N-CSRS 1 gei.txt GEI INVESTMENTS FUNDS - CERTIFICATION OF SHAREHOLDER REPORT FOR THE PERIOD ENDING 30TH JUNE, 2008 OMB APPROVAL OMB Number: 3235-0570 Expires: AUG. 31, 2011 Estimated average burden hours per response: 18.9 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: 12/31/07 --------------------------- Date of reporting period: : 06/30/08 ------------------------- ITEM 1. REPORTS TO STOCKHOLDERS. GE Investments Funds, Inc. U.S. Equity Fund Semi-Annual Report JUNE 30, 2008 [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, 2008 (unaudited) -------------------------------------------------------------------------------- Total returns take into account changes in share price and assume reinvestment of all dividends and capital gains distributions, if any. The performance data quoted represent past performance; past performance does not guarantee future results. Investment return and principal value will fluctuate so your shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data quoted. Periods less than one year are not annualized. Please call 800-242-0134 for the most recent month-end performance data. Total returns shown are net of Fund expenses but do not reflect fees and charges associated with the variable contracts such as administrative fees, account charges and surrender charges, which, if reflected, would reduce the Fund's total returns for all periods shown. Shares of the Fund are neither insured nor guaranteed by the U.S. Government, and their prices will fluctuate with market conditions. The Standard & Poor's ("S&P") 500(R) Composite Price Index of stocks (S&P 500 Index) is an unmanaged index and does not reflect the actual cost of investing in the instruments that comprise the index. The S&P 500 Index is a market capitalization-weighted index of stocks of 500 large U.S. companies, which is widely used as a measure of large-cap stock market performance. The results shown for the foregoing index assume the reinvestment of net dividends or interest. The peer universe of the underlying annuity funds used in our peer ranking calculation is based on the blend of Lipper peer categories, as shown. Lipper is an independent mutual fund rating service. A Fund's performance may be compared to or ranked within a universe of mutual funds with investment objectives and policies similar but not necessarily identical to the Fund's. Such comparisons or rankings are made on the basis of several factors, including the Fund's objectives and policies, management style and strategy, and portfolio composition, and may change over time if any of those factors change. ----------------- GE INVESTMENT DISTRIBUTORS, INC., MEMBER OF FINRA & SIPC, IS THE PRINCIPAL UNDERWRITER AND DISTRIBUTOR OF THE GE INVESTMENT FUNDS, INC. AND A WHOLLY OWNED SUBSIDIARY OF GE ASSET MANAGEMENT INCORPORATED, THE INVESTMENT ADVISER OF THE FUNDS. 1 U.S. Equity Fund -------------------------------------------------------------------------------- THE U.S. EQUITY FUND IS MANAGED BY A TEAM OF PORTFOLIO MANAGERS THAT INCLUDES THOMAS R. LINCOLN, PAUL C. REINHARDT, STEPHEN V. GELHAUS AND GEORGE A. BICHER (PICTURED BELOW LEFT TO RIGHT). EACH OF THE FOREGOING PORTFOLIO MANAGERS MANAGES (OR CO-MANAGES) ONE OF THREE SUB-PORTFOLIOS, WHICH COMPRISE THE FUND. THE THREE SUB-PORTFOLIOS ARE MANAGED INDEPENDENTLY OF EACH OTHER AND THE PORTFOLIO MANAGERS HAVE FULL DISCRETION OVER THEIR SUB-PORTFOLIO. THE WEIGHTINGS TO EACH SUB-PORTFOLIO IN THE U.S. EQUITY FUND, WHICH CAN BE CHANGED AT ANY TIME BUT GENERALLY REMAIN STABLE FOR 18 TO 24 MONTHS, ARE DRIVEN BY THE OBJECTIVE OF KEEPING THE FUND "STYLE NEUTRAL" SUCH THAT IT COMBINES GROWTH AND VALUE INVESTMENT MANAGEMENT STYLES AND DOES NOT TEND TO FAVOR EITHER STYLE. GEORGE A. BICHER IS A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT. MR. BICHER IS DIRECTOR OF THE U.S. EQUITY RESEARCH TEAM AND A PORTFOLIO MANAGER FOR THE U.S. EQUITY FUND. MR. BICHER HAS HELD THE POSITION OF EQUITY RESEARCH ANALYST SINCE JOINING GE ASSET MANAGEMENT IN JUNE 2002. PRIOR TO JOINING GE ASSET MANAGEMENT, HE SERVED IN A NUMBER OF POSITIONS AT DEUTSCHE BANC ALEX BROWN SINCE 1994. THOMAS R. LINCOLN IS A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT. HE HAS BEEN A MEMBER OF THE PORTFOLIO MANAGEMENT TEAM FOR THE U.S. EQUITY FUND SINCE MAY 2007. MR. LINCOLN JOINED GE ASSET MANAGEMENT IN 1994 AS A FINANCIAL ANALYST IN U.S. EQUITIES. MR. LINCOLN BECAME PART OF THE INVESTMENT MANAGEMENT TEAM FOR U.S. EQUITIES AT GE ASSET MANAGEMENT IN 1997 AND A PORTFOLIO MANAGER FOR U.S. EQUITIES IN 2003. PAUL C. REINHARDT IS A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT. HE HAS BEEN A PORTFOLIO MANAGER FOR THE U.S. EQUITY FUND SINCE JANUARY 2001. MR. REINHARDT JOINED GE ASSET MANAGEMENT IN 1982 AS AN EQUITY ANALYST AND HAS BEEN A PORTFOLIO MANAGER SINCE 1987. STEPHEN V. GELHAUS IS A VICE PRESIDENT OF GE ASSET MANAGEMENT. HE HAS BEEN A MEMBER OF THE PORTFOLIO MANAGEMENT TEAM FOR THE U.S. EQUITY FUND SINCE JANUARY 2002. MR. GELHAUS JOINED GE ASSET MANAGEMENT IN JUNE 1991 AND WAS A RESEARCH ANALYST IN THE U.S. EQUITIES GROUP FROM 1995 THROUGH 2001. Q. HOW DID THE U.S. EQUITY FUND PERFORM COMPARED TO ITS BENCHMARK AND LIPPER PEER GROUP FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2008? A. For the six-month period ended June 30, 2008, the U.S. Equity Fund returned -9.70% for the Class 1 shares and -6.96% for the Class 4 shares. The S&P 500 Index, the Fund's benchmark, returned -11.91% and the Fund's Lipper peer group of 207 Large-Cap Core funds returned an average of -11.56% for the same period. [PHOTO OMITTED] 2 Q&A -------------------------------------------------------------------------------- Q. WHAT MARKET CONDITIONS IMPACTED FUND PERFORMANCE? A. The six-month period proved challenging for U.S. equity investors, as the housing recession, skyrocketing commodity prices and tight credit conditions threatened the outlook for economic growth and corporate profits. Policymaker response was significant during the period as the Federal Reserve lowered interest rates and opened up its discount window to investment banks. Despite these actions, credit remained scarce, impeding economic growth and contributing to stock market volatility. Consumers began to receive the government's fiscal stimulus checks, but investors feared that the windfall might be consumed at the gas pump in an environment of $140 per barrel of oil. Only the inflationary energy (+9%) and materials (+1%) sectors had positive returns during the period. Financials (-30%) was by far the worst performing sector, followed by telecommunications (-17%), industrials (-14%), consumer discretionary (-13%) and technology (-13%). Healthcare (-13%), traditionally a defensive sector, has also lagged as it has exhibited some discretionary characteristics, and suffered regulatory uncertainty stemming from the upcoming presidential elections. Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE? A. Both information technology and financials have suffered double-digit declines year-to-date. Fortunately, strong stock selection in these volatile sectors has benefited performance. Within technology, Qualcomm (+13.5%) raised earnings estimates due in part to an accelerated forecast for 3G licenses as China opens its wireless market to this new technology. Google (+18.4%) has benefitted returns since we added it to the Fund upon a severe pullback earlier in the year. Western Union (+2%) also contributed to outperformance as the largest money-transfer business raised its long-term profit target and authorized an additional $1 billion stock buyback. Our sector underweight in financials was also a key contributor to outperformance. Despite exceptional weakness in global insurer AIG (-54%) amid the continuing fallout from the sub-prime mortgage situation, the Fund avoided most of the other credit-sensitive banks and brokers that swooned during the period. Relative strength among our media holdings -- exemplified by Comcast (+4%) -- also buffered the Fund during a tough environment for consumer spending. Slightly offsetting the sources of relative strength were pockets of weakness coming from an underweight in energy and some underperforming holdings within industrials. Taking profits within energy this year has resulted in an underweight, yet oil prices have continued to soar. Underexposure to energy offset our positive stock selection, as the Fund's energy holdings returned +12% versus +9% for the S&P 500 sector. In 2008, the rising cost of fuel and commodity inputs have punished aircraft-related stocks, and most global cyclicals. Textron (-32%) is a leading manufacturer of business jets, and Allegheny Technologies (-31%) is a maker of light specialty metals used in aircraft manufacturing. Both of these stocks have lagged along with other aerospace companies. While we have trimmed Textron -- the stock was one of 2007's top performers (+15%) -- we have maintained conviction in Allegheny, as it leverages the secular trend towards lighter, more fuel-efficient aircraft. Q. WERE THERE ANY SIGNIFICANT CHANGES TO THE FUND OVER THE PERIOD? A. No. We have remained committed to investing in high quality large-cap stocks with predictable and steady earnings growth at compelling valuations. We continued to be relatively defensively positioned, although at June 30, our largest overweight was in technology -- an area that we believe could benefit from multiple expansion in the months to come due to the large international component of tech earnings, and its above average growth prospects. Our tech holdings tend to be less economically sensitive, with high recurring revenues and ample free cash flow. 3 U.S. Equity Fund -------------------------------------------------------------------------------- Q&A In the continuing fallout from the subprime situation, the Fund's underweight in financials benefited performance. The odds of a recession continued to increase during the period, and we remained comfortable with our positioning in this environment. We have expected our large cap, high quality companies to demonstrate the financial flexibility and balance sheet strength to weather an economic slowdown, and to benefit from a flight to quality in skittish markets. Valuations of many of our holdings remain below historical averages, despite strong relative earnings performance. In addition, we believe many of our multinationals will likely benefit from better growth prospects outside of North America, although global growth is clearly slowing. We remain focused on a long-term investment horizon and continue to utilize a bottom-up, research-driven, fundamental approach to stock selection. 4 U.S. Equity Fund -------------------------------------------------------------------------------- Understanding Your Fund's Expenses As a shareholder of the Fund you incur ongoing expenses, which include portfolio management fees, professional fees, administrative fees and other Fund expenses. The following example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the period. The information in the following table is based on an investment of $1,000, which is invested at the beginning of the period and held for the entire six-month period ended June 30, 2008. ACTUAL EXPENSES The first section of the table provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your class under the heading "Expenses Paid During Period." HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second section of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholders reports of other funds. Please note that the expenses shown in the table do not reflect any transaction costs, such as sales charges or redemption fees.
