-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JJMCsHt+G/UQ5XYcJQ01rMIAasingiM9uCA8wU/0lwr26rANhM19B1zjdB1LA0dB e7trmNmusNbVeYBo1Jp0ww== 0000746687-07-000104.txt : 20070905 0000746687-07-000104.hdr.sgml : 20070905 20070905115859 ACCESSION NUMBER: 0000746687-07-000104 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20070630 FILED AS OF DATE: 20070905 DATE AS OF CHANGE: 20070905 EFFECTIVENESS DATE: 20070905 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GE INVESTMENT FUNDS INC CENTRAL INDEX KEY: 0000746687 IRS NUMBER: 541278621 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-04041 FILM NUMBER: 071098814 BUSINESS ADDRESS: STREET 1: 3001 SUMMER STREET CITY: STAMFORD STATE: CT ZIP: 06905 BUSINESS PHONE: 203-708-3133 MAIL ADDRESS: STREET 1: 3001 SUMMER STREET CITY: STAMFORD STATE: CT ZIP: 06905 FORMER COMPANY: FORMER CONFORMED NAME: LIFE OF VIRGINIA SERIES FUND INC DATE OF NAME CHANGE: 19920703 0000746687 S000001635 Emerging Markets Fund C000004437 Emerging Markets Fund 0000746687 S000001636 Small-Cap Equity Fund C000004438 Small-Cap Equity Fund 0000746687 S000001637 Total Return Fund C000004439 Class 1 Shares C000033160 Class 2 Shares C000033161 Class 3 Shares C000033162 Class 4 Shares 0000746687 S000001638 Real Estate Securities Fund C000004440 Real Estate Securities Fund 0000746687 S000001639 U.S. Equity Fund C000004441 U.S. Equity Fund 0000746687 S000001640 Value Equity Fund C000004442 Value Equity Fund 0000746687 S000001641 Europe Equity Fund C000004443 Europe Equity Fund 0000746687 S000001643 Income Fund C000004445 Income Fund 0000746687 S000001644 International Equity Fund C000004446 International Equity Fund 0000746687 S000001645 Mid-Cap Equity Fund C000004447 Mid-Cap Equity Fund 0000746687 S000001646 Money Market Fund C000004448 Money Market Fund 0000746687 S000001647 Premier Growth Equity Fund C000004449 Premier Growth Equity Fund 0000746687 S000001648 S&P 500 Index Fund C000004450 S&P 500 Index Fund N-CSRS 1 gei.txt GEI INVESTMENTS FUNDS - CERTIFICATION OF SHAREHOLDER REPORT FOR THE PERIOD ENDING 30TH JUNE, 2007 OMB APPROVAL OMB Number: 3235-0570 Expires: SEPT. 30, 2007 Estimated average burden hours per response: 19.4 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-04041 - ----------------------------------------------------------------- GE INVESTMENTS FUNDS, INC. - ------------------------------------------------------------------ (Exact name of registrant as specified in charter) 3001, SUMMER STREET,STAMFORD, CONNECTICUT, 06905 - ------------------------------------------------------------------- (Address of principal executive offices) (Zip code) GE ASSET MANAGEMENT INC,3001, SUMMER STREET,STAMFORD,CONNECTICUT, 06905 - ------------------------------------------------------------------ (Name and address of agent for service) Registrant"s telephone number, including area code: 800-242-0134 ---------------------------- Date of fiscal year end: 12/31 --------------------------- Date of reporting period: : 06/30/07 ------------------------- ITEM 1. REPORTS TO STOCKHOLDERS. GE Investments Funds, Inc. Income Fund Semi-Annual Report JUNE 30, 2007 [GE logo omitted] GE Investments Funds, Inc. Income Fund Contents - -------------------------------------------------------------------------------- NOTES TO PERFORMANCE .................................................... 1 MANAGER REVIEW AND SCHEDULE OF INVESTMENTS .............................. 2 NOTES TO SCHEDULE OF INVESTMENTS ........................................ 15 FINANCIAL STATEMENTS Financial Highlights ............................................... 16 Statement of Assets and Liabilities ................................ 17 Statement of Operations ............................................ 18 Statements of Changes in Net Assets ................................ 19 Notes to Financial Statements ...................................... 20 ADDITIONAL INFORMATION .................................................. 26 INVESTMENT TEAM ......................................................... 29 This report is prepared for Policyholders of certain variable contracts and may be distributed to others only if preceded or accompanied by the variable contract's current prospectus and the current prospectus of the Funds available for investments thereunder. Notes to Performance June 30, 2007 (unaudited) - ------------------------------------------------------------------------------- Total returns take into account changes in share price and assume reinvestment of dividends and capital gains distributions, if any. Investment returns and net asset value on an investment will fluctuate and you may have a gain or loss when you sell your shares. Periods less than one year are not annualized. Current performance may be lower or higher than that shown. You may call toll-free (800) 242-0134 for performance information as of the most recent month end. Total returns do not reflect expenses associated with the separate account such as administrative fees, account charges and surrender charges, which, if reflected, would reduce the total returns for all periods shown. Shares of the Fund are neither insured nor guaranteed by the U.S. Government, and their prices will fluctuate with market conditions. The Lehman Brothers Aggregate Bond Index (LB Aggregate) is an unmanaged index and do not reflect the actual cost of investing in the instruments that comprise the index. The LB Aggregate Bond Index is a market value-weighted index of investment-grade debt issues, including government, corporate, asset-backed and mortgage-backed securities, with maturities of one year or more. The results shown for the foregoing index assume the reinvestment of net dividends or interest. The peer universe of the underlying annuity funds used in our peer ranking calculation is based on the blend of Lipper peer categories, as shown. Lipper is an independent mutual fund rating service. A Fund's performance may be compared to or ranked within a universe of mutual funds with investment objectives and policies similar but not necessarily identical to the Fund's. Such comparisons or rankings are made on the basis of several factors, including the Fund's objectives and policies, management style and strategy, and portfolio composition, and may change over time if any of those factors change. 1 Income Fund - -------------------------------------------------------------------------------- THE INCOME FUND IS MANAGED BY A TEAM OF PORTFOLIO MANAGERS THAT INCLUDES PAUL M. COLONNA, MARK DELANEY, WILLIAM M. HEALEY, JAMES F. PALMIERI AND VITA MARIE PIKE. AS LEAD PORTFOLIO MANAGER FOR THE INCOME FUND, MR. COLONNA (PICTURED BELOW) HAS OVERSIGHT AUTHORITY BUT DOES NOT POSSESS THE POWER TO VETO THE INVESTMENT DECISIONS OF HIS CO-MANAGERS. PAUL M. COLONNA IS AN EXECUTIVE VICE PRESIDENT OF GE ASSET MANAGEMENT AND PRESIDENT - FIXED INCOME AT GE ASSET MANAGEMENT. SINCE JANUARY 2005, HE HAS LED THE TEAM OF PORTFOLIO MANAGERS FOR THE INCOME FUND. PRIOR TO JOINING GE ASSET MANAGEMENT IN FEBRUARY 2000, MR. COLONNA WAS A SENIOR PORTFOLIO MANAGER WITH THE FEDERAL HOME LOAN MORTGAGE CORPORATION, OVERSEEING THE MORTGAGE INVESTMENT GROUP. MARK DELANEY IS A VICE PRESIDENT OF GE ASSET MANAGEMENT. HE HAS BEEN A MEMBER OF THE PORTFOLIO MANAGEMENT TEAM FOR THE INCOME FUND SINCE JOINING GE ASSET MANAGEMENT IN APRIL 2002. PRIOR TO JOINING GE ASSET MANAGEMENT, MR. DELANEY WAS A SENIOR PORTFOLIO MANAGER AT SMITH GRAHAM SINCE AUGUST 1994. WILLIAM M. HEALEY IS A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT. HE HAS SERVED ON THE PORTFOLIO MANAGEMENT TEAM FOR THE INCOME FUND SINCE SEPTEMBER 1997. PRIOR TO JOINING GE ASSET MANAGEMENT, MR. HEALEY SPENT OVER 10 YEARS IN THE FIXED INCOME GROUP AT METLIFE. JAMES F. PALMIERI IS AN ASSISTANT PORTFOLIO MANAGER OF GEAM. SINCE MARCH 2006, HE HAS MANAGED THE MORTGAGE-BACKED SECURITIES SECTOR FOR THE S&S INCOME FUND. PRIOR TO JOINING GEAM, MR. PALMIERI WAS A DIRECTOR OF INVESTMENTS FOR CONSTITUTION CORPORATE FEDERAL CREDIT UNION FROM FEBRUARY 2005 TO MARCH 2006 AND A PORTFOLIO MANAGER FOR CIGNA INVESTMENT MANAGEMENT FROM JANUARY 2000 TO FEBRUARY 2005. VITA MARIE PIKE IS A VICE PRESIDENT OF GE ASSET MANAGEMENT. SHE HAS SERVED ON THE PORTFOLIO MANAGEMENT TEAM FOR THE INCOME FUND SINCE JUNE 2004. PRIOR TO JOINING GE ASSET MANAGEMENT IN JANUARY 2001, SHE WAS WITH ALLIANCE CAPITAL FOR OVER NINE YEARS SERVING IN A NUMBER OF DIFFERENT CAPACITIES INCLUDING PORTFOLIO MANAGER. Q. HOW DID THE INCOME FUND PERFORM COMPARED TO ITS BENCHMARK AND LIPPER PEER GROUP FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2007? A. For the six-month period ended June 30, 2007, the Income Fund returned 1.02%. The Lehman Brothers Aggregate Bond Index, the Fund's benchmark, returned 0.98% and the Fund's Lipper peer group of 62 Intermediate Investment Grade Debt Funds returned an average of 0.63% for the same period. [photo omitted] 2 Q&A Q. DESCRIBE WHAT HAPPENED IN THE U.S. ECONOMY DURING THE SIX-MONTH PERIOD ENDING JUNE 30, 2007. A. After slumping to a 0.7% growth rate (annualized) in the first quarter, U.S. GDP bounced back in the second quarter with a median estimate of 3.0% (Bloomberg survey of leading economists' forecast). The soft housing market weighed heavily on the economy and there was a curtailment in inventory building in the first quarter of 2007. Employment growth remained healthy through the first half. Monthly change in non-farm payrolls averaged 145,000 for the first six months. Inflation drifted lower but remains on the high side of the Fed's 1-2% comfort zone. The latest reading for the year-over year Personal Consumption Expenditure Core Price Index (the Fed's preferred measure) was 1.9%. The Federal Reserve maintained the fed funds target at 5.25% at each of its first four meetings this year. Worries over the sub-prime loan market and a mid-February drop in the Chinese stock market sent risk premiums higher. Investors quickly started building in expectations for rate cuts from the Fed. As GDP growth came back in the second quarter accompanied by the Fed's stated emphasis on inflation risk, expectations for rate cuts disappeared. By June end, market pricing implied no changes in fed funds through year-end. Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE? A. Sector allocation was the most positive contributor to Fund performance. The Fund's exposure to high yield, which in general outperformed the benchmark by nearly 2%, was the main driver of positive relative return. Specific security selection within BBB-rated corporate bonds also added value. Duration positioning added slightly to relative performance. 3 Income Fund - -------------------------------------------------------------------------------- Understanding Your Fund's Expenses As a shareholder of the Fund you incur transaction and ongoing expenses. Transaction expenses including sales charges on purchase payments, reinvested dividends (or other distributions), and redemption fees directly reduce the investment return of the Fund. Ongoing costs include portfolio management fees, distribution and service fees, professional fees, administrative fees and other Fund expenses. The following example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the period. The information in the following table is based on an investment of $1,000, which is invested at the beginning of the period and held for the entire six-month period ended June 30, 2007. ACTUAL EXPENSES The first section of the table provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your class under the heading "Expenses Paid During Period." HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second section of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholders reports of other funds. Please note that the expenses shown in the table do not reflect any transaction costs, such as sales charges or redemption fees.
JANUARY 1, 2007 - JUNE 30, 2007 - --------------------------------------------------------------------------------------------------------------------------- ACCOUNT VALUE AT ACCOUNT VALUE EXPENSES THE BEGINNING OF AT THE END OF PAID DURING THE PERIOD ($) THE PERIOD ($) THE PERIOD ($)* - --------------------------------------------------------------------------------------------------------------------------- Actual Fund Return** 1,000.00 1,010.17 3.01 - --------------------------------------------------------------------------------------------------------------------------- Hypothetical 5% Return (2.5% for the period) 1,000.00 1,021.58 3.01 - ---------------------------------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.60% (FROM PERIOD JANUARY 1, 2007 - JUNE 30, 2007), MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY 181/365 (TO REFLECT THE SIX MONTH PERIOD). ** ACTUAL FUND RETURN FOR SIX-MONTH PERIOD ENDED JUNE 30, 2007 WAS: 1.02%. 4 Income Fund (unaudited) - -------------------------------------------------------------------------------- CHANGE IN VALUE OF A $10,000 INVESTMENT - -------------------------------------------------------------------------------- [Line chart omitted -- plot points are as follows:] Income Fund LB Aggregate Bond Index 06/97 $10,000.00 $10,000.00 12/97 10,588.61 10,636.34 12/98 11,430.18 11,560.26 12/99 11,267.22 11,465.32 12/00 12,477.30 12,798.28 12/01 13,404.01 13,878.90 12/02 14,729.02 15,302.19 12/03 15,259.26 15,930.26 12/04 15,781.12 16,621.44 12/05 16,102.64 17,025.10 12/06 16,806.51 17,762.93 06/07 16,977.43 17,936.58 Income Fund (ending value $16,977) LB Aggregate Bond Index (ending value $17,937) AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2007 - ----------------------------------------------------------------------------- SIX ONE FIVE TEN MONTHS YEAR YEAR YEAR - ----------------------------------------------------------------------------- Income Fund 1.02% 5.88% 4.04% 5.44% - ----------------------------------------------------------------------------- LB Aggregate Bond Index 0.98% 6.12% 4.48% 6.02% - ----------------------------------------------------------------------------- Lipper peer group average* 0.63% 5.51% 4.43% 5.60% - ----------------------------------------------------------------------------- Inception date 1/3/95 - ----------------------------------------------------------------------------- INVESTMENT PROFILE A fund designed for investors who seek maximum income consistent with prudent investment management and the preservation of capital by investing at least 80% of its net assets in debt securities under normal circumstances. QUALITY RATINGS AS OF JUNE 30, 2007 as a % of Market Value - -------------------------------------------------------------------------------- MOODY'S/S&P/ PERCENTAGE OF FITCH RATING** MARKET VALUE - -------------------------------------------------------------------------------- Aaa / AAA 77.54% - -------------------------------------------------------------------------------- Aa / AA 4.39% - -------------------------------------------------------------------------------- A / A 3.34% - -------------------------------------------------------------------------------- Baa / BBB 5.65% - -------------------------------------------------------------------------------- Ba / BB and lower 9.08% - -------------------------------------------------------------------------------- PORTFOLIO COMPOSITION AS OF JUNE 30, 2007 as a % of Market Value - -------------------------------------------------------------------------------- Market Value of $186,200 (in thousands) [Pie chart omitted -- plot points are as follows:] Mortgage-Backed 34.9% Asset-Backed and Other 27.8% Corporate Notes 21.0% U.S. Treasuries 13.6% Federal Agencies 2.7% * LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR THE SIX MONTHS, ONE YEAR, FIVE-YEAR, AND TEN-YEAR PERIODS INDICATED IN THE INTERMEDIATE INVESTMENT GRADE DEBT FUNDS PEER GROUP CONSISTING OF 62, 62, 45 AND 16 UNDERLYING ANNUITY FUNDS, RESPECTIVELY. ** MOODY'S INVESTORS SERVICES INC., STANDARD & POOR'S AND FITCH ARE NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATIONS. *** LESS THAN 0.01% SEE NOTES TO PERFORMANCE ON PAGE 1 FOR FURTHER INFORMATION, INCLUDING AN EXPLANATION OF LIPPER PEER CATEGORIES. PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE AND THE GRAPH AND TABLE DO NOT REFLECT THE DEDUCTION OF TAXES. 5 INCOME FUND Schedule of Investments June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- INCOME FUND - -------------------------------------------------------------------------------- PRINCIPAL AMOUNT VALUE - -------------------------------------------------------------------------------- BONDS AND NOTES -- 106.9%+ - -------------------------------------------------------------------------------- U.S. TREASURIES -- 18.6% U.S. Treasury Bonds 4.50% 02/15/36 $ 135,000 $ 122,353(h) 4.75% 02/15/37 4,411,000 4,161,514(h) U.S. Treasury Notes 4.50% 04/30/12 1,120,000 1,099,381(h) 4.63% 11/15/09 - 02/15/17 10,639,000 10,373,947(h) 4.75% 05/31/12 2,211,000 2,193,843(h) 4.88% 05/31/09 7,436,000 7,435,033(h) 25,386,071 FEDERAL AGENCIES -- 3.7% Federal Home Loan Mortgage Corp. 4.75% 03/05/12 2,280,000 2,228,388(h) 4.88% 02/09/10 1,805,000 1,791,511(h) 5.00% 02/16/17 1,025,000 989,959(h) 5,009,858 AGENCY MORTGAGE BACKED -- 25.9% Federal Home Loan Mortgage Corp. 4.50% 06/01/33 - 02/01/35 282,089 256,767(f) 5.00% 07/01/35 - 10/01/35 454,756 427,413(f) 5.50% 05/01/20 71,820 70,794(f) 6.00% 04/01/17 - 05/01/35 981,656 979,403(f) 6.50% 01/01/27 - 08/01/36 596,454 604,629(f) 7.00% 10/01/16 - 08/01/36 221,713 228,374(f) 7.50% 11/01/09 - 09/01/33 26,296 27,275(f) 8.00% 09/01/09 - 11/01/30 25,332 26,569(f) 8.50% 04/01/30 - 05/01/30 28,075 30,069(f) Federal National Mortgage Assoc. 4.00% 05/01/19 - 06/01/19 276,365 256,114(f) 4.50% 05/01/18 - 12/01/34 1,600,884 1,511,901(f) 5.00% 03/01/34 - 01/01/37 597,332 561,490(f) 5.26% 04/01/37 159,115 157,184(g) 5.44% 04/01/37 14,332 14,244(g) 5.50% 12/01/13 - 12/01/35 751,285 736,148(f) 5.53% 04/01/37 200,647 199,786(g) 5.56% 03/01/37 13,715 13,667(g) 5.62% 04/01/37 356,223 355,374(g) 5.64% 06/01/37 264,736 264,328(g) 5.67% 05/01/37 99,732 99,580(g) 5.69% 04/01/37 129,612 129,557(g) 5.71% 04/01/37 512,492 512,447(g) 5.85% 06/01/37 319,990 320,970(g) 6.00% 06/01/14 - 07/01/35 1,755,565 1,744,384(f) 6.50% 07/01/17 - 02/01/37 2,109,889 2,140,418(f) PRINCIPAL AMOUNT VALUE - -------------------------------------------------------------------------------- 7.00% 03/01/15 - 06/01/36 $ 728,979 $ 752,154 (f) 7.50% 12/01/09 - 03/01/34 189,950 197,740 (f) 8.00% 12/01/12 - 11/01/33 138,845 146,320 (f) 8.50% 05/01/31 6,142 6,593 (f) 9.00% 04/01/16 - 12/01/22 23,869 25,314 (f) 5.00% TBA 7,611,190 7,172,892 (b) 5.50% TBA 8,459,000 8,213,026 (b) 6.00% TBA 3,470,000 3,432,045 (b) 6.50% TBA 1,735,000 1,751,266 (b) Government National Mortgage Assoc. 4.50% 08/15/33 - 09/15/34 508,903 469,252 (f) 6.00% 04/15/27 - 09/15/36 523,428 522,230 (f) 6.13% 11/20/22 - 12/20/24 7,578 7,662(f,g) 6.38% 02/20/23 - 02/20/26 16,253 16,401(f,g) 6.50% 04/15/19 - 08/15/36 464,263 472,538 (f) 7.00% 03/15/12 - 10/15/36 318,980 329,366 (f) 7.50% 11/15/31 - 10/15/33 10,768 11,261 (f) 8.00% 12/15/29 3,710 3,938 (f) 8.50% 10/15/17 23,184 24,668 (f) 9.00% 11/15/16 - 12/15/21 58,342 62,691 (f) 5.50% TBA 35,000 33,961 (b) 35,320,203 AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 5.2% Federal Home Loan Mortgage Corp. 1.13% 04/15/37 522,340 24,612(e,g) 1.33% 10/15/18 - 04/25/37 806,135 38,672(e,f,g) 1.43% 05/15/37 724,565 33,794(e,g) 1.83% 12/15/30 947,873 39,544(e,f,g) 1.88% 09/15/36 503,159 34,278(e,g) 2.46% 09/15/36 446,511 39,767(e,f,g) 3.98% 12/15/33 150,000 112,578(f,g) 4.50% 04/15/13 - 03/15/19 737,057 69,438(e,f) 5.00% 12/15/13 - 12/01/34 4,775,963 974,826(e,f) 5.50% 04/15/17 - 06/15/33 576,801 115,432(e,f) 5.50% 04/15/26 - 12/15/36 1,603,675 1,579,700 6.00% 03/15/28 457,928 461,097 7.50% 01/15/16 51,111 52,526 (f) 7.50% 07/15/27 14,779 3,091(e,f) 8.00% 02/01/23 - 07/01/24 7,349 1,869(e,f) 8.25% 06/01/26 60,000 74,895(f,i) 24.46% 09/25/43 1,750,891 19,365(c,e,f,g) Federal Home Loan Mortgage Corp. REMICS 6.00% 01/15/30 510,000 514,482 Federal Home Loan Mortgage STRIPS 7.24% 08/01/27 1,791 1,397(c,d,f) Federal National Mortgage Assoc STRIPS (Class 1) 5.23% 11/01/34 378,839 266,586(c,d,f) See Notes to Schedule of Investments on page 15 and Notes to Financial Statements. 6 INCOME FUND Schedule of Investments June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- PRINCIPAL AMOUNT VALUE - -------------------------------------------------------------------------------- Federal National Mortgage Assoc STRIPS (Class 2) 7.50% 11/01/23 $ 45,065 $ 12,344(e,f) 8.00% 08/01/23 - 07/01/24 15,916 4,031(e,f) 8.50% 07/25/22 758 164(e,f) 9.00% 05/25/22 490 103(e,f) Federal National Mortgage Assoc. 1.13% 05/25/37 - 06/25/37 6,167,938 305,976(e,g) 1.19% 12/25/42 117,841 3,903(e,f,g) 1.45% 03/25/37 411,897 25,661(e,g) 1.68% 10/25/29 500,325 24,734(e,f,g) 1.78% 12/25/30 480,189 21,983(e,f,g) 1.88% 06/25/36 - 07/25/37 5,893,352 392,332(e,f,g) 2.18% 05/25/18 839,808 50,565(e,f,g) 2.28% 09/25/42 1,227,180 65,194(e,f,g) 2.33% 04/25/17 - 10/25/17 1,062,926 59,944(e,f,g) 2.38% 08/25/16 308,962 12,266(e,f,g) 2.78% 06/25/42 422,925 25,965(e,f,g) 4.00% 02/25/28 25,111 24,593 (f) 4.50% 05/25/18 135,542 12,453(e,f) 4.75% 11/25/14 71,993 3,892(e,f) 5.00% 08/25/17 - 02/25/32 204,832 22,761(e,f) 5.50% 03/25/29 - 03/25/33 545,000 540,928 8.00% 07/25/14 119,839 121,130 (f) Federal National Mortgage Assoc. (Class 2) 5.50% 12/01/33 - 05/25/37 99,313 25,859 (e) Federal National Mortgage Assoc. (Class S) 1.78% 02/25/31 450,926 21,023(e,f,g) Federal National Mortgage Assoc. REMIC 1.88% 01/25/37 1,209,658 76,741(e,f,g) 4.50% 11/25/13 166,374 6,216(e,f) 4.91% 03/25/31 438,578 413,370(f,g) 5.00% 10/25/22 129,879 20,924(e,f) 7.00% 09/25/20 1,000 1,006 (f) Federal National Mortgage Assoc. REMIC (Class B) 6.13% 12/25/22 474 391(c,d,f) Federal National Mortgage Assoc. REMIC (Class J) 1080.91% 03/25/22 7 52(e,f) Federal National Mortgage Assoc. REMIC (Class K) 1008.00% 05/25/22 11 289(e,f) Federal National Mortgage Assoc. STRIPS (Class 2) 5.00% 08/01/34 1,296,348 337,456 (e) 7,092,198 PRINCIPAL AMOUNT VALUE - -------------------------------------------------------------------------------- ASSET BACKED -- 12.3% BA Credit Card Trust 5.32% 08/15/12 $3,500,000 $ 3,500,000(f,g) Bank One Issuance Trust 3.59% 05/17/10 85,000 84,698(f) Capital One Master Trust (Class C) 6.70% 06/15/11 200,000 202,348(a,f) Carmax Auto Owner Trust 4.35% 03/15/10 131,000 129,678(f) Chase Funding Mortgage Loan Asset-Backed Certificates 5.60% 02/25/33 75,075 75,100(f,g) 5.75% 05/25/32 32,000 30,096(f) Citibank Credit Card Issuance Trust 4.45% 04/07/10 274,000 271,656(f) Countrywide Asset-Backed Certificates 5.75% 05/25/33 18,750 18,759(f,g) GSAA Trust 5.38% 10/25/36 1,460,213 1,460,209(f,g) Honda Auto Receivables Owner Trust (Class A) 4.15% 10/15/10 146,000 144,251(f) JP Morgan Mortgage Acquisition Corp. 5.47% 03/01/37 1,000,000 999,440(g) Mid-State Trust 7.54% 07/01/35 2,634 2,779(f) Option One Mortgage Loan Trust 5.45% 06/25/37 1,000,000 1,000,554(g) Peco Energy Transition Trust 6.52% 12/31/10 192,000 197,625(f) Residential Asset Securities Corp. 5.82% 07/25/32 9,155 9,157(f,g) Superior Wholesale Inventory Financing Trust (Class A) 5.50% 06/15/10 2,000,000 2,004,965(f,g) Swift Master Auto Receivables Trust (Class A) 5.42% 06/15/12 1,500,000 1,500,000(g) Volkswagen Auto Lease Trust (Class A) 3.94% 10/20/10 88,000 87,727(f) Washington Mutual Master Note Trust 5.35% 05/15/14 5,000,000 5,000,000(a,g) Wells Fargo Home Equity Trust 3.97% 05/25/34 62,968 61,151(f,g) 16,780,193 See Notes to Schedule of Investments on page 15 and Notes to Financial Statements. 7 INCOME FUND Schedule of Investments June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- PRINCIPAL AMOUNT VALUE - -------------------------------------------------------------------------------- CORPORATE NOTES -- 27.3% Abbey National PLC 7.95% 10/26/29 $200,000 $ 239,851(f) AES Eastern Energy LP 9.67% 01/02/29 150,000 187,055(f) AES Ironwood LLC 8.86% 11/30/25 260,071 288,679(f) Air Jamaica Ltd. 9.38% 07/08/15 130,000 139,100(a,f) Allied World Assurance Holdings Ltd. 7.50% 08/01/16 110,000 115,673(f) American Electric Power Company, Inc. (Series D) 5.25% 06/01/15 90,000 86,444(f) American International Group, Inc. 6.25% 05/01/36 155,000 157,754(f) American Railcar Industries, Inc. 7.50% 03/01/14 60,000 59,700(f) Amgen Inc. 5.85% 06/01/17 165,000 162,307(a,f) Aramark Corp. 8.50% 02/01/15 135,000 137,363(a,f) Arizona Public Service Co. 6.25% 08/01/16 165,000 165,776(f) BAC CAP TRUST V 5.63% 03/08/35 180,000 160,562(f) Banco Santander Chile 5.38% 12/09/14 215,000 209,728(a,f) BanColombia S.A. 6.88% 05/25/17 80,000 77,500(f) Basell AF SCA 8.38% 08/15/15 375,000 359,063(a) BellSouth Corp. 4.20% 09/15/09 100,000 97,321(f) 6.55% 06/15/34 185,000 184,358(f) Bertin Ltd. 10.25% 10/05/16 100,000 109,500(a,f) BJ Services Co. 5.75% 06/01/11 165,000 164,541(f) Bristol-Myers Squibb Co. 5.88% 11/15/36 100,000 94,116(f) British Telecommunications PLC 8.63% 12/15/10 65,000 71,048(f) Cablevision Systems Corp. 8.00% 04/15/12 50,000 49,375(f) Capital One Bank 6.50% 06/13/13 75,000 76,923(f) Carolina Power & Light Co. 5.15% 04/01/15 80,000 76,715(f) 5.70% 04/01/35 45,000 41,904(f) 6.13% 09/15/33 235,000 232,615(f) PRINCIPAL AMOUNT VALUE - -------------------------------------------------------------------------------- Chaoda Modern Agriculture 7.75% 02/08/10 $130,000 $ 120,900(a,f) Chesapeake Energy Corp. 6.63% 01/15/16 180,000 173,250(a,f) Chubb Corp. 6.00% 05/11/37 140,000 133,872(f) CIT Group, Inc. 5.13% 09/30/14 50,000 46,866(f) Citigroup, Inc. 5.13% 02/14/11 220,000 217,250(f) Citizens Communications Co. 7.13% 03/15/19 450,000 425,250(f) Clarendon Alumina Production Ltd. 8.50% 11/16/21 255,000 270,300(a,f) Clear Channel Communications, Inc. 4.25% 05/15/09 90,000 86,984(f) 4.50% 01/15/10 390,000 372,661(f) CMS Energy Corp. 7.75% 08/01/10 130,000 135,185(f) Commonwealth Bank of Australia 6.02% 03/29/49 160,000 156,200(a,f,g) Constellation Brands, Inc. 7.25% 05/15/17 275,000 268,125(a,f) Consumers Energy Co. 5.15% 02/15/17 125,000 117,478(f) Corrections Corp of America 7.50% 05/01/11 165,000 167,269(f) COX Communications, Inc. 7.13% 10/01/12 220,000 232,204(f) 7.75% 11/01/10 130,000 138,202(f) CRH America, Inc. 6.00% 09/30/16 110,000 108,762(f) CSC Holdings, Inc. (Series B) 8.13% 07/15/09 205,000 209,100(f) CSX Corp. 6.15% 05/01/37 165,000 158,095(f) CSX Transportation, Inc. 9.75% 06/15/20 105,000 134,177(f) DaimlerChrysler NA Holding Corp. 4.05% 06/04/08 110,000 108,567(f) DBS Bank Ltd. 5.00% 11/15/19 235,000 221,096(a,f,g) Deluxe Corp. 3.50% 10/01/07 300,000 297,000 Denny's Holdings Inc. 10.00% 10/01/12 300,000 316,500 Dex Media West LLC 8.50% 08/15/10 460,000 476,675 Dillard's, Inc. 6.63% 11/15/08 390,000 390,975 Dominion Resources, Inc. (Series B) 6.30% 09/30/66 395,000 395,552(f,g) See Notes to Schedule of Investments on page 15 and Notes to Financial Statements. 8 INCOME FUND Schedule of Investments June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- PRINCIPAL AMOUNT VALUE - -------------------------------------------------------------------------------- Dover Corp. 6.50% 02/15/11 $ 90,000 $ 92,589(f) 6.65% 06/01/28 60,000 63,645(f) Duke Energy Corp. 5.38% 01/01/09 50,000 49,883(f) Dynegy Holdings Inc. 7.75% 06/01/19 260,000 241,800(a) Echostar DBS Corp. 7.00% 10/01/13 460,000 453,100(f) Edison Mission Energy 7.00% 05/15/17 300,000 282,750(a) EI Du Pont de Nemours & Co. 4.88% 04/30/14 110,000 104,376(f) El Paso Electric Co. 6.00% 05/15/35 90,000 83,934 Embarq Corp. 7.08% 06/01/16 165,000 165,758(f) Empresa Energetica de Sergipe and Sociedade Anonima de Eletrificaao da Paraiba 10.50% 07/19/13 115,000 128,225(a,f) Equistar Chemicals LP 8.75% 02/15/09 260,000 269,100 Federated Retail Holdings Inc. 5.35% 03/15/12 220,000 215,963 FirstEnergy Corp. (Series B) 6.45% 11/15/11 225,000 230,718(f) Freescale Semiconductor Inc. 8.88% 12/15/14 300,000 286,500(a) Galaxy Entertainment Finance Company Ltd. 9.88% 12/15/12 100,000 108,125(f) Gaz Capital for Gazprom 6.51% 03/07/22 335,000 330,645(a) Georgia Gulf Corp. 9.50% 10/15/14 115,000 114,425 Globo Comunicacoes e Participacoes S.A. 7.25% 04/26/22 100,000 96,625(a) GMAC LLC 5.13% 05/09/08 390,000 385,129 5.85% 01/14/09 160,000 157,686 Goldman Sachs Group, Inc. 6.60% 01/15/12 705,000 730,930(f) 6.88% 01/15/11 220,000 228,966 GTE Corp. 6.94% 04/15/28 240,000 245,636(f) Harrah's Operating Company, Inc. 5.38% 12/15/13 220,000 186,450 HCA Inc. 9.13% 11/15/14 390,000 409,988(a,f) Hexion US Finance Corp. 9.75% 11/15/14 260,000 269,100 PRINCIPAL AMOUNT VALUE - -------------------------------------------------------------------------------- Hospira, Inc. 5.55% 03/30/12 $160,000 $ 158,155 HSBC Bank USA NA 4.63% 04/01/14 150,000 140,174 HSBC Capital Funding LP (Series 1) 9.55% 12/31/49 65,000 71,777(a,f,g) HSBC Finance Corp. 6.75% 05/15/11 95,000 98,485 HSBC Holdings PLC 6.50% 05/02/36 100,000 102,669(f) Hutchison Whampoa Finance CI Ltd. (Series C) 7.50% 08/01/27 285,000 313,860(a,f) Hydro Quebec 8.50% 12/01/29 75,000 100,712(f) Idearc, Inc. 8.00% 11/15/16 260,000 262,600 IIRSA Norte Finance Ltd. 8.75% 05/30/24 149,868 173,847(a,f) Industrias Unidas S.A. 11.50% 11/15/16 140,000 147,350(a,f) ING Capital Funding TR III 8.44% 12/29/49 175,000 190,012(g) ING Groep N.V. 5.78% 12/29/49 185,000 178,352(g) Inmarsat Finance PLC 7.25% 11/15/12 335,000 319,506(c,i) International Steel Group Inc. 6.50% 04/15/14 145,000 147,359 Interoceanica IV Finance Ltd. 4.19% 11/30/18 150,000 93,435(a,c) 4.23% 11/30/25 150,000 69,375(a,c) IPSCO, Inc. 8.75% 06/01/13 120,000 127,125 iStar Financial, Inc. (REIT) 7.00% 03/15/08 40,000 40,324(f) JBS S.A. 9.38% 02/07/11 140,000 144,900 JP Morgan Chase & Co. 7.00% 11/15/09 195,000 201,493(f) JP Morgan Chase Bank 5.88% 06/13/16 275,000 274,506 Kansas Gas & Electric 5.65% 03/29/21 105,000 100,734(f) Kazkommerts International BV 7.00% 11/03/09 170,000 170,646(a) Landsbanki Islands 6.06% 08/25/09 170,000 171,766(a,f,g) Libbey Glass Inc. 12.38% 06/01/11 145,000 160,225(g) Lippo Karawaci Finance BV 8.88% 03/09/11 150,000 149,383 See Notes to Schedule of Investments on page 15 and Notes to Financial Statements. 9 INCOME FUND Schedule of Investments June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- PRINCIPAL AMOUNT VALUE - -------------------------------------------------------------------------------- Lloyds TSB Group PLC 6.27% 12/31/49 $100,000 $ 94,868(a,f,g) Lukoil International Finance BV 6.36% 06/07/17 110,000 106,370(a) Majestic Star Casino LLC 9.50% 10/15/10 300,000 312,000(f) Marfrig Overseas Ltd. 9.63% 11/16/16 140,000 146,300(a) Markel Corp. 7.35% 08/15/34 60,000 61,986(f) MBIA, Inc. 5.70% 12/01/34 90,000 82,689 Mediacom LLC 9.50% 01/15/13 230,000 235,175(f) Merck & Company, Inc. 5.75% 11/15/36 70,000 65,349(f) Metropolitan Life Global Funding I 4.25% 07/30/09 185,000 181,196(a,f) MGM Mirage 7.50% 06/01/16 170,000 161,288 Midamerican Energy Holdings Co. 6.13% 04/01/36 115,000 111,102(f) Mizuho Financial Group Cayman Ltd. 8.38% 12/29/49 75,000 78,314 Mohegan Tribal Gaming Authority 6.38% 07/15/09 20,000 19,800 8.00% 04/01/12 270,000 278,775(f) MUFG Capital Finance 1 Ltd. 6.35% 07/29/49 100,000 98,145(f,g) Munich Re America Corp. (Series B) 7.45% 12/15/26 105,000 116,822(f) NAK Naftogaz Ukrainy 8.13% 09/30/09 100,000 99,969 Nakilat Inc. 6.07% 12/31/33 215,000 201,468(a,f) 6.27% 12/31/33 130,000 123,466(a,f) Nelnet, Inc. 5.13% 06/01/10 205,000 197,643(f) Nevada Power Co. (Series N) 6.65% 04/01/36 75,000 75,249(f) Nexen Inc. 6.40% 05/15/37 230,000 220,610 Nisource Finance Corp. 5.45% 09/15/20 165,000 150,046(f) 7.88% 11/15/10 50,000 53,410(f) Norfolk Southern Corp. 8.63% 05/15/10 155,000 167,294(f) Norfolk Southern Railway Co. 9.75% 06/15/20 170,000 218,111(f) Nortel Networks Ltd. 10.75% 07/15/16 130,000 143,650(a,f) Northeast Utilities (Series B) 3.30% 06/01/08 235,000 229,840(f) PRINCIPAL AMOUNT VALUE - -------------------------------------------------------------------------------- Northern States Power Co. 6.25% 06/01/36 $ 65,000 $ 66,248(f) NorthWestern Corp. 5.88% 11/01/14 85,000 82,487(f) Ohio Power Co. (Series E) 6.60% 02/15/33 65,000 67,264(f) ONEOK Partners LP 5.90% 04/01/12 110,000 110,626(f) OPTI Canada Inc. 8.25% 12/15/14 265,000 268,975(a,f) Orion Power Holdings Inc. 12.00% 05/01/10 260,000 293,800 Owens Brockway Glass Container Inc. 8.88% 02/15/09 210,000 213,675 Pacific Bell 7.13% 03/15/26 85,000 89,674(f) Pacific Gas & Electric Co. 5.80% 03/01/37 105,000 98,017 PanAmSat Corp. 9.00% 08/15/14 240,000 250,200(f) Pemex Finance Ltd. 9.03% 02/15/11 48,750 51,600(f) Pemex Project Funding Master Trust 6.13% 08/15/08 265,000 266,031(f) 7.38% 12/15/14 30,000 32,540(f) 7.88% 02/01/09 65,000 67,204 Petrobras International Finance Co. 6.13% 10/06/16 110,000 107,800(f) Playtex Products, Inc. 8.00% 03/01/11 130,000 133,900(f) PNC Preferred Funding Trust I 6.52% 12/31/49 225,000 227,612(a,g) Potomac Edison Co. 5.35% 11/15/14 95,000 91,991(f) Prudential Financial, Inc. 5.70% 12/14/36 165,000 152,276(f) 6.10% 06/15/17 105,000 106,184 Puget Sound Energy, Inc. 3.36% 06/01/08 125,000 122,597(f) 5.48% 06/01/35 110,000 96,595(f) Puget Sound Energy, Inc. (Series A) 6.97% 06/01/67 210,000 210,000(g) Pulte Homes, Inc. 4.88% 07/15/09 130,000 126,039(f) Quebecor World Capital Corp. 4.88% 11/15/08 390,000 378,300 Rabobank Capital Funding Trust 5.25% 12/29/49 130,000 121,721(a,f,g) Rede Empresas de Energia Eletrica S.A. 11.13% 04/02/49 150,000 155,625(a) See Notes to Schedule of Investments on page 15 and Notes to Financial Statements. 10 INCOME FUND Schedule of Investments June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- PRINCIPAL AMOUNT VALUE - -------------------------------------------------------------------------------- Reichhold Industries, Inc. 9.00% 08/15/14 $130,000 $ 132,600(a,f) Reliant Energy, Inc. 7.88% 06/15/17 100,000 97,250 Residential Capital LLC 6.38% 06/30/10 220,000 216,959 6.46% 04/17/09 220,000 219,635 (g) Resona Bank Ltd. 5.85% 09/29/49 215,000 205,566(a,f,g) Rock-Tenn Co. 8.20% 08/15/11 285,000 293,550 Rouse Company LP (REIT) 6.75% 05/01/13 165,000 164,853(a,f) Royal Bank of Scotland Group PLC 5.00% 10/01/14 115,000 110,062 (f) RSHB Capital S.A. 6.30% 05/15/17 100,000 97,880 (a) Sabine Pass LNG LP 7.25% 11/30/13 185,000 183,613 (a) 7.50% 11/30/16 265,000 263,675 (a) Security Benefit Life Insurance 8.75% 05/15/16 120,000 137,651 (a) Seitel, Inc. 9.75% 02/15/14 300,000 297,000 (a) Sierra Pacific Resources 8.63% 03/15/14 450,000 482,990 Simon Property Group, L.P. (REIT) 4.60% 06/15/10 115,000 111,977 (f) Skandinaviska Enskilda Banken AB 7.50% 03/29/49 250,000 259,108(a,f,g) SLM Corp. 4.50% 07/26/10 390,000 360,750 5.66% 01/27/14 342,000 296,624 (g) Southern Copper Corp. 7.50% 07/27/35 145,000 155,192 Southern Natural Gas Co. 5.90% 04/01/17 75,000 72,541 (a) Sovereign Capital Trust VI 7.91% 06/13/36 320,000 341,946 (f) Sprint Capital Corp. 7.63% 01/30/11 660,000 694,943 Stallion Oilfield Finance Corp. 9.75% 02/01/15 260,000 265,200 (a) Standard Chartered Bank Hong Kong Ltd. 4.38% 12/03/14 210,000 204,120 (g) Station Casinos Inc. 7.75% 08/15/16 20,000 19,800 (f) Stewart Enterprises, Inc. 6.25% 02/15/13 135,000 129,938 (f) Swift Energy Co. 7.13% 06/01/17 300,000 285,750 PRINCIPAL AMOUNT VALUE - -------------------------------------------------------------------------------- Telecom Italia Capital S.A. 6.20% 07/18/11 $195,000 $ 197,569 Telefonica Emisiones SAU 5.86% 02/04/13 150,000 149,674 Tennessee Gas Pipeline Co. 7.63% 04/01/37 85,000 92,991 8.38% 06/15/32 110,000 128,986 Tesoro Corp. 6.50% 06/01/17 80,000 78,200(a) Titan Petrochemicals Group Ltd. 8.50% 03/18/12 100,000 95,250(a) TNK-BP Finance S.A. 6.13% 03/20/12 200,000 195,400(a) 6.63% 03/20/17 100,000 96,880(a) Tronox Worldwide LLC 9.50% 12/01/12 180,000 187,650(f) UBS Preferred Funding Trust I 8.62% 10/29/49 125,000 135,761(g) United Overseas Bank Ltd. 5.38% 09/03/19 185,000 178,281(a,g) Valspar Corp. 5.63% 05/01/12 110,000 108,596 VeraSun Energy Corp. 9.38% 06/01/17 290,000 269,700(a) Verizon Global Funding Corp. 7.25% 12/01/10 220,000 231,877 Verizon Pennsylvania, Inc. 8.35% 12/15/30 70,000 80,511(f) 8.75% 08/15/31 110,000 133,241(f) Vitro S.A. de C.V. 8.63% 02/01/12 100,000 101,500(a) VTB Capital S.A. 5.96% 08/01/08 115,000 115,115(a,f,g) Weatherford International, Inc. 5.95% 06/15/12 170,000 171,526(a) Westar Energy, Inc. 7.13% 08/01/09 60,000 61,366(f) Westlake Chemical Corp. 6.63% 01/15/16 250,000 236,875(f) Windstream Corp. 8.63% 08/01/16 285,000 301,388 Wisconsin Electric Power 5.70% 12/01/36 40,000 37,651(f) 37,171,359 NON-AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 13.5% Banc of America Commercial Mortgage Inc. 4.13% 07/10/42 200,000 194,681(f) 5.32% 10/10/11 148,000 145,958(f) 5.69% 03/10/17 800,000 791,530(f) See Notes to Schedule of Investments on page 15 and Notes to Financial Statements. 11 INCOME FUND Schedule of Investments June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- PRINCIPAL AMOUNT VALUE - -------------------------------------------------------------------------------- Banc of America Commercial Mortgage Inc. (Class A) 5.79% 05/11/35 $ 289,169 $ 291,358 (f) Banc of America Commercial Mortgage Inc. (Class C) 5.70% 04/10/17 100,000 97,184 (f) Banc of America Funding Corp. 5.74% 03/20/36 69,700 69,073(f,g) 5.84% 02/20/36 174,467 173,775(f,g) Banc of America Mortgage Securities (Class B) 5.38% 01/25/36 74,614 72,545(f,g) Bank of America Alternative Loan Trust 6.50% 07/25/35 74,733 75,094 (f) Bear Stearns Commercial Mortgage Securities 5.48% 10/12/41 245,000 243,005(f,g) 5.53% 10/12/41 245,000 241,418(f,g) 6.02% 02/14/31 300,000 301,597 (f) Bear Stearns Commercial Mortgage Securities (Class A) 5.66% 06/11/40 600,000 600,537 (g) CalSTRS Trust 4.13% 11/20/12 529,000 526,175(a,f) Countrywide Alternative Loan Trust 5.98% 05/25/36 24,689 21,380(f,g) 6.00% 03/25/36 - 08/25/36 132,399 93,597 (f) Countrywide Alternative Loan Trust (Class B) 6.00% 05/25/36 - 08/25/36 64,395 47,094 (f) Countrywide Home Loan Mortgage Pass Through Trust 5.47% 02/25/47 209,737 207,630(f,g) Countrywide Home Loan Mortgage Pass Through Trust (Class M) 5.50% 12/25/35 73,556 68,865 (f) Credit Suisse Mortgage Capital Certificates 5.47% 09/15/39 217,000 210,547 (f) Credit Suisse Mortgage Capital Certificates (Class C) 5.65% 02/25/36 39,396 37,516(f,g) Crusade Global Trust (Class A) 5.55% 09/18/34 111,741 111,866(f,g) CS First Boston Mortgage Securities Corp. 1.56% 03/15/35 3,159,415 106,337(a,f,g) 5.25% 08/25/34 69,577 68,637 (f) 5.33% 10/25/35 74,047 68,443(f,g) 5.75% 07/15/37 2,378,726 58,712(a,c,f,g) 6.13% 04/15/37 175,000 178,026 (f) PRINCIPAL AMOUNT VALUE - -------------------------------------------------------------------------------- CS First Boston Mortgage Securities Corp. (Class A) 5.44% 09/15/34 $ 200,000 $ 198,574 (f) 6.53% 06/15/34 200,000 205,660 (f) DLJ Commercial Mortgage Corp. (Class A) 7.18% 11/10/33 184,733 192,172 (f) First Union-Lehman Brothers-Bank of America 6.56% 11/18/35 118,378 118,841 (f) GMAC Commercial Mortgage Securities, Inc. 6.42% 05/15/35 313,979 315,879 (f) 6.47% 04/15/34 159,000 162,728 (f) GMAC Commercial Mortgage Securities, Inc. (Class X) 5.71% 12/10/41 3,930,529 80,226(c,f,g) Greenwich Capital Commercial Funding Corp. 5.12% 04/10/37 301,000 297,657 (f) Indymac INDA Mortgage Loan Trust 5.15% 01/25/36 99,828 95,975(f,g) Indymac INDA Mortgage Loan Trust (Class B) 5.15% 01/25/36 99,828 98,124(f,g) Indymac Index Mortgage Loan Trust 5.36% 06/25/35 117,928 115,831(f,g) JP Morgan Chase Commercial Mortgage Securities Corp. 1.27% 01/12/39 2,509,194 78,981(a,f,g) 5.75% 02/12/49 1,100,000 1,089,858 (g) 6.47% 11/15/35 190,000 195,498 (f) JP Morgan Mortgage Trust 5.87% 04/25/37 160,000 159,811 (g) LB-UBS Commercial Mortgage Trust 4.06% 09/15/27 495,000 482,443(f,g) 5.26% 09/15/39 150,000 148,112 (f) 5.42% 02/15/40 800,000 773,365 5.64% 01/18/12 3,234,344 79,947(c,f,g) 6.23% 03/15/26 130,000 131,259 (f) 6.85% 10/15/35 791,165 32,438(a,c,f,g) 7.47% 03/15/36 3,189,295 88,277(a,c,f,g) 7.49% 02/15/40 2,709,764 57,183(a,c,f,g) LB-UBS Commercial Mortgage Trust (Class A) 6.13% 12/15/30 172,000 175,259 (f) 6.65% 11/15/27 144,000 148,575 (f) LB-UBS Commercial Mortgage Trust (Class B) 6.65% 07/14/16 34,000 35,262(a,f) LB-UBS Commercial Mortgage Trust (Class X) 5.76% 09/15/39 6,830,000 212,026(c,f,g) See Notes to Schedule of Investments on page 15 and Notes to Financial Statements. 12 INCOME FUND Schedule of Investments June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- PRINCIPAL AMOUNT VALUE - -------------------------------------------------------------------------------- Master Alternative Loans Trust 5.00% 08/25/18 $170,589 $ 27,454(e,f) 6.50% 08/25/34 - 05/25/35 471,096 473,881(f) Master Alternative Loans Trust (Class 3) 6.50% 01/25/35 129,378 129,984(f) Merrill Lynch/Countrywide Commercial Mortgage Trust (Class A) 5.49% 03/12/51 800,000 775,051(g) 5.75% 06/12/50 500,000 494,781(g) MLCC Mortgage Investors, Inc. 5.38% 02/25/36 59,995 58,778(f,g) Morgan Stanley Capital I 5.28% 12/15/43 102,000 100,489(f,g) 5.33% 12/15/43 102,000 97,993(f,g) 5.39% 11/12/41 280,000 268,821(f,g) 5.44% 02/20/44 250,000 244,605(a,g) 5.45% 02/12/44 800,000 773,485(g) 5.69% 04/15/49 600,000 590,915(g) 5.71% 07/20/44 100,000 99,845(f) 7.11% 04/15/33 498,990 511,671(f) Morgan Stanley Capital I (Class A) 5.36% 02/12/44 175,000 172,755(g) Morgan Stanley Dean Witter Capital I 7.20% 10/15/33 184,955 191,628(f) Morgan Stanley Dean Witter Capital I (Class A) 6.39% 10/15/35 150,000 153,996(f) 6.54% 02/15/31 21,752 22,130(f) Nomura Asset Securities Corp. (Class A) 6.59% 03/15/30 472,878 475,672(f) PNC Mortgage Acceptance Corp. (Class A) 6.36% 03/12/34 300,000 306,694 Residential Funding Mortgage Security I 5.75% 01/25/36 196,918 186,961(f) Wachovia Bank Commercial Mortgage Trust 5.34% 12/15/43 800,000 766,349 5.42% 04/15/47 400,000 393,872 Wells Fargo Mortgage Backed Securities Trust 5.39% 08/25/35 106,306 102,436(f,g) 5.50% 01/25/36 149,995 140,288(f) 18,433,075 PRINCIPAL AMOUNT VALUE - -------------------------------------------------------------------------------- SOVEREIGN BONDS -- 0.4% Government of Argentina 7.00% 04/17/17 $ 175,000 $ 153,125 Government of Bahamas 6.63% 05/15/33 125,000 133,761(a,f) Government of Canada 7.50% 09/15/29 165,000 201,474 Government of Panama 6.70% 01/26/36 105,000 107,100 595,460 TOTAL BONDS AND NOTES (COST $149,445,656) 145,788,417 - -------------------------------------------------------------------------------- SECURITIES PURCHASED WITH COLLATERAL FROM SECURITIES ON LOAN -- 15.4% - -------------------------------------------------------------------------------- ASSET BACKED -- 10.9% Bear Stearns Asset Backed Securities Inc. 5.54% 11/25/35 2,000,000 2,001,989(f,g) Countrywide Asset-Backed Certificates 5.43% 06/25/35 690,843 690,881(f,g) Fleet Home Equity Loan Trust (Class A) 5.57% 01/20/33 295,852 296,118(f,g) Ford Credit Floorplan Master Owner Trust (Class A) 5.36% 07/15/09 2,500,000 2,499,934(f,g) RAAC Series (Class A) 5.49% 08/25/36 4,353,000 4,352,096(f,g) Residential Asset Mortgage Products, Inc. 5.52% 04/25/35 5,000,000 5,004,814(f,g) 5.65% 12/25/33 28,698 28,720(f,g) Residential Asset Mortgage Products, Inc. (Class A) 5.88% 06/25/32 37,035 37,047(f,g) 14,911,599 CORPORATE NOTES -- 1.5% Morgan Stanley 5.41% 05/07/09 2,000,000 2,000,102(g) See Notes to Schedule of Investments on page 15 and Notes to Financial Statements. 13 INCOME FUND Schedule of Investments June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- PRINCIPAL AMOUNT VALUE - -------------------------------------------------------------------------------- NON-AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 3.0% Granite Mortgages PLC (Class 1) 5.54% 01/20/43 $ 478,261 $ 478,562(f,g) JP Morgan Alternative Loan Trust 5.38% 08/25/36 1,278,524 1,278,569(f,g) Puma Finance Ltd. (Class A) 5.54% 10/11/34 165,004 165,337(f,g) Residential Accredit Loans, Inc. 5.50% 07/25/36 2,201,277 2,200,563(f,g) 4,123,031 TOTAL SECURITIES PURCHASED WITH COLLATERAL FROM SECURITIES ON LOAN (COST $21,028,605) 21,034,732 TOTAL INVESTMENT IN SECURITIES (COST $170,474,261) 166,823,149 NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 14.2% - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 6.7% GEI Short Term Investment Fund 5.55% 9,115,138 9,115,138(c,j) SHORT-TERM SECURITIES PURCHASED WITH COLLATERAL FROM SECURITIES ON LOAN -- 7.5% GEI Short Term Investment Fund 5.55% 10,261,338 10,261,338(c,j) TOTAL SHORT-TERM INVESTMENTS (COST $19,376,476) 19,376,476 TOTAL INVESTMENTS (COST $189,850,737) 186,199,625 LIABILITIES IN EXCESS OF OTHER ASSETS, NET-- (36.5)% (49,783,455) ------------ NET ASSETS-- 100.0% $136,416,170 ============ OTHER INFORMATION - -------------------------------------------------------------------------------- The GEI Income Fund had the following long futures contracts open at June 30, 2007 (unaudited): NUMBER CURRENT UNREALIZED EXPIRATION OF NOTIONAL APPRECIATION/ DESCRIPTION DATE CONTRACTS VALUE (DEPRECIATION) - -------------------------------------------------------------------------------- 90 Day Sterling Future December 2007 25 $ 5,877,346 $(18,945) Eurodollar Futures September 2007 87 20,590,725 1,936 U.S. Treasury Notes 10 Yr. Futures September 2007 86 9,090,469 49,569 ---------- $32,560 ========== See Notes to Schedule of Investments on page 15 and Notes to Financial Statements. 14 Notes to Schedule of Investments June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- The views expressed in this document reflect our judgment as of the publication date and are subject to change at any time without notice. The securities cited may not represent current or future holdings and should not be considered as a recommendation to purchase or sell a particular security. See the prospectus for complete descriptions of investment objectives, policies, risks and permissible investments. (a) Pursuant to Rule 144A of the Securities Act of 1933, these securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2007, these securities amounted to $17,032,390, or 12.49% of net assets for the GE Investments Income Fund. These securities have been determined to be liquid using procedures established by the Board of Trustees. (b) Settlement is on a delayed delivery or when-issued basis with final maturity to be announced (TBA) in the future. (c) Coupon amount represents effective yield. (d) Principal only securities represent the right to receive the monthly principal payments on an underlying pool of mortgages. No payments of interest on the pool are passed through to the "principal only" holder. (e) Interest only securities represent the right to receive the monthly interest payments on an underlying pool of mortgages. Payments of principal on the pool reduce the value of the "interest only" holding. (f) At June 30, 2007, all or a portion of this security was pledged to cover collateral requirements for futures, options, forward foreign currency contracts and/or TBA's. (g) Variable or floating rate security. The stated rate represents the rate at June 30, 2007. (h) All or a portion of the security is out on loan. (i) Step coupon bond. Security becomes interest bearing at a future date. (j) GEAM, the investment advisor of the fund, serves as investment advisor of the GEI Short Term Investment Fund. + Percentages are based on net assets as of June 30, 2007. Abbreviations: REMIC Real Estate Mortgage Investment Conduit STRIPS Separate Trading of Registered Interest and Principal of Security TBA To Be Announced 15
Financial Highlights Selected data based on a share outstanding throughout the periods indicated - ------------------------------------------------------------------------------------------------------------------------------------ INCOME FUND 6/30/07+ 12/31/06 12/31/05 12/31/04 12/31/03 12/31/02 - ------------------------------------------------------------------------------------------------------------------------------------ INCEPTION DATE -- -- -- -- -- 1/3/95 Net asset value, beginning of period ........ $11.80 $11.84 $12.25 $12.61 $12.93 $12.26 INCOME/(LOSS) FROM INVESTMENT OPERATIONS: Net investment income .................... 0.31 0.56 0.61 0.55 0.51 0.37 Net realized and unrealized gains/(losses) on investments ......... (0.19) (0.04) (0.36) (0.12) (0.04) 0.84 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INCOME FROM INVESTMENT OPERATIONS ..... 0.12 0.52 0.25 0.43 0.47 1.21 - ------------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS FROM: Net investment income .................... -- 0.56 0.61 0.57 0.56 0.38 Net realized gains ....................... -- -- 0.05 0.22 0.23 0.16 Return of capital ........................ -- -- 0.00(b) -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL DISTRIBUTIONS ......................... -- 0.56 0.66 0.79 0.79 0.54 - ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, END OF PERIOD .............. $11.92 $11.80 $11.84 $12.25 $12.61 $12.93 ==================================================================================================================================== TOTAL RETURN (A) ............................ 1.02% 4.37% 2.04% 3.42% 3.60% 9.89% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ........................ $136,416 $126,732 $116,558 $135,172 $189,318 $220,800 Ratios to average net assets: Net investment income* ................ 5.29% 5.07% 4.49% 3.82% 3.24% 3.79% Expenses* ............................. 0.60% 0.61% 0.60% 0.59% 0.55% 0.53% Portfolio turnover rate .................. 227% 270% 311% 343% 419% 385%
NOTES TO FINANCIAL HIGHLIGHTS - ------------------------------------------------------------------------------- (a) Total returns are historical and assume changes in share price and reinvestment of dividends and capital gains and do not include the effect of insurance contract charges. (b) Less than $0.01 per share. * Annualized for periods less than one year. + Unaudited. See Notes to Financial Statements. 16
Statement of Assets and Liabilities JUNE 30, 2007 (UNAUDITED) INCOME FUND - --------------------------------------------------------------------------------------------------------------------------- ASSETS Investments in securities, at market* (cost $170,474,261) .............................................. $166,823,149 Short-term affiliated investments (at amortized cost) .................................................. 19,376,476 Foreign cash (cost $464,834) ........................................................................... 442,648 Receivable for investments sold ........................................................................ 19,207,367 Income receivables ..................................................................................... 1,467,916 Receivable for fund shares sold ........................................................................ 17,705 Variation margin receivable ............................................................................ 45,175 Other assets ........................................................................................... 1,460 - --------------------------------------------------------------------------------------------------------------------------- TOTAL ASSETS ....................................................................................... 207,381,896 - --------------------------------------------------------------------------------------------------------------------------- LIABILITIES Payable upon return of securities loaned ............................................................... 31,296,070 Payable for investments purchased ...................................................................... 39,579,456 Payable for fund shares redeemed ....................................................................... 4,829 Payable to GEAM ........................................................................................ 82,683 Variation margin payable ............................................................................... 2,688 - --------------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES .................................................................................. 70,965,726 - --------------------------------------------------------------------------------------------------------------------------- NET ASSETS ................................................................................................ $136,416,170 - --------------------------------------------------------------------------------------------------------------------------- NET ASSETS CONSIST OF: Capital paid in ........................................................................................ 140,201,497 Undistributed (distribution in excess of) net investment income ........................................ 3,588,763 Accumulated net realized gain (loss) ................................................................... (3,733,349) Net unrealized appreciation/(depreciation) on: Investments ........................................................................................ (3,651,112) Futures ............................................................................................ 32,560 Foreign currency related transactions .............................................................. (22,189) - --------------------------------------------------------------------------------------------------------------------------- NET ASSETS ................................................................................................ $136,416,170 - --------------------------------------------------------------------------------------------------------------------------- NET ASSETS ................................................................................................ $136,416,170 Shares outstanding ($0.01 par value; unlimited shares authorized) ......................................... 11,446,197 Net asset value per share ................................................................................. $11.92
* Includes $30,395,929 of securities on loan. See Notes to Financial Statements. 17
Statement of Operations FOR THE SIX MONTHS ENDED JUNE 30, 2007 (UNAUDITED) INCOME FUND - --------------------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME INCOME: Interest ................................................................................. $ 3,141,766 Interest from affliated investments* ..................................................... 769,630 - --------------------------------------------------------------------------------------------------------------------------- TOTAL INCOME ............................................................................... 3,911,396 - --------------------------------------------------------------------------------------------------------------------------- EXPENSES: Advisory and administrative fees ......................................................... 332,622 Transfer agent ........................................................................... 18 Trustee's fees ........................................................................... 1,855 Custody and accounting expenses .......................................................... 43,253 Professional fees ........................................................................ 10,955 Registration expenses .................................................................... 1,977 Other expenses ........................................................................... 6,736 - --------------------------------------------------------------------------------------------------------------------------- TOTAL EXPENSES ............................................................................. 397,416 - --------------------------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME (LOSS) ............................................................... 3,513,980 =========================================================================================================================== NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS REALIZED GAIN (LOSS) ON: Investments ........................................................................... (1,023,609) Futures ............................................................................... (133,519) Written options ....................................................................... (3,220) Foreign currency transactions ......................................................... 22,537 INCREASE (DECREASE) IN UNREALIZED APPRECIATION/ (DEPRECIATION) ON: Investments ........................................................................... (1,165,921) Futures ............................................................................... 87,973 Foreign currency transactions ......................................................... (20,313) - --------------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments ................................... (2,236,072) - --------------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ............................ $1,277,908 ===========================================================================================================================
* Income attributable to security lending, net of rebate expenses, was $72,283. See Notes to Financial Statements. 18
Statements of Changes in Net Assets INCOME FUND - ------------------------------------------------------------------------------------------------------------------------------------ SIX MONTHS ENDED YEAR ENDED JUNE 30, 2007 DECEMBER 31, (UNAUDITED) 2006 - ------------------------------------------------------------------------------------------------------------------------------------ INCREASE (DECREASE) IN NET ASSETS OPERATIONS: Net investments income (loss) .............................................................. $ 3,513,980 $ 5,771,592 Net realized gain (loss) on investments, futures, written options, foreign currency transactions and swaps .................................................. (1,137,811) (1,197,380) Net increase (decrease) in unrealized appreciation/(depreciation) on investments, futures, written options, foreign currency translation ................... (1,098,261) 326,388 - ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) from operations .................................................... 1,277,908 4,900,600 - ------------------------------------------------------------------------------------------------------------------------------------ DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income ...................................................................... -- (5,692,439) - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL DISTRIBUTIONS .......................................................................... -- (5,692,439) - ------------------------------------------------------------------------------------------------------------------------------------ Increase (decrease) in net assets from operations and distributions .......................... 1,277,908 (791,839) - ------------------------------------------------------------------------------------------------------------------------------------ SHARE TRANSACTIONS: Proceeds from sale of shares ............................................................... 15,484,200 20,048,467 Value of distributions reinvested .......................................................... -- 5,692,439 Cost of shares redeemed .................................................................... (7,078,379) (14,774,800) - ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) from share transactions ........................................... 8,405,821 10,966,106 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INCREASE (DECREASE) IN NET ASSETS ...................................................... 9,683,729 10,174,267 NET ASSETS Beginning of period .......................................................................... 126,732,441 116,558,174 - ------------------------------------------------------------------------------------------------------------------------------------ End of period ............................................................................... $136,416,170 $126,732,441 ==================================================================================================================================== UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD ................. $ 3,588,763 $ 74,783 - ------------------------------------------------------------------------------------------------------------------------------------ CHANGES IN FUND SHARES Shares sold ................................................................................ 1,296,669 1,659,946 Issued for distributions reinvested ........................................................ -- 482,819 Shares redeemed ............................................................................ (593,097) (1,241,749) - ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in fund shares .......................................................... 703,572 901,016 ====================================================================================================================================
See Notes to Financial Statements. 19 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- 1. ORGANIZATION OF THE COMPANY GE Investments Funds, Inc. (the "Company") was incorporated under the laws of the Commonwealth of Virginia on May 14, 1984 and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company. The Company is composed of thirteen investment portfolios (collectively the "Funds"), although only the following eleven are currently being offered: U.S. Equity Fund, S&P 500 Index Fund, Premier Growth Equity Fund, Value Equity Fund, Mid-Cap Equity Fund, Small-Cap Equity Fund, International Equity Fund, Total Return Fund, Income Fund (the "Fund"), Money Market Fund and Real Estate Securities Fund. Shares of the Funds of the Company are offered only to insurance company separate accounts that fund certain variable life insurance contracts and variable annuity contracts. These insurance companies may include insurance companies affiliated with GE Asset Management Incorporated ("GEAM"), the investment adviser and administrator of each of the Funds. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions at the date of the financial statements. Actual results may differ from those estimates. The following summarizes the significant accounting policies of the Fund: SECURITY VALUATION AND TRANSACTIONS Securities for which exchange quotations are readily available are valued at the last sale price, or if no sales occurred on that day, at the last quoted bid price. Securities listed on the NASDAQ will be valued at the NASDAQ's official close price. Certain fixed income securities are valued by a dealer or by a pricing service based upon a matrix system, which considers market transactions as well as dealer supplied valuations. Short-term investments maturing within sixty days are valued at amortized cost. If quotations are not readily available for a portfolio security, or if it is believed that a quotation or other market price for a portfolio security does not represent its fair value, the security may be valued using procedures approved by the Fund's Board of Directors that are designed to establish its "fair value." These procedures require that the fair value of a security be established by the valuation committee. The fair value committee follows different protocols for different types of investments and circumstances. Foreign securities may be valued with the assistance of an independent fair value pricing service in circumstances where it is believed that they have been or would be materially affected by events occurring after the close of the portfolio security's primary market and before the close of regular trading on the NYSE. This independent fair value pricing service uses a computerized system to appraise affected securities and portfolios taking into consideration various factors and the fair value of such securities may be something other than the last available quotation or other market price. GE Asset Management may also separately monitor portfolio securities and, consistent with the Fund's fair value procedures, apply a different value to a portfolio security than would be applied had it been priced using market quotations or by an independent fair value pricing service. Determining the fair value of securities involves the application of both subjective and objective considerations. Security values may differ depending on the methodology used to determine their values, and may differ from the last quoted sale or closing price. No assurance can be given that use of these fair value procedures will always better represent the price at which a Fund could sell the affected portfolio security. Security transactions are accounted for as of the trade date. Realized gains and losses on investments sold are recorded on the basis of identified cost for both financial statement and federal tax purposes. In September 2006, FASB issued Statement of Financial Accounting Standards No. 157, FAIR VALUE MEASUREMENTS ("FAS 157"). FAS 157 establishes a single authoritative definition of fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. FAS 157 applies to fair value measurements already required or permitted by existing standards. The change to current generally accepted accounting principles from the application of FAS 157 relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. Management of the Fund does not believe the adoption of FAS 157 will materially impact the financial statement amounts, however, additional disclosures may be required about the inputs used to 20 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- develop the measurements and the effect of certain of the measurements on changes in net assets for the period. FAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. REPURCHASE AGREEMENTS The Fund may engage in repurchase agreement transactions with respect to instuments that are consistent with the Fund's investment objectives or policies. The Fund's or a third party custodian takes possession of the collateral pledged for investments in repurchase agreements on behalf of the Fund. The Fund values the underlying collateral daily on a mark-to-market basis to determine that the value, including accrued interest, is at least equal to 102% of the repurchase price. In the event the seller defaults and the value of the security declines, or if the seller enters an insolvency proceeding, realization of the collateral by the Fund may be delayed or limited. SECURITY LENDING The Fund may loan securities to brokers, dealers, and financial institutions determined by GEAM to be creditworthy, subject to certain limitations. The Fund continues to receive the interest and dividends on the loaned securities during the term of the loan. The loans of securities are secured by collateral in the form of cash or other liquid assets, which are segregated and maintained with the custodian in an amount at least equal to 102% of the current market value of the loaned securities. During the term of the loan, the Fund will record any gain or loss in the market value of its loaned securities and of securities in which cash collateral is invested. The Fund will also earn interest, net of any rebate, from securities in which cash collateral is invested. In the event the counterparty (borrower) does not meet its contracted obligation to return the securities, the Fund may be exposed to the risk of loss of reacquiring the loaned securities at prevailing market prices using the proceeds of the sale of the collateral. FOREIGN CURRENCY Accounting records of the Fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange at period end. Purchases and sales of securities, income receipts and expense payments denominated in foreign currencies are translated into U.S. dollars at the prevailing exchange rate on the respective dates of such transactions. The Fund does not isolate the portion of the results of operations resulting from changes in foreign exchange rates from the fluctuations arising from changes in the market prices of securities during the period. Such fluctuations are included in the net realized or unrealized gain or loss from investments. Net realized gains or losses on foreign currency transactions represent net gains or losses on sales and maturities of foreign currency contracts, disposition of foreign currencies, the difference between the amount of net investment income and withholding taxes accrued and the U.S. dollar amount actually received or paid, and gains or losses between the trade and settlement date on purchases and sales of securities. Net unrealized foreign exchange gains and losses arising from changes in the value of other assets and liabilities as a result of changes in foreign exchange rates are included as increases or decreases in unrealized appreciation/depreciation on foreign currency related transactions. FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or bond index futures contracts subject to certain limitations. The Fund may invest in futures contracts to manage its exposure to the stock and bond markets and fluctuations in currency values. Buying futures tends to increase the Fund's exposure to the underlying instrument while selling futures tends to decrease the Fund's exposure to the underlying instrument, or hedge other Fund investments. The Fund will not enter into a transaction involving futures for speculative purposes. The Fund's risks in using these contracts include changes in the value of the underlying instruments, non-performance of the counterparties under the contracts' terms and changes in the liquidity of the secondary market for the contracts. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they principally trade. Upon entering into a futures contract, the Fund is required to pledge to the broker an amount of cash and/or other assets equal to a certain percentage of the contract amount, known as initial margin deposit. Subsequent payments, known as variation margin, are made or received by the Fund each day, depending on the daily fluctuation in the fair value of the underlying security. The Fund records an unrealized gain or loss equal to the daily variation margin. Should market conditions move unexpectedly, the Fund may not achieve the anticipated benefits of the futures contracts and may incur a loss. The Fund recognizes a realized gain or loss on the expiration or closing of a futures contract. 21 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- OPTIONS The Fund may purchase and write options, subject to certain limitations. The Fund may invest in options contracts to manage its exposure to the stock and bond markets and fluctuations in foreign currency values. Writing puts and buying calls tend to increase the Fund's exposure to the underlying instrument while buying puts and writing calls tend to decrease the Fund's exposure to the underlying instrument, or hedge other Fund investments. The Fund will not enter into a transaction involving options for speculative purposes. The Fund's risks in using these contracts include changes in the value of the underlying instruments, non-performance of the counterparties under the contracts' terms and changes in the liquidity of the secondary market for the contracts. Options are valued at the last sale price, or if no sales occurred on that day, at the last quoted bid price. When the Fund writes an option, the amount of the premium received is recorded as a liability and is subsequently adjusted to the current fair value of the option written. Premiums received from writing options that expire unexercised are treated by the Fund on the expiration date as realized gains from investments. The difference between the premium and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium is less than the amount paid for the closing purchase, as a realized loss. When an option is exercised, the proceeds from the sale of the underlying security or the cost basis of the securities purchased is adjusted by the original premium received or paid. SWAP CONTRACTS As part of the investment strategy, the Fund may invest in swap agreements, which are agreements to exchange the return generated by one instrument for the return generated by another instrument. Total return swap agreements involve commitments to pay interest in exchange for a market linked return based upon a notional principal amount. To the extent the total return of the security or index underlying the agreement exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty. Swaps are marked to market daily based upon the underlying security or index. Payments received or made are recorded as realized gain or loss in the Statement of Operations. Entering into swap agreements involves, to varying degrees, elements of credit and market risk in excess of the amounts recognized on the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparty to the agreements may default on its obligation to perform and that there may be unfavorable changes in the value of the index or securities underlying the agreement. Notional principal amounts are used to express the extent of involvement in these transactions, but the amounts potentially subject to credit risk are much smaller. WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS The Fund may purchase or sell securities on a when-issued or forward commitment basis. These transactions are arrangements in which the Fund purchases and sells securities with payment and delivery scheduled a month or more after entering into the transactions. The price of the underlying securities and the date when these securities will be delivered and paid for are fixed at the time the transaction is negotiated. Losses may arise due to changes in the market value of the underlying securities or if the counterparty does not perform under the contracts. In connection with such purchases, the Fund maintains cash or liquid assets in an amount equal to purchase commitments for such underlying securities until settlement date and for sales commitments, the Fund maintains equivalent deliverable securities as "cover" for the transaction. Unsettled commitments are valued at the current market value of the underlying security. Daily fluctuations in the value of such contracts are recorded as unrealized gains or losses. The Fund will not enter into such commitments for the purpose of investment leverage. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS The Fund may enter into forward foreign currency exchange contracts to facilitate transactions in foreign denominated securities and to manage the Fund's currency exposure. Forward foreign currency exchange contracts are valued at the mean between the bid and the offered forward rates as last quoted by a recognized dealer. The aggregate principal amounts of the contracts are not recorded in the Fund's financial statements. Such amounts appear under the caption forward foreign currency contracts in the Schedule of Investments. Fluctuations in the value of the contracts are recorded in the Statement of Assets and Liabilities as an asset (or liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized gains or losses on foreign currency related transactions. The Fund's risks in using these contracts include changes in the value of foreign currency or the possibility that the counterparties do not perform under the contracts' terms. When the Fund enters into a forward foreign currency exchange contract, it is required to segregate cash or liquid securities with its custodian in an 22 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- amount equal to the value of the Fund's total assets committed to the consummation of the forward contract. If the value of the segregated securities declines, additional cash or securities is segregated so that the value of the account will equal the amount of the Fund's commitment with respect to the contract. INVESTMENTS IN FOREIGN MARKETS Investments in foreign markets may involve special risks and considerations not typically associated with investing in the United States. These risks include revaluation of currencies, high rates of inflation, repatriation on income and capital, and adverse political and economic developments. Moreover, securities issued in these markets may be less liquid, subject to government ownership controls, tariffs and taxes, subject to delays in settlements, and their prices may be more volatile. The Fund may be subject to capital gains and repatriation taxes imposed by certain countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued based upon net investment income, net realized gains and net unrealized appreciation as income and/or capital gains are earned. INCOME TAXES The Fund intends to comply with all sections of the Internal Revenue Code applicable to regulated investment companies including the distribution of substantially all of its taxable net investment income and net realized capital gains to its shareholders. Therefore, no provision for federal income tax has been made. The Fund is treated as a separate taxpayer for federal income tax purposes. At June 30, 2007, information on the tax cost of investments is as follows:
Cost of Gross Tax Gross Tax Net Tax Appreciation/ Investments for Unrealized Unrealized (Depreciation) Tax Purposes Appreciation Depreciation on Investments - --------------------------------------------------------------------------------------------------------------------------- $189,934,018 $418,010 $(4,152,403) $(3,734,393)
As of December 31, 2006, the Fund has capital loss carryovers as indicated below. Capital loss carryovers are available to offset future realized capital gains to the extent provided in the Internal Revenue Code and regulations thereunder. To the extent that these carryover losses are used to offset future capital gains, it is probable that the gains so offset will not be distributed to shareholders because they would be taxable as ordinary income. Amount Expires - ------------------------------------------------------------------------------- $1,055,894 12/31/2013 1,322,182 12/31/2014 Any net capital and currency losses incurred after October 31, within the Fund's tax year, are deemed to arise on the first day of the Fund's next tax year if the Fund so elects to defer such losses. The Fund elected to defer losses incurred after October 31, 2006 as follows: Capital Currency - -------------------------------------------------------------------------------- $196,033 $-- The tax composition of distributions paid during the year ended December 31, 2006 was as follows: Long-Term Ordinary Capital Income Gains Total - -------------------------------------------------------------------------------- $5,692,439 $-- $5,692,439 DISTRIBUTIONS TO SHAREHOLDERS The Fund declares and pays dividends from net investment income annually. The Fund declares and pays net realized capital gains in excess of capital loss carryforwards distributions annually. The character of income and gains to be distributed is determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences include (but are not limited to) futures, treatment of realized gains and losses on foreign currency contracts and losses deferred due to wash sale transactions. Reclassifications due to permanent book/tax differences are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. These reclassifications have no impact on net investment income, realized gains or losses, or the net 23 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- asset value of the Fund. The calculation of net investment income per share in the Financial Highlights table excludes these adjustments. The reclassifications for the year ended December 31, 2006 were as follows: Undistributed (Distribution in Excess of) Net Investment Accumulated Paid in Income Net Realized Gain Capital - -------------------------------------------------------------------------------- $7,341 $(7,341) $-- On June 29, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in Income Taxes." FIN48 provides guidance for how certain uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN48 requires evaluation of tax positions taken or expected to be taken in the course of preparing the Fund's tax return to determine whether the tax positions are "more likely than not" of being sustained by the applicable tax authority. The adoption of FIN48 did not have an impact on the Fund's net assets and financial statements. INVESTMENT INCOME Corporate actions (including cash dividends) are recorded on the ex-dividend date, net of applicable withholding taxes, except for certain foreign corporate actions, which are recorded as soon after ex-dividend date as such information becomes available. Interest income is recorded on the accrual basis. All discounts and premiums on bonds are accreted and amortized, respectively, to call or maturity date, whichever is shorter, using the effective yield method. EXPENSES Expenses of the Company which are directly identifiable to one of the Funds are allocated to that portfolio. Expenses which are not directly identifiable to one of the Funds are allocated in such a manner as deemed equitable, taking into consideration the nature and type of expenses and relative sizes of the Funds. All expenses of the Fund are paid by GEAM and reimbursed by the Fund. 3. LINE OF CREDIT The Fund shares a revolving credit facility of up to $25 million with a number of its affiliates. The credit facility is with its custodian bank, State Street Bank and Trust Company. The revolving credit facility requires the payment of a commitment fee equal to 0.09% per annum on the daily unused portion of the credit facility, payable quarterly. The portion borne by the Funds generally is borne proportionally based upon net assets. Generally, borrowings under the credit facility would accrue interest at the Federal Funds Rate plus 50 basis points and is borne by each of the borrowing Funds. The maximum amount allowed to be borrowed by any one of the Funds is the lesser of its prospectus limitation, 20% of its net assets, or $25 million. The credit facility was not utilized by the Fund during the period ended June 30, 2007. 4. AMOUNTS PAID TO AFFILIATES ADVISORY AND ADMINISTRATION FEES GEAM, a registered investment adviser, was retained by the Company's Board of Directors effective May 1, 1997 to act as investment adviser and administrator of the Fund. Compensation of GEAM for investment advisory and administrative services is paid monthly based on the average daily net assets of the Fund at an annualized rate of .50%. GENPACT performs certain accounting and certain administration services not provided by GEAM. For the period ended June 30, 2007, $1,030 was charged to the Fund. DIRECTORS' COMPENSATION The Fund pays no compensation to its directors who are officers or employees of GEAM or its affiliates. Directors who are not such officers or employees also serve in a similar capacity for other funds advised by GEAM. Compensation paid to unaffiliated directors are reflected on the Statement of Operations. These fees are allocated pro rata across all of the mutual fund platforms and share classes served by the directors, including the Fund, and are based upon the relative net assets of each fund within such platforms. (For additional information about directors compensation please refer to the Statement of Additional Information.) 24 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- 5. INVESTMENT TRANSACTIONS PURCHASES AND SALES OF SECURITIES The cost of purchases and the proceeds from sales of investments, other than short-term securities and options, for the period ended June 30, 2007 were as follows: Purchases Sales - -------------------------------------------------------------------------------- $381,191,336 $353,645,308 SECURITY LENDING At June 30, 2007, the Fund participated in securities lending: Loaned securities at Cash market value collateral - -------------------------------------------------------------------------------- $30,395,929 $31,296,070 25 Additional Information (unaudited) - -------------------------------------------------------------------------------- INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS: The business and affairs of the Company are managed under the direction of the Company's Board of Directors. Information pertaining to the Directors and officers of the Company is set forth below. INTERESTED DIRECTORS AND EXECUTIVE OFFICERS - -------------------------------------------------------------------------------- MICHAEL J. COSGROVE - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 58 POSITION(S) HELD WITH FUND Chairman of the Board and President TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 10 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President - GEAM since February 1997; President and Chief Executive Officer - Mutual Funds at GEAM since March 2007; Vice President, GE Capital Corporation, an indirect wholly-owned subsidiary of GE, since December 1999; Executive Vice President - Sales and Marketing of GEAM, a wholly-owned subsidiary of GE that is registered as an investment adviser under the Investment Advisers Act of 1940, as amended, since March 1993; Director of GEAM since 1988. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48 OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception; Trustee of Elfun Funds, GE Savings & Security Funds and General Electric Pension Trust since 1988; Trustee of Fordham University since 2003; Trustee of Elfun Foundation; Treasurer of GE Foundation; Director, GE Asset Management (Ireland) since February 1999; Director, GE Asset Management Funds Plc, GE Asset Canada Company, GE Asset Management Limited, and GE Volunteers. - -------------------------------------------------------------------------------- MATTHEW J. SIMPSON - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 46 POSITION(S) HELD WITH FUND Executive Vice President TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - less than one year PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General Counsel and Secretary of GEAM since July 2007; Senior Vice President and General Counsel - Marketing and Client Services (formerly Asset Management Services), at GEAM and Senior Vice President and General Counsel of GEAMS from February 1997 to June 2007; Vice President and Associate General Counsel of GEAM from October 1992 to February 1997; Secretary of Fund from 1997 to June 2007; Vice President of Fund from September 2003 to June 2007; Vice President of GE Institutional Funds and GE LifeStyle Funds from September 2003 to June 2007; Secretary of GE Institutional Funds and GE LifeStyle Funds from 1997 to June 2007; Vice President of Elfun Funds and GE Savings & Security Funds from October 2003 to June 2007; Assistant Secretary of Elfun Funds and GE Savings & Security Funds from 1998 to June 2007. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional Funds, GE LifeStyle Funds, Elfun Funds and GE Savings & Security Funds since July 2007. 26 Additional Information (unaudited) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SCOTT H. RHODES - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 48 POSITION(S) HELD WITH FUND Treasurer TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - one year PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds Operations Manager since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle Funds and GE Investments Funds since November 2005 and Elfun Funds and GE Savings & Security Funds since September 2005; from August 2004 to September 2005 Vice President, U.S. Trust Company, N.A. and Assistant Treasurer of Excelsior Funds, Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds, Inc.; from January 2004 to August 2004, Vice President BlackRock Financial Management, Inc.; from December 1996 to November 2003, Controller - Mutual Funds, American Skandia Investment Services, Inc. and Assistant Treasurer of American Skandia Trust and American Skandia Advisor Funds, Inc. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A - -------------------------------------------------------------------------------- JEANNE M. LAPORTA - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 42 POSITION(S) HELD WITH FUND Vice President and Secretary TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 2 years (Vice President); less than one year (Secretary) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Associate General Counsel - Marketing and Client Services (formerly Asset Management Services) at GEAM since May 1997; Vice President and Assistant Secretary of GE Funds, GE Institutional Funds and GE LifeStyle Funds since September 2003; Vice President and Assistant Secretary of Elfun Funds and GE Savings & Security Funds since October 2003; Assistant Secretary from September 2003 to June 2007 and Secretary since July 2007. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A 27 Additional Information (unaudited) - -------------------------------------------------------------------------------- NON-INTERESTED DIRECTORS - -------------------------------------------------------------------------------- JOHN R. COSTANTINO - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 61 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC since 2006; Managing Director, Walden Partners, Ltd., consultants and investors, since August 1992. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE Institutional Funds and GE LifeStyle Funds since their inception; Trustee of Fordham University since 2002 and Marymount College from 2001 through 2002; Neuroscience Research Institute since 1986; Diocesan Finance Counsel of the Dioceses of Brooklyn & Queens since 2001; Gregorian University Foundation since 1994. - -------------------------------------------------------------------------------- WILLIAM J. LUCAS - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 59 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Treasurer of Fairfield University since 1983. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception. - -------------------------------------------------------------------------------- ROBERT P. QUINN - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 71 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon Brothers Inc. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception. - -------------------------------------------------------------------------------- The Statement of Additional Information for the Fund includes additional information about the Directors and Officers and is available, without charge, upon request by calling 1-800-242-0134. 28 Investment Team - -------------------------------------------------------------------------------- INVESTMENT ADVISER AND ADMINISTRATOR GE Asset Management Incorporated BOARD OF DIRECTORS Michael J.Cosgrove, CHAIRMAN John R. Costantino William J. Lucas Robert P. Quinn Matthew J. Simpson SECRETARY Jeanne M. LaPorta ASSISTANT SECRETARIES Joseph A. Carucci Joon Won Choe TREASURER Scott H. Rhodes ASSISTANT TREASURERS Scott R. Fuchs Christopher M. Isaacs DISTRIBUTOR GE Investment Distributors, Inc. Member NASD and SIPC COUNSEL Sutherland, Asbill & Brennan, LLP CUSTODIAN State Street Bank & Trust Company INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM KPMG LLP OFFICERS OF THE INVESTMENT ADVISER James W. Ireland, CHIEF EXECUTIVE OFFICER Michael J. Cosgrove, EVP, PRESIDENT AND CHIEF EXECUTIVE OFFICER - MUTUAL FUNDS Paul M. Colonna, PRESIDENT - FIXED INCOME Kathryn D. Karlic, EVP, PRESIDENT - SALES AND MARKETING Ralph R. Layman, EVP, PRESIDENT - INTERNATIONAL EQUITIES Matthew J. Simpson, EVP, GENERAL COUNSEL AND SECRETARY Judith A. Studer, EVP, PRESIDENT - U.S. EQUITIES Don W. Torey, EVP, PRESIDENT - ALTERNATIVE INVESTMENTS AND REAL ESTATE John J. Walker, EVP, CHIEF FINANCIAL OFFICER 29 [This page intentionally left blank.] [This page intentionally left blank.] [This page intentionally left blank.] [This page intentionally left blank.] INVESTMENT ADVISER GE ASSET MANAGEMENT INCORPORATED 3001 SUMMER STREET PO BOX 7900 STAMFORD, CT 06904-7900 DISTRIBUTOR GE INVESTMENT DISTRIBUTORS, INC. MEMBER NASD AND SIPC 3001 SUMMER STREET PO BOX 7900 STAMFORD, CT 06904-7900 The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities is available without charge (i) upon request, by calling 1-800-242-0134; (ii) on the Fund's website at http://www.gefunds.com; and (iii) on the Commission's website at http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC - - information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Information (if any) regarding how the Fund voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through the Fund's website at http://www.gefunds.com; and (ii) on the Commission's website at http://www.sec.gov. [GE logo omitted] GE Investments Funds, Inc. U.S. Equity Fund Semi-Annual Report JUNE 30, 2007 [GE logo omitted] GE Investments Funds, Inc. U.S. Equity Fund Contents - -------------------------------------------------------------------------------- NOTES TO PERFORMANCE ................................................... 1 MANAGER REVIEW AND SCHEDULE OF INVESTMENTS ............................. 2 NOTES TO SCHEDULE OF INVESTMENTS ....................................... 10 FINANCIAL STATEMENTS Financial Highlights .............................................. 11 Statement of Assets and Liabilities ............................... 12 Statement of Operations ........................................... 13 Statements of Changes in Net Assets ............................... 14 Notes to Financial Statements ..................................... 15 ADDITIONAL INFORMATION ................................................. 20 INVESTMENT TEAM ........................................................ 23 This report is prepared for Policyholders of certain variable contracts and may be distributed to others only if preceded or accompanied by the variable contract's current prospectus and the current prospectus of the Funds available for investments thereunder. Notes to Performance June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- Total returns take into account changes in share price and assume reinvestment of dividends and capital gains distributions, if any. Investment returns and net asset value on an investment will fluctuate and you may have a gain or loss when you sell your shares. Periods less than one year are not annualized. Current performance may be lower or higher than that shown. You may call toll-free (800) 242-0134 for performance information as of the most recent month end. The performance data for the periods through December 12, 1997, reflect the prior performance and expense ratios of the Variable Investment Trust GE U.S. Equity Portfolio, the assets of which were transferred to the GE Investments U.S. Equity Fund, Inc. pursuant to an exemptive order granted by the Securities and Exchange Commission permitting a substitution of funds that occurred on December 12, 1997. Total returns do not reflect expenses associated with the separate account such as administrative fees, account charges and surrender charges, which, if reflected, would reduce the total returns for all periods shown. Shares of the Fund are neither insured nor guaranteed by the U.S. Government, and their prices will fluctuate with market conditions. The Standard & Poor's ("S&P") 500 Composite Price Index of stocks (S&P 500) is an unmanaged index and do not reflect the actual cost of investing in the instruments that comprise the index. The S&P 500 is a market capitalization-weighted index of stocks of 500 large U.S. companies, which is widely used as a measure of large-cap stock market performance. The results shown for the foregoing index assume the reinvestment of net dividends or interest. The peer universe of the underlying annuity funds used in our peer ranking calculation is based on the blend of Lipper peer categories, as shown. Lipper is an independent mutual fund rating service. A Fund's performance may be compared to or ranked within a universe of mutual funds with investment objectives and policies similar but not necessarily identical to the Fund's. Such comparisons or rankings are made on the basis of several factors, including the Fund's objectives and policies, management style and strategy, and portfolio composition, and may change over time if any of those factors change. 1 U.S. Equity Fund - -------------------------------------------------------------------------------- THE U.S. EQUITY FUND IS MANAGED BY A TEAM OF PORTFOLIO MANAGERS THAT INCLUDES THOMAS R. LINCOLN, PAUL C. REINHARDT, STEPHEN V. GELHAUS AND GEORGE A. BICHER (PICTURED BELOW LEFT TO RIGHT). EACH OF THE FOREGOING PORTFOLIO MANAGERS CO-MANAGES ONE OF THREE SUB-PORTFOLIOS, WHICH COMPRISE THE FUND. GEORGE A. BICHER IS A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT. MR. BICHER IS DIRECTOR OF THE U.S. EQUITY RESEARCH TEAM AND A PORTFOLIO MANAGER FOR THE U.S. EQUITY FUND. MR. BICHER HAS HELD THE POSITION OF EQUITY RESEARCH ANALYST SINCE JOINING GE ASSET MANAGEMENT IN JUNE 2002. PRIOR TO JOINING GE ASSET MANAGEMENT, HE SERVED IN A NUMBER OF POSITIONS AT DEUTSCHE BANC ALEX BROWN SINCE 1994. THOMAS R. LINCOLN IS A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT. HE HAS BEEN A MEMBER OF THE PORTFOLIO MANAGEMENT TEAM FOR THE U.S. EQUITY FUND SINCE MAY 2007. MR. LINCOLN JOINED GE ASSET MANAGEMENT IN 1994 AS A FINANCIAL ANALYST IN DOMESTIC EQUITIES. MR. LINCOLN BECAME PART OF THE INVESTMENT MANAGEMENT TEAM IN 1997 AND A PORTFOLIO MANAGER FOR DOMESTIC EQUITIES IN 2003. PAUL C. REINHARDT IS A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT. HE HAS BEEN A PORTFOLIO MANAGER FOR THE U.S. EQUITY FUND SINCE JANUARY 2001. MR. REINHARDT JOINED GE ASSET MANAGEMENT IN 1982 AS AN EQUITY ANALYST AND HAS BEEN A PORTFOLIO MANAGER SINCE 1987. STEPHEN V. GELHAUS IS A VICE PRESIDENT OF GE ASSET MANAGEMENT. HE HAS BEEN A MEMBER OF THE PORTFOLIO MANAGEMENT TEAM FOR THE U.S. EQUITY FUND SINCE JANUARY 2002. MR. GELHAUS JOINED GE ASSET MANAGEMENT IN JUNE 1991 AND WAS A RESEARCH ANALYST IN THE U.S. EQUITY DEPARTMENT FROM 1995 THROUGH 2001. Q. HOW DID THE U.S. EQUITY FUND PERFORM COMPARED TO ITS BENCHMARK AND LIPPER PEER GROUP FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2007? A. For the six-month period ended June 30, 2007, the U.S. Equity Fund returned 6.87%. The S&P 500 Index, the Fund's benchmark, returned 6.96% and the Fund's Lipper peer group of 205 Large-Cap Core funds returned an average of 7.21% for the same period. Q. WHAT MARKET CONDITIONS IMPACTED FUND PERFORMANCE? A. The period continued a rally that had propelled the U.S. equity markets higher over the past year. While first-quarter `07 earnings growth moderated into the single digit range for the first time in three years, corporate profits did climb +9%, surprising market-watchers to the upside. Despite a backdrop of slowing economic growth, a weakening dollar and rising oil [photo omitted] 2 Q&A prices, stocks rallied amid the strong corporate earnings, record M&A activity, cooling inflation worries and the absence of Fed tightening. By early June, several key U.S. equity indices reached new highs. However, the period ended with a whimper -- during the month of June each broad measure of U.S. equity market performance retreated. The S&P 500's June decline was just its second in 13 months, and its second down month in 2007. The pullback was brought on by renewed inflation fears, and concern that the Fed might need to raise interest rates this year to keep inflation in check. New liquidity and credit concerns also spooked the markets, amid the near collapse of two large sub-prime hedge funds. During the six-month period, S&P 500 sectors tilted toward global infrastructure investment outperformed, including energy (+17%), materials (+17%) and industrials (+11%). Telecom (+16%) also rallied on the strength of continued restructuring improvements and sector consolidation. Financials (-1%) offered the only negative sector return, facing credit cycle headwinds and anxiety stemming from leveraged speculation in the debt market. Consumer discretionary (+3%), consumer staples (+5%) and health care (+6%) also lagged. Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE? A. A significant underweight in financials has helped the Fund on a year-to-date basis. Also contributing to performance was strong stock selection within consumer discretionary and utilities. Within financials, underweighting commercial banks and REITs helped tremendously as the sub-prime mortgage market deteriorated. We remain alert to the risks of an aging credit cycle and have deliberately remained underweight in credit-sensitive financials, preferring the less cyclical insurance companies. Within consumer discretionary, emphasizing media companies has benefited the Fund; Liberty Global (+40%) and Liberty Media Capital (+20%) have shown particular strength. Avoiding lagging household durable companies also helped our results in the consumer space -- our sole holding, Philips Electronics, rallied approximately +15% during the period. Strong stock selection across the board boosted returns within utilities, however, we have taken some profits in holdings like Constellation (+28%) and Edison International (+25%). Offsetting these positives were health care and consumer staples stocks, as well as our underweight in the outperforming telecommunications sector. Biotechnology giant Amgen (-19%) was the portfolio's single largest performance detractor, suffering amid safety concerns regarding its anemia drugs, and increased FDA scrutiny. However, we continued to like the strength in Amgen's pipeline of therapeutics, and its long-term prospects. Commodity-cost pressures have weighed on consumer staples margins (E.G., Kimberly-Clark -0%, Clorox -2% and Colgate-Palmolive -0%), and overweighting staples hurt relative performance. Our continued underweight in telecom was another key detractor. While we have been building our position in AT&T (+18%), our underweight versus the benchmark held back returns. We continue to believe that the cable companies will be more successful taking share from phone companies than vice versa, hence our larger relative weighting in media. Q. WERE THERE ANY SIGNIFICANT CHANGES TO THE FUND OVER THE PERIOD? A. We have remained resolutely committed to investing in high quality large-cap stocks with predictable and steady earnings growth at compelling valuations. We continue to be relatively defensively positioned, although at June 30th, our largest overweight was in technology -- an area that we believe could benefit from multiple expansion and productivity investment in the months to come. We initiated a position in Qualcomm, and added to Intel, Cisco and Paychex. Our tech holdings tend to be less economically sensitive, with high recurring revenues and ample free cash flow. Our second-largest overweight remained in health care, a traditionally defensive area with relatively steady growth and attractive dividend yields. 3 U.S. Equity Fund - -------------------------------------------------------------------------------- Q&A We also added to our overweight in consumer staples, initiating a position in Nestle, and increasing our weighting in Proctor & Gamble. Our largest underweight remained in financials, reflecting headwinds from a higher interest rate environment and concerns about the credit cycle -- although we bolstered our defensive insurance holdings, adding to AIG and initiating a position in Hartford Financial. The U.S. has experienced economic growth that we believe is below potential so far in 2007, and earnings growth has slowed. We are constructive on our positioning in this environment, and with the high quality of our holdings. We have expected our companies to demonstrate the financial flexibility and balance sheet strength to weather a mid-cycle slowdown, and to be bolstered by a flight to quality in skittish markets. Valuations of larger, high-quality companies sold at little or no premium in the past six months. We believe that many of our stock selections will benefit from improving valuations and superior relative earnings growth. In addition, many of our multinationals will likely benefit from strong growth outside of North America. We remain focused on a long-term investment horizon and continue to utilize a bottom-up, research-driven, fundamental approach to stock selection. 4 U.S. Equity Fund - -------------------------------------------------------------------------------- Understanding Your Fund's Expenses As a shareholder of the Fund you incur transaction and ongoing expenses. Transaction expenses including sales charges on purchase payments, reinvested dividends (or other distributions), and redemption fees directly reduce the investment return of the Fund. Ongoing costs include portfolio management fees, distribution and service fees, professional fees, administrative fees and other Fund expenses. The following example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the period. The information in the following table is based on an investment of $1,000, which is invested at the beginning of the period and held for the entire six-month period ended June 30, 2007. ACTUAL EXPENSES The first section of the table provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your class under the heading "Expenses Paid During Period." HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second section of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholders reports of other funds. Please note that the expenses shown in the table do not reflect any transaction costs, such as sales charges or redemption fees.
