1, 1997 to act as investment adviser and administrator
of the Fund. GEAM's compensation for investment advisory and administrative
services is paid monthly based on the average daily net assets of the Fund. The
advisory and administrative fee is stated in the following schedule:
Annualized based on
average daily net assets
- --------------------------------------------------------------------------------
Average Daily Advisory and
Net Assets Administration
of Fund Fees
- --------------------------------------------------------------------------------
First $100 million 0.85%
Next $100 million 0.80%
Over $200 million 0.75%
GENPACT performs certain accounting and certain administration services not
provided by GEAM. For the period ending June 30, 2008, $810 was charged to the
Fund.
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 the Class 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 rate applicable is
0.45% for the Class 4 shares. Currently, Class 1 shares are not subject to a
Rule 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. SUB-ADVISORY FEES
Pursuant to an investment sub-advisory agreement with GEAM, Urdang Securities
Management, Inc. ("Urdang") is the Sub-Adviser to the Fund. Urdang is
responsible for the day-to-day portfolio management of the assets of the Fund,
including the responsibility for making decisions to buy, sell or hold a
particular security, under the general supervision of GEAM and the Board.
For their services, GEAM pays Urdang monthly sub-advisory fees which are
calculated as a percentage of the average daily net assets of the Fund.
6. INVESTMENT TRANSACTIONS
PURCHASES AND SALES OF SECURITIES The cost of purchases and the proceeds from
sales of investments, other than short-term securities and short-term options,
for the period ended June 30, 2008 were as follows:
Purchases Sales
- --------------------------------------------------------------------------------
$46,758,780 $57,528,450
16
<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 59
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 47
POSITION(S) HELD WITH FUND Executive Vice President
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - less than one year
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General
Counsel and Secretary of GEAM since July 2007; Senior Vice President and General
Counsel - Marketing and Client Services (formerly Asset Management Services), at
GEAM and Senior Vice President and General Counsel of GEAMS from February 1997
to June 2007; Vice President and Associate General Counsel of GEAM from October
1992 to February 1997; Secretary of Fund from 1997 to June 2007; Vice President
of Fund from September 2003 to June 2007; Vice President of GE Institutional
Funds and GE LifeStyle Funds from September 2003 to June 2007; Secretary of GE
Institutional Funds and GE LifeStyle Funds from 1997 to June 2007; Vice
President of Elfun Funds and GE Savings & Security Funds from October 2003 to
June 2007; Assistant Secretary of Elfun Funds and GE Savings & Security Funds
from 1998 to June 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional
Funds, GE LifeStyle Funds, Elfun Funds and GE Savings & Security Funds since
July 2007.
17
<page>
Additional Information (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCOTT H. RHODES
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 49
POSITION(S) HELD WITH FUND Treasurer
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 2 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds Operations
Manager since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle
Funds and GE Investments Funds since November 2005 and Elfun Funds and GE
Savings & Security Funds since September 2005; from August 2004 to September
2005 Vice President, U.S. Trust Company, N.A. and Assistant Treasurer of
Excelsior Funds, Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds,
Inc.; from January 2004 to August 2004, Vice President BlackRock Financial
Management, Inc.; from December 1996 to November 2003, Controller - Mutual
Funds, American Skandia Investment Services, Inc. and Assistant Treasurer of
American Skandia Trust and American Skandia Advisor Funds, Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A
OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A
- --------------------------------------------------------------------------------
JEANNE M. LAPORTA
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 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
18
<page>
Additional Information (unaudited)
- --------------------------------------------------------------------------------
NON-INTERESTED DIRECTORS
- --------------------------------------------------------------------------------
JOHN R. COSTANTINO
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 62
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 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 60
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 72
POSITION(S) HELD WITH FUND Director
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 9 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon
Brothers Inc.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40
OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE
Institutional Funds and GE LifeStyle Funds since their inception.
- --------------------------------------------------------------------------------
The Statement of Additional Information for the Fund includes additional
information about the Directors and Officers and is available, without charge,
upon request by calling 1-800-242-0134.
19
<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
Daniel O. Colao, EVP, CHIEF FINANCIAL OFFICER (AS OF JULY 28, 2008)
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)
David Wiederecht, EVP, PRESIDENT - INVESTMENT STRATEGIES
20
<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]
ITEM 2. CODE OF ETHICS.
Applicable only to an annual filing.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Applicable only to an annual filing.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Applicable only to an annual filing.
ITEM 5. Audit Committee of Listed Registrants
Applicable only to Closed-End Management Investment Companies.
ITEM 6. Schedule of Investments.
Attached as part of ITEM 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Applicable only to Closed-End Management Investment Companies.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Applicable only to Closed-End Management Investment Companies.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT
INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
Applicable only to Closed-End Management Investment Companies.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No material changes.
ITEM 11. CONTROLS AND PROCEDURES.
The officers providing the certifications in this report in accordance
with Rule 30a-3 under the Investment Company Act of 1940 have concluded,
based on their evaluation of the registrant's disclosure controls and
procedures (as such term is defined in such rule), that such controls and
procedures are adequate and reasonably designed to achieve the purpose
described in paragraph (c) of such rule.
There were no significant changes in the registrant's internal controls or
in other factors that could significantly affect these controls subsequent
to the date of their last evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
ITEM 12. EXHIBITS.
(a) Not applicable.
(b) Attached hereto as Exhibit 1 and Exhibit 2 are the Certifications of
Michael J. Cosgrove and Scott Rhodes as principal executive officer and
principal financial officer, respectively, as required by Rule 30a-2 under
the Investment Company Act of 1940.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, the Registrant has duly
caused this Report to be signed on its behalf by the undersigned,
thereunto duly authorized.
GE INVESTMENTS FUNDS, INC
By: /S/MICHAEL J. COSGROVE
Michael J. Cosgrove
Chairman, GE INVESTMENTS FUNDS, INC.
Date: September 04, 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: September 04, 2008
By: /S/SCOTT RHODES
Scott Rhodes
TREASURER, GE INVESTMENTS FUNDS, INC.
Date: September 04, 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.