JANUARY 1, 2008 - JUNE 30, 2008 ------------------------------------------------------------------------------------------------------------------------------------ ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($)* ------------------------------------------------------------------------------------------------------------------------------------ ACTUAL FUND RETURN** ------------------------------------------------------------------------------------------------------------------------------------ Class 1 1,000.00 903.05 3.18 Class 4 1,000.00 930.35 5.31 ------------------------------------------------------------------------------------------------------------------------------------ HYPOTHETICAL 5% RETURN (2.5% FOR THE PERIOD) ------------------------------------------------------------------------------------------------------------------------------------ Class 1 1,000.00 1,021.25 3.42 Class 4 1,000.00 1,019.31 5.51 ------------------------------------------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.68% FOR CLASS 1 AND 1.09% FOR CLASS 4, (FROM PERIOD JANUARY 1, 2008 - JUNE 30, 2008), MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY 182/366 (TO REFLECT THE ONE-HALF YEAR PERIOD). ** ACTUAL FUND RETURNS FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2008 WERE AS FOLLOWS: (9.70)% FOR CLASS 1 SHARES, AND SINCE INCEPTION (6.96)% FOR CLASS 4 SHARES. 5 U.S. Equity Fund (unaudited) -------------------------------------------------------------------------------- CHANGE IN VALUE OF A $10,000 INVESTMENT CLASS 1 SHARES -------------------------------------------------------------------------------- [Line chart omitted -- plot points are as follows:] GEI U.S. EQUITY S&P 500 INDEX 06/98 10,000.00 10,000.00 12/98 10,769.06 10,930.80 12/99 12,880.53 13,233.69 12/00 12,804.54 12,018.37 12/01 11,719.60 10,586.75 12/02 9,462.07 8,246.88 12/03 11,664.44 10,616.05 12/04 12,616.99 11,771.22 12/05 12,933.54 12,350.19 12/06 15,018.67 14,300.58 12/07 16,221.66 15,086.47 06/08 14,648.94 13,289.09
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2008 ------------------------------------------------------------------------------------------ CLASS 1 SHARES (Inception date: 1/3/95) ------------------------------------------------------------------------------------------ SIX ONE FIVE TEN ENDING VALUE OF A MONTHS YEAR YEAR YEAR $10,000 INVESTMENT ------------------------------------------------------------------------------------------ U.S. Equity Fund -9.70% -8.73% 7.08% 3.89% $14,649 ------------------------------------------------------------------------------------------ S&P 500 Index -11.91% -13.12% 7.59% 2.88% $13,289 ------------------------------------------------------------------------------------------ Lipper peer group average* -11.56% -12.51% 7.31% 2.49% ------------------------------------------------------------------------------------------
CLASS 4 SHARES -------------------------------------------------------------------------------- [Line chart omitted -- plot points are as follows:] GEI U.S. EQUITY S&P 500 INDEX 05/08 10,000.00 10,000.00 06/08 9,303.51 9,275.57 AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2008 -------------------------------------------------------------------------------- CLASS 4 SHARES (Inception date: 5/1/08) -------------------------------------------------------------------------------- ONE SINCE ENDING VALUE OF A MONTH INCEPTION $10,000 INVESTMENT -------------------------------------------------------------------------------- U.S. Equity Fund -7.51% -6.96% $9,304 -------------------------------------------------------------------------------- S&P 500 Index -8.43% -7.24% $9,276 -------------------------------------------------------------------------------- Lipper peer group average** -8.12% N/A -------------------------------------------------------------------------------- INVESTMENT PROFILE A fund designed for investors who seek long-term growth of capital by investing at least 80% of its net assets in equity securities of issuers that are tied economically to the U.S. under normal circumstances. PORTFOLIO COMPOSITION AS OF JUNE 30, 2008 as a % of Market Value -------------------------------------------------------------------------------- Market Value of $62,509 (in thousands) [Pie chart omitted -- plot points are as follows:] Information Technology 23.5% Healthcare 13.3% Energy 12.0% Financials 11.5% Consumer Staples 9.9% Consumer Discretionary 9.6% Industrials 7.5% Materials 4.1% Short-Term 3.1% Utilities 2.8% Telecommunication Services 2.7% Other Investments 0.0%*** TOP TEN EQUITY HOLDINGS AS OF JUNE 30, 2008 as a % of Market Value -------------------------------------------------------------------------------- Cisco Systems, Inc. 2.89% -------------------------------------------------------------------------------- Microsoft Corp. 2.72% -------------------------------------------------------------------------------- PepsiCo, Inc. 2.50% -------------------------------------------------------------------------------- Exxon Mobil Corp. 2.34% -------------------------------------------------------------------------------- Amgen, Inc. 2.28% -------------------------------------------------------------------------------- Intel Corp. 2.17% -------------------------------------------------------------------------------- QUALCOMM, Inc. 2.14% -------------------------------------------------------------------------------- Schlumberger Ltd. 2.06% -------------------------------------------------------------------------------- Transocean, Inc. 1.97% -------------------------------------------------------------------------------- Industrial Select Sector SPDR Fund 1.90% -------------------------------------------------------------------------------- * LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR THE SIX MONTHS, ONE YEAR, FIVE-YEAR, AND TEN-YEAR PERIODS INDICATED IN THE LARGE-CAP CORE FUNDS PEER GROUP CONSISTING OF 207, 207, 166 AND 79 UNDERLYING ANNUITY FUNDS, RESPECTIVELY. ** LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR THE ONE MONTH PERIOD INDICATED IN THE LARGE-CAP CORE FUNDS PEER GROUP CONSISTING OF 210 UNDERLYING ANNUITY FUNDS, RESPECTIVELY. *** LESS THAN 0.1%. SEE NOTES TO PERFORMANCE ON PAGE 1 FOR FURTHER INFORMATION, INCLUDING AN EXPLANATION OF LIPPER PEER CATEGORIES. PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE AND THE GRAPH AND TABLE DO NOT REFLECT THE DEDUCTION OF TAXES. 6 U.S. EQUITY FUND Schedule of Investments June 30, 2008 (unaudited) -------------------------------------------------------------------------------- U.S. EQUITY FUND -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE -------------------------------------------------------------------------------- COMMON STOCK -- 94.8% + -------------------------------------------------------------------------------- CONSUMER DISCRETIONARY -- 9.7% Bed Bath & Beyond, Inc. 23,062 $ 648,042(a) Cablevision Systems Corp. 5,554 125,520(a) Carnival Corp. 11,033 363,648 Comcast Corp. (Class A) 61,577 1,155,185(d) Darden Restaurants, Inc. 2,777 88,697 Kohl's Corp. 3,332 133,413(a) Liberty Global, Inc. (Series C) 5,656 171,716(a) Liberty Media Entertainment Corp. (Series A) 11,952 289,597(a) Lowe's Companies, Inc. 23,902 495,967 News Corp. (Class A) 11,108 167,064 Omnicom Group, Inc. 24,413 1,095,655 O'Reilly Automotive, Inc. 811 18,126(a) Staples, Inc. 6,738 160,028 Target Corp. 4,832 224,640 The Walt Disney Co. 5,721 178,495 Time Warner, Inc. 32,491 480,867 Viacom Inc. (Class B) 7,388 225,630(a) 6,022,290 CONSUMER STAPLES -- 10.0% Alberto-Culver Co. 8,589 225,633 Altria Group, Inc. 7,777 159,895 Clorox Co. 5,722 298,688 Diageo PLC ADR 2,556 188,812 General Mills, Inc. 8,328 506,093 Kimberly-Clark Corp. 16,766 1,002,271 McCormick & Company, Inc. 12,038 429,275 Nestle S.A. ADR 1,976 222,992 Pepsi Bottling Group, Inc. 4,611 128,739 PepsiCo, Inc. 24,534 1,560,117(d) Procter & Gamble Co. 7,664 466,048(d) Sara Lee Corp. 7,497 91,838 The Estee Lauder Companies Inc. (Class A) 5,832 270,896 Wal-Mart Stores, Inc. 11,698 657,428 6,208,725 ENERGY -- 12.1% Apache Corp. 2,110 293,290 Devon Energy Corp. 1,959 235,393 Exxon Mobil Corp. 16,598 1,462,782(d) Halliburton Co. 8,109 430,345 Hess Corp. 5,388 679,912 Marathon Oil Corp. 14,415 747,706 Nabors Industries Ltd. 4,849 238,716(a) NUMBER OF SHARES VALUE -------------------------------------------------------------------------------- National Oilwell Varco, Inc. 2,222 $ 197,136(a) Schlumberger Ltd. 11,994 1,288,515 Suncor Energy, Inc. 9,251 537,668 Transocean, Inc. 8,063 1,228,721 Valero Energy Corp. 4,444 183,004 7,523,188 FINANCIALS -- 11.0% ACE Ltd. 6,365 350,648 Allstate Corp. 2,499 113,929 American Express Co. 9,166 345,283 Ameriprise Financial, Inc. 9,957 404,951 AON Corp. 6,054 278,121 Bank of New York Mellon Corp. 8,609 325,678 Berkshire Hathaway, Inc. (Class B) 11 44,132(a) BlackRock, Inc. 555 98,235 CB Richard Ellis Group, Inc. (Class A) 14,629 280,877(a) Chubb Corp. 5,721 280,386 Citigroup, Inc. 23,922 400,933 CME Group Inc. 579 221,867 Federal National Mortgage Assoc. 7,766 151,515 Goldman Sachs Group, Inc. 3,733 652,902 HCC Insurance Holdings, Inc. 3,796 80,247 JP Morgan Chase & Co. 16,350 560,969 Marsh & McLennan Companies, Inc. 3,888 103,226 Metlife, Inc. 13,554 715,245 Prudential Financial, Inc. 1,123 67,088 State Street Corp. 13,683 875,575(c) SunTrust Banks, Inc. 6,019 218,008 US Bancorp. 6,943 193,640 Wachovia Corp. 7,089 110,092 6,873,547 HEALTHCARE -- 13.3% Abbott Laboratories 12,238 648,247(d) Aetna, Inc. 8,925 361,730 Amgen, Inc. 30,255 1,426,826(a) Baxter International, Inc. 6,491 415,034 Boston Scientific Corp. 33,196 407,979(a) Bristol-Myers Squibb Co. 12,386 254,285 Covidien Ltd. 8,080 386,951 Genentech Inc. 10,111 767,425(a) Gilead Sciences, Inc. 7,156 378,910(a) Hologic, Inc. 15,475 337,355(a) Johnson & Johnson 2,221 142,899 McKesson Corp. 4,998 279,438 Medtronic, Inc. 10,225 529,144 Merck & Company, Inc. 11,801 444,780 Resmed, Inc. 6,984 249,608(a) Thermo Fisher Scientific, Inc. 1,700 94,741(a) UnitedHealth Group, Inc. 20,416 535,920 Wyeth 13,482 646,597 8,307,869 See Notes to Schedule of Investments on page 10 and Notes to Financial Statements. 7 U.S. EQUITY FUND Schedule of Investments June 30, 2008 (unaudited) -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE -------------------------------------------------------------------------------- INDUSTRIALS -- 5.6% ABB Ltd. ADR 7,352 $ 208,209(a) CAE, Inc. 31,047 352,532 Cooper Industries Ltd. 4,998 197,421 Deere & Co. 2,055 148,227 Dover Corp. 1,006 48,660(d) Eaton Corp. 2,333 198,235 Emerson Electric Co. 3,523 174,212 General Dynamics Corp. 3,913 329,475 Hexcel Corp. 8,043 155,230(a) ITT Corp. 2,999 189,927 Koninklijke Philips Electronics N.V. 2,220 75,036 Monster Worldwide, Inc. 8,413 173,392(a) Rockwell Collins, Inc. 1,388 66,568 Siemens AG ADR 669 73,677 Suntech Power Holdings Company Ltd. ADR 2,271 85,072(a) Textron, Inc. 15,701 752,549 United Technologies Corp. 3,969 244,887 3,473,309 INFORMATION TECHNOLOGY -- 23.5% Affiliated Computer Services, Inc. (Class A) 3,610 193,099(a) Analog Devices, Inc. 5,832 185,283 Automatic Data Processing, Inc. 6,958 291,540 Cisco Systems, Inc. 77,671 1,806,627(a) Cognizant Technology Solutions Corp. (Class A) 1,399 45,482(a) Corning Incorporated 13,506 311,313 Dell, Inc. 6,276 137,319(a) Fidelity National Information Services, Inc. 8,311 306,759 Google, Inc. (Class A) 888 467,461(a) Hewlett-Packard Co. 15,961 705,636 Intel Corp. 63,224 1,358,052(d) International Business Machines Corp. 3,166 375,266 Intuit Inc. 19,914 549,029(a) Iron Mountain Incorporated 12,398 329,167(a) Lam Research Corp. 3,943 142,539(a) Maxim Integrated Products, Inc. 8,547 180,769 Microchip Technology Inc. 1,144 34,938 Microsoft Corp. 61,735 1,698,330(d) Molex, Inc. (Class A) 12,127 277,830 National Semiconductor Corp. 6,332 130,059 Oracle Corp. 52,822 1,109,262(a) Paychex, Inc. 18,380 574,926 QUALCOMM, Inc. 30,096 1,335,360 Research In Motion Ltd. 4,538 530,492(a) Taiwan Semiconductor Manufacturing Company Ltd. ADR 16,107 175,725(a) Texas Instruments Incorporated 10,219 287,767 Western Union Co. 43,088 1,065,135 Yahoo! Inc. 3,581 73,983(a) 14,679,148 NUMBER OF SHARES VALUE -------------------------------------------------------------------------------- MATERIALS -- 4.1% Alcoa, Inc. 4,915 $ 175,072 Allegheny Technologies Incorporated 9,135 541,523 Barrick Gold Corp. 7,554 343,707 Dow Chemical Co. 2,610 91,115 Freeport-McMoRan Copper & Gold, Inc. 2,900 339,851 Monsanto Co. 5,313 671,776 Praxair, Inc. 2,699 254,354 Vulcan Materials Co. 2,222 132,831 2,550,229 TELECOMMUNICATION SERVICES -- 2.7% American Tower Corp. (Class A) 2,625 110,906(a) AT&T, Inc. 3,499 117,881 NII Holdings Inc. (Class B) 17,541 833,022(a) Verizon Communications, Inc. 14,908 527,743(d) Vodafone Group, PLC ADR 3,332 98,161 1,687,713 UTILITIES -- 2.8% American Electric Power Company, Inc. 5,722 230,196 Dominion Resources, Inc. 14,523 689,697 Edison International 5,999 308,229 Entergy Corp. 1,555 187,346 FPL Group, Inc. 3,008 197,265 PG&E Corp. 3,729 148,004 1,760,737 TOTAL COMMON STOCK (COST $59,667,293) 59,086,755 -------------------------------------------------------------------------------- EXCHANGE TRADED FUNDS -- 2.4% -------------------------------------------------------------------------------- Financial Select Sector SPDR Fund 14,174 287,165(f) Industrial Select Sector SPDR Fund 34,908 1,187,221(f) TOTAL EXCHANGE TRADED FUNDS (COST $1,449,759) 1,474,386 -------------------------------------------------------------------------------- OTHER INVESTMENTS -- 0.0%* -------------------------------------------------------------------------------- GEI Investment Fund (COST $19,077) 14,498(e) TOTAL INVESTMENTS IN SECURITIES (COST $61,136,129) 60,575,639 See Notes to Schedule of Investments on page 10 and Notes to Financial Statements. 