JANUARY 1, 2007 - JUNE 30, 2007 - ------------------------------------------------------------------------------------------------------------------------------------ ACCOUNT VALUE AT ACCOUNT VALUE EXPENSES THE BEGINNING OF AT THE END OF PAID DURING THE PERIOD ($) THE PERIOD ($) THE PERIOD ($)* - ------------------------------------------------------------------------------------------------------------------------------------ Actual Fund Return** 1,000.00 1,068.68 3.37 - ------------------------------------------------------------------------------------------------------------------------------------ Hypothetical 5% Return (2.5% for the period) 1,000.00 1,021.29 3.31 - ------------------------------------------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.66% (FROM PERIOD JANUARY 1, 2007 - JUNE 30, 2007), MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY 181/365 (TO REFLECT THE SIX MONTH PERIOD). ** ACTUAL FUND RETURN FOR SIX-MONTH PERIOD ENDED JUNE 30, 2007 WAS: 6.87%. 5 U.S. Equity Fund (unaudited) - -------------------------------------------------------------------------------- CHANGE IN VALUE OF A $10,000 INVESTMENT - -------------------------------------------------------------------------------- [Line chart omitted -- plot points are as follows:] U.S. Equity Fund S&P 500 Index 06/97 $10,000.00 $10,000.00 12/97 11,126.27 11,057.91 12/98 13,731.10 14,231.31 12/99 16,423.33 17,229.53 12/00 16,326.44 15,647.27 12/01 14,943.08 13,783.37 12/02 12,064.63 10,736.98 12/03 14,872.75 13,821.52 12/04 16,087.31 15,325.48 12/05 16,490.92 16,079.27 12/06 19,149.57 18,618.57 06/07 20,464.81 19,914.71 U.S. Equity Fund (ending value $20,465) S&P 500 Index (ending value $19,915) AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2007 - -------------------------------------------------------------------------------- SIX ONE FIVE TEN MONTHS YEAR YEAR YEAR - -------------------------------------------------------------------------------- U.S. Equity Fund 6.87% 20.08% 8.95% 7.42% - -------------------------------------------------------------------------------- S&P 500 Index 6.96% 20.59% 10.72% 7.13% - -------------------------------------------------------------------------------- Lipper peer group average* 7.21% 19.79% 9.92% 6.00% - -------------------------------------------------------------------------------- Inception date 1/3/95 - -------------------------------------------------------------------------------- INVESTMENT PROFILE A fund designed for investors who seek long-term growth of capital by investing at least 80% of its net assets in equity securities of issuers that are tied economically to the U.S. under normal circumstances. TOP TEN EQUITY HOLDINGS AS OF JUNE 30, 2007 as a % of Market Value - -------------------------------------------------------------------------------- Exxon Mobil Corp. 3.30% - -------------------------------------------------------------------------------- American International Group, Inc. 3.26% - -------------------------------------------------------------------------------- PepsiCo, Inc. 2.82% - -------------------------------------------------------------------------------- Citigroup, Inc. 2.55% - -------------------------------------------------------------------------------- Cisco Systems, Inc. 2.49% - -------------------------------------------------------------------------------- Procter & Gamble Co. 2.38% - -------------------------------------------------------------------------------- Industrial Select Sector SPDR Fund 2.12% - -------------------------------------------------------------------------------- Wyeth 2.08% - -------------------------------------------------------------------------------- Microsoft Corp. 2.04% - -------------------------------------------------------------------------------- Oracle Corp. 1.91% - -------------------------------------------------------------------------------- PORTFOLIO COMPOSITION AS OF JUNE 30, 2007 as a % of Market Value - -------------------------------------------------------------------------------- Market Value of $92,559 (in thousands) [Pie chart omitted -- plot points are as follows:] Information Technology 19.2% Financials 14.5% Healthcare 13.7% Consumer Staples 11.1% Consumer Discretionary 10.3% Industrials 9.1% Energy 8.7% Short-Term 8.0% Materials 1.9% Utilities 1.9% Telecommunication Services 1.6% * LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR THE SIX MONTHS, ONE YEAR, FIVE-YEAR, AND TEN-YEAR PERIODS INDICATED IN THE LARGE-CAP CORE FUNDS PEER GROUP CONSISTING OF 205, 199, 152 AND 64 UNDERLYING ANNUITY FUNDS, RESPECTIVELY. SEE NOTES TO PERFORMANCE ON PAGE 1 FOR FURTHER INFORMATION, INCLUDING AN EXPLANATION OF LIPPER PEER CATEGORIES. PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE AND THE GRAPH AND TABLE DO NOT REFLECT THE DEDUCTION OF TAXES. 6 U.S. EQUITY FUND Schedule of Investments June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- U.S. EQUITY FUND - -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- COMMON STOCK -- 95.0%+ - -------------------------------------------------------------------------------- CONSUMER DISCRETIONARY -- 10.9% Bed Bath & Beyond, Inc. 27,152 $ 977,200(a,e) Carnival Corp. 11,986 584,557 Comcast Corp. (Class A) 58,515 1,636,079(a,d,e) General Motors Corp. 4,259 160,990(e) Home Depot, Inc. 10,708 421,360 Koninklijke Philips Electronics N.V. ADR 7,749 327,938 Liberty Global, Inc. (Series C) 8,885 349,181(a) Liberty Media Holding Corp - Capital (Series A) 4,084 480,605(a) Lowe's Companies, Inc. 22,944 704,151 News Corp. (Class A) 12,777 271,000 Omnicom Group, Inc. 28,570 1,511,924 Staples, Inc. 19,028 451,534 Starwood Hotels & Resorts Worldwide, Inc. 1,825 122,403 Target Corp. 11,882 755,695 The Cheesecake Factory 6,456 158,301(a,e) Time Warner, Inc. 29,205 614,473 9,527,391 CONSUMER STAPLES -- 11.8% Alberto-Culver Co. 1,218 28,891 Clorox Co. 13,213 820,527 Colgate-Palmolive Co. 11,317 733,907 Diageo PLC ADR 1,460 121,633 General Mills, Inc. 13,036 761,563 Kellogg Co. 2,556 132,375 Kimberly-Clark Corp. 14,665 980,942 Nestle S.A. ADR 1,649 157,727 PepsiCo, Inc. 40,271 2,611,574(d) Procter & Gamble Co. 36,044 2,205,532 Sara Lee Corp. 8,701 151,397 The Coca-Cola Co. 23,199 1,213,540 Wal-Mart Stores, Inc. 6,632 319,066 10,238,674 ENERGY -- 9.2% Apache Corp. 2,555 208,462 Devon Energy Corp. 2,030 158,929 EOG Resources, Inc. 3,651 266,742 Exxon Mobil Corp. 36,463 3,058,516(d) Halliburton Co. 10,343 356,833 NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- Hess Corp. 10,668 $ 628,985 Occidental Petroleum Corp. 9,341 540,657 Schlumberger Ltd. 19,411 1,648,770 Suncor Energy, Inc. 3,419 307,436 Transocean Inc. 8,019 849,854(a) 8,025,184 FINANCIALS -- 14.9% ACE Ltd. 6,780 423,886 Allstate Corp. 7,605 467,784 American International Group, Inc. 43,055 3,015,142 AON Corp. 5,902 251,484 Bank of America Corp. 12,169 594,942 Berkshire Hathaway, Inc. (Class B) 186 4,890(a) BlackRock Inc. (Class A) 973 152,362(e) CB Richard Ellis Group, Inc. (Class A) 730 26,645(a,e) Chubb Corp. 7,119 385,423 Citigroup, Inc. 46,018 2,360,263 Federal Home Loan Mortgage Corp. 11,884 721,359 Federal National Mortgage Assoc. 11,255 735,289 Hartford Financial Services Group, Inc. 3,103 305,677 HCC Insurance Holdings, Inc. 4,648 155,290(e) Mellon Financial Corp. 11,134 489,896 Merrill Lynch & Company, Inc. 304 25,408 Metlife, Inc. 13,312 858,358 Nuveen Investments, Inc. (Class A) 634 39,403(e) Prudential Financial, Inc. 669 65,047 State Street Corp. 18,347 1,254,935(c) SunTrust Banks, Inc. 6,265 537,161 The Bank of New York Company, Inc. 1,034 42,849 12,973,493 HEALTHCARE -- 14.6% Abbott Laboratories 11,439 612,558(d) Aetna, Inc. 21,226 1,048,564 Amgen, Inc. 29,549 1,633,764(a) Baxter International, Inc. 11,302 636,755 Boston Scientific Corp. 13,942 213,870(a) Bristol-Myers Squibb Co. 6,510 205,456 DaVita, Inc. 5,050 272,094(a) Gilead Sciences, Inc. 14,940 579,224(a) GlaxoSmithKline PLC ADR 4,272 223,725(e) Johnson & Johnson 4,198 258,681 Lincare Holdings Inc. 5,049 201,203(a) McKesson Corp. 2,738 163,294 Medco Health Solutions, Inc. 4,016 313,208(a) Medtronic Inc. 16,169 838,524 Novartis AG ADR 4,867 272,893 See Notes to Schedule of Investments on page 10 and Notes to Financial Statements. 7 U.S. EQUITY FUND Schedule of Investments June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- Pfizer Inc. 59,270 $ 1,515,534(d) Resmed, Inc. 8,183 337,631(a,e) Thermo Electron Corp. 3,468 179,365(a) UnitedHealth Group, Inc. 24,997 1,278,347 Wyeth 33,556 1,924,101 12,708,791 INDUSTRIALS -- 7.4% ABB Ltd. ADR 15,211 343,769 Cooper Industries Ltd. 5,050 288,304 Deere & Co. 3,286 396,752 Dover Corp. 15,322 783,720(d) Eaton Corp. 2,495 232,035 Emerson Electric Co. 8,082 378,238 General Dynamics Corp. 2,799 218,938 Hexcel Corp. 2,188 46,101(a,e) ITT Corp. 1,339 91,427 Northrop Grumman Corp. 5,537 431,166 Pitney Bowes Inc. 1,521 71,213(e) Rockwell Collins, Inc. 1,156 81,660 Southwest Airlines Co. 33,464 498,948(e) Textron Inc. 8,132 895,415 3M Co. 5,233 454,172 United Technologies Corp. 15,246 1,081,399 Waste Management, Inc. 1,399 54,631 WESCO International, Inc. 1,582 95,632(a) 6,443,520 INFORMATION TECHNOLOGY -- 20.4% Activision, Inc. 7,301 136,310(a) Analog Devices, Inc. 15,941 600,019 Automatic Data Processing, Inc. 8,791 426,100 Cisco Systems, Inc. 82,634 2,301,357(a) Corning Incorporated 4,746 121,260(a) Dell, Inc. 2,738 78,170(a) eBay, Inc. 7,385 237,649(a) EMC Corp. 9,437 170,810(a) First Data Corp. 9,735 318,042(d) Hewlett-Packard Co. 10,587 472,392 Intel Corp. 68,007 1,615,846 International Business Machines Corp. 6,571 691,598(e) Intuit Inc. 18,253 549,050(a) Lam Research Corp. 1,947 100,076(a) Maxim Integrated Products, Inc. 16,012 534,961 Microchip Technology Inc. 8,153 301,987(e) Microsoft Corp. 63,947 1,884,518(d) Molex, Inc. (Class A) 16,063 426,473(e) National Semiconductor Corp. 10,769 304,440(e) NAVTEQ Corp. 608 25,743(a) Oracle Corp. 89,549 1,765,011(a) Paychex, Inc. 25,920 1,013,990 NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- QUALCOMM, Inc. 23,400 $ 1,015,326 Salesforce.com, Inc. 1,231 52,761(a,e) Sun Microsystems, Inc. 12,169 64,009(a) Taiwan Semiconductor Manufacturing Company Ltd. ADR 12,499 139,111 Texas Instruments Incorporated 14,737 554,553 Western Union Co. 58,347 1,215,368 Yahoo! Inc. 22,876 620,626(a) 17,737,556 MATERIALS -- 2.0% Barrick Gold Corp. 19,877 577,824 Freeport-McMoRan Copper & Gold Inc. (Class B) 3,042 251,938 Monsanto Co. 7,391 499,188 PAN American Silver Corp. 2,738 72,092(a,e) Praxair, Inc. 5,135 369,669 1,770,711 TELECOMMUNICATION SERVICES -- 1.8% AT&T, Inc. 12,921 536,222 NII Holdings Inc. (Class B) 3,264 263,535(a) Sprint Nextel Corp. (Series 1) 6,997 144,908 Verizon Communications Inc. 10,526 433,355(d) Vodafone Group, PLC ADR 4,137 139,127 1,517,147 UTILITIES -- 2.0% Constellation Energy Group, Inc. 3,651 318,258 Dominion Resources, Inc. 9,946 858,439 Edison International 4,198 235,592 FPL Group, Inc. 3,424 194,278 PG&E Corp. 3,519 159,411(e) 1,765,978 TOTAL COMMON STOCK (COST $72,700,405) 82,708,445 - -------------------------------------------------------------------------------- EXCHANGE TRADED FUNDS -- 2.8% - -------------------------------------------------------------------------------- Financial Select Sector SPDR Fund 13,493 488,177(g) Industrial Select Sector SPDR Fund 50,192 1,959,496(g) TOTAL EXCHANGE TRADED FUNDS (COST $1,792,003) 2,447,673 TOTAL INVESTMENTS IN SECURITIES (COST $74,492,408) 85,156,118 See Notes to Schedule of Investments on page 10 and Notes to Financial Statements. 8 U.S. EQUITY FUND Schedule of Investments June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 8.5% - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 1.9% GEI Short Term Investment Fund 5.55% 1,680,179 $ 1,680,179(b,f) SHORT-TERM SECURITIES PURCHASED WITH COLLATERAL FROM SECURITIES ON LOAN -- 6.6% State Street Navigator Securities Lending Prime Portfolio 5.36% 5,723,563 5,723,562(b,c) TOTAL SHORT-TERM INVESTMENTS (COST $7,403,741) 7,403,741 TOTAL INVESTMENTS (COST $81,896,149) 92,559,859 LIABILITIES IN EXCESS OF OTHER ASSETS, NET-- (6.3)% (5,483,808) ----------- NET ASSETS-- 100.0% $87,076,051 =========== - -------------------------------------------------------------------------------- OTHER INFORMATION - -------------------------------------------------------------------------------- The GEI U.S. Equity had the following long futures contracts open at June 30, 2007 (unaudited): NUMBER CURRENT EXPIRATION OF NOTIONAL UNREALIZED DESCRIPTION DATE CONTRACTS VALUE APPRECIATION - -------------------------------------------------------------------------------- S&P 500 Index Futures September 2007 2 $757,700 $2,705 See Notes to Schedule of Investments on page 10 and Notes to Financial Statements. 9 Notes to Schedule of Investments June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- The views expressed in this document reflect our judgment as of the publication date and are subject to change at any time without notice. The securities cited may not represent current or future holdings and should not be considered as a recommendation to purchase or sell a particular security. See the prospectus for complete descriptions of investment objectives, policies, risks and permissible investments. (a) Non-income producing security. (b) Coupon amount represents effective yield. (c) State Street Corp. is the parent company of State Street Bank & Trust Co., the Fund's custodian and accounting agent. (d) At June 30, 2007, all or a portion of this security was pledged to cover collateral requirements for futures, options, forward foreign currency contracts and/or TBA's. (e) All or a portion of the security is out on loan. (f) GEAM, the investment advisor of the fund, serves as investment advisor of the GEI Short Term Investment Fund. (g) Sponsored by SSgA Funds Management, Inc., an affiliate of State Street Bank & Trust Co., the Fund's custodian and accounting agent. + Percentages are based on net assets as of June 30, 2007. Abbreviations: ADR American Depository Receipt SPDR Standard & Poors Depository Receipts 10
Financial Highlights Selected data based on a share outstanding throughout the periods indicated - ------------------------------------------------------------------------------------------------------------------------------------ U.S. EQUITY FUND 6/30/07+ 12/31/06 12/31/05 12/31/04 12/31/03 12/31/02 - ------------------------------------------------------------------------------------------------------------------------------------ INCEPTION DATE -- -- -- -- -- 1/3/95 Net asset value, beginning of period ............... $39.02 $34.06 $33.61 $31.48 $25.75 $32.21 INCOME/(LOSS) FROM INVESTMENT OPERATIONS: Net investment income ........................... 0.21 0.53 0.39 0.44 0.26 0.24 Net realized and unrealized gains/(losses) on investments ................ 2.47 4.96 0.46 2.13 5.73 (6.45) - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INCOME/(LOSS) FROM INVESTMENT OPERATIONS ..... 2.68 5.49 0.85 2.57 5.99 (6.21) - ------------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS FROM: Net investment income ........................... -- 0.53 0.40 0.44 0.26 0.25 Net realized gains .............................. -- -- -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL DISTRIBUTIONS ................................ -- 0.53 0.40 0.44 0.26 0.25 - ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, END OF PERIOD ..................... $41.70 $39.02 $34.06 $33.61 $31.48 $25.75 ==================================================================================================================================== TOTAL RETURN (A) ................................... 6.87% 16.12% 2.51% 8.17% 23.28% (19.26)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ........ $87,076 $101,885 $98,883 $112,545 $114,123 $102,112 Ratios to average net assets: Net investment income* ....................... 0.94% 1.43% 1.06% 1.30% 0.95% 0.87% Expenses* .................................... 0.66% 0.63% 0.63% 0.63% 0.61% 0.58% Portfolio turnover rate ......................... 30% 45% 40% 30% 39% 37%
NOTES TO FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- (a) Total returns are historical and assume changes in share price and reinvestment of dividends and capital gains and do not include the effect of insurance contract charges. * Annualized for periods less than one year. + Unaudited See Notes to Financial Statements. 11
Statement of Assets and Liabilities JUNE 30, 2007 (UNAUDITED) U.S. EQUITY FUND - ------------------------------------------------------------------------------------------------------------- ASSETS Investments in securities, at market* (cost $74,492,408) ........................ $85,156,118 Short-term Investments (at amortized cost) ..................................... 5,723,562 Short-term affiliated investments (at amortized cost) ........................... 1,680,179 Receivable for investments sold ................................................. 734,740 Income receivables .............................................................. 72,037 Other assets .................................................................... 1,414 - ------------------------------------------------------------------------------------------------------------- TOTAL ASSETS ................................................................ 93,368,050 - ------------------------------------------------------------------------------------------------------------- LIABILITIES Payable upon return of securities loaned ........................................ 5,723,562 Payable for investments purchased ............................................... 456,604 Payable for fund shares redeemed ................................................ 30,491 Payable to GEAM ................................................................. 80,442 Variation margin payable ........................................................ 900 - ------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES ........................................................... 6,291,999 - ------------------------------------------------------------------------------------------------------------- NET ASSETS ......................................................................... $87,076,051 ============================================================================================================= NET ASSETS CONSIST OF: Capital paid in ................................................................. 69,939,190 Undistributed (distribution in excess of) net investment income ................. 438,193 Accumulated net realized gain (loss) ............................................ 6,032,253 Net unrealized appreciation/(depreciation) on: Investments ................................................................. 10,663,710 Futures ..................................................................... 2,705 - ------------------------------------------------------------------------------------------------------------- NET ASSETS ......................................................................... $87,076,051 ============================================================================================================= NET ASSETS ......................................................................... 87,076,051 Shares outstanding ($0.01 par value; unlimited shares authorized) .................. 2,088,009 Net asset value per share .......................................................... $41.70
* Includes $5,578,448 of securities on loan. See Notes to Financial Statements. 12
Statement of Operations FOR THE SIX MONTHS ENDED JUNE 30, 2007 (UNAUDITED) U.S. EQUITY FUND - ------------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME INCOME: Dividend ................................................................................... $ 716,382 Interest* .................................................................................. 2,869 Interest from affliated investments ........................................................ 25,505 Less: Foreign taxes withheld ............................................................... (3,967) - ------------------------------------------------------------------------------------------------------------------- TOTAL INCOME ................................................................................. 740,789 - ------------------------------------------------------------------------------------------------------------------- EXPENSES: Advisory and administrative fees ........................................................... 256,649 Transfer agent ............................................................................. 24 Trustee's fees ............................................................................. 1,258 Custody and accounting expenses ............................................................ 25,902 Professional fees .......................................................................... 9,945 Registration expenses ...................................................................... 1,805 Other expenses ............................................................................. 9,830 - ------------------------------------------------------------------------------------------------------------------- TOTAL EXPENSES ............................................................................... 305,413 - ------------------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME (LOSS) ................................................................. 435,376 =================================================================================================================== NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS REALIZED GAIN (LOSS) ON: Investments ............................................................................. 8,690,975 Futures ................................................................................. 19,025 Foreign currency transactions ........................................................... 50 INCREASE (DECREASE) IN UNREALIZED APPRECIATION/ (DEPRECIATION) ON: Investments ............................................................................. (3,005,085) Futures ................................................................................. 1,235 - ------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments ..................................... 5,706,200 - ------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .............................. $6,141,576 ===================================================================================================================
* Income attributable to security lending activity, net of rebate expenses, was $2,869. See Notes to Financial Statements. 13
Statements of Changes in Net Assets U.S. EQUITY FUND - --------------------------------------------------------------------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED JUNE 30, 2007 DECEMBER 31, (UNAUDITED) 2006 - --------------------------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS OPERATIONS: Net investments income (loss) .......................................................... $ 435,376 $ 1,379,790 Net realized gain (loss) on investments, futures, written options, foreign currency transactions and swaps .............................................. 8,710,050 8,114,057 Net increase (decrease) in unrealized appreciation/(depreciation) on investments, futures, written options, foreign currency translation ............... (3,003,850) 5,009,082 - --------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) from operations ................................................ 6,141,576 14,502,929 - --------------------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income .................................................................. -- (1,376,973) - --------------------------------------------------------------------------------------------------------------------------------- TOTAL DISTRIBUTIONS ...................................................................... -- (1,376,973) - --------------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from operations and distributions ...................... 6,141,576 13,125,956 - --------------------------------------------------------------------------------------------------------------------------------- SHARE TRANSACTIONS: Proceeds from sale of shares ........................................................... 543,716 10,918,601 Value of distributions reinvested ...................................................... -- 1,376,973 Cost of shares redeemed ................................................................ (21,493,745) (22,419,927) - --------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) from share transactions ....................................... (20,950,029) (10,124,353) - --------------------------------------------------------------------------------------------------------------------------------- TOTAL INCREASE (DECREASE) IN NET ASSETS .................................................. (14,808,453) 3,001,603 NET ASSETS Beginning of period ...................................................................... 101,884,504 98,882,901 - --------------------------------------------------------------------------------------------------------------------------------- End of period ............................................................................ $ 87,076,051 $101,884,504 ================================================================================================================================= UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD .............. $ 438,193 $ 2,817 - --------------------------------------------------------------------------------------------------------------------------------- CHANGES IN FUND SHARES Shares sold ............................................................................ 13,423 296,918 Issued for distributions reinvested .................................................... -- 35,118 Shares redeemed ........................................................................ (536,406) (624,307) - --------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in fund shares ...................................................... (522,983) (292,271) =================================================================================================================================
See Notes to Financial Statements. 14 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- 1. ORGANIZATION OF THE COMPANY GE Investments Funds, Inc. (the "Company") was incorporated under the laws of the Commonwealth of Virginia on May 14, 1984 and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company. The Company is composed of thirteen investment portfolios (collectively the "Funds"), although only the following eleven are currently being offered: U.S. Equity Fund, (the "Fund") S&P 500 Index Fund, Premier Growth Equity Fund, Value Equity Fund, Mid-Cap Equity Fund, Small-Cap Equity Fund, International Equity Fund, Total Return Fund, Income Fund, Money Market Fund and Real Estate Securities Fund. Shares of the Funds of the Company are offered only to insurance company separate accounts that fund certain variable life insurance contracts and variable annuity contracts. These insurance companies may include insurance companies affiliated with GE Asset Management Incorporated ("GEAM"), the investment adviser and administrator of each of the Funds. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions at the date of the financial statements. Actual results may differ from those estimates. The following summarizes the significant accounting policies of the Fund: SECURITY VALUATION AND TRANSACTIONS for which exchange quotations are readily available are valued at the last sale price, or if no sales occurred on that day, at the last quoted bid price. Securities listed on the NASDAQ will be valued at the NASDAQ's official close price. Certain fixed income securities are valued by a dealer or by a pricing service based upon a matrix system, which considers market transactions as well as dealer supplied valuations. Short-term investments maturing within sixty days are valued at amortized cost. If quotations are not readily available for a portfolio security, or if it is believed that a quotation or other market price for a portfolio security does not represent its fair value, the security may be valued using procedures approved by the Fund's Board of Directors that are designed to establish its "fair value." These procedures require that the fair value of a security be established by the valuation committee. The fair value committee follows different protocols for different types of investments and circumstances. Foreign securities may be valued with the assistance of an independent fair value pricing service in circumstances where it is believed that they have been or would be materially affected by events occurring after the close of the portfolio security's primary market and before the close of regular trading on the NYSE. This independent fair value pricing service uses a computerized system to appraise affected securities and portfolios taking into consideration various factors and the fair value of such securities may be something other than the last available quotation or other market price. GE Asset Management may also separately monitor portfolio securities and, consistent with the Fund's fair value procedures, apply a different value to a portfolio security than would be applied had it been priced using market quotations or by an independent fair value pricing service. Determining the fair value of securities involves the application of both subjective and objective considerations. Security values may differ depending on the methodology used to determine their values, and may differ from the last quoted sale or closing price. No assurance can be given that use of these fair value procedures will always better represent the price at which a Fund could sell the affected portfolio security. Security transactions are accounted for as of the trade date. Realized gains and losses on investments sold are recorded on the basis of identified cost for both financial statement and federal tax purposes. In September 2006, FASB issued Statement of Financial Accounting Standards No. 157, FAIR VALUE MEASUREMENTS ("FAS 157"). FAS 157 establishes a single authoritative definition of fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. FAS 157 applies to fair value measurements already required or permitted by existing standards. The change to current generally accepted accounting principles from the application of FAS 157 relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. Management of the Fund does not believe the adoption of FAS 157 will materially impact the financial statement amounts, however, additional disclosures may be required about the inputs used to develop the measurements and the effect of certain of the 15 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- measurements on changes in net assets for the period. FAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. REPURCHASE AGREEMENTS The Fund may engage in repurchase agreement transactions with respect to instruments that are consistent with the Fund's investment objectives or policies. The Fund's or a third party custodian takes possession of the collateral pledged for investments in repurchase agreements on behalf of the Fund. The Fund values the underlying collateral daily on a mark-to-market basis to determine that the value, including accrued interest, is at least equal to 102% of the repurchase price. In the event the seller defaults and the value of the security declines, or if the seller enters an insolvency proceeding, realization of the collateral by the Fund may be delayed or limited. SECURITY LENDING The Fund may loan securities to brokers, dealers, and financial institutions determined by GEAM to be creditworthy, subject to certain limitations. The Fund continues to receive the interest and dividends on the loaned securities during the term of the loan. The loans of securities are secured by collateral in the form of cash or other liquid assets, which are segregated and maintained with the custodian in an amount at least equal to 102% of the current market value of the loaned securities. During the term of the loan, the Fund will record any gain or loss in the market value of its loaned securities and of securities in which cash collateral is invested. The Fund will also earn interest, net of any rebate, from securities in which cash collateral is invested. In the event the counterparty (borrower) does not meet its contracted obligation to return the securities, the Fund may be exposed to the risk of loss of reacquiring the loaned securities at prevailing market prices using the proceeds of the sale of the collateral. FOREIGN CURRENCY Accounting records of the Fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange at period end. Purchases and sales of securities, income receipts and expense payments denominated in foreign currencies are translated into U.S. dollars at the prevailing exchange rate on the respective dates of such transactions. The Fund does not isolate the portion of the results of operations resulting from changes in foreign exchange rates from the fluctuations arising from changes in the market prices of securities during the period. Such fluctuations are included in the net realized or unrealized gain or loss from investments. Net realized gains or losses on foreign currency transactions represent net gains or losses on sales and maturities of foreign currency contracts, disposition of foreign currencies, the difference between the amount of net investment income and withholding taxes accrued and the U.S. dollar amount actually received or paid, and gains or losses between the trade and settlement date on purchases and sales of securities. Net unrealized foreign exchange gains and losses arising from changes in the value of other assets and liabilities as a result of changes in foreign exchange rates are included as increases or decreases in unrealized appreciation/depreciation on foreign currency related transactions. FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or bond index futures contracts subject to certain limitations. The Fund may invest in futures contracts to manage its exposure to the stock and bond markets and fluctuations in currency values. Buying futures tends to increase the Fund's exposure to the underlying instrument while selling futures tends to decrease the Fund's exposure to the underlying instrument, or hedge other Fund investments. The Fund will not enter into a transaction involving futures for speculative purposes. The Fund's risks in using these contracts include changes in the value of the underlying instruments, non-performance of the counterparties under the contracts' terms and changes in the liquidity of the secondary market for the contracts. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they principally trade. Upon entering into a futures contract, the Fund is required to pledge to the broker an amount of cash and/or other assets equal to a certain percentage of the contract amount, known as initial margin deposit. Subsequent payments, known as variation margin, are made or received by the Fund each day, depending on the daily fluctuation in the fair value of the underlying security. The Fund records an unrealized gain or loss equal to the daily variation margin. Should market conditions move unexpectedly, the Fund may not achieve the anticipated benefits of the futures contracts and may incur a loss. The Fund recognizes a realized gain or loss on the expiration or closing of a futures contract. 16 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- OPTIONS The Fund may purchase and write options, subject to certain limitations. The Fund may invest in options contracts to manage its exposure to the stock and bond markets and fluctuations in foreign currency values. Writing puts and buying calls tend to increase the Fund's exposure to the underlying instrument while buying puts and writing calls tend to decrease the Fund's exposure to the underlying instrument, or hedge other Fund investments. The Fund will not enter into a transaction involving options for speculative purposes. The Fund's risks in using these contracts include changes in the value of the underlying instruments, non-performance of the counterparties under the contracts' terms and changes in the liquidity of the secondary market for the contracts. Options are valued at the last sale price, or if no sales occurred on that day, at the last quoted bid price. When the Fund writes an option, the amount of the premium received is recorded as a liability and is subsequently adjusted to the current fair value of the option written. Premiums received from writing options that expire unexercised are treated by the Fund on the expiration date as realized gains from investments. The difference between the premium and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium is less than the amount paid for the closing purchase, as a realized loss. When an option is exercised, the proceeds from the sale of the underlying security or the cost basis of the securities purchased is adjusted by the original premium received or paid. INVESTMENTS IN FOREIGN MARKETS Investments in foreign markets may involve special risks and considerations not typically associated with investing in the United States. These risks include revaluation of currencies, high rates of inflation, repatriation on income and capital, and adverse political and economic developments. Moreover, securities issued in these markets may be less liquid, subject to government ownership controls, tariffs and taxes, subject to delays in settlements, and their prices may be more volatile. The Fund may be subject to capital gains and repatriation taxes imposed by certain countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued based upon net investment income, net realized gains and net unrealized appreciation as income and/or capital gains are earned. INCOME TAXES The Fund intends to comply with all sections of the Internal Revenue Code applicable to regulated investment companies including the distribution of substantially all of its taxable net investment income and net realized capital gains to its shareholders. Therefore, no provision for federal income tax has been made. The Fund is treated as a separate taxpayer for federal income tax purposes. At June 30, 2007, information on the tax cost of investments is as follows:
Net Tax Cost of Gross Tax Gross Tax Appreciation/ Investments for Unrealized Unrealized (Depreciation) Tax Purposes Appreciation Depreciation on Investments - ----------------------------------------------------------------------------------------------------------------------------- $83,784,136 $11,629,351 $(2,853,628) $8,775,723
As of December 31, 2006, the Fund has capital loss carryovers as indicated below. Capital loss carryovers are available to offset future realized capital gains to the extent provided in the Internal Revenue Code and regulations thereunder. To the extent that these carryover losses are used to offset future capital gains, it is probable that the gains so offset will not be distributed to shareholders because they would be taxable as ordinary income. Amount Expires - -------------------------------------------------------------------------------- $788,340 12/31/2011 During the year ended December 31, 2006, the Fund utilized approximately $6,561,486 of capital loss carryovers. Any net capital and currency losses incurred after October 31, within the Fund's tax year, are deemed to arise on the first day of the Fund's next tax year if the Fund so elects to defer such losses. The Fund incurred no such losses after October 31, 2006. 17 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- The tax composition of distributions paid (other than return of capital distributions for the year) during the year ended December 31, 2006 was as follows: Ordinary Long-Term Income Capital Gains Total - -------------------------------------------------------------------------------- $1,376,973 $-- $1,376,973 DISTRIBUTIONS TO SHAREHOLDERS The Fund declares and pays dividends from net investment income annually. The Fund declares and pays net realized capital gains in excess of capital loss carryforwards distributions annually. The character of income and gains to be distributed is determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences include (but are not limited to) futures and losses deferred due to wash sale transactions. Reclassifications due to permanent book/tax differences are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. These reclassifications have no impact on net investment income, realized gains or losses, or the net asset value of the Fund. The calculation of net investment income per share in the Financial Highlights table excludes these adjustments. On June 29, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in Income Taxes." FIN48 provides guidance for how certain uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN48 requires evaluation of tax positions taken or expected to be taken in the course of preparing the Fund's tax return to determine whether the tax positions are "more likely than not" of being sustained by the applicable tax authority. The adoption of FIN48 did not have an impact on the Fund's net assets and financial statements. INVESTMENT INCOME Corporate actions (including cash dividends) are recorded on the ex-dividend date, net of applicable withholding taxes, except for certain foreign corporate actions, which are recorded as soon after ex-dividend date as such information becomes available. Interest income is recorded on the accrual basis. All discounts and premiums on bonds are accreted and amortized, respectively, to call or maturity date, whichever is shorter, using the effective yield method. EXPENSES Expenses of the Company which are directly identifiable to one of the Funds are allocated to that portfolio. Expenses which are not directly identifiable to one of the Funds are allocated in such a manner as deemed equitable, taking into consideration the nature and type of expenses and relative sizes of the Funds. All expenses of the Fund are paid by GEAM and reimbursed by the Fund. 3. LINE OF CREDIT The Fund shares a revolving credit facility of up to $25 million with a number of its affiliates. The credit facility is with its custodian bank, State Street Bank and Trust Company. The revolving credit facility requires the payment of a commitment fee equal to 0.09% per annum on the daily unused portion of the credit facility, payable quarterly. The portion borne by the Funds generally is borne proportionally based upon net assets. Generally, borrowings under the credit facility would accrue interest at the Federal Funds Rate plus 50 basis points and is borne by each of the borrowing Funds. The maximum amount allowed to be borrowed by any one of the Funds is the lesser of its prospectus limitation, 20% of its net assets, or $25 million. The credit facility was not utilized by the Fund during the period ended June 30, 2007. 4. AMOUNTS PAID TO AFFILIATES GEAM, a registered investment adviser, was retained by the Company's Board of Directors effective May 1, 1997 to act as investment adviser and administrator of the Fund. GEAM's compensation for investment advisory and administrative services is paid monthly based on the average daily net assets of the Fund at an annualized rate of .55%. GENPACT performs certain accounting and certain administration services not provided by GEAM. For the period ending June 30, 2007, $725 was charged to the Fund. DIRECTORS' COMPENSATION The Fund pays no compensation to its directors who are officers or employees of GEAM or its affiliates. Directors who are not such officers or employees also serve in a similar capacity for other funds advised by GEAM. Compensation paid to unaffiliated directors are reflected on the Statement of Operations. These fees are allocated pro rata across all of the mutual fund platforms and share classes served by the directors, including the Fund, and are based upon the relative net assets of each Fund within such platforms. (For additional information about directors compensation please refer to the Statement of Additional Information.) 18 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- 5. INVESTMENT TRANSACTIONS PURCHASES AND SALES OF SECURITIES The cost of purchases and the proceeds from sales of investments, other than short-term securities and options, for the period ended June 30, 2007 were as follows: Purchases Sales - -------------------------------------------------------------------------------- $27,475,934 $46,998,354 SECURITY LENDING At June 30, 2007, the Fund participated in securities lending: Loaned securities at Cash market value collateral* - -------------------------------------------------------------------------------- $5,578,448 $5,723,562 * COLLATERAL OF $5,733,327 DECREASED BY $9,765 ON JULY 1, 2007 TO REFLECT THE JUNE 30, 2007 CHANGE IN VALUE OF SECURITIES ON LOAN. 19 Additional Information (unaudited) - -------------------------------------------------------------------------------- INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS: The business and affairs of the Company are managed under the direction of the Company's Board of Directors. Information pertaining to the Directors and officers of the Company is set forth below. INTERESTED DIRECTORS AND EXECUTIVE OFFICERS - -------------------------------------------------------------------------------- MICHAEL J. COSGROVE - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 58 POSITION(S) HELD WITH FUND Chairman of the Board and President TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 10 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President - GEAM since February 1997; President and Chief Executive Officer - Mutual Funds at GEAM since March 2007; Vice President, GE Capital Corporation, an indirect wholly-owned subsidiary of GE, since December 1999; Executive Vice President - Sales and Marketing of GEAM, a wholly-owned subsidiary of GE that is registered as an investment adviser under the Investment Advisers Act of 1940, as amended, since March 1993; Director of GEAM since 1988. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48 OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception; Trustee of Elfun Funds, GE Savings & Security Funds and General Electric Pension Trust since 1988; Trustee of Fordham University since 2003; Trustee of Elfun Foundation; Treasurer of GE Foundation; Director, GE Asset Management (Ireland) since February 1999; Director, GE Asset Management Funds Plc, GE Asset Canada Company, GE Asset Management Limited, and GE Volunteers. - -------------------------------------------------------------------------------- MATTHEW J. SIMPSON - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 46 POSITION(S) HELD WITH FUND Executive Vice President TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - less than one year PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General Counsel and Secretary of GEAM since July 2007; Senior Vice President and General Counsel - Marketing and Client Services (formerly Asset Management Services), at GEAM and Senior Vice President and General Counsel of GEAMS from February 1997 to June 2007; Vice President and Associate General Counsel of GEAM from October 1992 to February 1997; Secretary of Fund from 1997 to June 2007; Vice President of Fund from September 2003 to June 2007; Vice President of GE Institutional Funds and GE LifeStyle Funds from September 2003 to June 2007; Secretary of GE Institutional Funds and GE LifeStyle Funds from 1997 to June 2007; Vice President of Elfun Funds and GE Savings & Security Funds from October 2003 to June 2007; Assistant Secretary of Elfun Funds and GE Savings & Security Funds from 1998 to June 2007. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional Funds, GE LifeStyle Funds, Elfun Funds and GE Savings & Security Funds since July 2007. 20 Additional Information (unaudited) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SCOTT H. RHODES - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 48 POSITION(S) HELD WITH FUND Treasurer TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - one year PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds Operations Manager since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle Funds and GE Investments Funds since November 2005 and Elfun Funds and GE Savings & Security Funds since September 2005; from August 2004 to September 2005 Vice President, U.S. Trust Company, N.A. and Assistant Treasurer of Excelsior Funds, Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds, Inc.; from January 2004 to August 2004, Vice President BlackRock Financial Management, Inc.; from December 1996 to November 2003, Controller - Mutual Funds, American Skandia Investment Services, Inc. and Assistant Treasurer of American Skandia Trust and American Skandia Advisor Funds, Inc. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A - -------------------------------------------------------------------------------- JEANNE M. LAPORTA - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 42 POSITION(S) HELD WITH FUND Vice President and Secretary TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 2 years (Vice President); less than one year (Secretary) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Associate General Counsel - Marketing and Client Services (formerly Asset Management Services) at GEAM since May 1997; Vice President and Assistant Secretary of GE Funds, GE Institutional Funds and GE LifeStyle Funds since September 2003; Vice President and Assistant Secretary of Elfun Funds and GE Savings & Security Funds since October 2003; Assistant Secretary from September 2003 to June 2007 and Secretary since July 2007. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A 21 Additional Information (unaudited) - -------------------------------------------------------------------------------- NON-INTERESTED DIRECTORS - -------------------------------------------------------------------------------- JOHN R. COSTANTINO - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 61 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC since 2006; Managing Director, Walden Partners, Ltd., consultants and investors, since August 1992. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE Institutional Funds and GE LifeStyle Funds since their inception; Trustee of Fordham University since 2002 and Marymount College from 2001 through 2002; Neuroscience Research Institute since 1986; Diocesan Finance Counsel of the Dioceses of Brooklyn & Queens since 2001; Gregorian University Foundation since 1994. - -------------------------------------------------------------------------------- WILLIAM J. LUCAS - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 59 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Treasurer of Fairfield University since 1983. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception. - -------------------------------------------------------------------------------- ROBERT P. QUINN - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 71 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon Brothers Inc. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception. - -------------------------------------------------------------------------------- The Statement of Additional Information for the Fund includes additional information about the Directors and Officers and is available, without charge, upon request by calling 1-800-242-0134. 22 Investment Team - -------------------------------------------------------------------------------- INVESTMENT ADVISER AND ADMINISTRATOR GE Asset Management Incorporated BOARD OF DIRECTORS Michael J.Cosgrove, CHAIRMAN John R. Costantino William J. Lucas Robert P. Quinn Matthew J. Simpson SECRETARY Jeanne M. LaPorta ASSISTANT SECRETARIES Joseph A. Carucci Joon Won Choe TREASURER Scott H. Rhodes ASSISTANT TREASURERS Scott R. Fuchs Christopher M. Isaacs DISTRIBUTOR GE Investment Distributors, Inc. Member NASD and SIPC COUNSEL Sutherland, Asbill & Brennan, LLP CUSTODIAN State Street Bank & Trust Company INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM KPMG LLP OFFICERS OF THE INVESTMENT ADVISER James W. Ireland, CHIEF EXECUTIVE OFFICER Michael J. Cosgrove, EVP, PRESIDENT AND CHIEF EXECUTIVE OFFICER - MUTUAL FUNDS Paul M. Colonna, PRESIDENT - FIXED INCOME Kathryn D. Karlic, EVP, PRESIDENT - SALES AND MARKETING Ralph R. Layman, EVP, PRESIDENT - INTERNATIONAL EQUITIES Matthew J. Simpson, EVP, GENERAL COUNSEL AND SECRETARY Judith A. Studer, EVP, PRESIDENT - U.S. EQUITIES Don W. Torey, EVP, PRESIDENT - ALTERNATIVE INVESTMENTS AND REAL ESTATE John J. Walker, EVP, CHIEF FINANCIAL OFFICER 23 [This page intentionally left blank.] [This page intentionally left blank.] INVESTMENT ADVISER GE ASSET MANAGEMENT INCORPORATED 3001 SUMMER STREET PO BOX 7900 STAMFORD, CT 06904-7900 DISTRIBUTOR GE INVESTMENT DISTRIBUTORS, INC. MEMBER NASD AND SIPC 3001 SUMMER STREET PO BOX 7900 STAMFORD, CT 06904-7900 The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities is available without charge (i) upon request, by calling 1-800-242-0134; (ii) on the Fund's website at http://www.gefunds.com; and (iii) on the Commission's website at http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC - - information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Information (if any) regarding how the Fund voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through the Fund's website at http://www.gefunds.com; and (ii) on the Commission's website at http://www.sec.gov. [GE logo omitted] GE Investments Funds, Inc. Value Equity Fund Semi-Annual Report JUNE 30, 2007 [GE logo omitted] GE Investments Funds, Inc. Value Equity Fund - -------------------------------------------------------------------------------- Contents NOTES TO PERFORMANCE ..................................................... 1 MANAGER REVIEW AND SCHEDULE OF INVESTMENTS ............................... 2 NOTES TO SCHEDULE OF INVESTMENTS ......................................... 8 FINANCIAL STATEMENTS Financial Highlights ................................................ 9 Statement of Assets and Liabilities ................................. 10 Statement of Operations ............................................. 11 Statements of Changes in Net Assets ................................. 12 Notes to Financial Statements ....................................... 13 ADDITIONAL INFORMATION ................................................... 18 INVESTMENT TEAM .......................................................... 21 This report is prepared for Policyholders of certain variable contracts and may be distributed to others only if preceded or accompanied by the variable contract's current prospectus and the current prospectus of the Funds available for investments thereunder. Notes to Performance June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- Total returns take into account changes in share price and assume reinvestment of dividends and capital gains distributions, if any. Investment returns and net asset value on an investment will fluctuate and you may have a gain or loss when you sell your shares. Periods less than one year are not annualized. Current performance may be lower or higher than that shown. You may call toll-free (800) 242-0134 for performance information as of the most recent month end. Total returns do not reflect expenses associated with the separate account such as administrative fees, account charges and surrender charges, which, if reflected, would reduce the total returns for all periods shown. Shares of the Fund are neither insured nor guaranteed by the U.S. Government, and their prices will fluctuate with market conditions. The Standard & Poor's ("S&P") 500 Composite Price Index of stocks (S&P 500) and Russell 1000 Value Index (Russell 1000 Value) are unmanaged indices and do not reflect the actual cost of investing in the instruments that comprise each index. The S&P 500 is an unmanaged, market capitalization-weighted index of stocks of 500 large U.S. companies, which is widely used as a measure of large-cap stock market performance. The results shown for the foregoing index assume the reinvestment of net dividends or interest. The peer universe of the underlying annuity funds used in our peer ranking calculation is based on the blend of Lipper peer categories, as shown. Lipper is an independent mutual fund rating service. A Fund's performance may be compared to or ranked within a universe of mutual funds with investment objectives and policies similar but not necessarily identical to the Fund's. Such comparisons or rankings are made on the basis of several factors, including the Fund's objectives and policies, management style and strategy, and portfolio composition, and may change over time if any of those factors change. 1 Value Equity Fund - -------------------------------------------------------------------------------- THE VALUE EQUITY FUND IS CO-MANAGED BY PAUL C. REINHARDT AND STEPHEN V. GELHAUS. MESSRS. REINHARDT AND GELHAUS BOTH MANAGE THE FUND AS A COLLABORATIVE TEAM. BOTH PORTFOLIO MANAGERS HAVE THE AUTHORITY TO INCREASE OR DECREASE EXISTING POSITIONS IN THE FUND; HOWEVER, MR. REINHARDT, AS LEAD MANAGER, IS VESTED WITH THE AUTHORITY TO PURCHASE SECURITIES THAT ARE NEW TO THE FUND OR TO DIVEST THE FUND OF ITS ENTIRE POSITION IN A SECURITY. MR. REINHARDT ALSO HAS VETO AUTHORITY OVER MR. GELHAUS' TRADE DECISIONS. PAUL REINHARDT (PICTURED BELOW) IS A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT AND LEAD PORTFOLIO MANAGER OF THE VALUE EQUITY FUND. HE HAS SERVED IN THIS CAPACITY SINCE APRIL 2002. MR. REINHARDT JOINED GE ASSET MANAGEMENT IN 1982 AS AN EQUITY ANALYST AND HAS BEEN A PORTFOLIO MANAGER SINCE 1987. STEPHEN V. GELHAUS IS A VICE PRESIDENT OF GE ASSET MANAGEMENT. HE HAS BEEN A MEMBER OF THE PORTFOLIO MANAGEMENT TEAM FOR THE VALUE EQUITY FUND SINCE JANUARY 2002. MR. GELHAUS JOINED GE ASSET MANAGEMENT IN JUNE 1991 AND WAS A RESEARCH ANALYST IN THE U.S. EQUITY DEPARTMENT FROM 1995 THROUGH 2001 AND BECAME AN ASSOCIATE PORTFOLIO MANAGER FOR THE VALUE EQUITY FUND IN AUGUST 1999. Q. HOW DID THE VALUE EQUITY FUND PERFORM COMPARED TO ITS BENCHMARK AND LIPPER PEER GROUP FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2007? A. For the six-month period ended June 30, 2007, the Value Equity Fund returned 7.85%. The S&P 500 Index, the Fund's benchmark, returned 6.96% and the Fund's Lipper peer group of 205 Large-Cap Core funds returned an average of 7.21% for the same period. Q. WHAT MARKET CONDITIONS IMPACTED FUND PERFORMANCE? A. The period continued a rally that had propelled the U.S. equity markets higher over the past year. While first-quarter `07 earnings growth moderated into the single digit range for the first time in three years, corporate profits did climb +9%, surprising market-watchers to the upside. Despite a backdrop of slowing economic growth, a weakening dollar and rising oil prices, stocks rallied amid the strong corporate earnings, record M&A activity, cooling inflation worries and the absence of Fed tightening. By early June, several key U.S. equity indices reached new highs. However, the period ended with a whimper -- during the month of June each broad measure of U.S. equity market performance retreated. The S&P 500's June decline was just its second in 13 months, and its second down month in 2007. The pullback was brought on by renewed inflation fears, and concern that the Fed might need to raise interest rates this year to keep inflation in check. New liquidity and credit concerns also spooked the markets, amid the near collapse of two large sub-prime hedge funds. During the six-month period, S&P 500 sectors tilted toward global infrastructure investment outperformed, including energy (+17%), materials (+17%) and industrials (+11%). Telecom (+16%) also rallied on the strength of continued restructuring improvements and sector consolidation. Financials (-1%) offered the only negative sector return, facing credit cycle [PHOTO OMITTED] 2 - -------------------------------------------------------------------------------- Q&A headwinds and anxiety stemming from leveraged speculation in the debt market. Consumer discretionary (+3%), consumer staples (+5%) and health care (+6%) also lagged. Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE? A. The primary sectors contributing to performance were industrials, utilities, information technology, and financials. Within industrials, strength in ABB (+27%), Cooper Industries (+27%), Deere (+28%), and Eaton (+25%) drove performance. The industrials rallied amid strong demand for global infrastructure investments, as did Freeport-McMoran (+50%), a leading global gold and copper miner. Within utilities, Constellation Energy Group (+28%) and Edison International (+25%) contributed most. Shares of Constellation Energy Group took off early in the year upon the announcement of the record-breaking $45 billion TXU Corp. leveraged buyout. Strong stock selection within information technology also aided returns, with Texas Instruments (+31%), Oracle (+15%) and First Data (+28%) all contributing to outperformance in this sector. Within financials, minimally weighting the commercial banks and avoiding poorly performing REITs were the primary drivers of performance. On the other hand, consumer staples, energy, and telecom services negatively impacted performance during the period. Consumer staples companies Clorox (-2%) and Kimberly-Clark (0%) lagged amid rising commodity cost pressures. Within energy, despite strong performance from our energy equipment holdings, most notably Transocean (+31%), and solid results from our oil and gas picks, underperformance in this sector was primarily a result of "not owning enough", as virtually all names in this space performed well. Our continued underweight in telecommunications was another key detractor. While we have been building our position in AT&T (+18%), our underweight versus the benchmark hampered returns. We continued to prefer the secular growth offered by media companies versus telecom. Biotechnology giant Amgen (-19%) was the single largest detractor from Fund performance. The stock suffered amid safety concerns regarding its anemia drugs, and increased FDA scrutiny. However, we continue to like the strength in Amgen's pipeline of therapeutics, and its long-term prospects. Q. WERE THERE ANY SIGNIFICANT CHANGES TO THE FUND OVER THE PERIOD? A. There were no significant changes to the Fund over the period. Our process has remained consistent, and we continued to employ a bottom-up relative value process to seek out underappreciated stocks with catalysts for growth or improving fundamentals. The Fund is positioned for a moderate slowdown in economic growth. The case for slowing growth was bolstered during the period as rising delinquencies in sub-prime mortgages and higher interest rates have dampened the outlook for home-price appreciation and consumer spending. Our bottom-up process has led us to high quality companies with financial flexibility. Our primary sector overweights include technology, consumer staples and health care -- areas that we believe can put up consistent earnings in a slowing economy. We are also overweight the insurance industry, while underweighting the commercial banks and REITs. Our largest underweights include the financial, energy and telecommunications sectors. We believe that the GE Value Equity Fund is appropriately positioned with high-quality, fundamentally strong holdings with attractive relative valuations. 3 Value Equity Fund - -------------------------------------------------------------------------------- Understanding Your Fund's Expenses As a shareholder of the Fund you incur transaction and ongoing expenses. Transaction expenses including sales charges on purchase payments, reinvested dividends (or other distributions), and redemption fees directly reduce the investment return of the Fund. Ongoing costs include portfolio management fees, distribution and service fees, professional fees, administrative fees and other Fund expenses. The following example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the period. The information in the following table is based on an investment of $1,000, which is invested at the beginning of the period and held for the entire six-month period ended June 30, 2007. ACTUAL EXPENSES The first section of the table provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your class under the heading "Expenses Paid During Period." HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second section of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholders reports of other funds. Please note that the expenses shown in the table do not reflect any transaction costs, such as sales charges or redemption fees.