8 U.S. EQUITY FUND Schedule of Investments June 30, 2008 (unaudited) -------------------------------------------------------------------------------- VALUE -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 3.1% -------------------------------------------------------------------------------- GE Money Market Fund Institutional Class 1.93% $ 1,932,964(b,g) (COST $1,932,964) TOTAL INVESTMENTS (COST $63,069,093) 62,508,603 LIABILITIES IN EXCESS OF OTHER ASSETS, NET -- (0.3)% (217,094) ----------- NET ASSETS -- 100.0% $62,291,509 =========== -------------------------------------------------------------------------------- OTHER INFORMATION -------------------------------------------------------------------------------- The GEI U.S. Equity had the following long futures contracts open at June 30, 2008 (unaudited): NUMBER CURRENT EXPIRATION OF NOTIONAL UNREALIZEDD DESCRIPTION DATE CONTRACTS VALUE DEPRECIATION -------------------------------------------------------------------------------- S&P 500 Index Futures September 2008 1 $320,275 $(19,645) See Notes to Schedule of Investments on page 10 and Notes to Financial Statements. 9 Notes to Schedule of Investments June 30, 2008 (unaudited) -------------------------------------------------------------------------------- The views expressed in this document reflect our judgment as of the publication date and are subject to change at any time without notice. The securities cited may not represent current or future holdings and should not be considered as a recommendation to purchase or sell a particular security. See the prospectus for complete descriptions of investment objectives, policies, risks and permissible investments. (a) Non-income producing security. (b) Coupon amount represents effective yield. (c) State Street Corp. is the parent company of State Street Bank & Trust Co., the Fund's custodian and accounting agent. (d) At June 30, 2008, all or a portion of this security was pledged to cover collateral requirements for futures, options, forward foreign currency contracts and/or TBA's. (e) GE Asset Management ("GEAM"), the investment adviser of the Fund, also serves as the investment adviser of the GEI Investment Fund. (f) Sponsored by SSgA Funds Management, Inc., an affiliate of State Street Bank & Trust Co., the Fund's custodian and accounting agent. (g) GEAM, the investment adviser of the Fund, also serves as investment adviser of the GE Money Market Fund. * Less than 0.1%. + Percentages are based on net assets as of June 30, 2008. Abbreviations: ADR American Depository Receipt SPDR Standard & Poors Depository Receipts 10 Financial Highlights Selected data based on a share outstanding throughout the periods indicated --------------------------------------------------------------------------------
U.S. EQUITY FUND --------------------------------------------------------------------- ------------ CLASS 1 CLASS 4 --------------------------------------------------------------------- ------------ 6/30/08+ 12/31/07 12/31/06 12/31/05 12/31/04 12/31/03 6/30/08+ --------------------------------------------------------------------- ------------ INCEPTION DATE -- -- -- -- -- 1/3/95 5/1/08 Net asset value, beginning of period .......... $36.41 $39.02 $34.06 $33.61 $31.48 $25.75 $35.32 INCOME/(LOSS) FROM INVESTMENT OPERATIONS: Net investment income ...................... 0.14 0.45 0.53 0.39 0.44 0.26 0.03 Net realized and unrealized gains/(losses) on investments ........... (3.67) 2.70 4.96 0.46 2.13 5.73 (2.49) ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INCOME/(LOSS) FROM INVESTMENT OPERATIONS ................................. (3.53) 3.15 5.49 0.85 2.57 5.99 (2.46) ------------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS FROM: Net investment income ...................... -- 0.44 0.53 0.40 0.44 0.26 -- Net realized gains ......................... -- 5.32 -- -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------------ TOTAL DISTRIBUTIONS ........................... -- 5.76 0.53 0.40 0.44 0.26 -- ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, END OF PERIOD ................ $32.88 $36.41 $39.02 $34.06 $33.61 $31.48 $32.86 ==================================================================================================================================== TOTAL RETURN (A) .............................. (9.70)% 8.01% 16.12% 2.51% 8.17% 23.28% (6.96)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ... $62,282 $77,777 $101,885 $98,883 $112,545 $114,123 $9 Ratios to average net assets: Net investment income* .................. 0.84% 0.94% 1.43% 1.06% 1.30% 0.95% 0.45% Expenses* ............................... 0.68% 0.66% 0.63% 0.63% 0.63% 0.61% 1.09% Portfolio turnover rate .................... 27% 55% 45% 40% 30% 39% 27%
NOTES TO FINANCIAL HIGHLIGHTS -------------------------------------------------------------------------------- (a) Total returns are historical and assume changes in share price and reinvestment of dividends and capital gains and do not include the effect of insurance contract charges. * Annualized for periods less than one year. + Unaudited See Notes to Financial Statements. 11
STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 2008 (UNAUDITED) -------------------------------------------------------------------------------------------------------------------------- U.S. EQUITY FUND -------------------------------------------------------------------------------------------------------------------------- ASSETS Investments in securities, at market (cost $61,117,052) ....................................... $60,561,141 Investments in affiliated securities, at market (cost $19,077) ................................ 14,498 Short-term affiliated investments (at amortized cost) ......................................... 1,932,964 Income receivables ............................................................................ 65,810 Variation margin receivable ................................................................... 275 -------------------------------------------------------------------------------------------------------------------------- TOTAL ASSETS .............................................................................. 62,574,688 -------------------------------------------------------------------------------------------------------------------------- LIABILITIES Payable for investments purchased ............................................................. 145,311 Payable for fund shares redeemed .............................................................. 32,963 Payable to GEAM ............................................................................... 28,670 Accrued other expenses ........................................................................ 75,792 Other liabilities ............................................................................. 443 -------------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES ......................................................................... 283,179 -------------------------------------------------------------------------------------------------------------------------- NET ASSETS ....................................................................................... $62,291,509 ========================================================================================================================== NET ASSETS CONSIST OF: Capital paid in ............................................................................... 62,196,534 Undistributed (distribution in excess of)net investment income ................................ 292,436 Accumulated net realized gain (loss) .......................................................... 382,673 Net unrealized appreciation/(depreciation) on: Investments ............................................................................... (560,490) Futures ................................................................................... (19,645) Foreign currency related transactions ..................................................... 1 -------------------------------------------------------------------------------------------------------------------------- NET ASSETS ....................................................................................... $62,291,509 ========================================================================================================================== CLASS 1: NET ASSETS ....................................................................................... 62,282,206 Shares outstanding ($0.01 par value; unlimited shares authorized) ................................ 1,894,487 Net asset value per share ........................................................................ $32.88 CLASS 4: NET ASSETS ....................................................................................... 9,303 Shares outstanding ($0.01 par value; unlimited shares authorized) ................................ 283 Net asset value per share ........................................................................ $32.86
See Notes to Financial Statements. 12
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2008 (UNAUDITED) ------------------------------------------------------------------------------------------------------------------ U.S. EQUITY FUND ------------------------------------------------------------------------------------------------------------------ INVESTMENT INCOME INCOME: Dividend ...................................................................... $ 495,423 Interest ...................................................................... 4,075 Interest from affiliated investments .......................................... 15,683 Less: Foreign taxes withheld .................................................. (1,846) ------------------------------------------------------------------------------------------------------------------ TOTAL INCOME .................................................................... 513,335 ------------------------------------------------------------------------------------------------------------------ EXPENSES: Advisory and administrative fees .............................................. 187,286 Distributors Fees (Note 4) Class 4 .................................................................... 7 Transfer agent ................................................................ 36 Trustee's fees ................................................................ 933 Custody and accounting expenses ............................................... 27,157 Professional fees ............................................................. 9,495 Registration expenses ......................................................... 2,136 Other expenses ................................................................ 2,727 ------------------------------------------------------------------------------------------------------------------ TOTAL EXPENSES BEFORE WAIVER AND REIMBURSEMENT .................................. 229,777 ------------------------------------------------------------------------------------------------------------------ Less: Expenses waived or borne by the adviser (waiver related to Fund of Fund Investment) ............................. (932) ------------------------------------------------------------------------------------------------------------------ Net expenses .................................................................. 228,845 ------------------------------------------------------------------------------------------------------------------ NET INVESTMENT INCOME (LOSS) .................................................... 284,490 ================================================================================================================== NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS REALIZED GAIN (LOSS) ON: Investments ................................................................ 504,171 Futures .................................................................... (32,800) Foreign currency transactions .............................................. (146) INCREASE (DECREASE) IN UNREALIZED APPRECIATION/(DEPRECIATION) ON: Investments ................................................................ (7,990,722) Futures .................................................................... (24,750) Foreign currency transactions .............................................. 4 ------------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments ........................ (7,544,243) ------------------------------------------------------------------------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ................. $(7,259,753) ==================================================================================================================