JANUARY 1, 2007 - JUNE 30, 2007 - ---------------------------------------------------------------------------------------------------------------------- ACCOUNT VALUE AT ACCOUNT VALUE EXPENSES THE BEGINNING OF AT THE END OF PAID DURING THE PERIOD ($) THE PERIOD ($) THE PERIOD ($)* - ---------------------------------------------------------------------------------------------------------------------- Actual Fund Return** 1,000.00 1,078.50 4.16 - ---------------------------------------------------------------------------------------------------------------------- Hypothetical 5% Return (2.5% for the period) 1,000.00 1,020.56 4.06 - ----------------------------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.81% (FROM PERIOD JANUARY 1, 2007 - JUNE 30, 2007), MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY 181/365 (TO REFLECT THE SIX MONTH PERIOD). ** ACTUAL FUND RETURN FOR SIX-MONTH PERIOD ENDED JUNE 30, 2007 WAS: 7.85%. 4 Value Equity Fund - -------------------------------------------------------------------------------- CHANGE IN VALUE OF A $10,000 INVESTMENT - -------------------------------------------------------------------------------- [Line chart omitted -- plot points are as follows:] Value Equity Fund S&P 500 Index 04/28/00 $10,000.00 $10,000.00 06/00 9,970.00 10,035.00 12/00 9,978.58 9,154.99 06/01 9,486.19 8,542.89 12/01 9,105.15 8,064.45 06/02 8,357.33 7,003.61 12/02 7,505.72 6,282.05 06/03 8,219.58 7,021.98 12/03 9,310.98 8,086.77 06/04 9,517.43 8,364.94 12/04 10,202.11 8,966.72 06/05 10,181.23 8,894.16 12/05 10,616.27 9,407.74 06/06 11,019.29 9,662.05 12/06 12,511.37 10,893.45 06/07 13,493.57 11,651.80 - ---------------------------------------- Value Equity Fund (ending value $13,494) S&P 500 Index (ending value $11,727) - ---------------------------------------- AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2007 - -------------------------------------------------------------------------------- SIX ONE FIVE SINCE MONTHS YEAR YEAR INCEPTION - -------------------------------------------------------------------------------- Value Equity Fund 7.85% 22.45% 10.06% 4.26% - -------------------------------------------------------------------------------- S&P 500 Index 6.96% 20.59% 10.72% 2.16% - -------------------------------------------------------------------------------- Lipper peer group average* 7.21% 19.79% 9.92% N/A - -------------------------------------------------------------------------------- Inception date 4/28/00 ================================================================================ INVESTMENT PROFILE A fund designed for investors who seek long-term growth of capital and future income by investing at least 80% of its net assets in equity securities under normal circumstances. The Fund invests primarily in U.S. companies that the portfolio manager believes are undervalued by the market but have solid growth prospects. TOP TEN LARGEST HOLDINGS AS OF JUNE 30, 2007 as a % of Market Value - -------------------------------------------------------------------------------- Exxon Mobil Corp. 4.04% - -------------------------------------------------------------------------------- American International Group, Inc. 2.83% - -------------------------------------------------------------------------------- Microsoft Corp. 2.50% - -------------------------------------------------------------------------------- PepsiCo, Inc. 2.33% - -------------------------------------------------------------------------------- Citigroup, Inc. 2.30% - -------------------------------------------------------------------------------- Oracle Corp. 2.16% - -------------------------------------------------------------------------------- Procter & Gamble Co. 2.05% - -------------------------------------------------------------------------------- Industrial Select Sector SPDR Fund 1.99% - -------------------------------------------------------------------------------- Amgen, Inc. 1.92% - -------------------------------------------------------------------------------- Omnicom Group, Inc. 1.89% ================================================================================ PORTFOLIO COMPOSITION AS OF JUNE 30, 2007 as a % of Market Value - -------------------------------------------------------------------------------- Market Value of $44,227 (in thousands) [Pie chart omitted -- plot points are as follows:] Information Technology 18.0% Financials 15.7% Healthcare 12.2% Consumer Staples 11.3% Short Term 10.7% Industrials 9.2% Energy 8.8% Consumer Discretionary 6.8% Utilities 3.1% Telecommunication Services 2.2% Materials 2.0% * LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR THE SIX MONTHS, ONE YEAR, AND FIVE-YEAR PERIODS INDICATED IN THE LARGE-CAP CORE FUNDS PEER GROUP CONSISTING OF 205, 199 AND 152 UNDERLYING ANNUITY FUNDS, RESPECTIVELY. SEE NOTES TO PERFORMANCE ON PAGE 1 FOR FURTHER INFORMATION, INCLUDING AN EXPLANATION OF LIPPER PEER CATEGORIES. PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE AND THE GRAPH AND TABLE DO NOT REFLECT THE DEDUCTION OF TAXES. 5 VALUE EQUITY FUND Schedule of Investments June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- VALUE EQUITY FUND - -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- COMMON STOCK -- 95.9%+ - -------------------------------------------------------------------------------- CONSUMER DISCRETIONARY -- 7.5% Bed Bath & Beyond, Inc. 4,095 $ 147,379(a,e) Comcast Corp. (Class A) 12,285 343,489(a,e) General Motors Corp. 4,778 180,608(e) Koninklijke Philips Electronics N.V. ADR 8,831 373,728 News Corp. (Class A) 14,333 304,003 Omnicom Group, Inc. 15,834 837,935 Starwood Hotels & Resorts Worldwide, Inc. 2,048 137,359 Time Warner, Inc. 32,761 689,291(d) 3,013,792 CONSUMER STAPLES -- 12.5% Clorox Co. 11,125 690,862 Diageo PLC ADR 1,638 136,462 General Mills, Inc. 10,715 625,970 Kellogg Co. 2,867 148,482 Kimberly-Clark Corp. 9,555 639,134 Nestle S.A. ADR 1,843 176,283 PepsiCo, Inc. 15,903 1,031,310 Procter & Gamble Co. 14,811 906,285 Sara Lee Corp. 9,760 169,824(e) The Coca-Cola Co. 4,095 214,209 Wal-Mart Stores, Inc. 5,119 246,275 4,985,096 ENERGY -- 9.7% Apache Corp. 2,867 233,919 Exxon Mobil Corp. 21,294 1,786,141(d) Halliburton Co. 5,460 188,370 Hess Corp. 6,825 402,402 Occidental Petroleum Corp. 6,006 347,627 Schlumberger Ltd. 3,140 266,712 Suncor Energy, Inc. 1,024 92,078 Transocean Inc. 5,392 571,444(a,e) 3,888,693 FINANCIALS -- 16.8% ACE Ltd. 4,641 290,155 Allstate Corp. 8,531 524,742 American International Group, Inc. 17,882 1,252,276 AON Corp. 6,620 282,078(e) Bank of America Corp. 13,650 667,348(d) BlackRock Inc. (Class A) 1,092 170,996(e) CB Richard Ellis Group, Inc. (Class A) 839 30,623(a,e) NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- Chubb Corp. 7,985 $ 432,308 Citigroup, Inc. 19,793 1,015,183 Federal Home Loan Mortgage Corp. 9,350 567,545 Federal National Mortgage Assoc. 1,638 107,011 Hartford Financial Services Group, Inc. 683 67,282 Mellon Financial Corp. 12,490 549,560 Merrill Lynch & Company, Inc. 341 28,501 Metlife, Inc. 6,962 448,910 Prudential Financial, Inc. 751 73,020 State Street Corp. 2,731 186,800(c) The Bank of New York Company, Inc. 1,160 48,070 6,742,408 HEALTHCARE -- 13.5% Aetna, Inc. 8,941 441,685 Amgen, Inc. 15,357 849,089(a,e) Baxter International, Inc. 7,985 449,875 Bristol-Myers Squibb Co. 7,303 230,483 DaVita, Inc. 5,665 305,230(a,e) GlaxoSmithKline PLC ADR 4,785 250,590(e) Johnson & Johnson 4,709 290,169 McKesson Corp. 3,071 183,154 Medco Health Solutions, Inc. 4,505 351,345(a) Novartis AG ADR 5,460 306,142 Pfizer Inc. 21,158 541,010(d) Thermo Electron Corp. 3,890 201,191(a,e) UnitedHealth Group, Inc. 3,413 174,541 Wyeth 14,196 813,999 5,388,503 INDUSTRIALS -- 8.0% ABB Ltd. ADR 17,063 385,624 Cooper Industries Ltd. 5,665 323,415(e) Deere & Co. 3,686 445,048 Eaton Corp. 2,798 260,214 General Dynamics Corp. 3,140 245,611 ITT Corp. 1,502 102,557 Northrop Grumman Corp. 6,211 483,651 Pitney Bowes Inc. 1,706 79,875(e) Rockwell Collins, Inc. 1,297 91,620 3M Co. 5,870 509,457 United Technologies Corp. 1,706 121,007 Waste Management, Inc. 1,570 61,309 WESCO International, Inc. 1,775 107,299(a) 3,216,687 INFORMATION TECHNOLOGY -- 19.9% Analog Devices, Inc. 11,261 423,864(d) Cisco Systems, Inc. 25,936 722,318(a,d) Corning Incorporated 5,324 136,028(a) Dell, Inc. 3,071 87,677(a) EMC Corp. 2,097 37,956(a) See Notes to Schedule of Investments on page 8 and Notes to Financial Statements. 6 VALUE EQUITY FUND Schedule of Investments June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- First Data Corp. 10,920 $ 356,756 Hewlett-Packard Co. 11,876 529,907 Intel Corp. 29,348 697,308 International Business Machines Corp. 7,371 775,798(e) Lam Research Corp. 2,184 112,258(a) Maxim Integrated Products, Inc. 11,603 387,656 Microchip Technology Inc. 6,347 235,093(e) Microsoft Corp. 37,538 1,106,245(d) National Semiconductor Corp. 12,080 341,502(e) Oracle Corp. 48,458 955,107(a,d) Sun Microsystems, Inc. 13,650 71,799(a) Taiwan Semiconductor Manufacturing Company Ltd. ADR 10,580 117,755 Texas Instruments Incorporated 12,354 464,881 Western Union Co. 18,974 395,228 7,955,136 MATERIALS -- 2.2% Barrick Gold Corp. 12,968 376,980 Freeport-McMoRan Copper & Gold Inc. (Class B) 3,413 282,665(e) PAN American Silver Corp. 3,071 80,859(a,e) Praxair, Inc. 2,048 147,436 887,940 TELECOMMUNICATION SERVICES -- 2.4% AT&T, Inc. 4,095 169,942 Sprint Nextel Corp. (Series 1) 7,849 162,553 Verizon Communications Inc. 11,807 486,094 Vodafone Group, PLC ADR 4,641 156,077(e) 974,666 UTILITIES -- 3.4% Constellation Energy Group, Inc. 4,095 356,961 Dominion Resources, Inc. 8,600 742,266(e) Edison International 4,709 264,269 1,363,496 TOTAL COMMON STOCK (COST $31,729,060) 38,416,417 - -------------------------------------------------------------------------------- EXCHANGE TRADED FUNDS -- 2.7% - -------------------------------------------------------------------------------- Financial Select Sector SPDR Fund 5,808 210,133(g) Industrial Select Sector SPDR Fund 22,579 881,484(d,g) TOTAL EXCHANGE TRADED FUNDS (COST $783,634) 1,091,617 TOTAL INVESTMENTS IN SECURITIES (COST $32,512,694) 39,508,034 - -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 11.8% - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 1.9% GEI Short Term Investment Fund 5.55% 759,553 $ 759,553(b,f) SHORT-TERM SECURITIES PURCHASED WITH COLLATERAL FROM SECURITIES ON LOAN -- 9.9% State Street Navigator Securities Lending Prime Portfolio 5.36% 3,959,866 3,959,866(b,c) TOTAL SHORT-TERM INVESTMENTS (COST $4,719,419) 4,719,419 TOTAL INVESTMENTS (COST $37,232,113) 44,227,453 LIABILITIES IN EXCESS OF OTHER ASSETS, NET -- (10.4)% (4,140,338) ------------ NET ASSETS -- 100.0% $ 40,087,115 ============ - -------------------------------------------------------------------------------- OTHER INFORMATION - -------------------------------------------------------------------------------- The GEI Value Equity Fund had the following long futures contracts open at June 30, 2007 (unaudited): NUMBER CURRENT EXPIRATION OF NOTIONAL UNREALIZED DESCRIPTION DATE CONTRACTS VALUE APPRECIATION - -------------------------------------------------------------------------------- S&P 500 Index Futures September 2007 1 $378,850 $805 See Notes to Schedule of Investments on page 8 and Notes to Financial Statements. 7 Notes to Schedule of Investments June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- The views expressed in this document reflect our judgment as of the publication date and are subject to change at any time without notice. The securities cited may not represent current or future holdings and should not be considered as a recommendation to purchase or sell a particular security. See the prospectus for complete descriptions of investment objectives, policies, risks and permissible investments. (a) Non-income producing security. (b) Coupon amount represents effective yield. (c) State Street Corp. is the parent company of State Street Bank & Trust Co., the Fund's custodian and accounting agent. (d) At June 30, 2007, all or a portion of this security was pledged to cover collateral requirements for futures, options, forward foreign currency contracts and/or TBA's. (e) All or a portion of the security is out on loan. (f) GEAM, the investment advisor of the fund, serves as investment advisor of the GEI Short Term Investment Fund. (g) Sponsored by SSgA Funds Management, Inc., an affiliate of State Street Bank & Trust Co., the Fund's custodian and accounting agent. + Percentages are based on net assets as of June 30, 2007. Abbreviations: ADR American Depository Receipt GDR Global Depository Receipt SPDR Standard & Poors Depository Receipts 8 Financial Highlights Selected data based on a share outstanding throughout the periods indicated - --------------------------------------------------------------------------------
VALUE EQUITY FUND 6/30/07+ 12/31/06 12/31/05 12/31/04 12/31/03 12/31/02 - ----------------------------------------------------------------------------------------------------------------------------------- INCEPTION DATE -- -- -- -- -- 4/28/00 Net asset value, beginning of period .............. $10.70 $10.01 $9.77 $9.02 $7.36 $9.01 INCOME/(LOSS) FROM INVESTMENT OPERATIONS: Net investment income .......................... 0.06 0.17 0.11 0.11 0.11 0.07 Net realized and unrealized gains/(losses) on investments ............... 0.78 1.62 0.29 0.75 1.66 (1.65) - ----------------------------------------------------------------------------------------------------------------------------------- TOTAL INCOME/(LOSS) FROM INVESTMENT OPERATIONS .... 0.84 1.79 0.40 0.86 1.77 (1.58) - ----------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS FROM: Net investment income .......................... -- 0.17 0.12 0.11 0.11 0.07 Net realized gains ............................. -- 0.93 0.04 -- -- -- - ----------------------------------------------------------------------------------------------------------------------------------- TOTAL DISTRIBUTIONS ............................... -- 1.10 0.16 0.11 0.11 0.07 - ----------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD .................... $11.54 $10.70 $10.01 $9.77 $9.02 $7.36 =================================================================================================================================== TOTAL RETURN (A) .................................. 7.85% 17.85% 4.06% 9.57% 24.05% (17.57)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ....... $40,087 $39,683 $37,115 $37,128 $29,989 $24,623 Ratios to average net assets: Net investment income* ...................... 0.99% 1.55% 1.13% 1.26% 1.16% 1.01% Expenses* ................................... 0.81% 0.81% 0.80% 0.80% 0.73% 0.74% Portfolio turnover rate ........................ 22% 42% 36% 53% 78% 76%
NOTES TO FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- (a) Total returns are historical and assume changes in share price and reinvestment of dividends and capital gains and do not include the effect of insurance contract charges. * Annualized for periods less than one year. + Unaudited. See Notes to Financial Statements. 9
VALUE Statement of Assets EQUITY and Liabilities JUNE 30, 2007 (UNAUDITED) FUND - --------------------------------------------------------------------------------------------------------------------------- ASSETS Investments in securities, at market* (cost $32,512,694) ................................................ $39,508,034 Short-term Investments (at amortized cost) .............................................................. 3,959,866 Short-term affiliated investments (at amortized cost) ................................................... 759,553 Receivable for investments sold ......................................................................... 311,006 Income receivables ...................................................................................... 40,869 Receivable for fund shares sold ......................................................................... 104 Variation margin receivable ............................................................................. 1,695 Other assets ............................................................................................ 943 - --------------------------------------------------------------------------------------------------------------------------- TOTAL ASSETS ........................................................................................ 44,582,070 - --------------------------------------------------------------------------------------------------------------------------- LIABILITIES Payable upon return of securities loaned ................................................................ 3,959,866 Payable for investments purchased ....................................................................... 222,815 Payable for fund shares redeemed ........................................................................ 261,065 Payable to GEAM ......................................................................................... 51,209 - --------------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES ................................................................................... 4,494,955 - --------------------------------------------------------------------------------------------------------------------------- NET ASSETS ................................................................................................. $40,087,115 =========================================================================================================================== NET ASSETS CONSIST OF: Capital paid in ......................................................................................... 30,023,574 Undistributed (distribution in excess of) net investment income ......................................... 198,911 Accumulated net realized gain (loss) .................................................................... 2,868,485 Net unrealized appreciation/(depreciation) on: Investments ......................................................................................... 6,995,340 Futures ............................................................................................. 805 - --------------------------------------------------------------------------------------------------------------------------- NET ASSETS ................................................................................................. $40,087,115 =========================================================================================================================== NET ASSETS ................................................................................................. 40,087,115 Shares outstanding ($0.01 par value; unlimited shares authorized) .......................................... 3,473,063 Net asset value per share .................................................................................. $11.54
* Includes $3,886,671 of securities on loan See Notes to Financial Statements. 10
VALUE Statement of Operations EQUITY FOR THE SIX MONTHS ENDED JUNE 30, 2007 (UNAUDITED) FUND - -------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME INCOME: Dividend ................................................................................ $ 349,272 Interest* ............................................................................... 2,512 Interest from affliated investments ..................................................... 11,909 Less: Foreign taxes withheld ............................................................ (2,967) - -------------------------------------------------------------------------------------------------------------- TOTAL INCOME .............................................................................. 360,726 - -------------------------------------------------------------------------------------------------------------- EXPENSES: Advisory and administrative fees ........................................................ 130,533 Transfer agent .......................................................................... 16 Trustee's fees .......................................................................... 534 Custody and accounting expenses ......................................................... 18,215 Professional fees ....................................................................... 8,867 Registration expenses ................................................................... 1,302 Other expenses .......................................................................... 2,348 - -------------------------------------------------------------------------------------------------------------- TOTAL EXPENSES ............................................................................ 161,815 - -------------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME (LOSS) .............................................................. 198,911 ============================================================================================================== NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS REALIZED GAIN (LOSS) ON: Investments .......................................................................... 2,594,799 Futures .............................................................................. (15,265) INCREASE (DECREASE) IN UNREALIZED APPRECIATION/ (DEPRECIATION) ON: Investments .......................................................................... 292,395 Futures .............................................................................. 3,250 - -------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments .................................. 2,875,179 - -------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ........................... $3,074,090 ==============================================================================================================
* Income attributable to security lending activity, net of rebate expenses, was $2,512. See Notes to Financial Statements. 11
VALUE Statements of EQUITY Changes in Net Assets FUND - ------------------------------------------------------------------------------------------------------------------------------ SIX MONTHS ENDED YEAR ENDED JUNE 30, 2007 DECEMBER 31, (UNAUDITED) 2006 - ------------------------------------------------------------------------------------------------------------------------------ INCREASE (DECREASE) IN NET ASSETS OPERATIONS: Net investments income (loss) ............................................................. $ 198,911 $ 582,026 Net realized gain (loss) on investments, futures, written options, foreign currency transactions and swaps ................................................. 2,579,534 3,361,481 Net increase (decrease) in unrealized appreciation/(depreciation) on investments, futures, written options, foreign currency translation .................. 295,645 2,256,614 - ------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) from operations ................................................... 3,074,090 6,200,121 - ------------------------------------------------------------------------------------------------------------------------------ DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income ..................................................................... -- (583,024) Net realized gains ........................................................................ -- (3,132,510) - ------------------------------------------------------------------------------------------------------------------------------ TOTAL DISTRIBUTIONS ......................................................................... -- (3,715,534) - ------------------------------------------------------------------------------------------------------------------------------ Increase (decrease) in net assets from operations and distributions ......................... 3,074,090 2,484,587 - ------------------------------------------------------------------------------------------------------------------------------ SHARE TRANSACTIONS: Proceeds from sale of shares .............................................................. 1,029,517 1,598,076 Value of distributions reinvested ......................................................... -- 3,715,534 Cost of shares redeemed ................................................................... (3,699,192) (5,230,437) - ------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) from share transactions ........................................... (2,669,675) 83,173 - ------------------------------------------------------------------------------------------------------------------------------ TOTAL INCREASE (DECREASE) IN NET ASSETS ..................................................... 404,415 2,567,760 NET ASSETS Beginning of period ......................................................................... 39,682,700 37,114,940 - ------------------------------------------------------------------------------------------------------------------------------ End of period ............................................................................... $40,087,115 $39,682,700 ============================================================================================================================== UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD ................. $ 198,911 $ -- - ------------------------------------------------------------------------------------------------------------------------------ CHANGES IN FUND SHARES Shares sold ............................................................................... 93,760 145,506 Issued for distributions reinvested ....................................................... -- 345,632 Shares redeemed ........................................................................... (329,970) (488,227) - ------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in fund shares ......................................................... (236,210) 2,911 ==============================================================================================================================
See Notes to Financial Statements. 12 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- 1. ORGANIZATION OF THE COMPANY GE Investments Funds, Inc. (the "Company") was incorporated under the laws of the Commonwealth of Virginia on May 14, 1984 and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company. The Company is composed of thirteen investment portfolios (collectively the "Funds"), although only the following eleven are currently being offered: U.S. Equity Fund, S&P 500 Index Fund, Premier Growth Equity Fund, Value Equity Fund (the "Fund"), Mid-Cap Equity Fund, Small-Cap Equity Fund, International Equity Fund, Total Return Fund, Income Fund, Money Market Fund and Real Estate Securities Fund. Shares of the Funds of the Company are offered only to insurance company separate accounts that fund certain variable life insurance contracts and variable annuity contracts. These insurance companies may include insurance companies affiliated with GE Asset Management Incorporated ("GEAM"), the investment adviser and administrator of each of the Funds. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions at the date of the financial statements. Actual results may differ from those estimates. The following summarizes the significant accounting policies of the Fund: SECURITY VALUATION AND TRANSACTIONS Securities for which exchange quotations are readily available are valued at the last sale price, or if no sales occurred on that day, at the last quoted bid price. Securities listed on the NASDAQ will be valued at the NASDAQ's official close price. Certain fixed income securities are valued by a dealer or by a pricing service based upon a matrix system, which considers market transactions as well as dealer supplied valuations. Short-term investments maturing within sixty days are valued at amortized cost. If quotations are not readily available for a portfolio security, or if it is believed that a quotation or other market price for a portfolio security does not represent its fair value, the security may be valued using procedures approved by the Fund's Board of Directors that are designed to establish its "fair value." These procedures require that the fair value of a security be established by the valuation committee. The fair value committee follows different protocols for different types of investments and circumstances. Foreign securities may be valued with the assistance of an independent fair value pricing service in circumstances where it is believed that they have been or would be materially affected by events occurring after the close of the portfolio security's primary market and before the close of regular trading on the NYSE. This independent fair value pricing service uses a computerized system to appraise affected securities and portfolios taking into consideration various factors and the fair value of such securities may be something other than the last available quotation or other market price. GE Asset Management may also separately monitor portfolio securities and, consistent with the Fund's fair value procedures, apply a different value to a portfolio security than would be applied had it been priced using market quotations or by an independent fair value pricing service. Determining the fair value of securities involves the application of both subjective and objective considerations. Security values may differ depending on the methodology used to determine their values, and may differ from the last quoted sale or closing price. No assurance can be given that use of these fair value procedures will always better represent the price at which a Fund could sell the affected portfolio security. Security transactions are accounted for as of the trade date. Realized gains and losses on investments sold are recorded on the basis of identified cost for both financial statement and federal tax purposes. In September 2006, FASB issued Statement of Financial Accounting Standards No. 157, FAIR VALUE MEASUREMENTS ("FAS 157"). FAS 157 establishes a single authoritative definition of fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. FAS 157 applies to fair value measurements already required or permitted by existing standards. The change to current generally accepted accounting principles from the application of FAS 157 relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. Management of the Fund does not believe the adoption of FAS 157 will materially impact the financial statement amounts, however, additional 13 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- disclosures may be required about the inputs used to develop the measurements and the effect of certain of the measurements on changes in net assets for the period. FAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. REPURCHASE AGREEMENTS The Fund may engage into repurchase agreement transactions with respect to instruments that are consistent with the Fund's investment objectives or policies. The Fund's or a third party custodian takes possession of the collateral pledged for investments in repurchase agreements on behalf of the Fund. The Fund values the underlying collateral daily on a mark-to-market basis to determine that the value, including accrued interest, is at least equal to 102% of the repurchase price. In the event the seller defaults and the value of the security declines, or if the seller enters an insolvency proceeding, realization of the collateral by the Fund may be delayed or limited. SECURITY LENDING The Fund may loan securities to brokers, dealers, and financial institutions determined by GEAM to be creditworthy, subject to certain limitations. The Fund continues to receive the interest and dividends on the loaned securities during the term of the loan. The loans of securities are secured by collateral in the form of cash or other liquid assets, which are segregated and maintained with the custodian in an amount at least equal to 102% of the current market value of the loaned securities. During the term of the loan, the Fund will record any gain or loss in the market value of its loaned securities and of securities in which cash collateral is invested. The Fund will also earn interest, net of any rebate, from securities in which cash collateral is invested. In the event the counterparty (borrower) does not meet its contracted obligation to return the securities, the Fund may be exposed to the risk of loss of reacquiring the loaned securities at prevailing market prices using the proceeds of the sale of the collateral. FOREIGN CURRENCY Accounting records of the Fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange at period end. Purchases and sales of securities, income receipts and expense payments denominated in foreign currencies are translated into U.S. dollars at the prevailing exchange rate on the respective dates of such transactions. The Fund does not isolate the portion of the results of operations resulting from changes in foreign exchange rates from the fluctuations arising from changes in the market prices of securities during the period. Such fluctuations are included in the net realized or unrealized gain or loss from investments. Net realized gains or losses on foreign currency transactions represent net gains or losses on sales and maturities of foreign currency contracts, disposition of foreign currencies, the difference between the amount of net investment income and withholding taxes accrued and the U.S. dollar amount actually received or paid, and gains or losses between the trade and settlement date on purchases and sales of securities. Net unrealized foreign exchange gains and losses arising from changes in the value of other assets and liabilities as a result of changes in foreign exchange rates are included as increases or decreases in unrealized appreciation/depreciation on foreign currency related transactions. FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or bond index futures contracts subject to certain limitations. The Fund may invest in futures contracts to manage its exposure to the stock and bond markets and fluctuations in currency values. Buying futures tends to increase the Fund's exposure to the underlying instrument while selling futures tends to decrease the Fund's exposure to the underlying instrument, or hedge other Fund investments. The Fund will not enter into a transaction involving futures for speculative purposes. The Fund's risks in using these contracts include changes in the value of the underlying instruments, non-performance of the counterparties under the contracts' terms and changes in the liquidity of the secondary market for the contracts. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they principally trade. Upon entering into a futures contract, the Fund is required to pledge to the broker an amount of cash and/or other assets equal to a certain percentage of the contract amount, known as initial margin deposit. Subsequent payments, known as variation margin, are made or received by the Fund each day, depending on the daily fluctuation in the fair value of the underlying security. The Fund records an unrealized gain or loss equal to the daily variation margin. Should market conditions move unexpectedly, the Fund may not achieve the anticipated 14 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- benefits of the futures contracts and may incur a loss. The Fund recognizes a realized gain or loss on the expiration or closing of a futures contract. OPTIONS The Fund may purchase and write options, subject to certain limitations. The Fund may invest in options contracts to manage its exposure to the stock and bond markets and fluctuations in foreign currency values. Writing puts and buying calls tend to increase the Fund's exposure to the underlying instrument while buying puts and writing calls tend to decrease the Fund's exposure to the underlying instrument, or hedge other Fund investments. The Fund will not enter into a transaction involving options for speculative purposes. The Fund's risks in using these contracts include changes in the value of the underlying instruments, non-performance of the counterparties under the contracts' terms and changes in the liquidity of the secondary market for the contracts. Options are valued at the last sale price, or if no sales occurred on that day, at the last quoted bid price. When the Fund writes an option, the amount of the premium received is recorded as a liability and is subsequently adjusted to the current fair value of the option written. Premiums received from writing options that expire unexercised are treated by the Fund on the expiration date as realized gains from investments. The difference between the premium and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium is less than the amount paid for the closing purchase, as a realized loss. When an option is exercised, the proceeds from the sale of the underlying security or the cost basis of the securities purchased is adjusted by the original premium received or paid. INVESTMENTS IN FOREIGN MARKETS Investments in foreign markets may involve special risks and considerations not typically associated with investing in the United States. These risks include revaluation of currencies, high rates of inflation, repatriation on income and capital, and adverse political and economic developments. Moreover, securities issued in these markets may be less liquid, subject to government ownership controls, tariffs and taxes, subject to delays in settlements, and their prices may be more volatile. The Fund may be subject to capital gains and repatriation taxes imposed by certain countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued based upon net investment income, net realized gains and net unrealized appreciation as income and/or capital gains are earned. INCOME TAXES The Fund intends to comply with all sections of the Internal Revenue Code applicable to regulated investment companies including the distribution of substantially all of its taxable net investment income and net realized capital gains to its shareholders. Therefore, no provision for federal income tax has been made. The Fund is treated as a separate taxpayer for federal income tax purposes. At June 30, 2007, information on the tax cost of investments is as follows: Net Tax Cost of Gross Tax Gross Tax Appreciation/ Investments for Unrealized Unrealized (Depreciation) Tax Purposes Appreciation Depreciation on Investments - ------------------------------------------------------------------------- $37,470,965 $7,341,389 $(584,901) $6,756,488 As of December 31, 2006, the Fund has no capital loss carryovers. Capital loss carryovers are available to offset future realized capital gains to the extent provided in the Internal Revenue Code and regulations thereunder. To the extent that these carryover losses are used to offset future capital gains, it is probable that the gains so offset will not be distributed to shareholders because they would be taxable as ordinary income. Any net capital and currency losses incurred after October 31, within the Fund's tax year, are deemed to arise on the first day of the Fund's next tax year if the Fund so elects to defer such losses. The Fund incurred no such losses after October 31, 2006. 15 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- The tax composition of distributions paid (other than return of capital distributions for the year) during the year ended December 31, 2006 was as follows: Long-Term Ordinary Capital Income Gains Total - -------------------------------------------------------------------------------- $671,827 $3,043,707 $3,715,534 DISTRIBUTIONS TO SHAREHOLDERS The Fund declares and pays dividends from net investment income annually. The Fund declares and pays net realized capital gains in excess of capital loss carryforwards distributions annually. The character of income and gains to be distributed is determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences include (but are not limited to) futures and losses deferred due to wash sale transactions. Reclassifications due to permanent book/tax differences are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. These reclassifications have no impact on net investment income, realized gains or losses, or the net asset value of the Fund. The calculation of net investment income per share in the Financial Highlights table excludes these adjustments. The reclassifications for the year ended December 31, 2006 were as follows: Undistributed (Distribution in Excess of) Net Investment Accumulated Paid in Income Net Realized Gain Capital - -------------------------------------------------------------------------------- $998 $(998) $ -- On June 29, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in Income Taxes." FIN48 provides guidance for how certain uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN48 requires evaluation of tax positions taken or expected to be taken in the course of preparing the Fund's tax return to determine whether the tax positions are "more likely than not" of being sustained by the applicable tax authority. The adoption of FIN48 did not have an impact on the Fund's net assets and financial statements. INVESTMENT INCOME Corporate actions (including cash dividends) are recorded on the ex-dividend date, net of applicable withholding taxes, except for certain foreign corporate actions, which are recorded as soon after ex-dividend date as such information becomes available. Interest income is recorded on the accrual basis. All discounts and premiums on bonds are accreted and amortized, respectively, to call or maturity date, whichever is shorter, using the effective yield method. EXPENSES Expenses of the Company which are directly identifiable to one of the Funds are allocated to that portfolio. Expenses which are not directly identifiable to one of the Funds are allocated in such a manner as deemed equitable, taking into consideration the nature and type of expenses and relative sizes of the Funds. All expenses of the Fund are paid by GEAM and reimbursed by the Fund. 3. LINE OF CREDIT The Fund shares a revolving credit facility of up to $25 million with a number of its affiliates. The credit facility is with its custodian bank, State Street Bank and Trust Company. The revolving credit facility requires the payment of a commitment fee equal to 0.09% per annum on the daily unused portion of the credit facility, payable quarterly. The portion borne by the Funds generally is borne proportionally based upon net assets. Generally, borrowings under the credit facility would accrue interest at the Federal Funds Rate plus 50 basis points and is borne by each of the borrowing Funds. The maximum amount allowed to be borrowed by any one of the Funds is the lesser of its prospectus limitation, 20% of its net assets, or $25 million. The credit facility was not utilized by the Fund during the period ended June 30, 2007. 4. AMOUNTS PAID TO AFFILIATES ADVISORY AND ADMINISTRATION FEES GEAM, a registered investment adviser, was retained by the Company's Board of Directors effective May 1, 1997 to act as investment adviser and administrator of the Fund. GEAM's compensation for investment advisory and administrative services is paid monthly based on the average daily net assets of the Fund at an annualized rate of .65%. GENPACT performs certain accounting and certain administration services not provided by GEAM. For the period ending June 30, 2007, $312 was charged to the Fund. DIRECTORS' COMPENSATION The Fund pays no compensation to its directors who are officers or employees of GEAM or its affiliates. Directors who are not 16 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- such officers or employees also serve in a similar capacity for other funds advised by GEAM. Compensation paid to unaffiliated directors are reflected on the Statement of Operations. These fees are allocated pro rata across all of the mutual fund platforms and share classes served by the directors, including the Fund, and are based upon the relative net assets of each fund within such platforms. (For additional information about directors compensation please refer to the Statement of Additional Information.) 5. INVESTMENT TRANSACTIONS PURCHASES AND SALES OF SECURITIES The cost of purchases and the proceeds from sales of investments, other than short-term securities and options, for the period ended June 30, 2007 were as follows: Purchases Sales - -------------------------------------------------------------------------------- $8,791,868 $11,287,834 SECURITY LENDING At June 30, 2007, the Fund participated in securities lending: Loaned securities at Cash market value collateral* - -------------------------------------------------------------------------------- $3,886,671 $3,959,866 * COLLATERAL OF $3,943,484 INCREASED BY $16,382 ON JULY 1, 2007 TO REFLECT THE JUNE 30, 2007 CHANGE IN VALUE OF SECURITIES ON LOAN. 17 Additional Information (unaudited) - -------------------------------------------------------------------------------- INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS: The business and affairs of the Company are managed under the direction of the Company's Board of Directors. Information pertaining to the Directors and officers of the Company is set forth below. INTERESTED DIRECTORS AND EXECUTIVE OFFICERS - -------------------------------------------------------------------------------- MICHAEL J. COSGROVE - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 58 POSITION(S) HELD WITH FUND Chairman of the Board and President TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 10 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President - GEAM since February 1997; President and Chief Executive Officer - Mutual Funds at GEAM since March 2007; Vice President, GE Capital Corporation, an indirect wholly-owned subsidiary of GE, since December 1999; Executive Vice President - Sales and Marketing of GEAM, a wholly-owned subsidiary of GE that is registered as an investment adviser under the Investment Advisers Act of 1940, as amended, since March 1993; Director of GEAM since 1988. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48 OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception; Trustee of Elfun Funds, GE Savings & Security Funds and General Electric Pension Trust since 1988; Trustee of Fordham University since 2003; Trustee of Elfun Foundation; Treasurer of GE Foundation; Director, GE Asset Management (Ireland) since February 1999; Director, GE Asset Management Funds Plc, GE Asset Canada Company, GE Asset Management Limited, and GE Volunteers. - -------------------------------------------------------------------------------- MATTHEW J. SIMPSON - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 46 POSITION(S) HELD WITH FUND Executive Vice President TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - less than one year PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General Counsel and Secretary of GEAM since July 2007; Senior Vice President and General Counsel - Marketing and Client Services (formerly Asset Management Services), at GEAM and Senior Vice President and General Counsel of GEAMS from February 1997 to June 2007; Vice President and Associate General Counsel of GEAM from October 1992 to February 1997; Secretary of Fund from 1997 to June 2007; Vice President of Fund from September 2003 to June 2007; Vice President of GE Institutional Funds and GE LifeStyle Funds from September 2003 to June 2007; Secretary of GE Institutional Funds and GE LifeStyle Funds from 1997 to June 2007; Vice President of Elfun Funds and GE Savings & Security Funds from October 2003 to June 2007; Assistant Secretary of Elfun Funds and GE Savings & Security Funds from 1998 to June 2007. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional Funds, GE LifeStyle Funds, Elfun Funds and GE Savings & Security Funds since July 2007. 18 Additional Information (unaudited) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SCOTT H. RHODES - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 48 POSITION(S) HELD WITH FUND Treasurer TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - one year PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds Operations Manager since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle Funds and GE Investments Funds since November 2005 and Elfun Funds and GE Savings & Security Funds since September 2005; from August 2004 to September 2005 Vice President, U.S. Trust Company, N.A. and Assistant Treasurer of Excelsior Funds, Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds, Inc.; from January 2004 to August 2004, Vice President BlackRock Financial Management, Inc.; from December 1996 to November 2003, Controller - Mutual Funds, American Skandia Investment Services, Inc. and Assistant Treasurer of American Skandia Trust and American Skandia Advisor Funds, Inc. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A - -------------------------------------------------------------------------------- JEANNE M. LAPORTA - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 42 POSITION(S) HELD WITH FUND Vice President and Secretary TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 2 years (Vice President); less than one year (Secretary) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Associate General Counsel - Marketing and Client Services (formerly Asset Management Services) at GEAM since May 1997; Vice President and Assistant Secretary of GE Funds, GE Institutional Funds and GE LifeStyle Funds since September 2003; Vice President and Assistant Secretary of Elfun Funds and GE Savings & Security Funds since October 2003; Assistant Secretary from September 2003 to June 2007 and Secretary since July 2007. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A 19 Additional Information (unaudited) - -------------------------------------------------------------------------------- NON-INTERESTED DIRECTORS - -------------------------------------------------------------------------------- JOHN R. COSTANTINO - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 61 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC since 2006; Managing Director, Walden Partners, Ltd., consultants and investors, since August 1992. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE Institutional Funds and GE LifeStyle Funds since their inception; Trustee of Fordham University since 2002 and Marymount College from 2001 through 2002; Neuroscience Research Institute since 1986; Diocesan Finance Counsel of the Dioceses of Brooklyn & Queens since 2001; Gregorian University Foundation since 1994. - -------------------------------------------------------------------------------- WILLIAM J. LUCAS - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 59 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Treasurer of Fairfield University since 1983. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception. - -------------------------------------------------------------------------------- ROBERT P. QUINN - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 71 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon Brothers Inc. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception. - -------------------------------------------------------------------------------- The Statement of Additional Information for the Fund includes additional information about the Directors and Officers and is available, without charge, upon request by calling 1-800-242-0134. 20 Investment Team - -------------------------------------------------------------------------------- INVESTMENT ADVISER AND ADMINISTRATOR GE Asset Management Incorporated BOARD OF DIRECTORS Michael J.Cosgrove, CHAIRMAN John R. Costantino William J. Lucas Robert P. Quinn Matthew J. Simpson SECRETARY Jeanne M. LaPorta ASSISTANT SECRETARIES Joseph A. Carucci Joon Won Choe TREASURER Scott H. Rhodes ASSISTANT TREASURERS Scott R. Fuchs Christopher M. Isaacs DISTRIBUTOR GE Investment Distributors, Inc. Member NASD and SIPC COUNSEL Sutherland, Asbill & Brennan, LLP CUSTODIAN State Street Bank & Trust Company INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM KPMG LLP OFFICERS OF THE INVESTMENT ADVISER James W. Ireland, CHIEF EXECUTIVE OFFICER Michael J. Cosgrove, EVP, PRESIDENT AND CHIEF EXECUTIVE OFFICER - MUTUAL FUNDS Paul M. Colonna, PRESIDENT - FIXED INCOME Kathryn D. Karlic, EVP, PRESIDENT - SALES AND MARKETING Ralph R. Layman, EVP, PRESIDENT - INTERNATIONAL EQUITIES Matthew J. Simpson, EVP, GENERAL COUNSEL AND SECRETARY Judith A. Studer, EVP, PRESIDENT - U.S. EQUITIES Don W. Torey, EVP, PRESIDENT - ALTERNATIVE INVESTMENTS AND REAL ESTATE John J. Walker, EVP, CHIEF FINANCIAL OFFICER 21 [This page intentionally left blank.] [This page intentionally left blank.] [This page intentionally left blank.] [This page intentionally left blank.] INVESTMENT ADVISER GE ASSET MANAGEMENT INCORPORATED 3001 SUMMER STREET PO BOX 7900 STAMFORD, CT 06904-7900 DISTRIBUTOR GE INVESTMENT DISTRIBUTORS, INC. MEMBER NASD AND SIPC 3001 SUMMER STREET PO BOX 7900 STAMFORD, CT 06904-7900 - -------------------------------------------------------------------------------- The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities is available without charge (i) upon request, by calling 1-800-242-0134; (ii) on the Fund's website at http://www.gefunds.com; and (iii) on the Commission's website at http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC - - information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Information (if any) regarding how the Fund voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through the Fund's website at http://www.gefunds.com; and (ii) on the Commission's website at http://www.sec.gov. - -------------------------------------------------------------------------------- [GE logo omitted] GE Investments Funds, Inc. Total Return Fund Semi-Annual Report JUNE 30, 2007 [GE LOGO OMITTED] GE Investments Funds, Inc. Total Return Fund Contents - ------------------------------------------------------------------------------- NOTES TO PERFORMANCE ................................................... 1 MANAGER REVIEW AND SCHEDULE OF INVESTMENTS ............................. 2 NOTES TO SCHEDULE OF INVESTMENTS ....................................... 18 FINANCIAL STATEMENTS Financial Highlights .............................................. 19 Statement of Assets and Liabilities ............................... 20 Statement of Operations ........................................... 21 Statements of Changes in Net Assets ............................... 22 Notes to Financial Statements ..................................... 24 ADDITIONAL INFORMATION ................................................. 30 INVESTMENT TEAM ........................................................ 33 This report is prepared for Policyholders of certain variable contracts and may be distributed to others only if preceded or accompanied by the variable contract's current prospectus and the current prospectus of the Funds available for investments thereunder. Notes to Performance June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- Total returns take into account changes in share price and assume reinvestment of dividends and capital gains distributions, if any. Investment returns and net asset value on an investment will fluctuate and you may have a gain or loss when you sell your shares. Periods less than one year are not annualized. Current performance may be lower or higher than that shown. You may call toll-free (800) 242-0134 for performance information as of the most recent month end. Total returns do not reflect expenses associated with the separate account such as administrative fees, account charges and surrender charges, which, if reflected, would reduce the total returns for all periods shown. Shares of the Fund are neither insured nor guaranteed by the U.S. Government, and their prices will fluctuate with market conditions. The Standard & Poor's ("S&P") 500 Composite Price Index of stocks (S&P 500) and Lehman Brothers Aggregate Bond Index (LB Aggregate) are unmanaged indices and do not reflect the actual cost of investing in the instruments that comprise each index. The S&P 500 is an unmanaged, market capitalization-weighted index of stocks of 500 large U.S. companies, which is widely used as a measure of large-cap stock market performance. The LB Aggregate Bond Index is a market value-weighted index of investment-grade debt issues, including government, corporate, asset-backed and mortgage-backed securities, with maturities of one year or more. The results shown for the foregoing indices assume the reinvestment of net dividends or interest. The peer universe of the underlying annuity funds used in our peer ranking calculation is based on the blend of Lipper peer categories, as shown. Lipper is an independent mutual fund rating service. A Fund's performance may be compared to or ranked within a universe of mutual funds with investment objectives and policies similar but not necessarily identical to the Fund's. Such comparisons or rankings are made on the basis of several factors, including the Fund's objectives and policies, management style and strategy, and portfolio composition, and may change over time if any of those factors change. 1 Total Return Fund - -------------------------------------------------------------------------------- THE TOTAL RETURN FUND IS MANAGED BY A TEAM OF PORTFOLIO MANAGERS THAT INCLUDES THOMAS R. LINCOLN, PAUL M. COLONNA, RALPH R. LAYMAN, JUDITH A. STUDER AND DIANE M. WEHNER. THE TEAM IS LED BY MS. STUDER WHO, AS A LEAD MEMBER OF THE TACTICAL ASSET ALLOCATION COMMITTEE, IS VESTED WITH OVERSIGHT AUTHORITY FOR DETERMINING ASSET ALLOCATIONS FOR THE FUND. EACH OF THE FOREGOING PORTFOLIO MANAGERS IS RESPONSIBLE FOR MANAGING ONE OF FOUR SUB-PORTFOLIOS: U.S. EQUITY, U.S. MID-CAP EQUITY, INTERNATIONAL EQUITY AND FIXED INCOME. MR. LINCOLN MANAGES THE U.S. EQUITY PORTION, MS. WEHNER MANAGES THE U.S. MID-CAP EQUITY PORTION, MR. LAYMAN MANAGES THE INTERNATIONAL EQUITY PORTION AND MR. COLONNA MANAGES THE FIXED INCOME PORTION, EACH WITH A TEAM OF PORTFOLIO MANAGERS AND ANALYSTS. THE SUB-PORTFOLIOS UNDERLYING THIS FUND ARE MANAGED INDEPENDENTLY OF EACH OTHER AND THE PORTFOLIO MANAGERS HAVE FULL DISCRETION OVER THEIR PARTICULAR SUB-PORTFOLIO; HOWEVER, THE PORTFOLIO MANAGEMENT TEAM IS COLLABORATIVE TO ENSURE STRICT ADHERENCE TO THIS FUND'S OBJECTIVES. JUDITH A. STUDER IS A DIRECTOR AND EXECTIVE VICE PRESIDENT OF GE ASSET MANAGEMENT AND PRESIDENT - U.S. EQUITIES AT GE ASSET MANAGEMENT. SHE HAS LED THE TEAM OF PORTFOLIO MANAGERS FOR THE TOTAL RETURN FUND SINCE JULY 2004. MS. STUDER JOINED GE ASSET MANAGEMENT IN AUGUST 1984. SHE BECAME SENIOR VICE PRESIDENT - DOMESTIC EQUITIES IN 1991, SENIOR VICE PRESIDENT - INTERNATIONAL EQUITIES IN 1995 AND EXECUTIVE VICE PRESIDENT - INVESTMENT STRATEGIES IN JULY 2006. PAUL M. COLONNA IS AN EXECUTIVE VICE PRESIDENT OF GE ASSET MANAGEMENT AND PRESIDENT - FIXED INCOME AT GE ASSET MANAGEMENT. SINCE JANUARY 2005, HE HAS BEEN RESPONSIBLE FOR THE FIXED INCOME PORTION OF THE TOTAL RETURN FUND. PRIOR TO JOINING GE ASSET MANAGEMENT IN FEBRUARY 2000, MR. COLONNA WAS A SENIOR PORTFOLIO MANAGER WITH THE FEDERAL HOME LOAN MORTGAGE CORPORATION, OVERSEEING THE MORTGAGE INVESTMENT GROUP. RALPH R. LAYMAN IS A DIRECTOR AND EXECUTIVE VICE PRESIDENT OF GE ASSET MANAGEMENT AND PRESIDENT - INTERNATIONAL EQUITIES AT GE ASSET MANAGEMENT. HE MANAGES THE OVERALL INTERNATIONAL EQUITY INVESTMENTS FOR GE ASSET MANAGEMENT. MR. LAYMAN HAS BEEN RESPONSIBLE FOR THE INTERNATIONAL EQUITY PORTION OF THE TOTAL RETURN FUND SINCE 1997. MR. LAYMAN JOINED GE ASSET MANAGEMENT IN 1991 AS SENIOR VICE PRESIDENT FOR INTERNATIONAL INVESTMENTS AND BECAME AND EXECUTIVE VICE PRESIDENT IN 1992. THOMAS R. LINCOLN IS A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT. HE HAS BEEN A MEMBER OF THE PORTFOLIO MANAGEMENT TEAM FOR THE TOTAL RETURN FUND SINCE MAY 2007. MR. LINCOLN JOINED GE ASSET MANAGEMENT IN 1994 AS A FINANCIAL ANALYST IN DOMESTIC EQUITIES. MR. LINCOLN BECAME PART OF THE INVESTMENT MANAGEMENT TEAM FOR DOMESTIC EQUITIES IN 1997 AND PORTFOLIO MANAGER FOR DOMESTIC EQUITIES IN 2003. DIANE M. WEHNER IS A VICE PRESIDENT OF GE ASSET MANAGEMENT. SHE HAS BEEN A PORTFOLIO MANAGER OF THE TOTAL RETURN FUND SINCE JANUARY 2006. BEFORE JOINING GE ASSET MANAGEMENT, MS. WEHNER WAS A VICE PRESIDENT AND SENIOR PORTFOLIO MANAGER FROM JANUARY 1997 TO JUNE 2001, AND ASSOCIATE PORTFOLIO MANAGER FROM MAY 1995 TO JANUARY 1997, WITH BENEFIT CAPITAL MANAGEMENT CORPORATION. MS. WEHNER HAS SERVED AS AN ANALYST/ PORTFOLIO MANAGER IN THE INVESTMENT MANAGEMENT INDUSTRY SINCE 1985. [PHOTO OMITTED] 2 Q&A Q. HOW DID THE TOTAL RETURN FUND PERFORM COMPARED TO ITS BENCHMARK AND LIPPER PEER GROUP FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2007? A. For the six-month period ended June 30, 2007, the Total Return Fund returned 7.35%. The Fund's broad based benchmarks, the S&P 500 Index and the Lehman Brothers Aggregate Bond Index, returned 6.96% and 0.98%, respectively. The Fund's Lipper peer group of 173 mixed asset target allocation growth funds returned an average of 6.29% for the same period. Q. WHAT MARKET CONDITIONS IMPACTED FUND PERFORMANCE? A. The period continued a rally that had propelled the U.S. equity markets higher over the past year. While first-quarter `07 earnings growth moderated into the single digit range for the first time in three years, corporate profits did climb +9%, surprising market-watchers to the upside. Despite a backdrop of slowing economic growth, a weakening dollar and rising oil prices, stocks rallied amid the strong corporate earnings, record M&A activity, cooling inflation worries and the absence of Fed tightening. By early June, several key U.S. equity indices reached new highs. The second quarter ended however with a whimper -- during the month of June each broad measure of U.S. equity market performance retreated. The S&P 500's June decline was just its second in 13 months, and its second down month in 2007. The pullback was brought on by renewed inflation fears, housing/consumption worries, and concern that the Fed might need to raise interest rates this year to keep inflation in check. New liquidity and credit concerns also spooked the markets, amid the near collapse of two large sub-prime hedge funds. Internationally, a similar pattern emerged with benchmarks hitting new highs uplifted by strong earnings and M&A activity, and further supported by attractive valuations and currency gains for U.S. investors. Sentiment stayed positive on the back of strong first quarter results that showed significant cash flow generation and more progress on efficiency. The recovery of Continental Europe after years of sluggish performance has been of increasing importance, with falling unemployment in the crucial markets of Germany and France contributing to rising consumer sentiment. Japan continued to disappoint although the background indications of improving corporate performance and consumer trends are encouraging. In the fixed income market, the Federal Reserve maintained the fed funds target at 5.25% at each of its first four meetings this year. Worries over the sub-prime loan market and a mid-February drop in the Chinese stock market sent risk premiums higher. Investors quickly started building in expectations for rate cuts from the Fed. As GDP growth came back in the second quarter accompanied by the Fed's stated emphasis on inflation risk, expectations for rate cuts disappeared. By June end, market pricing implied no changes in fed funds through year-end. Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE? A. The Fund's performance was driven by the Fund's overweight position in equities (particularly non-U.S.) and underweight in fixed income. The U.S. Disciplined Growth Equity portion of the Fund moderately trailed the S&P 500 Index, hurt by underweights in the strongly performing telecommunications services, materials and energy sectors, the best performing three groups in the index this year so far. Also weighing on performance were our stock selections in the healthcare, information technology and industrials groups. On the positive side, performance was helped by our significant underweight in financials, especially commercial bank stocks and REITs (both of which were hit as the sub-prime mortgage market continued to deteriorate). 3 Total Return Fund - -------------------------------------------------------------------------------- Q&A Positive stock selection within the consumer discretionary area, particularly in media stocks, and the materials sector, also added value. The Mid-Cap Equity allocation helped boost Fund performance in June with a year-to-date return of over 11%, which outperformed its benchmark largely due to solid stock selection within the information technology, healthcare, energy, consumer staples and materials sectors. The Fund's overweight position in International Equities contributed strongly to returns, as the MSCI EAFE Index, a benchmark for non-U.S. developed markets, returned nearly 11%; further, the Fund's investments in this area handily exceeded the index. A significant positive contribution came from holdings in the materials sector, from both metals and mining and chemical stocks. In addition, industrial holdings in the conglomerate and infrastructure equipment segments performed well as did holdings in telecom services, especially wireless. Additionally, the Fund was overweight in emerging markets, which had led market returns during the period with a strong 17.6% showing. In fixed income, the Fund benefited from being overweight in shorter-duration securities but was hindered by being underweight in high-yield, the period's best performing sector. Security selection benefited the Fund's pre-fee return in the fixed income area. 4 Total Return Fund - -------------------------------------------------------------------------------- Understanding Your Fund's Expenses As a shareholder of the Fund you incur transaction and ongoing expenses. Transaction expenses including sales charges on purchase payments, reinvested dividends (or other distributions), and redemption fees directly reduce the investment return of the Fund. Ongoing costs include portfolio management fees, distribution and service fees, professional fees, administrative fees and other Fund expenses. The following example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the period. The information in the following table is based on an investment of $1,000, which is invested at the beginning of the period and held for the entire six-month period ended June 30, 2007. ACTUAL EXPENSES The first section of the table provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your class under the heading "Expenses Paid During Period." HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second section of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholders reports of other funds. Please note that the expenses shown in the table do not reflect any transaction costs, such as sales charges or redemption fees.
JANUARY 1, 2007 - JUNE 30, 2007 - --------------------------------------------------------------------------------------------------------------------------- ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING PERIOD ($)* - --------------------------------------------------------------------------------------------------------------------------- ACTUAL FUND RETURN** - --------------------------------------------------------------------------------------------------------------------------- Class 1 1,000.00 1,073.49 2.67 Class 2 1,000.00 1,073.53 2.82 Class 3 1,000.00 1,072.92 3.18 Class 4 1,000.00 1,073.01 3.74 - --------------------------------------------------------------------------------------------------------------------------- HYPOTHETICAL 5% RETURN (2.5% FOR THE PERIOD) - --------------------------------------------------------------------------------------------------------------------------- Class 1 1,000.00 1,021.97 2.61 Class 2 1,000.00 1,021.82 2.76 Class 3 1,000.00 1,021.49 3.11 Class 4 1,000.00 1,020.95 3.66 - ---------------------------------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.52% FOR CLASS 1, 0.55% FOR CLASS 2, 0.62% FOR CLASS 3, AND 0.73% FOR CLASS 4, (FROM PERIOD JANUARY 1, 2007 - JUNE 30, 2007), MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY 181/365 (TO REFLECT THE SIX MONTH PERIOD). ** ACTUAL FUND RETURNS FOR SIX-MONTH PERIOD ENDED JUNE 30, 2007 WERE AS FOLLOWS: 7.35% FOR CLASS 1 SHARES, 7.35% FOR CLASS 2 SHARES, 7.29% FOR CLASS 3 SHARES, AND 7.30% FOR CLASS 4 SHARES. 5 Total Return Fund (unaudited) - -------------------------------------------------------------------------------- INVESTMENT PROFILE A fund designed for investors who seek the highest total return, composed of current income and capital appreciation, as is consistent with prudent investment risk by investing primarily in a combination of equity securities and investment grade debt securities. TOP TEN LARGEST HOLDINGS AS OF JUNE 30, 2007 as a % of Market Value - -------------------------------------------- Federal National Mortgage Assoc., 5.50%, TBA 2.11% - -------------------------------------------- U.S. Treasury Notes, 4.63%, 11/15/09 - 02/15/17 2.09% - -------------------------------------------- American International Group, Inc. 1.21% - -------------------------------------------- PepsiCo, Inc. 1.10% - -------------------------------------------- Federal National Mortgage Assoc., 5.00%, TBA 1.08% - -------------------------------------------- Schlumberger Ltd. 1.04% - -------------------------------------------- U.S. Treasury Notes, 4.88%, 05/31/09 1.00% - -------------------------------------------- Cisco Systems, Inc. 0.99% - -------------------------------------------- Exxon Mobil Corp. 0.93% - -------------------------------------------- QUALCOMM, Inc. 0.92% - -------------------------------------------- LIPPER PERFORMANCE COMPARISON Mixed-Asset Target Allocation Growth Funds Based on average annual total returns for the periods ended 6/30/07 SIX ONE FIVE TEN MONTHS YEAR YEAR YEAR - ---------------------------------------------------- Number of Funds in peer group: 173 165 76 45 - ---------------------------------------------------- Peer group average annual total return: 6.29% 16.27% 9.39% 6.73% - ---------------------------------------------------- CHANGE IN VALUE OF A $10,000 INVESTMENT CLASS 1 SHARES [LINE CHART OMITTED -- PLOT POINTS ARE AS FOLLOWS:] TOTAL S&P 500 LB AGGREGATE RETURN INDEX BOND INDEX 06/97 $10000.00 $10000.00 $10000.00 12/97 10690.12 11057.91 10636.34 12/98 12518.19 14231.31 11560.26 12/99 14176.85 17229.53 11465.32 12/00 14877.72 15647.27 12798.28 12/01 14447.80 13783.37 13878.90 12/02 13102.41 10736.98 15302.19 12/03 15763.99 13821.52 15930.26 12/04 17054.79 15325.48 16621.44 12/05 17680.63 16079.27 17025.10 12/06 20111.23 18618.57 17762.93 6/07 21589.16 19914.71 17936.58 AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2007 ENDING VALUE OF A SIX ONE FIVE TEN $10,000 MONTHS YEAR YEAR YEAR INVESTMENT - -------------------------------------------------------------------------------- Total Return Fund 7.35% 18.63% 9.46% 8.00% $21,589 S&P 500 Index 6.96% 20.59% 10.72% 7.13% $19,915 LB Aggregate Bond Index 0.98% 6.12% 4.48% 6.02% $17,937 Inception date 7/1/85 CLASS 2 SHARES [LINE CHART OMITTED -- PLOT POINTS ARE AS FOLLOWS:] TOTAL S&P 500 LB AGGREGATE RETURN INDEX BOND INDEX 05/06 $10000.00 $10000.00 $10000.00 06/06 9700.53 9725.39 10010.49 09/06 10099.82 10276.45 10391.65 12/06 10704.55 10964.86 10520.34 03/07 10874.08 11035.19 10678.50 06/07 11491.65 11728.19 10623.19 AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2007 ENDING VALUE OF A SIX ONE SINCE $10,000 MONTHS YEAR INCEPTION INVESTMENT - -------------------------------------------------------------------------------- Total Return Fund 7.35% 18.46% 12.62% $11,492 S&P 500 Index 6.96% 20.59% 7.13% $11,728 LB Aggregate Bond Index 0.98% 6.12% 6.02% $10,623 Inception date 5/1/06 CLASS 3 SHARES [LINE CHART OMITTED -- PLOT POINTS ARE AS FOLLOWS:] TOTAL S&P 500 LB AGGREGATE RETURN INDEX BOND INDEX 05/06 $10000.00 $10000.00 $10000.00 06/06 9700.53 9725.39 10010.49 09/06 10105.70 10276.45 10391.65 12/06 10717.44 10964.86 10520.34 03/07 10874.96 11035.19 10678.50 06/07 11498.98 11728.19 10623.19 AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2007 ENDING VALUE OF A SIX ONE SINCE $10,000 MONTHS YEAR INCEPTION INVESTMENT - -------------------------------------------------------------------------------- Total Return Fund 7.29% 18.54% 12.68% $11,499 S&P 500 Index 6.96% 20.59% 7.13% $11,728 LB Aggregate Bond Index 0.98% 6.12% 6.02% $10,623 Inception date 5/1/06 CLASS 4 SHARES [LINE CHART OMITTED -- PLOT POINTS ARE AS FOLLOWS:] TOTAL S&P 500 LB AGGREGATE RETURN INDEX BOND INDEX 05/06 $10000.00 $10000.00 $10000.00 06/06 9688.78 9725.39 10010.49 09/06 10088.08 10276.45 10391.65 12/06 10688.52 10964.86 10520.34 03/07 10845.80 11035.19 10678.50 06/07 11468.84 11728.19 10623.19 AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2007 ENDING VALUE OF A SIX ONE SINCE $10,000 MONTHS YEAR INCEPTION INVESTMENT - -------------------------------------------------------------------------------- Total Return Fund 7.30% 18.37% 12.43% $11,469 S&P 500 Index 6.96% 20.59% 7.13% $11,728 LB Aggregate Bond Index 0.98% 6.12% 6.02% $10,623 Inception date 5/1/06 Total Return Fund S&P 500 Index LB Aggregate Bond Index SEE NOTES TO PERFORMANCE ON PAGE 1 FOR FURTHER INFORMATION, INCLUDING AN EXPLANATION OF LIPPER PEER CATEGORIES. PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE AND THE GRAPHS AND TABLES DO NOT REFLECT THE DEDUCTION OF TAXES. 6 TOTAL RETURN FUND Schedule of Investments June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- TOTAL RETURN FUND Portfolio Composition as a % of the Market Value of $2,647,083 (in thousands) as of June 30, 2007 [PIE CHART OMITTED -- PLOT POINTS ARE AS FOLLOWS:] Domestic Equity 37.2% Foreign Equity 26.4% Bonds & Notes 22.2% Short Term & Others 14.2% NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- DOMESTIC EQUITY -- 42.6%+ - -------------------------------------------------------------------------------- CONSUMER DISCRETIONARY -- 6.4% Bed Bath & Beyond, Inc. 510,880 $ 18,386,571(a) Carnival Corp. 288,376 14,064,098(h) Coach, Inc. 16,026 759,472(a) Comcast Corp. (Class A) 845,985 23,653,741(a) Dick's Sporting Goods, Inc. 14,338 834,041(a,j) Home Depot, Inc. 257,636 10,137,977(h) Liberty Global, Inc. (Series C) 246,703 9,695,428(a) Liberty Media Holding Corp - Capital (Series A) 98,257 11,562,884(a) Life Time Fitness, Inc. 54,831 2,918,654(a,j) Lowe's Companies, Inc. 399,502 12,260,716 Omnicom Group, Inc. 161,022 8,521,284 O'Reilly Automotive, Inc. 79,245 2,896,405(a) Pulte Homes, Inc. 33,342 748,528 Regal Entertainment Group, (Class A) 80,025 1,754,948(j) Staples, Inc. 284,445 6,749,880 Starwood Hotels & Resorts Worldwide, Inc. 25,045 1,679,768 Target Corp. 174,196 11,078,866 The Cheesecake Factory 220,927 5,417,130(a,j) Weight Watchers International Inc. 33,888 1,722,866(j) 144,843,257 CONSUMER STAPLES -- 4.4% Alberto-Culver Co. 123,417 2,927,452 Brown-Forman Corp. (Class B) 7,914 578,355 Clorox Co. 35,178 2,184,554 Colgate-Palmolive Co. 272,274 17,656,969(h) Kimberly-Clark Corp. 33,668 2,252,053 NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- McCormick & Company, Inc. 43,860 $ 1,674,575 PepsiCo, Inc. 447,935 29,048,585 Procter & Gamble Co. 320,581 19,616,351 The Coca-Cola Co. 380,598 19,909,081(h) The Kroger Co. 23,992 674,895 Wal-Mart Stores, Inc. 49,771 2,394,483 98,917,353 ENERGY -- 3.4% Dresser-Rand Group, Inc. 58,247 2,300,757(a) EOG Resources, Inc. 111,798 8,167,962 Exxon Mobil Corp. 292,768 24,557,380(h) GlobalSantaFe Corp. 32,060 2,316,335 Halliburton Co. 131,746 4,545,237 Hess Corp. 33,755 1,990,195 Peabody Energy Corp. 34,659 1,676,802 Schlumberger Ltd. 324,973 27,603,207 Weatherford International Ltd. 55,881 3,086,866(a) 76,244,741 FINANCIALS -- 5.6% Affiliated Managers Group, Inc. 17,179 2,211,968(a,j) American International Group, Inc. 456,7183 1,983,962(h) CB Richard Ellis Group, Inc. (Class A) 118,640 4,330,360(a) Citigroup, Inc. 386,430 19,819,995 CVB Financial Corp. 178,985 1,990,313(j) Douglas Emmett, Inc. (REIT) 52,700 1,303,798(j) Federal National Mortgage Assoc. 235,678 15,396,844 Fortress Investment Group LLC (Class A) 78,428 1,868,155(j) Greenhill & Company, Inc. 33,116 2,275,400(j) Hartford Financial Services Group, Inc. 18,509 1,823,322 HCC Insurance Holdings, Inc. 195,213 6,522,066 Legg Mason, Inc. 27,522 2,707,614 Metlife, Inc. 70,264 4,530,623 SL Green Realty Corp. (REIT) 17,712 2,194,340 State Street Corp. 269,347 18,423,335(e) SunTrust Banks, Inc. 84,903 7,279,583 Zions Bancorporation 22,098 1,699,557 126,361,235 HEALTHCARE -- 7.8% Abbott Laboratories 275,202 14,737,067(h) Aetna, Inc. 231,541 11,438,125 Alcon, Inc. 13,832 1,866,075 Amgen, Inc. 274,159 15,158,251(a,h) Amylin Pharmaceuticals, Inc. 65,720 2,705,035(a,j) Barr Pharmaceuticals, Inc. 55,191 2,772,244(a) DENTSPLY International, Inc. 65,562 2,508,402 Gen-Probe Inc. 34,581 2,089,384(a) Gilead Sciences, Inc. 252,590 9,792,914(a) Henry Schein, Inc. 35,822 1,913,969(a) Hologic, Inc. 54,825 3,032,371(a,j) Lifecell Corp. 57,353 1,751,561(a,j) See Notes to Schedule of Investments on page 18 and Notes to Financial Statements. 7 TOTAL RETURN FUND Schedule of Investments June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- Lincare Holdings Inc. 121,499 $ 4,841,735(a) Manor Care, Inc. 42,720 2,789,189(j) Medtronic Inc. 389,003 20,173,696 Pfizer Inc. 698,529 17,861,387 Psychiatric Solutions Inc. 101,574 3,683,073(a,j) Resmed, Inc. 235,553 9,718,917(a,j) Thermo Electron Corp. 77,583 4,012,593(a) UnitedHealth Group, Inc. 418,799 21,417,381 Vertex Pharmaceuticals, Inc. 59,181 1,690,209(a) Wyeth 348,393 19,976,855 175,930,433 INDUSTRIALS -- 3.3% Corporate Executive Board Co. 39,148 2,541,097(j) CoStar Group, Inc. 43,216 2,285,262(a,j) Dover Corp. 289,850 14,825,828(h) Harsco Corp. 70,057 3,642,964 Hexcel Corp. 179,168 3,775,070(a,j) Joy Global, Inc. 28,478 1,661,122 SAIC, Inc. 98,850 1,786,220(a,j) Southwest Airlines Co. 805,112 12,004,220(j) Spirit Aerosystems Holdings, Inc. (Class A) 33,455 1,206,053(a) Stericycle, Inc. 12,400 551,304(a,j) Textron Inc. 139,036 15,309,254 United Technologies Corp. 175,661 12,459,635 WESCO International, Inc. 30,364 1,835,504(a) 73,883,533 INFORMATION TECHNOLOGY -- 9.9% Activision, Inc. 334,630 6,247,542(a) Analog Devices, Inc. 141,992 5,344,579(h) Automatic Data Processing, Inc. 211,509 10,251,841 Cisco Systems, Inc. 939,359 26,161,148(a,h) Citrix Systems, Inc. 54,823 1,845,890(a) Cogent, Inc. 117,081 1,719,920(a,j) Comverse Technology, Inc. 82,832 1,727,047(a) DST Systems, Inc. 28,713 2,274,357(a) eBay, Inc. 48,307 1,554,519(a) Electronic Arts, Inc. 8,435 399,144(a) EMC Corp. 183,126 3,314,581(a) Global Cash Access Holdings, Inc. 152,508 2,443,178(a,j) Harris Corp. 43,529 2,374,507 Hittite Microwave Corp. 38,799 1,657,881(a,j) Intel Corp. 652,872 15,512,239 Intuit Inc. 517,658 15,571,152(a) Juniper Networks, Inc. 113,836 2,865,252(a) Limelight Networks, Inc. 53,364 1,055,540(a,j) Linear Technology Corp. 26,705 966,187(j) Macrovision Corp. 123,033 3,698,372(a,j) Microchip Technology Inc. 57,698 2,137,134 Microsoft Corp. 526,982 15,530,160 Molex, Inc. (Class A) 462,349 12,275,366(j) NAVTEQ Corp. 14,638 619,773(a,j) Network Appliance, Inc. 31,922 932,122(a) Nvidia Corp. 42,172 1,742,125(a) NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- Oracle Corp. 819,750 $ 16,157,273(a,h) Paychex, Inc. 473,527 18,524,376 QUALCOMM, Inc. 562,994 24,428,310 Salesforce.com, Inc. 27,833 1,192,922(a,j) Western Union Co. 712,890 14,849,499 Yahoo! Inc. 345,466 9,372,493(a) 224,746,429 MATERIALS -- 0.8% Cabot Corp. 40,534 1,932,661 Martin Marietta Materials, Inc. 17,543 2,842,317 Monsanto Co. 152,406 10,293,501 Praxair, Inc. 33,620 2,420,304 17,488,783 TELECOMMUNICATION SERVICES -- 0.7% American Tower Corp. (Class A) 48,258 2,026,836(a) BigBand Networks, Inc. 100,255 1,314,343(a,j) Neustar, Inc. (Class A) 124,587 3,609,285(a,j) NII Holdings Inc. (Class B) 117,732 9,505,682(a) 16,456,146 UTILITIES -- 0.3% DTE Energy Co. 33,342 1,607,751 ITC Holdings Corp. 76,758 3,118,678(j) PPL Corp. 35,078 1,641,300 SCANA Corp. 40,675 1,557,446 7,925,175 TOTAL DOMESTIC EQUITY (COST $874,139,743) 962,797,085 - -------------------------------------------------------------------------------- FOREIGN EQUITY -- 31.0% - -------------------------------------------------------------------------------- CONSUMER DISCRETIONARY -- 2.3% Accor S.A. 22,619 1,995,246(j) China Travel International Inv 1,523,319 798,954 DaimlerChrysler AG (Regd.) 38,378 3,542,805 Esprit Holdings Ltd. 100,000 1,270,757 Gafisa S.A. 37,950 595,062 Hyundai Motor Co. 37,400 2,950,930 Indian Hotels Company Ltd. 107,352 397,216 Koninklijke Philips Electronics N.V. 304,090 12,858,750 LVMH Moet Hennessy Louis Vuitton S.A. 43,916 5,042,337(j) Megainfo Holdings Ltd. 1,808,000 408,275(a) Naspers Ltd. 13,572 349,463 Natura Cosmeticos S.A. 30,000 436,137 ON*Media Corp. 78,340 724,887(a) Prajay Engineers Syndicate Ltd. 75,862 468,065 Reed Elsevier PLC 268,350 3,465,087 Renault S.A. 14,689 2,350,899 Sekisui Chemical Company Ltd. 90,989 701,107 See Notes to Schedule of Investments on page 18 and Notes to Financial Statements. 8 TOTAL RETURN FUND Schedule of Investments June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- Swatch Group AG 7,988 $ 2,261,553 Toyota Motor Corp. 172,988 10,877,041 Truworths International Ltd. 63,887 329,388 Urbi Desarrollos Urbanos S.A. de C.V. 187,037 862,225(a) 52,686,184 CONSUMER STAPLES -- 1.9% Cosan S.A. Industria e Comercio 25,800 422,231(a) Diageo PLC 304,699 6,327,562 Groupe Danone 24,051 1,938,337 IOI Corp. 535,000 807,421 ITC Ltd. 97,097 369,139 Massmart Holdings Ltd. 25,468 310,940 Metro AG 54,146 4,486,072(j) Nestle S.A. (Regd.) 29,514 11,177,016 Seven & I Holdings Company Ltd. 155,300 4,426,008(j) Shinsegae Company Ltd. 630 409,982 Shiseido Company Ltd. 294,000 6,257,043 Tesco PLC 722,696 6,041,265 Tiger Brands Ltd. 25,902 664,250 43,637,266 ENERGY -- 2.8% Acergy S.A. 280,556 6,306,018(j) BG Group, PLC 247,524 4,053,984 CAT Oil AG 27,566 746,903(a) China Oilfield Services Ltd. (Series H) 206,000 208,242 China Petroleum & Chemical Corp. 4,248,000 4,745,605 China Shenhua Energy Company Ltd. 174,000 601,689 ENI S.p.A. 49,858 1,803,841(j) LUKOIL ADR 13,085 997,077 Nexen, Inc. 55,222 1,709,121 OAO Gazprom ADR 83,407 3,494,753(j) Paladin Resources Ltd. 527,140 3,665,473(a,j) PetroChina Company Ltd. 260,000 384,912 Petroleo Brasileiro S.A. ADR 92,333 9,850,085 Reliance Industries Ltd. 13,602 569,206 Saipem S.p.A. 419,036 14,266,999(j) Thai Oil PCL 290,300 592,792 Total S.A. 117,299 9,489,985(j) 63,486,685 FINANCIALS -- 7.6% Allianz AG (Regd.) 25,915 6,064,926(j) AXA S.A. 132,706 5,692,210(j) Banca Intesa S.p.A. 927,046 6,896,978(j) Banco do Brasil S.A. 46,192 668,897 Banco Santander Central Hispano S.A. (Regd.) 476,283 8,736,232(j) Bank of Yokohama Ltd. 541,012 3,777,772 BNP Paribas 94,619 11,215,060(j) CapitaLand Ltd. 935,000 4,957,906(j) China Merchants Bank Company Ltd. 54,000 164,819 NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- China Vanke Company Ltd. 367,850 $ 761,534 Credit Agricole S.A. 151,519 6,135,143(j) Credit Suisse Group, (Regd.) 131,354 9,293,765 Dubai Islamic Bank 182,573 491,123 Egyptian Financial Group- Hermes Holding 48,149 385,202 Emaar Properties 171,269 552,578 Hongkong Land Holdings Ltd. 727,999 3,280,510(j) Hung Poo Real Estate Development Corp. 686,000 818,305 ICICI Bank Ltd. 17,570 411,651 ICICI Bank Ltd. ADR 45,238 2,223,448(j) ING Groep N.V. 144,115 6,329,434 Jardine Matheson Holdings Ltd. 106,306 2,532,041(j) Kookmin Bank 58,191 5,103,576 Lloyds TSB Group, PLC 343,846 3,818,953 Mitsubishi Estate Company Ltd. 401,982 10,873,351 Mitsubishi UFJ Financial Group, Inc. 1,024 11,251,363 Nomura Holdings, Inc. 723,798 14,016,457(j) Ping An Insurance Group 68,500 485,304 Plaza Centers N.V. 104,902 419,503(a) Prudential PLC 484,597 6,891,833 PT Bank Niaga 7,931,553 719,092 Royal Bank of Scotland Group, PLC 826,765 10,452,261 Samsung Fire & Marine Insurance Company Ltd. 4,990 960,560 Siam Commercial Bank PCL 383,400 810,665 Standard Bank Group, Ltd. 46,348 643,153 State Bank of India Ltd. 3,520 132,246 State Bank of India Ltd. GDR 5,284 466,049(j) Sumitomo Realty & Development Company Ltd. 104,000 3,376,761 Sun Hung Kai Properties Ltd. 328,476 3,957,295 Swiss Reinsurance 28,905 2,627,320 Tisco Bank PCL 436,686 347,598 UniCredito Italiano S.p.A. 1,229,333 10,956,345 Woori Investment & Securities Co Ltd 32,350 987,990 170,687,209 HEALTHCARE -- 1.2% GlaxoSmithKline PLC 139,192 3,622,765 Novartis AG (Regd.) 75,215 4,208,488 Roche Holding AG 80,614 14,235,923 Smith & Nephew PLC ADR 31,729 1,968,150(j) Teva Pharmaceutical Industries Ltd. ADR 19,895 820,669(j) Yuhan Corp. 3,291 615,753 Zentiva N.V. 6,692 452,500(a) 25,924,248 INDUSTRIALS -- 4.5% ABB Ltd. (Regd.) 375,335 8,434,655 Adecco S.A. (Regd.) 41,921 3,232,246(j) Alstom 30,741 5,115,139(a,j) See Notes to Schedule of Investments on page 18 and Notes to Financial Statements. 9 TOTAL RETURN FUND Schedule of Investments June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- Asahi Glass Company Ltd. 346,005 $ 4,651,353(j) Barloworld Ltd. 14,715 409,774 Brambles Ltd. 144,921 1,495,101(a) Canadian National Railway Co. 143,997 7,336,909 China Communications Construction Company Ltd. 408,080 731,399 Chiyoda Corp. 224,676 4,268,339(j) Daewoo Shipbuilding & Marine Engineering Company Ltd. 8,340 471,498 Doosan Heavy Industries and Construction Company Ltd. 18,570 1,776,014 East Japan Railway Co. 895 6,875,496 Empresas ICA Sociedad Controladora S.A. de C.V. 150,029 761,826(a) Enka Insaat ve Sanayi AS 79,044 905,057 Fraser and Neave Ltd. 100,000 356,767 Genting Bhd 227,000 543,207 Group 4 Securicor PLC 1,288,341 5,419,531 Grupo Aeroportuario del Sureste S.A. de C.V. ADR (Series B) 7,286 383,899 Hyunjin Materials Company Ltd. 16,695 741,833 Jaguar Mining Inc. 53,686 371,954(a) Jaiprakash Associates Ltd. 40,469 738,743 Komatsu Ltd. 196,075 5,665,829 Larsen & Toubro Ltd. 37,787 2,033,158 Mitsubishi Heavy Industries Ltd. 578,000 3,690,726 Orascom Construction Industries 80,112 5,244,127 Orascom Construction Industries GDR 100 13,212 Orkla ASA 167,776 3,158,363 Sandvik AB 315,070 6,333,145(j) Schneider Electric S.A. 23,911 3,342,938 Siemens AG (Regd.) 74,765 10,735,875(j) Smiths Group PLC 94,003 2,227,388 United Tractors Tbk PT 946,000 864,627 Vinci S.A. 31,951 2,379,610 100,709,738 INFORMATION TECHNOLOGY -- 2.3% Delta Electronics Inc. 272,579 1,073,126(a) Gemtek Technology Corp. 328,000 842,597 HON HAI Precision Industry Company Ltd. 200,200 1,729,233 Hoya Corp. 114,200 3,777,017 Ibiden Company Ltd. 96,361 6,198,919 MediaTek Inc. 118,900 1,849,908 Mettler Toledo International Inc. 19,831 1,894,059(a) Nidec Corp. 107,613 6,294,627(j) Nokia OYJ 484,915 13,589,738(j) Samsung Electronics Company Ltd. 12,790 7,818,773 Sohu.com Inc. 10,188 325,914(a,j) Taiwan Semiconductor Manufacturing Company Ltd. 2,861,914 6,129,193 51,523,104 NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- MATERIALS -- 3.5% Bayer AG 109,493 $ 8,272,761(j) BHP Billiton PLC 577,410 16,025,686 Good Fellow Group Ltd. 6,636,000 1,275,898(a) Harmony Gold Mining Company Ltd. ADR 42,256 602,993(a,j) Holcim Ltd. (Regd.) 24,528 2,640,102(j) Israel Chemicals Ltd. 135,211 1,075,770 Linde AG 64,179 7,729,312(j) Makhteshim-Agan Industries Ltd. 107,775 780,013 MMC Norilsk Nickel ADR 5,141 1,141,302 Novozymes (Series B) 19,598 2,266,581 POSCO 2,170 1,041,725 Potash Corp of Saskatchewan 141,332 11,064,767 Rio Tinto PLC (Regd.) 93,062 7,113,340 Samling Global Ltd. 1,692,000 653,608(a) Steppe Cement Ltd. 5,687 36,848(a) Syngenta AG (Regd) 31,105 6,043,654 Toray Industries Inc. 1,427,998 10,520,449(j) Vedanta Resources PLC 32,143 1,035,180 79,319,989 TELECOMMUNICATION SERVICES -- 2.7% America Movil S.A. de C.V. ADR (Series L) 147,947 9,162,357 Bharti Airtel Ltd. 49,773 1,021,939(a) China Mobile Ltd. 104,500 1,126,513 Hellenic Telecommunications Organization S.A. 168,232 5,203,012 Hutchison Telecommunications International Ltd. 317,000 408,361 Mobile Telesystems OJSC ADR 65,469 3,965,457(a) MTN Group, Ltd. 457,080 6,226,692 Orascom Telecom Holding SAE 53,873 692,585 Philippine Long Distance Telephone Co. 8,920 509,885 Singapore Telecommunications Ltd. 2,359,003 5,250,931 Telekom Malaysia Bhd 254,000 758,880 Telekomunikasi Indonesia Tbk PT (Series B) 684,500 742,538 Telenor ASA 669,184 13,059,642 Vodafone Group, PLC 4,133,247 13,837,560 61,966,352 UTILITIES -- 1.4% CEZ 16,084 827,418 E.ON AG 58,404 9,785,463 First Philippine Holdings Corp. 307,500 598,794 National Grid PLC 274,712 4,049,896 Perusahaan Gas Negara 465,500 487,436 RWE AG 33,790 3,598,624(j) Suez S.A. 60,988 3,479,105 Veolia Environnement 110,103 8,629,039(j) 31,455,775 TOTAL COMMON STOCK (COST $554,602,148) 681,396,550 See Notes to Schedule of Investments on page 18 and Notes to Financial Statements. 10 TOTAL RETURN FUND Schedule of Investments June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- PREFERRED STOCK -- 0.8% - -------------------------------------------------------------------------------- All America Latina Logistica S.A. 229,100 $ 3,140,312 Cia Vale do Rio Doce 52,761 1,985,797 Cia Vale do Rio Doce ADR 312,667 11,787,546 Petroleo Brasileiro S.A. 14,400 386,093 TOTAL PREFERRED STOCK (COST $11,118,801) 17,299,748 - -------------------------------------------------------------------------------- RIGHTS -- 0.0%* - -------------------------------------------------------------------------------- Veolia Environnement (COST $7,751) 110,103 156,135(a,j) TOTAL FOREIGN EQUITY (COST $565,728,700) 698,852,433 PRINCIPAL AMOUNT VALUE - -------------------------------------------------------------------------------- BONDS AND NOTES -- 23.7% - -------------------------------------------------------------------------------- U.S. TREASURIES -- 5.5% U.S. Treasury Bonds 4.50% 02/15/36 $ 265,000 240,175(j) 4.75% 02/15/37 16,210,000 15,293,163(j) U.S. Treasury Notes 4.50% 04/30/12 18,020,000 17,688,251(j) 4.63% 11/15/09 - 02/15/17 56,636,000 55,289,502(j) 4.75% 05/31/12 10,316,000 10,235,948(j) 4.88% 05/31/09 26,364,000 26,360,573(j) 125,107,612 FEDERAL AGENCIES -- 0.5% Federal Home Loan Mortgage Corp. 4.75% 03/05/12 7,890,000 7,711,396 4.88% 02/09/10 610,000 605,442(j) 5.00% 02/16/17 3,480,000 3,361,033(j) 11,677,871 AGENCY MORTGAGE BACKED -- 7.0% Federal Home Loan Mortgage Corp. 4.50% 06/01/33 - 02/01/35 282,089 256,767(h) 5.00% 07/01/35 - 10/01/35 8,678,905 8,157,184(h) 5.50% 05/01/20 98,652 97,241(h) 6.00% 04/01/17 - 11/01/36 788,768 787,759(h) 6.50% 01/01/27 - 08/01/36 1,066,222 1,079,777(h) 7.00% 10/01/25 - 08/01/36 305,335 313,492(h) 7.50% 11/01/09 - 09/01/33 48,572 50,536(h) 8.00% 01/01/30 - 11/01/30 17,018 17,882(h) 9.00% 10/01/25 767 829(h) PRINCIPAL AMOUNT VALUE - -------------------------------------------------------------------------------- Federal National Mortgage Assoc. 