See Notes to Financial Statements. 13
Statements of Changes in Net Assets ------------------------------------------------------------------------------------------------------------------------------------ U.S. EQUITY FUND ------------------------------------------------------------------------------------------------------------------------------------ SIX MONTHS ENDED YEAR ENDED JUNE 30, 2008 DECEMBER 31, (UNAUDITED) 2007 ------------------------------------------------------------------------------------------------------------------------------------ INCREASE (DECREASE) IN NET ASSETS OPERATIONS: Net investments income (loss) ....................................................... $ 284,490 $ 826,681 Net realized gain (loss) on investments, futures, written options, and foreign currency transactions ........................................................... 471,225 12,445,211 Net increase (decrease) in unrealized appreciation/(depreciation) on investments, futures, written options, and foreign currency translation ...................... (8,015,468) (6,234,931) ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) from operations ............................................. (7,259,753) 7,036,961 ------------------------------------------------------------------------------------------------------------------------------------ DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Class 1 ........................................................................... -- (821,468) Class 4 ........................................................................... -- -- Net realized gains Class 1 ........................................................................... -- (9,856,050) Class 4 ........................................................................... -- -- ------------------------------------------------------------------------------------------------------------------------------------ TOTAL DISTRIBUTIONS ................................................................... -- (10,677,518) ------------------------------------------------------------------------------------------------------------------------------------ Increase (decrease) in net assets from operations and distributions ................... (7,259,753) (3,640,557) ------------------------------------------------------------------------------------------------------------------------------------ SHARE TRANSACTIONS: Proceeds from sale of shares Class 1 ........................................................................... 425,961 831,344 Class 4 ........................................................................... 10,000 -- Value of distributions reinvested Class 1 ........................................................................... -- 10,677,532 Class 4 ........................................................................... -- -- Cost of shares redeemed Class 1 ........................................................................... (8,661,521) (31,976,001) Class 4 ........................................................................... -- -- ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) from share transactions ..................................... (8,225,560) (20,467,125) ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INCREASE (DECREASE) IN NET ASSETS ............................................... (8,225,560) (24,107,682) NET ASSETS Beginning of period ................................................................... 77,776,822 101,884,504 ------------------------------------------------------------------------------------------------------------------------------------ End of period ......................................................................... $62,291,509 $ 77,776,822 ==================================================================================================================================== UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD ........... $ 292,436 $ 7,946 ------------------------------------------------------------------------------------------------------------------------------------ CHANGES IN FUND SHARES CLASS 1 Shares sold .............................................................................. 12,511 20,172 Issued for distributions reinvested ...................................................... -- 291,815 Shares redeemed .......................................................................... (253,889) (787,114) ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in fund shares ................................................... (241,378) (475,127) ==================================================================================================================================== CLASS 4 Shares sold .............................................................................. 283 -- Issued for distributions reinvested ...................................................... -- -- Shares redeemed .......................................................................... -- -- ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in fund shares ................................................... 283 -- ====================================================================================================================================
See Notes to Financial Statements. 14 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- 1. ORGANIZATION OF THE COMPANY GE Investments Funds, Inc. (the "Company") was incorporated under the laws of the Commonwealth of Virginia on May 14, 1984 and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company. The Company is composed of thirteen investment portfolios (collectively the "Funds"), although only the following eleven are currently being offered: U.S. Equity Fund, (the "Fund") S&P 500 Index Fund, Premier Growth Equity Fund, Core Value Equity Fund, Mid-Cap Equity Fund, Small-Cap Equity Fund, International Equity Fund, Total Return Fund, Income Fund, Money Market Fund and Real Estate Securities Fund. Shares of the Funds of the Company are offered only to insurance company separate accounts that fund certain variable life insurance contracts and variable annuity contracts. These insurance companies may include insurance companies affiliated with GE Asset Management Incorporated ("GEAM"), the investment adviser and administrator of each of the Funds. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results may differ from those estimates. The following summarizes the significant accounting policies of the Fund: SECURITY VALUATION AND TRANSACTIONS The Fund's portfolio securities are valued generally on the basis of market quotations. Equity securities generally are valued at the last reported sales price on the primary market in which they are traded. Portfolio securities listed on NASDAQ are valued using the NASDAQ Official Closing Price, which may not necessarily represent the last sale price. If no sales occurred on the exchange or NASDAQ that day, the portfolio security generally is valued using the last reported bid price. Debt securities (other than short-term securities described below) generally are valued at an evaluated bid as reported by an independent pricing service. Values obtained from pricing services are based on various factors such as market transactions, dealer supplied valuations, security characteristics and other market data. In the absence of a reliable price from such a pricing service, debt securities may be valued based on dealer supplied valuations or quotations. The Fund's written or purchased options are valued at the last sales price, or if no sales occurred that day, at the last reported bid price. Short-term investments with remaining maturities of sixty days or less at the time of purchase are valued on the basis of amortized cost, which approximates market value. All assets and liabilities of the Fund initially expressed in foreign currency values will be converted into U.S. dollars at the WM/Reuters exchange rate computed at 11:00 a.m., Eastern time. If prices are not readily available for a portfolio security, or if it is believed that a price for a portfolio security does not represent its fair value, the security may be valued using procedures approved by the Fund's Board of Directors that are designed to establish its "fair" value. Those procedures require that the fair value of a security be established by the fair valuation committee. The fair valuation committee follows different protocols for different types of investments and circumstances. The fair value procedures may be used to value any investment by the Fund in the appropriate circumstances. Examples of the types of securities that may be fair valued include: thinly traded or illiquid investments, high-yield securities or foreign securities. Foreign securities may be valued with the assistance of an independent fair value pricing service in circumstances where it is believed that they have been or would be materially affected by events occurring after the close of the portfolio security's primary market and before the close of regular trading on the NYSE. This independent fair value pricing service uses a computerized system to appraise affected securities and portfolios taking into consideration various factors and the fair value of such securities may be something other than the last available quotation or other market price. GEAM may also separately monitor portfolio securities and, consistent with the Fund's fair value procedures, apply a different value to a portfolio security than would be applied had it been priced using market quotations or by an independent fair value pricing service. 15 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- Determining the fair value of securities involves the application of both subjective and objective considerations. Security values may differ depending on the methodology used to determine their values, and may differ from the last quoted sale or closing price. No assurance can be given that use of these fair value procedures will always better represent the price at which the Fund could sell the affected portfolio security. Security transactions are accounted for as of the trade date. Realized gains and losses on investments sold are recorded on the basis of identified cost for both financial statement and federal tax purposes. The Fund adopted FASB Statement No. 157, FAIR VALUE MEASUREMENTS (FAS 157). FAS 157 establishes a single definition of fair value, a framework for measuring fair value, and expanded disclosures about fair value measurements. Various inputs are used in determining the value of the Fund's investments. These inputs are classified into three broad levels: Level 1 includes quoted prices in active markets of securities identical to those of the Fund. Level 2 includes: 1) quoted prices in active markets for similar securities to those of the Fund; 2) quoted prices for identical or similar securities to those of the Fund that trade in markets in which there are few transactions or the quoted prices are not current; 3) prices based on observable market data such as interest rates and yield curves, volatilities, bond prepayment speeds, and credit risk and; 4) prices based principally on observable market data by use of correlation techniques or other means. Level 3 includes unobservable market inputs used to fair value securities. These inputs are based on assumptions that market participants would use to price securities and may include the adviser's own assumptions. Other financial instruments are derivative instruments that are not reflected in TOTAL INVESTMENTS, such as futures, forwards, swaps, and written options contracts, which are valued based on the unrealized appreciation/depreciation of the instrument.
Level 1 Level 2 Level 3 Total ------------------------------------------------------------------------------------------------------------------------------------ Investments in Securities $ 62,494,105 $ 14,498 $-- $ 62,508,603 Other Financial Instruments $ (19,645) $ -- $-- $ (19,645)
REPURCHASE AGREEMENTS The Fund may enter into repurchase agreement transactions with respect to instruments that are consistent with the Fund's investment objectives or policies. The Fund's custodian or a third party custodian takes possession of the collateral pledged for investments in repurchase agreements on behalf of the Fund. The Fund values the underlying collateral daily on a mark-to-market basis to determine that the value, including accrued interest, is at least equal to 102% of the repurchase price. In the event the seller defaults and the value of the security declines, or if the seller enters an insolvency proceeding, realization of the collateral by the Fund may be delayed or limited. SECURITY LENDING The Fund may loan securities to brokers, dealers, and financial institutions determined by GEAM to be creditworthy, subject to certain limitations. The Fund continues to receive the interest and dividends on the loaned securities during the term of the loan. The loans of securities are secured by collateral in the form of cash or other liquid assets, which are segregated and maintained with the custodian in an amount at least equal to 102% of the current market value of the loaned securities. During the term of the loan, the Fund will record any gain or loss in the market value of its loaned securities and of securities in which cash collateral is invested. The Fund will also earn interest, net of any rebate, from securities in which cash collateral is invested. In the event the counterparty (borrower) does not meet its contracted obligation to return the securities, the Fund may be exposed to the risk of loss of reacquiring the loaned securities at prevailing market prices using the proceeds of the sale of the collateral. FOREIGN CURRENCY Accounting records of the Fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange on a daily basis (on days the New York Stock Exchange is open). Purchases and sales of securities, income receipts and expense payments denominated in foreign currencies are translated into U.S. dollars at the prevailing exchange rate on the respective dates of such transactions. 16 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- The Fund does not isolate the portion of the results of operations resulting from changes in foreign exchange rates from the fluctuations arising from changes in the market prices of securities during the period. Such fluctuations are included in the net realized or unrealized gain or loss from investments. Net realized gains or losses on foreign currency transactions represent net gains or losses on sales and maturities of foreign currency contracts, disposition of foreign currencies, the difference between the amount of net investment income and withholding taxes accrued and the U.S. dollar amount actually received or paid, and gains or losses between the trade and settlement date on purchases and sales of securities. Net unrealized foreign exchange gains and losses arising from changes in the value of other assets and liabilities as a result of changes in foreign exchange rates are included as increases or decreases in unrealized appreciation/depreciation on foreign currency related transactions. FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or bond index futures contracts subject to certain limitations. The Fund may invest in futures contracts to manage its exposure to the stock and bond markets and fluctuations in currency values. Buying futures tends to increase the Fund's exposure to the underlying instrument while selling futures tends to decrease the Fund's exposure to the underlying instrument, or hedge other Fund investments. The Fund will not enter into a transaction involving futures for speculative purposes. The Fund's risks in using these contracts include changes in the value of the underlying instruments, non-performance of the counterparties under the contracts' terms and changes in the liquidity of the secondary market for the contracts. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they principally trade. Upon entering into a futures contract, the Fund is required to pledge to the broker an amount of cash and/or other assets equal to a certain percentage of the contract amount, known as initial margin deposit. Subsequent payments, known as variation margin, are made or received by the Fund each day, depending on the daily fluctuation in the fair value of the underlying security. The Fund records an unrealized gain or loss equal to the daily variation margin. Should market conditions move unexpectedly, the Fund may not achieve the anticipated benefits of the futures contracts and may incur a loss. The Fund recognizes a realized gain or loss on the expiration or closing of a futures contract. OPTIONS The Fund may purchase and write options, subject to certain limitations. The Fund may invest in options contracts to manage its exposure to the stock and bond markets and fluctuations in foreign currency values. Writing puts and buying calls tend to increase the Fund's exposure to the underlying instrument while buying puts and writing calls tend to decrease the Fund's exposure to the underlying instrument, or hedge other Fund investments. The Fund will not enter into a transaction involving options for speculative purposes. The Fund's risks in using these contracts include changes in the value of the underlying instruments, non-performance of the counterparties under the contracts' terms and changes in the liquidity of the secondary market for the contracts. Options are valued at the last sale price, or if no sales occurred on that day, at the last quoted bid price. When the Fund writes an option, the amount of the premium received is recorded as a liability and is subsequently adjusted to the current fair value of the option written. Premiums received from writing options that expire unexercised are treated by the Fund on the expiration date as realized gains from investments. The difference between the premium and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium is less than the amount paid for the closing purchase, as a realized loss. When an option is exercised, the proceeds from the sale of the underlying security or the cost basis of the securities purchased is adjusted by the original premium received or paid. INVESTMENTS IN FOREIGN MARKETS Investments in foreign markets may involve special risks and considerations not typically associated with investing in the United States. These risks include revaluation of currencies, high rates of inflation, repatriation on income and capital, and adverse political and economic developments. Moreover, securities issued in these markets may be less liquid, subject to government ownership controls, tariffs and taxes, subject to delays in settlements, and their prices may be more volatile. The Fund may be subject to capital gains and repatriation taxes imposed by certain countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued based upon net investment income, net realized gains and net unrealized appreciation as income and/or capital gains are earned. 17 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- INCOME TAXES The Fund intends to comply with all sections of the Internal Revenue Code applicable to regulated investment companies including the distribution of substantially all of its taxable net investment income and net realized capital gains to its shareholders. Therefore, no provision for federal income tax has been made. The Fund is treated as a separate taxpayer for federal income tax purposes. At June 30, 2008, information on the tax cost of investments is as follows:
Net Tax Cost of Gross Tax Gross Tax Appreciation/ Investments for Unrealized Unrealized (Depreciation) Tax Purposes Appreciation Depreciation on Investments ------------------------------------------------------------------------------------------------------------------------------------ $63,890,916 $4,955,861 $(6,357,251) $(1,401,390)
As of December 31, 2007, the Fund has no capital loss carryovers. Capital loss carryovers are available to offset future realized capital gains to the extent provided in the Internal Revenue Code and regulations thereunder. To the extent that these carryover losses are used to offset future capital gains, it is probable that the gains so offset will not be distributed to shareholders because they would be taxable as ordinary income. During the year ended December 31, 2007, the Fund utilized approximately $788,340 of capital loss carryovers. Any net capital and currency losses incurred after October 31, within the Fund's tax year, are deemed to arise on the first day of the Fund's next tax year if the Fund so elects to defer such losses. The Fund incurred no such losses after October 31, 2007. The tax composition of distributions paid during the years ended December 31, 2007 and December 31, 2006 were as follows: Ordinary Long-Term Income Capital Gains Total -------------------------------------------------------------------------------- 2007 $ 821,468 $9,856,050 $10,677,518 2006 1,376,973 -- 1,376,973 DISTRIBUTIONS TO SHAREHOLDERS The Fund declares and pays dividends from net investment income annually. The Fund declares and pays net realized capital gains in excess of capital loss carryforwards distributions annually. The character of income and gains to be distributed is determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences include (but are not limited to) futures and losses deferred due to wash sale transactions. Reclassifications due to permanent book/tax differences are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. These reclassifications have no impact on net investment income, realized gains or losses, or the net asset value of the Fund. The calculation of net investment income per share in the Financial Highlights table excludes these adjustments. The reclassifications for the year ended December 31, 2007 were as follows: Undistributed (Distribution in Excess of) Net Investment Accumulated Income Net Realized Gain -------------------------------------------------------------------------------- $(84) $84 On June 29, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in Income Taxes." FIN48 provides guidance for how certain uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN48 requires evaluation of tax positions taken or expected to be taken in the course of preparing the Fund's tax returns to determine whether the tax positions are "more likely than not" of being sustained by the applicable tax authority. The adoption of FIN48 did not have an impact on the Fund's net assets and financial statements. The Funds' 2004, 2005, 2006 and 2007 calendar years tax returns are still open to examination by the Federal and applicable state tax authorities. INVESTMENT INCOME Corporate actions (including cash dividends) are recorded on the ex-dividend date, net of applicable withholding taxes, except for certain foreign corporate actions, which are recorded as soon after ex-dividend date as such information becomes available. Interest income is recorded on the accrual basis. All discounts and premiums on bonds are accreted and amortized, respectively, to call or maturity date, whichever is shorter, using the effective yield method. 18 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- EXPENSES Expenses of the Company which are directly identifiable to the Fund are allocated to the portfolio. Expenses which are not directly identifiable to the Fund are allocated in such a manner as deemed equitable, taking into consideration the nature and type of expenses and relative size of the Fund. All expenses of the Fund are paid by GEAM and reimbursed by the Fund. 3. LINE OF CREDIT The Company shares a revolving credit facility of up to $150 million with a number of its affiliates. The credit facility is with its custodian bank, State Street Bank and Trust Company. The revolving credit facility requires the payment of a commitment fee equal to 0.09% per annum on the daily unused portion of the credit facility, payable quarterly. The portion borne by the Funds generally is borne proportionally based upon net assets. In addition, the Company has a $100 million uncommitted, unsecured line of credit with State Street. Generally, borrowings under the credit facilities would accrue interest at the Federal Funds Rate plus 50 basis points and would be borne by the borrowing Fund. The maximum amount allowed to be borrowed by any one Fund is the lesser of (i) its prospectus limitation or (ii) 20% of its net assets. The credit facilities were not utilized by the Fund during the period ended June 30, 2008. 4. AMOUNTS PAID TO AFFILIATES GEAM, a registered investment adviser, was retained by the Company's Board of Directors effective May 1, 1997 to act as investment adviser and administrator of the Fund. GEAM's compensation for investment advisory and administrative services is paid monthly based on the average daily net assets of the Fund at an annualized rate of 0.55%. GENPACT performs certain accounting and certain administration services not provided by GEAM. For the period ending June 30, 2008, $573 was charged to the Fund DISTRIBUTION AND SHAREHOLDER SERVICING FEES The Fund has adopted a Shareholder Servicing and Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act with respect to the Class 4 shares of the Fund. The Fund pays GE Investment Distributors, Inc. ("GEID"), a wholly-owned subsidiary of GEAM and the Fund's principal underwriter, a monthly fee for distribution and/or shareholder services provided, at an annual rate of the average daily net assets attributable to each applicable class of shares. The annual rate applicable is 0.45% for the Class 4 shares. Currently, Class 1 shares are not subject to a Rule 12b-1 fee. DIRECTORS' COMPENSATION The Fund pays no compensation to its directors who are officers or employees of GEAM or its affiliates. Directors who are not such officers or employees also serve in a similar capacity for other funds advised by GEAM. Compensation paid to unaffiliated directors are reflected on the Statement of Operations. These fees are allocated pro rata across all of the mutual fund platforms and share classes served by the directors, including the Fund, and are based upon the relative net assets of each Fund within such platforms. (For additional information about directors compensation please refer to the Statement of Additional Information.) 5. INVESTMENT TRANSACTIONS PURCHASES AND SALES OF SECURITIES The cost of purchases and the proceeds from sales of investments, other than short-term securities and options, for the period ended June 30, 2008 were as follows: Purchases Sales -------------------------------------------------------------------------------- $18,033,387 $26,301,280 SECURITY LENDING At June 30, 2008, the Fund did not participate in securities lending. 19 Additional Information (unaudited) -------------------------------------------------------------------------------- INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS: The business and affairs of the Company are managed under the direction of the Company's Board of Directors. Information pertaining to the Directors and officers of the Company is set forth below. INTERESTED DIRECTORS AND EXECUTIVE OFFICERS -------------------------------------------------------------------------------- MICHAEL J. COSGROVE -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 59 POSITION(S) HELD WITH FUND Chairman of the Board and President TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 10 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President - GEAM since February 1997; President and Chief Executive Officer - Mutual Funds at GEAM since March 2007; Vice President, GE Capital Corporation, an indirect wholly-owned subsidiary of GE, since December 1999; Executive Vice President - Sales and Marketing of GEAM, a wholly-owned subsidiary of GE that is registered as an investment adviser under the Investment Advisers Act of 1940, as amended, since March 1993; Director of GEAM since 1988. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48 OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception; Trustee of Elfun Funds, GE Savings & Security Funds and General Electric Pension Trust since 1988; Trustee of Fordham University since 2003; Trustee of Elfun Foundation; Treasurer of GE Foundation; Director, GE Asset Management (Ireland) since February 1999; Director, GE Asset Management Funds Plc, GE Asset Canada Company, GE Asset Management Limited, and GE Volunteers. -------------------------------------------------------------------------------- MATTHEW J. SIMPSON -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 47 POSITION(S) HELD WITH FUND Executive Vice President TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - less than one year PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General Counsel and Secretary of GEAM since July 2007; Senior Vice President and General Counsel - Marketing and Client Services (formerly Asset Management Services), at GEAM and Senior Vice President and General Counsel of GEAMS from February 1997 to June 2007; Vice President and Associate General Counsel of GEAM from October 1992 to February 1997; Secretary of Fund from 1997 to June 2007; Vice President of Fund from September 2003 to June 2007; Vice President of GE Institutional Funds and GE LifeStyle Funds from September 2003 to June 2007; Secretary of GE Institutional Funds and GE LifeStyle Funds from 1997 to June 2007; Vice President of Elfun Funds and GE Savings & Security Funds from October 2003 to June 2007; Assistant Secretary of Elfun Funds and GE Savings & Security Funds from 1998 to June 2007. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional Funds, GE LifeStyle Funds, Elfun Funds and GE Savings & Security Funds since July 2007. 20 Additional Information (unaudited) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SCOTT H. RHODES -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 49 POSITION(S) HELD WITH FUND Treasurer TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 2 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds Operations Manager since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle Funds and GE Investments Funds since November 2005 and Elfun Funds and GE Savings & Security Funds since September 2005; from August 2004 to September 2005 Vice President, U.S. Trust Company, N.A. and Assistant Treasurer of Excelsior Funds, Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds, Inc.; from January 2004 to August 2004, Vice President BlackRock Financial Management, Inc.; from December 1996 to November 2003, Controller - Mutual Funds, American Skandia Investment Services, Inc. and Assistant Treasurer of American Skandia Trust and American Skandia Advisor Funds, Inc. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A -------------------------------------------------------------------------------- JEANNE M. LAPORTA -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 42 POSITION(S) HELD WITH FUND Vice President and Secretary TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 2 years (Vice President); less than one year (Secretary) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Senior Vice President and Deputy General Counsel at GE Asset Management since October 2007; Vice President and Associate General Counsel - Marketing and Client Services (formerly Asset Management Services) at GEAM from May 1997 to October 2007; Vice President and Assistant Secretary of GE Funds, GE Institutional Funds and GE LifeStyle Funds since September 2003; Vice President and Assistant Secretary of Elfun Funds and GE Savings & Security Funds since October 2003; Assistant Secretary from September 2003 to June 2007 and Secretary since July 2007. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A 21 Additional Information (unaudited) -------------------------------------------------------------------------------- NON-INTERESTED DIRECTORS -------------------------------------------------------------------------------- JOHN R. COSTANTINO -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 62 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC since 2006; Managing Director, Walden Partners, Ltd., consultants and investors, since August 1992. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE Institutional Funds and GE LifeStyle Funds since their inception; Trustee of Fordham University since 2002 and Marymount College from 2001 through 2002; Neuroscience Research Institute since 1986; Diocesan Finance Counsel of the Dioceses of Brooklyn & Queens since 2001; Gregorian University Foundation since 1994. -------------------------------------------------------------------------------- WILLIAM J. LUCAS -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 60 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Treasurer of Fairfield University since 1983. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception. -------------------------------------------------------------------------------- ROBERT P. QUINN -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 72 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon Brothers Inc. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception. -------------------------------------------------------------------------------- The Statement of Additional Information for the Fund includes additional information about the Directors and Officers and is available, without charge, upon request by calling 1-800-242-0134. 22 Investment Team -------------------------------------------------------------------------------- INVESTMENT ADVISER AND ADMINISTRATOR GE Asset Management Incorporated BOARD OF DIRECTORS Michael J.Cosgrove, CHAIRMAN John R. Costantino William J. Lucas Robert P. Quinn Matthew J. Simpson SECRETARY Jeanne M. LaPorta ASSISTANT SECRETARIES Joseph A. Carucci Joon Won Choe TREASURER Scott H. Rhodes ASSISTANT TREASURERS Scott R. Fuchs Christopher M. Isaacs DISTRIBUTOR GE Investment Distributors, Inc. Member FINRA and SIPC COUNSEL Sutherland, Asbill & Brennan, LLP CUSTODIAN State Street Bank & Trust Company INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM KPMG LLP OFFICERS OF THE INVESTMENT ADVISER James W. Ireland, CHIEF EXECUTIVE OFFICER Daniel O. Colao, EVP, CHIEF FINANCIAL OFFICER (AS OF JULY 28, 2008) Michael J. Cosgrove, EVP, PRESIDENT AND CHIEF EXECUTIVE OFFICER - MUTUAL FUNDS Paul M. Colonna, EVP, PRESIDENT - FIXED INCOME Kathryn D. Karlic, EVP, PRESIDENT - INSTITUTIONAL SALES AND MARKETING Ralph R. Layman, EVP, PRESIDENT - INTERNATIONAL EQUITIES Matthew J. Simpson, EVP, GENERAL COUNSEL AND SECRETARY Judith A. Studer, EVP, PRESIDENT - U.S. EQUITIES Don W. Torey, EVP, PRESIDENT - ALTERNATIVE INVESTMENTS AND REAL ESTATE John J. Walker, EVP, CHIEF OPERATING OFFICER (AS OF JANUARY 31, 2008) David Wiederecht, EVP, PRESIDENT - INVESTMENT STRATEGIES 23 [This page intentionally left blank.] [This page intentionally left blank.] INVESTMENT ADVISER GE ASSET MANAGEMENT INCORPORATED 3001 SUMMER STREET PO BOX 7900 STAMFORD, CT 06904-7900 DISTRIBUTOR GE INVESTMENT DISTRIBUTORS, INC. MEMBER FINRA AND SIPC 3001 SUMMER STREET PO BOX 7900 STAMFORD, CT 06904-7900 The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities is available without charge (i) upon request, by calling 1-800-242-0134; (ii) on the Fund's website at HTTP://WWW.GEFUNDS.COM; and (iii) on the Commission's website at HTTP://WWW.SEC.GOV. The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC - information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Information (if any) regarding how the Fund voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through the Fund's website at HTTP://WWW.GEFUNDS.COM; and (ii) on the Commission's website at HTTP://WWW.SEC.GOV. [GE LOGO OMITTED] GE Investments Funds, Inc. S&P 500 Index Fund Semi-Annual Report JUNE 30, 2008 [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, 2008 (unaudited) -------------------------------------------------------------------------------- Total returns take into account changes in share price and assume reinvestment of all dividends and capital gains distributions, if any. The performance data quoted represent past performance; past performance does not guarantee future results. Investment return and principal value will fluctuate so your shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data quoted. Periods less than one year are not annualized. Please call 800-242-0134 for the most recent month-end performance data. Total returns shown are net of Fund expenses but do not reflect fees and charges associated with the variable contracts such as administrative fees, account charges and surrender charges, which, if reflected, would reduce the Fund's total returns for all periods shown. Shares of the Fund are neither insured nor guaranteed by the U.S. Government, and their prices will fluctuate with market conditions. The Standard & Poor's ("S&P") 500(R) Composite Price Index of stocks (S&P 500 Index) is an unmanaged index and does not reflect the actual cost of investing in the instruments that comprise the index. The S&P 500 Index is a market capitalization-weighted index of stocks of 500 large U.S. companies, which is widely used as a measure of large-cap stock market performance. The results shown for the foregoing index assume the reinvestment of net dividends or interest. The peer universe of the underlying annuity funds used in our peer ranking calculation is based on the blend of Lipper peer categories, as shown. Lipper is an independent mutual fund rating service. A Fund's performance may be compared to or ranked within a universe of mutual funds with investment objectives and policies similar but not necessarily identical to the Fund's. Such comparisons or rankings are made on the basis of several factors, including the Fund's objectives and policies, management style and strategy, and portfolio composition, and may change over time if any of those factors change. The S&P 500 Index Fund is not sponsored, endorsed, sold or promoted by Standard & Poor's, and Standard & Poor's makes no representation or warranty, express or implied, to the investors of the Fund or any member of the public regarding the advisability of investing in the securities generally or in this Fund particularly or the ability of the S&P 500 Index Fund to track general stock market performance. ------------------------- GE INVESTMENT DISTRIBUTORS, INC., MEMBER OF FINRA & SIPC, IS THE PRINCIPAL UNDERWRITER AND DISTRIBUTOR OF THE GE INVESTMENT FUNDS, INC. AND A WHOLLY OWNED SUBSIDIARY OF GE ASSET MANAGEMENT INCORPORATED, THE INVESTMENT ADVISER OF THE FUNDS. 1 S&P 500 Index Fund -------------------------------------------------------------------------------- Q&A SSgA FUNDS MANAGEMENT, INC. ("SSgA FM") IS THE SUB-ADVISER FOR THE S&P 500 INDEX FUND. SSgA FM IS REGISTERED WITH THE SEC AS AN INVESTMENT ADVISER UNDER THE INVESTMENT ACT OF 1940 AND IS A WHOLLY OWNED SUBSIDIARY OF STATE STREET CORPORATION. THE FUND IS MANAGED BY A TEAM OF PORTFOLIO MANAGERS COMPOSED OF THE FOLLOWING MEMBERS: KARL SCHNEIDER AND JOHN TUCKER. KARL SCHNEIDER, LEAD PORTFOLIO MANAGER FOR THE FUND, IS A VICE PRESIDENT OF STATE STREET GLOBAL ADVISORS AND A PRINCIPAL OF SSgA FM. KARL JOINED THE FIRM IN 1996 AND IS A MEMBER OF THE FIRM'S GLOBAL STRUCTURED PRODUCTS TEAM. KARL MANAGES A VARIETY OF THE FIRM'S DOMESTIC AND INTERNATIONAL PASSIVE FUNDS. KARL HOLDS A BACHELORS OF SCIENCE DEGREE IN FINANCE AND INVESTMENTS FROM BABSON COLLEGE AND ALSO A MASTER OF SCIENCE DEGREE IN FINANCE FROM THE CARROLL SCHOOL OF MANAGEMENT AT BOSTON COLLEGE. ADDITIONALLY, HE HOLDS A SERIES 3 LICENSE FROM THE NATIONAL FUTURES ASSOCIATION. JOHN TUCKER, CFA, IS A VICE PRESIDENT OF SSgA AND A PRINCIPAL OF SSgA FM. JOHN JOINED THE FIRM IN 1988 AND IS HEAD OF US EQUITY MARKETS IN THE GLOBAL STRUCTURED PRODUCTS TEAM. HE IS ALSO RESPONSIBLE FOR ALL DERIVATIVE STRATEGIES AND EXCHANGE TRADED FUNDS. JOHN RECEIVED A BA IN ECONOMICS FROM TRINITY COLLEGE AND AN MS IN FINANCE FROM BOSTON COLLEGE. HE IS A MEMBER OF THE BOSTON SECURITY ANALYSTS SOCIETY AND THE CFA INSTITUTE. Q. HOW DID THE S&P 500 INDEX FUND PERFORM COMPARED TO ITS BENCHMARK AND LIPPER PEER GROUP FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2008? A. For the six-month period ended June 30, 2008, the S&P 500 Index Fund returned -12.14%. The S&P 500 Index, the Fund's benchmark, returned -11.91% and the Fund's Lipper peer group of 59 S&P 500 Index Objective funds returned an average of -12.07% for the same period. Q. WHAT MARKET CONDITIONS IMPACTED FUND PERFORMANCE? A. The credit crisis continued in the first half of 2008, as troubled mortgage paper continued to fall in value, and corporate bonds worried about eroding profits and rising default potential. The inexorable upward march of crude oil prices, which saw double-digit gains in both April and May, exacerbated inflation concerns as summer approached. As consumers realized elevated energy costs might be more than just a temporary phenomenon, a deep chill was cast over the tentative spring recovery in investor sentiment. Many broad equity averages, having come within hailing distance of their 2007 closing levels in mid-May, soon found themselves flirting with the lows that they had plumbed in January and March. Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE? A. By utilizing a passive, full replication investment style, the Fund owned the same stocks and sectors in approximately the same weights as the S&P 500 Index. As of June 30th, 2008, the four largest sectors in the S&P 500 Index were Information Technology (16.4%), Energy (16.2%), Financials (14.3%) and Healthcare (11.9%). The highest returning sector for the last six months was Energy (+8%) followed by Materials (+0.2%). The lowest returning sectors were Financials (-30%) and Telecommunication Services (-18%). Q. WERE THERE ANY SIGNIFICANT CHANGES TO THE FUND DURING THE PERIOD? A. Over the past six months, there were 10 index addition/deletion changes announced by Standard & Poors that impacted the Fund. Not all the additions and deletions were bought and sold in the Fund, however, as many changes were as a result of a merger or acquisition, or a spin-off involving another S&P500 Index constituent. Additionally, there were numerous index share changes throughout the period, as well as at each quarter's end. Many of the share changes also required no trading, as the weight change within the portfolio was negligible. 2 S&P 500 Index Fund -------------------------------------------------------------------------------- Understanding Your Fund's Expenses As a shareholder of the Fund you incur ongoing expenses, which include portfolio management fees, professional fees, administrative fees and other Fund expenses. The following example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the period. The information in the following table is based on an investment of $1,000, which is invested at the beginning of the period and held for the entire six-month period ended June 30, 2008. ACTUAL EXPENSES The first section of the table provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your class under the heading "Expenses Paid During Period." HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second section of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholders reports of other funds. Please note that the expenses shown in the table do not reflect any transaction costs, such as sales charges or redemption fees.