4.00% 05/01/19 - 06/01/19 $ 259,004 $ 240,025(h) 4.50% 05/01/18 - 02/01/35 2,545,758 2,391,934 (h) 5.00% 06/01/20 - 08/01/35 5,067,611 4,773,280 (h) 5.01% 07/01/35 1,177,628 1,175,526(h,i) 5.10% 08/01/35 767,462 763,448(h,i) 5.26% 04/01/37 598,775 591,509 (i) 5.44% 04/01/37 53,309 52,980 (i) 5.50% 04/01/14 - 08/01/35 1,932,640 1,889,186 (h) 5.53% 04/01/37 752,385 749,153 (i) 5.56% 03/01/37 51,013 50,833 (i) 5.62% 04/01/37 1,340,508 1,337,310 (i) 5.64% 06/01/37 1,003,998 1,002,451 (i) 5.67% 05/01/37 388,988 388,395 (i) 5.69% 04/01/37 482,141 481,937 (i) 5.71% 04/01/37 1,901,800 1,901,636 (i) 5.85% 06/01/37 1,209,961 1,213,670 (i) 6.00% 09/01/19 - 08/01/35 4,804,636 4,765,750 (h) 6.50% 09/01/17 - 08/01/36 2,497,943 2,531,552 (h) 7.00% 04/01/17 - 06/01/36 419,019 431,707 (h) 7.50% 12/01/09 - 03/01/34 108,772 112,988 (h) 8.00% 12/01/11 - 11/01/33 39,600 41,325 (h) 8.50% 06/01/30 225 242 (h) 9.00% 06/01/09 - 12/01/22 20,128 21,095 (h) 5.00% TBA 30,180,000 28,505,334 (c) 5.50% TBA 57,664,000 55,808,236 (c) 6.00% TBA 23,488,000 23,245,743 (c) 6.50% TBA 5,845,000 5,899,797 (c) Government National Mortgage Assoc. 4.50% 08/15/33 - 09/15/34 464,833 428,613 (h) 6.00% 04/15/27 - 09/15/36 668,028 665,676 (h) 6.50% 04/15/24 - 09/15/36 642,127 652,522 (h) 7.00% 03/15/12 - 10/15/36 679,059 700,405 (h) 8.00% 03/15/30 3,376 3,625 (h) 9.00% 11/15/16 - 12/15/21 20,650 22,189 (h) 5.50% TBA 4,535,000 4,400,365 (c) 158,001,904 AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.8% Federal Home Loan Mortgage Corp. 1.13% 04/15/37 1,980,951 93,341(g,i) 1.33% 10/15/18 - 04/25/37 1,943,821 95,976(g,h,i) 1.43% 05/15/37 2,806,630 130,903(g,i) 1.83% 12/15/30 421,277 17,575(g,h,i) 1.88% 09/15/36 1,862,160 126,860(g,i) 2.46% 09/15/36 1,588,639 141,488(g,h,i) 3.98% 12/15/33 45,000 33,773(h,i) 4.50% 04/15/13 - 03/15/19 479,372 35,287(g,h) 5.00% 12/15/13 - 12/01/34 4,868,945 1,110,855(g,h) 5.50% 04/15/17 - 06/15/33 216,765 33,768(g,h) 5.50% 04/15/26 - 12/15/36 6,326,919 6,233,722 6.00% 03/15/28 1,872,117 1,885,074 7.50% 01/15/16 9,293 9,550 (h) 7.50% 07/15/27 6,339 1,326(g,h) 8.00% 02/01/23 - 07/01/24 4,494 1,143(g,h) 24.46% 09/25/43 425,216 4,703(d,g,h,i) See Notes to Schedule of Investments on page 18 and Notes to Financial Statements. 11 TOTAL RETURN FUND Schedule of Investments June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- PRINCIPAL AMOUNT VALUE - -------------------------------------------------------------------------------- Federal Home Loan Mortgage Corp. REMICS 6.00% 01/15/30 $ 2,085,000 $ 2,103,325 Federal Home Loan Mortgage STRIPS 7.24% 08/01/27 1,017 793(d,f,h) Federal National Mortgage Assoc STRIPS (Class 2) 7.50% 11/01/23 20,186 5,529(g,h) 8.00% 08/01/23 - 07/01/24 9,494 2,404(g,h) Federal National Mortgage Assoc. 1.13% 05/25/37 - 06/25/37 23,908,770 1,186,002(g,i) 1.19% 12/25/42 235,681 7,807(g,h,i) 1.45% 03/25/37 1,555,516 96,909(g,i) 1.88% 06/25/36 - 07/25/37 21,836,984 1,461,042(g,h,i) 2.28% 09/25/42 233,164 12,387(g,h,i) 2.33% 04/25/17 - 10/25/17 187,070 10,718(g,h,i) 2.38% 08/25/16 71,427 2,836(g,h,i) 4.50% 05/25/18 124,247 11,415(g,h) 4.75% 11/25/14 23,998 1,297(g,h) 5.00% 02/25/32 34,077 2,660(g,h) 5.50% 03/25/29 - 03/25/33 2,210,000 2,193,779 8.00% 07/25/14 25,885 26,164(h) Federal National Mortgage Assoc. (Class 2) 5.50% 12/01/33 - 05/25/37 409,365 106,589(g) Federal National Mortgage Assoc. (Class S) 1.78% 02/25/31 75,971 3,542(g,h,i) Federal National Mortgage Assoc. REMIC 1.88% 01/25/37 4,411,412 279,860(g,h,i) 4.50% 11/25/13 71,754 2,661(g,h) 4.91% 03/25/31 80,170 75,562(h,i) 5.00% 10/25/22 109,898 17,705(g,h) Federal National Mortgage Assoc. REMIC (Class J) 1080.91% 03/25/22 7 52(g,h) Federal National Mortgage Assoc. REMIC (Class K) 1008.00% 05/25/22 5 144(g,h) Federal National Mortgage Assoc. STRIPS (Class 2) 5.00% 08/01/34 4,987,341 1,298,267(g) 18,864,793 ASSET BACKED -- 2.7% American Express Credit Account Master Trust (Class A) 5.31% 12/17/12 5,000,000 4,999,957(h,i) BA Credit Card Trust 5.32% 08/15/12 9,500,000 9,500,000(h,i) Bank One Issuance Trust 3.59% 05/17/10 20,000 19,929(h) PRINCIPAL AMOUNT VALUE - -------------------------------------------------------------------------------- Bear Stearns Asset Backed Securities Inc. (Class A) 5.69% 01/25/34 $ 14,031 $ 14,078(h,i) Capital Auto Receivables Asset Trust 5.38% 05/15/11 8,000,000 8,001,248(h,i) Capital One Auto Finance Trust 5.32% 04/15/12 3,000,000 2,999,985(h,i) Carmax Auto Owner Trust 4.35% 03/15/10 154,000 152,446(h) Citibank Credit Card Issuance Trust 4.45% 04/07/10 35,000 34,701(h) Ford Credit Auto Owner Trust (Class A) 5.36% 02/15/12 7,125,000 7,121,254(h,i) Ford Credit Floorplan Master Owner Trust (Class A) 5.36% 07/15/09 2,000,000 1,999,947(h,i) Honda Auto Receivables Owner Trust (Class A) 4.15% 10/15/10 138,000 136,347(h) Indymac Residential Asset Backed Trust 5.49% 10/25/35 4,500,000 4,500,809(h,i) 7.32% 04/25/37 189,000 181,568(i) JP Morgan Mortgage Acquisition Corp. 5.47% 03/01/37 1,500,000 1,499,160(i) Long Beach Mortgage Loan Trust 5.60% 09/25/35 1,184,086 1,185,390(h,i) Mid-State Trust 7.54% 07/01/35 5,267 5,557(h) Option One Mortgage Loan Trust 5.45% 06/25/37 4,000,000 4,002,218(i) Peco Energy Transition Trust 6.52% 12/31/10 50,000 51,465(h) Residential Asset Mortgage Products, Inc. 5.56% 03/25/34 10,283 10,289(h,i) Residential Asset Securities Corp. 5.57% 01/25/36 3,000,000 3,005,156(h,i) 5.82% 07/25/32 10,070 10,073(h,i) Residential Asset Securities Corp. (Class A) 4.16% 07/25/30 138,384 136,915(h,i) SLM Student Loan Trust (Class A) 5.41% 06/15/18 289,483 289,696(h,i) Superior Wholesale Inventory Financing Trust (Class A) 5.50% 06/15/10 4,000,000 4,009,930(h,i) Swift Master Auto Receivables Trust (Class A) 5.42% 06/15/12 4,250,000 4,250,000(i) Triad Auto Receivables Owner Trust (Class A) 5.38% 02/12/14 2,000,000 1,998,911(i) See Notes to Schedule of Investments on page 18 and Notes to Financial Statements. 12 TOTAL RETURN FUND Schedule of Investments June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- PRINCIPAL AMOUNT VALUE Volkswagen Auto Lease Trust (Class A) 3.94% 10/20/10 $ 103,000 102,681(h) Wells Fargo Home Equity Trust 3.97% 05/25/34 44,160 42,885(h,i) 60,262,595 CORPORATE NOTES -- 3.6% Abbey National PLC 7.95% 10/26/29 340,000 407,746(h) Allied World Assurance Holdings Ltd. 7.50% 08/01/16 325,000 341,762(h) American Electric Power Company, Inc. (Series C) 5.38% 03/15/10 2,125,000 2,114,366(h) American Electric Power Company, Inc. (Series D) 5.25% 06/01/15 1,040,000 998,909(h) American International Group, Inc. 6.25% 05/01/36 490,000 498,706(h) Appalachian Power Co. (Series G) 3.60% 05/15/08 20,000 19,682(h) Arizona Public Service Co. 6.25% 08/01/16 370,000 371,741(h) AT&T, Inc. 4.13% 09/15/09 1,800,000 1,749,008(h) BAC CAP TRUST V 5.63% 03/08/35 925,000 825,109(h) BellSouth Corp. 4.20% 09/15/09 735,000 715,308(h) 6.55% 06/15/34 510,000 508,229(h) BJ Services Co. 5.75% 06/01/11 430,000 428,805(h) Bristol-Myers Squibb Co. 5.88% 11/15/36 420,000 395,288(h) British Telecommunications PLC 8.63% 12/15/10 170,000 185,818(h) Burlington Northern Santa Fe Corp. 6.75% 07/15/11 1,000,000 1,036,328(h) Capital One Bank 6.50% 06/13/13 25,000 25,641(h) Carolina Power & Light Co. 5.15% 04/01/15 810,000 776,738(h) 5.70% 04/01/35 155,000 144,336(h) 6.13% 09/15/33 190,000 188,072(h) Chubb Corp. 6.00% 05/11/37 400,000 382,490(h) CIT Group, Inc. 5.13% 09/30/14 485,000 454,599(h) Citigroup, Inc. 5.13% 02/14/11 - 05/05/14 3,805,000 3,695,071(h) Clear Channel Communications, Inc. 4.25% 05/15/09 355,000 343,104(h) Consumers Energy Co. 5.15% 02/15/17 555,000 521,603(h) PRINCIPAL AMOUNT VALUE - -------------------------------------------------------------------------------- Corrections Corp of America 7.50% 05/01/11 $ 645,000 $ 653,869(h) COX Communications, Inc. 7.13% 10/01/12 505,000 533,013(h) 7.75% 11/01/10 375,000 398,659(h) CRH America, Inc. 6.00% 09/30/16 290,000 286,736(h) CSX Corp. 6.15% 05/01/37 485,000 464,703(h) CSX Transportation, Inc. 9.75% 06/15/20 1,021,000 1,304,715(h) DaimlerChrysler NA Holding Corp. 4.05% 06/04/08 280,000 276,352(h) Dex Media West LLC 8.50% 08/15/10 270,000 279,788 Dominion Resources, Inc. 5.69% 05/15/08 370,000 370,445(h,k) Dominion Resources, Inc. (Series B) 6.30% 09/30/66 1,505,000 1,507,101(h,i) Dover Corp. 6.50% 02/15/11 375,000 385,788(h) 6.65% 06/01/28 195,000 206,845(h) Duke Energy Corp. 5.38% 01/01/09 160,000 159,626(h) EI Du Pont de Nemours & Co. 4.88% 04/30/14 325,000 308,383(h) El Paso Electric Co. 6.00% 05/15/35 270,000 251,803 Embarq Corp. 7.08% 06/01/16 490,000 492,251(h) Federated Retail Holdings Inc. 5.35% 03/15/12 1,790,000 1,757,154 FirstEnergy Corp. (Series B) 6.45% 11/15/11 2,040,000 2,091,843(h) GMAC LLC 5.85% 01/14/09 600,000 591,322 Goldman Sachs Group, Inc. 6.60% 01/15/12 5,135,000 5,323,863(h) 6.88% 01/15/11 900,000 936,678 GTE Corp. 6.94% 04/15/28 850,000 869,962(h) 7.51% 04/01/09 165,000 170,080(h) Harrah's Operating Company, Inc. 5.38% 12/15/13 640,000 542,400 Hospira, Inc. 5.55% 03/30/12 590,000 583,197 HSBC Bank USA NA 3.88% 09/15/09 1,175,000 1,137,112(h) 4.63% 04/01/14 1,085,000 1,013,924 HSBC Finance Corp. 6.75% 05/15/11 405,000 419,856 HSBC Holdings PLC 6.50% 05/02/36 100,000 102,669(h) Hydro Quebec 8.05% 07/07/24 820,000 1,029,456(h) 8.50% 12/01/29 1,585,000 2,128,386(h) ING Capital Funding TR III 8.44% 12/29/49 960,000 1,042,353(h,i) See Notes to Schedule of Investments on page 18 and Notes to Financial Statements. 13 TOTAL RETURN FUND Schedule of Investments June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- PRINCIPAL AMOUNT VALUE - -------------------------------------------------------------------------------- ING Groep N.V. 5.78% 12/29/49 $1,265,000 $ 1,219,543(h,i) International Business Machines Corp. 4.75% 11/29/12 1,300,000 1,253,733(h) International Steel Group Inc. 6.50% 04/15/14 415,000 421,751 IPSCO, Inc. 8.75% 06/01/13 350,000 370,782 iStar Financial, Inc. (REIT) 7.00% 03/15/08 400,000 403,240(h) JP Morgan Chase & Co. 7.00% 11/15/09 1,130,000 1,167,627(h) JP Morgan Chase Bank 5.88% 06/13/16 825,000 823,518 Kansas Gas & Electric 5.65% 03/29/21 425,000 407,735(h) Lehman Brothers Holdings, Inc. 5.00% 01/14/11 1,150,000 1,128,879(h) Markel Corp. 7.35% 08/15/34 340,000 351,255(h) Marsh & McLennan Companies, Inc. 5.50% 07/13/07 1,500,000 1,500,009(h,i) Martin Marietta Materials, Inc. 6.25% 05/01/37 105,000 101,853 MBIA, Inc. 5.70% 12/01/34 285,000 261,847 Merck & Company, Inc. 5.75% 11/15/36 445,000 415,435(h) Mizuho Financial Group Cayman Ltd. 8.38% 12/29/49 595,000 621,287 Mohegan Tribal Gaming Authority 6.38% 07/15/09 80,000 79,200 MUFG Capital Finance 1 Ltd. 6.35% 07/29/49 240,000 235,547(h,i) Munich Re America Corp. (Series B) 7.45% 12/15/26 315,000 350,467(h) Nevada Power Co. (Series A) 8.25% 06/01/11 250,000 270,514(h) Nevada Power Company (Series I) 6.50% 04/15/12 515,000 524,431(h) Nexen Inc. 6.40% 05/15/37 930,000 892,033 Nisource Finance Corp. 5.45% 09/15/20 370,000 336,467(h) 7.88% 11/15/10 160,000 170,912(h) Norfolk Southern Corp. 6.00% 04/30/08 20,000 20,063(h) 8.63% 05/15/10 485,000 523,467(h) Norfolk Southern Railway Co. 9.75% 06/15/20 64,000 82,112(h) Northeast Utilities (Series B) 3.30% 06/01/08 30,000 29,341(h) NorthWestern Corp. 5.88% 11/01/14 200,000 194,086(h) ONEOK Partners LP 5.90% 04/01/12 780,000 784,440(h) PRINCIPAL AMOUNT VALUE - -------------------------------------------------------------------------------- Pacific Bell 7.13% 03/15/26 $ 55,000 $ 58,024(h) Pacific Gas & Electric Co. 5.80% 03/01/37 500,000 466,748 Pemex Finance Ltd. 9.03% 02/15/11 198,750 210,371(h) Pemex Project Funding Master Trust 7.38% 12/15/14 2,055,000 2,228,976(h) 7.88% 02/01/09 195,000 201,612 8.63% 02/01/22 60,000 73,495(h) Petrobras International Finance Co. 6.13% 10/06/16 740,000 725,200(h) Prudential Financial, Inc. 5.70% 12/14/36 485,000 447,600(h) 6.10% 06/15/17 415,000 419,680 Public Service Company of Colorado 7.88% 10/01/12 520,000 572,637(h) Puget Sound Energy, Inc. 3.36% 06/01/08 30,000 29,423(h) 5.48% 06/01/35 130,000 114,158(h) Puget Sound Energy, Inc. (Series A) 6.97% 06/01/67 830,000 830,000(i) Pulte Homes, Inc. 4.88% 07/15/09 385,000 373,269(h) Reliant Energy, Inc. 7.88% 06/15/17 420,000 408,450 Residential Capital LLC 6.38% 06/30/10 660,000 650,877 6.46% 04/17/09 650,000 648,921(i) Royal Bank of Scotland Group PLC 5.00% 10/01/14 375,000 358,899(h) SLM Corp. 5.66% 01/27/14 1,251,000 1,085,019(i) Sovereign Capital Trust VI 7.91% 06/13/36 945,000 1,009,809(h) Sprint Capital Corp. 7.63% 01/30/11 2,200,000 2,316,478 Standard Chartered Bank Hong Kong Ltd. 4.38% 12/03/14 380,000 369,360(i) Station Casinos Inc. 7.75% 08/15/16 50,000 49,500(h) Telecom Italia Capital S.A. 6.20% 07/18/11 1,175,000 1,190,482 Telefonica Emisiones SAU 5.86% 02/04/13 600,000 598,697 Tennessee Gas Pipeline Co. 7.63% 04/01/37 275,000 300,853 8.38% 06/15/32 325,000 381,094 Time Warner, Inc. 6.88% 05/01/12 25,000 26,085(h) TXU Electric Delivery Co. 6.38% 05/01/12 580,000 591,899(h) UBS Preferred Funding Trust I 8.62% 10/29/49 495,000 537,613(i) Valspar Corp. 5.63% 05/01/12 320,000 315,915 See Notes to Schedule of Investments on page 18 and Notes to Financial Statements. 14 TOTAL RETURN FUND Schedule of Investments June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- PRINCIPAL AMOUNT VALUE - -------------------------------------------------------------------------------- Verizon Global Funding Corp. 7.25% 12/01/10 $ 900,000 $ 948,589 Verizon Pennsylvania Inc. 8.75% 08/15/31 165,000 199,861(h) 8.35% 12/15/30 210,000 241,532(h) Wal-Mart Stores, Inc. 6.88% 08/10/09 1,000,000 1,028,882(h) Wells Fargo & Co. 5.25% 12/01/07 90,000 89,911(h) Wells Fargo Bank NA 5.95% 08/26/36 1,450,000 1,420,908(h) Westar Energy, Inc. 7.13% 08/01/09 190,000 194,325(h) Wisconsin Electric Power 5.70% 12/01/36 115,000 108,247(h) 81,513,764 NON-AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 3.5% Banc of America Commercial Mortgage Inc. 4.13% 07/10/42 1,800,000 1,752,128(h) 5.32% 10/10/11 1,300,000 1,282,062(h) 5.69% 03/10/17 2,600,000 2,572,472(h) Banc of America Commercial Mortgage Inc. (Class A) 5.79% 05/11/35 1,927,791 1,942,389(h) Banc of America Commercial Mortgage Inc. (Class C) 5.70% 04/10/17 400,000 388,737(h) Banc of America Funding Corp. 5.74% 03/20/36 194,164 192,417(h,i) 5.84% 02/20/36 345,942 344,571(h,i) Banc of America Mortgage Securities (Class B) 5.33% 10/25/35 199,929 188,343(h,i) 5.38% 01/25/36 198,971 193,692(h,i) 5.56% 02/25/36 159,086 156,137(h,i) Bank of America Alternative Loan Trust 6.50% 07/25/35 224,198 225,281(h) Bear Stearns Asset Backed Securities Trust (Class A) 5.57% 07/25/36 7,859,322 7,847,821(h,i) Bear Stearns Commercial Mortgage Securities 5.48% 10/12/41 1,500,000 1,487,788(h,i) 5.53% 10/12/41 1,500,000 1,478,072(h,i) 5.58% 03/11/39 1,000,000 997,193(h,i) 6.02% 02/14/31 75,000 75,399(h) Bear Stearns Commercial Mortgage Securities (Class A) 5.63% 04/12/38 700,000 699,722(h,i) 5.66% 06/11/40 2,100,000 2,101,880(i) Citigroup Mortgage Loan Trust, Inc. 6.07% 08/25/36 549,026 544,911(h,i) Countrywide Alternative Loan Trust 5.98% 05/25/36 74,067 64,139(h,i) 6.00% 03/25/36 - 08/25/36 424,473 300,493(h) PRINCIPAL AMOUNT VALUE - -------------------------------------------------------------------------------- Countrywide Alternative Loan Trust (Class B) 6.00% 05/25/36 - 08/25/36 $ 227,917 $ 173,115(h) Countrywide Home Loan Mortgage Pass Through Trust 5.47% 02/25/47 809,682 801,548(h,i) Countrywide Home Loan Mortgage Pass Through Trust (Class M) 5.50% 12/25/35 166,727 156,093(h) Credit Suisse Mortgage Capital Certificates 5.47% 09/15/39 682,000 661,718(h) Credit Suisse Mortgage Capital Certificates (Class C) 5.65% 02/25/36 113,263 107,859(h,i) Crusade Global Trust (Class A) 5.56% 01/17/34 2,566,733 2,572,380(h,i) CS First Boston Mortgage Securities Corp. 5.25% 08/25/34 249,005 245,641(h) 5.33% 10/25/35 167,840 155,137(h,i) 6.13% 04/15/37 50,000 50,865(h) CS First Boston Mortgage Securities Corp. (Class A) 5.44% 09/15/34 600,000 595,721(h) 6.53% 06/15/34 600,000 616,980(h) DLJ Commercial Mortgage Corp. 6.24% 11/12/31 220,651 222,045(h) DLJ Commercial Mortgage Corp. (Class A) 7.18% 11/10/33 1,662,600 1,729,546 7.62% 06/10/33 2,973,106 3,113,109(h) GMAC Commercial Mortgage Securities, Inc. 6.42% 05/15/35 434,874 437,506(h) 6.47% 04/15/34 400,000 409,378(h) GMAC Commercial Mortgage Securities, Inc. (Class X) 5.71% 12/10/41 3,436,128 70,135(d,h,i) Greenwich Capital Commercial Funding Corp. 5.12% 04/10/37 500,000 494,448(h) Impac CMB Trust 5.58% 04/25/35 376,587 376,688(h,i) Indymac INDA Mortgage Loan Trust 5.15% 01/25/36 99,828 95,975(h,i) Indymac INDA Mortgage Loan Trust (Class B) 5.15% 01/25/36 107,814 105,974(h,i) Indymac Index Mortgage Loan Trust 5.36% 06/25/35 317,190 311,550(h,i) JP Morgan Chase Commercial Mortgage Securities Corp. 5.75% 02/12/49 3,700,000 3,665,886(i) 6.47% 11/15/35 40,000 41,157(h) JP Morgan Mortgage Trust 5.87% 04/25/37 635,000 634,251(i) See Notes to Schedule of Investments on page 18 and Notes to Financial Statements. 15 TOTAL RETURN FUND Schedule of Investments June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- PRINCIPAL AMOUNT VALUE - -------------------------------------------------------------------------------- LB-UBS Commercial Mortgage Trust 4.06% 09/15/27 $ 108,000 $ 105,260(h,i) 5.26% 09/15/39 1,000,000 987,415(h) 5.42% 02/15/40 359,000 347,048 5.53% 03/15/39 1,000,000 999,203(h) 5.64% 01/18/12 4,585,120 113,336(d,h,i) 5.66% 03/15/39 1,000,000 987,908(h,i) 6.23% 03/15/26 53,000 53,513(h) LB-UBS Commercial Mortgage Trust (Class A) 6.65% 11/15/27 704,000 726,366(h) LB-UBS Commercial Mortgage Trust (Class X) 5.76% 09/15/39 21,464,000 666,313(d,h,i) Master Alternative Loans Trust 5.00% 08/25/18 53,309 8,579(g,h) 6.50% 08/25/34 - 05/25/35 472,934 476,018(h) Master Alternative Loans Trust (Class 3) 6.50% 01/25/35 113,206 113,736(h) Medallion Trust (Class A) 5.40% 08/22/36 1,577,032 1,581,137(h,i) Merrill Lynch Mortgage Trust (Class A) 5.80% 05/12/39 1,000,000 1,002,733(h,i) Merrill Lynch/Countrywide Commercial Mortgage Trust (Class A) 5.49% 03/12/51 2,700,000 2,615,796(i) 5.75% 06/12/50 1,900,000 1,880,167(i) MLCC Mortgage Investors, Inc. 5.38% 02/25/36 164,986 161,640(h,i) Morgan Stanley Capital I 5.28% 12/15/43 1,500,000 1,477,777(h,i) 5.33% 12/15/43 1,500,000 1,441,073(h,i) 5.39% 11/12/41 2,000,000 1,920,152(h,i) 5.44% 02/20/44 1,000,000 978,421(b,i) 5.45% 02/12/44 1,000,000 966,857(i) 5.69% 04/15/49 2,500,000 2,462,144(i) 5.71% 07/20/44 300,000 299,536(h) 6.53% 03/15/31 272,379 274,987(h) 7.11% 04/15/33 71,006 72,811(h) Morgan Stanley Capital I (Class A) 5.36% 02/12/44 1,000,000 987,170(i) Morgan Stanley Dean Witter Capital I 7.20% 10/15/33 46,471 48,148(h) MortgageIT Trust (Class A) 5.62% 08/25/35 2,529,452 2,532,968(h,i) Nomura Asset Securities Corp. (Class A) 6.59% 03/15/30 472,878 475,672(h) Opteum Mortgage Acceptance Corp. 5.62% 02/25/35 271,317 271,275(h,i) PNC Mortgage Acceptance Corp. (Class A) 6.36% 03/12/34 2,000,000 2,044,626 Residential Accredit Loans, Inc. 6.00% 01/25/36 244,617 233,467(h) 6.04% 01/25/36 108,709 108,750(h,i) PRINCIPAL AMOUNT VALUE - -------------------------------------------------------------------------------- Residential Asset Securitization Trust (Class A) 5.50% 05/25/35 $ 985,656 $ 984,171(h,i) Residential Funding Mortgage Security I 5.75% 01/25/36 229,409 218,055(h) Wachovia Bank Commercial Mortgage Trust 5.34% 12/15/43 2,600,000 2,490,633 5.42% 04/15/47 2,000,000 1,969,360 Washington Mutual Inc. 5.66% 01/25/45 154,791 155,168(h,i) Wells Fargo Mortgage Backed Securities Trust 5.39% 08/25/35 472,913 456,019(h,i) 5.50% 01/25/36 - 03/25/36 686,279 641,298(h) Wells Fargo Mortgage Backed Securities Trust (Class B) 5.50% 03/25/36 983,512 929,054(h) 79,946,112 SOVEREIGN BONDS -- 0.1% Government of Canada 7.50% 09/15/29 495,000 604,421 Government of Manitoba Canada 4.90% 12/06/16 330,000 316,728(h) 921,149 TOTAL BONDS AND NOTES (COST $541,663,666) 536,295,800 NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- EXCHANGE TRADED FUNDS -- 1.0% - -------------------------------------------------------------------------------- Financial Select Sector SPDR Fund 24,551 4,506,255(j,m) Industrial Select Sector SPDR Fund 472,996 18,465,764(j,m) TOTAL EXCHANGE TRADED FUNDS (COST $18,393,174) 22,972,019 PRINCIPAL AMOUNT VALUE - -------------------------------------------------------------------------------- SECURITIES PURCHASED WITH COLLATERAL FROM SECURITIES ON LOAN -- 2.2% - -------------------------------------------------------------------------------- ASSET BACKED -- 1.6% Bear Stearns Asset Backed Securities Inc. 5.54% 11/25/35 $5,000,000 5,004,972(h,i) Countrywide Asset-Backed Certificates 5.43% 06/25/35 2,072,528 2,072,642(h,i) See Notes to Schedule of Investments on page 18 and Notes to Financial Statements. 16 TOTAL RETURN FUND Schedule of Investments June 30, 2007 (unaudited) - ------------------------------------------------------------------------------- PRINCIPAL AMOUNT VALUE - -------------------------------------------------------------------------------- Countrywide Asset-Backed Certificates (Class M) 6.02% 06/26/33 $ 740,121 $ 741,208(h,i) Discover Card Master Trust I 5.33% 04/15/10 3,000,000 2,999,188(i) Discover Card Master Trust I (Class A) 5.35% 04/16/10 3,200,000 3,202,653(h,i) GSAA Trust 5.38% 10/25/36 7,301,067 7,301,044(h,i) GSAMP Trust 5.43% 05/25/36 1,951,922 1,944,602(b,h,i) GSR Mortgage Loan Trust 5.52% 11/25/30 2,217,870 2,218,373(h,i) Indymac Residential Asset Backed Trust 5.44% 06/25/36 7,000,000 7,002,370(h,i) Waverly Community School (Class A) 5.48% 02/25/37 4,592,723 4,596,310(h,i) 37,083,362 CORPORATE NOTES -- 0.4% Countrywide Financial Corp. 5.51% 09/02/08 4,000,000 4,001,388(h,i) Morgan Stanley 5.41% 05/07/09 4,000,000 4,000,204(i) 8,001,592 NON-AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.2% JP Morgan Alternative Loan Trust 5.38% 08/25/36 1,704,698 1,704,758(h,i) Residential Accredit Loans, Inc. 5.50% 07/25/36 3,668,794 3,667,605(h,i) 5,372,363 TOTAL SECURITIES PURCHASED WITH COLLATERAL FROM SECURITIES ON LOAN (COST $50,454,421) 50,457,317 TOTAL INVESTMENTS IN SECURITIES (COST $2,050,379,704) 2,271,374,654 NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 16.6% - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 6.1% GEI Short Term Investment Fund 5.55% 138,244,865 138,244,865(d,l) SHORT-TERM SECURITIES PURCHASED WITH COLLATERAL FROM SECURITIES ON LOAN -- 10.5% GEI Short Term Investment Fund 5.55% 51,560,010 51,560,010(d,l) NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- State Street Navigator Securities Lending Prime Portfolio 5.36% 185,903,699$ 185,903,699(d,e) TOTAL SHORT-TERM SECURITIES PURCHASED WITH COLLATERAL FROM SECURITIES ON LOAN (COST $237,463,709) 237,463,709 TOTAL SHORT-TERM INVESTMENTS (COST $375,708,574) 375,708,574 TOTAL INVESTMENTS (COST $2,426,088,278) 2,647,083,228 LIABILITIES IN EXCESS OF OTHER ASSETS, NET-- (17.1)% (387,839,104) -------------- NET ASSETS-- 100.0% $2,259,244,124 ============== - -------------------------------------------------------------------------------- OTHER INFORMATION - -------------------------------------------------------------------------------- The GEI Total Return Fund had the following long futures contracts open at June 30, 2007 (unaudited): NUMBER CURRENT EXPIRATION OF NOTIONAL UNREALIZED DESCRIPTION DATE CONTRACTS VALUE DEPRECIATION - -------------------------------------------------------------------------------- Euro Dollar Futures September 2007 309 $73,132,575 $ 6,757 90 Day Sterling Future December 2007 85 19,982,976 (64,413) S&P 500 Index Futures September 2007 64 24,246,400 (183,350) U.S. Treasury Notes 10 Yr. Futures September 2007 354 37,418,906 210,550 --------- $(30,456) ========= See Notes to Schedule of Investments on page 18 and Notes to Financial Statements. 17 Notes to Schedule of Investments June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- The views expressed in this document reflect our judgment as of the publication date and are subject to change at any time without notice. The securities cited may not represent current or future holdings and should not be considered as a recommendation to purchase or sell a particular security. See the prospectus for complete descriptions of investment objectives, policies, risks and permissible investments. (a) Non-income producing security. (b) Pursuant to Rule 144A of the Securities Act of 1933, these securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30,2007, these securities amounted to $2,923,023 or 0.13% of net assets for the GE Investments Total Return Fund. These securities have been determined to be liquid using procedures established by the Board of Trustees. (c) Settlement is on a delayed delivery or when-issued basis with final maturity to be announced (TBA) in the future. (d) Coupon amount represents effective yield. (e) State Street Corp. is the parent company of State Street Bank & Trust Co., the Fund's custodian and accounting agent. (f) Principal only securities represent the right to receive the monthly principal payments on an underlying pool of mortgages. No payments of interest on the pool are passed through to the "principal only" holder. (g) Interest only securities represent the right to receive the monthly interest payments on an underlying pool of mortgages. Payments of principal on the pool reduce the value of the "interest only" holding. (h) At June 30, 2007, all or a portion of this security was pledged to cover collateral requirements for futures, options, forward foreign currency contracts and/or TBA's. (i) Variable or floating rate security. The stated rate represents the rate at June 30, 2007. (j) All or a portion of the security is out on loan. (k) Step coupon bond. Security becomes interest bearing at a future date. (l) GEAM, the investment advisor of the fund, serves as investment advisor of the GEI Short Term Investment Fund. (m) Sponsored by SSgA Funds Management, Inc., an affiliate of State Street Bank & Trust Co., the Fund's custodian and accounting agent. * Less than 0.1%. + Percentages are based on net assets as of June 30, 2007. Abbreviations: ADR American Depository Receipt GDR Global Depository Receipt REGD. Registered REIT Real Estate Investment Trust REMIC Real Estate Mortgage Investment Conduit SPDR Standard & Poors Depository Receipts STRIPS Separate Trading of Registered Interest and Principal of Security TBA To Be Announced 18
Financial Highlights Selected data based on a share outstanding throughout the periods indicated - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN FUND ------------------------------------------------------------------------- CLASS 1 ------------------------------------------------------------------------- 6/30/07+ 12/31/06 12/31/05 12/31/04 12/31/03 12/31/02 ------------------------------------------------------------------------- INCEPTION DATE -- -- -- -- -- 7/1/85 Net asset value, beginning of period ..................... $17.69 $16.04 $15.97 $15.09 $12.68 $14.49 INCOME/(LOSS) FROM INVESTMENT OPERATIONS: Net investment income .................................. 0.24 0.36 0.23 0.20 0.16 0.31 Net realized and unrealized gains/(losses) on investments ...................................... 1.06 1.84 0.36 1.04 2.41 (1.67) - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INCOME/(LOSS) FROM INVESTMENT OPERATIONS ........... 1.30 2.20 0.59 1.24 2.57 (1.36) - ------------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS FROM: Net investment income .................................. -- 0.31 0.23 0.20 0.16 0.32 Net realized gains ..................................... -- 0.24 0.29 0.16 -- 0.13 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL DISTRIBUTIONS ...................................... -- 0.55 0.52 0.36 0.16 0.45 - ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, END OF PERIOD ........................... $18.99 $17.69 $16.04 $15.97 $15.09 $12.68 ==================================================================================================================================== TOTAL RETURN (A) ......................................... 7.35% 13.75% 3.67% 8.19% 20.31% (9.31)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ............... $1,485,208 $1,390,230 $959,531 $515,506 $225,867 $112,747 Ratios to average net assets: Net investment income* ............................... 2.65% 2.33% 1.89% 1.81% 1.58% 2.22% Net Expenses* ........................................ 0.52% 0.48% 0.45% 0.49% 0.53% 0.54% Gross Expenses* ...................................... 0.57% 0.53% 0.45% 0.49% 0.53% 0.54% Portfolio turnover rate ................................ 89% 138% 146% 141% 115% 126% -------------------- ----------------- ----------------- CLASS 2 CLASS 3 CLASS 4 -------------------- ----------------- ----------------- 6/30/07+ 12/31/06 6/30/07+ 12/31/06 6/30/07+ 12/31/06 -------- -------- -------- -------- -------- -------- INCEPTION DATE -- 5/1/06 -- 5/1/06 -- 5/1/06 Net asset value, beginning of period ..................... $17.68 $17.03 $17.69 $17.03 $17.68 $17.03 INCOME/(LOSS) FROM INVESTMENT OPERATIONS: Net investment income .................................. 0.02 0.26 0.18 0.12 0.22 0.26 Net realized and unrealized gains/(losses) on investments ..................................... 1.28 0.94 1.11 1.10 1.06 0.92 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INCOME/(LOSS) FROM INVESTMENT OPERATIONS ........... 1.30 1.20 1.29 1.22 1.28 1.18 - ------------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS FROM: Net investment income .................................. -- 0.31 -- 0.32 -- 0.29 Net realized gains ..................................... -- 0.24 -- 0.24 -- 0.24 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL DISTRIBUTIONS ...................................... -- 0.55 -- 0.56 -- 0.53 - ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, END OF PERIOD ........................... $18.98 $17.68 $18.98 $17.69 $18.96 $17.68 ==================================================================================================================================== TOTAL RETURN (A) ......................................... 7.35% 7.05% 7.29% 7.17% 7.30% 6.89% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ............... $1,368 $1 $772,665 $396,349 $1 $1 Ratios to average net assets: Net investment income* ............................... 2.60% 2.33% 2.64% 2.09% 2.45% 2.17% Net Expenses* ........................................ 0.55% 0.57% 0.62% 0.62% 0.73% 0.77% Gross Expenses* ...................................... 0.59% 0.64% 0.66% 0.69% 0.81% 0.84% Portfolio turnover rate ................................ 89% 138% 89% 138% 89% 138%
NOTES TO FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- (a) Total returns are historical and assume changes in share price and reinvestment of dividends and capital gains and do not include the effect of insurance contract charges. * Annualized for periods less than one year. + Unaudited See Notes to Financial Statements. 19
Statement of Assets and Liabilities JUNE 30, 2007 (UNAUDITED) TOTAL RETURN FUND - --------------------------------------------------------------------------------------------------------------------------- ASSETS Investments in securities, at market* (cost $2,050,379,704) ..................................... $ 2,271,374,654 Short-term Investments (at amortized cost) ...................................................... 185,903,699 Short-term affiliated investments (at amortized cost) ........................................... 189,804,875 Foreign cash (cost $2,734,365) .................................................................. 2,674,184 Receivable for investments sold ................................................................. 92,944,008 Income receivables .............................................................................. 8,313,653 Receivable for fund shares sold ................................................................. 3,542,407 Variation margin receivable ..................................................................... 184,725 Other assets .................................................................................... 3,037 - --------------------------------------------------------------------------------------------------------------------------- TOTAL ASSETS ................................................................................ 2,754,745,242 - --------------------------------------------------------------------------------------------------------------------------- LIABILITIES Payable upon return of securities loaned ........................................................ 287,921,026 Payable for investments purchased ............................................................... 206,070,012 Payable for fund shares redeemed ................................................................ 51,636 Payable to GEAM ................................................................................. 1,427,230 Variation margin payable ........................................................................ 31,214 - --------------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES ........................................................................... 495,501,118 - --------------------------------------------------------------------------------------------------------------------------- NET ASSETS ......................................................................................... $2,259,244,124 =========================================================================================================================== NET ASSETS CONSIST OF: Capital paid in ................................................................................. 1,944,596,567 Undistributed (distribution in excess of) net investment income ................................. 26,321,275 Accumulated net realized gain (loss) ............................................................ 67,402,077 Net unrealized appreciation/(depreciation) on: Investments ................................................................................. 220,994,950 Futures ..................................................................................... (30,456) Foreign currency related transactions ....................................................... (40,289) - --------------------------------------------------------------------------------------------------------------------------- NET ASSETS ......................................................................................... $2,259,244,124 =========================================================================================================================== CLASS 1: NET ASSETS ......................................................................................... 1,485,208,967 Shares outstanding ($0.01 par value; unlimited shares authorized) .................................. 78,205,031 Net asset value per share .......................................................................... 18.99 CLASS 2: NET ASSETS ......................................................................................... 1,368,194 Shares outstanding ($0.01 par value; unlimited shares authorized) .................................. 72,095 Net asset value per share .......................................................................... 18.98 CLASS 3: NET ASSETS ......................................................................................... 772,665,815 Shares outstanding ($0.01 par value; unlimited shares authorized) .................................. 40,716,664 Net asset value per share .......................................................................... 18.98 CLASS 4: NET ASSETS ......................................................................................... 1,148 Shares outstanding ($0.01 par value; unlimited shares authorized) .................................. 61 Net asset value per share .......................................................................... 18.96
* Includes $280,572,128 of securities on loan. See Notes to Financial Statements. 20
Statement of Operations FOR THE SIX MONTHS ENDED JUNE 30, 2007 (UNAUDITED) TOTAL RETURN FUND - --------------------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME INCOME: Dividend ....................................................................... $17,010,031 Interest ....................................................................... 9,286,543 Interest from affliated investments* ........................................... 6,334,784 Less: Foreign taxes withheld ................................................... (1,140,931) - --------------------------------------------------------------------------------------------------------------------------- TOTAL INCOME ..................................................................... 31,490,427 - --------------------------------------------------------------------------------------------------------------------------- EXPENSES: Advisory and administrative fees ............................................... 3,239,893 Investor Service Fees - Class 1 (Notes 4) ...................................... 1,427,758 Distributors Fees (Notes 4) Class 2 ..................................................................... 149 Class 3 ..................................................................... 838,994 Class 4 ..................................................................... 2 Transfer agent ................................................................. 17,930 Trustee's fees ................................................................. 26,021 Custody and accounting expenses ................................................ 197,081 Professional fees .............................................................. 107,314 Registration expenses .......................................................... 10,987 Other expenses ................................................................. 52,710 - --------------------------------------------------------------------------------------------------------------------------- TOTAL EXPENSES BEFORE WAIVER AND REIMBURSEMENT ................................... 5,918,839 - --------------------------------------------------------------------------------------------------------------------------- Less: Expenses Waived or borne by the adviser .................................. (472,375) Net expenses ................................................................... 5,446,464 - --------------------------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME (LOSS) ..................................................... 26,043,963 =========================================================================================================================== NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS REALIZED GAIN (LOSS) ON: Investments ................................................................. 48,328,628 Futures ..................................................................... 4,674,439 Written options ............................................................. (10,988) Foreign currency transactions ............................................... (166,321) INCREASE (DECREASE) IN UNREALIZED APPRECIATION/ (DEPRECIATION) ON: Investments ................................................................. 63,394,717 Futures ..................................................................... 78,065 Foreign currency transactions ............................................... (39,561) - --------------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments ......................... 116,258,979 - --------------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .................. $142,302,942 ===========================================================================================================================
* Income attributable to security lending, net of rebate expenses, was $618,187. See Notes to Financial Statements. 21 Statements of Changes in Net Assets
TOTAL RETURN FUND - ----------------------------------------------------------------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED JUNE 30, 2007 DECEMBER 31, (UNAUDITED) 2006 - ---------------------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS OPERATIONS: Net investments income (loss) .................................................. $ 26,043,963 $ 30,879,471 Net realized gain (loss) on investments, futures, written options, foreign currency transactions and swaps ...................................... 52,825,758 34,835,590 Net increase (decrease) in unrealized appreciation/(depreciation) on investments, futures, written options, foreign currency translation ....... 63,433,221 115,639,111 - ----------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) from operations ........................................ 142,302,942 181,354,172 - ----------------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Class 1 ...................................................................... -- (23,735,343) Class 2 ...................................................................... -- (18) Class 3 ...................................................................... -- (6,765,709) Class 4 ...................................................................... -- (17) Net realized gains Class 1 ...................................................................... -- (18,619,381) Class 2 ...................................................................... -- (15) Class 3 ...................................................................... -- (5,194,867) Class 4 ...................................................................... -- (15) - ----------------------------------------------------------------------------------------------------------------------------- TOTAL DISTRIBUTIONS .............................................................. -- (54,315,365) - ----------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from operations and distributions .............. 142,302,942 127,038,807 - ----------------------------------------------------------------------------------------------------------------------------- SHARE TRANSACTIONS: Proceeds from sale of shares Class 1 ...................................................................... 23,929,622 289,978,256 Class 2 ...................................................................... 1,365,237 1,000 Class 3 ...................................................................... 336,279,316 372,387,466 Class 4 ...................................................................... -- 1,000 Value of distributions reinvested Class 1 ...................................................................... -- 42,354,257 Class 2 ...................................................................... -- 32 Class 3 ...................................................................... -- 11,960,436 Class 4 ...................................................................... -- 31 Cost of shares redeemed Class 1 ...................................................................... (31,119,289) (16,516,114) Class 2 ...................................................................... (1) -- Class 3 ...................................................................... (94,601) (155,188) Class 4 ...................................................................... -- -- - ----------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) from share transactions ................................ 330,360,284 700,011,176 - ----------------------------------------------------------------------------------------------------------------------------- TOTAL INCREASE (DECREASE) IN NET ASSETS .......................................... 472,663,226 827,049,983 NET ASSETS Beginning of period .............................................................. 1,786,580,898 959,530,915 - ----------------------------------------------------------------------------------------------------------------------------- End of period .................................................................... $2,259,244,124 $1,786,580,898 ============================================================================================================================= UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD ...... $ 26,321,275 $ 277,312 - -----------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements. 22
Statements of Changes in Net Assets (continued) Changes in Fund Shares TOTAL RETURN FUND - ------------------------------------------------------------------------------------------------------------------------------ SIX MONTHS ENDED YEAR ENDED JUNE 30, 2007 DECEMBER 31, (UNAUDITED) 2006 - ------------------------------------------------------------------------------------------------------------------------------ CLASS 1: Shares sold ............................................................................. 1,308,369 17,330,893 Issued for distributions reinvested ..................................................... -- 2,390,195 Shares redeemed ......................................................................... (1,682,586) (952,918) - ------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in fund shares .................................................. (374,217) 18,768,170 ============================================================================================================================== CLASS 2: Shares sold ............................................................................. 72,034 59 Issued for distributions reinvested ..................................................... -- 2 Shares redeemed ......................................................................... -- -- - ------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in fund shares .................................................. 72,034 61 ============================================================================================================================== CLASS 3: Shares sold ............................................................................. 18,312,517 21,743,379 Issued for distributions reinvested ..................................................... -- 674,968 Shares redeemed ......................................................................... (5,078) (9,122) - ------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in fund shares .................................................. 18,307,439 22,409,225 ============================================================================================================================== CLASS 4: Shares sold ............................................................................. -- 59 Issued for distributions reinvested ..................................................... -- 2 Shares redeemed ......................................................................... -- -- - ------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in fund shares .................................................. -- 61 ==============================================================================================================================
See Notes to Financial Statements. 23 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- 1. ORGANIZATION OF THE COMPANY GE Investments Funds, Inc. (the "Company") was incorporated under the laws of the Commonwealth of Virginia on May 14, 1984 and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company. The Company is composed of thirteen investment portfolios (collectively the "Funds"), although only the following eleven are currently being offered: U.S. Equity Fund, S&P 500 Index Fund, Premier Growth Equity Fund, Value Equity Fund, Mid-Cap Equity Fund, Small-Cap Equity Fund, International Equity Fund, Total Return Fund (the "Fund"), Income Fund, Money Market Fund and Real Estate Securities Fund. The Fund presently offers four classes of shares. Shares of the Funds of the Company are offered only to insurance company separate accounts that fund certain variable life insurance contracts and variable annuity contracts. These insurance companies may include insurance companies affiliated with GE Asset Management Incorporated ("GEAM"), the investment adviser and administrator of each of the Funds. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions at the date of the financial statements. Actual results may differ from those estimates. The following summarizes the significant accounting policies of the Fund: SECURITY VALUATION AND TRANSACTIONS for which exchange quotations are readily available are valued at the last sale price, or if no sales occurred on that day, at the last quoted bid price. Securities listed on the NASDAQ will be valued at the NASDAQ's official close price. Certain fixed income securities are valued by a dealer or by a pricing service based upon a matrix system, which considers market transactions as well as dealer supplied valuations. Short-term investments maturing within sixty days are valued at amortized cost. If quotations are not readily available for a portfolio security, or if it is believed that a quotation or other market price for a portfolio security does not represent its fair value, the security may be valued using procedures approved by the Fund's Board of Directors that are designed to establish its "fair value." These procedures require that the fair value of a security be established by the valuation committee. The fair value committee follows different protocols for different types of investments and circumstances. Foreign securities may be valued with the assistance of an independent fair value pricing service in circumstances where it is believed that they have been or would be materially affected by events occurring after the close of the portfolio security's primary market and before the close of regular trading on the NYSE. This independent fair value pricing service uses a computerized system to appraise affected securities and portfolios taking into consideration various factors and the fair value of such securities may be something other than the last available quotation or other market price. GE Asset Management may also separately monitor portfolio securities and, consistent with the Fund's fair value procedures, apply a different value to a portfolio security than would be applied had it been priced using market quotations or by an independent fair value pricing service. Determining the fair value of securities involves the application of both subjective and objective considerations. Security values may differ depending on the methodology used to determine their values, and may differ from the last quoted sale or closing price. No assurance can be given that use of these fair value procedures will always better represent the price at which a Fund could sell the affected portfolio security. Security transactions are accounted for as of the trade date. Realized gains and losses on investments sold are recorded on the basis of identified cost for both financial statement and federal tax purposes. In September 2006, FASB issued Statement of Financial Accounting Standards No. 157, FAIR VALUE MEASUREMENTS ("FAS 157"). FAS 157 establishes a single authoritative definition of fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. FAS 157 applies to fair value measurements already required or permitted by existing standards. The change to current generally accepted accounting principles from the application of FAS 157 relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. Management of the Fund does not believe the adoption of FAS 157 will materially impact the financial statement amounts, however, additional disclosures may be required about the inputs used to 24 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- develop the measurements and the effect of certain of the measurements on changes in net assets for the period. FAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. REPURCHASE AGREEMENTS The Fund may enter into repurchase agreement transactions with respect to instruments that are consistent with the Fund's investment objectives or policies. The Fund's or a third party custodian takes possession of the collateral pledged for investments in repurchase agreements on behalf of the Fund. The Fund values the underlying collateral daily on a mark-to-market basis to determine that the value, including accrued interest, is at least equal to 102% of the repurchase price. In the event the seller defaults and the value of the security declines, or if the seller enters an insolvency proceeding, realization of the collateral by the Fund may be delayed or limited. SECURITY LENDING The Fund may loan securities to brokers, dealers, and financial institutions determined by GEAM to be creditworthy, subject to certain limitations. The Fund continues to receive the interest and dividends on the loaned securities during the term of the loan. The loans of securities are secured by collateral in the form of cash or other liquid assets, which are segregated and maintained with the custodian in an amount at least equal to 102% of the current market value of the loaned securities. During the term of the loan, the Fund will record any gain or loss in the market value of its loaned securities and of securities in which cash collateral is invested. The Fund will also earn interest, net of any rebate, from securities in which cash collateral is invested. In the event the counterparty (borrower) does not meet its contracted obligation to return the securities, the Fund may be exposed to the risk of loss of reacquiring the loaned securities at prevailing market prices using the proceeds of the sale of the collateral. FOREIGN CURRENCY Accounting records of the Fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange at period end. Purchases and sales of securities, income receipts and expense payments denominated in foreign currencies are translated into U.S. dollars at the prevailing exchange rate on the respective dates of such transactions. The Fund does not isolate the portion of the results of operations resulting from changes in foreign exchange rates from the fluctuations arising from changes in the market prices of securities during the period. Such fluctuations are included in the net realized or unrealized gain or loss from investments. Net realized gains or losses on foreign currency transactions represent net gains or losses on sales and maturities of foreign currency contracts, disposition of foreign currencies, the difference between the amount of net investment income and withholding taxes accrued and the U.S. dollar amount actually received or paid, and gains or losses between the trade and settlement date on purchases and sales of securities. Net unrealized foreign exchange gains and losses arising from changes in the value of other assets and liabilities as a result of changes in foreign exchange rates are included as increases or decreases in unrealized appreciation/depreciation on foreign currency related transactions. FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or bond index futures contracts subject to certain limitations. The Fund may invest in futures contracts to manage its exposure to the stock and bond markets and fluctuations in currency values. Buying futures tends to increase the Fund's exposure to the underlying instrument while selling futures tends to decrease the Fund's exposure to the underlying instrument, or hedge other Fund investments. The Fund will not enter into a transaction involving futures for speculative purposes. The Fund's risks in using these contracts include changes in the value of the underlying instruments, non-performance of the counterparties under the contracts' terms and changes in the liquidity of the secondary market for the contracts. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they principally trade. Upon entering into a futures contract, the Fund is required to pledge to the broker an amount of cash and/or other assets equal to a certain percentage of the contract amount, known as initial margin deposit. Subsequent payments, known as variation margin, are made or received by the Fund each day, depending on the daily fluctuation in the fair value of the underlying security. The Fund records an unrealized gain or loss equal to the daily variation margin. Should market conditions move unexpectedly, the Fund may not achieve the anticipated benefits of the futures contracts and may incur a loss. The Fund recognizes a realized gain or loss on the expiration or closing of a futures contract. OPTIONS The Fund may purchase and write options, subject to certain limitations. The Fund may invest in options contracts to manage its exposure to the stock and 25 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- bond markets and fluctuations in foreign currency values. Writing puts and buying calls tend to increase the Fund's exposure to the underlying instrument while buying puts and writing calls tend to decrease the Fund's exposure to the underlying instrument, or hedge other Fund investments. The Fund will not enter into a transaction involving options for speculative purposes. The Fund's risks in using these contracts include changes in the value of the underlying instruments, non-performance of the counterparties under the contracts' terms and changes in the liquidity of the secondary market for the contracts. Options are valued at the last sale price, or if no sales occurred on that day, at the last quoted bid price. When the Fund writes an option, the amount of the premium received is recorded as a liability and is subsequently adjusted to the current fair value of the option written. Premiums received from writing options that expire unexercised are treated by the Fund on the expiration date as realized gains from investments. The difference between the premium and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium is less than the amount paid for the closing purchase, as a realized loss. When an option is exercised, the proceeds from the sale of the underlying security or the cost basis of the securities purchased is adjusted by the original premium received or paid. SWAP CONTRACTS As part of the investment strategy, the Fund may invest in swap agreements, which are agreements to exchange the return generated by one instrument for the return generated by another instrument. Total return swap agreements involve commitments to pay interest in exchange for a market linked return based upon a notional principal amount. To the extent the total return of the security or index underlying the agreement exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty. Swaps are marked to market daily based upon the underlying security or index. Payments received or made are recorded as realized gain or loss in the Statement of Operations. Entering into swap agreements involves, to varying degrees, elements of credit and market risk in excess of the amounts recognized on the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparty to the agreements may default on its obligation to perform and that there may be unfavorable changes in the value of the index or securities underlying the agreement. Notional principal amounts are used to express the extent of involvement in these transactions, but the amounts potentially subject to credit risk are much smaller. WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS The Fund may purchase or sell securities on a when-issued or forward commitment basis. These transactions are arrangements in which the Fund purchases and sells securities with payment and delivery scheduled a month or more after entering into the transactions. The price of the underlying securities and the date when these securities will be delivered and paid for are fixed at the time the transaction is negotiated. Losses may arise due to changes in the market value of the underlying securities or if the counterparty does not perform under the contracts. In connection with such purchases, the Fund maintains cash or liquid assets in an amount equal to purchase commitments for such underlying securities until settlement date and for sales commitments, the Fund maintains equivalent deliverable securities as "cover" for the transaction. Unsettled commitments are valued at the current market value of the underlying security. Daily fluctuations in the value of such contracts are recorded as unrealized gains or losses. The Fund will not enter into such commitments for the purpose of investment leverage. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS The Fund may enter into forward foreign currency exchange contracts to facilitate transactions in foreign denominated securities and to manage the Fund's currency exposure. Forward foreign currency exchange contracts are valued at the mean between the bid and the offered forward rates as last quoted by a recognized dealer. The aggregate principal amounts of the contracts are not recorded in the Fund's financial statements. Such amounts appear under the caption forward foreign currency contracts in the Schedule of Investments. Fluctuations in the value of the contracts are recorded in the Statement of Assets and Liabilities as an asset (or liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized gains or losses on foreign currency related transactions. The Fund's risks in using these contracts include changes in the value of foreign currency or the possibility that the counterparties do not perform under the contracts' terms. When the Fund enters into a forward foreign currency exchange contract, it is required to 26 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- segregate cash or liquid securities with its custodian in an amount equal to the value of the Fund's total assets committed to the consummation of the forward contract. If the value of the segregated securities declines, additional cash or securities is segregated so that the value of the account will equal the amount of the Fund's commitment with respect to the contract. INVESTMENTS IN FOREIGN MARKETS Investments in foreign markets may involve special risks and considerations not typically associated with investing in the United States. These risks include revaluation of currencies, high rates of inflation, repatriation on income and capital, and adverse political and economic developments. Moreover, securities issued in these markets may be less liquid, subject to government ownership controls, tariffs and taxes, subject to delays in settlements, and their prices may be more volatile. The Fund may be subject to capital gains and repatriation taxes imposed by certain countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued based upon net investment income, net realized gains and net unrealized appreciation as income and/or capital gains are earned. INCOME TAXES The Fund intends to comply with all sections of the Internal Revenue Code applicable to regulated investment companies including the distribution of substantially all of its taxable net investment income and net realized capital gains to its shareholders. Therefore, no provision for federal income tax has been made. The Fund is treated as a separate taxpayer for federal income tax purposes. At June 30, 2007, information on the tax cost of investments is as follows:
Net Tax Cost of Gross Tax Gross Tax Appreciation/ Investments for Unrealized Unrealized (Depreciation) Tax Purposes Appreciation Depreciation on Investments - --------------------------------------------------------------------------------------------------------------------------- $2,427,637,644 $246,904,469 $(27,458,906) $219,445,564
As of December 31, 2006, the Fund has no capital loss carryovers. Any net capital and currency losses incurred after October 31, within the Fund's tax year, are deemed to arise on the first day of the Fund's next tax year if the Fund so elects to defer such losses. The Fund elected to defer losses incurred after October 31, 2006 as follows: Capital Currency - -------------------------------------------------------------------------------- $-- $42,064 The tax composition of distributions paid (other than return of capital distributions for the year) during the year ended December 31, 2006 was as follows: Ordinary Long-Term Income Capital Gains Total - -------------------------------------------------------------------------------- $31,461,661 $22,853,704 $54,315,365 DISTRIBUTIONS TO SHAREHOLDERS The Fund declares and pays net realized capital gains in excess of capital loss carryforwards distributions annually. The character of income and gains to be distributed is determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences include (but are not limited to) futures, treatment of realized gains and losses on foreign currency transactions, and losses deferred due to wash sale transactions. Reclassifications due to permanent book/tax differences are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. These reclassifications have no impact on net investment income, realized gains or losses, or the net asset value of the Fund. The calculation of net investment income per share in the Financial Highlights table excludes these adjustments. 27 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- The reclassifications for the year ended December 31, 2006 were as follows: Undistributed (Distribution in Excess of) Net Investment Accumulated Paid in Income Net Realized Gain Capital - -------------------------------------------------------------------------------- $(80,440) $80,440 $-- On June 29, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in Income Taxes." FIN48 provides guidance for how certain uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN48 requires evaluation of tax positions taken or expected to be taken in the course of preparing the Fund's tax return to determine whether the tax positions are "more likely than not" of being sustained by the applicable tax authority. The adoption of FIN48 did not have an impact on the Fund's net assets and financial statements. INVESTMENT INCOME Corporate actions (including cash dividends) are recorded on the ex-dividend date, net of applicable withholding taxes, except for certain foreign corporate actions, which are recorded as soon after ex-dividend date as such information becomes available. Interest income is recorded on the accrual basis. All discounts and premiums on bonds are accreted and amortized respectively to call or maturity date, whichever is shorter, using the effective yield method. EXPENSES Expenses of the Company which are directly identifiable to one of the Funds are allocated to that portfolio and pro rata across share classes . Expenses which are not directly identifiable to one of the Funds are allocated in such a manner as deemed equitable, taking into consideration the nature and type of expenses and relative sizes of the Funds based on net assets. All expenses of the Fund are paid by GEAM and reimbursed by the Fund. 3. LINE OF CREDIT The Fund shares a revolving credit facility of up to $25 million with a number of its affiliates. The credit facility is with its custodian bank, State Street Bank and Trust Company. The revolving credit facility requires the payment of a commitment fee equal to 0.09% per annum on the daily unused portion of the credit facility, payable quarterly. The portion borne by the Funds generally is borne proportionally based upon net assets. Generally. borrowings under the credit facility would accrue interest at the Federal Funds Rate plus 50 basis points and is borne by each of the borrowing Funds. The maximum amount allowed to be borrowed by any one of the Funds is the lesser of its prospectus limitation, 20% of its net assets, or $25 million. The credit facility was not utilized by the Fund during the period ended June 30, 2007. 4. AMOUNTS PAID TO AFFILIATES GEAM, a registered investment adviser, was retained by the Company's Board of Directors effective May 1, 1997 to act as investment adviser and administrator of the Fund. GEAM's compensation for investment advisory and administrative services is paid monthly based on the average daily net assets of the Fund. The advisory and administrative fee is stated in the following schedule: Annualized based on average daily net assets - -------------------------------------------------------------------------------- Average Daily Advisory and Net Assets Administration of Fund Fees - -------------------------------------------------------------------------------- First $100 million .50% Next $100 million .45% Next $100 million .40% Next $100 million .35% Over $400 million .30% Pursuant to an expense limitation agreement with the Fund, GEAM has agreed to limit total operating expenses charged to Fund assets attributable to each class of shares (excluding class specific expenses such as Investor Service Plan Fees (for Class 1 shares), Distribution and Service (12b-1) Fees, and excluding interest, taxes, brokerage commissions, other expenditures that are capitalized in accordance with generally accepted accounting principles, and other extraordinary expenses not incurred in the ordinary course of the Fund's business) to 0.32% of the average daily net assets of the Fund attributable to such shares, in each case on an annual basis. Under the agreement, this expense limitation will continue until April 30, 2009, unless extended. The expense limitation agreement will terminate upon termination of the management agreement, or by the Fund without payment of penalty upon sixty (60) days written notice to GEAM. The agreement can only be changed with the approval of both the Fund and GEAM. 28 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- GENPACT performs certain accounting and certain administration services not provided by GEAM. For the period ending June 30, 2007, $15,485 was charged to the Fund. INVESTOR SERVICE PLAN -- CLASS 1 SHARES The Company adopted an Investor Service Plan (the "Services Plan") on December 9, 2005 with respect to Class 1 shares of the Total Return Fund. The Services Plan was not adopted pursuant to Rule 12b-1 under the 1940 Act. The Services Plan provides that during any fiscal year, the amount of compensation paid under the Services Plan by the Total Return Fund Class 1 shares may not exceed the annual rate of 20% of the average daily net assets of the Total Return Fund attributable to such class shares. DISTRIBUTION AND SHAREHOLDER SERVICING FEES The Fund has adopted a Shareholder Servicing and Distribution Plan ("the Plan") pursuant to Rule 12b-1 under the 1940 Act with respect to Class 2, 3 and 4 shares of the Fund. The Fund pays GE Investment Distributors, Inc. ("GEID"), a wholly-owned subsidiary of GEAM and the Fund's principal underwriter, a monthly fee for distribution and/or shareholder services provided, at an annual rate of the average daily net assets attributable to each applicable class of shares. The annual rates applicable are 0.25% for Class 2 shares, 0.30% for Class 3 shares and 0.45% for Class 4 shares. Currently, Class 1 shares are not subject to a 12b-1 fee. DIRECTORS' COMPENSATION The Fund pays no compensation to its Directors who are officers or employees of GEAM or its affiliates. Directors who are not such officers or employees also serve in a similar capacity for other funds advised by GEAM. Compensation paid to unaffiliated directors are reflected on the Statement of Operations. These fees are allocated pro rata across all of the mutual Fund platforms and share classes served by the directors, including the Fund, and are based upon the relative net assets of each fund within such platforms. (For additional information about directors compensation please refer to the Statement of Additional Information.) 5. INVESTMENT TRANSACTIONS PURCHASES AND SALES OF SECURITIES The cost of purchases and the proceeds from sales of investments, other than short-term securities and options, for the period ended June 30, 2007, were as follows: Purchases Sales - -------------------------------------------------------------------------------- $2,142,799,957 $1,752,073,326 SECURITY LENDING At June 30, 2007, the Fund participated in securities lending: Loaned securities at Cash market value collateral* - -------------------------------------------------------------------------------- $280,572,128 $287,921,026 * COLLATERAL OF $289,237,063 DECREASED BY $1,316,037 ON JULY 1, 2007 TO REFLECT THE JUNE 30, 2007 CHANGE IN VALUE OF SECURITIES ON LOAN. 29 Additional Information (unaudited) - -------------------------------------------------------------------------------- INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS: The business and affairs of the Company are managed under the direction of the Company's Board of Directors. Information pertaining to the Directors and officers of the Company is set forth below. INTERESTED DIRECTORS AND EXECUTIVE OFFICERS - -------------------------------------------------------------------------------- MICHAEL J. COSGROVE - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 58 POSITION(S) HELD WITH FUND Chairman of the Board and President TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 10 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President - GEAM since February 1997; President and Chief Executive Officer - Mutual Funds at GEAM since March 2007; Vice President, GE Capital Corporation, an indirect wholly-owned subsidiary of GE, since December 1999; Executive Vice President - Sales and Marketing of GEAM, a wholly-owned subsidiary of GE that is registered as an investment adviser under the Investment Advisers Act of 1940, as amended, since March 1993; Director of GEAM since 1988. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48 OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception; Trustee of Elfun Funds, GE Savings & Security Funds and General Electric Pension Trust since 1988; Trustee of Fordham University since 2003; Trustee of Elfun Foundation; Treasurer of GE Foundation; Director, GE Asset Management (Ireland) since February 1999; Director, GE Asset Management Funds Plc, GE Asset Canada Company, GE Asset Management Limited, and GE Volunteers. - -------------------------------------------------------------------------------- MATTHEW J. SIMPSON - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 46 POSITION(S) HELD WITH FUND Executive Vice President TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - less than one year PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General Counsel and Secretary of GEAM since July 2007; Senior Vice President and General Counsel - Marketing and Client Services (formerly Asset Management Services), at GEAM and Senior Vice President and General Counsel of GEAMS from February 1997 to June 2007; Vice President and Associate General Counsel of GEAM from October 1992 to February 1997; Secretary of Fund from 1997 to June 2007; Vice President of Fund from September 2003 to June 2007; Vice President of GE Institutional Funds and GE LifeStyle Funds from September 2003 to June 2007; Secretary of GE Institutional Funds and GE LifeStyle Funds from 1997 to June 2007; Vice President of Elfun Funds and GE Savings & Security Funds from October 2003 to June 2007; Assistant Secretary of Elfun Funds and GE Savings & Security Funds from 1998 to June 2007. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional Funds, GE LifeStyle Funds, Elfun Funds and GE Savings & Security Funds since July 2007. 30 Additional Information (unaudited) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SCOTT H. RHODES - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 48 POSITION(S) HELD WITH FUND Treasurer TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - one year PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds Operations Manager since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle Funds and GE Investments Funds since November 2005 and Elfun Funds and GE Savings & Security Funds since September 2005; from August 2004 to September 2005 Vice President, U.S. Trust Company, N.A. and Assistant Treasurer of Excelsior Funds, Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds, Inc.; from January 2004 to August 2004, Vice President BlackRock Financial Management, Inc.; from December 1996 to November 2003, Controller - Mutual Funds, American Skandia Investment Services, Inc. and Assistant Treasurer of American Skandia Trust and American Skandia Advisor Funds, Inc. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A - -------------------------------------------------------------------------------- JEANNE M. LAPORTA - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 42 POSITION(S) HELD WITH FUND Vice President and Secretary TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 2 years (Vice President); less than one year (Secretary) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Associate General Counsel - Marketing and Client Services (formerly Asset Management Services) at GEAM since May 1997; Vice President and Assistant Secretary of GE Funds, GE Institutional Funds and GE LifeStyle Funds since September 2003; Vice President and Assistant Secretary of Elfun Funds and GE Savings & Security Funds since October 2003; Assistant Secretary from September 2003 to June 2007 and Secretary since July 2007. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A 31 Additional Information (unaudited) - -------------------------------------------------------------------------------- NON-INTERESTED DIRECTORS - -------------------------------------------------------------------------------- JOHN R. COSTANTINO - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 61 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC since 2006; Managing Director, Walden Partners, Ltd., consultants and investors, since August 1992. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE Institutional Funds and GE LifeStyle Funds since their inception; Trustee of Fordham University since 2002 and Marymount College from 2001 through 2002; Neuroscience Research Institute since 1986; Diocesan Finance Counsel of the Dioceses of Brooklyn & Queens since 2001; Gregorian University Foundation since 1994. - -------------------------------------------------------------------------------- WILLIAM J. LUCAS - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 59 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Treasurer of Fairfield University since 1983. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception. - -------------------------------------------------------------------------------- ROBERT P. QUINN - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 71 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon Brothers Inc. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception. - -------------------------------------------------------------------------------- The Statement of Additional Information for the Fund includes additional information about the Directors and Officers and is available, without charge, upon request by calling 1-800-242-0134. 32 Investment Team - -------------------------------------------------------------------------------- INVESTMENT ADVISER AND ADMINISTRATOR GE Asset Management Incorporated BOARD OF DIRECTORS Michael J.Cosgrove, CHAIRMAN John R. Costantino William J. Lucas Robert P. Quinn Matthew J. Simpson SECRETARY Jeanne M. LaPorta ASSISTANT SECRETARIES Joseph A. Carucci Joon Won Choe TREASURER Scott H. Rhodes ASSISTANT TREASURERS Scott R. Fuchs Christopher M. Isaacs DISTRIBUTOR GE Investment Distributors, Inc. Member NASD and SIPC COUNSEL Sutherland, Asbill & Brennan, LLP CUSTODIAN State Street Bank & Trust Company INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM KPMG LLP OFFICERS OF THE INVESTMENT ADVISER James W. Ireland, CHIEF EXECUTIVE OFFICER Michael J. Cosgrove, EVP, PRESIDENT AND CHIEF EXECUTIVE OFFICER - MUTUAL FUNDS Paul M. Colonna, PRESIDENT - FIXED INCOME Kathryn D. Karlic, EVP, PRESIDENT - SALES AND MARKETING Ralph R. Layman, EVP, PRESIDENT - INTERNATIONAL EQUITIES Matthew J. Simpson, EVP, GENERAL COUNSEL AND SECRETARY Judith A. Studer, EVP, PRESIDENT - U.S. EQUITIES Don W. Torey, EVP, PRESIDENT - ALTERNATIVE INVESTMENTS AND REAL ESTATE John J. Walker, EVP, CHIEF FINANCIAL OFFICER 33 [This page intentionally left blank.] [This page intentionally left blank.] [This page intentionally left blank.] [This page intentionally left blank.] INVESTMENT ADVISER GE ASSET MANAGEMENT INCORPORATED 3001 SUMMER STREET PO BOX 7900 STAMFORD, CT 06904-7900 DISTRIBUTOR GE INVESTMENT DISTRIBUTORS, INC. MEMBER NASD AND SIPC 3001 SUMMER STREET PO BOX 7900 STAMFORD, CT 06904-7900 The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities is available without charge (i) upon request, by calling 1-800-242-0134; (ii) on the Fund's website at http://www.gefunds.com; and (iii) on the Commission's website at http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC - - information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Information (if any) regarding how the Fund voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through the Fund's website at http://www.gefunds.com; and (ii) on the Commission's website at http://www.sec.gov. [GE LOGO OMITTED] GE Investments Funds, Inc. S&P 500 Index Fund Semi-Annual Report JUNE 30, 2007 [GE logo omitted] GE Investments Funds, Inc. S&P 500 Index Fund - -------------------------------------------------------------------------------- Contents NOTES TO PERFORMANCE .................................................... 1 MANAGER REVIEW AND SCHEDULE OF INVESTMENTS .............................. 2 NOTES TO SCHEDULE OF INVESTMENTS ........................................ 11 FINANCIAL STATEMENTS Financial Highlights ............................................... 12 Statement of Assets and Liabilities ................................ 13 Statement of Operations ............................................ 14 Statements of Changes in Net Assets ................................ 15 Notes to Financial Statements ...................................... 16 ADDITIONAL INFORMATION .................................................. 21 INVESTMENT TEAM ......................................................... 24 This report is prepared for Policyholders of certain variable contracts and may be distributed to others only if preceded or accompanied by the variable contract's current prospectus and the current prospectus of the Funds available for investments thereunder. Notes to Performance June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- Total returns take into account changes in share price and assume reinvestment of dividends and capital gains distributions, if any. Investment returns and net asset value on an investment will fluctuate and you may have a gain or loss when you sell your shares. Periods less than one year are not annualized. Current performance may be lower or higher than that shown. You may call toll-free (800) 242-0134 for performance information as of the most recent month end. Total returns do not reflect expenses associated with the separate account such as administrative fees, account charges and surrender charges, which, if reflected, would reduce the total returns for all periods shown. Shares of the Fund are neither insured nor guaranteed by the U.S. Government, and their prices will fluctuate with market conditions. The Standard & Poor's ("S&P") 500 Composite Price Index of stocks (S&P 500) is an unmanaged index and do not reflect the actual cost of investing in the instruments that comprise the index. The S&P 500 is a market capitalization-weighted index of stocks of 500 large U.S. companies, which is widely used as a measure of large-cap stock market performance. The results shown for the foregoing index assume the reinvestment of net dividends or interest. The peer universe of the underlying annuity funds used in our peer ranking calculation is based on the blend of Lipper peer categories, as shown. Lipper is an independent mutual fund rating service. A Fund's performance may be compared to or ranked within a universe of mutual funds with investment objectives and policies similar but not necessarily identical to the Fund's. Such comparisons or rankings are made on the basis of several factors, including the Fund's objectives and policies, management style and strategy, and portfolio composition, and may change over time if any of those factors change. The S&P 500 Index Fund is not sponsored, endorsed, sold or promoted by Standard & Poor's, and Standard & Poor's makes no representation or warranty, express or implied, to the investors of the Fund or any member of the public regarding the advisability of investing in the securities generally or in this Fund particularly or the ability of the S&P 500 Index Fund to track general stock market performance. 1 S&P 500 Index Fund Q&A - -------------------------------------------------------------------------------- SSGA FUNDS MANAGEMENT, INC. ("SSGA FM") IS THE SUB- ADVISER FOR THE S&P 500 INDEX FUND. SSGA FM IS REGISTERED WITH THE SEC AS AN INVESTMENT ADVISER UNDER THE INVESTMENT ACT OF 1940 AND IS A WHOLLY OWNED SUBSIDIARY OF STATE STREET CORPORATION. THE FUND IS MANAGED BY A TEAM OF PORTFOLIO MANAGERS COMPOSED OF THE FOLLOWING MEMBERS: KARL SCHNEIDER AND JOHN TUCKER. KARL SCHNEIDER, LEAD PORTFOLIO MANAGER FOR THE FUND, IS A VICE PRESIDENT OF STATE STREET GLOBAL ADVISORS AND A PRINCIPAL OF SSGA FM. KARL JOINED THE FIRM IN 1996 AND IS A MEMBER OF THE FIRM'S GLOBAL STRUCTURED PRODUCTS TEAM. KARL MANAGES A VARIETY OF THE FIRM'S DOMESTIC AND INTERNATIONAL PASSIVE FUNDS. KARL HOLDS A BACHELORS OF SCIENCE DEGREE IN FINANCE AND INVESTMENTS FROM BABSON COLLEGE AND ALSO A MASTER OF SCIENCE DEGREE IN FINANCE FROM THE CARROLL SCHOOL OF MANAGEMENT AT BOSTON COLLEGE. ADDITIONALLY, HE HOLDS A SERIES 3 LICENSE FROM THE NATIONAL FUTURES ASSOCIATION. JOHN TUCKER, CFA, IS A VICE PRESIDENT OF SSGA AND A PRINCIPAL OF SSGA FM. JOHN JOINED THE FIRM IN 1988 AND IS HEAD OF US EQUITY MARKETS IN THE GLOBAL STRUCTURED PRODUCTS TEAM. HE IS ALSO RESPONSIBLE FOR ALL DERIVATIVE STRATEGIES AND EXCHANGE TRADED FUNDS. JOHN RECEIVED A BA IN ECONOMICS FROM TRINITY COLLEGE AND AN MS IN FINANCE FROM BOSTON COLLEGE. HE IS A MEMBER OF THE BOSTON SECURITY ANALYSTS SOCIETY AND THE CFA INSTITUTE. Q. HOW DID THE S&P 500 INDEX FUND PERFORM COMPARED TO ITS BENCHMARK AND LIPPER PEER GROUP FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2007? A. For the six-month period ended June 30, 2007, the S&P 500 Index Fund returned 6.75%. The S&P 500 Index, the Fund's benchmark, returned 6.96% and the Fund's Lipper peer group of 56 S&P 500 Index Objective funds returned an average of 6.75% for the same period. Q. WHAT MARKET CONDITIONS IMPACTED FUND PERFORMANCE? A. Signs of stress in the fixed income markets brought a cautious end to the first half of 2007, with US stocks and bonds both slipping in June. Risk aversion tended to increase in choppy fashion throughout the second quarter, especially after hopes for an official rate cut eroded through May. The second quarter did bring record highs for both the Dow Jones Industrial Average and the S&P 500, but the underpinnings of the global liquidity that has been buoying the capital markets clearly began to creak. Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE? A. By utilizing a passive, full replication investment style, the Fund owns the same stocks and sectors in approximately the same weights as the S&P 500 Index. As of June 30, 2007, the four largest sectors in the S&P 500 Index were Financials (20.9%), Information Technology (15.5%), Healthcare (11.8%) and Industrials (11.1%). The highest returning sector for the last six months was Energy (+16%) followed by Materials (+15%). The lowest returning sectors were Financials (-2%) and Consumer Discretionary (+2%). Q. WERE THERE ANY SIGNIFICANT CHANGES TO THE FUND DURING THE PERIOD? A. Over the last six months, there were 21 index addition/deletion changes announced by Standard & Poors that impacted the Fund. Not all the additions and deletions were bought and sold in the Fund, however, as many changes were as a result of a merger or acquisition, or a spin-off involving another S&P 500 constituent. Additionally, there were numerous index share changes throughout the period, as well as at each quarter's end. Many of the share changes also required no trading, as the weight change within the portfolio was negligible. 2 S&P 500 Index Fund - -------------------------------------------------------------------------------- Understanding Your Fund's Expenses As a shareholder of the Fund you incur transaction and ongoing expenses. Transaction expenses including sales charges on purchase payments, reinvested dividends (or other distributions), and redemption fees directly reduce the investment return of the Fund. Ongoing costs include portfolio management fees, distribution and service fees, professional fees, administrative fees and other Fund expenses. The following example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the period. The information in the following table is based on an investment of $1,000, which is invested at the beginning of the period and held for the entire six-month period ended June 30, 2007. ACTUAL EXPENSES The first section of the table provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your class under the heading "Expenses Paid During Period." HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second section of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholders reports of other funds. Please note that the expenses shown in the table do not reflect any transaction costs, such as sales charges or redemption fees.