JANUARY 1, 2008 - JUNE 30, 2008 ------------------------------------------------------------------------------------------------------------------------------------ ACCOUNT VALUE AT ACCOUNT VALUE EXPENSES THE BEGINNING OF AT THE END OF PAID DURING THE PERIOD ($) THE PERIOD ($) THE PERIOD ($)* ------------------------------------------------------------------------------------------------------------------------------------ Actual Fund Return** 1,000.00 878.58 1.86 ------------------------------------------------------------------------------------------------------------------------------------ Hypothetical 5% Return (2.5% for the period) 1,000.00 1,022.62 2.01 ------------------------------------------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.40% (FROM PERIOD JANUARY 1, 2008 - JUNE 30, 2008), MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY 182/366 (TO REFLECT THE SIX MONTH PERIOD). ** ACTUAL FUND RETURN FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2008 WAS: (12.14)%. 3 S&P 500 Index Fund (unaudited) -------------------------------------------------------------------------------- CHANGE IN VALUE OF A $10,000 INVESTMENT -------------------------------------------------------------------------------- [Line chart omitted -- plot points are as follows:] GEI S&P 500 INDEX S&P 500 INDEX 06/98 10,000.00 10,000.00 12/98 10,911.87 10,930.83 12/99 13,160.94 13,233.67 12/00 11,920.41 12,016.74 12/01 10,458.24 10,586.04 12/02 8,119.08 8,246.81 12/03 10,414.64 10,617.04 12/04 11,504.13 11,771.36 12/05 12,022.61 12,348.39 12/06 13,877.60 14,298.67 12/07 14,584.73 15,084.63 06/08 12,813.88 13,287.88 AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2008 -------------------------------------------------------------------------------- SIX ONE FIVE TEN MONTHS YEAR YEAR YEAR -------------------------------------------------------------------------------- S&P 500 Index Fund -12.14% -13.51% 7.19% 2.51% -------------------------------------------------------------------------------- S&P 500 Index -11.91% -13.12% 7.59% 2.88% -------------------------------------------------------------------------------- Lipper peer group average* -12.07% -13.40% 7.18% 2.57% -------------------------------------------------------------------------------- Inception date 4/15/85 -------------------------------------------------------------------------------- INVESTMENT PROFILE A fund designed for investors who seek growth of capital and accumulation of income that corresponds to the investment return of the Standard & Poor's 500 Composite Stock Index by investing at least 80% of its net assets in equity securities of companies contained in that Index. TOP TEN LARGEST HOLDINGS (EXCLUDES SHORT-TERM INVESTMENTS) AS OF JUNE 30, 2008 as a % of Market Value -------------------------------------------------------------------------------- Exxon Mobil Corp. 4.10% -------------------------------------------------------------------------------- General Electric Co. 2.34% -------------------------------------------------------------------------------- Microsoft Corp. 1.93% -------------------------------------------------------------------------------- Chevron Corp. 1.81% -------------------------------------------------------------------------------- AT&T, Inc. 1.76% -------------------------------------------------------------------------------- Procter & Gamble Co. 1.64% -------------------------------------------------------------------------------- Johnson & Johnson 1.60% -------------------------------------------------------------------------------- International Business Machines Corp. 1.43% -------------------------------------------------------------------------------- Apple Computer, Inc. 1.29% -------------------------------------------------------------------------------- ConocoPhillips 1.28% -------------------------------------------------------------------------------- PORTFOLIO COMPOSITION AS OF JUNE 30, 2008 as a % of Market Value -------------------------------------------------------------------------------- Market Value of $369,869 (in thousands) [Pie chart omitted -- plot points are as follows:] Information Technology 16.1% Energy 15.9% Financials 14.0% Healthcare 11.7% Industrials 11.0% Consumer Staples 10.6% Consumer Discretionary 8.0% Utilities 3.9% Materials 3.9% Telecommunication Services 3.3% Short-Term 1.6% Other Investments 0.0%** * LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR THE SIX MONTHS, ONE YEAR, FIVE-YEAR, AND TEN-YEAR PERIODS INDICATED IN THE S&P 500 INDEX OBJECTIVE FUNDS PEER GROUP CONSISTING OF 59, 58, 51 AND 27 UNDERLYING ANNUITY FUNDS, RESPECTIVELY. ** LESS THAN 0.1% SEE NOTES TO PERFORMANCE ON PAGE 1 FOR FURTHER INFORMATION, INCLUDING AN EXPLANATION OF LIPPER PEER CATEGORIES. PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE AND THE GRAPH AND TABLE DO NOT REFLECT THE DEDUCTION OF TAXES. 4 S&P 500 INDEX FUND Schedule of Investments June 30, 2008 (unaudited) -------------------------------------------------------------------------------- S&P 500 INDEX FUND -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE -------------------------------------------------------------------------------- COMMON STOCK -- 98.8% + -------------------------------------------------------------------------------- CONSUMER DISCRETIONARY -- 8.0% Abercrombie & Fitch Co. (Class A) ................... 2,800 $ 175,504 Amazon.Com, Inc................ 10,100 740,633(a) Apollo Group, Inc. (Class A)... 4,400 194,744(a) Autonation, Inc................ 4,772 47,815(a) Autozone, Inc.................. 1,444 174,738(a) Bed Bath & Beyond, Inc......... 8,600 241,660(a) Best Buy Company, Inc.......... 11,500 455,400 Big Lots, Inc.................. 2,500 78,100(a) Black & Decker Corp............ 2,007 115,423 Carnival Corp.................. 14,400 474,624 CBS Corp....................... 22,409 436,751 Centex Corp.................... 4,120 55,084 Clear Channel Communications, Inc. ........................ 16,000 563,200 Coach, Inc..................... 11,300 326,344(a) Comcast Corp. (Class A)........ 96,458 1,829,808 D.R. Horton, Inc............... 9,700 105,245 Darden Restaurants, Inc........ 4,429 141,462 Dillard's, Inc. (Class A)...... 2,295 26,553 DIRECTV Group, Inc............. 23,400 606,294(a) Eastman Kodak Co............... 9,175 132,395 Expedia, Inc................... 7,100 130,498(a) Family Dollar Stores, Inc...... 5,000 99,700 Ford Motor Co.................. 70,527 339,235(a) Fortune Brands, Inc............ 5,141 320,850 GameStop Corp. (Class A)....... 5,400 218,160(a) Gannett Company, Inc........... 7,408 160,531 General Motors Corp............ 18,547 213,291 Genuine Parts Co............... 5,596 222,049 Goodyear Tire & Rubber Co...... 7,319 130,498(a) H&R Block, Inc................. 10,408 222,731 Harley-Davidson, Inc........... 8,000 290,080 Harman International Industries Inc............... 1,900 78,641 Hasbro, Inc.................... 4,696 167,741 Home Depot, Inc................ 55,118 1,290,864 IAC/InterActiveCorp............ 6,300 121,464(a) International Game Technology.. 10,000 249,800 Interpublic Group of Companies, Inc............... 14,530 124,958(a) J.C. Penney Company, Inc....... 7,187 260,816 Johnson Controls, Inc.......... 19,246 551,975 Jones Apparel Group, Inc....... 2,400 33,000 KB Home........................ 2,860 48,420 Kohl's Corp.................... 10,400 416,416(a) Leggett & Platt, Incorporated.. 5,100 85,527 Lennar Corp. (Class A)......... 4,800 59,232 Limited Brands, Inc............ 9,888 166,613 Liz Claiborne Inc.............. 3,830 54,194 Lowe's Companies, Inc.......... 47,356 982,637 NUMBER OF SHARES VALUE -------------------------------------------------------------------------------- Macy's, Inc.................... 14,030 $ 272,463 Marriott International Inc. (Class A) ................... 9,544 250,435 Mattel, Inc.................... 11,551 197,753 McDonald's Corp................ 37,390 2,102,066 McGraw-Hill Companies Inc...... 10,621 426,115 Meredith Corp.................. 1,298 36,720 New York Times Co. (Class A)... 5,188 79,843 Newell Rubbermaid, Inc......... 8,756 147,013 News Corp. (Class A)........... 74,600 1,121,984 Nike Inc. (Class B)............ 12,510 745,721 Nordstrom, Inc................. 5,792 175,498 Office Depot, Inc.............. 8,400 91,896(a) Omnicom Group, Inc............. 10,300 462,264 Polo Ralph Lauren Corp. (Class A) ................... 1,800 113,004 Pulte Homes, Inc............... 7,388 71,146 RadioShack Corp................ 4,656 57,129 Sears Holdings Corp............ 2,419 178,184(a) Snap-On Incorporated........... 2,009 104,488 Staples, Inc................... 22,450 533,187 Starbucks Corp................. 23,798 374,581(a) Starwood Hotels & Resorts Worldwide, Inc............... 6,100 244,427 Target Corp.................... 25,349 1,178,475 The E.W. Scripps Co. (Class A). 2,900 120,466 The Gap, Inc................... 14,379 239,698 The Sherwin-Williams Co........ 3,163 145,277 The Stanley Works.............. 2,426 108,758 The Walt Disney Co............. 61,079 1,905,665 Tiffany & Co................... 4,000 163,000 Time Warner, Inc............... 115,914 1,715,527(d) TJX Companies, Inc............. 14,480 455,686 VF Corp........................ 2,802 199,446 Viacom Inc. (Class B).......... 