JANUARY 1, 2007 - JUNE 30, 2007 - ------------------------------------------------------------------------------------------------------------------------------------ ACCOUNT VALUE AT ACCOUNT VALUE EXPENSES THE BEGINNING OF AT THE END OF PAID DURING THE PERIOD ($) THE PERIOD ($) THE PERIOD ($)* - ------------------------------------------------------------------------------------------------------------------------------------ Actual Fund Return** 1,000.00 1,067.54 2.01 - ------------------------------------------------------------------------------------------------------------------------------------ Hypothetical 5% Return (2.5% for the period) 1,000.00 1,022.58 1.97 - ------------------------------------------------------------------------------------------------------------------------------------
*EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.39% (FROM PERIOD JANUARY 1, 2007 - JUNE 30, 2007), MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY 181/365 (TO REFLECT THE SIX MONTH PERIOD). **ACTUAL FUND RETURN FOR SIX-MONTH PERIOD ENDED JUNE 30, 2007 WAS: 6.75%. 3 S&P 500 Index Fund (unaudited) - -------------------------------------------------------------------------------- CHANGE IN VALUE OF A $10,000 INVESTMENT - -------------------------------------------------------------------------------- S&P 500 Index Fund S&P 500 Index 06/97 $10,000.00 $10,000.00 12/97 11,035.49 11,057.91 12/98 14,152.08 14,231.31 12/99 17,069.00 17,229.53 12/00 15,460.09 15,647.27 12/01 13,563.75 13,783.37 12/02 10,529.98 10,736.98 12/03 13,507.16 13,821.52 12/04 14,920.19 15,325.48 12/05 15,592.61 16,079.27 12/06 17,998.42 18,618.57 06/07 19,213.97 19,914.71 S&P 500 Index Fund (ending value $19,214) S&P 500 Index (ending value $19,915) AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2007 - -------------------------------------------------------------------------------- SIX ONE FIVE TEN MONTHS YEAR YEAR YEAR - -------------------------------------------------------------------------------- S&P 500 Index Fund 6.75% 20.19% 10.33% 6.75% - -------------------------------------------------------------------------------- S&P 500 Index 6.96% 20.59% 10.72% 7.13% - -------------------------------------------------------------------------------- Lipper peer group average* 6.75% 20.11% 10.28% 6.81% - -------------------------------------------------------------------------------- Inception date 4/15/85 - -------------------------------------------------------------------------------- INVESTMENT PROFILE A fund designed for investors who seek growth of capital and accumulation of income that corresponds to the investment return of the Standard & Poor's 500 Composite Stock Index by investing at least 80% of its net assets in equity securities of companies contained in that Index. TOP TEN LARGEST HOLDINGS AS OF JUNE 30, 2007 as a % of Market Value - -------------------------------------------------------------------------------- Exxon Mobil Corp. 3.47% - -------------------------------------------------------------------------------- General Electric Co. 2.89% - -------------------------------------------------------------------------------- AT&T, Inc. 1.88% - -------------------------------------------------------------------------------- Citigroup, Inc. 1.86% - -------------------------------------------------------------------------------- Microsoft Corp. 1.82% - -------------------------------------------------------------------------------- Bank of America Corp. 1.59% - -------------------------------------------------------------------------------- Procter & Gamble Co. 1.42% - -------------------------------------------------------------------------------- American International Group, Inc. 1.33% - -------------------------------------------------------------------------------- Chevron Corp. 1.33% - -------------------------------------------------------------------------------- Pfizer Inc. 1.32% - -------------------------------------------------------------------------------- PORTFOLIO COMPOSITION AS OF JUNE 30, 2007 as a % of Market Value - -------------------------------------------------------------------------------- Market Value of $481,721 (in thousands) Financials 20.5% Information Technology 15.1% Healthcare 11.5% Industrials 11.2% Energy 10.6% Consumer Discretionary 10.0% Consumer Staples 9.1% Telecommunication Services 3.7% Utilities 3.5% Materials 3.1% Short-Term 1.7% * LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR THE SIX MONTHS, ONE YEAR, FIVE-YEAR, AND TEN-YEAR PERIODS INDICATED IN THE S&P 500 INDEX OBJECTIVE FUNDS PEER GROUP CONSISTING OF 56, 56, 49 AND 22 UNDERLYING ANNUITY FUNDS, RESPECTIVELY. SEE NOTES TO PERFORMANCE ON PAGE 1 FOR FURTHER INFORMATION, INCLUDING AN EXPLANATION OF LIPPER PEER CATEGORIES. PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE AND THE GRAPH AND TABLE DO NOT REFLECT THE DEDUCTION OF TAXES. 4 S&P 500 INDEX FUND Schedule of Investments June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- S&P 500 INDEX FUND - -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- COMMON STOCK -- 98.0%+ - -------------------------------------------------------------------------------- CONSUMER DISCRETIONARY -- 10.0% Abercrombie & Fitch Co. (Class A) 3,200 $ 233,536 Amazon.Com, Inc. 11,000 752,510(a) Apollo Group, Inc. (Class A) 5,000 292,150(a) Autonation, Inc. 5,772 129,524(a) Autozone, Inc. 1,744 238,265(a) Bed Bath & Beyond, Inc. 10,000 359,900(a) Best Buy Company, Inc. 14,600 681,382 Big Lots, Inc. 3,600 105,912(a) Black & Decker Corp. 2,207 194,900 Brunswick Corp. 3,368 109,898 Carnival Corp. 15,400 751,058 CBS Corp. 25,613 853,425 Centex Corp. 4,120 165,212 Circuit City Stores, Inc. 5,226 78,808 Citadel Broadcasting Corp. 601 3,877 Clear Channel Communications, Inc. 17,700 669,414 Coach, Inc. 13,400 635,026(a) Comcast Corp. (Class A) 110,658 3,111,703(a) D.R. Horton, Inc. 10,200 203,286 Darden Restaurants, Inc. 5,329 234,423 Dillard's, Inc. (Class A) 2,295 82,459 DIRECTV Group, Inc. 27,600 637,836(a) Dollar General Corp. 11,591 254,075 Dow Jones & Company, Inc. 2,442 140,293 Eastman Kodak Co. 9,775 272,038 Family Dollar Stores, Inc. 5,400 185,328 Ford Motor Co. 66,999 631,131 Fortune Brands, Inc. 5,441 448,175 Gannett Company, Inc. 8,108 445,535 General Motors Corp. 20,247 765,337 Genuine Parts Co. 5,896 292,442 Goodyear Tire & Rubber Co. 6,419 223,124(a) H&R Block, Inc. 11,008 257,257 Harley-Davidson, Inc. 9,200 548,412 Harman International Industries Inc. 2,300 268,640 Harrah's Entertainment, Inc. 6,735 574,226 Hasbro, Inc. 5,496 172,629 Hilton Hotels Corp. 13,988 468,178 Home Depot, Inc. 69,718 2,743,403 IAC/InterActiveCorp. 8,000 276,880(a) International Game Technology 12,000 476,400 Interpublic Group of Companies, Inc. 16,830 191,862(a) J.C. Penney Company, Inc. 7,987 578,099 Johnson Controls, Inc. 6,982 808,306 Jones Apparel Group, Inc. 4,200 118,650 NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- KB Home 2,860 $ 112,598 Kohl's Corp. 11,500 816,845(a) Leggett & Platt, Incorporated 6,800 149,940 Lennar Corp. (Class A) 4,800 175,488 Limited Brands, Inc. 11,988 329,071 Liz Claiborne Inc. 3,830 142,859 Lowe's Companies, Inc. 53,156 1,631,358 Macy's, Inc. 16,630 661,541 Marriott International Inc. (Class A) 11,944 516,458 Mattel, Inc. 14,151 357,879 McDonald's Corp. 42,090 2,136,488 McGraw-Hill Companies Inc. 12,040 819,683 Meredith Corp. 1,498 92,277 New York Times Co. (Class A) 5,188 131,775 Newell Rubbermaid Inc. 9,656 284,176 News Corp. (Class A) 82,000 1,739,220 Nike Inc. (Class B) 13,608 793,210 Nordstrom, Inc. 7,984 408,142 Office Depot, Inc. 9,500 287,850(a) OfficeMax, Inc. 2,523 99,154 Omnicom Group, Inc. 11,500 608,580 Polo Ralph Lauren Corp. (Class A) 2,300 225,653 Pulte Homes, Inc. 7,388 165,861 RadioShack Corp. 4,656 154,300 Sears Holdings Corp. 2,819 477,820(a) Snap-On Incorporated 2,009 101,475 Staples, Inc. 25,250 599,182 Starbucks Corp. 26,800 703,232(a) Starwood Hotels & Resorts Worldwide, Inc. 7,500 503,025 Target Corp. 30,352 1,930,387 The E.W. Scripps Co. (Class A) 2,700 123,363 The Gap, Inc. 18,118 346,054 The Sherwin-Williams Co. 3,863 256,774 The Stanley Works 3,026 183,678 The Walt Disney Co. 69,837 2,384,235 Tiffany & Co. 4,900 259,994 Time Warner, Inc. 134,214 2,823,862(d) TJX Companies, Inc. 16,380 450,450 Tribune Co. 1,830 53,802 VF Corp. 3,102 284,081 Viacom Inc. (Class B) 24,513 1,020,476(a) Wendy's International, Inc. 3,331 122,414 Whirlpool Corp. 2,743 305,022 Wyndham Worldwide Corp. 6,549 237,467(a) Yum! Brands, Inc. 18,844 616,576 48,288,699 CONSUMER STAPLES -- 9.1% Altria Group, Inc. 74,679 5,237,985 Anheuser-Busch Companies, Inc. 26,708 1,393,089(d) Archer-Daniels-Midland Co. 22,886 757,298 Avon Products, Inc. 15,828 581,679 Brown-Forman Corp. (Class B) 2,958 216,171 Campbell Soup Co. 7,976 309,549 See Notes to Schedule of Investments on page 11 and Notes to Financial Statements. 5 S&P 500 INDEX FUND Schedule of Investments June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- Clorox Co. 5,584 $ 346,766 Coca-Cola Enterprises, Inc. 9,400 225,600 Colgate-Palmolive Co. 18,272 1,184,939 ConAgra Foods, Inc. 17,568 471,877 Constellation Brands, Inc. (Class A) 6,400 155,392(a) Costco Wholesale Corp. 15,666 916,774 CVS Corp. 54,480 1,985,796 Dean Foods Co. 4,700 149,789 General Mills, Inc. 12,022 702,325 HJ Heinz Co. 11,697 555,257 Kellogg Co. 8,890 460,413 Kimberly-Clark Corp. 16,036 1,072,648 Kraft Foods, Inc. (Class A) 56,540 1,993,035 McCormick & Company, Inc. 4,800 183,264 Molson Coors Brewing Co. (Class B) 1,665 153,946 Pepsi Bottling Group, Inc. 4,500 151,560 PepsiCo, Inc. 57,574 3,733,674 Procter & Gamble Co. 111,445 6,819,319 Reynolds American Inc. 6,200 404,240 Safeway Inc. 15,800 537,674 Sara Lee Corp. 26,157 455,132 Supervalu Inc. 7,513 348,002 Sysco Corp. 21,544 710,736 The Coca-Cola Co. 70,951 3,711,447(d) The Estee Lauder Companies Inc. (Class A) 4,100 186,591 The Hershey Co. 6,284 318,096 The Kroger Co. 24,630 692,842 Tyson Foods, Inc. (Class A) 8,900 205,056 UST Inc. 5,779 310,390 Walgreen Co. 35,400 1,541,316 Wal-Mart Stores, Inc. 85,624 4,119,371 Whole Foods Market, Inc. 4,900 187,670 WM Wrigley Jr. Co. 7,385 408,464 43,895,172 ENERGY -- 10.5% Anadarko Petroleum Corp. 16,656 865,945 Apache Corp. 11,848 966,678 Baker Hughes Incorporated 11,450 963,288 BJ Services Co. 10,800 307,152 Chesapeake Energy Corp. 14,300 494,780 Chevron Corp. 76,069 6,408,052 ConocoPhillips 57,788 4,536,358 Consol Energy, Inc. 6,400 295,104 Devon Energy Corp. 15,792 1,236,356 El Paso Corp. 25,482 439,055 ENSCO International Inc. 5,300 323,353 EOG Resources, Inc. 8,600 628,316 Exxon Mobil Corp. 199,524 16,736,073(d) Halliburton Co. 32,391 1,117,489 Hess Corp. 9,470 558,351(d) Marathon Oil Corp. 24,442 1,465,542 Murphy Oil Corp. 6,800 404,192 Nabors Industries Ltd. 10,000 333,800(a) NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- National Oilwell Varco, Inc. 6,300 $ 656,712(a) Noble Corp. 4,700 458,344 Occidental Petroleum Corp. 29,620 1,714,406 Peabody Energy Corp. 9,200 445,096 Rowan Companies, Inc. 3,677 150,684 Schlumberger Ltd. 41,708 3,542,677 Smith International, Inc. 7,300 428,072 Spectra Energy Corp. 22,277 578,311 Sunoco, Inc. 4,276 340,712 The Williams Companies, Inc. 20,986 663,577 Transocean Inc. 10,066 1,066,795(a) Valero Energy Corp. 19,600 1,447,656 Weatherford International Ltd. 12,100 668,404(a) XTO Energy, Inc. 13,233 795,303 51,036,633 FINANCIALS -- 20.5% ACE Ltd. 11,500 718,980 AFLAC Incorporated 17,400 894,360 Allstate Corp. 21,376 1,314,838(d) AMBAC Financial Group, Inc. 3,600 313,884 American Express Co. 41,922 2,564,788(d) American International Group, Inc. 91,809 6,429,384(d) Ameriprise Financial, Inc. 8,504 540,599 AON Corp. 10,536 448,939 Apartment Investment & Management Co. (Class A) (REIT) 3,700 186,554 Archstone-Smith Trust (REIT) 7,900 466,969 Assurant, Inc. 3,000 176,760 AvalonBay Communities, Inc. (REIT) 2,800 332,864 Bank of America Corp. 157,021 7,676,757 BB&T Corp. 19,500 793,260 Boston Properties, Inc. (REIT) 4,200 428,946 Capital One Financial Corp. 14,425 1,131,497 CB Richard Ellis Group, Inc. (Class A) 6,500 237,250(a) Charles Schwab Corp. 36,511 749,206 Chicago Mercantile Exchange Holdings Inc. 1,227 655,660 Chubb Corp. 14,494 784,705 Cincinnati Financial Corp. 5,892 255,713 CIT Group, Inc. 6,900 378,327 Citigroup, Inc. 175,076 8,979,648(d) Comerica Incorporated 5,556 330,415 Commerce Bancorp Inc. 6,300 233,037 Compass Bancshares, Inc. 4,700 324,206 Countrywide Financial Corp. 20,798 756,007 Developers Diversified Realty Corp. (REIT) 4,600 242,466 E*Trade Financial Corp. 15,100 333,559(a) Equity Residential (REIT) 10,000 456,300 Federal Home Loan Mortgage Corp. 23,665 1,436,465 Federal National Mortgage Assoc. 34,476 2,252,317 Federated Investors Inc. (Class B) 3,000 114,990 See Notes to Schedule of Investments on page 11 and Notes to Financial Statements. 6 S&P 500 INDEX FUND Schedule of Investments June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- Fifth Third Bancorp 19,816 $ 788,082 First Horizon National Corp. 4,400 171,600 Franklin Resources, Inc. 5,800 768,326 General Growth Properties, Inc. (REIT) 8,700 460,665 Genworth Financial, Inc. (Class A) 14,500 498,800 Goldman Sachs Group, Inc. 14,400 3,121,200 Hartford Financial Services Group, Inc. 11,304 1,113,557 Host Hotels & Resorts Inc. (REIT) 19,1004 41,592 Hudson City Bancorp, Inc. 16,800 205,296 Huntington Bancshares Incorporated 12,934 294,119 Janus Capital Group, Inc. 6,400 178,176 JP Morgan Chase & Co. 121,276 5,875,822(d) Keycorp 14,228 488,447 Kimco Realty Corp. (REIT) 8,200 312,174 Legg Mason, Inc. 4,700 462,386 Lehman Brothers Holdings, Inc. 18,700 1,393,524 Lincoln National Corp. 9,642 684,100 Loews Corp. 15,596 795,084 M&T Bank Corp. 2,800 299,320 Marsh & McLennan Companies, Inc. 19,708 608,583 Marshall & Ilsley Corp. 9,300 442,959 MBIA Inc. 4,735 294,612 Mellon Financial Corp. 15,028 661,232 Merrill Lynch & Company, Inc. 30,734 2,568,748 Metlife, Inc. 26,100 1,682,928 MGIC Investment Corp. 3,159 179,621 Moody's Corp. 8,284 515,265 Morgan Stanley 37,396 3,136,777 National City Corp. 20,600 686,392 Northern Trust Corp. 6,900 443,256 Plum Creek Timber Company, Inc. (REIT) 6,200 258,292 PNC Financial Services Group, Inc. 12,108 866,691 Principal Financial Group, Inc. 9,400 547,926 Prologis (REIT) 9,200 523,480 Prudential Financial, Inc. 16,600 1,614,018 Public Storage, Inc. (REIT) 4,300 330,326 Regions Financial Corp. 24,668 816,511 Safeco Corp. 3,981 247,857 Simon Property Group, Inc. (REIT) 7,900 735,016 SLM Corp. 14,700 846,426 Sovereign Bancorp, Inc. 12,850 271,649 State Street Corp. 14,100 964,440(c) SunTrust Banks, Inc. 12,529 1,074,237 Synovus Financial Corp. 11,750 360,725 T Rowe Price Group, Inc. 9,600 498,144 The Bank of New York Company, Inc. 27,110 1,123,438(d) The Bear Stearns Companies Inc. 4,269 597,660 The Progressive Corp. 26,200 626,966 Torchmark Corp. 3,400 227,800 Travelers Companies, Inc. 23,399 1,251,846 NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- UnumProvident Corp. 11,789 $ 307,811 US Bancorp 61,499 2,026,392 Vornado Realty Trust (REIT) 4,700 516,248 Wachovia Corp. 67,688 3,469,010 Washington Mutual Inc. 31,581 1,346,614 Wells Fargo & Co. 118,536 4,168,911 XL Capital Ltd. 6,500 547,885 Zions Bancorporation 3,800 292,258 98,970,870 HEALTHCARE -- 11.4% Abbott Laboratories 54,596 2,923,616(d) Aetna, Inc. 18,208 899,475 Allergan, Inc. 10,904 628,506 AmerisourceBergen Corp. 6,542 323,633 Amgen, Inc. 41,248 2,280,602(a,d) Applera Corp - Applied Biosystems Group 6,800 207,672 Barr Pharmaceuticals, Inc. 3,900 195,897(a) Bausch & Lomb Inc. 1,828 126,936 Baxter International, Inc. 23,248 1,309,792 Becton Dickinson & Co. 8,670 645,915 Biogen Idec, Inc. 12,200 652,700(a) Biomet, Inc. 8,915 407,594 Boston Scientific Corp. 42,178 647,010(a) Bristol-Myers Squibb Co. 69,408 2,190,517(d) C.R. Bard, Inc. 3,702 305,896 Cardinal Health, Inc. 13,501 953,711 Celgene Corp. 13,500 773,955(a) Cigna Corp. 10,189 532,070 Coventry Healthcare, Inc. 5,300 305,545(a) Eli Lilly & Co. 34,916 1,951,106 Express Scripts, Inc. 9,800 490,098(a) Forest Laboratories, Inc. 11,000 502,150(a) Genzyme Corp. 9,500 611,800(a) Gilead Sciences, Inc. 33,000 1,279,410(a) Hospira, Inc. 5,539 216,243(a) Humana Inc. 5,827 354,923(a) IMS Health Inc. 6,757 217,102 Johnson & Johnson 102,893 6,340,267 King Pharmaceuticals, Inc. 8,833 180,723(a) Laboratory Corp of America Holdings 4,300 336,518(a) Manor Care, Inc. 2,537 165,641 McKesson Corp. 10,461 623,894 Medco Health Solutions, Inc. 9,783 762,976(a) Medtronic Inc. 40,832 2,117,547 Merck & Company, Inc. 76,950 3,832,110 Millipore Corp. 1,945 146,050(a) Mylan Laboratories Inc. 7,500 136,425 Patterson Companies, Inc. 4,800 178,896(a) PerkinElmer, Inc. 4,410 114,925 Pfizer Inc. 249,277 6,374,013 Quest Diagnostics Inc. 5,400 278,910 Schering-Plough Corp. 52,958 1,612,041(d) See Notes to Schedule of Investments on page 11 and Notes to Financial Statements. 7 S&P 500 INDEX FUND Schedule of Investments June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- St. Jude Medical, Inc. 12,292 $ 509,995(a) Stryker Corp. 10,500 662,445 Tenet Healthcare Corp. 15,395 100,222(a) Thermo Electron Corp. 14,928 772,076(a) UnitedHealth Group, Inc. 47,476 2,427,923 Varian Medical Systems, Inc. 4,800 204,048(a) Waters Corp. 3,600 213,696(a) Watson Pharmaceuticals, Inc. 3,600 117,108(a) WellPoint, Inc. 21,800 1,740,294(a) Wyeth 47,854 2,743,948(d) Zimmer Holdings, Inc. 8,300 704,587(a) 55,331,152 INDUSTRIALS -- 11.2% Allied Waste Industries, Inc. 9,000 121,140(a) American Standard Companies, Inc. 6,100 359,778 Avery Dennison Corp. 3,155 209,744 Boeing Co. 27,916 2,684,402(d) Burlington Northern Santa Fe Corp. 12,449 1,059,908 Caterpillar, Inc. 22,832 1,787,746 CH Robinson Worldwide, Inc. 6,100 320,372 Cintas Corp. 5,000 197,150 Cooper Industries Ltd. 6,442 367,774 CSX Corp. 15,576 702,166 Cummins, Inc. 3,678 372,250 Danaher Corp. 8,600 649,300 Deere & Co. 7,920 956,261 Dover Corp. 7,358 376,362 Eaton Corp. 5,100 474,300 Emerson Electric Co. 27,948 1,307,966 Equifax, Inc. 4,400 195,448 FedEx Corp. 10,760 1,194,037 Fluor Corp. 3,052 339,901 General Dynamics Corp. 14,364 1,123,552 General Electric Co. 364,295 13,945,213(f) Goodrich Corp. 4,601 274,036 Honeywell International Inc. 27,516 1,548,601 Illinois Tool Works Inc. 14,494 785,430 Ingersoll-Rand Company Ltd. (Class A) 10,898 597,428 ITT Corp. 6,526 445,595 L-3 Communications Holdings, Inc. 4,400 428,516 Lockheed Martin Corp. 12,552 1,181,520 Masco Corp. 13,590 386,907 Monster Worldwide, Inc. 4,800 197,280(a) Norfolk Southern Corp. 13,901 730,776 Northrop Grumman Corp. 12,122 943,940 Paccar Inc. 8,715 758,554 Pall Corp. 4,278 196,745 Parker Hannifin Corp. 4,115 402,900 Pitney Bowes Inc. 8,032 376,058 NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- Precision Castparts Corp. 4,900 $ 594,664 Raytheon Co. 15,624 841,977 Robert Half International Inc. 5,800 211,700 Rockwell Automation, Inc. 5,468 379,698 Rockwell Collins, Inc. 5,868 414,515 RR Donnelley & Sons Co. 7,952 345,991 Ryder System, Inc. 1,931 103,888 Southwest Airlines Co. 28,349 422,684 Terex Corp. 3,600 292,680(a) Textron Inc. 4,568 502,983 3M Co. 25,480 2,211,409 Tyco International Ltd. 70,239 2,373,376 Union Pacific Corp. 9,554 1,100,143 United Parcel Service Inc. (Class B) 37,500 2,737,500 United Technologies Corp. 35,072 2,487,657 W.W. Grainger, Inc. 2,482 230,950 Waste Management, Inc. 18,112 707,274 53,958,145 INFORMATION TECHNOLOGY -- 15.1% Adobe Systems Incorporated 21,084 846,523(a,d) Advanced Micro Devices, Inc. 19,574 279,908(a,d) Affiliated Computer Services, Inc. (Class A) 3,500 198,520(a) Agilent Technologies, Inc. 13,685 526,051(a) Altera Corp. 12,400 274,412 Analog Devices, Inc. 11,900 447,916 Apple Computer, Inc. 30,740 3,751,510(a) Applied Materials, Inc. 48,400 961,708(d) Autodesk, Inc. 7,948 374,192(a) Automatic Data Processing, Inc. 19,418 941,191 Avaya, Inc. 16,801 282,929(a) BMC Software, Inc. 7,600 230,280(a) Broadcom Corp. (Class A) 16,050 469,462(a) CA, Inc. 14,900 384,867 Ciena Corp. 3,242 117,134(a) Cisco Systems, Inc. 215,604 6,004,571(a,d) Citrix Systems, Inc. 6,800 228,956(a) Cognizant Technology Solutions Corp. (Class A) 5,100 382,959(a) Computer Sciences Corp. 6,182 365,665(a) Compuware Corp. 11,000 130,460(a) Convergys Corp. 5,000 121,200(a) Corning Incorporated 55,239 1,411,357(a) Dell, Inc. 80,048 2,285,370(a,d) eBay, Inc. 39,700 1,277,546(a) Electronic Arts, Inc. 10,900 515,788(a) Electronic Data Systems Corp. 18,300 507,459 EMC Corp. 74,614 1,350,513(a) Fidelity National Information Services, Inc. 5,800 314,824 First Data Corp. 27,160 887,317 Fiserv, Inc. 5,750 326,600(a) Google, Inc. (Class A) 7,658 4,008,044(a) See Notes to Schedule of Investments on page 11 and Notes to Financial Statements. 8 S&P 500 INDEX FUND Schedule of Investments June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- Hewlett-Packard Co. 92,565 $ 4,130,250 Intel Corp. 205,408 4,880,494 International Business Machines Corp. 48,430 5,097,257 Intuit Inc. 12,100 363,968(a) Jabil Circuit, Inc. 5,800 128,006 JDS Uniphase Corp. 7,250 97,367(a) Juniper Networks, Inc. 19,600 493,332(a) Kla-Tencor Corp. 6,600 362,670 Lexmark International Inc. (Class A) 3,600 177,516(a) Linear Technology Corp. 8,700 314,766 LSI Logic Corp. 28,192 211,722(a) Maxim Integrated Products, Inc. 11,000 367,510 MEMC Electronic Materials, Inc. 8,000 488,960(a) Micron Technology, Inc. 26,654 333,975(a) Microsoft Corp. 298,000 8,782,060(d) Molex, Inc. 5,150 154,551 Motorola, Inc. 81,750 1,446,975 National Semiconductor Corp. 10,366 293,047 NCR Corp. 6,600 346,764(a) Network Appliance, Inc. 13,600 397,120(a) Novell, Inc. 12,866 100,226(a) Novellus Systems, Inc. 4,300 121,991(a) Nvidia Corp. 12,900 532,899(a) Oracle Corp. 140,252 2,764,367(a) Paychex, Inc. 11,825 462,594 QLogic Corp. 5,700 94,905(a) QUALCOMM, Inc. 59,000 2,560,010 SanDisk Corp. 8,000 391,520(a) Solectron Corp. 30,900 113,712(a) Sun Microsystems, Inc. 125,860 662,024(a) Symantec Corp. 32,545 657,409(a) Tektronix, Inc. 2,576 86,914 Tellabs, Inc. 14,552 156,579(a) Teradyne, Inc. 6,400 112,512(a) Texas Instruments Incorporated 50,536 1,901,670 Unisys Corp. 13,509 123,472(a) VeriSign Inc. 8,400 266,532(a) Western Union Co. 27,460 571,992 Xerox Corp. 33,990 628,135(a) Xilinx, Inc. 10,200 273,054 Yahoo! Inc. 43,200 1,172,016(a) 72,828,075 MATERIALS -- 3.1% Air Products & Chemicals, Inc. 7,732 621,421(d) Alcoa, Inc. 30,640 1,241,839(d) Allegheny Technologies Incorporated 3,751 393,405 Ashland, Inc. 2,007 128,348 Ball Corp. 3,816 202,897 Bemis Co. 3,362 111,551 Domtar Corp. 11 123(a) Dow Chemical Co. 33,894 1,498,793 NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- E.I. du Pont de Nemours and Co. 32,813 $ 1,668,213 Eastman Chemical Co. 3,059 196,786 Ecolab Inc. 6,252 266,960 Freeport-McMoRan Copper & Gold Inc. (Class B) 13,455 1,114,343 Hercules Incorporated 4,228 83,080(a) International Flavors & Fragrances Inc. 2,647 138,015 International Paper Co. 15,175 592,584 MeadWestvaco Corp. 6,800 240,176 Monsanto Co. 19,216 1,297,849 Newmont Mining Corp. 16,228 633,866 Nucor Corp. 10,836 635,531 Pactiv Corp. 4,848 154,603(a) PPG Industries, Inc. 5,937 451,865 Praxair, Inc. 11,170 804,128 Rohm & Haas Co. 4,914 268,697 Sealed Air Corp. 6,114 189,656 Sigma-Aldrich Corp. 4,682 199,781 Temple-Inland Inc. 3,952 243,167 United States Steel Corp. 4,265 463,819 Vulcan Materials Co. 3,500 400,890 Weyerhaeuser Co. 7,494 591,501 14,833,887 TELECOMMUNICATION SERVICES -- 3.7% Alltel Corp. 12,294 830,460 AT&T, Inc. 218,181 9,054,511 CenturyTel, Inc. 4,150 203,557 Citizens Communications Co. 12,200 186,294 Embarq Corp. 5,370 340,297 Qwest Communications International Inc. 53,848 522,326(a) Sprint Nextel Corp. (Series 1) 102,800 2,128,988 Verizon Communications Inc. 102,586 4,223,466 Windstream Corp. 16,743 247,127 17,737,026 UTILITIES -- 3.4% Allegheny Energy, Inc. 6,000 310,440(a) Ameren Corp. 7,542 369,633 American Electric Power Company, Inc. 14,225 640,694(d) Centerpoint Energy, Inc. 11,818 205,633 CMS Energy Corp. 8,600 147,920 Consolidated Edison, Inc. 9,107 410,908 Constellation Energy Group, Inc. 6,303 549,432 Dominion Resources, Inc. 12,418 1,071,798 DTE Energy Co. 6,166 297,324 Duke Energy Corp. 44,154 808,018 Dynegy, Inc. (Class A) 12,900 121,776(a) Edison International 11,342 636,513 Entergy Corp. 7,047 756,496 See Notes to Schedule of Investments on page 11 and Notes to Financial Statements. 9 S&P 500 INDEX FUND Schedule of Investments June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- Exelon Corp. 23,826 $ 1,729,768 FirstEnergy Corp. 10,620 687,433 FPL Group, Inc. 14,262 809,226 Integrys Energy Group, Inc. 2,531 128,398 KeySpan Corp. 6,500 272,870 Nicor Inc. 1,543 66,226 NiSource Inc. 9,515 197,056 PG&E Corp. 12,454 564,166 Pinnacle West Capital Corp. 3,500 139,475 PPL Corp. 13,844 647,761 Progress Energy, Inc. 9,256 421,981 Public Service Enterprise Group, Inc. 8,959 786,421 Questar Corp. 6,000 317,100 Sempra Energy 9,275 549,358 TECO Energy, Inc. 7,100 121,978 The AES Corp. 24,100 527,308(a) The Southern Co. 26,758 917,532 TXU Corp. 16,472 1,108,566 Xcel Energy Inc. 14,680 300,500 16,619,708 TOTAL INVESTMENTS IN SECURITIES (COST $384,118,458) 473,499,367 - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 1.7% - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 1.4% GEI Short Term Investment Fund 5.55% 6,734,056 6,734,056(b,e) Money Market Obligation trust 5.22% 448 448(g) PRINCIPAL AMOUNT VALUE - -------------------------------------------------------------------------------- U.S. GOVERNMENT -- 0.3% U.S. Treasury Bill 4.67% 09/06/07 $1,500,000 $ 1,486,977 TOTAL SHORT-TERM INVESTMENTS (COST $8,221,481) 8,221,481 TOTAL INVESTMENTS (COST $392,339,939) 481,720,848 OTHER ASSETS AND LIABLITES, NET-- 0.3% 1,611,836 ------------ NET ASSETS-- 100.0% $483,332,684 ============ - -------------------------------------------------------------------------------- OTHER INFORMATION - -------------------------------------------------------------------------------- The GEI S&P 500 Index had the following long futures contracts open at June 30, 2007 (unaudited): NUMBER CURRENT EXPIRATION OF NOTIONAL UNREALIZED DESCRIPTION DATE CONTRACTS VALUE DEPRECIATION - -------------------------------------------------------------------------------- S&P Mini 500 Index Futures September 2007 133 $10,077,410 $(64,904) See Notes to Schedule of Investments on page 11 and Notes to Financial Statements. 10 Notes to Schedule of Investments June 30, 2007 (unaudited) - ------------------------------------------------------------------------------- The views expressed in this document reflect our judgment as of the publication date and are subject to change at any time without notice. The securities cited may not represent current or future holdings and should not be considered as a recommendation to purchase or sell a particular security. See the prospectus for complete descriptions of investment objectives, policies, risks and permissible investments. (a) Non-income producing security. (b) Coupon amount represents effective yield. (c) State Street Corp. is the parent company of State Street Bank & Trust Co., the Fund's custodian and accounting agent. (d) At June 30, 2007, all or a portion of this security was pledged to cover collateral requirements for futures, options, forward foreign currency contracts and/or TBA's. (e) GEAM, the investment advisor of the fund, serves as investment advisor of the GEI Short Term Investment Fund. (f) General Electric Co. is the parent company of GE Asset Management Incorporated, the Fund's investment Advisor. (g) Managed by SSgA Funds Management, Inc., the Fund's sub-adviser. + Percentages are based on net assets as of June 30, 2007. Abbreviations: REGD. Registered REIT Real Estate Investment Trust 11
Financial Highlights Selected data based on a share outstanding throughout the periods indicated - ------------------------------------------------------------------------------------------------------------------------------------ S&P 500 INDEX FUND 6/30/07+ 12/31/06 12/31/05 12/31/04 12/31/03 12/31/02 - ------------------------------------------------------------------------------------------------------------------------------------ INCEPTION DATE -- -- -- -- -- 4/15/85 Net asset value, beginning of period ............. $26.06 $22.94 $22.30 $20.51 $16.18 $21.19 INCOME/(LOSS) FROM INVESTMENT OPERATIONS: Net investment income ......................... 0.21 0.42 0.36 0.36 0.24 0.24 Net realized and unrealized gains/(losses) on investments .............. 1.55 3.12 0.65 1.79 4.33 (4.98) - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INCOME/(LOSS) FROM INVESTMENT OPERATIONS ... 1.76 3.54 1.01 2.15 4.57 (4.74) - ------------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS FROM: Net investment income ......................... -- 0.42 0.37 0.36 0.24 0.24 Net realized gains ............................ -- -- -- -- -- 0.03 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL DISTRIBUTIONS .............................. -- 0.42 0.37 0.36 0.24 0.27 - ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, END OF PERIOD ................... $27.82 $26.06 $22.94 $22.30 $20.51 $16.18 ==================================================================================================================================== TOTAL RETURN (A) ................................. 6.75% 15.43% 4.51% 10.46% 28.27% (22.37)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ...... $483,333 $497,105 $531,015 $601,008 $597,185 $449,173 Ratios to average net assets: Net investment income* ..................... 1.53% 1.58% 1.47% 1.62% 1.41% 1.20% Expenses* .................................. 0.39% 0.40% 0.40% 0.40% 0.37% 0.40% Portfolio turnover rate ....................... 1% 4% 4% 5% 5% 11%
NOTES TO FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- (a) Total returns are historical and assume changes in share price and reinvestment of dividends and capital gains and do not include the effect of insurance contract charges. * Annualized for periods less than one year. + Unaudited. See Notes to Financial Statements. 12
Statement of Assets and Liabilities JUNE 30, 2007 (UNAUDITED) S&P 500 INDEX FUND - ------------------------------------------------------------------------------------------------------------------------------------ ASSETS Investments in securities, at market (cost $369,399,865) ........................................... $459,554,155 Investments in affiliated securities, at market (cost $14,718,593) .................................. 13,945,212 Short-term Investments (at amortized cost) .......................................................... 1,487,425 Short-term affiliated investments (at amortized cost) ............................................... 6,734,056 Receivable for investments sold ..................................................................... 2,341,031 Income receivables .................................................................................. 546,852 Receivable for fund shares sold ..................................................................... 2,316 Other assets ........................................................................................ 2,021 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL ASSETS .................................................................................... 484,613,068 - ------------------------------------------------------------------------------------------------------------------------------------ LIABILITIES Payable for investments purchased ................................................................... 717,194 Payable for fund shares redeemed .................................................................... 330,347 Payable to GEAM ..................................................................................... 220,873 Variation margin payable ............................................................................ 11,970 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL LIABILITIES ............................................................................... 1,280,384 - ------------------------------------------------------------------------------------------------------------------------------------ NET ASSETS ............................................................................................. $483,332,684 ==================================================================================================================================== NET ASSETS CONSIST OF: Capital paid in ..................................................................................... 396,600,022 Undistributed (distribution in excess of) net investment income ..................................... 3,720,754 Accumulated net realized gain (loss) ................................................................ (6,304,097) Net unrealized appreciation/ (depreciation) on: Investments ..................................................................................... 89,380,909 Futures ......................................................................................... (64,904) - ------------------------------------------------------------------------------------------------------------------------------------ NET ASSETS ............................................................................................. $483,332,684 ==================================================================================================================================== NET ASSETS ............................................................................................. 483,332,684 Shares outstanding ($0.01 par value; unlimited shares authorized) ...................................... 17,374,996 Net asset value per share .............................................................................. $27.82
See Notes to Financial Statements. 13
Statement of Operations FOR THE SIX MONTHS ENDED JUNE 30, 2007 (UNAUDITED) S&P 500 INDEX FUND - --------------------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME INCOME: Dividend .............................................................................. $ 4,244,722 Dividend from affliated investments ................................................... 211,369 Interest .............................................................................. 41,357 Interest from affliated investments ................................................... 172,285 - --------------------------------------------------------------------------------------------------------------------------- TOTAL INCOME ............................................................................ 4,669,733 - --------------------------------------------------------------------------------------------------------------------------- EXPENSES: Advisory and administrative fees ...................................................... 853,869 Transfer agent ........................................................................ 16 Trustee's fees ........................................................................ 6,437 Custody and accounting expenses ....................................................... 23,678 Professional fees ..................................................................... 21,344 Registration expenses ................................................................. 30,679 Other expenses ........................................................................ 21,569 - --------------------------------------------------------------------------------------------------------------------------- TOTAL EXPENSES .......................................................................... 957,592 - --------------------------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME (LOSS) ............................................................ 3,712,141 =========================================================================================================================== NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS REALIZED GAIN (LOSS) ON: Investments ........................................................................ 2,429,713 Futures ............................................................................ 458,584 INCREASE (DECREASE) IN UNREALIZED APPRECIATION/(DEPRECIATION) ON: Investments ........................................................................ 25,154,037 Futures ............................................................................ (61,845) - --------------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments ................................ 27,980,489 - --------------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ......................... $31,692,630 ===========================================================================================================================
See Notes to Financial Statements. 14
Statements of Changes in Net Assets S&P 500 INDEX FUND - ------------------------------------------------------------------------------------------------------------------------------------ SIX MONTHS ENDED YEAR ENDED JUNE 30, 2007 DECEMBER 31, (UNAUDITED) 2006 - ------------------------------------------------------------------------------------------------------------------------------------ INCREASE (DECREASE) IN NET ASSETS OPERATIONS: Net investments income (loss) .......................................................... $ 3,712,141 $ 7,945,552 Net realized gain (loss) on investments, futures, written options, foreign currency transactions and swaps .............................................. 2,888,297 710,908 Net increase (decrease) in unrealized appreciation/(depreciation) on investments, futures, written options, foreign currency translation ............... 25,092,192 63,299,875 - -------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) from operations ................................................ 31,692,630 71,956,335 - -------------------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income .................................................................. -- (7,912,831) - -------------------------------------------------------------------------------------------------------------------------------- TOTAL DISTRIBUTIONS ...................................................................... -- (7,912,831) - -------------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from operations and distributions ...................... 31,692,630 64,043,504 - -------------------------------------------------------------------------------------------------------------------------------- SHARE TRANSACTIONS: Proceeds from sale of shares ........................................................... 3,121,024 5,786,380 Value of distributions reinvested ...................................................... -- 7,912,831 Cost of shares redeemed ................................................................ (48,585,947) (111,652,724) - -------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) from share transactions ........................................ (45,464,923) (97,953,513) - -------------------------------------------------------------------------------------------------------------------------------- TOTAL INCREASE (DECREASE) IN NET ASSETS .................................................. (13,772,293) (33,910,009) NET ASSETS Beginning of period ...................................................................... 497,104,977 531,014,986 - -------------------------------------------------------------------------------------------------------------------------------- End of period ............................................................................ $ 483,332,684 $ 497,104,977 ================================================================================================================================ UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD .............. $ 3,720,754 $ 8,613 - -------------------------------------------------------------------------------------------------------------------------------- CHANGES IN FUND SHARES Shares sold ............................................................................ 114,780 241,604 Issued for distributions reinvested .................................................... -- 302,363 Shares redeemed ........................................................................ (1,817,021) (4,614,589) - -------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in fund shares ...................................................... (1,702,241) (4,070,622) ================================================================================================================================
See Notes to Financial Statements. 15 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- 1. ORGANIZATION OF THE COMPANY GE Investments Funds, Inc. (the "Company") was incorporated under the laws of the Commonwealth of Virginia on May 14, 1984 and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company. The Company is composed of thirteen investment portfolios (collectively the "Funds"), although only the following eleven are currently being offered: U.S. Equity Fund, S&P 500 Index Fund (the "Fund"), Premier Growth Equity Fund, Value Equity Fund, Mid-Cap Equity Fund, Small-Cap Equity Fund, International Equity Fund, Total Return Fund, Income Fund, Money Market Fund and Real Estate Securities Fund. Shares of the Funds of the Company are offered only to insurance company separate accounts that fund certain variable life insurance contracts and variable annuity contracts. These insurance companies may include insurance companies affiliated with GE Asset Management Incorporated ("GEAM"), the investment adviser and administrator of each of the Funds. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions at the date of the financial statements. Actual results may differ from those estimates. The following summarizes the significant accounting policies of the Fund: SECURITY VALUATION AND TRANSACTIONS Securities for which exchange quotations are readily available are valued at the last sale price, or if no sales occurred on that day, at the last quoted bid price. Securities listed on the NASDAQ will be valued at the NASDAQ's official close price. Certain fixed income securities are valued by a dealer or by a pricing service based upon a matrix system, which considers market transactions as well as dealer supplied valuations. Short-term investments maturing within sixty days are valued at amortized cost. If quotations are not readily available for a portfolio security, or if it is believed that a quotation or other market price for a portfolio security does not represent its fair value, the security may be valued using procedures approved by the Fund's Board of Directors that are designed to establish its "fair value." These procedures require that the fair value of a security be established by the valuation committee. The fair value committee follows different protocols for different types of investments and circumstances. Foreign securities may be valued with the assistance of an independent fair value pricing service in circumstances where it is believed that they have been or would be materially affected by events occurring after the close of the portfolio security's primary market and before the close of regular trading on the NYSE. This independent fair value pricing service uses a computerized system to appraise affected securities and portfolios taking into consideration various factors and the fair value of such securities may be something other than the last available quotation or other market price. GE Asset Management may also separately monitor portfolio securities and, consistent with the Fund's fair value procedures, apply a different value to a portfolio security than would be applied had it been priced using market quotations or by an independent fair value pricing service. Determining the fair value of securities involves the application of both subjective and objective considerations. Security values may differ depending on the methodology used to determine their values, and may differ from the last quoted sale or closing price. No assurance can be given that use of these fair value procedures will always better represent the price at which a Fund could sell the affected portfolio security. Security transactions are accounted for as of the trade date. Realized gains and losses on investments sold are recorded on the basis of identified cost for both financial statement and federal tax purposes. In September 2006, FASB issued Statement of Financial Accounting Standards No. 157, FAIR VALUE MEASUREMENTS ("FAS 157"). FAS 157 establishes a single authoritative definition of fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. FAS 157 applies to fair value measurements already required or permitted by existing standards. The change to current generally accepted accounting principles from the application of FAS 157 relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. Management of the Fund does not believe the adoption of FAS 157 will materially impact the financial statement amounts, however, additional disclosures may be required about the inputs used to develop the measurements and the effect of certain of the 16 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- measurements on changes in net assets for the period. FAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. REPURCHASE AGREEMENTS The Fund may engage in repurchase agreement transactions with respect to instruments that are consistent with the Fund's investment objectives or policies. The Fund's or a third party custodian takes possession of the collateral pledged for investments in repurchase agreements on behalf of the Fund. The Fund values the underlying collateral daily on a mark-to-market basis to determine that the value, including accrued interest, is at least equal to 102% of the repurchase price. In the event the seller defaults and the value of the security declines, or if the seller enters an insolvency proceeding, realization of the collateral by the Fund may be delayed or limited. SECURITY LENDING The Fund may loan securities to brokers, dealers, and financial institutions determined by GEAM to be creditworthy, subject to certain limitations. The Fund continues to receive the interest and dividends on the loaned securities during the term of the loan. The loans of securities are secured by collateral in the form of cash or other liquid assets, which are segregated and maintained with the custodian in an amount at least equal to 102% of the current market value of the loaned securities. During the term of the loan, the Fund will record any gain or loss in the market value of its loaned securities and of securities in which cash collateral is invested. The Fund will also earn interest, net of any rebate, from securities in which cash collateral is invested. In the event the counterparty (borrower) does not meet its contracted obligation to return the securities, the Fund may be exposed to the risk of loss of reacquiring the loaned securities at prevailing market prices using the proceeds of the sale of the collateral. FOREIGN CURRENCY Accounting records of the Fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange at period end. Purchases and sales of securities, income receipts and expense payments denominated in foreign currencies are translated into U.S. dollars at the prevailing exchange rate on the respective dates of such transactions. The Fund does not isolate the portion of the results of operations resulting from changes in foreign exchange rates from the fluctuations arising from changes in the market prices of securities during the period. Such fluctuations are included in the net realized or unrealized gain or loss from investments. Net realized gains or losses on foreign currency transactions represent net gains or losses on sales and maturities of foreign currency contracts, disposition of foreign currencies, the difference between the amount of net investment income and withholding taxes accrued and the U.S. dollar amount actually received or paid, and gains or losses between the trade and settlement date on purchases and sales of securities. Net unrealized foreign exchange gains and losses arising from changes in the value of other assets and liabilities as a result of changes in foreign exchange rates are included as increases or decreases in unrealized appreciation/depreciation on foreign currency related transactions. FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or bond index futures contracts subject to certain limitations. The Fund may invest in futures contracts to manage its exposure to the stock and bond markets and fluctuations in currency values. Buying futures tends to increase the Fund's exposure to the underlying instrument while selling futures tends to decrease the Fund's exposure to the underlying instrument, or hedge other Fund investments. The Fund will not enter into a transaction involving futures for speculative purposes. The Fund's risks in using these contracts include changes in the value of the underlying instruments, non-performance of the counterparties under the contracts' terms and changes in the liquidity of the secondary market for the contracts. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they principally trade. Upon entering into a futures contract, the Fund is required to pledge to the broker an amount of cash and/or other assets equal to a certain percentage of the contract amount, known as initial margin deposit. Subsequent payments, known as variation margin, are made or received by the Fund each day, depending on the daily fluctuation in the fair value of the underlying security. The Fund records an unrealized gain or loss equal to the daily variation margin. Should market conditions move unexpectedly, the Fund may not achieve the anticipated benefits of the futures contracts and may incur a loss. The Fund recognizes a realized gain or loss on the expiration or closing of a futures contract. 17 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- OPTIONS The Fund may purchase and write options, subject to certain limitations. The Fund may invest in options contracts to manage its exposure to the stock and bond markets and fluctuations in foreign currency values. Writing puts and buying calls tend to increase the Fund's exposure to the underlying instrument while buying puts and writing calls tend to decrease the Fund's exposure to the underlying instrument, or hedge other Fund investments. The Fund will not enter into a transaction involving options for speculative purposes. The Fund's risks in using these contracts include changes in the value of the underlying instruments, non-performance of the counterparties under the contracts' terms and changes in the liquidity of the secondary market for the contracts. Options are valued at the last sale price, or if no sales occurred on that day, at the last quoted bid price. When the Fund writes an option, the amount of the premium received is recorded as a liability and is subsequently adjusted to the current fair value of the option written. Premiums received from writing options that expire unexercised are treated by the Fund on the expiration date as realized gains from investments. The difference between the premium and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium is less than the amount paid for the closing purchase, as a realized loss. When an option is exercised, the proceeds from the sale of the underlying security or the cost basis of the securities purchased is adjusted by the original premium received or paid. INVESTMENTS IN FOREIGN MARKETS Investments in foreign markets may involve special risks and considerations not typically associated with investing in the United States. These risks include revaluation of currencies, high rates of inflation, repatriation on income and capital, and adverse political and economic developments. Moreover, securities issued in these markets may be less liquid, subject to government ownership controls, tariffs and taxes, subject to delays in settlements, and their prices may be more volatile. The Fund may be subject to capital gains and repatriation taxes imposed by certain countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued based upon net investment income, net realized gains and net unrealized appreciation as income and/or capital gains are earned. INCOME TAXES The Fund intends to comply with all sections of the Internal Revenue Code applicable to regulated investment companies including the distribution of substantially all of its taxable net investment income and net realized capital gains to its shareholders. Therefore, no provision for federal income tax has been made. The Fund is treated as a separate taxpayer for federal income tax purposes. At June 30, 2007, information on the tax cost of investments is as follows:
Net Tax Cost of Gross Tax Gross Tax Appreciation Investments for Unrealized Unrealized (Depreciation) Tax Purposes Appreciation Depreciation on Investments - ------------------------------------------------------------------------------------------------------------------------------------ $383,430,057 $133,365,932 $(49,793,734) $83,572,198
As of December 31, 2006, the Fund has capital loss carryovers as indicated below. Capital loss carryovers are available to offset future realized capital gains to the extent provided in the Internal Revenue Code and regulations thereunder. To the extent that these carryover losses are used to offset future capital gains, it is probable that the gains so offset will not be distributed to shareholders because they would be taxable as ordinary income. Amount Expires - -------------------------------------------------------------------------------- $2,515,583 12/31/2010 857,803 12/31/2011 During the year ended December 31, 2006, the Fund utilized approximately $122,615 of capital loss carryovers. Any net capital and currency losses incurred after October 31, within the Fund's tax year, are deemed to arise on the first day of the Fund's next tax year if the Fund so elects to defer such losses. 18 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- The Fund elected to defer losses incurred after October 31, 2006 as follows: Capital Currency - -------------------------------------------------------------------------------- $(13,356) $-- The tax composition of distributions paid (other than return of capital distributions for the year) during the year ended December 31, 2006 was as follows: Ordinary Long-Term Income Capital Gains Total - -------------------------------------------------------------------------------- $7,912,831 $-- $7,912,831 DISTRIBUTIONS TO SHAREHOLDERS The Fund declares and pays dividends from net investment income annually. The Fund declares and pays net realized capital gains in excess of capital loss carryforwards distributions annually. The character of income and gains to be distributed is determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences include (but are not limited to) futures, distributions from Real Estate Investment Trusts (REITS), and losses deferred due to wash sale transactions. Reclassifications due to permanent book/tax differences are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. These reclassifications have no impact on net investment income, realized gains or losses, or the net asset value of the Fund. The calculation of net investment income per share in the Financial Highlights table excludes these adjustments. The reclassifications for the year ended December 31, 2006 were as follows: Undistributed (Distribution in Excess of) Net Investment Accumulated Paid in Income Net Realized Gain Capital - -------------------------------------------------------------------------------- $(24,108) $54,148 $(30,040) On June 29, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in Income Taxes." FIN48 provides guidance for how certain uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN48 requires evaluation of tax positions taken or expected to be taken in the course of preparing the Fund's tax return to determine whether the tax positions are "more likely than not" of being sustained by the applicable tax authority. The adoption of FIN48 did not have an impact on the Fund's net assets and financial statements. INVESTMENT INCOME Corporate actions (including cash dividends) are recorded on the ex-dividend date, net of applicable withholding taxes, except for certain foreign corporate actions, which are recorded as soon after ex-dividend date as such information becomes available. Interest income is recorded on the accrual basis. All discounts and premiums on bonds are accreted and amortized, respectively, to call or maturity date, whichever is shorter, using the effective yield method. EXPENSES Expenses of the Company which are directly identifiable to one of the Funds are allocated to that portfolio. Expenses which are not directly identifiable to one of the Funds are allocated in such a manner as deemed equitable, taking into consideration the nature and type of expenses and relative sizes of the Funds. All expenses of the Fund are paid by GEAM and reimbursed by the Fund. 3. AMOUNTS PAID TO AFFILIATES GEAM, a registered investment adviser, was retained by the Company's Board of Directors effective May 1, 1997 to act as investment adviser and administrator of the Fund. GEAM's compensation for investment advisory and administrative services is paid monthly based on the average daily net assets of the Fund at an annualized rate of .35%. GENPACT performs certain accounting and certain administration services not provided by GEAM. For the period ending June 30, 2007, $3,784 was charged to the Fund. DIRECTORS' COMPENSATION The Fund pays no compensation to its directors who are officers or employees of GEAM or its affiliates. Directors who are not such officers or employees also serve in a similar capacity for other funds advised by GEAM. Compensation paid to unaffiliated directors are reflected on the Statement of Operations. These fees are allocated pro rata across all of the mutual fund platforms and share classes served by the directors, including the Fund, and are based upon the relative net assets of each fund within such platforms. (For additional information about directors compensation please refer to the Statement of Additional Information.) 19 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- 4. SUB-ADVISORY FEES Pursuant to an investment sub-advisory agreement with GEAM, SSgA Funds Management, Inc. ("SSgA") is the Sub-Adviser to the S&P 500 Index Fund. SSgA is responsible for the day-to-day portfolio management of the assets of the Fund, including the responsibility for making decisions to buy, sell or hold a particular security, under the general supervision of GEAM and the Board. For its services, GEAM pays SSgA monthly sub-advisory fees which are calculated as a percentage of the average daily net assets of the Fund. 5. INVESTMENT TRANSACTIONS PURCHASES AND SALES OF SECURITIES The cost of purchases and the proceeds from sales of investments, other than short-term securities and options, for the period ended June 30, 2007 were as follows: Purchases Sales - -------------------------------------------------------------------------------- $6,460,061 $49,263,933 20 Additional Information (unaudited) - -------------------------------------------------------------------------------- INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS: The business and affairs of the Company are managed under the direction of the Company's Board of Directors. Information pertaining to the Directors and officers of the Company is set forth below. INTERESTED DIRECTORS AND EXECUTIVE OFFICERS - -------------------------------------------------------------------------------- MICHAEL J. COSGROVE - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 58 POSITION(S) HELD WITH FUND Chairman of the Board and President TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 10 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President - GEAM since February 1997; President and Chief Executive Officer - Mutual Funds at GEAM since March 2007; Vice President, GE Capital Corporation, an indirect wholly-owned subsidiary of GE, since December 1999; Executive Vice President - Sales and Marketing of GEAM, a wholly-owned subsidiary of GE that is registered as an investment adviser under the Investment Advisers Act of 1940, as amended, since March 1993; Director of GEAM since 1988. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48 OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception; Trustee of Elfun Funds, GE Savings & Security Funds and General Electric Pension Trust since 1988; Trustee of Fordham University since 2003; Trustee of Elfun Foundation; Treasurer of GE Foundation; Director, GE Asset Management (Ireland) since February 1999; Director, GE Asset Management Funds Plc, GE Asset Canada Company, GE Asset Management Limited, and GE Volunteers. - -------------------------------------------------------------------------------- MATTHEW J. SIMPSON - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 46 POSITION(S) HELD WITH FUND Executive Vice President TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - less than one year PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General Counsel and Secretary of GEAM since July 2007; Senior Vice President and General Counsel - Marketing and Client Services (formerly Asset Management Services), at GEAM and Senior Vice President and General Counsel of GEAMS from February 1997 to June 2007; Vice President and Associate General Counsel of GEAM from October 1992 to February 1997; Secretary of Fund from 1997 to June 2007; Vice President of Fund from September 2003 to June 2007; Vice President of GE Institutional Funds and GE LifeStyle Funds from September 2003 to June 2007; Secretary of GE Institutional Funds and GE LifeStyle Funds from 1997 to June 2007; Vice President of Elfun Funds and GE Savings & Security Funds from October 2003 to June 2007; Assistant Secretary of Elfun Funds and GE Savings & Security Funds from 1998 to June 2007. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional Funds, GE LifeStyle Funds, Elfun Funds and GE Savings & Security Funds since July 2007. 21 Additional Information (unaudited) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SCOTT H. RHODES - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 48 POSITION(S) HELD WITH FUND Treasurer TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - one year PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds Operations Manager since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle Funds and GE Investments Funds since November 2005 and Elfun Funds and GE Savings & Security Funds since September 2005; from August 2004 to September 2005 Vice President, U.S. Trust Company, N.A. and Assistant Treasurer of Excelsior Funds, Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds, Inc.; from January 2004 to August 2004, Vice President BlackRock Financial Management, Inc.; from December 1996 to November 2003, Controller - Mutual Funds, American Skandia Investment Services, Inc. and Assistant Treasurer of American Skandia Trust and American Skandia Advisor Funds, Inc. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A - -------------------------------------------------------------------------------- JEANNE M. LAPORTA - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 42 POSITION(S) HELD WITH FUND Vice President and Secretary TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 2 years (Vice President); less than one year (Secretary) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Associate General Counsel - Marketing and Client Services (formerly Asset Management Services) at GEAM since May 1997; Vice President and Assistant Secretary of GE Funds, GE Institutional Funds and GE LifeStyle Funds since September 2003; Vice President and Assistant Secretary of Elfun Funds and GE Savings & Security Funds since October 2003; Assistant Secretary from September 2003 to June 2007 and Secretary since July 2007. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A 22 Additional Information (unaudited) - -------------------------------------------------------------------------------- NON-INTERESTED DIRECTORS - -------------------------------------------------------------------------------- JOHN R. COSTANTINO - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 61 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC since 2006; Managing Director, Walden Partners, Ltd., consultants and investors, since August 1992. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE Institutional Funds and GE LifeStyle Funds since their inception; Trustee of Fordham University since 2002 and Marymount College from 2001 through 2002; Neuroscience Research Institute since 1986; Diocesan Finance Counsel of the Dioceses of Brooklyn & Queens since 2001; Gregorian University Foundation since 1994. - -------------------------------------------------------------------------------- WILLIAM J. LUCAS - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 59 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Treasurer of Fairfield University since 1983. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception. - -------------------------------------------------------------------------------- ROBERT P. QUINN - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 71 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon Brothers Inc. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception. - -------------------------------------------------------------------------------- The Statement of Additional Information for the Fund includes additional information about the Directors and Officers and is available, without charge, upon request by calling 1-800-242-0134. 23 Investment Team - -------------------------------------------------------------------------------- INVESTMENT ADVISER AND ADMINISTRATOR GE Asset Management Incorporated BOARD OF DIRECTORS Michael J.Cosgrove, CHAIRMAN John R. Costantino William J. Lucas Robert P. Quinn Matthew J. Simpson SECRETARY Jeanne M. LaPorta ASSISTANT SECRETARIES Joseph A. Carucci Joon Won Choe TREASURER Scott H. Rhodes ASSISTANT TREASURERS Scott R. Fuchs Christopher M. Isaacs DISTRIBUTOR GE Investment Distributors, Inc. Member NASD and SIPC COUNSEL Sutherland, Asbill & Brennan, LLP CUSTODIAN State Street Bank & Trust Company INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM KPMG LLP OFFICERS OF THE INVESTMENT ADVISER James W. Ireland, CHIEF EXECUTIVE OFFICER Michael J. Cosgrove, EVP, PRESIDENT AND CHIEF EXECUTIVE OFFICER - MUTUAL FUNDS Paul M. Colonna, PRESIDENT - FIXED INCOME Kathryn D. Karlic, EVP, PRESIDENT - SALES AND MARKETING Ralph R. Layman, EVP, PRESIDENT - INTERNATIONAL EQUITIES Matthew J. Simpson, EVP, GENERAL COUNSEL AND SECRETARY Judith A. Studer, EVP, PRESIDENT - U.S. EQUITIES Don W. Torey, EVP, PRESIDENT - ALTERNATIVE INVESTMENTS AND REAL ESTATE John J. Walker, EVP, CHIEF FINANCIAL OFFICER 24 [This page intentionally left blank.] INVESTMENT ADVISER GE ASSET MANAGEMENT INCORPORATED 3001 SUMMER STREET PO BOX 7900 STAMFORD, CT 06904-7900 DISTRIBUTOR GE INVESTMENT DISTRIBUTORS, INC. MEMBER NASD AND SIPC 3001 SUMMER STREET PO BOX 7900 STAMFORD, CT 06904-7900 The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities is available without charge (i) upon request, by calling 1-800-242-0134; (ii) on the Fund's website at http://www.gefunds.com; and (iii) on the Commission's website at http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC - - information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Information (if any) regarding how the Fund voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through the Fund's website at http://www.gefunds.com; and (ii) on the Commission's website at http://www.sec.gov. [GE LOGO OMITTED] GE Investments Funds, Inc. Small-Cap Equity Fund Semi-Annual Report JUNE 30, 2007 [GE logo omitted] GE Investments Funds, Inc. Small-Cap Equity Fund - -------------------------------------------------------------------------------- Contents NOTES TO PERFORMANCE .................................................. 1 MANAGER REVIEW AND SCHEDULE OF INVESTMENTS ............................ 2 NOTES TO SCHEDULE OF INVESTMENTS ...................................... 8 FINANCIAL STATEMENTS Financial Highlights ............................................. 9 Statement of Assets and Liabilities .............................. 10 Statement of Operations .......................................... 11 Statements of Changes in Net Assets .............................. 12 Notes to Financial Statements .................................... 13 ADDITIONAL INFORMATION ................................................ 17 INVESTMENT TEAM ....................................................... 20 This report is prepared for Policyholders of certain variable contracts and may be distributed to others only if preceded or accompanied by the variable contract's current prospectus and the current prospectus of the Funds available for investments thereunder. Notes to Performance June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- Total returns take into account changes in share price and assume reinvestment of dividends and capital gains distributions, if any. Investment returns and net asset value on an investment will fluctuate and you may have a gain or loss when you sell your shares. Periods less than one year are not annualized. Current performance may be lower or higher than that shown. You may call toll-free (800) 242-0134 for performance information as of the most recent month end. Total returns do not reflect expenses associated with the separate account such as administrative fees, account charges and surrender charges, which, if reflected, would reduce the total returns for all periods shown. Shares of the Fund are neither insured nor guaranteed by the U.S. Government, and their prices will fluctuate with market conditions. The Russell 2000 Index (Russell 2000) is an unmanaged index and do not reflect the actual cost of investing in the instruments that comprise the index. The Russell 2000 Index is a market capitalization-weighted index consisting of approximately 2,000 of the smallest U.S.-domiciled publicly traded common stocks that are included in the Russell 3000(R) Index. The Russell 3000 Index is comprised of the 3,000 largest U.S. domiciled companies. The results shown for the foregoing index assume the reinvestment of net dividends or interest. The peer universe of the underlying annuity funds used in our peer ranking calculation is based on the blend of Lipper peer categories, as shown. Lipper is an independent mutual fund rating service. A Fund's performance may be compared to or ranked within a universe of mutual funds with investment objectives and policies similar but not necessarily identical to the Fund's. Such comparisons or rankings are made on the basis of several factors, including the Fund's objectives and policies, management style and strategy, and portfolio composition, and may change over time if any of those factors change. 1 Small-Cap Equity Fund - -------------------------------------------------------------------------------- PALISADE CAPITAL MANAGEMENT, L.L.C. ("PALISADE") HAS A HISTORY OF MANAGING SMALL-CAP EQUITY PORTFOLIOS AND FOR SEVERAL YEARS HAS PROVIDED PENSION FUND SERVICES TO GE. PALISADE TRANSLATES ITS EXPERIENCE FROM VARIOUS INSTITUTIONAL AND PRIVATE ACCOUNTS TO MUTUAL FUND PORTFOLIOS IT SUB-ADVISES FOR GE ASSET MANAGEMENT. PALISADE HAS MANAGED THE SMALL-CAP EQUITY FUND SINCE ITS INCEPTION. SMALL-CAP EQUITY FUND IS MANAGED BY JACK FEILER, JEFFREY SCHWARTZ AND DENNISON T. ("DAN") VERU, MEMBERS OF PALISADE'S INVESTMENT POLICY COMMITTEE. MR. FEILER, MR. SCHWARTZ AND MR. VERU ARE JOINTLY AND PRIMARILY RESPONSIBLE FOR THE STRATEGY OF THE FUND AND THE DAY-TO-DAY MANAGEMENT OF THE FUND IS EXECUTED BY MR. SCHWARTZ. JACK FEILER, PRESIDENT AND CHIEF INVESTMENT OFFICER, HAS DAY-TO-DAY RESPONSIBILITY FOR MANAGING THE SMALL-CAP EQUITY FUND. MR. FEILER HAS MORE THAN 33 YEARS OF INVESTMENT EXPERIENCE AND HAS SERVED AS THE PRINCIPAL SMALL-CAP PORTFOLIO MANAGER AT PALISADE SINCE THE COMMENCEMENT OF PALISADE'S OPERATIONS IN APRIL 1995. HE HAS SERVED AS A PORTFOLIO MANAGER OF THE SMALL-CAP EQUITY FUND SINCE ITS INCEPTION. PRIOR TO JOINING PALISADE, MR. FEILER WAS A SENIOR VICE PRESIDENT-INVESTMENTS AT SMITH BARNEY FROM 1990 TO 1995. JEFFREY SCHWARTZ, SENIOR PORTFOLIO MANAGER, JOINED PALISADE IN OCTOBER 2004. PRIOR TO JOINING PALISADE, MR. SCHWARTZ WAS VICE PRESIDENT AND SENIOR PORTFOLIO MANAGER OF SAFECO ASSET MANAGEMENT FROM SEPTEMBER 2003 TO SEPTEMBER 2004. FROM JUNE 2001 TO AUGUST 2003, MR. SCHWARTZ FOUNDED NANTUCKET INVESTMENT RESEARCH IN FARMINGTON HILLS, MI, CONDUCTED INDEPENDENT INVESTMENT RESEARCH AND WAS A PRIVATE INVESTOR. FROM JUNE 1992 UNTIL MAY 2001, MR. SCHWARTZ WAS AT MUNDER CAPITAL MANAGEMENT, MOST RECENTLY AS A SENIOR PORTFOLIO MANAGER AND PRINCIPAL. DENNISON T. ("DAN") VERU IS AN EXECUTIVE VICE-PRESIDENT AND CO-INVESTMENT OFFICER OF PALISADE. SINCE JOINING PALISADE IN MARCH 2000, MR. VERU HAS BEEN A MEMBER OF THE INVESTMENT POLICY COMMITTEE. MR. VERU BECAME A PRINCIPAL OF PALISADE IN JULY 2004. PRIOR TO JOINING PALISADE, HE WAS PRESIDENT AND DIRECTOR OF RESEARCH OF AWAD ASSET MANAGEMENT, A DIVISION OF RAYMOND JAMES & ASSOCIATES. MR. VERU HAS BEEN A FREQUENT GUEST ON CNBC, CNN AND BLOOMBERG TELEVISION. PRIOR TO AWAD, MR. VERU WORKED WITH THE PALISADE TEAM FROM 1984 THROUGH 1992. Q. HOW DID THE SMALL-CAP EQUITY FUND PERFORM COMPARED TO ITS BENCHMARK FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2007? A. For the six-month period ended June 30, 2007, the Small-Cap Equity Fund returned 9.03%. The Russell 2000 Index, the Fund's benchmark, returned 6.42% and the Fund's Lipper peer group of 124 Small-Cap Core Funds returned an average of 8.25% for the same period. Q. WHAT MARKET CONDITIONS IMPACTED FUND PERFORMANCE? A. The Fund added value relative to the benchmark during the first and second quarters of 2007. This occurred despite continued investor unease about high oil prices and concerns about the subprime mortgage market. The adjustments made during the second half of 2006 served the Fund well during the first half of this year. The portfolio remains positioned for slow, steady domestic economic growth but should continue to participate in global economic growth. We remain invested in companies with consistent earnings growth, increasing ROIC, and improving free cash flow generation. Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE? A. The primary contributors during the six-month period came from the Fund's selection of stocks in the Energy, Industrials, and Financials sectors. Despite the Energy sector's small relative allocation in the Fund, the Fund's Energy names significantly outpaced those of the benchmark's sector which delivered a robust amount of added value. The Fund received disappointing results from the Healthcare and Utilities sectors. Much of the underperformance in Healthcare came from Medical Action Industries which declined (-16%) on valuation concerns and integration risk of 2 - -------------------------------------------------------------------------------- Q&A announced acquisitions. The Fund held only one position in Utilities and that position created drag relative to the benchmark. Q. WERE THERE ANY SIGNIFICANT CHANGES TO THE FUND DURING THE PERIOD? A. The most significant changes in sector allocation include reductions in the Industrials and Information Technology sectors and increases in the Consumer Discretionary and Healthcare sectors. Accordingly, we are now overweight in the Consumer Discretionary sector and remain underweight in Healthcare, although by a smaller margin than in the previous six-month period. While our overall allocation to the Financials sector has changed only nominally, we have reduced our exposure to community banks due to net interest margin pressures while increasing our exposure to insurance brokers and financial services providers. 3 Small-Cap Equity Fund - -------------------------------------------------------------------------------- Understanding Your Fund's Expenses As a shareholder of the Fund you incur transaction and ongoing expenses. Transaction expenses including sales charges on purchase payments, reinvested dividends (or other distributions), and redemption fees directly reduce the investment return of the Fund. Ongoing costs include portfolio management fees, distribution and service fees, professional fees, administrative fees and other Fund expenses. The following example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the period. The information in the following table is based on an investment of $1,000, which is invested at the beginning of the period and held for the entire six-month period ended June 30, 2007. ACTUAL EXPENSES The first section of the table provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your class under the heading "Expenses Paid During Period." HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second section of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholders reports of other funds. Please note that the expenses shown in the table do not reflect any transaction costs, such as sales charges or redemption fees.
JANUARY 1, 2007 - JUNE 30, 2007 - ------------------------------------------------------------------------------------------------------------------------ ACCOUNT VALUE AT ACCOUNT VALUE EXPENSES THE BEGINNING OF AT THE END OF PAID DURING THE PERIOD ($) THE PERIOD ($) THE PERIOD ($)* - ------------------------------------------------------------------------------------------------------------------------ Actual Fund Return** 1,000.00 1,090.34 4.48 - ------------------------------------------------------------------------------------------------------------------------ Hypothetical 5% Return (2.5% for the period) 1,000.00 1,020.32 4.31 - ------------------------------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.86% (FROM PERIOD JANUARY 1, 2007 - JUNE 30, 2007), MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY 181/365 (TO REFLECT THE SIX MONTH PERIOD). ** ACTUAL FUND RETURN FOR SIX-MONTH PERIOD ENDED JUNE 30, 2007 WAS: 9.03%. 4 Small-Cap Equity Fund (unaudited) - -------------------------------------------------------------------------------- CHANGE IN VALUE OF A $10,000 INVESTMENT - -------------------------------------------------------------------------------- [Line chart omitted -- plot points are as follows:] Small-Cap Equity Fund Russell 2000 Index 04/28/00 $10,000.00 $10,000.00 12/00 11,325.90 9,650.02 12/01 12,455.23 9,896.45 12/02 10,729.52 7,876.43 12/03 13,316.94 11,601.44 12/04 15,334.17 13,727.92 12/05 16,795.59 14,348.21 12/06 19,023.85 16,983.05 06/07 20,742.48 18,074.18 - -------------------------------------------- Small-Cap Equity Fund (ending value $20,742) Russell 2000 Index (ending value $18,074) - -------------------------------------------- AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2007 - -------------------------------------------------------------------------------- SIX ONE FIVE SINCE MONTHS YEAR YEAR INCEPTION - -------------------------------------------------------------------------------- Small-Cap Equity Fund 9.03% 17.40% 10.72% 10.70% - -------------------------------------------------------------------------------- Russell 2000 Index 6.42% 16.42% 13.89% 8.61% - -------------------------------------------------------------------------------- Lipper peer group average* 8.25% 16.82% 13.09% N/A - -------------------------------------------------------------------------------- Inception date 4/28/00 ================================================================================ INVESTMENT PROFILE A fund designed for investors who seek long-term growth of capital by investing at least 80% of its net assets in equity securities of small-cap companies under normal circumstances. The Fund invests primarily in small-cap companies that the portfolio managers believe are undervalued by the market but have solid growth prospects. TOP TEN LARGEST HOLDINGS AS OF JUNE 30, 2007 as a % of Market Value - -------------------------------------------------------------------------------- Oil States International, Inc. 2.63% - -------------------------------------------------------------------------------- DRS Technologies, Inc. 2.59% - -------------------------------------------------------------------------------- Harsco Corp. 2.25% - -------------------------------------------------------------------------------- Oshkosh Truck Corp. 2.23% - -------------------------------------------------------------------------------- Woodward Governor Co. 2.04% - -------------------------------------------------------------------------------- Varian, Inc. 1.99% - -------------------------------------------------------------------------------- HCC Insurance Holdings, Inc. 1.93% - -------------------------------------------------------------------------------- Arbitron, Inc. 1.84% - -------------------------------------------------------------------------------- Micros Systems, Inc. 1.82% - -------------------------------------------------------------------------------- Jarden Corp. 1.80% ================================================================================ PORTFOLIO COMPOSITION AS OF JUNE 30, 2007 as a % of Market Value - -------------------------------------------------------------------------------- Market Value of $152,653 (in thousands) [Pie chart omitted -- plot points are as follows:] Industrials 20.9% Short-Term 16.0% Financials 15.9% Consumer Discretionary 15.1% Information Technology 11.4% Healthcare 9.4% Energy 4.0% Materials 3.2% Consumer Staples 3.0% Utilities 1.1% * LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR THE SIX MONTHS, ONE YEAR, AND FIVE-YEAR PERIODS INDICATED IN THE SMALL-CAP CORE FUNDS PEER GROUP CONSISTING OF 124, 120 AND 83 UNDERLYING ANNUITY FUNDS, RESPECTIVELY. SEE NOTES TO PERFORMANCE ON PAGE 1 FOR FURTHER INFORMATION, INCLUDING AN EXPLANATION OF LIPPER PEER CATEGORIES. PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE AND THE GRAPH AND TABLE DO NOT REFLECT THE DEDUCTION OF TAXES. 5 SMALL-CAP EQUITY FUND Schedule of Investments June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- SMALL-CAP EQUITY FUND - -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- COMMON STOCK -- 99.4%+ - -------------------------------------------------------------------------------- CONSUMER DISCRETIONARY -- 17.8% Aaron Rents, Inc. 75,400 $ 2,201,680(d) Aeropostale, Inc. 62,300 2,596,664(a) American Eagle Outfitters 21,900 561,954 Arbitron, Inc. 54,600 2,813,538 Bright Horizons Family Solutions, Inc. 46,200 1,797,642(a,d) CBRL Group, Inc. 23,600 1,002,528(d) Finish Line (Class A) 34,000 309,740(d) Interactive Data Corp. 91,500 2,450,370(d) Jarden Corp. 63,900 2,748,339(a,d) LKQ Corp. 49,700 1,225,602(a,d) Pool Corp. 46,900 1,830,507(d) RARE Hospitality International, Inc. 15,000 401,550(a) The Talbots, Inc. 32,800 820,984(d) Timberland Co. (Class A) 27,600 695,244(a) Triarc Companies, Inc. (Class B) 97,600 1,532,320(d) 22,988,662 CONSUMER STAPLES -- 3.5% Central European Distribution Corp. 69,800 2,416,476(a,d) Smithfield Foods, Inc. 70,200 2,161,458(a,d) 4,577,934 ENERGY -- 4.8% Dril-Quip Inc. 38,700 1,739,565(a) Oil States International, Inc. 97,200 4,018,248(a,d) St. Mary Land & Exploration Co. 10,200 373,524 6,131,337 FINANCIALS -- 18.9% BioMed Realty Trust, Inc. (REIT) 103,400 2,597,408 Cullen/Frost Bankers, Inc. 18,600 994,542 DCT Industrial Trust, Inc. (REIT) 91,300 982,388(d) Federal Realty Investment Trust (REIT) 13,700 1,058,462 GFI Group, Inc. 22,500 1,630,800(a,d) Global Cash Access Holdings, Inc. 117,600 1,883,952(a,d) HCC Insurance Holdings, Inc. 88,400 2,953,444 Hilb Rogal & Hobbs Co. 60,800 2,605,888(d) Jones Lang LaSalle Inc. 10,200 1,157,700 Omega Healthcare Investors, Inc. (REIT) 150,800 2,387,164 Raymond James Financial, Inc. 78,275 2,418,698(d) Sandy Spring Bancorp, Inc. 24,600 773,424(d) NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- Sterling Bancorp 33,562 $ 537,998(d) Webster Financial Corp. 23,900 1,019,813(d) Westamerica Bancorporation 29,900 1,322,776(d) 24,324,457 HEALTHCARE -- 11.1% AMN Healthcare Services, Inc. 53,400 1,174,800(a,d) Computer Programs and Systems, Inc. 53,300 1,651,234(d) Cubist Pharmaceuticals, Inc. 27,100 534,141(a,d) HMS Holdings Corp. 20,300 388,542(a,d) Immunicon Corp. 79,700 163,385(a,d) KV Pharmaceutical Co. (Class A) 97,900 2,666,796(a,d) Medical Action Industries Inc. 76,000 1,372,560(a,d) Molina Healthcare, Inc. 37,400 1,141,448(a,d) Salix Pharmaceuticals Ltd. 69,500 854,850(a,d) Thoratec Corp. 71,900 1,322,241(a,d) Varian, Inc. 55,400 3,037,582(a) 14,307,579 INDUSTRIALS -- 24.8% Applied Industrial Technologies, Inc. 24,200 713,900(d) Baldor Electric Co. 35,800 1,764,224(d) Comfort Systems USA, Inc. 81,100 1,149,998(d) DRS Technologies, Inc. 69,100 3,957,357(d) Genesee & Wyoming Inc. (Class A) 88,700 2,646,808(a,d) Harsco Corp. 66,000 3,432,000 Herman Miller Inc. 79,300 2,505,880 Mueller Industries, Inc. 59,200 2,038,848 NCI Building Systems, Inc. 33,100 1,632,823(a,d) Old Dominion Freight Line 41,800 1,260,270(a) Oshkosh Truck Corp. 54,200 3,410,264(d) Quanta Services, Inc. 61,200 1,877,004(a,d) Teledyne Technologies Inc. 53,900 2,476,705(a) Woodward Governor Co. 57,900 3,107,493(d) 31,973,574 INFORMATION TECHNOLOGY -- 13.4% Blackbaud, Inc. 67,700 1,494,816(d) CommScope, Inc. 43,700 2,549,895(a,d) Micros Systems, Inc. 51,100 2,779,840(a) Mobility Electronics, Inc. 87,600 330,252(a,d) MoneyGram International, Inc. 70,800 1,978,860(d) Parametric Technology Corp. 121,100 2,616,971(a,d) Photon Dynamics, Inc. 51,800 564,620(a,d) Rudolph Technologies, Inc. 96,600 1,604,526(a,d) Semtech Corp. 71,500 1,239,095(a,d) SRA International, Inc. (Class A) 13,900 351,114(a) Transaction Systems Architects Inc. (Class A) 27,400 922,284(a,d) Zebra Technologies Corp. (Class A) 23,200 898,768(a,d) 17,331,041 See Notes to Schedule of Investments on page 8 and Notes to Financial Statements. 6 SMALL-CAP EQUITY FUND Schedule of Investments June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- MATERIALS -- 3.8% Commercial Metals Co. 76,700 $ 2,590,159(d) Packaging Corporation of America 69,500 1,759,045 Pioneer Drilling Co. 38,200 569,562(a,d) 4,918,766 UTILITIES -- 1.3% IDACORP, Inc. 53,100 1,701,324(d) TOTAL INVESTMENTS IN SECURITIES (COST $109,544,424) 128,254,674 - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 18.9% - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 1.0% GEI Short Term Investment Fund 5.55% 1,267,836 1,267,836(b,e) SHORT-TERM SECURITIES PURCHASED WITH COLLATERAL FROM SECURITIES ON LOAN -- 17.9% State Street Navigator Securities Lending Prime Portfolio 5.36% 23,130,091 23,130,091(b,c) TOTAL SHORT-TERM INVESTMENTS (COST $24,397,927) 24,397,927 TOTAL INVESTMENTS (COST $133,942,351) 152,652,601 LIABILITIES IN EXCESS OF OTHER ASSETS, NET -- (18.3)% (23,633,230) ------------ NET ASSETS -- 100.0% $129,019,371 ============ See Notes to Schedule of Investments on page 8 and Notes to Financial Statements. 7 Notes to Schedule of Investments June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- The views expressed in this document reflect our judgment as of the publication date and are subject to change at any time without notice. The securities cited may not represent current or future holdings and should not be considered as a recommendation to purchase or sell a particular security. See the prospectus for complete descriptions of investment objectives, policies, risks and permissible investments. (a) Non-income producing security. (b) Coupon amount represents effective yield. (c) State Street Corp. is the parent company of State Street Bank & Trust Co., the Fund's custodian and accounting agent. (d) All or a portion of the security is out on loan. (e) GEAM, the investment advisor of the fund, serves as investment advisor of the GEI Short Term Investment Fund. + Percentages are based on net assets as of June 30, 2007. Abbreviations: ADR American Depository Receipt REIT Real Estate Investment Trust 8 Financial Highlights Selected data based on a share outstanding throughout the periods indicated - --------------------------------------------------------------------------------
SMALL-CAP EQUITY FUND 6/30/07+ 12/31/06 12/31/05 12/31/04 12/31/03 12/31/02 - -------------------------------------------------------------------------------------------------------------------------------- INCEPTION DATE -- -- -- -- -- 4/28/00 Net asset value, beginning of period ............... $14.39 $14.44 $13.62 $12.74 $10.27 $12.01 INCOME/(LOSS) FROM INVESTMENT OPERATIONS: Net investment income ........................... 0.02 0.05 0.02 0.08 0.02 0.03 Net realized and unrealized gains/(losses) on investments ................ 1.28 1.87 1.28 1.85 2.46 (1.69) - -------------------------------------------------------------------------------------------------------------------------------- TOTAL INCOME/(LOSS) FROM INVESTMENT OPERATIONS ..... 1.30 1.92 1.30 1.93 2.48 (1.66) - -------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS FROM: Net investment income ........................... -- 0.04 0.03 0.07 0.01 0.02 Net realized gains .............................. -- 1.93 0.45 0.98 -- 0.05 Return of capital ............................... -- -- -- -- -- 0.01 - -------------------------------------------------------------------------------------------------------------------------------- TOTAL DISTRIBUTIONS ................................ -- 1.97 0.48 1.05 0.01 0.08 - -------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD ..................... $15.69 $14.39 $14.44 $13.62 $12.74 $10.27 ================================================================================================================================ TOTAL RETURN (A) ................................... 9.03% 13.27% 9.53% 15.15% 24.11% (13.86)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ........ $129,019 $127,381 $128,142 $117,158 $86,330 $52,359 Ratios to average net assets: Net investment income* ....................... 0.27% 0.31% 0.11% 0.67% 0.17% 0.34% Expenses* .................................... 0.86% 0.86% 0.86% 0.88% 0.86% 0.84% Portfolio turnover rate ......................... 17% 52% 33% 101% 119% 108%
NOTES TO FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- (a) Total returns are historical and assume changes in share price and reinvestment of dividends and capital gains and do not include the effect of insurance contract charges. * Annualized for periods less than one year. + Unaudited. See Notes to Financial Statements. 9
SMALL-CAP Statement of Assets EQUITY and Liabilities JUNE 30, 2007 (UNAUDITED) FUND - ------------------------------------------------------------------------------------------------------------------------- ASSETS Investments in securities, at market* (cost $109,544,424) ........................................... $128,254,674 Short-term Investments (at amortized cost) .......................................................... 23,130,091 Short-term affiliated investments (at amortized cost) ............................................... 1,267,836 Receivable for investments sold ..................................................................... 765,820 Income receivables .................................................................................. 113,396 Receivable for fund shares sold ..................................................................... 2,497 Other assets ........................................................................................ 1,414 - ------------------------------------------------------------------------------------------------------------------------- TOTAL ASSETS .................................................................................... 153,535,728 - ------------------------------------------------------------------------------------------------------------------------- LIABILITIES Payable upon return of securities loaned ............................................................ 23,130,091 Payable for investments purchased ................................................................... 1,192,871 Payable for fund shares redeemed .................................................................... 72,072 Payable to GEAM ..................................................................................... 121,323 - ------------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES ............................................................................... 24,516,357 - ------------------------------------------------------------------------------------------------------------------------- NET ASSETS ............................................................................................. $129,019,371 ========================================================================================================================= NET ASSETS CONSIST OF: Capital paid in ..................................................................................... 93,479,305 Undistributed (distribution in excess of) net investment income ..................................... 206,557 Accumulated net realized gain (loss) ................................................................ 16,623,259 Net unrealized appreciation/(depreciation) on: Investments ...................................................................................... 18,710,250 - ------------------------------------------------------------------------------------------------------------------------- NET ASSETS ............................................................................................. $129,019,371 ========================================================================================================================= NET ASSETS ............................................................................................. 129,019,371 Shares outstanding ($0.01 par value; unlimited shares authorized) ...................................... 8,223,270 Net asset value per share .............................................................................. $15.69
* Includes $22,415,620 of securities on loan. See Notes to Financial Statements. 10
SMALL-CAP Statement of Operations EQUITY FOR THE SIX MONTHS ENDED JUNE 30, 2007 (UNAUDITED) FUND - --------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME INCOME: Dividend ................................................................................ $ 630,495 Interest* ............................................................................... 24,605 Interest from affliated investments ..................................................... 66,808 - --------------------------------------------------------------------------------------------------------------- TOTAL INCOME .............................................................................. 721,908 - --------------------------------------------------------------------------------------------------------------- EXPENSES: Advisory and administrative fees ........................................................ 511,661 Transfer agent .......................................................................... 16 Trustee's fees .......................................................................... 1,691 Custody and accounting expenses ......................................................... 17,575 Professional fees ....................................................................... 11,826 Registration expenses ................................................................... 2,076 Other expenses .......................................................................... 6,663 - --------------------------------------------------------------------------------------------------------------- TOTAL EXPENSES ............................................................................ 551,508 - --------------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME (LOSS) .............................................................. 170,400 =============================================================================================================== NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS REALIZED GAIN (LOSS) ON: Investments .......................................................................... 9,007,542 INCREASE (DECREASE) IN UNREALIZED APPRECIATION/(DEPRECIATION) ON: Investments .......................................................................... 1,893,827 - --------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments .................................. 10,901,369 - --------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ........................... $11,071,769 ===============================================================================================================
* Income attributable to security lending activity, net of rebate expenses, was $24,605. See Notes to Financial Statements. 11
SMALL-CAP Statements of EQUITY Changes in Net Assets FUND - ---------------------------------------------------------------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED JUNE 30, 2007 DECEMBER 31, (UNAUDITED) 2006 - ---------------------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS OPERATIONS: Net investments income (loss) ..................................................... $ 170,400 $ 342,034 Net realized gain (loss) on investments, futures, written options, foreign currency transactions and swaps ......................................... 9,007,542 22,145,575 Net increase (decrease) in unrealized appreciation/(depreciation) on investments, futures, written options, foreign currency translation .......... 1,893,827 (6,549,704) - ---------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) from operations ........................................... 11,071,769 15,937,905 - ---------------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income ............................................................. -- (348,798) Net realized gains ................................................................ -- (15,076,626) - ---------------------------------------------------------------------------------------------------------------------------- TOTAL DISTRIBUTIONS ................................................................. -- (15,425,424) - ---------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from operations and distributions ................. 11,071,769 512,481 - ---------------------------------------------------------------------------------------------------------------------------- SHARE TRANSACTIONS: Proceeds from sale of shares ...................................................... 1,933,497 10,121,601 Value of distributions reinvested ................................................. -- 15,425,391 Cost of shares redeemed ........................................................... (11,366,621) (26,821,168) - ---------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) from share transactions .................................. (9,433,124) (1,274,176) - ---------------------------------------------------------------------------------------------------------------------------- TOTAL INCREASE (DECREASE) IN NET ASSETS ............................................. 1,638,645 (761,695) NET ASSETS Beginning of period ................................................................. 127,380,726 128,142,421 - ---------------------------------------------------------------------------------------------------------------------------- End of period ...................................................................... $129,019,371 $127,380,726 ============================================================================================================================ UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD ........ $ 206,557 $ 36,157 - ---------------------------------------------------------------------------------------------------------------------------- CHANGES IN FUND SHARES Shares sold ....................................................................... 126,773 657,522 Issued for distributions reinvested ............................................... -- 1,064,554 Shares redeemed ................................................................... (755,876) (1,744,050) - ---------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in fund shares ................................................. (629,103) (21,974) ============================================================================================================================
See Notes to Financial Statements. 12 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- 1. ORGANIZATION OF THE COMPANY GE Investments Funds, Inc. (the "Company") was incorporated under the laws of the Commonwealth of Virginia on May 14, 1984 and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company. The Company is composed of thirteen investment portfolios (collectively the "Funds"), although only the following eleven are currently being offered: U.S. Equity Fund, S&P 500 Index Fund, Premier Growth Equity Fund, Value Equity Fund, Mid-Cap Equity Fund, Small-Cap Equity Fund (the "Fund"), International Equity Fund, Total Return Fund, Income Fund, Money Market Fund and Real Estate Securities Fund. Shares of the Funds of the Company are offered only to insurance company separate accounts that fund certain variable life insurance contracts and variable annuity contracts. These insurance companies may include insurance companies affiliated with GE Asset Management Incorporated ("GEAM"), the investment adviser and administrator of each of the Funds. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions at the date of the financial statements. Actual results may differ from those estimates. The following summarizes the significant accounting policies of the Fund: SECURITY VALUATION AND TRANSACTIONS for which exchange quotations are readily available are valued at the last sale price, or if no sales occurred on that day, at the last quoted bid price. Securities listed on the NASDAQ will be valued at the NASDAQ's official close price. Certain fixed income securities are valued by a dealer or by a pricing service based upon a matrix system, which considers market transactions as well as dealer supplied valuations. Short-term investments maturing within sixty days are valued at amortized cost. If quotations are not readily available for a portfolio security, or if it is believed that a quotation or other market price for a portfolio security does not represent its fair value, the security may be valued using procedures approved by the Fund's Board of Directors that are designed to establish its "fair value." These procedures require that the fair value of a security be established by the valuation committee. The fair value committee follows different protocols for different types of investments and circumstances. Foreign securities may be valued with the assistance of an independent fair value pricing service in circumstances where it is believed that they have been or would be materially affected by events occurring after the close of the portfolio security's primary market and before the close of regular trading on the NYSE. This independent fair value pricing service uses a computerized system to appraise affected securities and portfolios taking into consideration various factors and the fair value of such securities may be something other than the last available quotation or other market price. GE Asset Management may also separately monitor portfolio securities and, consistent with the Fund's fair value procedures, apply a different value to a portfolio security than would be applied had it been priced using market quotations or by an independent fair value pricing service. Determining the fair value of securities involves the application of both subjective and objective considerations. Security values may differ depending on the methodology used to determine their values, and may differ from the last quoted sale or closing price. No assurance can be given that use of these fair value procedures will always better represent the price at which a Fund could sell the affected portfolio security. Security transactions are accounted for as of the trade date. Realized gains and losses on investments sold are recorded on the basis of identified cost for both financial statement and federal tax purposes. In September 2006, FASB issued Statement of Financial Accounting Standards No. 157, FAIR VALUE MEASUREMENTS ("FAS 157"). FAS 157 establishes a single authoritative definition of fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. FAS 157 applies to fair value measurements already required or permitted by existing standards. The change to current generally accepted accounting principles from the application of FAS 157 relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. Management of the Fund does not believe the adoption of FAS 157 will materially impact the financial statement amounts, however, additional 13 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- disclosures may be required about the inputs used to develop the measurements and the effect of certain of the measurements on changes in net assets for the period. FAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. REPURCHASE AGREEMENTS The Fund may engage in repurchase agreement transactions with respect to instruments that are consistent with the Funds's investment objectives or policies. The Fund's or a third party custodian takes possession of the collateral pledged for investments in repurchase agreements on behalf of the Fund. The Fund values the underlying collateral daily on a mark-to-market basis to determine that the value, including accrued interest, is at least equal to 102% of the repurchase price. In the event the seller defaults and the value of the security declines, or if the seller enters an insolvency proceeding, realization of the collateral by the Fund may be delayed or limited. SECURITY LENDING The Fund may loan securities to brokers, dealers, and financial institutions determined by GEAM to be creditworthy, subject to certain limitations. The Fund continues to receive the interest and dividends on the loaned securities during the term of the loan. The loans of securities are secured by collateral in the form of cash or other liquid assets, which are segregated and maintained with the custodian in an amount at least equal to 102% of the current market value of the loaned securities. During the term of the loan, the Fund will record any gain or loss in the market value of its loaned securities and of securities in which cash collateral is invested. The Fund will also earn interest, net of any rebate, from securities in which cash collateral is invested. In the event the counterparty (borrower) does not meet its contracted obligation to return the securities, the Fund may be exposed to the risk of loss of reacquiring the loaned securities at prevailing market prices using the proceeds of the sale of the collateral. FOREIGN CURRENCY Accounting records of the Fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange at period end. Purchases and sales of securities, income receipts and expense payments denominated in foreign currencies are translated into U.S. dollars at the prevailing exchange rate on the respective dates of such transactions. The Fund does not isolate the portion of the results of operations resulting from changes in foreign exchange rates from the fluctuations arising from changes in the market prices of securities during the period. Such fluctuations are included in the net realized or unrealized gain or loss from investments. Net realized gains or losses on foreign currency transactions represent net gains or losses on sales and maturities of foreign currency contracts, disposition of foreign currencies, the difference between the amount of net investment income and withholding taxes accrued and the U.S. dollar amount actually received or paid, and gains or losses between the trade and settlement date on purchases and sales of securities. Net unrealized foreign exchange gains and losses arising from changes in the value of other assets and liabilities as a result of changes in foreign exchange rates are included as increases or decreases in unrealized appreciation/depreciation on foreign currency related transactions. INVESTMENTS IN FOREIGN MARKETS Investments in foreign markets may involve special risks and considerations not typically associated with investing in the United States. These risks include revaluation of currencies, high rates of inflation, repatriation on income and capital, and adverse political and economic developments. Moreover, securities issued in these markets may be less liquid, subject to government ownership controls, tariffs and taxes, subject to delays in settlements, and their prices may be more volatile. The Fund may be subject to capital gains and repatriation taxes imposed by certain countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued based upon net investment income, net realized gains and net unrealized appreciation as income and/or capital gains are earned. INCOME TAXES The Fund intends to comply with all sections of the Internal Revenue Code applicable to regulated investment companies including the distribution of substantially all of its taxable net investment income and net realized capital gains to its shareholders. Therefore, no provision for federal income tax has been made. The Fund is treated as a separate taxpayer for federal income tax purposes. 14 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- At June 30, 2007, information on the tax cost of investments is as follows: Cost of Gross Tax Gross Tax Net Tax Appreciation/ Investments for Unrealized Unrealized (Depreciation) Tax Purposes Appreciation Depreciation on Investments - -------------------------------------------------------------------------------- $133,999,605 $23,005,084 $(4,352,088) $18,652,996 As of December 31, 2006, the Fund has no capital loss carryovers. Capital loss carryovers are available to offset future realized capital gain to the extent provided in the Internal Revenue Code and regulations thereunder. To the extent that these carryover losses are used to offset future capital gains, it is probable that gains so offset will not be distributed to shareholders because they would be taxable as ordinary income. Any net capital and currency losses incurred after October 31, within the Fund's tax year, are deemed to arise on the first day of the Fund's next tax year if the Fund so elects to defer such losses. The Fund incurred no such losses after October 31, 2006. The tax composition of distributions paid (other than return of capital distributions for the year) during the year ended December 31, 2006 was as follows: Long-Term Ordinary Capital Income Gains Total - -------------------------------------------------------------------------------- $966,332 $14,459,092 $15,425,424 DISTRIBUTIONS TO SHAREHOLDERS The Fund declares and pays dividends from net investment income annually. The Fund declares and pays net realized capital gains in excess of capital loss carryforwards distributions annually. The character of income and gains to be distributed is determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences include (but are not limited to) distributions from Real Estate Investment Trusts (REITS) and losses deferred due to wash sale transactions. Reclassifications due to permanent book/tax differences are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. These reclassifications have no impact on net investment income, realized gains or losses, or the net asset value of the Fund. The calculation of net investment income per share in the Financial Highlights table excludes these adjustments. The reclassifications for the year ended December 31, 2006 were as follows: Undistributed (Distribution in Excess of) Net Investment Accumulated Paid in Income Net Realized Gain Capital - -------------------------------------------------------------------------------- $26,690 $(26,690) $ -- On June 29, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in Income Taxes." FIN48 provides guidance for how certain uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN48 requires evaluation of tax positions taken or expected to be taken in the course of preparing the Fund's tax return to determine whether the tax positions are "more likely than not" of being sustained by the applicable tax authority. The adoption of FIN48 did not have an impact on the Fund's net assets and financial statements. INVESTMENT INCOME Corporate actions (including cash dividends) are recorded on the ex-dividend date, net of applicable withholding taxes, except for certain foreign corporate actions, which are recorded as soon after ex-dividend date as such information becomes available. Interest income is recorded on the accrual basis. All discounts and premiums on bonds are accreted and amortized, respectively, to call or maturity date, whichever is shorter, using the effective yield method. EXPENSES Expenses of the Company which are directly identifiable to one of the Funds are allocated to that portfolio. Expenses which are not directly identifiable to one of the Funds are allocated in such a manner as deemed equitable, taking into consideration the nature and type of expenses and relative sizes of the Funds. All expenses of the Fund are paid by GEAM and reimbursed by the Fund. 15 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- 3. LINE OF CREDIT The Fund shares a revolving credit facility of up to $25 million with a number of its affiliates. The credit facility is with its custodian bank, State Street Bank and Trust Company. The revolving credit facility requires the payment of a commitment fee equal to 0.09% per annum on the daily unused portion of the credit facility, payable quarterly. The portion borne by the Funds generally is borne proportionally based upon net assets. Generally, borrowings under the credit facility would accrue interest at the Federal Funds Rate plus 50 basis points and is borne by each of the borrowing Funds. The maximum amount allowed to be borrowed by any one of the Funds is the lesser of its prospectus limitation, 20% of its net assets, or $25 million. The credit facility was not utilized by the Fund during the period ended June 30, 2007. 4. AMOUNTS PAID TO AFFILIATES GEAM, a registered investment adviser, was retained by the Company's Board of Directors effective May 1, 1997 to act as investment adviser and administrator of the Fund. GEAM's compensation for investment advisory and administrative services is paid monthly based on the average daily net assets of the Fund at an annualized rate of .80%. GENPACT performs certain accounting and certain administration services not provided by GEAM. For the period ending June 30, 2007, $995 was charged to the Fund. DIRECTORS' COMPENSATION The Fund pays no compensation to its directors who are officers or employees of GEAM or its affiliates. Directors who are not such officers or employees also serve in a similar capacity for other funds advised by GEAM. Compensation paid to unaffiliated directors are reflected on the Statement of Operations. These fees are allocated pro rata across all of the mutual fund platforms and share classes served by the directors, including the Fund, and are based upon the relative net assets of each fund within such platforms. (For additional information about directors compensation please refer to the Statement of Additional Information.) 5. SUB-ADVISORY FEES Pursuant to an investment sub-advisory agreement with GEAM, Palisade Capital Management, LLC ("Palisade") is the Sub-Adviser to the Small-Cap Equity Fund. Palisade is responsible for the day-to-day portfolio management of the assets of the Fund, including the responsibility for making decisions to buy, sell or hold a particular security, under the general supervision of GEAM and the Board. For their services, GEAM pays Palisade monthly sub-advisory fees which are calculated as a percentage of the average daily net assets of the Fund. 6. INVESTMENT TRANSACTIONS PURCHASES AND SALES OF SECURITIES The cost of purchases and the proceeds from sales of investments, other than short-term securities and options, for the period ended June 30, 2007 were as follows: Purchases Sales - -------------------------------------------------------------------------------- $21,423,799 $26,100,628 SECURITY LENDING At June 30, 2007, the Fund participated in securities lending: Loaned securities at Cash market value collateral* - -------------------------------------------------------------------------------- $22,415,620 $23,130,091 * COLLATERAL OF $23,252,454 DECREASED BY $122,363 ON JULY 1, 2007 TO REFLECT THE JUNE 30, 2007 CHANGE IN VALUE OF SECURITIES ON LOAN. 16 Additional Information (unaudited) - -------------------------------------------------------------------------------- INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS: The business and affairs of the Company are managed under the direction of the Company's Board of Directors. Information pertaining to the Directors and officers of the Company is set forth below. INTERESTED DIRECTORS AND EXECUTIVE OFFICERS - -------------------------------------------------------------------------------- MICHAEL J. COSGROVE - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 58 POSITION(S) HELD WITH FUND Chairman of the Board and President TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 10 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President - GEAM since February 1997; President and Chief Executive Officer - Mutual Funds at GEAM since March 2007; Vice President, GE Capital Corporation, an indirect wholly-owned subsidiary of GE, since December 1999; Executive Vice President - Sales and Marketing of GEAM, a wholly-owned subsidiary of GE that is registered as an investment adviser under the Investment Advisers Act of 1940, as amended, since March 1993; Director of GEAM since 1988. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48 OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception; Trustee of Elfun Funds, GE Savings & Security Funds and General Electric Pension Trust since 1988; Trustee of Fordham University since 2003; Trustee of Elfun Foundation; Treasurer of GE Foundation; Director, GE Asset Management (Ireland) since February 1999; Director, GE Asset Management Funds Plc, GE Asset Canada Company, GE Asset Management Limited, and GE Volunteers. - -------------------------------------------------------------------------------- MATTHEW J. SIMPSON - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 46 POSITION(S) HELD WITH FUND Executive Vice President TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - less than one year PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General Counsel and Secretary of GEAM since July 2007; Senior Vice President and General Counsel - Marketing and Client Services (formerly Asset Management Services), at GEAM and Senior Vice President and General Counsel of GEAMS from February 1997 to June 2007; Vice President and Associate General Counsel of GEAM from October 1992 to February 1997; Secretary of Fund from 1997 to June 2007; Vice President of Fund from September 2003 to June 2007; Vice President of GE Institutional Funds and GE LifeStyle Funds from September 2003 to June 2007; Secretary of GE Institutional Funds and GE LifeStyle Funds from 1997 to June 2007; Vice President of Elfun Funds and GE Savings & Security Funds from October 2003 to June 2007; Assistant Secretary of Elfun Funds and GE Savings & Security Funds from 1998 to June 2007. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional Funds, GE LifeStyle Funds, Elfun Funds and GE Savings & Security Funds since July 2007. 17 Additional Information (unaudited) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SCOTT H. RHODES - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 48 POSITION(S) HELD WITH FUND Treasurer TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - one year PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds Operations Manager since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle Funds and GE Investments Funds since November 2005 and Elfun Funds and GE Savings & Security Funds since September 2005; from August 2004 to September 2005 Vice President, U.S. Trust Company, N.A. and Assistant Treasurer of Excelsior Funds, Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds, Inc.; from January 2004 to August 2004, Vice President BlackRock Financial Management, Inc.; from December 1996 to November 2003, Controller - Mutual Funds, American Skandia Investment Services, Inc. and Assistant Treasurer of American Skandia Trust and American Skandia Advisor Funds, Inc. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A - -------------------------------------------------------------------------------- JEANNE M. LAPORTA - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 42 POSITION(S) HELD WITH FUND Vice President and Secretary TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 2 years (Vice President); less than one year (Secretary) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Associate General Counsel - Marketing and Client Services (formerly Asset Management Services) at GEAM since May 1997; Vice President and Assistant Secretary of GE Funds, GE Institutional Funds and GE LifeStyle Funds since September 2003; Vice President and Assistant Secretary of Elfun Funds and GE Savings & Security Funds since October 2003; Assistant Secretary from September 2003 to June 2007 and Secretary since July 2007. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A 18 Additional Information (unaudited) - -------------------------------------------------------------------------------- NON-INTERESTED DIRECTORS - -------------------------------------------------------------------------------- JOHN R. COSTANTINO - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 61 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC since 2006; Managing Director, Walden Partners, Ltd., consultants and investors, since August 1992. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE Institutional Funds and GE LifeStyle Funds since their inception; Trustee of Fordham University since 2002 and Marymount College from 2001 through 2002; Neuroscience Research Institute since 1986; Diocesan Finance Counsel of the Dioceses of Brooklyn & Queens since 2001; Gregorian University Foundation since 1994. - -------------------------------------------------------------------------------- WILLIAM J. LUCAS - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 59 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Treasurer of Fairfield University since 1983. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception. - -------------------------------------------------------------------------------- ROBERT P. QUINN - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 71 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon Brothers Inc. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception. - -------------------------------------------------------------------------------- The Statement of Additional Information for the Fund includes additional information about the Directors and Officers and is available, without charge, upon request by calling 1-800-242-0134. 19 Investment Team - -------------------------------------------------------------------------------- INVESTMENT ADVISER AND ADMINISTRATOR GE Asset Management Incorporated BOARD OF DIRECTORS Michael J.Cosgrove, CHAIRMAN John R. Costantino William J. Lucas Robert P. Quinn Matthew J. Simpson SECRETARY Jeanne M. LaPorta ASSISTANT SECRETARIES Joseph A. Carucci Joon Won Choe TREASURER Scott H. Rhodes ASSISTANT TREASURERS Scott R. Fuchs Christopher M. Isaacs DISTRIBUTOR GE Investment Distributors, Inc. Member NASD and SIPC COUNSEL Sutherland, Asbill & Brennan, LLP CUSTODIAN State Street Bank & Trust Company INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM KPMG LLP OFFICERS OF THE INVESTMENT ADVISER James W. Ireland, CHIEF EXECUTIVE OFFICER Michael J. Cosgrove, EVP, PRESIDENT AND CHIEF EXECUTIVE OFFICER - MUTUAL FUNDS Paul M. Colonna, PRESIDENT - FIXED INCOME Kathryn D. Karlic, EVP, PRESIDENT - SALES AND MARKETING Ralph R. Layman, EVP, PRESIDENT - INTERNATIONAL EQUITIES Matthew J. Simpson, EVP, GENERAL COUNSEL AND SECRETARY Judith A. Studer, EVP, PRESIDENT - U.S. EQUITIES Don W. Torey, EVP, PRESIDENT - ALTERNATIVE INVESTMENTS AND REAL ESTATE John J. Walker, EVP, CHIEF FINANCIAL OFFICER 20 [This page intentionally left blank.] INVESTMENT ADVISER GE ASSET MANAGEMENT INCORPORATED 3001 SUMMER STREET PO BOX 7900 STAMFORD, CT 06904-7900 DISTRIBUTOR GE INVESTMENT DISTRIBUTORS, INC. MEMBER NASD AND SIPC 3001 SUMMER STREET PO BOX 7900 STAMFORD, CT 06904-7900 - -------------------------------------------------------------------------------- The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities is available without charge (i) upon request, by calling 1-800-242-0134; (ii) on the Fund's website at http://www.gefunds.com; and (iii) on the Commission's website at http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC - - information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Information (if any) regarding how the Fund voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through the Fund's website at http://www.gefunds.com; and (ii) on the Commission's website at http://www.sec.gov. - -------------------------------------------------------------------------------- [GE logo omitted] GE Investments Funds, Inc. Real Estate Securities Fund Semi-Annual Report JUNE 30, 2007 [GE LOGO OMITTED] GE Investments Funds, Inc. Real Estate Securities Fund Contents - -------------------------------------------------------------------------------- NOTES TO PERFORMANCE .................................................. 1 MANAGER REVIEW AND SCHEDULE OF INVESTMENTS ............................ 2 NOTES TO SCHEDULE OF INVESTMENTS ...................................... 8 FINANCIAL STATEMENTS Financial Highlights ............................................. 9 Statement of Assets and Liabilities .............................. 10 Statement of Operations .......................................... 11 Statements of Changes in Net Assets .............................. 12 Notes to Financial Statements .................................... 13 ADDITIONAL INFORMATION ................................................ 18 INVESTMENT TEAM ....................................................... 21 This report is prepared for Policyholders of certain variable contracts and may be distributed to others only if preceded or accompanied by the variable contract's current prospectus and the current prospectus of the Funds available for investments thereunder. Notes to Performance June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- Total returns take into account changes in share price and assume reinvestment of dividends and capital gains distributions, if any. Investment returns and net asset value on an investment will fluctuate and you may have a gain or loss when you sell your shares. Periods less than one year are not annualized. Current performance may be lower or higher than that shown. You may call toll-free (800) 242-0134 for performance information as of the most recent month end. Total returns do not reflect expenses associated with the separate account such as administrative fees, account charges and surrender charges, which, if reflected, would reduce the total returns for all periods shown. Shares of the Fund are neither insured nor guaranteed by the U.S. Government, and their prices will fluctuate with market conditions. The Wilshire Real Estate Securities Index (Wilshire RES) is an unmanaged index and do not reflect the actual cost of investing in the instruments that comprise the index. The Wilshire RES Index is a market capitalization-weighted index comprised of publicly traded real estate securities, such as real estate investment trusts (REITs) and real estate operating companies (REOCs). NAREIT Equity Index is an unmanaged index of all tax-qualified real estate investment trusts (REITs) listed on the New York Stock Exchange, American Stock Exchange and NASDAQ which have 75% or more of their gross invested book assets invested directly or indirectly in the equity ownership of real estate. The results shown for the foregoing indices assume the reinvestment of net dividends or interest. The peer universe of the underlying annuity funds used in our peer ranking calculation is based on the blend of Lipper peer categories, as shown. Lipper is an independent mutual fund rating service. A Fund's performance may be compared to or ranked within a universe of mutual funds with investment objectives and policies similar but not necessarily identical to the Fund's. Such comparisons or rankings are made on the basis of several factors, including the Fund's objectives and policies, management style and strategy, and portfolio composition, and may change over time if any of those factors change. 1 Real Estate Securities Fund - -------------------------------------------------------------------------------- URDANG SECURITIES MANAGEMENT, INC. (URDANG) IS THE SUB-ADVISER FOR THE REAL ESTATE SECURITIES FUND. URDANG IS A WHOLLY OWNED SUBSIDIARY OF URDANG CAPITAL MANAGEMENT, INC. (URDANG CAPITAL). URDANG CAPITAL IS WHOLLY OWNED BY THE BANK OF NEW YORK COMPANY, INC. (BANK OF NEW YORK) AND OPERATES AS PART OF BANK OF NEW YORK'S ASSET MANAGEMENT DIVISION. AS A WHOLLY OWNED SUBSIDIARY OF URDANG CAPITAL, URDANG IS A SECOND TIER SUBSIDIARY OF BANK OF NEW YORK. URDANG IS A REGISTERED INVESTMENT ADVISER THAT WAS FORMED IN 1995 TO FOCUS EXCLUSIVELY ON OPPORTUNITIES IN THE REAL ESTATE SECURITIES MARKET, INCLUDING PUBLICLY TRADED REAL ESTATE INVESTMENT TRUSTS (REITS). THE REAL ESTATE SECURITIES FUND IS CO-MANAGED BY TODD BRIDDELL, CFA, DEAN FRANKEL, CFA AND ERIC ROTHMAN, CFA. TODD BRIDDELL IS A MANAGING DIRECTOR OF REAL ESTATE SECURITIES AND SERVES AS SENIOR PORTFOLIO MANAGER TO THE FUND. HE CO-FOUNDED URDANG SECURITIES MANAGEMENT IN 1995 AND HAS 14 YEARS OF REAL ESTATE INDUSTRY EXPERIENCE. DEAN FRANKEL JOINED THE FIRM IN 1997 AND IS A PORTFOLIO MANAGER. HE MANAGES THE FIRM'S PROPRIETARY RESEARCH EFFORT AND OVERSEES THE FIRM'S TRADING ACTIVITIES. ERIC ROTHMAN JOINED THE FIRM IN 2006 AND IS A PORTFOLIO MANAGER. IN HIS ROLE AS PORTFOLIO MANAGER, MR. ROTHMAN IS RESPONSIBLE FOR ASSISTING MR. FRANKEL FOR THE STRATEGY FOR U.S. REITS, INCLUDING MARKET RESEARCH AND ANALYSIS OF REAL ESTATE SECURITIES. PRIOR TO JOINING URDANG, MR. ROTHMAN WAS AN EQUITY RESEARCH ANALYST AT AEW CAPITAL MANAGEMENT, L.P. FROM AUGUST 2006 TO NOVEMBER 2006 AND WACHOVIA SECURITIES FROM FEBRUARY 2001 TO AUGUST 2006. Q. HOW DID THE REAL ESTATE SECURITIES FUND PERFORM COMPARED TO ITS BENCHMARK AND LIPPER GROUP FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2007? A. For the six-month period ended June 30, 2007, the Real Estate Securities Fund returned -6.28%. The NAREIT Equity Index, the Fund's benchmark, returned -5.89% and the Fund's Lipper peer group of 60 Real Estate funds returned an average of -5.04% for the same period. Q. WHAT MARKET CONDITIONS IMPACTED FUND PERFORMANCE? A. M&A activity negatively impacted the Fund's performance during the past six-month period because the Fund was underweight in those stocks that were targets of M&A activity. Overall, M&A activity cost the Fund approximately -1.20%, erasing some solid stock and sector selections over the period. Fundamentally however, strong execution and great sector selection together with a number of good stock picks helped the Fund to overcome losses as a result of the Fund's underweight in companies involved in M&A activities. Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE? A. The Fund's performance was aided .63% by solid sector selection, but negatively impacted by poor stock selection -.54%. From a sector standpoint, the Fund's underweight to specialty, mostly timber companies, adversely impacted the Fund by -.39%; while the underweight to health care and overweight to hotels added .23% and .24%, respectively. Stock selection was most negatively affected by the Fund's underweight in companies that were targets of M&A activity, costing the Fund -1.20% versus the benchmark. Outside of such stocks affected by M&A activity, the Fund fared about equally well in stock selection and sector selection. Selection of hotel stocks most negatively affected the Fund -.45%, of which approximately -.30% of underperformance coming from losses as a result of M&A activities alone. Stock selection in the apartment sector was also poor due to M&A activities, as a large underweight in Archstone Communites cost the Fund -.63%, while the rest of the apartment sector only added .26% to Fund performance. However, stock selection in the industrial and office sectors added to the performance of the Fund by .16% and .19%, respectively. 2 Q&A Q. WERE THERE ANY SIGNIFICANT CHANGES TO THE FUND OVER THE PERIOD? A. During the period, we added to hotels and apartments, and cut our retail allocation. Both apartments and hotels have solid fundamental and are trading at significant discounts to underlying private market asset valuations. Most apartment companies trade at 15-20% discounts, and hotel discounts are even larger. Both sectors should hold up well in a down market, as M&A will provide a floor. We reduced the Fund's weighting on Retail because it had been a relative out-performer in the first quarter, notwithstanding the fact that consumer spending had shown signs of weakening. In addition, retail companies trade closer to their private market valuations and will likely offer less of a floor in a down market. 3 Real Estate Securities Fund - -------------------------------------------------------------------------------- Understanding Your Fund's Expenses As a shareholder of the Fund you incur transaction and ongoing expenses. Transaction expenses including sales charges on purchase payments, reinvested dividends (or other distributions), and redemption fees directly reduce the investment return of the Fund. Ongoing costs include portfolio management fees, distribution and service fees, professional fees, administrative fees and other Fund expenses. The following example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the period. The information in the following table is based on an investment of $1,000, which is invested at the beginning of the period and held for the entire six-month period ended June 30, 2007. ACTUAL EXPENSES The first section of the table provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your class under the heading "Expenses Paid During Period." HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second section of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholders reports of other funds. Please note that the expenses shown in the table do not reflect any transaction costs, such as sales charges or redemption fees.
JANUARY 1, 2007 - JUNE 30, 2007 - ------------------------------------------------------------------------------------------------------------------------------------ ACCOUNT VALUE AT ACCOUNT VALUE EXPENSES THE BEGINNING OF AT THE END OF PAID DURING THE PERIOD ($) THE PERIOD ($) THE PERIOD ($)* - ------------------------------------------------------------------------------------------------------------------------------------ Actual Fund Return** 1,000.00 937.18 4.56 - ------------------------------------------------------------------------------------------------------------------------------------ Hypothetical 5% Return (2.5% for the period) 1,000.00 1,020.17 4.46 - ------------------------------------------------------------------------------------------------------------------------------------
*EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.89% (FROM PERIOD JANUARY 1, 2007 - JUNE 30, 2007), MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY 181/365 (TO REFLECT THE SIX MONTH PERIOD). **ACTUAL FUND RETURN FOR SIX-MONTH PERIOD ENDED JUNE 30, 2007 WAS: -6.28%. 4 Real Estate Securities Fund (unaudited) - -------------------------------------------------------------------------------- CHANGE IN VALUE OF A $10,000 INVESTMENT - -------------------------------------------------------------------------------- [LINE CHART OMITTED PLOT POINTS FOLLOWS] REAL ESTATE NAREIT SECURITIES EQUITY INDEX 06/97 $ 10000.00 $ 10000.00 12/97 11005.63 11377.13 12/98 9059.31 9385.89 12/99 9039.61 8952.26 12/00 11981.20 11312.56 12/01 13399.47 12888.72 12/02 13219.13 13381.17 12/03 18170.71 18350.10 12/04 24038.00 24144.60 12/05 26869.98 27081.27 12/06 35744.38 36576.15 6/07 33498.92 34422.30
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2007 - ------------------------------------------------------------------------------------------------------------ SIX ONE FIVE TEN MONTHS YEAR YEAR YEAR - ------------------------------------------------------------------------------------------------------------ Real Estate Securities Fund -6.28% 11.75% 18.43% 12.85% - ------------------------------------------------------------------------------------------------------------ NAREIT Equity Index -5.89% 12.57% 18.63% 13.16% - ------------------------------------------------------------------------------------------------------------ Lipper peer group average* -5.04% 14.03% 19.21% 13.44% - ------------------------------------------------------------------------------------------------------------ Inception date 5/1/95 - ------------------------------------------------------------------------------------------------------------
Real Estate Securities Fund (ending value $33,499) NAREIT Equity Index (ending value $34,422) INVESTMENT PROFILE A fund designed for investors who seek maximum total return through current income and capital appreciation by investing at least 80% of its net assets in equity securities and debt securities of U.S. issuers that are principally engaged in or related to the real estate industry, including those that own significant real estate assets, under normal circumstances. TOP TEN LARGEST HOLDINGS AS OF JUNE 30, 2007 as a % of Market Value - ------------------------------------------------------------------ Simon Property Group, Inc. 7.15% - ------------------------------------------------------------------ Equity Residential 6.21% - ------------------------------------------------------------------ Brookfield Properties Corp. 4.53% - ------------------------------------------------------------------ AvalonBay Communities, Inc. 4.31% - ------------------------------------------------------------------ Prologis 4.06% - ------------------------------------------------------------------ Essex Property Trust, Inc. 4.04% - ------------------------------------------------------------------ SL Green Realty Corp. 3.98% - ------------------------------------------------------------------ BRE Properties, Inc. 3.72% - ------------------------------------------------------------------ Vornado Realty Trust 3.71% - ------------------------------------------------------------------ Kimco Realty Corp. 3.56% - ------------------------------------------------------------------ PORTFOLIO COMPOSITION AS OF JUNE 30, 2007 as a % of Market Value - ------------------------------------------------------------------ Market Value of $136,099 (in thousands) [PIE CHART OMITTED PLOT POINTS FOLLOWS] MULTIFAMILY 21.6% OFFICE 18.1% HOTEL 13.1% REGIONAL MALLS 12.7% SHOPPING CENTERS 8.0% INDUSTRIAL 6.1% DIVERSIFIED 4.5% SPECIALTY 4.3% HEALTHCARE 4.1% OFFICE/INDUSTRIAL 2.8% SELF STORAGE 2.7% FREESTANDING 1.6% SHORT-TERM 0.4% * LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR THE SIX MONTHS, ONE YEAR, FIVE-YEAR, AND TEN-YEAR PERIODS INDICATED IN THE REAL ESTATE FUNDS PEER GROUP CONSISTING OF 59, 59, 30 AND 10 UNDERLYING ANNUITY FUNDS, RESPECTIVELY. SEE NOTES TO PERFORMANCE ON PAGE 1 FOR FURTHER INFORMATION, INCLUDING AN EXPLANATION OF LIPPER PEER CATEGORIES. PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE AND THE GRAPH AND TABLE DO NOT REFLECT THE DEDUCTION OF TAXES. 5 REAL ESTATE SECURITIES FUND Schedule of Investments June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- REAL ESTATE SECURITIES FUND - -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- COMMON STOCK (REIT) -- 88.0%+ - -------------------------------------------------------------------------------- DIVERSIFIED -- 4.4% Cousins Properties, Inc. 35,510 $ 1,030,145 Vornado Realty Trust 45,980 5,050,443 6,080,588 FREESTANDING -- 1.6% National Retail Properties, Inc. 97,860 2,139,220 HEALTHCARE -- 4.0% Nationwide Health Properties Inc. 52,260 1,421,472 Ventas, Inc. 112,650 4,083,562 5,505,034 HOTEL -- 8.6% Ashford Hospitality Trust, Inc. 115,330 1,356,281 DiamondRock Hospitality Co. 38,080 726,566 FelCor Lodging Trust Inc. 36,480 949,574 Host Hotels & Resorts Inc. 206,548 4,775,390 LaSalle Hotel Properties 31,390 1,362,954 Sunstone Hotel Investors, Inc. 91,290 2,591,723 11,762,488 INDUSTRIAL -- 6.1% AMB Property Corp. 53,130 2,827,579 Prologis 97,230 5,532,387 8,359,966 MULTIFAMILY -- 21.5% American Campus Communities, Inc. 32,300 913,767 AvalonBay Communities, Inc. 49,380 5,870,294 BRE Properties, Inc. 85,350 5,060,401 Equity Residential 185,196 8,450,493 Essex Property Trust, Inc. 47,220 5,491,686 Post Properties, Inc. 17,900 933,127 UDR, Inc. 101,980 2,682,074 29,401,842 OFFICE -- 13.5% Alexandria Real Estate Equities, Inc. 45,280 4,384,010 Boston Properties, Inc. 30,430 3,107,816 Douglas Emmett, Inc. 41,320 1,022,257 Highwoods Properties, Inc. 75,840 2,844,000 NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- Kilroy Realty Corp. 16,690 $ 1,182,320(c) Republic Property Trust 46,700 572,075 SL Green Realty Corp. 43,680 5,411,515 18,523,993 OFFICE/INDUSTRIAL -- 2.8% Duke Realty Corp. 28,860 1,029,436 Liberty Property Trust 63,620 2,794,827 3,824,263 REGIONAL MALLS -- 12.7% CBL & Associates Properties, Inc. 39,240 1,414,602 General Growth Properties, Inc. 45,260 2,396,517 Macerich Co. 33,450 2,756,949 Simon Property Group, Inc. 104,650 9,736,636 Taubman Centers, Inc. 20,780 1,030,896 17,335,600 SELF STORAGE -- 2.7% Public Storage, Inc. 47,540 3,652,023 SHOPPING CENTERS -- 8.0% Acadia Realty Trust 55,220 1,432,959 Federal Realty Investment Trust 42,200 3,260,372 Kimco Realty Corp. 127,112 4,839,154 Regency Centers Corp. 19,830 1,398,015 10,930,500 SPECIALTY -- 2.1% Digital Realty Trust, Inc. 19,570 737,398 Plum Creek Timber Company, Inc. 52,170 2,173,402 2,910,800 TOTAL COMMON STOCK (REIT) (COST $115,072,329) 120,426,317 - -------------------------------------------------------------------------------- COMMON STOCK -- 11.1% - -------------------------------------------------------------------------------- HOTEL -- 4.5% Hilton Hotels Corp. 103,690 3,470,504 Starwood Hotels & Resorts Worldwide, Inc. 39,530 2,651,277 6,121,781 OFFICE -- 4.5% Brookfield Properties Corp. 253,395 6,160,032 See Notes to Schedule of Investments on page 8 and Notes to Financial Statements. 6 REAL ESTATE SECURITIES FUND Schedule of Investments June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- SPECIALTY -- 2.1% American Tower Corp. (Class A) 68,990 $ 2,897,580(a) TOTAL COMMON STOCK (COST $15,435,197) 15,179,393 TOTAL INVESTMENTS IN SECURITIES (COST $130,507,526) 135,605,710 - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 0.4% - -------------------------------------------------------------------------------- GEI Short Term Investment Fund 5.55% (COST $493,088) 493,088 493,088(b,d) TOTAL INVESTMENTS (COST $131,000,614) 136,098,798 OTHER ASSETS AND LIABLITIES, NET-- 0.5% 680,720 ------------ NET ASSETS-- 100.0% $136,779,518 ============ See Notes to Schedule of Investments on page 8 and Notes to Financial Statements. 7 Notes to Schedule of Investments June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- The views expressed in this document reflect our judgment as of the publication date and are subject to change at any time without notice. The securities cited may not represent current or future holdings and should not be considered as a recommendation to purchase or sell a particular security. See the prospectus for complete descriptions of investment objectives, policies, risks and permissible investments. (a) Non-income producing security. (b) Coupon amount represents effective yield. (c) At June 30, 2007, all or a portion of this security was pledged to cover collateral requirements for futures, options, forward foreign currency contracts and/or TBA's. (d) GEAM, the investment advisor of the fund, serves as investment advisor of the GEI Short Term Investment Fund. + Percentages are based on net assets as of June 30, 2007. Abbreviations: REGD. Registered REIT Real Estate Investment Trust SPDR Standard & Poors Depository Receipts 8
Financial Highlights Selected data based on a share outstanding throughout the periods indicated - ------------------------------------------------------------------------------------------------------------------------------------ REAL ESTATE SECURITIES FUND 6/30/07+ 12/31/06 12/31/05 12/31/04 12/31/03 12/31/02 - ------------------------------------------------------------------------------------------------------------------------------------ INCEPTION DATE -- -- -- -- -- 5/1/95 Net asset value, beginning of period .............. $21.49 $19.20 $19.54 $16.78 $13.14 $14.78 INCOME/(LOSS) FROM INVESTMENT OPERATIONS: Net investment income .......................... 0.28 0.65 0.70 0.65 0.50 0.80 Net realized and unrealized gains/(losses) on investments .............. (1.63) 5.68 1.62 4.76 4.42 (1.01) - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INCOME/(LOSS) FROM INVESTMENT OPERATIONS .... (1.35) 6.33 2.32 5.41 4.92 (0.21) - ------------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS FROM: Net investment income .......................... -- 0.48 0.75 0.52 0.41 0.66 Net realized gains ............................. -- 3.56 1.91 2.13 0.87 0.77 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL DISTRIBUTIONS ............................... -- 4.04 2.66 2.65 1.28 1.43 - ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, END OF PERIOD .................... $20.14 $21.49 $19.20 $19.54 $16.78 $13.14 ==================================================================================================================================== TOTAL RETURN (A) .................................. (6.28)% 33.03% 11.78% 32.29% 37.38% (1.35)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ....... $136,780 $178,317 $143,801 $146,221 $98,294 $70,164 Ratios to average net assets: Net investment income* ...................... 2.16% 3.08% 3.21% 4.15% 4.65% 4.81% Expenses* ................................... 0.89% 0.88% 0.89% 0.90% 0.89% 0.89% Portfolio turnover rate ........................ 49% 92% 52% 78% 52% 90%
NOTES TO FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- (a) Total returns are historical and assume changes in share price and reinvestment of dividends and capital gains and do not include the effect of insurance contract charges. * Annualized for periods less than one year. + Unaudited. See Notes to Financial Statements. 9
Statement of Assets and Liabilities JUNE 30, 2007 (UNAUDITED) REAL ESATE SECURITIES FUND - -------------------------------------------------------------------------------------------------------------------------- ASSETS Investments in securities, at market* (cost $130,507,526) ..................................... $135,605,710 Short-term affiliated investments (at amortized cost) ......................................... 493,088 Receivable for investments sold ............................................................... 540,569 Income receivables ............................................................................ 500,895 Receivable for fund shares sold ............................................................... 3,541 Other assets .................................................................................. 1,616 - -------------------------------------------------------------------------------------------------------------------------- TOTAL ASSETS .............................................................................. 137,145,419 - -------------------------------------------------------------------------------------------------------------------------- LIABILITIES Payable for investments purchased ............................................................. 186,042 Payable for fund shares redeemed .............................................................. 43,664 Payable to GEAM ............................................................................... 136,195 - -------------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES ......................................................................... 365,901 - -------------------------------------------------------------------------------------------------------------------------- NET ASSETS ....................................................................................... $136,779,518 ========================================================================================================================== NET ASSETS CONSIST OF: Capital paid in ............................................................................... 100,004,664 Undistributed (distribution in excess of) net investment income ............................... 2,177,778 Accumulated net realized gain (loss) .......................................................... 29,498,892 Net unrealized appreciation/(depreciation) on: Investments ................................................................................ 5,098,184 - -------------------------------------------------------------------------------------------------------------------------- NET ASSETS ....................................................................................... $136,779,518 ========================================================================================================================== NET ASSETS ....................................................................................... 136,779,518 Shares outstanding ($0.01 par value; unlimited shares authorized) ................................ 6,790,979 Net asset value per share ........................................................................ $20.14
See Notes to Financial Statements. 10
Statement of Operations FOR THE SIX MONTHS ENDED JUNE 30, 2007 (UNAUDITED) REAL ESATE SECURITIES FUND - -------------------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME INCOME: Dividend ....................................................................... $ 2,548,238 Interest from affliated investments ............................................ 60,161 Less: Foreign taxes withheld ................................................ (10,481) - -------------------------------------------------------------------------------------------------------------------------- TOTAL INCOME ..................................................................... 2,597,918 - -------------------------------------------------------------------------------------------------------------------------- EXPENSES: Advisory and administrative fees ............................................... 707,387 Transfer agent ................................................................. 15 Trustee's fees ................................................................. 2,370 Custody and accounting expenses ................................................ 16,415 Professional fees .............................................................. 14,607 Registration expenses .......................................................... 2,242 Other expenses ................................................................. 15,149 - -------------------------------------------------------------------------------------------------------------------------- TOTAL EXPENSES ................................................................... 758,185 - -------------------------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME (LOSS) ..................................................... 1,839,733 - -========================================================================================================================= NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS REALIZED GAIN (LOSS) ON: Investments ................................................................. 25,156,109 INCREASE (DECREASE) IN UNREALIZED APPRECIATION/ (DEPRECIATION) ON: Investments ................................................................. (35,398,123) - -------------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments ......................... (10,242,014) - -------------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .................. $ (8,402,281) - --------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements. 11
Statements of Changes in Net Assets REAL ESTATE SECURITIES FUND - ------------------------------------------------------------------------------------------------------------------------------------ SIX MONTHS ENDED YEAR ENDED JUNE 30, 2007 DECEMBER 31, (UNAUDITED) 2006 - ------------------------------------------------------------------------------------------------------------------------------------ INCREASE (DECREASE) IN NET ASSETS OPERATIONS: Net investments income (loss) .................................................... $ 1,839,733 $ 4,078,747 Net realized gain (loss) on investments, futures, written options, foreign currency transactions and swaps ........................................ 25,156,109 24,153,309 Net increase (decrease) in unrealized appreciation/(depreciation) on investments, futures, written options, foreign currency translation ........................................................... (35,398,123) 15,955,603 - ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) from operations .......................................... (8,402,281) 44,187,659 - ------------------------------------------------------------------------------------------------------------------------------------ DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income ............................................................ -- (3,335,137) Net realized gains ............................................................... -- (24,834,755) - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL DISTRIBUTIONS ................................................................ -- (28,169,892) - ------------------------------------------------------------------------------------------------------------------------------------ Increase (decrease) in net assets from operations and distributions ................ (8,402,281) 16,017,767 - ------------------------------------------------------------------------------------------------------------------------------------ SHARE TRANSACTIONS: Proceeds from sale of shares ..................................................... 3,796,451 20,203,690 Value of distributions reinvested ................................................ -- 28,169,892 Cost of shares redeemed .......................................................... (36,932,133) (29,874,788) - ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) from share transactions ................................. (33,135,682) 18,498,794 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INCREASE (DECREASE) IN NET ASSETS ............................................ (41,537,963) 34,516,561 NET ASSETS Beginning of period ................................................................ 178,317,481 143,800,920 - ------------------------------------------------------------------------------------------------------------------------------------ End of period ...................................................................... $136,779,518 $178,317,481 - ------------------------------------------------------------------------------------------------------------------------------------ UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD ....... $ 2,177,778 $ 338,045 ==================================================================================================================================== CHANGES IN FUND SHARES Shares sold ...................................................................... 164,019 870,622 Issued for distributions reinvested .............................................. -- 1,316,352 Shares redeemed .................................................................. (1,669,167) (1,380,231) - ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in fund shares ................................................ (1,505,148) 806,743 ====================================================================================================================================
See Notes to Financial Statements. 12 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- 1. ORGANIZATION OF THE COMPANY GE Investments Funds, Inc. (the "Company") was incorporated under the laws of the Commonwealth of Virginia on May 14, 1984 and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company. The Company is composed of thirteen investment portfolios (collectively the "Funds"), although only the following eleven are currently being offered: U.S. Equity Fund, S&P 500 Index Fund, Premier Growth Equity Fund, Value Equity Fund, Mid-Cap Equity Fund, Small-Cap Equity Fund, International Equity Fund, Total Return Fund, Income Fund, Money Market Fund and Real Estate Securities Fund (the "Fund"). Shares of the Funds of the Company are offered only to insurance company separate accounts that fund certain variable life insurance contracts and variable annuity contracts. These insurance companies may include insurance companies affiliated with GE Asset Management Incorporated ("GEAM"), the investment adviser and administrator of each of the Funds. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions at the date of the financial statements. Actual results may differ from those estimates. The following summarizes the significant accounting policies of the Fund: SECURITY VALUATION AND TRANSACTIONS Securities for which exchange quotations are readily available are valued at the last sale price, or if no sales occurred on that day, at the last quoted bid price. Securities listed on the NASDAQ will be valued at the NASDAQ's official close price. Certain fixed income securities are valued by a dealer or by a pricing service based upon a matrix system, which considers market transactions as well as dealer supplied valuations. Short-term investments maturing within sixty days are valued at amortized cost. If quotations are not readily available for a portfolio security, or if it is believed that a quotation or other market price for a portfolio security does not represent its fair value, the security may be valued using procedures approved by the Fund's Board of Directors that are designed to establish its "fair value." These procedures require that the fair value of a security be established by the valuation committee. The fair value committee follows different protocols for different types of investments and circumstances. Foreign securities may be valued with the assistance of an independent fair value pricing service in circumstances where it is believed that they have been or would be materially affected by events occurring after the close of the portfolio security's primary market and before the close of regular trading on the NYSE. This independent fair value pricing service uses a computerized system to appraise affected securities and portfolios taking into consideration various factors and the fair value of such securities may be something other than the last available quotation or other market price. GE Asset Management may also separately monitor portfolio securities and, consistent with the Fund's fair value procedures, apply a different value to a portfolio security than would be applied had it been priced using market quotations or by an independent fair value pricing service. Determining the fair value of securities involves the application of both subjective and objective considerations. Security values may differ depending on the methodology used to determine their values, and may differ from the last quoted sale or closing price. No assurance can be given that use of these fair value procedures will always better represent the price at which a Fund could sell the affected portfolio security. Security transactions are accounted for as of the trade date. Realized gains and losses on investments sold are recorded on the basis of identified cost for both financial statement and federal tax purposes. In September 2006, FASB issued Statement of Financial Accounting Standards No. 157, FAIR VALUE MEASUREMENTS ("FAS 157"). FAS 157 establishes a single authoritative definition of fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. FAS 157 applies to fair value measurements already required or permitted by existing standards. The change to current generally accepted accounting principles from the application of FAS 157 relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. Management of the Fund does not believe the adoption of FAS 157 will materially impact the financial statement amounts, however, additional disclosures may be required about the inputs used to develop the measurements and the effect of certain of the measurements on changes in net assets for the period. 13 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- FAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. REPURCHASE AGREEMENTS The Fund may enter into repurchase agreement transactions with respect to instruments that are consistent with the Fund's investment objectives or policies. The Fund's or a third party custodian takes possession of the collateral pledged for investments in repurchase agreements on behalf of the Fund. The Fund values the underlying collateral daily on a mark-to-market basis to determine that the value, including accrued interest, is at least equal to 102% of the repurchase price. In the event the seller defaults and the value of the security declines, or if the seller enters an insolvency proceeding, realization of the collateral by the Fund may be delayed or limited. SECURITY LENDING The Fund may loan securities to brokers, dealers, and financial institutions determined by GEAM to be creditworthy, subject to certain limitations. The Fund continues to receive the interest and dividends on the loaned securities during the term of the loan. The loans of securities are secured by collateral in the form of cash or other liquid assets, which are segregated and maintained with the custodian in an amount at least equal to 102% of the current market value of the loaned securities. During the term of the loan, the Fund will record any gain or loss in the market value of its loaned securities and of securities in which cash collateral is invested. The Fund will also earn interest, net of any rebate, from securities in which cash collateral is invested. In the event the counterparty (borrower) does not meet its contracted obligation to return the securities, the Fund may be exposed to the risk of loss of reacquiring the loaned securities at prevailing market prices using the proceeds of the sale of the collateral. FOREIGN CURRENCY Accounting records of the Fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange at period end. Purchases and sales of securities, income receipts and expense payments denominated in foreign currencies are translated into U.S. dollars at the prevailing exchange rate on the respective dates of such transactions. The Fund does not isolate the portion of the results of operations resulting from changes in foreign exchange rates from the fluctuations arising from changes in the market prices of securities during the period. Such fluctuations are included in the net realized or unrealized gain or loss from investments. Net realized gains or losses on foreign currency transactions represent net gains or losses on sales and maturities of foreign currency contracts, disposition of foreign currencies, the difference between the amount of net investment income and withholding taxes accrued and the U.S. dollar amount actually received or paid, and gains or losses between the trade and settlement date on purchases and sales of securities. Net unrealized foreign exchange gains and losses arising from changes in the value of other assets and liabilities as a result of changes in foreign exchange rates are included as increases or decreases in unrealized appreciation/depreciation on foreign currency related transactions. FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or bond index futures contracts subject to certain limitations. The Fund may invest in futures contracts to manage its exposure to the stock and bond markets and fluctuations in currency values. Buying futures tends to increase the Fund's exposure to the underlying instrument while selling futures tends to decrease the Fund's exposure to the underlying instrument, or hedge other Fund investments. The Fund will not enter into a transaction involving futures for speculative purposes. The Fund's risks in using these contracts include changes in the value of the underlying instruments, non-performance of the counterparties under the contracts' terms and changes in the liquidity of the secondary market for the contracts. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they principally trade. Upon entering into a futures contract, the Fund is required to pledge to the broker an amount of cash and/or other assets equal to a certain percentage of the contract amount, known as initial margin deposit. Subsequent payments, known as variation margin, are made or received by the Fund each day, depending on the daily fluctuation in the fair value of the underlying security. The Fund records an unrealized gain or loss equal to the daily variation margin. Should market conditions move unexpectedly, the Fund may not achieve the anticipated benefits of the futures contracts and may incur a loss. The Fund recognizes a realized gain or loss on the expiration or closing of a futures contract. OPTIONS The Fund may purchase and write options, subject to certain limitations. The Fund may invest in options contracts to manage its exposure to the stock and 14 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- bond markets and fluctuations in foreign currency values. Writing puts and buying calls tend to increase the Fund's exposure to the underlying instrument while buying puts and writing calls tend to decrease the Fund's exposure to the underlying instrument, or hedge other Fund investments. The Fund will not enter into a transaction involving options for speculative purposes. The Fund's risks in using these contracts include changes in the value of the underlying instruments, non-performance of the counterparties under the contracts' terms and changes in the liquidity of the secondary market for the contracts. Options are valued at the last sale price, or if no sales occurred on that day, at the last quoted bid price. When the Fund writes an option, the amount of the premium received is recorded as a liability and is subsequently adjusted to the current fair value of the option written. Premiums received from writing options that expire unexercised are treated by the Fund on the expiration date as realized gains from investments. The difference between the premium and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium is less than the amount paid for the closing purchase, as a realized loss. When an option is exercised, the proceeds from the sale of the underlying security or the cost basis of the securities purchased is adjusted by the original premium received or paid. REAL ESTATE INVESTMENT TRUSTS Dividend income, attributable to real estate investment trusts ("REITs"), is recorded based on management's estimate of the income included in the distributions received. Distributions received in excess of this amount are recorded as a reduction of the cost of the investments. The actual amounts of income and return of capital are determined by each REIT only after its fiscal year-end, and may differ from the estimated amounts. INVESTMENTS IN FOREIGN MARKETS Investments in foreign markets may involve special risks and considerations not typically associated with investing in the United States. These risks include revaluation of currencies, high rates of inflation, repatriation on income and capital, and adverse political and economic developments. Moreover, securities issued in these markets may be less liquid, subject to government ownership controls, tariffs and taxes, subject to delays in settlements, and their prices may be more volatile. The Fund may be subject to capital gains and repatriation taxes imposed by certain countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued based upon net investment income, net realized gains and net unrealized appreciation as income and/or capital gains are earned. INCOME TAXES The Fund intends to comply with all sections of the Internal Revenue Code applicable to regulated investment companies including the distribution of substantially all of its taxable net investment income and net realized capital gains to its shareholders. Therefore, no provision for federal income tax has been made. The Fund is treated as a separate taxpayer for federal income tax purposes. At June 30, 2007, information on the tax cost of investments is as follows:
Cost of Gross Tax Gross Tax Net Tax Appreciation/ Investments for Unrealized Unrealized (Depreciation) Tax Purposes Appreciation Depreciation on Investments - ----------------------------------------------------------------------------------------------------------------------------- $131,107,535 $10,961,186 $(5,969,923) $4,991,263
As of December 31, 2006, the Fund has no capital loss carryovers. Any net capital and currency losses incurred after October 31, within the Fund's tax year, are deemed to arise on the first day of the Fund's next tax year if the Fund so elects to defer such losses. The Fund incurred no such losses after October 31, 2006. The tax composition of distributions paid (other than return of capital distributions for the year) during the year ended December 31, 2006 was as follows: Ordinary Long-Term Income Capital Gains Total - ---------------------------------------------------------------- $4,582,222 $23,587,670 $28,169,892 15 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS The Fund declares and pays dividends from net investment income annually. The Fund declares and pays net realized capital gains in excess of capital loss carryforwards distributions annually. The character of income and gains to be distributed is determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences include (but are not limited to) distributions from Real Estate Investment Trusts (REITS), and losses deferred due to wash sale transactions. Reclassifications due to permanent book/tax differences are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. These reclassifications have no impact on net investment income, realized gains or losses, or the net asset value of the Fund. The calculation of net investment income per share in the Financial Highlights table excludes these adjustments. The reclassifications for the year ended December 31, 2006 were as follows: Undistributed (Distribution in Excess of) Net Investment Accumulated Paid in Income Net Realized Gain Capital - -------------------------------------------------------------------------------- $(514,828) $514,828 $-- On June 29, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in Income Taxes." FIN48 provides guidance for how certain uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN48 requires evaluation of tax positions taken or expected to be taken in the course of preparing the Fund's tax return to determine whether the tax positions are "more likely than not" of being sustained by the applicable tax authority. The adoption of FIN48 did not have an impact on the Fund's net assets and financial statements. INVESTMENT INCOME Corporate actions (including cash dividends) are recorded on the ex-dividend date, net of applicable withholding taxes, except for certain foreign corporate actions, which are recorded as soon after ex-dividend date as such information becomes available. Interest income is recorded on the accrual basis. All discounts and premiums on bonds are accreted and amortized, respectively, to call or maturity date, whichever is shorter, using the effective yield method. EXPENSES Expenses of the Company which are directly identifiable to one of the Funds are allocated to that portfolio. Expenses which are not directly identifiable to one of the Funds are allocated in such a manner as deemed equitable, taking into consideration the nature and type of expenses and relative sizes of the Funds. All expenses of the Fund are paid by GEAM and reimbursed by the Fund. 3. LINE OF CREDIT The Fund shares a revolving credit facility of up to $25 million with a number of its affiliates. The credit facility is with its custodian bank, State Street Bank and Trust Company. The revolving credit facility requires the payment of a commitment fee equal to 0.09% per annum on the daily unused portion of the credit facility, payable quarterly. The portion borne by the Funds generally is borne proportionally based upon net assets. Generally, borrowings under the credit facility would accrue interest at the Federal Funds Rate plus 50 basis points and is borne by each of the borrowing Funds. The maximum amount allowed to be borrowed by any one of the Funds is the lesser of its prospectus limitation, 20% of its net assets, or $25 million. The credit facility was not utilized by the Fund during the period ended June 30, 2007. 4. AMOUNTS PAID TO AFFILIATES GEAM, a registered investment adviser, was retained by the Company's Board of Directors effective May 1, 1997 to act as investment adviser and administrator of the Fund. GEAM's compensation for investment advisory and administrative services is paid monthly based on the average daily net assets of the Fund. The advisory and administrative fee is stated in the following schedule: Annualized based on average daily net assets - ------------------------------------------------------------------ Average Daily Advisory and Net Assets Administration of Fund Fees - ------------------------------------------------------------------ First $100 million .85% Next $100 million .80% Over $200 million .75% 16 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- GENPACT performs certain accounting and certain administration services not provided by GEAM. For the period ending June 30, 2007, $1,330 was charged to the Fund. DIRECTORS' COMPENSATION The Fund pays no compensation to its directors who are officers or employees of GEAM or its affiliates. Directors who are not such officers or employees also serve in a similar capacity for other funds advised by GEAM. Compensation paid to unaffiliated directors are reflected on the Statement of Operations. These fees are allocated pro rata across all of the mutual fund platforms and share classes served by the directors, including the Fund, and are based upon the relative net assets of each fund within such platforms. (For additional information about directors compensation please refer to the Statement of Additional Information.) 5. SUB-ADVISORY FEES Pursuant to an investment sub-advisory agreement with GEAM, Urdang Securities Management, Inc. ("Urdang") is the Sub-Adviser to the Real Estate Securities Fund. Urdang is responsible for the day-to-day portfolio management of the assets of the Fund, including the responsibility for making decisions to buy, sell or hold a particular security, under the general supervision of GEAM and the Board. For their services, GEAM pays Urdang monthly sub-advisory fees which are calculated as a percentage of the average daily net assets of the Fund. 6. INVESTMENT TRANSACTIONS PURCHASES AND SALES OF SECURITIES The cost of purchases and the proceeds from sales of investments, other than short-term securities and options, for the period ended June 30, 2007 were as follows: Purchases Sales - ---------------------------------------------------------------- $82,367,866 $108,072,253 17 Additional Information (unaudited) - -------------------------------------------------------------------------------- INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS: The business and affairs of the Company are managed under the direction of the Company's Board of Directors. Information pertaining to the Directors and officers of the Company is set forth below. INTERESTED DIRECTORS AND EXECUTIVE OFFICERS - -------------------------------------------------------------------------------- MICHAEL J. COSGROVE - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 58 POSITION(S) HELD WITH FUND Chairman of the Board and President TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and ualified - 10 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President - GEAM since February 1997; President and Chief Executive Officer - Mutual Funds at GEAM since March 2007; Vice President, GE Capital Corporation, an indirect wholly-owned subsidiary of GE, since December 1999; Executive Vice President - Sales and Marketing of GEAM, a wholly-owned subsidiary of GE that is registered as an investment adviser under the Investment Advisers Act of 1940, as amended, since March 1993; Director of GEAM since 1988. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48 OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception; Trustee of Elfun Funds, GE Savings & Security Funds and General Electric Pension Trust since 1988; Trustee of Fordham University since 2003; Trustee of Elfun Foundation; Treasurer of GE Foundation; Director, GE Asset Management (Ireland) since February 1999; Director, GE Asset Management Funds Plc, GE Asset Canada Company, GE Asset Management Limited, and GE Volunteers. - -------------------------------------------------------------------------------- MATTHEW J. SIMPSON - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 46 POSITION(S) HELD WITH FUND Executive Vice President TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - less than one year PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General Counsel and Secretary of GEAM since July 2007; Senior Vice President and General Counsel - Marketing and Client Services (formerly Asset Management Services), at GEAM and Senior Vice President and General Counsel of GEAMS from February 1997 to June 2007; Vice President and Associate General Counsel of GEAM from October 1992 to February 1997; Secretary of Fund from 1997 to June 2007; Vice President of Fund from September 2003 to June 2007; Vice President of GE Institutional Funds and GE LifeStyle Funds from September 2003 to June 2007; Secretary of GE Institutional Funds and GE LifeStyle Funds from 1997 to June 2007; Vice President of Elfun Funds and GE Savings & Security Funds from October 2003 to June 2007; Assistant Secretary of Elfun Funds and GE Savings & Security Funds from 1998 to June 2007. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional Funds, GE LifeStyle Funds, Elfun Funds and GE Savings & Security Funds since July 2007. 18 Additional Information (unaudited) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SCOTT H. RHODES - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 48 POSITION(S) HELD WITH FUND Treasurer TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - one year PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds Operations Manager since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle Funds and GE Investments Funds since November 2005 and Elfun Funds and GE Savings & Security Funds since September 2005; from August 2004 to September 2005 Vice President, U.S. Trust Company, N.A. and Assistant Treasurer of Excelsior Funds, Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds, Inc.; from January 2004 to August 2004, Vice President BlackRock Financial Management, Inc.; from December 1996 to November 2003, Controller - Mutual Funds, American Skandia Investment Services, Inc. and Assistant Treasurer of American Skandia Trust and American Skandia Advisor Funds, Inc. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A - -------------------------------------------------------------------------------- JEANNE M. LAPORTA - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 42 POSITION(S) HELD WITH FUND Vice President and Secretary TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 2 years (Vice President); less than one year (Secretary) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Associate General Counsel - Marketing and Client Services (formerly Asset Management Services) at GEAM since May 1997; Vice President and Assistant Secretary of GE Funds, GE Institutional Funds and GE LifeStyle Funds since September 2003; Vice President and Assistant Secretary of Elfun Funds and GE Savings & Security Funds since October 2003; Assistant Secretary from September 2003 to June 2007 and Secretary since July 2007. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A 19 Additional Information (unaudited) - -------------------------------------------------------------------------------- NON-INTERESTED DIRECTORS - -------------------------------------------------------------------------------- JOHN R. COSTANTINO - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 61 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC since 2006; Managing Director, Walden Partners, Ltd., consultants and investors, since August 1992. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE Institutional Funds and GE LifeStyle Funds since their inception; Trustee of Fordham University since 2002 and Marymount College from 2001 through 2002; Neuroscience Research Institute since 1986; Diocesan Finance Counsel of the Dioceses of Brooklyn & Queens since 2001; Gregorian University Foundation since 1994. - -------------------------------------------------------------------------------- WILLIAM J. LUCAS - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 59 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Treasurer of Fairfield University since 1983. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception. - -------------------------------------------------------------------------------- ROBERT P. QUINN - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 71 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon Brothers Inc. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception. - -------------------------------------------------------------------------------- The Statement of Additional Information for the Fund includes additional information about the Directors and Officers and is available, without charge, upon request by calling 1-800-242-0134. 20 Investment Team - -------------------------------------------------------------------------------- INVESTMENT ADVISER AND ADMINISTRATOR GE Asset Management Incorporated BOARD OF DIRECTORS Michael J.Cosgrove, CHAIRMAN John R. Costantino William J. Lucas Robert P. Quinn Matthew J. Simpson SECRETARY Jeanne M. LaPorta ASSISTANT SECRETARIES Joseph A. Carucci Joon Won Choe TREASURER Scott H. Rhodes ASSISTANT TREASURERS Scott R. Fuchs Christopher M. Isaacs DISTRIBUTOR GE Investment Distributors, Inc. Member NASD and SIPC COUNSEL Sutherland, Asbill & Brennan, LLP CUSTODIAN State Street Bank & Trust Company INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM KPMG LLP OFFICERS OF THE INVESTMENT ADVISER James W. Ireland, CHIEF EXECUTIVE OFFICER Michael J. Cosgrove, EVP, PRESIDENT AND CHIEF EXECUTIVE OFFICER - MUTUAL FUNDS Paul M. Colonna, PRESIDENT - FIXED INCOME Kathryn D. Karlic, EVP, PRESIDENT - SALES AND MARKETING Ralph R. Layman, EVP, PRESIDENT - INTERNATIONAL EQUITIES Matthew J. Simpson, EVP, GENERAL COUNSEL AND SECRETARY Judith A. Studer, EVP, PRESIDENT - U.S. EQUITIES Don W. Torey, EVP, PRESIDENT - ALTERNATIVE INVESTMENTS AND REAL ESTATE John J. Walker, EVP, CHIEF FINANCIAL OFFICER 21 [This page intentionally left blank.] [This page intentionally left blank.] [This page intentionally left blank.] [This page intentionally left blank.] INVESTMENT ADVISER GE ASSET MANAGEMENT INCORPORATED 3001 SUMMER STREET PO BOX 7900 STAMFORD, CT 06904-7900 DISTRIBUTOR GE INVESTMENT DISTRIBUTORS, INC. MEMBER NASD AND SIPC 3001 SUMMER STREET PO BOX 7900 STAMFORD, CT 06904-7900 The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities is available without charge (i) upon request, by calling 1-800-242-0134; (ii) on the Fund's website at http://www.gefunds.com; and (iii) on the Commission's website at http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC - - information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Information (if any) regarding how the Fund voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through the Fund's website at http://www.gefunds.com; and (ii) on the Commission's website at http://www.sec.gov. [GE LOGO OMITTED] GE Investments Funds, Inc. International Equity Fund Semi-Annual Report JUNE 30, 2007 [GE logo omitted] GE Investments Funds, Inc. International Equity Fund Contents - -------------------------------------------------------------------------------- NOTES TO PERFORMANCE .................................................... 1 MANAGER REVIEW AND SCHEDULE OF INVESTMENTS .............................. 2 NOTES TO SCHEDULE OF INVESTMENTS ........................................ 9 FINANCIAL STATEMENTS Financial Highlights ............................................... 10 Statement of Assets and Liabilities ................................ 11 Statement of Operations ............................................ 12 Statements of Changes in Net Assets ................................ 13 Notes to Financial Statements ...................................... 14 ADDITIONAL INFORMATION .................................................. 19 INVESTMENT TEAM ......................................................... 22 This report is prepared for Policyholders of certain variable contracts and may be distributed to others only if preceded or accompanied by the variable contract's current prospectus and the current prospectus of the Funds available for investments thereunder. Notes to Performance June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- Total returns take into account changes in share price and assume reinvestment of dividends and capital gains distributions, if any. Investment returns and net asset value on an investment will fluctuate and you may have a gain or loss when you sell your shares. Periods less than one year are not annualized. Current performance may be lower or higher than that shown. You may call toll-free (800) 242-0134 for performance information as of the most recent month end. Total returns do not reflect expenses associated with the separate account such as administrative fees, account charges and surrender charges, which, if reflected, would reduce the total returns for all periods shown. Shares of the Fund are neither insured nor guaranteed by the U.S. Government, and their prices will fluctuate with market conditions. The Morgan Stanley Capital International EAFE Index (MSCI EAFE) is an unmanaged index and do not reflect the actual cost of investing in the instruments that comprise the index. The MSC(R) EAFE(R) Index is a market capitalization-weighted index of equity securities of companies domiciled in various countries. The Index is designed to represent the performance of developed stock markets outside the U.S. and Canada and excludes certain market segments unavailable to U.S. based investors. The results shown for the foregoing index assume the reinvestment of net dividends or interest. The peer universe of the underlying annuity funds used in our peer ranking calculation is based on the blend of Lipper peer categories, as shown. Lipper is an independent mutual fund rating service. A Fund's performance may be compared to or ranked within a universe of mutual funds with investment objectives and policies similar but not necessarily identical to the Fund's. Such comparisons or rankings are made on the basis of several factors, including the Fund's objectives and policies, management style and strategy, and portfolio composition, and may change over time if any of those factors change. 1 International Equity Fund - -------------------------------------------------------------------------------- THE INTERNATIONAL EQUITY FUND IS MANAGED BY A TEAM OF PORTFOLIO MANAGERS THAT INCLUDES BRIAN HOPKINSON, RALPH R. LAYMAN, PAUL NESTRO, JONATHAN L. PASSMORE, MICHAEL J. SOLECKI AND MAKOTO SUMINO. AS OF FEBRUARY 1, 2007, PAUL NESTRO AND MAKOTO SUMINO WILL ASSUME MS. STUDER'S RESPONSIBILITIES IN THE FUND. AS LEAD PORTFOLIO MANAGER FOR THE FUND, MR. LAYMAN (PICTURED BELOW) OVERSEES THE ENTIRE TEAM AND ASSIGNS A PORTION OF THE FUND TO EACH MANAGER, INCLUDING HIMSELF. RALPH R. LAYMAN IS A DIRECTOR AND EXECUTIVE VICE PRESIDENT OF GE ASSET MANAGEMENT AND PRESIDENT - INTERNATIONAL EQUITIES AT GE ASSET MANAGEMENT. HE MANAGES THE OVERALL INTERNATIONAL EQUITY INVESTMENTS FOR GE ASSET MANAGEMENT. MR. LAYMAN HAS LED THE TEAM OF PORTFOLIO MANAGERS FOR THE FUND SINCE 1997. MR. LAYMAN JOINED GE ASSET MANAGEMENT IN 1991 AS SENIOR VICE PRESIDENT FOR INTERNATIONAL INVESTMENTS AND BECAME AN EXECUTIVE VICE PRESIDENT IN 1992. BRIAN HOPKINSON IS A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT. HE HAS BEEN A PORTFOLIO MANAGER FOR THE FUND SINCE OCTOBER 1996. PRIOR TO JOINING GE ASSET MANAGEMENT, MR. HOPKINSON WORKED FOR FIDUCIARY TRUST INTERNATIONAL IN BOTH LONDON AND NEW YORK. PAUL NESTRO IS A VICE PRESIDENT OF GE ASSET MANAGEMENT. HE JOINED GE ASSET MANAGEMENT IN JANUARY 1993 AND HAS BEEN A MEMBER OF THE PORTFOLIO MANAGEMENT TEAM FOR THE GE INTERNATIONAL EQUITY FUND SINCE FEBRUARY 2007. JONATHAN L. PASSMORE IS A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT. HE HAS SERVED AS A PORTFOLIO MANAGER OF THE FUND SINCE JANUARY 2002. PRIOR TO JOINING GE ASSET MANAGEMENT IN JANUARY 2001, HE WAS WITH MERRILL LYNCH FOR SIX YEARS, MOST RECENTLY AS DIRECTOR, INTERNATIONAL EQUITY. MICHAEL J. SOLECKI IS A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT. HE HAS SERVED AS A PORTFOLIO MANAGER OF THE FUND SINCE SEPTEMBER 1997 HE JOINED GE ASSET MANAGEMENT IN 1990 AS AN INTERNATIONAL EQUITY ANALYST. HE BECAME A VICE PRESIDENT FOR INTERNATIONAL EQUITY PORTFOLIOS IN 1996 AND SENIOR VICE PRESIDENT IN 2000. MAKOTO SUMINO IS A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT. HE HAS SERVED ON THE PORTFOLIO MANAGEMENT TEAM FOR THE GE INTERNATIONAL EQUITY FUND SINCE FEBRUARY 2007. MR. SUMINO JOINED GE ASSET MANAGEMENT IN SEPTEMBER 1996 AS A SECURITIES ANALYST AND PORTFOLIO MANAGER. HE BECAME DEPUTY DIRECTOR OF THE INTERNATIONAL EQUITY RESEARCH TEAM IN JANUARY 2001 AND DIRECTOR IN APRIL 2005. Q. HOW DID THE INTERNATIONAL EQUITY FUND PERFORM COMPARED TO ITS BENCHMARK AND LIPPER PEER GROUP FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2007? A. For the six-month period ended June 30, 2007, the International Equity Fund returned 12.43%. The MSCI EAFE Index, the Fund's benchmark, returned 10.74% and the Fund's Lipper peer group of 136 International Core funds returned an average of 10.65% for the same period. Q. WHAT MARKET CONDITIONS IMPACTED FUND PERFORMANCE? A. Strong absolute returns were driven by a combination of attractive valuations (even after several strong quarters), mergers and acquisitions activity, a weak US Dollar and continued acceptance of risk. [photo omitted] 2 Q&A Sentiment stayed positive on the back of strong first quarter results that showed significant cash flow generation and more progress on efficiency. Q. WHAT DOMESTIC OR WORLD EVENTS HAD A MAJOR IMPACT ON THE FINANCIAL MARKETS? A. The recovery of Continental Europe after years of sluggish performance has been of increasing importance as it gathers momentum. Falling unemployment in the crucial markets of Germany and France is having a positive effect on consumer sentiment. In addition, France is benefiting from the election of Center-Right candidate Sarkozy to the Presidency, increasing the likelihood of a major change in France's hitherto outdated approach to regional and global economics. Japan continued to disappoint although the background indications of corporate performance and consumer trends are encouraging. Q. WHICH STOCKS & SECTORS SIGNIFICANTLY AFFECTED FUND PERFORMANCE? A. A significant positive contribution came from holdings in the materials sector, from both metals and mining and chemical stocks. In addition, industrial holdings in the conglomerate and infrastructure equipment segments performed well as did holdings in telecom services, especially wireless. Among the top performers in the Fund were BHP Billiton (UK - mining), Potash (Canada - fertilizers), CVRD (Brazil - mining) and Siemens (Germany - industrial). Holdings in IT were a modest drag on performance as stocks including Nidec (Japan) and Samsung Electronics (Korea) underperformed due to cyclical pricing issues. Q. DID THE WEIGHTINGS/COUNTRY ALLOCATIONS OF THE FUND CHANGE? WHY? A. We have continued to trim industrial holdings where valuations or qualitative issue demand but have selectively introduced new holdings that specialize in new, essential technologies such as pollution filters and enzymes, for example. We have added to our underweight positions in consumer stocks through autos, watches and clothing retail, as we see opportunities in the consumer space for well-positioned, global companies. The funds for these additions came from reductions in weightings with respect to healthcare, financials and the equipment segment of IT. Q. WHAT WERE THE MAJOR BUYS AND SELLS FOR THE PERIOD AND WHY? A. New positions were adopted in Orkla (Norway), an industrial company specializing in aluminum technology and silicon preparation for the solar industry; Esprit, (Hong Kong), a clothing retailer that has a large market share in the fast-growing market of Germany, supplied by lower cost products from Asia; and Ibiden (Japan), a manufacturer of high-tech diesel particulate filters for the US market. Disposals included Ericsson (Sweden), a wireless equipment manufacturer for valuation reasons, and Mitsui Sumitomo Insurance (Japan) on concerns over local business practices and a regulatory response. 3 International Equity Fund - -------------------------------------------------------------------------------- Understanding Your Fund's Expenses As a shareholder of the Fund you incur transaction and ongoing expenses. Transaction expenses including sales charges on purchase payments, reinvested dividends (or other distributions), and redemption fees directly reduce the investment return of the Fund. Ongoing costs include portfolio management fees, distribution and service fees, professional fees, administrative fees and other Fund expenses. The following example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the period. The information in the following table is based on an investment of $1,000, which is invested at the beginning of the period and held for the entire six-month period ended June 30, 2007. ACTUAL EXPENSES The first section of the table provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your class under the heading "Expenses Paid During Period." HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second section of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholders reports of other funds. Please note that the expenses shown in the table do not reflect any transaction costs, such as sales charges or redemption fees.
JANUARY 1, 2007 - JUNE 30, 2007 - ------------------------------------------------------------------------------------------------------------------------------------ ACCOUNT VALUE AT ACCOUNT VALUE EXPENSES THE BEGINNING OF AT THE END OF PAID DURING THE PERIOD ($) THE PERIOD ($) THE PERIOD ($)* - ------------------------------------------------------------------------------------------------------------------------------------ Actual Fund Return** 1,000.00 1,124.29 5.86 - ------------------------------------------------------------------------------------------------------------------------------------ Hypothetical 5% Return (2.5% for the period) 1,000.00 1,019.06 5.61 - ------------------------------------------------------------------------------------------------------------------------------------
*EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 1.12% (FROM PERIOD JANUARY 1, 2007 - JUNE 30, 2007), MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY 181/365 (TO REFLECT THE SIX MONTH PERIOD). **ACTUAL FUND RETURN FOR SIX-MONTH PERIOD ENDED JUNE 30, 2007 WAS: 12.43%. 4 International Equity Fund (unaudited) - -------------------------------------------------------------------------------- CHANGE IN VALUE OF A $10,000 INVESTMENT - -------------------------------------------------------------------------------- [Line chart omitted -- plot points are as follows:] International Equity Fund MSCI EAFE Index 06/97 $10,000.00 $10,000.00 12/97 9,372.93 9,151.81 12/98 11,008.06 10,981.61 12/99 14,346.71 13,942.78 12/00 12,521.90 11,967.47 12/01 9,910.05 9,380.83 12/02 7,548.46 7,885.52 12/03 10,409.89 10,928.21 12/04 12,059.73 13,140.86 12/05 14,253.97 14,919.55 12/06 17,773.53 18,849.44 06/07 19,982.59 20,873.97 International Equity Fund (ending value $19,983) MSCI EAFE (ending value $20,874)
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2007 - -------------------------------------------------------------------------------------------------- SIX ONE FIVE TEN MONTHS YEAR YEAR YEAR - -------------------------------------------------------------------------------------------------- International Equity Fund 12.43% 28.28% 16.00% 7.17% - -------------------------------------------------------------------------------------------------- MSCI EAFE Index 10.74% 27.00% 17.73% 7.64% - -------------------------------------------------------------------------------------------------- Lipper peer group average* 10.65% 26.16% 16.42% 7.76% - -------------------------------------------------------------------------------------------------- Inception date 5/1/95 - --------------------------------------------------------------------------------------------------
INVESTMENT PROFILE A fund designed for investors who seek long-term growth of capital by investing at least 80% of its net assets in equity securities under normal circumstances. The Fund invests primarily in developed and developing countries outside the United States. TOP TEN LARGEST HOLDINGS AS OF JUNE 30, 2007 as a % of Market Value - -------------------------------------------------------------------------------- BHP Billiton PLC 2.17% - -------------------------------------------------------------------------------- Saipem S.p.A. 1.93% - -------------------------------------------------------------------------------- Roche Holding AG 1.93% - -------------------------------------------------------------------------------- Nomura Holdings, Inc. 1.90% - -------------------------------------------------------------------------------- Vodafone Group, PLC 1.88% - -------------------------------------------------------------------------------- Nokia OYJ 1.84% - -------------------------------------------------------------------------------- Telenor ASA 1.77% - -------------------------------------------------------------------------------- Koninklijke Philips Electronics N.V. 1.74% - -------------------------------------------------------------------------------- Cia Vale do Rio Doce ADR 1.60% - -------------------------------------------------------------------------------- BNP Paribas 1.52% - -------------------------------------------------------------------------------- PORTFOLIO COMPOSITION AS OF JUNE 30, 2007 as a % of Market Value - -------------------------------------------------------------------------------- Market Value of $104,267 (in thousands) [Pie chart omitted -- plot points are as follows:] Continental Europe 40.7% Japan 15.9% United States 15.9% United Kingdom 12.3% Latin America 3.8% Pacific Rim 3.6% Emerging Asia 3.6% Canada 2.5% Emerging Europe 1.7% * LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR THE SIX MONTHS, ONE YEAR, FIVE-YEAR, AND TEN-YEAR PERIODS INDICATED IN THE INTERNATIONAL CORE PEER GROUP CONSISTING OF 136, 132, 107 AND 45 UNDERLYING ANNUITY FUNDS, RESPECTIVELY. SEE NOTES TO PERFORMANCE ON PAGE 1 FOR FURTHER INFORMATION, INCLUDING AN EXPLANATION OF LIPPER PEER CATEGORIES. PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE AND THE GRAPH AND TABLE DO NOT REFLECT THE DEDUCTION OF TAXES. 5 INTERNATIONAL EQUITY FUND Schedule of Investments June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- INTERNATIONAL EQUITY FUND - -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- COMMON STOCK -- 96.2%+ - -------------------------------------------------------------------------------- AUSTRALIA -- 0.8% Brambles Ltd. 20,481 $ 211,295(a) Paladin Resources Ltd. 74,515 518,141(a,f) 729,436 BRAZIL -- 1.1% Petroleo Brasileiro S.A. ADR 9,529 1,016,554(f) CANADA -- 2.9% Canadian National Railway Co. 20,352 1,036,971(f) Potash Corp of Saskatchewan 19,973 1,563,658 2,600,629 CHINA -- 0.6% China Petroleum & Chemical Corp. 518,000 578,678(f) DENMARK -- 0.8% Group 4 Securicor PLC 99,047 416,121 Novozymes (Series B) 2,812 325,218 741,339 EGYPT -- 0.7% Orascom Construction Industries 9,469 619,840 FINLAND -- 2.2% Nokia OYJ 68,512 1,920,048(f) FRANCE -- 10.6% Accor S.A. 3,197 282,011(f) Alstom 4,347 723,318(a) AXA S.A. 18,755 804,465(f) BNP Paribas 13,372 1,584,965(e,f) Credit Agricole S.A. 21,421 867,356(f) Groupe Danone 3,407 274,580 LVMH Moet Hennessy Louis Vuitton S.A. 6,206 712,559(f) Renault S.A. 2,076 332,253(f) Schneider Electric S.A. 3,382 472,829 Suez S.A. 8,621 491,791(f) Total S.A. 16,577 1,341,149(f) Veolia Environnement 15,560 1,219,475(f) Vinci S.A. 4,516 336,337 9,443,088 NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- GERMANY -- 8.6% Allianz AG (Regd.) 3,662 $ 857,023(f) Bayer AG 15,476 1,169,292(f) DaimlerChrysler AG (Regd.) 5,435 501,724 E.ON AG 8,255 1,383,107 Linde AG 9,070 1,092,333(f) Metro AG 7,652 633,979(f) RWE AG 4,774 508,429 Siemens AG (Regd.) 10,566 1,517,224 7,663,111 GREECE -- 0.9% Hellenic Telecommunications Organization S.A. 24,967 772,169 HONG KONG -- 1.8% Esprit Holdings Ltd. 14,000 177,906 Hongkong Land Holdings Ltd. 102,999 464,134 Jardine Matheson Holdings Ltd. 15,741 374,926 Sun Hung Kai Properties Ltd. 45,930 553,339(f) 1,570,305 INDIA -- 0.7% ICICI Bank Ltd. ADR 10,670 524,430(f) Larsen & Toubro Ltd. 1,005 54,075 Reliance Capital Ltd. ADR 1,702 45,503(a,b) 624,008 ITALY -- 5.4% Banca Intesa S.p.A. 131,014 974,710(f) ENI S.p.A. 7,137 258,214(f) Saipem S.p.A. 59,220 2,016,275(f) UniCredito Italiano S.p.A. 173,734 1,548,392 4,797,591 JAPAN -- 18.6% Asahi Glass Company Ltd. 49,003 658,748(f) Bank of Yokohama Ltd. 76,506 534,225 Chiyoda Corp. 31,618 600,671 East Japan Railway Co. 126 967,947 Hoya Corp. 16,100 532,487 Ibiden Company Ltd. 13,566 872,703(f) Komatsu Ltd. 27,811 803,633 Mitsubishi Estate Company Ltd. 56,982 1,541,326 Mitsubishi Heavy Industries Ltd. 82,000 523,598 Mitsubishi UFJ Financial Group, Inc. 144 1,582,223 Nidec Corp. 14,962 875,175(f) Nomura Holdings, Inc. 102,199 1,979,099(f) Sekisui Chemical Company Ltd. 11,998 92,449 Seven & I Holdings Company Ltd. 22,000 626,994(f) Shiseido Company Ltd. 42,000 893,863(f) See Notes to Schedule of Investments on page 9 and Notes to Financial Statements. 6 INTERNATIONAL EQUITY FUND Schedule of Investments June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- Sumitomo Realty & Development Company Ltd. 15,000 $ 487,033(f) Toray Industries Inc. 202,999 1,495,549(f) Toyota Motor Corp. 24,504 1,540,749 16,608,472 MEXICO -- 1.2% America Movil S.A. de C.V. ADR (Series L) 16,776 1,038,938(f) NETHERLANDS -- 3.0% ING Groep N.V. 20,367 894,505 Koninklijke Philips Electronics N.V. 42,981 1,817,495 2,712,000 NORWAY -- 3.6% Acergy S.A. 40,189 903,323 Orkla ASA 23,711 446,357 Telenor ASA 94,549 1,845,197 3,194,877 RUSSIA -- 0.5% Mobile Telesystems OJSC ADR 7,632 462,270(a) SINGAPORE -- 1.6% CapitaLand Ltd. 132,000 699,940 Singapore Telecommunications Ltd. 333,314 741,927 1,441,867 SOUTH AFRICA -- 0.8% MTN Group, Ltd. 51,630 703,343 SOUTH KOREA -- 1.8% Hyundai Motor Co. 3,630 286,414 Kookmin Bank ADR 6,843 600,268 Samsung Electronics Company Ltd. 120 73,358 Samsung Electronics Company Ltd. GDR 2,135 660,782(b) 1,620,822 SPAIN -- 1.4% Banco Santander Central Hispano S.A. (Regd.) 67,310 1,234,635(f) SWEDEN -- 1.0% Sandvik AB 44,688 898,263(f) NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- SWITZERLAND -- 10.2% ABB Ltd. (Regd.) 53,044 $ 1,192,023 Adecco S.A. (Regd.) 5,924 456,760 Credit Suisse Group, (Regd.) 18,563 1,313,399(e) Holcim Ltd. (Regd.) 3,465 372,960 Nestle S.A. (Regd.) 4,171 1,579,567(e) Novartis AG (Regd.) 10,617 594,051 Roche Holding AG 11,393 2,011,932 Swatch Group AG 1,129 319,641 Swiss Reinsurance 4,083 371,124 Syngenta AG (Regd) 4,396 854,136 9,065,593 TAIWAN -- 1.0% Taiwan Semiconductor Manufacturing Company Ltd. 405,061 867,495 UNITED KINGDOM -- 14.4% BG Group, PLC 34,981 572,924 BHP Billiton PLC 81,602 2,264,817(e) Diageo PLC 43,061 894,242 GlaxoSmithKline PLC 19,629 510,886(e) Group 4 Securicor PLC 83,026 349,786 Lloyds TSB Group, PLC 48,594 539,713 National Grid PLC 38,832 572,463 Prudential PLC 68,485 973,979 Reed Elsevier PLC 37,924 489,696 Rio Tinto PLC (Regd.) 13,152 1,005,294 Royal Bank of Scotland Group, PLC 116,842 1,477,159 Smiths Group PLC 13,965 330,899 Tesco PLC 102,127 853,715 Vodafone Group, PLC 584,127 1,955,579 12,791,152 TOTAL COMMON STOCK (COST $58,757,262) 85,716,523 - -------------------------------------------------------------------------------- PREFERRED STOCK -- 2.2% - -------------------------------------------------------------------------------- All America Latina Logistica S.A. 19,300 264,548 Cia Vale do Rio Doce ADR 44,151 1,664,493 TOTAL PREFERRED STOCK (COST $1,131,028) 1,929,041 - -------------------------------------------------------------------------------- RIGHTS -- 0.0%* - -------------------------------------------------------------------------------- Veolia Environnement (COST $0) 15,560 22,065(a) TOTAL INVESTMENTS IN SECURITIES (COST $59,888,290) 87,667,629 See Notes to Schedule of Investments on page 9 and Notes to Financial Statements. 7 INTERNATIONAL EQUITY FUND Schedule of Investments June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 18.6% - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 1.7% GEI Short Term Investment Fund 5.55% 1,521,205 $ 1,521,205(c,g) SHORT-TERM SECURITIES PURCHASED WITH COLLATERAL FROM SECURITIES ON LOAN -- 16.9% State Street Navigator Securities Lending Prime Portfolio 5.36% 15,078,355 15,078,355(c,d) TOTAL SHORT-TERM INVESTMENTS (COST $16,599,560) 16,599,560 TOTAL INVESTMENTS (COST $76,487,850) 104,267,189 LIABILITIES IN EXCESS OF OTHER ASSETS, NET-- (17.0)% (15,133,502) ------------- NET ASSETS-- 100.0% $ 89,133,687 ============= - -------------------------------------------------------------------------------- OTHER INFORMATION - -------------------------------------------------------------------------------- The GEI International Equity had the following long futures contracts open at June 30, 2007 (unaudited): NUMBER CURRENT EXPIRATION OF NOTIONAL UNREALIZED DESCRIPTION DATE CONTRACTS VALUE APPRECIATION - -------------------------------------------------------------------------------- DJ Euro Stoxx 50 Index Futures September 2007 9 $548,796 $3,526 FTSE 100 Index Futures September 2007 2 266,363 2,769 Topix Index Futures September 2007 2 287,461 3,320 ------ $9,615 ====== The GEI International Equity was invested in the following sectors at June 30, 2007 (unaudited): SECTOR PERCENTAGE (BASED ON MARKET VALUE) - -------------------------------------------------------------------------------- Financials 21.89% Short-Term 15.92% Industrials 12.35% Materials 11.33% Telecommunication Services 7.21% Energy 6.91% Consumer Discretionary 6.28% Information Technology 5.57% Consumer Staples 5.52% Utilities 4.03% Healthcare 2.99% --------- 100.00% ========= See Notes to Schedule of Investments on page 9 and Notes to Financial Statements. 8 Notes to Schedule of Investments June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- The views expressed in this document reflect our judgment as of the publication date and are subject to change at any time without notice. The securities cited may not represent current or future holdings and should not be considered as a recommendation to purchase or sell a particular security. See the prospectus for complete descriptions of investment objectives, policies, risks and permissible investments. (a) Non-income producing security. (b) Pursuant to Rule 144A of the Securities Act of 1933, these securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2007, these securities amounted to $706,285 or 0.79%, of net assets for the GE Investments International Equity Fund. These securities have been determined to be liquid using procedures established by the Board of Trustees. (c) Coupon amount represents effective yield. (d) State Street Corp. is the parent company of State Street Bank & Trust Co., the Fund's custodian and accounting agent. (e) At June 30, 2007, all or a portion of this security was pledged to cover collateral requirements for futures, options, forward foreign currency contracts and/or TBA's. (f) All or a portion of the security is out on loan. (g) GEAM, the investment advisor of the fund, serves as investment advisor of the GEI Short Term Investment Fund. * Less than 0.1%. + Percentages are based on net assets as of June 30, 2007. Abbreviations: ADR American Depository Receipt GDR Global Depository Receipt REGD. Registered REIT Real Estate Investment Trust SPDR Standard & Poors Depository Receipts 9
Financial Highlights Selected data based on a share outstanding throughout the periods indicated - ------------------------------------------------------------------------------------------------------------------------------------ INTERNATIONAL EQUITY FUND 6/30/07+ 12/31/06 12/31/05 12/31/04 12/31/03 12/31/02 - ------------------------------------------------------------------------------------------------------------------------------------ INCEPTION DATE -- -- -- -- -- 5/1/95 Net asset value, beginning of period .............. $14.08 $11.42 $9.76 $8.52 $6.23 $8.28 INCOME/(LOSS) FROM INVESTMENT OPERATIONS: Net investment income .......................... 0.19 0.15 0.13 0.11 0.07 0.07 Net realized and unrealized gains/(losses) on investments ............... 1.56 2.67 1.65 1.24 2.29 (2.04) - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INCOME/(LOSS) FROM INVESTMENT OPERATIONS .... 1.75 2.82 1.78 1.35 2.36 (1.97) - ------------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS FROM: Net investment income .......................... -- 0.16 0.12 0.11 0.07 0.08 Net realized gains ............................. -- -- -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL DISTRIBUTIONS ............................... -- 0.16 0.12 0.11 0.07 0.08 - ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, END OF PERIOD .................... $15.83 $14.08 $11.42 $9.76 $8.52 $6.23 ==================================================================================================================================== TOTAL RETURN (A) .................................. 12.43% 24.69% 18.19% 15.85% 37.91% (23.83)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ....... $89,134 $80,648 $65,450 $55,714 $45,198 $31,683 Ratios to average net assets: Net investment income* ...................... 2.57% 1.16% 1.19% 1.31% 1.13% 0.88% Expenses* ................................... 1.12% 1.13% 1.25% 1.15% 1.07% 1.09% Portfolio turnover rate ........................ 15% 34% 53% 38% 35% 42%
NOTES TO FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- (a) Total returns are historical and assume changes in share price and reinvestment of dividends and capital gains and do not include the effect of insurance contract charges. * Annualized for periods less than one year. + Unaudited. See Notes to Financial Statements. 10
Statement of Assets and Liabilities JUNE 30, 2007 (UNAUDITED) INTERNATIONAL EQUITY FUND - ------------------------------------------------------------------------------------------------------------------------------------ ASSETS Investments in securities, at market* (cost $59,888,290) ............................................... $87,667,629 Short-term Investments (at amortized cost) ............................................................. 15,078,355 Short-term affiliated investments (at amortized cost) .................................................. 1,521,205 Foreign cash (cost $208,487) ........................................................................... 209,023 Receivable for investments sold ........................................................................ 247,940 Income receivables ..................................................................................... 403,084 Variation margin receivable ............................................................................ 15,188 Other assets ........................................................................................... 131,540 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL ASSETS ....................................................................................... 105,273,964 - ------------------------------------------------------------------------------------------------------------------------------------ LIABILITIES Payable upon return of securities loaned ............................................................... 15,078,355 Payable for investments purchased ...................................................................... 361,151 Payable for fund shares redeemed ....................................................................... 582,774 Payable to GEAM ........................................................................................ 117,997 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL LIABILITIES .................................................................................. 16,140,277 - ------------------------------------------------------------------------------------------------------------------------------------ NET ASSETS ................................................................................................ $89,133,687 ==================================================================================================================================== NET ASSETS CONSIST OF: Capital paid in ........................................................................................ 56,182,281 Undistributed (distribution in excess of) net investment income ........................................ 1,068,197 Accumulated net realized gain (loss) ................................................................... 4,086,949 Net unrealized appreciation/(depreciation) on: Investments ........................................................................................ 27,779,339 Futures ............................................................................................ 9,615 Foreign currency related transactions .............................................................. 7,306 - ------------------------------------------------------------------------------------------------------------------------------------ NET ASSETS ................................................................................................ $89,133,687 ==================================================================================================================================== NET ASSETS ................................................................................................ 89,133,687 Shares outstanding ($0.01 par value; unlimited shares authorized) ......................................... 5,631,071 Net asset value per share ................................................................................. $15.83
* Includes $14,471,785 of securities out on loan. See Notes to Financial Statements. 11
Statement of Operations FOR THE SIX MONTHS ENDED JUNE 30, 2007 (UNAUDITED) INTERNATIONAL EQUITY FUND - -------------------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME INCOME: Dividend .................................................................................. $1,649,870 Interest* ................................................................................. 43,281 Interest from affliated investments ....................................................... 31,558 Less: Foreign taxes withheld .............................................................. (176,260) - -------------------------------------------------------------------------------------------------------------------------- TOTAL INCOME ................................................................................ 1,548,449 - -------------------------------------------------------------------------------------------------------------------------- EXPENSES: Advisory and administrative fees .......................................................... 419,698 Transfer agent ............................................................................ 31 Trustee's fees ............................................................................ 1,112 Custody and accounting expenses ........................................................... 32,286 Professional fees ......................................................................... 9,727 Registration expenses ..................................................................... 1,573 Other expenses ............................................................................ 3,863 - -------------------------------------------------------------------------------------------------------------------------- TOTAL EXPENSES .............................................................................. 468,290 - -------------------------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME (LOSS) ................................................................ 1,080,159 ========================================================================================================================== NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS REALIZED GAIN (LOSS) ON: Investments ............................................................................ 3,963,387 Futures ................................................................................ 5,611 Foreign currency transactions .......................................................... (9,105) INCREASE (DECREASE) IN UNREALIZED APPRECIATION/ (DEPRECIATION) ON: Investments ............................................................................ 4,842,504 Futures ................................................................................ 7,414 Foreign currency transactions .......................................................... 3,153 - -------------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments ......................................................................... 8,812,964 - -------------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ............................. $9,893,123 ==========================================================================================================================
* Income attributable to security lending activity, net of rebate expenses, was $40,255. See Notes to Financial Statements. 12
Statements of Changes in Net Assets INTERNATIONAL EQUITY FUND - ----------------------------------------------------------------------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED JUNE 30, 2007 DECEMBER 31, (UNAUDITED) 2006 - ----------------------------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS OPERATIONS: Net investments income (loss) .............................................................. $ 1,080,159 $ 847,096 Net realized gain (loss) on investments, futures, written options, foreign currency transactions and swaps .................................................. 3,959,893 7,318,705 Net increase (decrease) in unrealized appreciation/(depreciation) on investments, futures, written options, foreign currency translation ................... 4,853,071 7,918,422 - ----------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) from operations .................................................... 9,893,123 16,084,223 - ----------------------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income ...................................................................... -- (903,051) - ----------------------------------------------------------------------------------------------------------------------------------- TOTAL DISTRIBUTIONS .......................................................................... -- (903,051) - ----------------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from operations and distributions .......................... 9,893,123 15,181,172 - ----------------------------------------------------------------------------------------------------------------------------------- SHARE TRANSACTIONS: Proceeds from sale of shares ............................................................... 16,354,523 18,473,402 Value of distributions reinvested .......................................................... -- 903,051 Cost of shares redeemed .................................................................... (17,761,813) (19,359,985) - ----------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) from share transactions ............................................ (1,407,290) 16,468 - ----------------------------------------------------------------------------------------------------------------------------------- TOTAL INCREASE (DECREASE) IN NET ASSETS ...................................................... 8,485,833 15,197,640 NET ASSETS Beginning of period .......................................................................... 80,647,854 65,450,214 - ----------------------------------------------------------------------------------------------------------------------------------- End of period ................................................................................ $89,133,687 $ 80,647,854 =================================================================================================================================== UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD .................. $ 1,068,197 $ (11,962) - ----------------------------------------------------------------------------------------------------------------------------------- CHANGES IN FUND SHARES Shares sold ................................................................................ 1,099,627 1,476,929 Issued for distributions reinvested ........................................................ (2) 64,322 Shares redeemed ............................................................................ (1,197,237) (1,544,654) - ----------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in fund shares .......................................................... (97,612) (3,403) ===================================================================================================================================
See Notes to Financial Statements. 13 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- 1. ORGANIZATION OF THE COMPANY GE Investments Funds, Inc. (the "Company") was incorporated under the laws of the Commonwealth of Virginia on May 14, 1984 and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company. The Company is composed of thirteen investment portfolios (collectively the "Funds"), although only the following eleven are currently being offered: U.S. Equity Fund, S&P 500 Index Fund, Premier Growth Equity Fund, Value Equity Fund, Mid-Cap Equity Fund, Small-Cap Equity Fund, International Equity Fund (the "Fund"), Total Return Fund, Income Fund, Money Market Fund and Real Estate Securities Fund. Shares of the Funds of the Company are offered only to insurance company separate accounts that fund certain variable life insurance contracts and variable annuity contracts. These insurance companies may include insurance companies affiliated with GE Asset Management Incorporated ("GEAM"), the investment adviser and administrator of each of the Funds. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions at the date of the financial statements. Actual results may differ from those estimates. The following summarizes the significant accounting policies of the Fund: SECURITY VALUATION AND TRANSACTIONS for which exchange quotations are readily available are valued at the last sale price, or if no sales occurred on that day, at the last quoted bid price. Securities listed on the NASDAQ will be valued at the NASDAQ's official close price. Certain fixed income securities are valued by a dealer or by a pricing service based upon a matrix system, which considers market transactions as well as dealer supplied valuations. Short-term investments maturing within sixty days are valued at amortized cost. If quotations are not readily available for a portfolio security, or if it is believed that a quotation or other market price for a portfolio security does not represent its fair value, the security may be valued using procedures approved by the Fund's Board of Directors that are designed to establish its "fair value." These procedures require that the fair value of a security be established by the valuation committee. The fair value committee follows different protocols for different types of investments and circumstances. Foreign securities may be valued with the assistance of an independent fair value pricing service in circumstances where it is believed that they have been or would be materially affected by events occurring after the close of the portfolio security's primary market and before the close of regular trading on the NYSE. This independent fair value pricing service uses a computerized system to appraise affected securities and portfolios taking into consideration various factors and the fair value of such securities may be something other than the last available quotation or other market price. GE Asset Management may also separately monitor portfolio securities and, consistent with the Fund's fair value procedures, apply a different value to a portfolio security than would be applied had it been priced using market quotations or by an independent fair value pricing service. Determining the fair value of securities involves the application of both subjective and objective considerations. Security values may differ depending on the methodology used to determine their values, and may differ from the last quoted sale or closing price. No assurance can be given that use of these fair value procedures will always better represent the price at which a Fund could sell the affected portfolio security. Security transactions are accounted for as of the trade date. Realized gains and losses on investments sold are recorded on the basis of identified cost for both financial statement and federal tax purposes. In September 2006, FASB issued Statement of Financial Accounting Standards No. 157, FAIR VALUE MEASUREMENTS ("FAS 157"). FAS 157 establishes a single authoritative definition of fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. FAS 157 applies to fair value measurements already required or permitted by existing standards. The change to current generally accepted accounting principles from the application of FAS 157 relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. Management of the Fund does not believe the adoption of FAS 157 will materially impact the financial statement amounts, however, additional disclosures may be required about the inputs used to develop the measurements and the effect of certain of the measurements on changes in net assets for the period. 14 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- FAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. REPURCHASE AGREEMENTS The Fund may engage in repurchase agreement transactions with respect to instruments that are consistent with the Fund's investment obectives or policies. The Fund's or a third party custodian takes possession of the collateral pledged for investments in repurchase agreements on behalf of the Fund. The Fund values the underlying collateral daily on a mark-to-market basis to determine that the value, including accrued interest, is at least equal to 102% of the repurchase price. In the event the seller defaults and the value of the security declines, or if the seller enters an insolvency proceeding, realization of the collateral by the Fund may be delayed or limited. SECURITY LENDING The Fund may loan securities to brokers, dealers, and financial institutions determined by GEAM to be creditworthy, subject to certain limitations. The Fund continues to receive the interest and dividends on the loaned securities during the term of the loan. The loans of securities are secured by collateral in the form of cash or other liquid assets, which are segregated and maintained with the custodian in an amount at least equal to 102% of the current market value of the loaned securities. During the term of the loan, the Fund will record any gain or loss in the market value of its loaned securities and of securities in which cash collateral is invested. The Fund will also earn interest, net of any rebate, from securities in which cash collateral is invested. In the event the counterparty (borrower) does not meet its contracted obligation to return the securities, the Fund may be exposed to the risk of loss of reacquiring the loaned securities at prevailing market prices using the proceeds of the sale of the collateral. FOREIGN CURRENCY Accounting records of the Fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange at period end. Purchases and sales of securities, income receipts and expense payments denominated in foreign currencies are translated into U.S. dollars at the prevailing exchange rate on the respective dates of such transactions. The Fund does not isolate the portion of the results of operations resulting from changes in foreign exchange rates from the fluctuations arising from changes in the market prices of securities during the period. Such fluctuations are included in the net realized or unrealized gain or loss from investments. Net realized gains or losses on foreign currency transactions represent net gains or losses on sales and maturities of foreign currency contracts, disposition of foreign currencies, the difference between the amount of net investment income and withholding taxes accrued and the U.S. dollar amount actually received or paid, and gains or losses between the trade and settlement date on purchases and sales of securities. Net unrealized foreign exchange gains and losses arising from changes in the value of other assets and liabilities as a result of changes in foreign exchange rates are included as increases or decreases in unrealized appreciation/depreciation on foreign currency related transactions. FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or bond index futures contracts subject to certain limitations. The Fund may invest in futures contracts to manage its exposure to the stock and bond markets and fluctuations in currency values. Buying futures tends to increase the Fund's exposure to the underlying instrument while selling futures tends to decrease the Fund's exposure to the underlying instrument, or hedge other Fund investments. The Fund will not enter into a transaction involving futures for speculative purposes. The Fund's risks in using these contracts include changes in the value of the underlying instruments, non-performance of the counterparties under the contracts' terms and changes in the liquidity of the secondary market for the contracts. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they principally trade. Upon entering into a futures contract, the Fund is required to pledge to the broker an amount of cash and/or other assets equal to a certain percentage of the contract amount, known as initial margin deposit. Subsequent payments, known as variation margin, are made or received by the Fund each day, depending on the daily fluctuation in the fair value of the underlying security. The Fund records an unrealized gain or loss equal to the daily variation margin. Should market conditions move unexpectedly, the Fund may not achieve the anticipated benefits of the futures contracts and may incur a loss. The Fund recognizes a realized gain or loss on the expiration or closing of a futures contract. OPTIONS The Fund may purchase and write options, subject to certain limitations. The Fund may invest in options contracts to manage its exposure to the stock and bond markets and fluctuations in foreign currency values. 15 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- Writing puts and buying calls tend to increase the Fund's exposure to the underlying instrument while buying puts and writing calls tend to decrease the Fund's exposure to the underlying instrument, or hedge other Fund investments. The Fund will not enter into a transaction involving options for speculative purposes. The Fund's risks in using these contracts include changes in the value of the underlying instruments, non-performance of the counterparties under the contracts' terms and changes in the liquidity of the secondary market for the contracts. Options are valued at the last sale price, or if no sales occurred on that day, at the last quoted bid price. When the Fund writes an option, the amount of the premium received is recorded as a liability and is subsequently adjusted to the current fair value of the option written. Premiums received from writing options that expire unexercised are treated by the Fund on the expiration date as realized gains from investments. The difference between the premium and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium is less than the amount paid for the closing purchase, as a realized loss. When an option is exercised, the proceeds from the sale of the underlying security or the cost basis of the securities purchased is adjusted by the original premium received or paid. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS The Fund may enter into forward foreign currency exchange contracts to facilitate transactions in foreign denominated securities and to manage the Fund's currency exposure. Forward foreign currency exchange contracts are valued at the mean between the bid and the offered forward rates as last quoted by a recognized dealer. The aggregate principal amounts of the contracts are not recorded in the Fund's financial statements. Such amounts appear under the caption forward foreign currency contracts in the Schedule of Investments. Fluctuations in the value of the contracts are recorded in the Statement of Assets and Liabilities as an asset (or liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized gains or losses on foreign currency related transactions. The Fund's risks in using these contracts include changes in the value of foreign currency or the possibility that the counterparties do not perform under the contracts' terms. When the Fund enters into a forward foreign currency exchange contract, it is required to segregate cash or liquid securities with its custodian in an amount equal to the value of the Fund's total assets committed to the consummation of the forward contract. If the value of the segregated securities declines, additional cash or securities is segregated so that the value of the account will equal the amount of the Fund's commitment with respect to the contract. INVESTMENTS IN FOREIGN MARKETS Investments in foreign markets may involve special risks and considerations not typically associated with investing in the United States. These risks include revaluation of currencies, high rates of inflation, repatriation on income and capital, and adverse political and economic developments. Moreover, securities issued in these markets may be less liquid, subject to government ownership controls, tariffs and taxes, subject to delays in settlements, and their prices may be more volatile. The Fund may be subject to capital gains and repatriation taxes imposed by certain countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued based upon net investment income, net realized gains and net unrealized appreciation as income and/or capital gains are earned. INCOME TAXES The Fund intends to comply with all sections of the Internal Revenue Code applicable to regulated investment companies including the distribution of substantially all of its taxable net investment income and net realized capital gains to its shareholders. Therefore, no provision for federal income tax has been made. The Fund is treated as a separate taxpayer for federal income tax purposes. At June 30, 2007, information on the tax cost of investments is as follows:
Cost of Gross Tax Gross Tax Net Tax Appreciation/ Investments for Unrealized Unrealized (Depreciation) Tax Purposes Appreciation Depreciation on Investments - ------------------------------------------------------------------------------------------------------------------------------------ $76,633,158 $28,275,570 $(641,539) $27,634,031
16 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- As of December 31, 2006, the Fund has no capital loss carryovers. Capital loss carryovers are available to offset future realized capital gains to the extent provided in the Internal Revenue Code and regulations thereunder. To the extent that these carryover losses are used to offset future capital gains, it is probable that the gains so offset will not be distributed to shareholders because they would be taxable as ordinary income. During the year ended December 31, 2006, the Fund utilized approximately $6,931,084 of capital loss carryovers. Any net capital and currency losses incurred after October 31, within the Fund's tax year, are deemed to arise on the first day of the Fund's next tax year if the Fund so elects to defer such losses. The Fund elected to defer losses incurred after October 31, 2006 as follows: Capital Currency - -------------------------------------------------------------------------------- $-- $6,230 The tax composition of distributions paid (other than return of capital distributions for the year) during the year ended December 31, 2006 was as follows: Ordinary Long-Term Income Capital Gains Total - -------------------------------------------------------------------------------- $892,355 $10,696 $903,051 DISTRIBUTIONS TO SHAREHOLDERS The Fund declares and pays dividends from net investment income annually. The Fund declares and pays net realized capital gains in excess of capital loss carryforwards distributions annually. The character of income and gains to be distributed is determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences include (but are not limited to) futures, treatment of realized gains and losses on foreign currency contracts, and losses deferred due to wash sale transactions. Reclassifications due to permanent book/tax differences are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. These reclassifications have no impact on net investment income, realized gains or losses, or the net asset value of the Fund. The calculation of net investment income per share in the Financial Highlights table excludes these adjustments. The reclassifications for the year ended December 31, 2006 were as follows: Undistributed (Distribution in Excess of) Net Investment Accumulated Paid in Income Net Realized Gain Capital - -------------------------------------------------------------------------------- $17,009 $(17,009) $-- On June 29, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in Income Taxes." FIN48 provides guidance for how certain uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN48 requires evaluation of tax positions taken or expected to be taken in the course of preparing the Fund's tax return to determine whether the tax positions are "more likely than not" of being sustained by the applicable tax authority. The adoption of FIN48 did not have an impact on the Fund's net assets and financial statements. INVESTMENT INCOME Corporate actions (including cash dividends) are recorded on the ex-dividend date, net of applicable withholding taxes, except for certain foreign corporate actions, which are recorded as soon after ex-dividend date as such information becomes available. Interest income is recorded on the accrual basis. All discounts and premiums on bonds are accreted and amortized, respectively, to call or maturity date, whichever is shorter, using the effective yield method. EXPENSES Expenses of the Company which are directly identifiable to one of the Funds are allocated to that portfolio. Expenses which are not directly identifiable to one of the Funds are allocated in such a manner as deemed equitable, taking into consideration the nature and type of expenses and relative sizes of the Funds. All expenses of the Fund are paid by GEAM and reimbursed by the Fund. 3. LINE OF CREDIT The Fund shares a revolving credit facility of up to $25 million with a number of its affiliates. The credit facility is with its custodian bank, State Street Bank and Trust Company. The revolving credit facility requires the payment of a commitment fee equal to 0.09% per annum on the daily unused portion of the credit facility, payable quarterly. The portion borne by the Funds generally is borne proportionally based upon net assets. Generally, 17 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- borrowings under the credit facility would accrue interest at the Federal Funds Rate plus 50 basis points and is borne by each of the borrowing Funds. The maximum amount allowed to be borrowed by any one of the Funds is the lesser of its prospectus limitation, 20% of its net assets, or $25 million. The credit facility was not utilized by the Fund during the period ended June 30, 2007. 4. AMOUNTS PAID TO AFFILIATES GEAM, a registered investment adviser, was retained by the Company's Board of Directors effective May 1, 1997 to act as investment adviser and administrator of the Fund. Compensation of GEAM for investment advisory and administrative services is paid monthly based on the average daily net assets of the Fund. The advisory and administrative fee is stated in the following schedule: Annualized based on average daily net assets - -------------------------------------------------------------------------------- Average Daily Advisory and Net Assets Administration of Fund Fees - -------------------------------------------------------------------------------- First $100 million 1.00% Next $100 million .95% Over $200 million .90% GENPACT performs certain accounting and certain administration services not provided by GEAM. For the period ending June 30, 2007, $653 was charged to the Fund. DIRECTORS' COMPENSATION The Fund pays no compensation to its directors who are officers or employees of GEAM or its affiliates. Directors who are not such officers or employees also serve in a similar capacity for other funds advised by GEAM. Compensation paid to unaffiliated directors are reflected on the Statement of Operations. These fees are allocated pro rata across all of the mutual fund platforms and share classes served by the directors, including the Fund, and are based upon the relative net assets of each fund within such platforms. (For additional information about directors compensation please refer to the Statement of Additional Information.) 5. INVESTMENT TRANSACTIONS PURCHASES AND SALES OF SECURITIES The cost of purchases and the proceeds from sales of investments, other than short-term securities and options, for the period ended June 30, 2007 were as follows: Purchases Sales - -------------------------------------------------------------------------------- $12,675,803 $13,480,541 SECURITY LENDING At June 30, 2007, the Fund participated in securities lending: Loaned securities at Cash market value collateral* - -------------------------------------------------------------------------------- $14,471,785 $15,078,355 * COLLATERAL OF $15,001,767 INCREASED BY $76,588 ON JULY 1, 2007 TO REFLECT THE JUNE 30, 2007 CHANGE IN VALUE OF SECURITIES ON LOAN. 18 Additional Information (unaudited) - -------------------------------------------------------------------------------- INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS: The business and affairs of the Company are managed under the direction of the Company's Board of Directors. Information pertaining to the Directors and officers of the Company is set forth below. INTERESTED DIRECTORS AND EXECUTIVE OFFICERS - -------------------------------------------------------------------------------- MICHAEL J. COSGROVE - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 58 POSITION(S) HELD WITH FUND Chairman of the Board and President TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 10 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President - GEAM since February 1997; President and Chief Executive Officer - Mutual Funds at GEAM since March 2007; Vice President, GE Capital Corporation, an indirect wholly-owned subsidiary of GE, since December 1999; Executive Vice President - Sales and Marketing of GEAM, a wholly-owned subsidiary of GE that is registered as an investment adviser under the Investment Advisers Act of 1940, as amended, since March 1993; Director of GEAM since 1988. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48 OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception; Trustee of Elfun Funds, GE Savings & Security Funds and General Electric Pension Trust since 1988; Trustee of Fordham University since 2003; Trustee of Elfun Foundation; Treasurer of GE Foundation; Director, GE Asset Management (Ireland) since February 1999; Director, GE Asset Management Funds Plc, GE Asset Canada Company, GE Asset Management Limited, and GE Volunteers. - -------------------------------------------------------------------------------- MATTHEW J. SIMPSON - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 46 POSITION(S) HELD WITH FUND Executive Vice President TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - less than one year PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General Counsel and Secretary of GEAM since July 2007; Senior Vice President and General Counsel - Marketing and Client Services (formerly Asset Management Services), at GEAM and Senior Vice President and General Counsel of GEAMS from February 1997 to June 2007; Vice President and Associate General Counsel of GEAM from October 1992 to February 1997; Secretary of Fund from 1997 to June 2007; Vice President of Fund from September 2003 to June 2007; Vice President of GE Institutional Funds and GE LifeStyle Funds from September 2003 to June 2007; Secretary of GE Institutional Funds and GE LifeStyle Funds from 1997 to June 2007; Vice President of Elfun Funds and GE Savings & Security Funds from October 2003 to June 2007; Assistant Secretary of Elfun Funds and GE Savings & Security Funds from 1998 to June 2007. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional Funds, GE LifeStyle Funds, Elfun Funds and GE Savings & Security Funds since July 2007. 19 Additional Information (unaudited) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SCOTT H. RHODES - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 48 POSITION(S) HELD WITH FUND Treasurer TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - one year PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds Operations Manager since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle Funds and GE Investments Funds since November 2005 and Elfun Funds and GE Savings & Security Funds since September 2005; from August 2004 to September 2005 Vice President, U.S. Trust Company, N.A. and Assistant Treasurer of Excelsior Funds, Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds, Inc.; from January 2004 to August 2004, Vice President BlackRock Financial Management, Inc.; from December 1996 to November 2003, Controller - Mutual Funds, American Skandia Investment Services, Inc. and Assistant Treasurer of American Skandia Trust and American Skandia Advisor Funds, Inc. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A - -------------------------------------------------------------------------------- JEANNE M. LAPORTA - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 42 POSITION(S) HELD WITH FUND Vice President and Secretary TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 2 years (Vice President); less than one year (Secretary) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Associate General Counsel - Marketing and Client Services (formerly Asset Management Services) at GEAM since May 1997; Vice President and Assistant Secretary of GE Funds, GE Institutional Funds and GE LifeStyle Funds since September 2003; Vice President and Assistant Secretary of Elfun Funds and GE Savings & Security Funds since October 2003; Assistant Secretary from September 2003 to June 2007 and Secretary since July 2007. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A 20 Additional Information (unaudited) - -------------------------------------------------------------------------------- NON-INTERESTED DIRECTORS - -------------------------------------------------------------------------------- JOHN R. COSTANTINO - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 61 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC since 2006; Managing Director, Walden Partners, Ltd., consultants and investors, since August 1992. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE Institutional Funds and GE LifeStyle Funds since their inception; Trustee of Fordham University since 2002 and Marymount College from 2001 through 2002; Neuroscience Research Institute since 1986; Diocesan Finance Counsel of the Dioceses of Brooklyn & Queens since 2001; Gregorian University Foundation since 1994. - -------------------------------------------------------------------------------- WILLIAM J. LUCAS - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 59 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Treasurer of Fairfield University since 1983. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception. - -------------------------------------------------------------------------------- ROBERT P. QUINN - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 71 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon Brothers Inc. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception. - -------------------------------------------------------------------------------- The Statement of Additional Information for the Fund includes additional information about the Directors and Officers and is available, without charge, upon request by calling 1-800-242-0134. 21 Investment Team - -------------------------------------------------------------------------------- INVESTMENT ADVISER AND ADMINISTRATOR GE Asset Management Incorporated BOARD OF DIRECTORS Michael J.Cosgrove, CHAIRMAN John R. Costantino William J. Lucas Robert P. Quinn Matthew J. Simpson SECRETARY Jeanne M. LaPorta ASSISTANT SECRETARIES Joseph A. Carucci Joon Won Choe TREASURER Scott H. Rhodes ASSISTANT TREASURERS Scott R. Fuchs Christopher M. Isaacs DISTRIBUTOR GE Investment Distributors, Inc. Member NASD and SIPC COUNSEL Sutherland, Asbill & Brennan, LLP CUSTODIAN State Street Bank & Trust Company INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM KPMG LLP OFFICERS OF THE INVESTMENT ADVISER James W. Ireland, CHIEF EXECUTIVE OFFICER Michael J. Cosgrove, EVP, PRESIDENT AND CHIEF EXECUTIVE OFFICER - MUTUAL FUNDS Paul M. Colonna, PRESIDENT - FIXED INCOME Kathryn D. Karlic, EVP, PRESIDENT - SALES AND MARKETING Ralph R. Layman, EVP, PRESIDENT - INTERNATIONAL EQUITIES Matthew J. Simpson, EVP, GENERAL COUNSEL AND SECRETARY Judith A. Studer, EVP, PRESIDENT - U.S. EQUITIES Don W. Torey, EVP, PRESIDENT - ALTERNATIVE INVESTMENTS AND REAL ESTATE John J. Walker, EVP, CHIEF FINANCIAL OFFICER 22 [This page intentionally left blank.] [This page intentionally left blank.] [This page intentionally left blank.] INVESTMENT ADVISER GE ASSET MANAGEMENT INCORPORATED 3001 SUMMER STREET PO BOX 7900 STAMFORD, CT 06904-7900 DISTRIBUTOR GE INVESTMENT DISTRIBUTORS, INC. MEMBER NASD AND SIPC 3001 SUMMER STREET PO BOX 7900 STAMFORD, CT 06904-7900 The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities is available without charge (i) upon request, by calling 1-800-242-0134; (ii) on the Fund's website at http://www.gefunds.com; and (iii) on the Commission's website at http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC - - information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Information (if any) regarding how the Fund voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through the Fund's website at http://www.gefunds.com; and (ii) on the Commission's website at http://www.sec.gov. [GE logo omitted] GE Investments Funds, Inc. Premier Growth Equity Fund Semi-Annual Report JUNE 30, 2007 [GE LOGO OMITTED] GE Investments Funds, Inc. Premier Growth Equity Fund Contents - -------------------------------------------------------------------------------- NOTES TO PERFORMANCE ..................................................... 1 MANAGER REVIEW AND SCHEDULE OF INVESTMENTS ............................... 2 NOTES TO SCHEDULE OF INVESTMENTS ......................................... 7 FINANCIAL STATEMENTS Financial Highlights ................................................ 8 Statement of Assets and Liabilities ................................. 9 Statement of Operations ............................................. 10 Statements of Changes in Net Assets ................................. 11 Notes to Financial Statements ....................................... 12 ADDITIONAL INFORMATION ................................................... 17 INVESTMENT TEAM .......................................................... 20 This report is prepared for Policyholders of certain variable contracts and may be distributed to others only if preceded or accompanied by the variable contract's current prospectus and the current prospectus of the Funds available for investments thereunder. Notes to Performance June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- Total returns take into account changes in share price and assume reinvestment of dividends and capital gains distributions, if any. Investment returns and net asset value on an investment will fluctuate and you may have a gain or loss when you sell your shares. Periods less than one year are not annualized. Current performance may be lower or higher than that shown. You may call toll-free (800) 242-0134 for performance information as of the most recent month end. Total returns do not reflect expenses associated with the separate account such as administrative fees, account charges and surrender charges, which, if reflected, would reduce the total returns for all periods shown. Shares of the Fund are neither insured nor guaranteed by the U.S. Government, and their prices will fluctuate with market conditions. The Standard & Poor's ("S&P") 500 Composite Price Index of stocks (S&P 500) is an unmanaged index and do not reflect the actual cost of investing in the instruments that comprise the index. The S&P 500 is a market capitalization-weighted index of stocks of 500 large U.S. companies, which is widely used as a measure of large-cap stock market performance. The results shown for the foregoing index assume the reinvestment of net dividends or interest. The peer universe of the underlying annuity funds used in our peer ranking calculation is based on the blend of Lipper peer categories, as shown. Lipper is an independent mutual fund rating service. A Fund's performance may be compared to or ranked within a universe of mutual funds with investment objectives and policies similar but not necessarily identical to the Fund's. Such comparisons or rankings are made on the basis of several factors, including the Fund's objectives and policies, management style and strategy, and portfolio composition, and may change over time if any of those factors change. 1 Premier Growth Equity Fund - ------------------------------------------------------------------------------- DAVID B. CARLSON IS A SENIOR VICE PRESIDENT AND CHIEF INVESTMENT OFFICER - U.S. EQUITIES OF GE ASSET MANAGEMENT. HE MANAGES THE OVERALL U.S. EQUITY INVESTMENTS FOR GE ASSET MANAGEMENT. MR. CARLSON IS PORTFOLIO MANAGER FOR THE PREMIER GROWTH EQUITY FUND AND HAS SERVED IN THAT CAPACITY SINCE THE FUND'S COMMENCEMENT. MR. CARLSON JOINED GE ASSET MANAGEMENT IN 1982 AS A SECURITIES ANALYST FOR INVESTMENT OPERATIONS. HE BECAME A VICE PRESIDENT FOR MUTUAL FUND PORTFOLIOS IN 1987, A SENIOR VICE PRESIDENT IN 1989. Q. HOW DID THE PREMIER GROWTH EQUITY FUND PERFORM COMPARED TO ITS BENCHMARK AND LIPPER PEER GROUP FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2007? A. For the six-month period ended June 30, 2007, the Premier Growth Equity Fund returned 5.78%. The S&P 500 Index, the Fund's benchmark, returned 6.96% and the Fund's Lipper peer group of 196 Large-Cap Growth funds returned an average of 7.43% for the same period. Q. WHAT MARKET CONDITIONS IMPACTED FUND PERFORMANCE? A. The period continued a rally that had propelled the U.S. equity markets higher over the past year. While first-quarter `07 earnings growth moderated into the single digit range for the first time in three years, corporate profits did climb +9%, surprising market-watchers to the upside. Despite a backdrop of slowing economic growth, a weakening dollar and rising oil prices, stocks rallied amid the strong corporate earnings, record M&A activity, cooling inflation worries and the absence of Fed tightening. By early June, several key U.S. equity indices reached new highs. However, the period ended with a whimper -- during the month of June each broad measure of U.S. equity market performance retreated. The S&P 500's June decline was just its second in 13 months, and its second down month in 2007. The pullback was brought on by renewed inflation fears, and concern that the Fed might need to raise interest rates this year to keep inflation in check. New liquidity and credit concerns also spooked the markets, amid the near collapse of two large sub-prime hedge funds. During the six-month period, S&P 500 sectors tilted toward global infrastructure investment outperformed, including energy (+17%), materials (+17%) and industrials (+11%). Telecom (+16%) also rallied on the strength of continued restructuring improvements and sector consolidation. Financials (-1%) offered the only negative sector return, facing credit cycle headwinds and anxiety stemming from leveraged speculation in the debt market. Consumer discretionary (+3%), consumer staples (+5%) and health care (+6%) also lagged. Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE? A. While the Fund picked up significant performance relative to the S&P 500 during the second half of the period -- helped by a strategic underweight in financials amid increasing concerns about the aging credit cycle -- the Fund still lagged the benchmark year-to-date. As a growth oriented portfolio, the overweight in technology and healthcare negatively [photo omitted] 2 Q&A impacted performance of the Fund during the period. The Fund was underweight in industrials, and had no holdings in utilities or telecom. The energy weight was modest at 6% of the Fund's holdings. Looking at individual holdings, media stocks did well, and Liberty Global and Liberty Capital were up +40% and +20%, respectively. Strength in the Fund's oil services holdings more than offset the energy underweight, as Schlumberger rallied +35% and Transocean was up +31% during the period. Monsanto (+29%) was another notable gainer, as a materials stock leveraged the global development trends. On the downside, Amgen, the world's largest biotechnology company, declined -19% during the period amid increased FDA scrutiny. While we have lowered our `07 earnings estimates, we continue to like its innovative product pipeline. Western Union (-7%) also dragged, due to a Mexican-market slowdown caused by immigration concerns. However, we continued to believe in the strength of Western Union's agency business model, its attractive growth rate outside the Americas, and its industry-leading return on invested capital. Bed Bath & Beyond (-5%), UnitedHealth (-5%) and Molex (-4%) represented other key detractors, however we believed the fundamentals remained intact and continue to maintain a conviction towards each company's long-term growth prospects. Q. WERE THERE ANY SIGNIFICANT CHANGES TO THE FUND OVER THE PERIOD? A. There were no significant changes in the Fund's holdings during the period. We had a swap in the retail sector from Home Depot to Lowes. We initiated a position in PepsiCo and eliminated First Data. We also eliminated student lender, Sallie Mae, after a +40% rally on a buyout bid. We ended the period with 33 names in the Fund. Technology stocks made up about 30% of the Fund, with consumer and healthcare at about 20% each. With economic growth slowing, the forecast for corporate profits has slowed significantly. This change in the macro environment may lead to a change in stock market leadership where the more cyclically tied companies cool off, and the steady growers start to outperform. Our stock selection continues to be focused on industry leaders, with financial strength and above average long-term growth prospects. We believe these characteristics will lead to strong performance over the long term. 3 Premier Growth Equity Fund - -------------------------------------------------------------------------------- Understanding Your Fund's Expenses As a shareholder of the Fund you incur transaction and ongoing expenses. Transaction expenses including sales charges on purchase payments, reinvested dividends (or other distributions), and redemption fees directly reduce the investment return of the Fund. Ongoing costs include portfolio management fees, distribution and service fees, professional fees, administrative fees and other Fund expenses. The following example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the period. The information in the following table is based on an investment of $1,000, which is invested at the beginning of the period and held for the entire six-month period ended June 30, 2007. ACTUAL EXPENSES The first section of the table provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your class under the heading "Expenses Paid During Period." HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second section of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholders reports of other funds. Please note that the expenses shown in the table do not reflect any transaction costs, such as sales charges or redemption fees.
JANUARY 1, 2007 - JUNE 30, 2007 - --------------------------------------------------------------------------------------------------------------------------- ACCOUNT VALUE AT ACCOUNT VALUE EXPENSES THE BEGINNING OF AT THE END OF PAID DURING THE PERIOD ($) THE PERIOD ($) THE PERIOD ($)* - --------------------------------------------------------------------------------------------------------------------------- Actual Fund Return** 1,000.00 1,057.81 3.66 - --------------------------------------------------------------------------------------------------------------------------- Hypothetical 5% Return (2.5% for the period) 1,000.00 1,021.00 3.61 - ---------------------------------------------------------------------------------------------------------------------------
*EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.72% (FROM PERIOD JANUARY 1, 2007 - JUNE 30, 2007), MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY 181/365 (TO REFLECT THE SIX MONTH PERIOD). **ACTUAL FUND RETURN FOR SIX-MONTH PERIOD ENDED JUNE 30, 2007 WAS: 5.78%. 4 Premier Growth Equity Fund (unaudited) - -------------------------------------------------------------------------------- CHANGE IN VALUE OF A $10,000 INVESTMENT - -------------------------------------------------------------------------------- [Line chart omitted -- plot points are as follows:] Premier Growth Equity Fund S&P 500 Index 12/97 $10,000.00 $10,000.00 12/97 10,345.74 10,168.40 12/98 14,125.24 13,086.53 12/99 19,247.20 15,843.58 12/00 18,240.70 14,388.59 12/01 16,573.75 12,674.62 12/02 13,090.75 9,873.29 12/03 16,875.83 12,709.71 12/04 18,062.45 14,092.69 12/05 18,295.86 14,785.84 12/06 19,955.08 17,120.88 06/07 21,108.62 18,312.76 Premier Growth Equity Fund (ending value $21,109) S&P 500 Index (ending value $18,313) AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2007 - -------------------------------------------------------------------------------- SIX ONE FIVE SINCE MONTHS YEAR YEAR INCEPTION - -------------------------------------------------------------------------------- Premier Growth Equity Fund 5.78% 16.78% 7.53% 8.14% - -------------------------------------------------------------------------------- S&P 500 Index 6.96% 20.59% 10.72% 6.52% - -------------------------------------------------------------------------------- Lipper peer group average* 7.43% 16.96% 8.51% N/A - -------------------------------------------------------------------------------- Inception date 12/12/97 - -------------------------------------------------------------------------------- INVESTMENT PROFILE A fund designed for investors who seek long-term growth of capital and future income rather than current income by investing at least 80% of its net assets in equity securities under normal circumstances. The Fund invests primarily in a limited number of large- and medium-sized companies that the portfolio manager believes have above-average growth histories and/or growth potential. TOP TEN LARGEST HOLDINGS AS OF JUNE 30, 2007 as a % of Market Value - -------------------------------------------------------------------------------- State Street Corp. 3.90% - -------------------------------------------------------------------------------- Cisco Systems, Inc. 3.89% - -------------------------------------------------------------------------------- Schlumberger Ltd. 3.74% - -------------------------------------------------------------------------------- Dover Corp. 3.50% - -------------------------------------------------------------------------------- Liberty Global, Inc. (Series C) 3.49% - -------------------------------------------------------------------------------- Paychex, Inc. 3.45% - -------------------------------------------------------------------------------- Medtronic Inc. 3.35% - -------------------------------------------------------------------------------- Carnival Corp. 3.30% - -------------------------------------------------------------------------------- Comcast Corp. (Class A) 3.28% - -------------------------------------------------------------------------------- Monsanto Co. 3.27% - -------------------------------------------------------------------------------- PORTFOLIO COMPOSITION AS OF JUNE 30, 2007 as a % of Market Value - -------------------------------------------------------------------------------- Market Value of $112,534 (in thousands) [Pie chart omitted -- plot points are as follows:] Information Technology 30.2% Consumer Discretionary 19.4% Healthcare 15.4% Financials 10.9% Short-Term 7.8% Energy 6.8% Industrials 3.5% Materials 3.3% Consumer Staples 2.7% * LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR THE SIX MONTHS, ONE YEAR AND FIVE-YEAR PERIODS INDICATED IN THE LARGE-CAP GROWTH FUNDS PEER GROUP CONSISTING OF 196, 194 AND 143 UNDERLYING ANNUITY FUNDS, RESPECTIVELY. SEE NOTES TO PERFORMANCE ON PAGE 1 FOR FURTHER INFORMATION, INCLUDING AN EXPLANATION OF LIPPER PEER CATEGORIES. PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE AND THE GRAPH AND TABLE DO NOT REFLECT THE DEDUCTION OF TAXES. 5 PREMIER GROWTH EQUITY FUND Schedule of Investments June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- PREMIER GROWTH EQUITY FUND - -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- COMMON STOCK -- 98.0%+ - -------------------------------------------------------------------------------- CONSUMER DISCRETIONARY -- 20.6% Bed Bath & Beyond, Inc. 91,944 $ 3,309,065(a) Carnival Corp. 76,217 3,717,103 Comcast Corp. (Class A) 131,868 3,687,015(a,e) Liberty Global, Inc. (Series C) 99,928 3,927,170(a,e) Liberty Media Holding Corp - Capital (Series A) 27,825 3,274,446(a) Liberty Media Holding Corp - Interactive (Series A) 70,168 1,566,851(a) Lowe's Companies, Inc. 77,427 2,376,235 21,857,885 CONSUMER STAPLES -- 2.9% PepsiCo, Inc. 47,182 3,059,753 ENERGY -- 7.2% Schlumberger Ltd. 49,601 4,213,109 Transocean Inc. 32,664 3,461,731(a) 7,674,840 FINANCIALS -- 11.6% AFLAC Incorporated 58,070 2,984,798 CB Richard Ellis Group, Inc. (Class A) 82,266 3,002,709(a,e) Federal National Mortgage Assoc. 29,035 1,896,857 State Street Corp. 64,119 4,385,740(c) 12,270,104 HEALTHCARE -- 16.4% Amgen, Inc. 44,762 2,474,891(a) Johnson & Johnson 24,196 1,490,957 Lincare Holdings Inc. 64,119 2,555,142(a) Medtronic Inc. 72,588 3,764,414 UnitedHealth Group, Inc. 67,264 3,439,881 Zimmer Holdings, Inc. 42,343 3,594,497(a) 17,319,782 INDUSTRIALS -- 3.7% Dover Corp. 76,942 3,935,583 INFORMATION TECHNOLOGY -- 32.1% Analog Devices, Inc. 60,489 2,276,806 Cisco Systems, Inc. 157,273 4,380,053(a,d) eBay, Inc. 78,636 2,530,506(a) Intuit Inc. 116,140 3,493,491(a,d) NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- Linear Technology Corp. 31,454 $ 1,138,006 Microsoft Corp. 110,091 3,244,382 Molex, Inc. (Class A) 114,930 3,051,391(d) Paychex, Inc. 99,203 3,880,821 QUALCOMM, Inc. 84,685 3,674,482 Western Union Co. 153,643 3,200,384 Yahoo! Inc. 113,720 3,085,224(a) 33,955,546 MATERIALS -- 3.5% Monsanto Co. 54,440 3,676,878 TOTAL INVESTMENTS IN SECURITIES (COST $86,345,484) 103,750,371 - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 8.3% - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 2.4% GEI Short Term Investment Fund 5.55% 2,524,729 2,524,729(b,f) SHORT-TERM SECURITIES PURCHASED WITH COLLATERAL FROM SECURITIES ON LOAN -- 5.9% State Street Navigator Securities Lending Prime Portfolio 5.36% 6,259,394 6,259,394(b,c) TOTAL SHORT-TERM INVESTMENTS (COST $8,784,123) 8,784,123 TOTAL INVESTMENTS (COST $95,129,607) 112,534,494 LIABILITIES IN EXCESS OF OTHER ASSETS, NET -- (6.3)% (6,678,750) ------------ NET ASSETS-- 100.0% $105,855,744 ============ - -------------------------------------------------------------------------------- OTHER INFORMATION - -------------------------------------------------------------------------------- The GEI Premier Growth Equity had the following long futures contracts open at June 30, 2007 (unaudited): NUMBER CURRENT EXPIRATION OF NOTIONAL UNREALIZED DESCRIPTION DATE CONTRACTS VALUE DEPRECIATION - -------------------------------------------------------------------------------- S&P 500 Index Futures September 2007 1 $378,850 $(2,163) See Notes to Schedule of Investments on page 7 and Notes to Financial Statements. 6 Notes to Schedule of Investments June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- The views expressed in this document reflect our judgment as of the publication date and are subject to change at any time without notice. The securities cited may not represent current or future holdings and should not be considered as a recommendation to purchase or sell a particular security. See the prospectus for complete descriptions of investment objectives, policies, risks and permissible investments. (a) Non-income producing security. (b) Coupon amount represents effective yield. (c) State Street Corp. is the parent company of State Street Bank & Trust Co., the Fund's custodian and accounting agent. (d) At June 30, 2007, all or a portion of this security was pledged to cover collateral requirements for futures, options, forward foreign currency contracts and/or TBA's. (e) All or a portion of the security is out on loan. (f) GEAM, the investment advisor of the fund, serves as investment advisor of the GEI Short Term Investment Fund. + Percentages are based on net assets as of June 30, 2007. 7
Financial Highlights Selected data based on a share outstanding throughout the periods indicated - ----------------------------------------------------------------------------------------------------------------------------------- PREMIER GROWTH EQUITY FUND 6/30/07+ 12/31/06 12/31/05 12/31/04 12/31/03 12/31/02 - ----------------------------------------------------------------------------------------------------------------------------------- INCEPTION DATE -- -- -- -- -- 12/12/97 Net asset value, beginning of period ........... $82.17 $75.65 $74.95 $70.46 $54.74 $69.34 INCOME/(LOSS) FROM INVESTMENT OPERATIONS: Net investment income ....................... 0.07 0.35 0.24 0.47 0.11 0.03 Net realized and unrealized gains/(losses) on investments ............ 4.68 6.51 0.73 4.48 15.72 (14.60) - ----------------------------------------------------------------------------------------------------------------------------------- TOTAL INCOME/(LOSS) FROM INVESTMENT OPERATIONS . 4.75 6.86 0.97 4.95 15.83 (14.57) - ----------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS FROM: Net investment income ....................... -- 0.34 0.27 0.46 0.11 0.03 Net realized gains .......................... -- -- -- -- -- -- - ----------------------------------------------------------------------------------------------------------------------------------- TOTAL DISTRIBUTIONS ............................ -- 0.34 0.27 0.46 0.11 0.03 - ----------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD ................. $86.92 $82.17 $75.65 $74.95 $70.46 $54.74 =================================================================================================================================== TOTAL RETURN (A) ............................... 5.78% 9.07% 1.29% 7.03% 28.91% (21.02)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) .... $105,856 $110,538 $126,682 $137,801 $143,202 $87,569 Ratios to average net assets: Net investment income* ................... 0.15% 0.41% 0.30% 0.62% 0.20% 0.05% Expenses* ................................ 0.72% 0.71% 0.71% 0.71% 0.70% 0.67% Portfolio turnover rate ..................... 15% 27% 34% 22% 24% 25%
NOTES TO FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- (a) Total returns are historical and assume changes in share price and reinvestment of dividends and capital gains and do not include the effect of insurance contract charges. * Annualized for periods less than one year. + Unaudited. See Notes to Financial Statements. 8
Statement of Assets and Liabilities JUNE 30, 2007 (UNAUDITED) PREMIER GROWTH EQUITY FUND - -------------------------------------------------------------------------------------------------------------------------------- ASSETS Investments in securities, at market* (cost $86,345,484) ................................................ $103,750,371 Short-term Investments (at amortized cost) .............................................................. 6,259,394 Short-term affiliated investments (at amortized cost) ................................................... 2,524,729 Receivable for investments sold ......................................................................... 96,580 Income receivables ...................................................................................... 38,843 Receivable for fund shares sold ......................................................................... 630 Variation margin receivable ............................................................................. 1,540 Other assets ............................................................................................ 1,414 - -------------------------------------------------------------------------------------------------------------------------------- TOTAL ASSETS ........................................................................................ 112,673,501 - -------------------------------------------------------------------------------------------------------------------------------- LIABILITIES Payable upon return of securities loaned ................................................................ 6,259,394 Payable for investments purchased ....................................................................... 281,812 Payable for fund shares redeemed ........................................................................ 186,258 Payable to GEAM ......................................................................................... 90,293 - -------------------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES ................................................................................... 6,817,757 - -------------------------------------------------------------------------------------------------------------------------------- NET ASSETS ................................................................................................. $105,855,744 ================================================================================================================================ NET ASSETS CONSIST OF: Capital paid in ......................................................................................... 84,842,132 Undistributed (distribution in excess of) net investment income ......................................... 101,529 Accumulated net realized gain (loss) .................................................................... 3,509,359 Net unrealized appreciation/ (depreciation) on: Investments ......................................................................................... 17,404,887 Futures ............................................................................................. (2,163) - -------------------------------------------------------------------------------------------------------------------------------- NET ASSETS ................................................................................................. $105,855,744 ================================================================================================================================ NET ASSETS ................................................................................................. 105,855,744 Shares outstanding ($0.01 par value; unlimited shares authorized) .......................................... 1,217,918 Net asset value per share .................................................................................. $86.92
* Includes $6,098,297 of securities on loan. See Notes to Financial Statements. 9
Statement of Operations FOR THE SIX MONTHS ENDED JUNE 30, 2007 (UNAUDITED) PREMIER GROWTH EQUITY FUND - --------------------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME INCOME: Dividend ................................................................................. $ 418,128 Interest* ................................................................................ 3,613 Interest from affliated investments ...................................................... 49,947 - --------------------------------------------------------------------------------------------------------------------------- TOTAL INCOME ............................................................................... 471,688 - --------------------------------------------------------------------------------------------------------------------------- EXPENSES: Advisory and administrative fees ......................................................... 351,400 Transfer agent ........................................................................... 40 Trustee's fees ........................................................................... 1,433 Custody and accounting expenses .......................................................... 17,045 Professional fees ........................................................................ 10,206 Registration expenses .................................................................... 2,000 Other expenses ........................................................................... 5,999 - --------------------------------------------------------------------------------------------------------------------------- TOTAL EXPENSES ............................................................................. 388,123 - --------------------------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME (LOSS) ............................................................... 83,565 =========================================================================================================================== NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS REALIZED GAIN (LOSS) ON: Investments .............................................................................. 5,889,617 Futures .................................................................................. (33,865) INCREASE (DECREASE) IN UNREALIZED APPRECIATION/ (DEPRECIATION) ON: Investments ........................................................................... 160,286 Futures ............................................................................... (2,200) - --------------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments ................................... 6,013,838 - --------------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ............................ $6,097,403 ===========================================================================================================================
* Income attributable to security lending activity, net of rebate expenses, was $3,423. See Notes to Financial Statements. 10
Statements of Changes in Net Assets PREMIER GROWTH EQUITY FUND - -------------------------------------------------------------------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED JUNE 30, 2007 DECEMBER 31, (UNAUDITED) 2006 - -------------------------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS OPERATIONS: Net investments income (loss) ..................................................... $ 83,565 $ 478,425 Net realized gain (loss) on investments, futures, written options, foreign currency transactions and swaps ......................................... 5,855,752 6,381,334 Net increase (decrease) in unrealized appreciation/(depreciation) on investments, futures, written options, foreign currency translation .......... 158,086 2,887,353 - -------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) from operations ........................................... 6,097,403 9,747,112 - -------------------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income ............................................................. -- (460,461) - -------------------------------------------------------------------------------------------------------------------------------- TOTAL DISTRIBUTIONS ................................................................. -- (460,461) - -------------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from operations and distributions ................. 6,097,403 9,286,651 - -------------------------------------------------------------------------------------------------------------------------------- SHARE TRANSACTIONS: Proceeds from sale of shares ...................................................... 1,225,716 2,711,181 Value of distributions reinvested ................................................. -- 460,457 Cost of shares redeemed ........................................................... (12,005,553) (28,602,300) - -------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) from share transactions ................................... (10,779,837) (25,430,662) - -------------------------------------------------------------------------------------------------------------------------------- TOTAL INCREASE (DECREASE) IN NET ASSETS ............................................. (4,682,434) (16,144,011) NET ASSETS Beginning of period ................................................................. 110,538,178 126,682,189 - -------------------------------------------------------------------------------------------------------------------------------- End of period ....................................................................... $105,855,744 $110,538,178 ================================================================================================================================ UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD ......... $101,529 $ 17,964 - -------------------------------------------------------------------------------------------------------------------------------- CHANGES IN FUND SHARES Shares sold ....................................................................... 14,674 34,867 Issued for distributions reinvested ............................................... -- 5,588 Shares redeemed ................................................................... (141,932) (369,756) - -------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in fund shares ................................................. (127,258) (329,301) ================================================================================================================================
See Notes to Financial Statements. 11 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- 1. ORGANIZATION OF THE COMPANY GE Investments Funds, Inc. (the "Company") was incorporated under the laws of the Commonwealth of Virginia on May 14, 1984 and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company. The Company is composed of thirteen investment portfolios (collectively the "Funds"), although only the following eleven are currently being offered: U.S. Equity Fund, S&P 500 Index Fund, Premier Growth Equity Fund (the "Fund"), Value Equity Fund, Mid-Cap Equity Fund, Small-Cap Equity Fund, International Equity Fund, Total Return Fund, Income Fund, Money Market Fund and Real Estate Securities Fund. Shares of the Funds of the Company are offered only to insurance company separate accounts that fund certain variable life insurance contracts and variable annuity contracts. These insurance companies may include insurance companies affiliated with GE Asset Management Incorporated ("GEAM"), the investment adviser and administrator of each of the Funds. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions at the date of the financial statements. Actual results may differ from those estimates. The following summarizes the significant accounting policies of the Fund: SECURITY VALUATION AND TRANSACTION Securities for which exchange quotations are readily available are valued at the last sale price, or if no sales occurred on that day, at the last quoted bid price. Securities listed on the NASDAQ will be valued at the NASDAQ's official close price. Certain fixed income securities are valued by a dealer or by a pricing service based upon a matrix system, which considers market transactions as well as dealer supplied valuations. Short-term investments maturing within sixty days are valued at amortized cost. If quotations are not readily available for a portfolio security, or if it is believed that a quotation or other market price for a portfolio security does not represent its fair value, the security may be valued using procedures approved by the Fund's Board of Directors that are designed to establish its "fair value." These procedures require that the fair value of a security be established by the valuation committee. The fair value committee follows different protocols for different types of investments and circumstances. Foreign securities may be valued with the assistance of an independent fair value pricing service in circumstances where it is believed that they have been or would be materially affected by events occurring after the close of the portfolio security's primary market and before the close of regular trading on the NYSE. This independent fair value pricing service uses a computerized system to appraise affected securities and portfolios taking into consideration various factors and the fair value of such securities may be something other than the last available quotation or other market price. GE Asset Management may also separately monitor portfolio securities and, consistent with the Fund's fair value procedures, apply a different value to a portfolio security than would be applied had it been priced using market quotations or by an independent fair value pricing service. Determining the fair value of securities involves the application of both subjective and objective considerations. Security values may differ depending on the methodology used to determine their values, and may differ from the last quoted sale or closing price. No assurance can be given that use of these fair value procedures will always better represent the price at which a Fund could sell the affected portfolio security. Security transactions are accounted for as of the trade date. Realized gains and losses on investments sold are recorded on the basis of identified cost for both financial statement and federal tax purposes. In September 2006, FASB issued Statement of Financial Accounting Standards No. 157, FAIR VALUE MEASUREMENTS ("FAS 157"). FAS 157 establishes a single authoritative definition of fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. FAS 157 applies to fair value measurements already required or permitted by existing standards. The change to current generally accepted accounting principles from the application of FAS 157 relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. Management of the Fund does not believe the adoption of FAS 157 will materially impact the financial statement amounts, however, additional 12 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- disclosures may be required about the inputs used to develop the measurements and the effect of certain of the measurements on changes in net assets for the period. FAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. REPURCHASE AGREEMENTS The Fund may engage in repurchase agreement transactions with respect to instruments that are consistent with the Fund's investment objectives or policies. The Fund's or a third party custodian takes possession of the collateral pledged for investments in repurchase agreements on behalf of the Fund. The Fund values the underlying collateral daily on a mark-to-market basis to determine that the value, including accrued interest, is at least equal to 102% of the repurchase price. In the event the seller defaults and the value of the security declines, or if the seller enters an insolvency proceeding, realization of the collateral by the Fund may be delayed or limited. SECURITY LENDING The Fund may loan securities to brokers, dealers, and financial institutions determined by GEAM to be creditworthy, subject to certain limitations. The Fund continues to receive the interest and dividends on the loaned securities during the term of the loan. The loans of securities are secured by collateral in the form of cash or other liquid assets, which are segregated and maintained with the custodian in an amount at least equal to 102% of the current market value of the loaned securities. During the term of the loan, the Fund will record any gain or loss in the market value of its loaned securities and of securities in which cash collateral is invested. The Fund will also earn interest, net of any rebate, from securities in which cash collateral is invested. In the event the counterparty (borrower) does not meet its contracted obligation to return the securities, the Fund may be exposed to the risk of loss of reacquiring the loaned securities at prevailing market prices using the proceeds of the sale of the collateral. FOREIGN CURRENCY Accounting records of the Fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange at period end. Purchases and sales of securities, income receipts and expense payments denominated in foreign currencies are translated into U.S. dollars at the prevailing exchange rate on the respective dates of such transactions. The Fund does not isolate the portion of the results of operations resulting from changes in foreign exchange rates from the fluctuations arising from changes in the market prices of securities during the period. Such fluctuations are included in the net realized or unrealized gain or loss from investments. Net realized gains or losses on foreign currency transactions represent net gains or losses on sales and maturities of foreign currency contracts, disposition of foreign currencies, the difference between the amount of net investment income and withholding taxes accrued and the U.S. dollar amount actually received or paid, and gains or losses between the trade and settlement date on purchases and sales of securities. Net unrealized foreign exchange gains and losses arising from changes in the value of other assets and liabilities as a result of changes in foreign exchange rates are included as increases or decreases in unrealized appreciation/ depreciation on foreign currency related transactions. FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or bond index futures contracts subject to certain limitations. The Fund may invest in futures contracts to manage its exposure to the stock and bond markets and fluctuations in currency values. Buying futures tends to increase the Fund's exposure to the underlying instrument while selling futures tends to decrease the Fund's exposure to the underlying instrument, or hedge other Fund investments. The Fund will not enter into a transaction involving futures for speculative purposes. The Fund's risks in using these contracts include changes in the value of the underlying instruments, non-performance of the counterparties under the contracts' terms and changes in the liquidity of the secondary market for the contracts. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they principally trade. Upon entering into a futures contract, the Fund is required to pledge to the broker an amount of cash and/or other assets equal to a certain percentage of the contract amount, known as initial margin deposit. Subsequent payments, known as variation margin, are made or received by the Fund each day, depending on the daily fluctuation in the fair value of the underlying security. The Fund records an unrealized gain or loss equal to the daily variation margin. Should market conditions move unexpectedly, the Fund may not achieve the anticipated benefits of the futures contracts and may incur a loss. The Fund recognizes a realized gain or loss on the expiration or closing of a futures contract. 13 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- OPTIONS The Fund may purchase and write options, subject to certain limitations. The Fund may invest in options contracts to manage its exposure to the stock and bond markets and fluctuations in foreign currency values. Writing puts and buying calls tend to increase the Fund's exposure to the underlying instrument while buying puts and writing calls tend to decrease the Fund's exposure to the underlying instrument, or hedge other Fund investments. The Fund will not enter into a transaction involving options for speculative purposes. The Fund's risks in using these contracts include changes in the value of the underlying instruments, non-performance of the counterparties under the contracts' terms and changes in the liquidity of the secondary market for the contracts. Options are valued at the last sale price, or if no sales occurred on that day, at the last quoted bid price. When the Fund writes an option, the amount of the premium received is recorded as a liability and is subsequently adjusted to the current fair value of the option written. Premiums received from writing options that expire unexercised are treated by the Fund on the expiration date as realized gains from investments. The difference between the premium and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium is less than the amount paid for the closing purchase, as a realized loss. When an option is exercised, the proceeds from the sale of the underlying security or the cost basis of the securities purchased is adjusted by the original premium received or paid. INVESTMENTS IN FOREIGN MARKETS Investments in foreign markets may involve special risks and considerations not typically associated with investing in the United States. These risks include revaluation of currencies, high rates of inflation, repatriation on income and capital, and adverse political and economic developments. Moreover, securities issued in these markets may be less liquid, subject to government ownership controls, tariffs and taxes, subject to delays in settlements, and their prices may be more volatile. The Fund may be subject to capital gains and repatriation taxes imposed by certain countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued based upon net investment income, net realized gains and net unrealized appreciation as income and/or capital gains are earned. INCOME TAXES The Fund intends to comply with all sections of the Internal Revenue Code applicable to regulated investment companies including the distribution of substantially all of its taxable net investment income and net realized capital gains to its shareholders. Therefore, no provision for federal income tax has been made. The Fund is treated as a separate taxpayer for federal income tax purposes. At June 30, 2007, information on the tax cost of investments is as follows:
Net Tax Cost of Gross Tax Gross Tax Appreciation/ Investments for Unrealized Unrealized (Depreciation) Tax Purposes Appreciation Depreciation on Investments - --------------------------------------------------------------------------------------------------------------------------- $97,496,065 $18,681,857 $(3,643,428) $15,038,429
As of December 31, 2006, the Fund has no capital loss carryovers as indicated below. Capital loss carryovers are available to offset future realized capital gains to the extent provided in the Internal Revenue Code and regulations thereunder. To the extent that these carryover losses are used to offset future capital gains, it is probable that the gains so offset will not be distributed to shareholders because they would be taxable as ordinary income. During the year ended December 31, 2006, the Fund utilized approximately $3,350,016 of capital loss carryovers. Any net capital and currency losses incurred after October 31, within the Fund's tax year, are deemed to arise on the first day of the Fund's next tax year if the Fund so elects to defer such losses. 14 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- The Fund incurred no such losses after October 31, 2006. The tax composition of distributions paid (other than return of capital distributions for the year) during the year ended December 31, 2006 was as follows: Ordinary Long-Term Income Capital Gains Total - -------------------------------------------------------------------------------- $460,461 $-- $460,461 DISTRIBUTIONS TO SHAREHOLDERS The Fund declares and pays dividends from net investment income annually. The Fund declares and pays net realized capital gains in excess of capital loss carryforwards distributions annually. The character of income and gains to be distributed is determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences include (but are not limited to) futures and losses deferred due to wash sale transactions. Reclassifications due to permanent book/tax differences are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. These reclassifications have no impact on net investment income, realized gains or losses, or the net asset value of the Fund. The calculation of net investment income per share in the Financial Highlights table excludes these adjustments. On June 29, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in Income Taxes." FIN48 provides guidance for how certain uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN48 requires evaluation of tax positions taken or expected to be taken in the course of preparing the Fund's tax return to determine whether the tax positions are "more likely than not" of being sustained by the applicable tax authority. The adoption of FIN48 did not have an impact on the Fund's net assets and financial statements. INVESTMENT INCOME Corporate actions (including cash dividends) are recorded on the ex-dividend date, net of applicable withholding taxes, except for certain foreign corporate actions, which are recorded as soon after ex-dividend date as such information becomes available. Interest income is recorded on the accrual basis. All discounts and premiums on bonds are accreted and amortized, respectively, to call or maturity date, whichever is shorter, using the effective yield method. EXPENSES Expenses of the Company which are directly identifiable to one of the Funds are allocated to that portfolio. Expenses which are not directly identifiable to one of the Funds are allocated in such a manner as deemed equitable, taking into consideration the nature and type of expenses and relative sizes of the Funds. All expenses of the Fund are paid by GEAM and reimbursed by the Fund. 3. LINE OF CREDIT The Fund shares a revolving credit facility of up to $25 million with a number of its affiliates. The credit facility is with its custodian bank, State Street Bank and Trust Company. The revolving credit facility requires the payment of a commitment fee equal to 0.09% per annum on the daily unused portion of the credit facility, payable quarterly. The portion borne by the Funds generally is borne proportionally based upon net assets. Generally, borrowings under the credit facility would accrue interest at the Federal Funds Rate plus 50 basis points and is borne by each of the borrowing Funds. The maximum amount allowed to be borrowed by any one of the Funds is the lesser of its prospectus limitation, 20% of its net assets, or $25 million. The credit facility was not utilized by the Fund during the period ended June 30, 2007. 4. AMOUNTS PAID TO AFFILIATES GEAM, a registered investment adviser, was retained by the Company's Board of Directors effective May 1, 1997 to act as investment adviser and administrator of the Fund. GEAM's compensation for investment advisory and administrative services is paid monthly based on the average daily net assets of the Fund at an annualized rate of .65%. GENPACT performs certain accounting and certain administration services not provided by GEAM. For the period ending June 30, 2007, $840 was charged to the Fund. DIRECTORS' COMPENSATION The Fund pays no compensation to its directors who are officers or employees of GEAM or its affiliates. Directors who are not such officers or employees also serve in a similar capacity for other funds advised by GEAM. Compensation paid to unaffiliated directors are reflected on the Statement of Operations. These fees are allocated pro rata across all of 15 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- the mutual fund platforms and share classes served by the directors, including the Fund, and are based upon the relative net assets of each fund within such platforms. (For additional information about directors compensation please refer to the Statement of Additional Information.) 5. INVESTMENT TRANSACTIONS PURCHASES AND SALES OF SECURITIES The cost of purchases and the proceeds from sales of investments, other than short-term securities and options, for the period ended June 30, 2007 were as follows: Purchases Sales - -------------------------------------------------------------------------------- $15,946,192 $26,305,996 SECURITY LENDING At June 30, 2007, the Fund participated in securities lending: Loaned securities at Cash market value collateral* - -------------------------------------------------------------------------------- $6,098,297 $6,259,394 * COLLATERAL OF $6,275,463 DECREASED BY $16,069 ON JULY 1, 2007 TO REFLECT THE JUNE 30, 2007 CHANGE IN VALUE OF SECURITIES ON LOAN. 16 Additional Information - -------------------------------------------------------------------------------- INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS: The business and affairs of the Company are managed under the direction of the Company's Board of Directors. Information pertaining to the Directors and officers of the Company is set forth below. INTERESTED DIRECTORS AND EXECUTIVE OFFICERS - -------------------------------------------------------------------------------- MICHAEL J. COSGROVE - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 58 POSITION(S) HELD WITH FUND Chairman of the Board and President TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 10 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President - GEAM since February 1997; President and Chief Executive Officer - Mutual Funds at GEAM since March 2007; Vice President, GE Capital Corporation, an indirect wholly-owned subsidiary of GE, since December 1999; Executive Vice President - Sales and Marketing of GEAM, a wholly-owned subsidiary of GE that is registered as an investment adviser under the Investment Advisers Act of 1940, as amended, since March 1993; Director of GEAM since 1988. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48 OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception; Trustee of Elfun Funds, GE Savings & Security Funds and General Electric Pension Trust since 1988; Trustee of Fordham University since 2003; Trustee of Elfun Foundation; Treasurer of GE Foundation; Director, GE Asset Management (Ireland) since February 1999; Director, GE Asset Management Funds Plc, GE Asset Canada Company, GE Asset Management Limited, and GE Volunteers. - -------------------------------------------------------------------------------- MATTHEW J. SIMPSON - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 46 POSITION(S) HELD WITH FUND Executive Vice President TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - less than one year PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General Counsel and Secretary of GEAM since July 2007; Senior Vice President and General Counsel - Marketing and Client Services (formerly Asset Management Services), at GEAM and Senior Vice President and General Counsel of GEAMS from February 1997 to June 2007; Vice President and Associate General Counsel of GEAM from October 1992 to February 1997; Secretary of Fund from 1997 to June 2007; Vice President of Fund from September 2003 to June 2007; Vice President of GE Institutional Funds and GE LifeStyle Funds from September 2003 to June 2007; Secretary of GE Institutional Funds and GE LifeStyle Funds from 1997 to June 2007; Vice President of Elfun Funds and GE Savings & Security Funds from October 2003 to June 2007; Assistant Secretary of Elfun Funds and GE Savings & Security Funds from 1998 to June 2007. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional Funds, GE LifeStyle Funds, Elfun Funds and GE Savings & Security Funds since July 2007. 17 Additional Information (unaudited) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SCOTT H. RHODES - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 48 POSITION(S) HELD WITH FUND Treasurer TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - one year PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds Operations Manager since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle Funds and GE Investments Funds since November 2005 and Elfun Funds and GE Savings & Security Funds since September 2005; from August 2004 to September 2005 Vice President, U.S. Trust Company, N.A. and Assistant Treasurer of Excelsior Funds, Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds, Inc.; from January 2004 to August 2004, Vice President BlackRock Financial Management, Inc.; from December 1996 to November 2003, Controller - Mutual Funds, American Skandia Investment Services, Inc. and Assistant Treasurer of American Skandia Trust and American Skandia Advisor Funds, Inc. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A - -------------------------------------------------------------------------------- JEANNE M. LAPORTA - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 42 POSITION(S) HELD WITH FUND Vice President and Secretary TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 2 years (Vice President); less than one year (Secretary) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Associate General Counsel - Marketing and Client Services (formerly Asset Management Services) at GEAM since May 1997; Vice President and Assistant Secretary of GE Funds, GE Institutional Funds and GE LifeStyle Funds since September 2003; Vice President and Assistant Secretary of Elfun Funds and GE Savings & Security Funds since October 2003; Assistant Secretary from September 2003 to June 2007 and Secretary since July 2007. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A 18 Additional Information (unaudited) - -------------------------------------------------------------------------------- NON-INTERESTED DIRECTORS - -------------------------------------------------------------------------------- JOHN R. COSTANTINO - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 61 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC since 2006; Managing Director, Walden Partners, Ltd., consultants and investors, since August 1992. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE Institutional Funds and GE LifeStyle Funds since their inception; Trustee of Fordham University since 2002 and Marymount College from 2001 through 2002; Neuroscience Research Institute since 1986; Diocesan Finance Counsel of the Dioceses of Brooklyn & Queens since 2001; Gregorian University Foundation since 1994. - -------------------------------------------------------------------------------- WILLIAM J. LUCAS - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 59 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Treasurer of Fairfield University since 1983. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception. - -------------------------------------------------------------------------------- ROBERT P. QUINN - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 71 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon Brothers Inc. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception. - -------------------------------------------------------------------------------- The Statement of Additional Information for the Fund includes additional information about the Directors and Officers and is available, without charge, upon request by calling 1-800-242-0134. 19 Investment Team - -------------------------------------------------------------------------------- INVESTMENT ADVISER AND ADMINISTRATOR GE Asset Management Incorporated BOARD OF DIRECTORS Michael J.Cosgrove, CHAIRMAN John R. Costantino William J. Lucas Robert P. Quinn Matthew J. Simpson SECRETARY Jeanne M. LaPorta ASSISTANT SECRETARIES Joseph A. Carucci Joon Won Choe TREASURER Scott H. Rhodes ASSISTANT TREASURERS Scott R. Fuchs Christopher M. Isaacs DISTRIBUTOR GE Investment Distributors, Inc. Member NASD and SIPC COUNSEL Sutherland, Asbill & Brennan, LLP CUSTODIAN State Street Bank & Trust Company INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM KPMG LLP OFFICERS OF THE INVESTMENT ADVISER James W. Ireland, CHIEF EXECUTIVE OFFICER Michael J. Cosgrove, EVP, PRESIDENT AND CHIEF EXECUTIVE OFFICER - MUTUAL FUNDS Paul M. Colonna, PRESIDENT - FIXED INCOME Kathryn D. Karlic, EVP, PRESIDENT - SALES AND MARKETING Ralph R. Layman, EVP, PRESIDENT - INTERNATIONAL EQUITIES Matthew J. Simpson, EVP, GENERAL COUNSEL AND SECRETARY Judith A. Studer, EVP, PRESIDENT - U.S. EQUITIES Don W. Torey, EVP, PRESIDENT - ALTERNATIVE INVESTMENTS AND REAL ESTATE John J. Walker, EVP, CHIEF FINANCIAL OFFICER 20 [This page intentionally left blank.] INVESTMENT ADVISER GE ASSET MANAGEMENT INCORPORATED 3001 SUMMER STREET PO BOX 7900 STAMFORD, CT 06904-7900 DISTRIBUTOR GE INVESTMENT DISTRIBUTORS, INC. MEMBER NASD AND SIPC 3001 SUMMER STREET PO BOX 7900 STAMFORD, CT 06904-7900 The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities is available without charge (i) upon request, by calling 1-800-242-0134; (ii) on the Fund's website at http://www.gefunds.com; and (iii) on the Commission's website at http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC - - information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Information (if any) regarding how the Fund voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through the Fund's website at http://www.gefunds.com; and (ii) on the Commission's website at http://www.sec.gov. [GE logo omitted] GE Investments Funds, Inc. Money Market Fund Semi-Annual Report JUNE 30, 2007 [GE LOGO OMITTED] GE Investments Funds, Inc. Money Market Fund Contents - -------------------------------------------------------------------------------- NOTES TO PERFORMANCE ........................................................ 1 MANAGER REVIEW AND SCHEDULE OF INVESTMENTS .................................. 2 NOTES TO SCHEDULE OF INVESTMENTS ............................................ 6 FINANCIAL STATEMENTS Financial Highlights ................................................... 7 Statement of Assets and Liabilities .................................... 8 Statement of Operations ................................................ 9 Statements of Changes in Net Assets .................................... 10 Notes to Financial Statements .......................................... 11 ADDITIONAL INFORMATION ...................................................... 15 INVESTMENT TEAM ............................................................. 18 This report is prepared for Policyholders of certain variable contracts and may be distributed to others only if preceded or accompanied by the variable contract's current prospectus and the current prospectus of the Funds available for investments thereunder. Notes to Performance June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- Total returns take into account changes in share price and assume reinvestment of dividends and capital gains distributions, if any. Investment returns and net asset value on an investment will fluctuate and you may have a gain or loss when you sell your shares. Periods less than one year are not annualized. Current performance may be lower or higher than that shown. You may call toll-free (800) 242-0134 for performance information as of the most recent month end. Total returns do not reflect expenses associated with the separate account such as administrative fees, account charges and surrender charges, which, if reflected, would reduce the total returns for all periods shown. Shares of the Fund are neither insured nor guaranteed by the U.S. Government, and their prices will fluctuate with market conditions. The 90 Day T-Bill is an unmanaged measure/index of the performance of U.S. Treasury bills currently available in the marketplace having a remaining maturity of 90 days. The peer universe of the underlying annuity funds used in our peer ranking calculation is based on the blend of Lipper peer categories, as shown. Lipper is an independent mutual fund rating service. A Fund's performance may be compared to or ranked within a universe of mutual funds with investment objectives and policies similar but not necessarily identical to the Fund's. Such comparisons or rankings are made on the basis of several factors, including the Fund's objectives and policies, management style and strategy, and portfolio composition, and may change over time if any of those factors change. 1 Money Market Fund - -------------------------------------------------------------------------------- Q&A DONALD J. DUNCAN IS A VICE PRESIDENT OF GE ASSET MANAGEMENT AND PORTFOLIO MANAGER OF THE MONEY MARKET FUND. MR. DUNCAN JOINED GE ASSET MANAGEMENT IN 1988 IN TRADE SUPPORT AND HELD SEVERAL POSITIONS INCLUDING MUTUAL FUND CONTROLLER. HE WAS APPOINTED INVESTMENT MANAGER - SHORT TERM SECURITIES IN 1990 AND VICE PRESIDENT - MONEY MARKETS IN 2002. Q. HOW DID THE MONEY MARKET FUND PERFORM COMPARED TO ITS BENCHMARK AND LIPPER PEER GROUP FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2007? A. For the six-month period ended June 30, 2007, the Money Market Fund returned 2.44%. The 90-day Treasury Bill, the Fund's benchmark, returned 2.44% and the Fund's Lipper peer group of 108 Money Market funds returned an average of 2.39% for the same period. Q. DESCRIBE WHAT HAPPENED IN THE U.S. ECONOMY DURING THE SIX-MONTH PERIOD ENDING JUNE 30, 2007. A. After slumping to a 0.7% growth rate (annualized) in the first quarter, U.S. GDP bounced back in the second quarter with a median estimate of 3.0% (Bloomberg survey of leading economists' forecast). The soft housing market weighed heavily on the economy and there was a curtailment in inventory building in the first quarter of 2007. Employment growth remained healthy through the first half. Monthly change in non-farm payrolls averaged 145,000 for the first six months. Inflation drifted lower but remains on the high side of the Fed's 1-2% comfort zone. The latest reading for the Year-over year Personal Consumption Expenditure Core Price Index (the Fed's preferred measure) was 1.9%. Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE? A. The primary driver of performance is our positioning of the average maturity of the Fund given our view on fed policy and its effect on the short end of the yield curve. We extended the average maturity of the Fund early in the year (50 days at June 30th) as we viewed the Fed on hold from raising Fed funds, with a possible chance of a rate cut. [PHOTO OMITTED] 2 Money Market Fund - -------------------------------------------------------------------------------- Understanding Your Fund's Expenses As a shareholder of the Fund you incur transaction and ongoing expenses. Transaction expenses including sales charges on purchase payments, reinvested dividends (or other distributions), and redemption fees directly reduce the investment return of the Fund. Ongoing costs include portfolio management fees, distribution and service fees, professional fees, administrative fees and other Fund expenses. The following example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the period. The information in the following table is based on an investment of $1,000, which is invested at the beginning of the period and held for the entire six-month period ended June 30, 2007. ACTUAL EXPENSES The first section of the table provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your class under the heading "Expenses Paid During Period." HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second section of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholders reports of other funds. Please note that the expenses shown in the table do not reflect any transaction costs, such as sales charges or redemption fees. JANUARY 1, 2007 - JUNE 30, 2007
- ------------------------------------------------------------------------------------------------------------------------------------ ACCOUNT VALUE AT ACCOUNT VALUE EXPENSES THE BEGINNING OF AT THE END OF PAID DURING THE PERIOD ($) THE PERIOD ($) THE PERIOD ($)* - ------------------------------------------------------------------------------------------------------------------------------------ Actual Fund Return** 1,000.00 1,024.39 2.46 - ------------------------------------------------------------------------------------------------------------------------------------ Hypothetical 5% Return (2.5% for the period) 1,000.00 1,022.12 2.46 - ------------------------------------------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.49% (FROM PERIOD JANUARY 1, 2007 - JUNE 30, 2007), MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY 181/365 (TO REFLECT THE SIX MONTH PERIOD) . ** ACTUAL FUND RETURN FOR SIX-MONTH PERIOD ENDED JUNE 30, 2007 WAS: 2.44%. 3 Money Market Fund (unaudited) - -------------------------------------------------------------------------------- CHANGE IN VALUE OF A $10,000 INVESTMENT [LINE CHART OMITTED -- PLOT POINTS AS FOLLOWS:] GEI MONEY MARKET 90 DAY T-BILL 06/97 $10000.00 $10000.00 12/97 10267.29 10259.19 12/98 10807.37 10761.88 12/99 11348.01 11275.72 12/00 12055.65 11952.86 12/01 12536.20 12366.68 12/02 12722.34 12568.33 12/03 12821.68 12697.40 12/04 12942.88 12874.86 12/05 13304.50 13289.02 12/06 13922.83 13931.19 6/07 14262.47 14271.76 Money Market Fund (ending value $14,262) 90-Day T-Bill (ending value $14,272) INVESTMENT PROFILE A fund designed for investors who seek a high level of current income consistent with the preservation of capital and maintenance of liquidity by investing primarily in short-term U.S. dollar-denominated money market instruments. AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2007 - -------------------------------------------------------------------------------- SIX ONE FIVE TEN MONTHS YEAR YEAR YEAR - -------------------------------------------------------------------------------- Money Market Fund 2.44% 4.95% 2.45% 3.61% - -------------------------------------------------------------------------------- 90 Day T-Bill 2.44% 5.00% 2.73% 3.62% - -------------------------------------------------------------------------------- Lipper peer group average* 2.39% 4.87% 2.33% 3.49% - -------------------------------------------------------------------------------- Inception date 7/1/85 - -------------------------------------------------------------------------------- FUND YIELD AT JUNE 30, 2007 - -------------------------------------------------------------------------------- FUND IBC'S MONEY FUND** - -------------------------------------------------------------------------------- 7-DAY CURRENT 4.77%+ 4.70% - -------------------------------------------------------------------------------- 7-DAY EFFECTIVE 4.89% 4.81% - -------------------------------------------------------------------------------- CURRENT YIELD REPRESENTS INCOME EARNED ON AN INVESTMENT IN THE MONEY MARKET FUND FOR A SEVEN DAY PERIOD AND THEN ANNUALIZED. EFFECTIVE YIELD IS CALCULATED SIMILARLY BUT COULD BE SLIGHTLY HIGHER BECAUSE IT REFLECTS THE COMPOUNDING EFFECT OF EARNINGS ON REINVESTED DIVIDENDS. + THE SEVEN DAY CURRENT YIELD, RATHER THAN THE TOTAL RETURN, MORE CLOSELY REFLECTS THE CURRENT EARNINGS OF THE MONEY MARKET FUND AT JUNE 30, 2007. ** IBC'S MONEY FUND REPORT PROVIDES AVERAGE YIELD FOR ALL MAJOR MONEY MARKET FUNDS. AN INVESTMENT IN THE MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE FUND SEEKS TO PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUND. *LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR THE SIX MONTHS, ONE YEAR, FIVE-YEAR, AND TEN-YEAR PERIODS INDICATED IN THE MONEY MARKET FUNDS PEER GROUP CONSISTING OF 108, 107, 91 AND 67 UNDERLYING ANNUITY FUNDS, RESPECTIVELY. SEE NOTES TO PERFORMANCE ON PAGE 1 FOR FURTHER INFORMATION, INCLUDING AND EXPLANATION OF LIPPER PEER CATEGORIES. PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE AND THE GRAPH AND TABLE DO NOT REFLECT THE DEDUCTION OF TAXES. 4 MONEY MARKET FUND Schedule of Investments June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- MONEY MARKET FUND Portfolio Composition based on a Market Value of $313,369 (in thousands) as of June 30, 2007 [PIE CHART OMITTED -- PLOT POINTS AS FOLLOWS:] Certificates of Deposit 37.2% Commercial Paper 37.2% Repurchase Agreements 15.3% Corporate Notes 5.8% Time Deposit 4.5% PRINCIPAL AMORTIZED AMOUNT COST SHORT-TERM INVESTMENTS -- 99.6%+ - -------------------------------------------------------------------------------- COMMERCIAL PAPER -- 37.1% ABN AMRO North America 5.24% 09/21/07 $ 12,450,000 $ 12,301,402 Bank of America Corp. 5.24% 08/31/07 15,200,000 15,065,041 Barclays PLC 5.24% 08/15/07 15,280,000 15,179,916 Citigroup Funding Inc. 5.25% 09/19/07 15,860,000 15,674,967 Goldman Sachs Group 5.17% 10/22/07 11,000,000 10,821,491 Greenwich Capital Holdings Inc. 5.28% 11/09/07 11,150,000 11,150,000 HBOS PLC 5.23% 07/26/07 10,650,000 10,611,337 ING Group 5.25% 07/11/07 15,000,000 14,978,125 UBS AG 5.19% 12/06/07 11,190,000 10,935,111 116,717,390 REPURCHASE AGREEMENTS -- 15.3% Deutsche Bank 5.35% dated 06/29/07, to be repurchased at $24,010,700 on 07/02/07 collateralized by $24,480,000 U.S. Government agency bonds, coupon rate 4.26%, 5.29%, 5.00%, 5.47%, 6.50% and 5.49% maturing 09/01/34, 08/01/34, 03/01/33, 12/01/35, 03/01/37 and 07/01/36, respectively 24,000,000 24,000,000 PRINCIPAL AMORTIZED AMOUNT COST 5.40% dated 06/29/07, to be repurchased at $24,010,800 on 07/02/07 collateralized by $24,480,000 U.S. Government agency bonds, coupon rate 4.26%, 5.29%, 5.00%, 5.47%, 6.50% and 5.49% maturing 09/01/34, 08/01/34, 03/01/33, 12/01/35, 03/01/37 and 07/01/36 respectively $ 24,000,000 $ 24,000,000 48,000,000 CORPORATE NOTES -- 5.7% American Express Credit Corp. 5.42% 03/05/08 6,940,000 6,941,747(i) Morgan Stanley Group Inc. 5.36% 08/01/08 11,130,000 11,130,000(i) 18,071,747 TIME DEPOSIT -- 4.5% Calyon 5.38% 07/02/07 13,870,000 13,870,000 State Street Corp. 4.85% 07/02/07 150,476 150,476(e) 14,020,476 CERTIFICATES OF DEPOSIT -- 37.0% Bank of Montreal 5.28% 06/06/08 14,000,000 14,000,000 BNP Paribas 5.31% 10/09/07 15,580,000 15,580,000 Canadian Imperial Bank 5.32% 07/23/08 10,580,000 10,580,000 Credit Suisse 5.29% 04/14/08 15,430,000 15,430,000 Deutsche Bank A.G. 5.35% 08/07/07 8,000,000 8,000,000 Dresdner Bank AG 5.30% 10/9/07 - 01/10/08 9,120,000 9,120,000 Fortis Bank 5.28% 07/13/07 15,630,000 15,630,000 HBOS Tre Svc PLC. 5.28% 09/04/07 4,000,000 3,999,113 Societe Generale 5.38% 03/27/08 13,000,000 13,000,000 Toronto-Dominion Bank 5.31% 07/09/07 11,220,000 11,220,000 116,559,113 TOTAL SHORT-TERM INVESTMENTS (COST $313,368,726) 313,368,726 OTHER ASSETS AND LIABLITES, NET-- 0.4% 1,295,407 ------------ NET ASSETS-- 100.0% $314,664,133 ============ See Notes to Schedule of Investments on page 6 and Notes to Financial Statements. 5 Notes to Schedule of Investments June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- The views expressed in this document reflect our judgment as of the publication date and are subject to change at any time without notice. The securities cited may not represent current or future holdings and should not be considered as a recommendation to purchase or sell a particular security. See the prospectus for complete descriptions of investment objectives, policies, risks and permissible investments. (a) State Street Corp. is the parent company of State Street Bank & Trust Co., the Fund's custodian and accounting agent. (b) Variable or floating rate security. The stated rate represents the rate at June 30, 2007. + Percentages are based on net assets as of June 30, 2007. 6 Financial Highlights Selected data based on a share outstanding throughout the periods indicated
- ------------------------------------------------------------------------------------------------------------------------------------ MONEY MARKET FUND 6/30/07+ 12/31/06 12/31/05 12/31/04 12/31/03 12/31/02 - ------------------------------------------------------------------------------------------------------------------------------------ INCEPTION DATE ................................... -- -- -- -- -- 7/1/85 Net asset value, beginning of period ............. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income ......................... 0.02 0.05 0.03 0.01 0.01 0.01 Net realized and unrealized gains on investments ....................... -- -- -- -- 0.00(b) 0.00(b) - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INCOME FROM INVESTMENT OPERATIONS .......... 0.02 0.05 0.03 0.01 0.01 0.01 - ------------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS FROM: Net investment income ......................... 0.02 0.05 0.03 0.01 0.01 0.01 Return of capital ............................. -- -- 0.00(b) -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL DISTRIBUTIONS .............................. 0.02 0.05 0.03 0.01 0.01 0.01 - ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, END OF PERIOD ................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (A) ................................. 2.44% 4.65% 2.79% 0.95% 0.78% 1.48% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ...... $314,664 $279,622 $250,149 $278,703 $392,533 $685,353 Ratios to average net assets: Net investment income* ..................... 4.87% 4.58% 2.74% 0.92% 0.80% 1.46% Net expenses* .............................. 0.49% 0.49% 0.49% 0.47% 0.43% 0.40% Gross expenses* ............................ 0.49% 0.49% 0.49% 0.47% 0.43% 0.40%
NOTES TO FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- (a) Total returns are historical and assume changes in share price and reinvestment of dividends and capital gains and do not include the effect of insurance contract charges. Had the adviser not absorbed a portion of the expense, total returns would have been lower. (b) Less than $0.01 per share. * Annualized for periods less than one year. + Unaudited. See Notes to Financial Statements. 7 Statement of Assets and Liabilities JUNE 30, 2007 (UNAUDITED)
MONEY MARKET FUND - --------------------------------------------------------------------------------------------------------------------------- ASSETS Short-term Investments (at amortized cost) ....................................................... $313,368,726 Income receivables ............................................................................... 1,400,353 Receivable for fund shares sold .................................................................. 61,071 Other assets ..................................................................................... 2,021 - --------------------------------------------------------------------------------------------------------------------------- TOTAL ASSETS ................................................................................. 314,832,171 - --------------------------------------------------------------------------------------------------------------------------- LIABILITIES Payable for fund shares redeemed ................................................................. 7,307 Payable to GEAM .................................................................................. 160,731 - --------------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES ............................................................................ 168,038 - --------------------------------------------------------------------------------------------------------------------------- NET ASSETS .......................................................................................... $314,664,133 - --------------------------------------------------------------------------------------------------------------------------- NET ASSETS CONSIST OF: Capital paid in .................................................................................. 314,728,002 Undistributed (distribution in excess of) accumulated net realized gain (loss) ................... (63,869) - --------------------------------------------------------------------------------------------------------------------------- NET ASSETS .......................................................................................... $314,664,133 - --------------------------------------------------------------------------------------------------------------------------- Shares outstanding ($0.01 par value; unlimited shares authorized) ................................... 314,717,836 Net asset value per share ........................................................................... $1.00
See Notes to Financial Statements. 8 Statement of Operations FOR THE SIX MONTHS ENDED JUNE 30, 2007 (UNAUDITED)
MONEY MARKET FUND - --------------------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME INCOME: Interest ......................................................................................... $7,941,366 - --------------------------------------------------------------------------------------------------------------------------- TOTAL INCOME ....................................................................................... 7,941,366 - --------------------------------------------------------------------------------------------------------------------------- EXPENSES: Advisory and administrative fees ................................................................. 667,795 Transfer agent ................................................................................... 23 Trustee's fees ................................................................................... 4,159 Custody and accounting expenses .................................................................. 18,934 Professional fees ................................................................................ 16,398 Registration expenses ............................................................................ 3,365 Other expenses ................................................................................... 12,336 - --------------------------------------------------------------------------------------------------------------------------- TOTAL EXPENSES ..................................................................................... 723,010 - --------------------------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME (LOSS) ....................................................................... 7,218,356 - --------------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .................................... $7,218,356 - ---------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements. 9 Statements of Changes in Net Assets
MONEY MARKET FUND - ------------------------------------------------------------------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED JUNE 30, 2007 DECEMBER 31, (UNAUDITED) 2006 - ------------------------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS OPERATIONS: Net investments income (loss) .................................................. $ 7,218,356 $ 12,896,680 - ------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) from operations ........................................ 7,218,356 12,896,680 - ------------------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income .......................................................... (7,218,356) (12,896,680) - ------------------------------------------------------------------------------------------------------------------------------- TOTAL DISTRIBUTIONS .............................................................. (7,218,356) (12,896,680) - ------------------------------------------------------------------------------------------------------------------------------- SHARE TRANSACTIONS: Proceeds from sale of shares ................................................... 121,453,936 176,527,442 Value of distributions reinvested .............................................. 7,218,355 12,896,680 Cost of shares redeemed ........................................................ (93,630,586) (159,950,239) - ------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) from share transactions ................................ 35,041,705 29,473,883 - ------------------------------------------------------------------------------------------------------------------------------- TOTAL INCREASE (DECREASE) IN NET ASSETS .......................................... 35,041,705 29,473,883 NET ASSETS Beginning of period .............................................................. 279,622,428 250,148,545 - ------------------------------------------------------------------------------------------------------------------------------- End of period .................................................................... $314,664,133 $ 279,622,428 - ------------------------------------------------------------------------------------------------------------------------------- UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD ...... $ -- $ -- CHANGES IN FUND SHARES Shares sold .................................................................... 121,453,933 176,527,116 Issued for distributions reinvested ............................................ 7,218,355 12,897,006 Shares redeemed ................................................................ (93,630,586) (159,950,239) - ------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in fund shares .............................................. 35,041,702 29,473,883 - -------------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements. 10 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- 1. ORGANIZATION OF THE COMPANY GE Investments Funds, Inc. (the "Company") was incorporated under the laws of the Commonwealth of Virginia on May 14, 1984 and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company. The Company is composed of thirteen investment portfolios (collectively the "Funds"), although only the following eleven are currently being offered: U.S. Equity Fund, S&P 500 Index Fund, Premier Growth Equity Fund, Value Equity Fund, Mid-Cap Equity Fund, Small-Cap Equity Fund, International Equity Fund, Total Return Fund, Income Fund, Money Market Fund (the "Fund") and Real Estate Securities Fund. Shares of the Funds of the Company are offered only to insurance company separate accounts that fund certain variable life insurance contracts and variable annuity contracts. These insurance companies may include insurance companies affiliated with GE Asset Management Incorporated ("GEAM"), the investment adviser and administrator of each of the Funds. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions at the date of the financial statements. Actual results may differ from those estimates. The following summarizes the significant accounting policies of the Fund: SECURITY VALUATION AND TRANSACTIONS Securities for which exchange quotations are readily available are valued at the last sale price, or if no sales occurred on that day, at the last quoted bid price. Securities listed on the NASDAQ will be valued at the NASDAQ's official close price. Certain fixed income securities are valued by a dealer or by a pricing service based upon a matrix system, which considers market transactions as well as dealer supplied valuations. Short-term investments maturing within sixty days are valued at amortized cost. If quotations are not readily available for a portfolio security, or if it is believed that a quotation or other market price for a portfolio security does not represent its fair value, the security may be valued using procedures approved by the Fund's Board of Directors that are designed to establish its "fair value." These procedures require that the fair value of a security be established by the valuation committee. The fair value committee follows different protocols for different types of investments and circumstances. Foreign securities may be valued with the assistance of an independent fair value pricing service in circumstances where it is believed that they have been or would be materially affected by events occurring after the close of the portfolio security's primary market and before the close of regular trading on the NYSE. This independent fair value pricing service uses a computerized system to appraise affected securities and portfolios taking into consideration various factors and the fair value of such securities may be something other than the last available quotation or other market price. GE Asset Management may also separately monitor portfolio securities and, consistent with the Fund's fair value procedures, apply a different value to a portfolio security than would be applied had it been priced using market quotations or by an independent fair value pricing service. Determining the fair value of securities involves the application of both subjective and objective considerations. Security values may differ depending on the methodology used to determine their values, and may differ from the last quoted sale or closing price. No assurance can be given that use of these fair value procedures will always better represent the price at which a Fund could sell the affected portfolio security. In accordance with Rule 2a-7 of the 1940 Act, GE Money Market Fund values securities initially at cost and, thereafter, securities are assumed to have a constant amortization to maturity of any discount or premium. Amortized cost approximates fair value. Security transactions are accounted for as of the trade date. Realized gains and losses on investments sold are recorded on the basis of identified cost for both financial statement and federal tax purposes. In September 2006, FASB issued Statement of Financial Accounting Standards No. 157, FAIR VALUE MEASUREMENTS ("FAS 157"). FAS 157 establishes a single authoritative definition of fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. FAS 157 applies to fair value measurements already required or permitted by existing standards. The change to current generally accepted accounting principles from the application of FAS 157 relate to the definition of fair value, the methods used to 11 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- measure fair value, and the expanded disclosures about fair value measurements. Management of the Fund does not believe the adoption of FAS 157 will materially impact the financial statement amounts, however, additional disclosures may be required about the inputs used to develop the measurements and the effect of certain of the measurements on changes in net assets for the period. FAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. REPURCHASE AGREEMENTS The Fund may engage in repurchase agreement transactions with respect to instruments that are consistent with the Fund's investment objectives or policies. The Fund's or a third party custodian takes possession of the collateral pledged for investments in repurchase agreements on behalf of the Fund. The Fund values the underlying collateral daily on a mark-to-market basis to determine that the value, including accrued interest, is at least equal to 102% of the repurchase price. In the event the seller defaults and the value of the security declines, or if the seller enters an insolvency proceeding, realization of the collateral by the Fund may be delayed or limited. FOREIGN CURRENCY Accounting records of the Fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange at period end. Purchases and sales of securities, income receipts and expense payments denominated in foreign currencies are translated into U.S. dollars at the prevailing exchange rate on the respective dates of such transactions. The Fund does not isolate the portion of the results of operations resulting from changes in foreign exchange rates from the fluctuations arising from changes in the market prices of securities during the period. Such fluctuations are included in the net realized or unrealized gain or loss from investments. Net realized gains or losses on foreign currency transactions represent net gains or losses on sales and maturities of foreign currency contracts, disposition of foreign currencies, the difference between the amount of net investment income and withholding taxes accrued and the U.S. dollar amount actually received or paid, and gains or losses between the trade and settlement date on purchases and sales of securities. Net unrealized foreign exchange gains and losses arising from changes in the value of other assets and liabilities as a result of changes in foreign exchange rates are included as increases or decreases in unrealized appreciation/depreciation on foreign currency related transactions. INVESTMENTS IN FOREIGN MARKETS Investments in foreign markets may involve special risks and considerations not typically associated with investing in the United States. These risks include revaluation of currencies, high rates of inflation, repatriation on income and capital, and adverse political and economic developments. Moreover, securities issued in these markets may be less liquid, subject to government ownership controls, tariffs and taxes, subject to delays in settlements, and their prices may be more volatile. The Fund may be subject to capital gains and repatriation taxes imposed by certain countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued based upon net investment income, net realized gains and net unrealized appreciation as income and/or capital gains are earned. INCOME TAXES The Fund intends to comply with all sections of the Internal Revenue Code applicable to regulated investment companies including the distribution of substantially all of its taxable net investment income and net realized capital gains to its shareholders. Therefore, no provision for federal income tax has been made. The Fund is treated as a separate taxpayer for federal income tax purposes. At June 30, 2007, information on the tax cost of investments is as follows:
Cost of Gross Tax Gross Tax Net Tax Appreciation/ Investments for Unrealized Unrealized (Depreciation) Tax Purposes Appreciation Depreciation on Investments - ---------------------------------------------------------------------------------------------------------------------------------- $313,368,726 $ -- $ -- $ --
12 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- As of December 31, 2006, the Fund has capital loss carryovers as indicated below. Capital loss carryovers are available to offset future realized capital gains to the extent provided in the Internal Revenue Code and regulations thereunder. To the extent that these carryover losses are used to offset future capital gains, it is probable that the gains so offset will not be distributed to shareholders because they would be taxable as ordinary income. Amount Expires - -------------------------------------------------------------------------------- $63,869 12/31/2010 Any net capital and currency losses incurred after October 31, within the Fund's tax year, are deemed to arise on the first day of the Fund's next tax year if the Fund so elects to defer such losses. The Fund incurred no such losses after October 31, 2006. The tax composition of distributions paid during the year ended December 31, 2006 was as follows: Long-Term Ordinary Capital Income Gains Total - -------------------------------------------------------------------------------- $12,896,680 $ -- $12,896,680 DISTRIBUTIONS TO SHAREHOLDERS The Fund declares net investment income dividends daily and pays them monthly. The character of income and gains to be distributed is determined in accordance with income tax regulations which may differ from generally accepted accounting principles. Reclassifications due to permanent book/tax differences are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. These reclassifications have no impact on net investment income, realized gains or losses, or the net asset value of the Fund. The calculation of net investment income per share in the Financial Highlights table excludes these adjustments. On June 29, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in Income Taxes." FIN48 provides guidance for how certain uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN48 requires evaluation of tax positions taken or expected to be taken in the course of preparing the Fund's tax return to determine whether the tax positions are "more likely than not" of being sustained by the applicable tax authority. The adoption of FIN48 did not have an impact on the Fund's net assets and financial statements. INVESTMENT INCOME Corporate actions (including cash dividends) are recorded on the ex-dividend date, net of applicable withholding taxes, except for certain foreign corporate actions, which are recorded as soon after ex-dividend date as such information becomes available. Interest income is recorded on the accrual basis. All discounts and premiums on bonds are accreted and amortized, respectively, to call or maturity date, whichever is shorter, using the effective yield method. EXPENSES Expenses of the Company which are directly identifiable to one of the Funds are allocated to that portfolio. Expenses which are not directly identifiable to one of the Funds are allocated in such a manner as deemed equitable, taking into consideration the nature and type of expenses and relative sizes of the Funds. All expenses of the Fund are paid by GEAM and reimbursed by the Fund. 3. LINE OF CREDIT The Fund shares a revolving credit facility of up to $25 million with a number of its affiliates. The credit facility is with its custodian bank, State Street Bank and Trust Company. The revolving credit facility requires the payment of a commitment fee equal to 0.09% per annum on the daily unused portion of the credit facility, payable quarterly. The portion borne by the Funds generally is borne proportionally based upon net assets. Generally, borrowings under the credit facility would accrue interest at the Federal Funds Rate plus 50 basis points and is borne by each of the borrowing Funds. The maximum amount allowed to be borrowed by any one of the Funds is the lesser of its prospectus limitation, 20% of its net assets, or $25 million. The credit facility was not utilized by the Fund during the period ended June 30, 2007. 4. AMOUNTS PAID TO AFFILIATES ADVISORY AND ADMINISTRATION FEES GEAM, a registered investment adviser, was retained by the Company's Board of Directors effective May 1, 1997 to act as investment adviser and administrator of the Fund. Compensation of 13 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- GEAM for investment advisory and administrative services is paid monthly based on the average daily net assets of the Fund. The advisory and administrative fee is stated in the following schedule: Annualized based on average daily net assets ------------------------------------- Average Daily Advisory and Net Assets Administration of Fund Fees - --------------------------------------------------------------------------- Money Market Fund First $100 million .50% Next $100 million .45% Next $100 million .40% Next $100 million .35% Over $400 million .30% GENPACT performs certain accounting and certain administration services not provided by GEAM. For the period ending June 30, 2007, $2,308 was charged to the Fund. DIRECTORS' COMPENSATION The Fund pays no compensation to its directors who are officers or employees of GEAM or its affiliates. Directors who are not such officers or employees also serve in a similar capacity for other funds advised by GEAM. Compensation paid to unaffiliated directors are reflected on the Statement of Operations. These fees are allocated pro rata across all of the mutual fund platforms and share classes served by the directors, including the Fund, and are based upon the relative net assets of each fund within such platforms. (For additional information about directors compensation please refer to the Statement of Additional Information.) 14 Additional Information (unaudited) - -------------------------------------------------------------------------------- INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS: The business and affairs of the Company are managed under the direction of the Company's Board of Directors. Information pertaining to the Directors and officers of the Company is set forth below. INTERESTED DIRECTORS AND EXECUTIVE OFFICERS - -------------------------------------------------------------------------------- MICHAEL J. COSGROVE - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 58 POSITION(S) HELD WITH FUND Chairman of the Board and President TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 10 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President - GEAM since February 1997; President and Chief Executive Officer - Mutual Funds at GEAM since March 2007; Vice President, GE Capital Corporation, an indirect wholly-owned subsidiary of GE, since December 1999; Executive Vice President - Sales and Marketing of GEAM, a wholly-owned subsidiary of GE that is registered as an investment adviser under the Investment Advisers Act of 1940, as amended, since March 1993; Director of GEAM since 1988. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48 OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception; Trustee of Elfun Funds, GE Savings & Security Funds and General Electric Pension Trust since 1988; Trustee of Fordham University since 2003; Trustee of Elfun Foundation; Treasurer of GE Foundation; Director, GE Asset Management (Ireland) since February 1999; Director, GE Asset Management Funds Plc, GE Asset Canada Company, GE Asset Management Limited, and GE Volunteers. - -------------------------------------------------------------------------------- MATTHEW J. SIMPSON - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 46 POSITION(S) HELD WITH FUND Executive Vice President TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - less than one year PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General Counsel and Secretary of GEAM since July 2007; Senior Vice President and General Counsel - Marketing and Client Services (formerly Asset Management Services), at GEAM and Senior Vice President and General Counsel of GEAMS from February 1997 to June 2007; Vice President and Associate General Counsel of GEAM from October 1992 to February 1997; Secretary of Fund from 1997 to June 2007; Vice President of Fund from September 2003 to June 2007; Vice President of GE Institutional Funds and GE LifeStyle Funds from September 2003 to June 2007; Secretary of GE Institutional Funds and GE LifeStyle Funds from 1997 to June 2007; Vice President of Elfun Funds and GE Savings & Security Funds from October 2003 to June 2007; Assistant Secretary of Elfun Funds and GE Savings & Security Funds from 1998 to June 2007. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional Funds, GE LifeStyle Funds, Elfun Funds and GE Savings & Security Funds since July 2007. 15 Additional Information (unaudited) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SCOTT H. RHODES - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 48 POSITION(S) HELD WITH FUND Treasurer TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - one year PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds OperatTions Manager since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle Funds and GE Investments Funds since November 2005 and Elfun Funds and GE Savings & Security Funds since September 2005; from August 2004 to September 2005 Vice President, U.S. Trust Company, N.A. and Assistant Treasurer of Excelsior Funds, Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds, Inc.; from January 2004 to August 2004, Vice President BlackRock Financial Management, Inc.; from December 1996 to November 2003, Controller - Mutual Funds, American Skandia Investment Services, Inc. and Assistant Treasurer of American Skandia Trust and American Skandia Advisor Funds, Inc. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A - -------------------------------------------------------------------------------- JEANNE M. LAPORTA - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 42 POSITION(S) HELD WITH FUND Vice President and Secretary TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 2 years (Vice President); less than one year (Secretary) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Associate General Counsel - Marketing and Client Services (formerly Asset Management Services) at GEAM since May 1997; Vice President and Assistant Secretary of GE Funds, GE Institutional Funds and GE LifeStyle Funds since September 2003; Vice President and Assistant Secretary of Elfun Funds and GE Savings & Security Funds since October 2003; Assistant Secretary from September 2003 to June 2007 and Secretary since July 2007. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A 16 Additional Information (unaudited) - -------------------------------------------------------------------------------- NON-INTERESTED DIRECTORS - -------------------------------------------------------------------------------- JOHN R. COSTANTINO - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 61 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC since 2006; Managing Director, Walden Partners, Ltd., consultants and investors, since August 1992. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE Institutional Funds and GE LifeStyle Funds since their inception; Trustee of Fordham University since 2002 and Marymount College from 2001 through 2002; Neuroscience Research Institute since 1986; Diocesan Finance Counsel of the Dioceses of Brooklyn & Queens since 2001; Gregorian University Foundation since 1994. - -------------------------------------------------------------------------------- WILLIAM J. LUCAS - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 59 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Treasurer of Fairfield University since 1983. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception. - -------------------------------------------------------------------------------- ROBERT P. QUINN - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 71 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon Brothers Inc. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception. - -------------------------------------------------------------------------------- The Statement of Additional Information for the Fund includes additional information about the Directors and Officers and is available, without charge, upon request by calling 1-800-242-0134. 17 Investment Team - -------------------------------------------------------------------------------- INVESTMENT ADVISER AND ADMINISTRATOR GE Asset Management Incorporated BOARD OF DIRECTORS Michael J.Cosgrove, CHAIRMAN John R. Costantino William J. Lucas Robert P. Quinn Matthew J. Simpson SECRETARY Jeanne M. LaPorta ASSISTANT SECRETARIES Joseph A. Carucci Joon Won Choe TREASURER Scott H. Rhodes ASSISTANT TREASURERS Scott R. Fuchs Christopher M. Isaacs DISTRIBUTOR GE Investment Distributors, Inc. Member NASD and SIPC COUNSEL Sutherland, Asbill & Brennan, LLP CUSTODIAN State Street Bank & Trust Company INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM KPMG LLP OFFICERS OF THE INVESTMENT ADVISER James W. Ireland, CHIEF EXECUTIVE OFFICER Michael J. Cosgrove, EVP, PRESIDENT AND CHIEF EXECUTIVE OFFICER - MUTUAL FUNDS Paul M. Colonna, PRESIDENT - FIXED INCOME Kathryn D. Karlic, EVP, PRESIDENT - SALES AND MARKETING Ralph R. Layman, EVP, PRESIDENT - INTERNATIONAL EQUITIES Matthew J. Simpson, EVP, GENERAL COUNSEL AND SECRETARY Judith A. Studer, EVP, PRESIDENT - U.S. EQUITIES Don W. Torey, EVP, PRESIDENT - ALTERNATIVE INVESTMENTS AND REAL ESTATE John J. Walker, EVP, CHIEF FINANCIAL OFFICER 18 [This page intentionally left blank.] [This page intentionally left blank.] [This page intentionally left blank.] INVESTMENT ADVISER GE ASSET MANAGEMENT INCORPORATED 3001 SUMMER STREET PO BOX 7900 STAMFORD, CT 06904-7900 DISTRIBUTOR GE INVESTMENT DISTRIBUTORS, INC. MEMBER NASD AND SIPC 3001 SUMMER STREET PO BOX 7900 STAMFORD, CT 06904-7900 The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities is available without charge (i) upon request, by calling 1-800-242-0134; (ii) on the Fund's website at http://www.gefunds.com; and (iii) on the Commission's website at http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC - - information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Information (if any) regarding how the Fund voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through the Fund's website at http://www.gefunds.com; and (ii) on the Commission's website at http://www.sec.gov. [GE LOGO OMITTED] GE Investments Funds, Inc. Mid-Cap Equity Fund Semi-Annual Report JUNE 30, 2007 [GE logo omitted] GE Investments Funds, Inc. Mid-Cap Equity Fund - -------------------------------------------------------------------------------- Contents NOTES TO PERFORMANCE ..................................................... 1 MANAGER REVIEW AND SCHEDULE OF INVESTMENTS ............................... 2 NOTES TO SCHEDULE OF INVESTMENTS ......................................... 8 FINANCIAL STATEMENTS Financial Highlights ................................................ 9 Statement of Assets and Liabilities ................................. 10 Statement of Operations ............................................. 11 Statements of Changes in Net Assets ................................. 12 Notes to Financial Statements ....................................... 13 ADDITIONAL INFORMATION ................................................... 18 INVESTMENT TEAM .......................................................... 21 This report is prepared for Policyholders of certain variable contracts and may be distributed to others only if preceded or accompanied by the variable contract's current prospectus and the current prospectus of the Funds available for investments thereunder. Notes to Performance June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- Total returns take into account changes in share price and assume reinvestment of dividends and capital gains distributions, if any. Investment returns and net asset value on an investment will fluctuate and you may have a gain or loss when you sell your shares. Periods less than one year are not annualized. Current performance may be lower or higher than that shown. You may call toll-free (800) 242-0134 for performance information as of the most recent month end. Total returns do not reflect expenses associated with the separate account such as administrative fees, account charges and surrender charges, which, if reflected, would reduce the total returns for all periods shown. Shares of the Fund are neither insured nor guaranteed by the U.S. Government, and their prices will fluctuate with market conditions. The Russell Mid Cap Index (Russell Mid Cap) is an unmanaged index and does not reflect the actual cost of investing in the instruments that comprise each index. Russell Mid Cap is a market capitalization-weighted index of the smallest 800 companies included in the Russell 1000 Index that represent approximately 25% of the total market capitalization of the Russell 1000 Index. The results shown for the foregoing index assume the reinvestment of net dividends or interest. The peer universe of the underlying annuity funds used in our peer ranking calculation is based on the blend of Lipper peer categories, as shown. Lipper is an independent mutual fund rating service. A Fund's performance may be compared to or ranked within a universe of mutual funds with investment objectives and policies similar but not necessarily identical to the Fund's. Such comparisons or rankings are made on the basis of several factors, including the Fund's objectives and policies, management style and strategy, and portfolio composition, and may change over time if any of those factors change. 1 Mid-Cap Equity Fund - -------------------------------------------------------------------------------- DIANE M. WEHNER IS A VICE PRESIDENT OF GE ASSET MANAGEMENT AND PORTFOLIO MANAGER OF THE MID-CAP EQUITY FUND. SHE HAS SERVED IN THIS CAPACITY SINCE SEPTEMBER 2004. BEFORE JOINING GE ASSET MANAGEMENT, MS. WEHNER WAS A VICE PRESIDENT AND SENIOR PORTFOLIO MANAGER FROM JANUARY 1997 TO JUNE 2001, AND ASSOCIATE PORTFOLIO MANAGER FROM MAY 1995 TO JANUARY 1997, WITH BENEFIT CAPITAL MANAGEMENT CORPORATION. MS. WEHNER HAS SERVED AS AN ANALYST/PORTFOLIO MANAGER IN THE INVESTMENT MANAGEMENT INDUSTRY SINCE 1985. Q. HOW DID THE MID-CAP EQUITY FUND PERFORM COMPARED TO ITS BENCHMARK AND LIPPER PEER GROUP FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2007? A. For the six-month period ended June 30, 2007, the Mid-Cap Equity Fund returned 11.00%. The Russell Mid-Cap Index, the Fund's benchmark, returned 9.91% and the Fund's Lipper peer group of 153 Mid-Cap Growth funds returned an average of 12.52% for the same period. Q. WHAT MARKET CONDITIONS IMPACTED FUND PERFORMANCE? A. During the first half of 2007, the growth style of investing outperformed value. The Fund's growth bias and its overweight in the faster growing information technology and healthcare sectors contributed to performance. In addition, the Fund benefited from an underweight in financials, which continued to be weak due to the flat yield curve environment and increasing concerns about credit risk. In particular, we remained underweight REITs and regional bank stocks, which underperformed the benchmark, thus adding to performance. Mergers and acquisition activity remained robust during the first half of the year, driven in part by relatively low interest rates and private equity's appetite for mid-cap companies. The Fund had two companies that were the target of M&A activity, Affiliated Computer Services and HCR Manor Care. Commodity prices boomed during the first half of 2007, and while the Fund was hurt by an underweight in metals and mining stocks, this underperformance was more than offset by the overweight in energy stocks which benefited from the rise in oil prices. Problems in the housing market persisted through the first half of the year as inventories of unsold homes continued to climb. Concerns about the spillover effects of declining home prices on consumer spending resulted in our remaining underweight the consumer discretionary sector, and in particular homebuilding stocks, which positively impacted performance. Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE? A. The Fund outperformed during the six-month period, largely due to solid stock selection within the information technology, healthcare, energy, consumer staples and materials sectors. Specifically Sunpower (+52%), a leading manufacturer of solar cells and panels for electricity generation, rose as investors continued their interest in the high-growth alternative energy space. Meanwhile, the graphic semiconductor chip company Nvidia (+32%) benefited from strong sales and earnings growth. Within healthcare, the Fund was positively impacted by HCR Manor Care [Photo omitted] 2 - -------------------------------------------------------------------------------- Q&A (+40%), which saw strong occupancy rates for its nursing homes, and benefited from takeout speculation (company has since announced a buyout by private equity firm Carlyle Group). Energy service companies Dresser-Rand (+61%) and Weatherford International (+32%) performed well due to strong demand fundamentals for this group. Within the materials sector, Martin Marietta Materials (+57%) gained from a strong pricing environment. Within the industrial sector, consulting services firm Corporate Executive Board (-25%) detracted from performance, as sales were weaker than expected due to a slowdown in corporate spending and difficulties in building their sales force. Within information technology, detracting from performance was BigBand Networks (-23%) as concerns rose about the deployment of their video switching technology. Fortress Investment Group (-22%) corrected due to discussions of a Senate-proposed tax bill, which would seek to increase the tax on publicly-traded partnerships. Finally, Vertex Pharmaceuticals (-24%) was negatively impacted by uncertainty surrounding the timing of a major drug approval. Believing the fundamentals remain sound, we took advantage of the correction in these four names to add to our existing positions during the period. Q. WERE THERE AND SIGNIFICANT CHANGES TO THE FUND OVER THE PERIOD? A. During the period we increased the Fund's weighting in the healthcare, energy and telecommunications services sectors and we reduced our exposure to the financial and industrials sectors. We are focused on investing in attractively valued companies with solid earnings prospects, strong market share and superior long-term fundamentals. With an emphasis on growth, we continue to look to invest in innovative companies that provide prospects for above-average earnings growth. Therefore, healthcare and information technology companies represent a meaningful percentage of the Fund's holdings. 3 Mid-Cap Equity Fund - -------------------------------------------------------------------------------- Understanding Your Fund's Expenses As a shareholder of the Fund you incur transaction and ongoing expenses. Transaction expenses including sales charges on purchase payments, reinvested dividends (or other distributions), and redemption fees directly reduce the investment return of the Fund. Ongoing costs include portfolio management fees, distribution and service fees, professional fees, administrative fees and other Fund expenses. The following example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the period. The information in the following table is based on an investment of $1,000, which is invested at the beginning of the period and held for the entire six-month period ended June 30, 2007. ACTUAL EXPENSES The first section of the table provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your class under the heading "Expenses Paid During Period." HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second section of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholders reports of other funds. Please note that the expenses shown in the table do not reflect any transaction costs, such as sales charges or redemption fees.
JANUARY 1, 2007 - JUNE 30, 2007 - ----------------------------------------------------------------------------------------------------------------------- ACCOUNT VALUE AT ACCOUNT VALUE EXPENSES THE BEGINNING OF AT THE END OF PAID DURING THE PERIOD ($) THE PERIOD ($) THE PERIOD ($)* - ----------------------------------------------------------------------------------------------------------------------- Actual Fund Return** 1,000.00 1,109.95 3.68 - ----------------------------------------------------------------------------------------------------------------------- Hypothetical 5% Return (2.5% for the period) 1,000.00 1,021.10 3.51 - -----------------------------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.70% (FROM PERIOD JANUARY 1, 2007 - JUNE 30, 2007), MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY 181/365 (TO REFLECT THE SIX MONTH PERIOD). ** ACTUAL FUND RETURN FOR SIX-MONTH PERIOD ENDED JUNE 30, 2007 WAS: 11.00%. 4 Mid-Cap Equity Fund (unaudited) - -------------------------------------------------------------------------------- CHANGE IN VALUE OF A $10,000 INVESTMENT - -------------------------------------------------------------------------------- [Line chart omitted -- plot points are as follows:] Mid-Cap Equity Fund Russell Midcap Index 6/97 $10,000.00 $10,000.00 12/97 11,576.97 11,448.16 12/98 12,351.04 12,599.03 12/99 14,483.31 14,891.44 12/00 15,683.72 16,121.16 12/01 15,734.84 15,211.37 12/02 13,568.99 12,750.93 12/03 18,038.41 17,863.48 12/04 20,928.68 21,466.46 12/05 23,385.61 24,182.17 12/06 25,349.67 27,879.55 06/07 28,136.88 30,642.69 - ------------------------------------------- Mid-Cap Equity Fund (ending value $28,137) Russell MidCap Index (ending value $30,643) - ------------------------------------------- AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2007 - -------------------------------------------------------------------------------- SIX ONE FIVE TEN MONTHS YEAR YEAR YEAR - -------------------------------------------------------------------------------- Mid-Cap Equity Fund 11.00% 17.62% 12.34% 10.90% - -------------------------------------------------------------------------------- Russell MidCap Index 9.91% 20.84% 16.39% 11.85% - -------------------------------------------------------------------------------- Lipper peer group average* 12.52% 19.18% 13.17% 8.60% - -------------------------------------------------------------------------------- Inception date 5/1/97 ================================================================================ INVESTMENT PROFILE A fund designed for investors who seek long-term growth of capital and future income by investing at least 80% of its net assets in equity securities of mid cap companies under normal circumstances. The Fund invests primarily in mid-cap companies that the portfolio manager believes are undervalued by the market and have above-average growth potential. TOP TEN LARGEST HOLDINGS AS OF JUNE 30, 2007 as a % of Market Value - -------------------------------------------------------------------------------- CB Richard Ellis Group, Inc. (Class A) 1.90% - -------------------------------------------------------------------------------- Thermo Electron Corp. 1.76% - -------------------------------------------------------------------------------- Macrovision Corp. 1.62% - -------------------------------------------------------------------------------- Psychiatric Solutions Inc. 1.62% - -------------------------------------------------------------------------------- Harsco Corp. 1.60% - -------------------------------------------------------------------------------- Neustar, Inc. (Class A) 1.58% - -------------------------------------------------------------------------------- NII Holdings Inc. (Class B) 1.49% - -------------------------------------------------------------------------------- Liberty Global, Inc. (Series C) 1.38% - -------------------------------------------------------------------------------- ITC Holdings Corp. 1.37% - -------------------------------------------------------------------------------- Weatherford International Ltd. 1.35% ================================================================================ PORTFOLIO COMPOSITION AS OF JUNE 30, 2007 as a % of Market Value - -------------------------------------------------------------------------------- Market Value of $228,686 (in thousands) [Pie chart omitted -- plot points are as follows:] Information Technology 17.7% Healthcare 15.9% Short Term Investments 15.4% Financials 11.1% Industrials 9.2% Consumer Discretionary 8.8% Energy 6.5% Telecommunication Services 4.5% Materials 4.2% Utilities 3.5% Consumer Staples 3.2% * LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR THE SIX MONTHS, ONE YEAR, FIVE-YEAR, AND TEN-YEAR PERIODS INDICATED IN THE MID-CAP GROWTH FUNDS PEER GROUP CONSISTING OF 153, 151, 135 AND 27 UNDERLYING ANNUITY FUNDS, RESPECTIVELY. SEE NOTES TO PERFORMANCE ON PAGE 1 FOR FURTHER INFORMATION, INCLUDING AN EXPLANATION OF LIPPER PEER CATEGORIES. PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE AND THE GRAPH AND TABLE DO NOT REFLECT THE DEDUCTION OF TAXES. 5 MID-CAP EQUITY FUND Schedule of Investments June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- MID-CAP EQUITY FUND - -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- COMMON STOCK -- 98.5%+ - -------------------------------------------------------------------------------- CONSUMER DISCRETIONARY -- 10.2% Bed Bath & Beyond, Inc. 50,453 $ 1,815,803(a,d) Coach, Inc. 16,072 761,652(a) Dick's Sporting Goods, Inc. 14,380 836,485(a,e) Liberty Global, Inc. (Series C) 80,338 3,157,283(a) Life Time Fitness, Inc. 54,990 2,927,118(a,e) O'Reilly Automotive, Inc. 79,476 2,904,848(a) Pulte Homes, Inc. 33,439 750,706 Regal Entertainment Group, (Class A) 80,257 1,760,036(e) Starwood Hotels & Resorts Worldwide, Inc. 25,118 1,684,664 The Cheesecake Factory 70,383 1,725,791(a,e) Weight Watchers International Inc. 33,987 1,727,899(e) 20,052,285 CONSUMER STAPLES -- 3.8% Alberto-Culver Co. 94,415 2,239,524 Brown-Forman Corp. (Class B) 7,937 580,036(e) Clorox Co. 35,280 2,190,888 McCormick & Company, Inc. 43,986 1,679,385 The Kroger Co. 24,062 676,864 7,366,697 ENERGY -- 7.6% Dresser-Rand Group, Inc. 58,416 2,307,432(a) EOG Resources, Inc. 24,037 1,756,143 GlobalSantaFe Corp. 32,154 2,323,127 Hess Corp. 33,853 1,995,973 Nexen, Inc. 55,383 1,714,104 Peabody Energy Corp. 34,760 1,681,689 Weatherford International Ltd. 56,044 3,095,871(a) 14,874,339 FINANCIALS -- 12.9% Affiliated Managers Group, Inc. 17,229 2,218,406(a,e) CB Richard Ellis Group, Inc. (Class A) 118,985 4,342,953(a,d) CVB Financial Corp. 179,504 1,996,084(e) Douglas Emmett, Inc. (REIT) 52,853 1,307,583 Fortress Investment Group LLC (Class A) 78,655 1,873,562(e) Greenhill & Company, Inc. 33,212 2,281,997(e) - -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- Hartford Financial Services Group, Inc. 18,563 $ 1,828,641 HCC Insurance Holdings, Inc. 83,640 2,794,412 Legg Mason, Inc. 27,602 2,715,485 SL Green Realty Corp. (REIT) 17,764 2,200,782 Zions Bancorporation 22,162 1,704,479 25,264,384 HEALTHCARE -- 18.5% Alcon, Inc. 13,873 1,871,606 Amylin Pharmaceuticals, Inc. 65,911 2,712,897(a,e) Barr Pharmaceuticals, Inc. 55,351 2,780,281(a) DENTSPLY International, Inc. 65,752 2,515,672 Gen-Probe Inc. 34,681 2,095,426(a) Gilead Sciences, Inc. 42,668 1,654,238(a) Henry Schein, Inc. 35,926 1,919,526(a) Hologic, Inc. 54,983 3,041,110(a,e) Lifecell Corp. 57,520 1,756,661(a,e) Manor Care, Inc. 42,845 2,797,350 Psychiatric Solutions Inc. 101,869 3,693,770(a) Resmed, Inc. 44,632 1,841,516(a,e) Smith & Nephew PLC ADR 31,822 1,973,919(e) Thermo Electron Corp. 77,808 4,024,230(a,d) Vertex Pharmaceuticals, Inc. 59,353 1,695,122(a,e) 36,373,324 INDUSTRIALS -- 10.8% Corporate Executive Board Co. 39,262 2,548,496 CoStar Group, Inc. 43,341 2,291,872(a,e) Dover Corp. 23,080 1,180,542 Harsco Corp. 70,261 3,653,572 Hexcel Corp. 93,591 1,971,962(a,e) Joy Global, Inc. 28,561 1,665,963 SAIC, Inc. 99,138 1,791,424(a,e) Spirit Aerosystems Holdings, Inc. (Class A) 33,553 1,209,586(a) Stericycle, Inc. 12,437 552,949(a) Textron Inc. 21,993 2,421,649 WESCO International, Inc. 30,452 1,840,823(a) 21,128,838 INFORMATION TECHNOLOGY -- 20.6% Activision, Inc. 159,431 2,976,577(a,d) Citrix Systems, Inc. 54,983 1,851,278(a) Cogent, Inc. 117,421 1,724,914(a,e) Comverse Technology, Inc. 83,073 1,732,072(a,d) DST Systems, Inc. 28,796 2,280,931(a) Electronic Arts, Inc. 8,459 400,280(a) Global Cash Access Holdings, Inc. 153,012 2,451,252(a) Harris Corp. 43,656 2,381,435(d) Hittite Microwave Corp. 38,911 1,662,667(a,e) See Notes to Schedule of Investments on page 8 and Notes to Financial Statements. 6 MID-CAP EQUITY FUND Schedule of Investments June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- Intuit Inc. 78,734 $ 2,368,319(a) Juniper Networks, Inc. 114,167 2,873,583(a) Limelight Networks, Inc. 53,519 1,058,606(a) Linear Technology Corp. 26,782 968,973(e) Macrovision Corp. 123,390 3,709,103(a,e) Mettler Toledo International Inc. 19,888 1,899,503(a) Microchip Technology Inc. 57,865 2,143,320 Molex, Inc. (Class A) 76,117 2,020,906 Network Appliance, Inc. 32,014 934,809(a) Nvidia Corp. 42,294 1,747,165(a) Paychex, Inc. 55,545 2,172,920 Salesforce.com, Inc. 27,914 1,196,394(a) 40,555,007 MATERIALS -- 4.8% Cabot Corp. 40,652 1,938,287 Martin Marietta Materials, Inc. 17,594 2,850,580 Monsanto Co. 33,934 2,291,902 Praxair, Inc. 33,717 2,427,287 9,508,056 TELECOMMUNICATION SERVICES -- 5.3% American Tower Corp. (Class A) 48,399 2,032,758(a) BigBand Networks, Inc. 100,546 1,318,158(a,e) Neustar, Inc. (Class A) 124,949 3,619,773(a,e) NII Holdings Inc. (Class B) 42,141 3,402,464(a) 10,373,153 UTILITIES -- 4.0% DTE Energy Co. 33,439 1,612,429 ITC Holdings Corp. 76,981 3,127,738(e) PPL Corp. 35,181 1,646,119 SCANA Corp. 40,793 1,561,964 7,948,250 TOTAL INVESTMENTS IN SECURITIES (COST $150,737,291) 193,444,333 - -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 17.9% - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 1.2% GEI Short Term Investment Fund 5.55% 2,425,205 $ 2,425,205(b,f) SHORT-TERM SECURITIES PURCHASED WITH COLLATERAL FROM SECURITIES ON LOAN -- 16.7% State Street Navigator Securities Lending Prime Portfolio 5.36% 32,816,575 32,816,575(b,c) TOTAL SHORT-TERM INVESTMENTS (COST $35,241,780) 35,241,780 TOTAL INVESTMENTS (COST $185,979,071) 228,686,113 LIABILITIES IN EXCESS OF OTHER ASSETS, NET -- (16.4)% (32,293,471) -------------- NET ASSETS -- 100.0% $ 196,392,642 ============== - -------------------------------------------------------------------------------- OTHER INFORMATION - -------------------------------------------------------------------------------- The GEI Mid-Cap Equity had the following long futures contracts open at June 30, 2007 (unaudited): NUMBER CURRENT EXPIRATION OF NOTIONAL UNREALIZED DESCRIPTION DATE CONTRACTS VALUE DEPRECIATION - -------------------------------------------------------------------------------- S&P Midcap 400 Futures September 2007 3 $1,356,300 $(4,542) See Notes to Schedule of Investments on page 8 and Notes to Financial Statements. 7 Notes to Schedule of Investments June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- The views expressed in this document reflect our judgment as of the publication date and are subject to change at any time without notice. The securities cited may not represent current or future holdings and should not be considered as a recommendation to purchase or sell a particular security. See the prospectus for complete descriptions of investment objectives, policies, risks and permissible investments. (a) Non-income producing security. (b) Coupon amount represents effective yield. (c) State Street Corp. is the parent company of State Street Bank & Trust Co., the Fund's custodian and accounting agent. (d) At June 30, 2007, all or a portion of this security was pledged to cover collateral requirements for futures, options, forward foreign currency contracts and/or TBA's. (e) All or a portion of the security is out on loan. (f) GEAM, the investment advisor of the fund, serves as investment advisor of the GEI Short Term Investment Fund. + Percentages are based on net assets as of June 30, 2007. Abbreviations: ADR American Depository Receipt GDR Global Depository Receipt REIT Real Estate Investment Trust 8 Financial Highlights Selected data based on a share outstanding throughout the periods indicated - -------------------------------------------------------------------------------- MID-CAP EQUITY FUND
6/30/07+ 12/31/06 12/31/05 12/31/04 12/31/03 12/31/02 - ----------------------------------------------------------------------------------------------------------------------------------- INCEPTION DATE -- -- -- -- -- 5/1/97 Net asset value, beginning of period ............. $18.19 $19.22 $18.33 $17.48 $13.30 $15.66 INCOME/(LOSS) FROM INVESTMENT OPERATIONS: Net investment income ......................... 0.05 0.23 0.05 0.17 0.19 0.12 Net realized and unrealized gains/(losses) on investments .............. 1.95 1.40 2.11 2.63 4.19 (2.28) - ----------------------------------------------------------------------------------------------------------------------------------- TOTAL INCOME/(LOSS) FROM INVESTMENT OPERATIONS ... 2.00 1.63 2.16 2.80 4.38 (2.16) - ----------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS FROM: Net investment income ......................... -- 0.22 0.06 0.14 0.18 0.12 Net realized gains ............................ -- 2.44 1.21 1.81 0.02 0.08 - ----------------------------------------------------------------------------------------------------------------------------------- TOTAL DISTRIBUTIONS .............................. -- 2.66 1.27 1.95 0.20 0.20 - ----------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD ................... $20.19 $18.19 $19.22 $18.33 $17.48 $13.30 =================================================================================================================================== TOTAL RETURN (A) ................................. 11.00% 8.40% 11.74% 16.02% 32.94% (13.76)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ...... $196,393 $199,311 $229,097 $239,831 $226,929 $170,422 Ratios to average net assets: Net investment income* ..................... 0.47% 1.01% 0.24% 0.89% 1.36% 0.82% Expenses* .................................. 0.70% 0.69% 0.70% 0.70% 0.69% 0.68% Portfolio turnover rate ....................... 36% 29% 27% 78% 28% 37%
NOTES TO FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- (a) Total returns are historical and assume changes in share price and reinvestment of dividends and capital gains and do not include the effect of insurance contract charges. * Annualized for periods less than one year. + Unaudited. See Notes to Financial Statements. 9
MID-CAP Statement of Assets EQUITY and Liabilities JUNE 30, 2007 (UNAUDITED) FUND - --------------------------------------------------------------------------------------------------------------------------- ASSETS Investments in securities, at market* (cost $150,737,291) .............................................. $193,444,333 Short-term Investments (at amortized cost) ............................................................. 32,816,575 Short-term affiliated investments (at amortized cost) .................................................. 2,425,205 Receivable for investments sold ........................................................................ 2,985,072 Income receivables ..................................................................................... 174,507 Receivable for fund shares sold ........................................................................ 2,007 Other assets ........................................................................................... 1,616 - --------------------------------------------------------------------------------------------------------------------------- TOTAL ASSETS ....................................................................................... 231,849,315 - --------------------------------------------------------------------------------------------------------------------------- LIABILITIES Payable upon return of securities loaned ............................................................... 32,816,575 Payable for investments purchased ...................................................................... 2,205,578 Payable for fund shares redeemed ....................................................................... 283,283 Payable to GEAM ........................................................................................ 148,537 Variation margin payable ............................................................................... 2,700 - --------------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES .................................................................................. 35,456,673 - --------------------------------------------------------------------------------------------------------------------------- NET ASSETS ................................................................................................ $196,392,642 =========================================================================================================================== NET ASSETS CONSIST OF: Capital paid in ........................................................................................ 132,790,041 Undistributed (distribution in excess of) net investment income ........................................ 478,354 Accumulated net realized gain (loss) ................................................................... 20,421,747 Net unrealized appreciation/(depreciation) on: Investments ........................................................................................ 42,707,042 Futures ............................................................................................ (4,542) - --------------------------------------------------------------------------------------------------------------------------- NET ASSETS ................................................................................................ $196,392,642 =========================================================================================================================== NET ASSETS ................................................................................................ 196,392,642 Shares outstanding ($0.01 par value; unlimited shares authorized) ......................................... 9,728,742 Net asset value per share ................................................................................. $20.19
* Includes $31,728,456 of securities on loan. See Notes to Financial Statements. 10
MID-CAP Statement of Operations EQUITY FOR THE SIX MONTHS ENDED JUNE 30, 2007 (UNAUDITED) FUND - -------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME INCOME: Dividend .................................................................................. $1,006,498 Interest* ................................................................................. 71,228 Interest from affliated investments ....................................................... 81,870 Less: Foreign taxes withheld .............................................................. (4,637) - -------------------------------------------------------------------------------------------------------------- TOTAL INCOME ................................................................................ 1,154,959 - -------------------------------------------------------------------------------------------------------------- EXPENSES: Advisory and administrative fees .......................................................... 642,111 Transfer agent ............................................................................ 23 Trustee's fees ............................................................................ 2,608 Custody and accounting expenses ........................................................... 20,564 Professional fees ......................................................................... 11,957 Registration expenses ..................................................................... 2,838 Other expenses ............................................................................ 13,289 - -------------------------------------------------------------------------------------------------------------- TOTAL EXPENSES .............................................................................. 693,390 - -------------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME (LOSS) ................................................................ 461,569 ============================================================================================================== NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS REALIZED GAIN (LOSS) ON: Investments ............................................................................ 17,281,138 Futures ................................................................................ (83,280) Foreign currency transactions .......................................................... 20 INCREASE (DECREASE) IN UNREALIZED APPRECIATION/ (DEPRECIATION) ON: Investments ............................................................................ 3,025,785 Futures ................................................................................ (30,146) Foreign currency transactions .......................................................... 15 - -------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments .................................... 20,193,532 - -------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ............................. $20,655,101 ==============================================================================================================
* Income attributable to security lending activity, net of rebate expenses, was $71,228. See Notes to Financial Statements. 11
MID-CAP Statements of EQUITY Changes in Net Assets FUND - ------------------------------------------------------------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED JUNE 30, 2007 DECEMBER 31, (UNAUDITED) 2006 - ------------------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS OPERATIONS: Net investments income (loss) ................................................... $ 461,569 $ 2,107,300 Net realized gain (loss) on investments, futures, written options, foreign currency transactions and swaps ....................................... 17,197,878 24,149,867 Net increase (decrease) in unrealized appreciation/(depreciation) on investments, futures, written options, foreign currency translation ........ 2,995,654 (8,838,212) - ------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) from operations ......................................... 20,655,101 17,418,955 - ------------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income ........................................................... -- (2,123,415) Net realized gains .............................................................. -- (23,338,915) - ------------------------------------------------------------------------------------------------------------------------- TOTAL DISTRIBUTIONS ............................................................... -- (25,462,330) - ------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from operations and distributions ............... 20,655,101 (8,043,375) - ------------------------------------------------------------------------------------------------------------------------- SHARE TRANSACTIONS: Proceeds from sale of shares .................................................... 471,333 1,813,307 Value of distributions reinvested ............................................... -- 25,462,330 Cost of shares redeemed ......................................................... (24,044,529) (49,018,282) - ------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) from share transactions ................................. (23,573,196) (21,742,645) - ------------------------------------------------------------------------------------------------------------------------- TOTAL INCREASE (DECREASE) IN NET ASSETS ........................................... (2,918,095) (29,786,020) NET ASSETS Beginning of period ............................................................... 199,310,737 229,096,757 - ------------------------------------------------------------------------------------------------------------------------- End of period ..................................................................... $196,392,642 $ 199,310,737 ========================================================================================================================= UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD ....... $ 478,354 $ 16,785 - ------------------------------------------------------------------------------------------------------------------------- CHANGES IN FUND SHARES Shares sold ..................................................................... 24,379 92,067 Issued for distributions reinvested ............................................. -- 1,391,385 Shares redeemed ................................................................. (1,250,974) (2,449,915) - ------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in fund shares ............................................... (1,226,595) (966,463) =========================================================================================================================
See Notes to Financial Statements. 12 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- 1. ORGANIZATION OF THE COMPANY GE Investments Funds, Inc. (the "Company") was incorporated under the laws of the Commonwealth of Virginia on May 14, 1984 and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company. The Company is composed of thirteen investment portfolios (collectively the "Funds"), although only the following eleven are currently being offered: U.S. Equity Fund, S&P 500 Index Fund, Premier Growth Equity Fund, Value Equity Fund, Mid-Cap Equity Fund (the "Fund"), Small-Cap Equity Fund, International Equity Fund, Total Return Fund, Income Fund, Money Market Fund and Real Estate Securities Fund. Shares of the Funds of the Company are offered only to insurance company separate accounts that fund certain variable life insurance contracts and variable annuity contracts. These insurance companies may include insurance companies affiliated with GE Asset Management Incorporated ("GEAM"), the investment adviser and administrator of each of the Funds. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions at the date of the financial statements. Actual results may differ from those estimates. The following summarizes the significant accounting policies of the Fund: SECURITY VALUATION AND TRANSACTIONS Securities for which exchange quotations are readily available are valued at the last sale price, or if no sales occurred on that day, at the last quoted bid price. Securities listed on the NASDAQ will be valued at the NASDAQ's official close price. Certain fixed income securities are valued by a dealer or by a pricing service based upon a matrix system, which considers market transactions as well as dealer supplied valuations. Short-term investments maturing within sixty days are valued at amortized cost. If quotations are not readily available for a portfolio security, or if it is believed that a quotation or other market price for a portfolio security does not represent its fair value, the security may be valued using procedures approved by the Fund's Board of Directors that are designed to establish its "fair value." These procedures require that the fair value of a security be established by the valuation committee. The fair value committee follows different protocols for different types of investments and circumstances. Foreign securities may be valued with the assistance of an independent fair value pricing service in circumstances where it is believed that they have been or would be materially affected by events occurring after the close of the portfolio security's primary market and before the close of regular trading on the NYSE. This independent fair value pricing service uses a computerized system to appraise affected securities and portfolios taking into consideration various factors and the fair value of such securities may be something other than the last available quotation or other market price. GE Asset Management may also separately monitor portfolio securities and, consistent with the Fund's fair value procedures, apply a different value to a portfolio security than would be applied had it been priced using market quotations or by an independent fair value pricing service. Determining the fair value of securities involves the application of both subjective and objective considerations. Security values may differ depending on the methodology used to determine their values, and may differ from the last quoted sale or closing price. No assurance can be given that use of these fair value procedures will always better represent the price at which a Fund could sell the affected portfolio security. Security transactions are accounted for as of the trade date. Realized gains and losses on investments sold are recorded on the basis of identified cost for both financial statement and federal tax purposes. In September 2006, FASB issued Statement of Financial Accounting Standards No. 157, FAIR VALUE MEASUREMENTS ("FAS 157"). FAS 157 establishes a single authoritative definition of fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. FAS 157 applies to fair value measurements already required or permitted by existing standards. The change to current generally accepted accounting principles from the application of FAS 157 relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. Management of the Fund does not believe the adoption of FAS 157 will materially impact the financial statement amounts, however, additional 13 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- disclosures may be required about the inputs used to develop the measurements and the effect of certain of the measurements on changes in net assets for the period. FAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. REPURCHASE AGREEMENTS The Fund may engage in repurchase agreement transactions with respect to instruments that are consistent with the Fund's investment objectives or policies. The Fund's or a third party custodian takes possession of the collateral pledged for investments in repurchase agreements on behalf of the Fund. The Fund values the underlying collateral daily on a mark-to-market basis to determine that the value, including accrued interest, is at least equal to 102% of the repurchase price. In the event the seller defaults and the value of the security declines, or if the seller enters an insolvency proceeding, realization of the collateral by the Fund may be delayed or limited. SECURITY LENDING The Fund may loan securities to brokers, dealers, and financial institutions determined by GEAM to be creditworthy, subject to certain limitations. The Fund continues to receive the interest and dividends on the loaned securities during the term of the loan. The loans of securities are secured by collateral in the form of cash or other liquid assets, which are segregated and maintained with the custodian in an amount at least equal to 102% of the current market value of the loaned securities. During the term of the loan, the Fund will record any gain or loss in the market value of its loaned securities and of securities in which cash collateral is invested. The Fund will also earn interest, net of any rebate, from securities in which cash collateral is invested. In the event the counterparty (borrower) does not meet its contracted obligation to return the securities, the Fund may be exposed to the risk of loss of reacquiring the loaned securities at prevailing market prices using the proceeds of the sale of the collateral. FOREIGN CURRENCY Accounting records of the Fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange at period end. Purchases and sales of securities, income receipts and expense payments denominated in foreign currencies are translated into U.S. dollars at the prevailing exchange rate on the respective dates of such transactions. The Fund does not isolate the portion of the results of operations resulting from changes in foreign exchange rates from the fluctuations arising from changes in the market prices of securities during the period. Such fluctuations are included in the net realized or unrealized gain or loss from investments. Net realized gains or losses on foreign currency transactions represent net gains or losses on sales and maturities of foreign currency contracts, disposition of foreign currencies, the difference between the amount of net investment income and withholding taxes accrued and the U.S. dollar amount actually received or paid, and gains or losses between the trade and settlement date on purchases and sales of securities. Net unrealized foreign exchange gains and losses arising from changes in the value of other assets and liabilities as a result of changes in foreign exchange rates are included as increases or decreases in unrealized appreciation/depreciation on foreign currency related transactions. FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or bond index futures contracts subject to certain limitations. The Fund may invest in futures contracts to manage its exposure to the stock and bond markets and fluctuations in currency values. Buying futures tends to increase the Fund's exposure to the underlying instrument while selling futures tends to decrease the Fund's exposure to the underlying instrument, or hedge other Fund investments. The Fund will not enter into a transaction involving futures for speculative purposes. The Fund's risks in using these contracts include changes in the value of the underlying instruments, non-performance of the counterparties under the contracts' terms and changes in the liquidity of the secondary market for the contracts. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they principally trade. Upon entering into a futures contract, the Fund is required to pledge to the broker an amount of cash and/or other assets equal to a certain percentage of the contract amount, known as initial margin deposit. Subsequent payments, known as variation margin, are made or received by the Fund each day, depending on the daily fluctuation in the fair value of the underlying security. The Fund records an unrealized gain or loss equal to the daily variation margin. Should market conditions move unexpectedly, the Fund may not achieve the anticipated benefits of the futures contracts and may incur a loss. The Fund recognizes a realized gain or loss on the expiration or closing of a futures contract. 14 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- OPTIONS The Fund may purchase and write options, subject to certain limitations. The Fund may invest in options contracts to manage its exposure to the stock and bond markets and fluctuations in foreign currency values. Writing puts and buying calls tend to increase the Fund's exposure to the underlying instrument while buying puts and writing calls tend to decrease the Fund's exposure to the underlying instrument, or hedge other Fund investments. The Fund will not enter into a transaction involving options for speculative purposes. The Fund's risks in using these contracts include changes in the value of the underlying instruments, non-performance of the counterparties under the contracts' terms and changes in the liquidity of the secondary market for the contracts. Options are valued at the last sale price, or if no sales occurred on that day, at the last quoted bid price. When the Fund writes an option, the amount of the premium received is recorded as a liability and is subsequently adjusted to the current fair value of the option written. Premiums received from writing options that expire unexercised are treated by the Fund on the expiration date as realized gains from investments. The difference between the premium and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium is less than the amount paid for the closing purchase, as a realized loss. When an option is exercised, the proceeds from the sale of the underlying security or the cost basis of the securities purchased is adjusted by the original premium received or paid. INVESTMENTS IN FOREIGN MARKETS Investments in foreign markets may involve special risks and considerations not typically associated with investing in the United States. These risks include revaluation of currencies, high rates of inflation, repatriation on income and capital, and adverse political and economic developments. Moreover, securities issued in these markets may be less liquid, subject to government ownership controls, tariffs and taxes, subject to delays in settlements, and their prices may be more volatile. The Fund may be subject to capital gains and repatriation taxes imposed by certain countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued based upon net investment income, net realized gains and net unrealized appreciation as income and/or capital gains are earned. INCOME TAXES The Fund intends to comply with all sections of the Internal Revenue Code applicable to regulated investment companies including the distribution of substantially all of its taxable net investment income and net realized capital gains to its shareholders. Therefore, no provision for federal income tax has been made. The Fund is treated as a separate taxpayer for federal income tax purposes. At June 30, 2007, information on the tax cost of investments is as follows:
Cost of Gross Tax Gross Tax Net Tax Appreciation/ Investments for Unrealized Unrealized (Depreciation) Tax Purposes Appreciation Depreciation on Investments - ------------------------------------------------------------------------------------------------------------------ $186,661,507 $46,277,635 $(4,253,029) $42,024,606
As of December 31, 2006, the Fund has no capital loss carryovers. Capital loss carryovers are available to offset future realized capital gains to the extent provided in the Internal Revenue Code and regulations thereunder. To the extent that these carryover losses are used to offset future capital gains, it is probable that the gains so offset will not be distributed to shareholders because they would be taxable as ordinary income. Any net capital and currency losses incurred after October 31, within the Fund's tax year, are deemed to arise on the first day of the Fund's next tax year if the Fund so elects to defer such losses. The Fund incurred no such losses after October 31, 2006. The tax composition of distributions paid (other than return of capital distributions for the year) during the year ended December 31, 2006 was as follows: Long-Term Ordinary Capital Income Gains Total - -------------------------------------------------------------------------------- $3,072,947 $22,389,383 $25,462,330 15 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS The Fund declares and pays dividends from net investment income annually. The Fund declares and pays net realized capital gains in excess of capital loss carryforwards distributions annually. The character of income and gains to be distributed is determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences include (but are not limited to) futures, distributions from Real Estate Investment Trusts (REITS), and losses deferred due to wash sale transactions. Reclassifications due to permanent book/tax differences are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. These reclassifications have no impact on net investment income, realized gains or losses, or the net asset value of the Fund. The calculation of net investment income per share in the Financial Highlights table excludes these adjustments. The reclassifications for the year ended December 31, 2006 were as follows: Undistributed (Distribution in Excess of) Net Investment Accumulated Paid in Income Net Realized Gain Capital - -------------------------------------------------------------------------------- $17,550 $(17,550) $ -- On June 29, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in Income Taxes." FIN48 provides guidance for how certain uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN48 requires evaluation of tax positions taken or expected to be taken in the course of preparing the Fund's tax return to determine whether the tax positions are "more likely than not" of being sustained by the applicable tax authority. The adoption of FIN48 did not have an impact on the Fund's net assets and financial statements. INVESTMENT INCOME Corporate actions (including cash dividends) are recorded on the ex-dividend date, net of applicable withholding taxes, except for certain foreign corporate actions, which are recorded as soon after ex-dividend date as such information becomes available. Interest income is recorded on the accrual basis. All discounts and premiums on bonds are accreted and amortized, respectively, to call or maturity date, whichever is shorter, using the effective yield method. EXPENSES Expenses of the Company which are directly identifiable to one of the Funds are allocated to that portfolio. Expenses which are not directly identifiable to one of the Funds are allocated in such a manner as deemed equitable, taking into consideration the nature and type of expenses and relative sizes of the Funds. All expenses of the Fund are paid by GEAM and reimbursed by the Fund. 3. LINE OF CREDIT The Fund shares a revolving credit facility of up to $25 million with a number of its affiliates. The credit facility is with its custodian bank, State Street Bank and Trust Company. The revolving credit facility requires the payment of a commitment fee equal to 0.09% per annum on the daily unused portion of the credit facility, payable quarterly. The portion borne by the Funds generally is borne proportionally based upon net assets. Generally, borrowings under the credit facility would accrue interest at the Federal Funds Rate plus 50 basis points and is borne by each of the borrowing Funds. The maximum amount allowed to be borrowed by any one of the Funds is the lesser of its prospectus limitation, 20% of its net assets, or $25 million. The credit facility was not utilized by the Fund during the period ended June 30, 2007. 4. AMOUNTS PAID TO AFFILIATES GEAM, a registered investment adviser, was retained by the Company's Board of Directors effective May 1, 1997 to act as investment adviser and administrator of the Fund. GEAM's compensation for investment advisory and administrative services is paid monthly based on the average daily net assets of the Fund at an annualized rate of .65%. GENPACT performs certain accounting and certain administration services not provided by GEAM. For the period ending June 30, 2007, $1,536 was charged to the Fund. DIRECTORS' COMPENSATION The Fund pays no compensation to its directors who are officers or employees of GEAM or its affiliates. Directors who are not such officers or employees also serve in a similar capacity for other funds advised by GEAM. Compensation paid to unaffiliated directors are reflected on the Statement of Operations. These fees are allocated pro rata across all of 16 Notes to Financial Statements June 30, 2007 (unaudited) - -------------------------------------------------------------------------------- the mutual fund platforms and share classes served by the directors, including the Fund, and are based upon the relative net assets of each fund within such platforms. (For additional information about directors compensation please refer to the Statement of Additional Information.) 5. INVESTMENT TRANSACTIONS PURCHASES AND SALES OF SECURITIES The cost of purchases and the proceeds from sales of investments, other than short-term securities and options, for the period ended June 30, 2007 were as follows: Purchases Sales - -------------------------------------------------------------------------------- $69,619,822 $88,722,830 SECURITY LENDING At June 30, 2007, the Fund participated in securities lending: Loaned securities Cash at market value collateral* - -------------------------------------------------------------------------------- $31,728,456 $32,816,575 * COLLATERAL OF $33,133,590 DECREASED BY $317,015 ON JULY 1, 2007 TO REFLECT THE JUNE 30, 2007 CHANGE IN VALUE OF SECURITIES ON LOAN. 17 Additional Information (unaudited) - -------------------------------------------------------------------------------- INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS: The business and affairs of the Company are managed under the direction of the Company's Board of Directors. Information pertaining to the Directors and officers of the Company is set forth below. INTERESTED DIRECTORS AND EXECUTIVE OFFICERS - -------------------------------------------------------------------------------- MICHAEL J. COSGROVE - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 58 POSITION(S) HELD WITH FUND Chairman of the Board and President TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 10 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President - GEAM since February 1997; President and Chief Executive Officer - Mutual Funds at GEAM since March 2007; Vice President, GE Capital Corporation, an indirect wholly-owned subsidiary of GE, since December 1999; Executive Vice President - Sales and Marketing of GEAM, a wholly-owned subsidiary of GE that is registered as an investment adviser under the Investment Advisers Act of 1940, as amended, since March 1993; Director of GEAM since 1988. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48 OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception; Trustee of Elfun Funds, GE Savings & Security Funds and General Electric Pension Trust since 1988; Trustee of Fordham University since 2003; Trustee of Elfun Foundation; Treasurer of GE Foundation; Director, GE Asset Management (Ireland) since February 1999; Director, GE Asset Management Funds Plc, GE Asset Canada Company, GE Asset Management Limited, and GE Volunteers. - -------------------------------------------------------------------------------- MATTHEW J. SIMPSON - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 46 POSITION(S) HELD WITH FUND Executive Vice President TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - less than one year PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General Counsel and Secretary of GEAM since July 2007; Senior Vice President and General Counsel - Marketing and Client Services (formerly Asset Management Services), at GEAM and Senior Vice President and General Counsel of GEAMS from February 1997 to June 2007; Vice President and Associate General Counsel of GEAM from October 1992 to February 1997; Secretary of Fund from 1997 to June 2007; Vice President of Fund from September 2003 to June 2007; Vice President of GE Institutional Funds and GE LifeStyle Funds from September 2003 to June 2007; Secretary of GE Institutional Funds and GE LifeStyle Funds from 1997 to June 2007; Vice President of Elfun Funds and GE Savings & Security Funds from October 2003 to June 2007; Assistant Secretary of Elfun Funds and GE Savings & Security Funds from 1998 to June 2007. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional Funds, GE LifeStyle Funds, Elfun Funds and GE Savings & Security Funds since July 2007. 18 Additional Information (unaudited) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SCOTT H. RHODES - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 48 POSITION(S) HELD WITH FUND Treasurer TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - one year PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds Operations Manager since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle Funds and GE Investments Funds since November 2005 and Elfun Funds and GE Savings & Security Funds since September 2005; from August 2004 to September 2005 Vice President, U.S. Trust Company, N.A. and Assistant Treasurer of Excelsior Funds, Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds, Inc.; from January 2004 to August 2004, Vice President BlackRock Financial Management, Inc.; from December 1996 to November 2003, Controller - Mutual Funds, American Skandia Investment Services, Inc. and Assistant Treasurer of American Skandia Trust and American Skandia Advisor Funds, Inc. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A - -------------------------------------------------------------------------------- JEANNE M. LAPORTA - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 42 POSITION(S) HELD WITH FUND Vice President and Secretary TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 2 years (Vice President); less than one year (Secretary) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Associate General Counsel - Marketing and Client Services (formerly Asset Management Services) at GEAM since May 1997; Vice President and Assistant Secretary of GE Funds, GE Institutional Funds and GE LifeStyle Funds since September 2003; Vice President and Assistant Secretary of Elfun Funds and GE Savings & Security Funds since October 2003; Assistant Secretary from September 2003 to June 2007 and Secretary since July 2007. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A 19 Additional Information (unaudited) - -------------------------------------------------------------------------------- NON-INTERESTED DIRECTORS - -------------------------------------------------------------------------------- JOHN R. COSTANTINO - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 61 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC since 2006; Managing Director, Walden Partners, Ltd., consultants and investors, since August 1992. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE Institutional Funds and GE LifeStyle Funds since their inception; Trustee of Fordham University since 2002 and Marymount College from 2001 through 2002; Neuroscience Research Institute since 1986; Diocesan Finance Counsel of the Dioceses of Brooklyn & Queens since 2001; Gregorian University Foundation since 1994. - -------------------------------------------------------------------------------- WILLIAM J. LUCAS - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 59 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Treasurer of Fairfield University since 1983. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception. - -------------------------------------------------------------------------------- ROBERT P. QUINN - -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 71 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon Brothers Inc. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception. - -------------------------------------------------------------------------------- The Statement of Additional Information for the Fund includes additional information about the Directors and Officers and is available, without charge, upon request by calling 1-800-242-0134. 20 Investment Team - -------------------------------------------------------------------------------- INVESTMENT ADVISER AND ADMINISTRATOR GE Asset Management Incorporated BOARD OF DIRECTORS Michael J.Cosgrove, CHAIRMAN John R. Costantino William J. Lucas Robert P. Quinn Matthew J. Simpson SECRETARY Jeanne M. LaPorta ASSISTANT SECRETARIES Joseph A. Carucci Joon Won Choe TREASURER Scott H. Rhodes ASSISTANT TREASURERS Scott R. Fuchs Christopher M. Isaacs DISTRIBUTOR GE Investment Distributors, Inc. Member NASD and SIPC COUNSEL Sutherland, Asbill & Brennan, LLP CUSTODIAN State Street Bank & Trust Company INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM KPMG LLP OFFICERS OF THE INVESTMENT ADVISER James W. Ireland, CHIEF EXECUTIVE OFFICER Michael J. Cosgrove, EVP, PRESIDENT AND CHIEF EXECUTIVE OFFICER - MUTUAL FUNDS Paul M. Colonna, PRESIDENT - FIXED INCOME Kathryn D. Karlic, EVP, PRESIDENT - SALES AND MARKETING Ralph R. Layman, EVP, PRESIDENT - INTERNATIONAL EQUITIES Matthew J. Simpson, EVP, GENERAL COUNSEL AND SECRETARY Judith A. Studer, EVP, PRESIDENT - U.S. EQUITIES Don W. Torey, EVP, PRESIDENT - ALTERNATIVE INVESTMENTS AND REAL ESTATE John J. Walker, EVP, CHIEF FINANCIAL OFFICER 21 [This page intentionally left blank.] [This page intentionally left blank.] [This page intentionally left blank.] [This page intentionally left blank.] INVESTMENT ADVISER GE ASSET MANAGEMENT INCORPORATED 3001 SUMMER STREET PO BOX 7900 STAMFORD, CT 06904-7900 DISTRIBUTOR GE INVESTMENT DISTRIBUTORS, INC. MEMBER NASD AND SIPC 3001 SUMMER STREET PO BOX 7900 STAMFORD, CT 06904-7900 - -------------------------------------------------------------------------------- The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities is available without charge (i) upon request, by calling 1-800-242-0134; (ii) on the Fund's website at http://www.gefunds.com; and (iii) on the Commission's website at http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC - - information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Information (if any) regarding how the Fund voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through the Fund's website at http://www.gefunds.com; and (ii) on the Commission's website at http://www.sec.gov. - -------------------------------------------------------------------------------- [GE logo omitted] ITEM 2. CODE OF ETHICS. Applicable only to an annual filing. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Applicable only to an annual filing. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Applicable only to an annual filing. ITEM 5. Audit Committee of Listed Registrants Applicable only to Closed-End Management Investment Companies. ITEM 6. Schedule of Investments. Attached as part of ITEM 1. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Applicable only to Closed-End Management Investment Companies. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Applicable only to Closed-End Management Investment Companies. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Applicable only to Closed-End Management Investment Companies. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. No material changes. ITEM 11. CONTROLS AND PROCEDURES. The officers providing the certifications in this report in accordance with Rule 30a-3 under the Investment Company Act of 1940 have concluded, based on their evaluation of the registrant's disclosure controls and procedures (as such term is defined in such rule), that such controls and procedures are adequate and reasonably designed to achieve the purpose described in paragraph (c) of such rule. There were no significant changes in the registrant's internal controls or in other factors that could significantly affect these controls subsequent to the date of their last evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. ITEM 12. EXHIBITS. (a) Not applicable. (b) Attached hereto as Exhibit 1 and Exhibit 2 are the Certifications of Michael J. Cosgrove and Scott Rhodes as principal executive officer and principal financial officer, respectively, as required by Rule 30a-2 under the Investment Company Act of 1940. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. GE INVESTMENTS FUNDS, INC By: /S/MICHAEL J. COSGROVE Michael J. Cosgrove Chairman, GE INVESTMENTS FUNDS, INC. Date: September 05, 2007 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. By: /S/MICHAEL J. COSGROVE Michael J. Cosgrove Chairman, GE INVESTMENTS FUNDS, INC. Date: September 05, 2007 By: /S/SCOTT RHODES Scott Rhodes TREASURER, GE INVESTMENTS FUNDS, INC. Date: September 05, 2007 EXHIBIT INDEX (b)(1) Certifications of principal executive officer and principal financial officer as required by Rule 30a-2 under the Investment Company Act of 1940. (b)(2) Certification of principal executive officer and principal financial officer as required by Section 906 of the Sarbanes-Oxley Act of 2002. EX-99.CERT 2 geicsr302cert.txt CERTIFICATIONS PURSUANT TO SECTION 302 SECTION 302 CERTIFICATIONS CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER I, Michael J. Cosgrove, certify that: 1.I have reviewed this report on Form N-CSR of GE Investments Funds, Inc.; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4.The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a.Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding reliability of financial reporting and preparation of the financial statements for external purposes in accordance with generally accepted accounting principles. c.Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusion about the effectiveness of the disclosure controls and procedures as of a date within 90 days prior to the filing date of this report based on such evaluation; and d.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during second fiscal quarter of the period covered by this report that has materially effected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5.The registrant's other certifying officers and I have disclosed, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a.All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably, likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. Date: September 05, 2007 Michael J. Cosgrove Chairman, GE Investments Funds, Inc. SECTION 302 CERTIFICATIONS CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER I, Scott Rhodes, certify that: 1.I have reviewed this report on Form N-CSR of GE Investments Funds, Inc.; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4.The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a.Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding reliability of financial reporting and preparation of the financial statements for external purposes in accordance with generally accepted accounting principles. c.Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusion about the effectiveness of the disclosure controls and procedures as of a date within 90 days prior to the filing date of this report based on such evaluation; and d.Disclosed in this report any change in the registrant's internal controlover financial reporting that occurred during second fiscal quarter of the period covered by this report that has materially effected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5.The registrant's other certifying officers and I have disclosed, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a.All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably, likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. Date: September 05, 2007 Scott Rhodes Treasurer, GE Investments Funds, Inc. EX-99.906 CERT 3 geicsr906cert.txt CERTIFICATIONS PURSUANT TO SECTION 906 Exhibit (b)(2) In connection with this report on Form N-CSR for the Registrant as furnished to the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as applicable; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and the results of operations of the Registrant. By: /s/ Michael J. Cosgrove Michael J. Cosgrove Chairman, GE Investments Funds,Inc. Date: September 05, 2007 By: /s/ Scott Rhodes Scott Rhodes Treasurer, GE Investments Funds,Inc. Date: September 05, 2007 [A signed original of this written statement required by Section 906 has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission or its staff upon request.] -----END PRIVACY-ENHANCED MESSAGE-----