20,813 635,629(a) Washington Post Co. (Class B).. 190 111,511 Wendy's International, Inc..... 2,731 74,338 Whirlpool Corp................. 2,443 150,806 Wyndham Worldwide Corp......... 5,949 106,547 Yum! Brands, Inc............... 15,329 537,895 29,596,339 CONSUMER STAPLES -- 10.7% Altria Group, Inc.............. 68,579 1,409,984 Anheuser-Busch Companies, Inc.. 23,142 1,437,581(d) Archer-Daniels-Midland Co...... 21,086 711,653 Avon Products, Inc............. 13,628 490,881 Brown-Forman Corp. (Class B)... 2,758 208,422 Campbell Soup Co............... 7,176 240,109 Clorox Co...................... 4,684 244,505 Coca-Cola Enterprises, Inc..... 9,100 157,430 Colgate-Palmolive Co........... 16,672 1,152,035 ConAgra Foods, Inc............. 15,868 305,935 Constellation Brands, Inc. (Class A) ................... 6,100 121,146(a) Costco Wholesale Corp.......... 14,266 1,000,617 CVS Caremark Corp.............. 46,727 1,848,987 Dean Foods Co.................. 4,700 92,214(a) General Mills, Inc............. 11,003 668,652 HJ Heinz Co.................... 10,397 497,496 See Notes to Schedule of Investments on page 11 and Notes to Financial Statements. 5 S&P 500 INDEX FUND Schedule of Investments June 30, 2008 (unaudited) -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE -------------------------------------------------------------------------------- Kellogg Co..................... 8,390 $ 402,888 Kimberly-Clark Corp............ 13,636 815,160 Kraft Foods, Inc. (Class A).... 50,098 1,425,288 Lorillard, Inc................. 5,711 394,973(a) McCormick & Company, Inc....... 4,300 153,338 Molson Coors Brewing Co. (Class B) 4,398 238,943 Pepsi Bottling Group, Inc...... 4,700 131,224 PepsiCo, Inc................... 51,974 3,305,027 Philip Morris International Inc. 68,479 3,382,178 Procter & Gamble Co............ 99,449 6,047,494 Reynolds American, Inc......... 5,700 266,019 Safeway Inc.................... 14,300 408,265 Sara Lee Corp.................. 23,157 283,673 Supervalu Inc.................. 6,713 207,365 SYSCO Corp..................... 19,444 534,904 The Coca-Cola Co............... 65,002 3,378,804(d) The Estee Lauder Companies Inc. (Class A).................... 3,600 167,220 The Hershey Co................. 5,284 173,210 The Kroger Co.................. 21,566 622,610 Tyson Foods, Inc. (Class A).... 8,900 132,966 UST Inc........................ 4,779 260,981 Walgreen Co.................... 32,200 1,046,822 Wal-Mart Stores, Inc........... 75,787 4,259,229 Whole Foods Market, Inc........ 4,400 104,236 WM Wrigley Jr. Co.............. 6,985 543,293 39,273,757 ENERGY -- 16.0% Anadarko Petroleum Corp........ 15,256 1,141,759 Apache Corp.................... 10,848 1,507,872 Baker Hughes Incorporated...... 10,150 886,501 BJ Services Co................. 9,700 309,818 Cabot Oil & Gas Corp........... 3,100 209,963 Cameron International Corp..... 7,000 387,450(a) Chesapeake Energy Corp......... 15,700 1,035,572 Chevron Corp................... 67,558 6,697,025 ConocoPhillips................. 50,219 4,740,171 Consol Energy, Inc............. 6,000 674,220 Devon Energy Corp.............. 14,392 1,729,343 El Paso Corp................... 22,882 497,455 ENSCO International Inc........ 4,700 379,478 EOG Resources, Inc............. 8,100 1,062,720 Exxon Mobil Corp............... 172,102 15,167,349(d) Halliburton Co................. 28,591 1,517,324 Hess Corp...................... 9,070 1,144,543(d) Marathon Oil Corp.............. 23,042 1,195,189 Massey Energy Co............... 2,600 243,750 Murphy Oil Corp................ 6,100 598,105 Nabors Industries Ltd.......... 9,300 457,839(a) National Oilwell Varco, Inc.... 13,400 1,188,848(a) Noble Corp..................... 8,700 565,152 Noble Energy, Inc.............. 5,600 563,136 Occidental Petroleum Corp...... 26,720 2,401,059 Peabody Energy Corp............ 8,700 766,035 Range Resources Corp........... 5,000 327,700 Rowan Companies, Inc........... 3,577 167,225 NUMBER OF SHARES VALUE -------------------------------------------------------------------------------- Schlumberger Ltd............... 38,933 $ 4,182,572 Smith International, Inc....... 6,500 540,410 Southwestern Energy Co......... 11,100 528,471(a) Spectra Energy Corp............ 20,677 594,257 Sunoco, Inc.................... 3,976 161,783 Tesoro Corp.................... 4,800 94,896 Transocean, Inc................ 10,310 1,571,141 Valero Energy Corp............. 17,500 720,650 Weatherford International Ltd.. 22,000 1,090,980(a) Williams Companies, Inc........ 18,786 757,264 XTO Energy, Inc................ 16,441 1,126,373 58,931,398 FINANCIALS -- 14.0% ACE Ltd........................ 10,700 589,463 AFLAC Incorporated............. 15,400 967,120 Allstate Corp.................. 18,311 834,798(d) American Capital Strategies Ltd. 6,200 147,374 American Express Co............ 37,796 1,423,775(d) American International Group, Inc. 87,517 2,315,700(d) Ameriprise Financial, Inc...... 7,304 297,054 AON Corp....................... 9,636 442,678 Apartment Investment & Management Co. (Class A) (REIT) 2,920 99,455 Assurant, Inc.................. 3,200 211,072 AvalonBay Communities, Inc. (REIT) 2,500 222,900 Bank of America Corp........... 144,441 3,447,807 Bank of New York Mellon Corp... 37,003 1,399,823 BB&T Corp...................... 18,000 409,860 Boston Properties, Inc. (REIT). 3,900 351,858 Capital One Financial Corp..... 12,225 464,672 CB Richard Ellis Group, Inc. (Class A).................... 5,500 105,600(a) Charles Schwab Corp............ 30,111 618,480 Chubb Corp..................... 12,094 592,727 Cincinnati Financial Corp...... 5,592 142,037 CIT Group, Inc................. 6,600 44,946 Citigroup, Inc................. 177,306 2,971,649(d) CME Group Inc.................. 1,721 659,470 Comerica Incorporated.......... 5,156 132,148 Countrywide Financial Corp..... 19,698 83,716 Developers Diversified Realty Corp. (REIT)................. 3,900 135,369 Discover Financial Services.... 15,298 201,475 E*Trade Financial Corp......... 15,100 47,414(a) Equity Residential (REIT)...... 8,800 336,776 Federal Home Loan Mortgage Corp................ 20,765 340,546 Federal National Mortgage Assoc. 34,176 666,774 Federated Investors Inc. (Class B) 2,700 92,934 Fifth Third Bancorp............ 17,516 178,313 First Horizon National Corp.... 4,400 32,692 Franklin Resources, Inc........ 5,100 467,415 General Growth Properties, Inc. (REIT)....................... 7,900 276,737 Genworth Financial, Inc. (Class A) 14,100 251,121 Goldman Sachs Group, Inc....... 12,841 2,245,891 See Notes to Schedule of Investments on page 11 and Notes to Financial Statements. 6 S&P 500 INDEX FUND Schedule of Investments June 30, 2008 (unaudited) -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE -------------------------------------------------------------------------------- Hartford Financial Services Group, Inc................... 10,204 $ 658,872 HCP, Inc. (REIT)............... 7,500 238,575 Host Hotels & Resorts Inc. (REIT) 16,700 227,955 Hudson City Bancorp, Inc....... 16,600 276,888 Huntington Bancshares Incorporated................ 11,434 65,974 IntercontinentalExchange, Inc.. 2,300 262,200(a) Janus Capital Group, Inc....... 5,100 134,997 JP Morgan Chase & Co........... 112,450 3,858,159(d) Keycorp........................ 15,828 173,791 Kimco Realty Corp. (REIT)...... 8,100 279,612 Legg Mason, Inc................ 4,300 187,351 Lehman Brothers Holdings, Inc.. 22,000 435,820 Leucadia National Corp......... 5,500 258,170 Lincoln National Corp.......... 8,542 387,123 Loews Corp..................... 12,766 598,725 M&T Bank Corp.................. 2,400 169,296 Marsh & McLennan Companies, Inc.............. 16,969 450,527 Marshall & Ilsley Corp......... 8,298 127,208 MBIA Inc....................... 4,535 19,909 Merrill Lynch & Company, Inc... 31,634 1,003,114 Metlife, Inc................... 23,171 1,222,734 MGIC Investment Corp........... 2,959 18,079 Moody's Corp................... 6,884 237,085 Morgan Stanley................. 35,996 1,298,376 National City Corp............. 21,291 101,558 Northern Trust Corp............ 6,200 425,134 NYSE Euronext.................. 8,700 440,742 Plum Creek Timber Company, Inc. (REIT)...................... 5,700 243,447 PNC Financial Services Group, Inc. 11,208 639,977 Principal Financial Group, Inc. 8,300 348,351 Prologis (REIT)................ 8,400 456,540 Prudential Financial, Inc...... 14,600 872,204 Public Storage (REIT).......... 4,000 323,160 Regions Financial Corp......... 23,068 251,672 Safeco Corp.................... 2,881 193,488 Simon Property Group, Inc. (REIT) 7,200 647,208 SLM Corp....................... 14,200 274,770(a) Sovereign Bancorp, Inc......... 15,650 115,184 State Street Corp.............. 13,800 883,062(c) SunTrust Banks, Inc............ 11,429 413,958 T Rowe Price Group, Inc........ 8,700 491,289 The Progressive Corp........... 22,473 420,695 Torchmark Corp................. 3,072 180,173 Travelers Companies, Inc....... 19,999 867,957 Unum Group..................... 10,989 224,725 US Bancorp..................... 56,199 1,567,390 Vornado Realty Trust (REIT).... 4,400 387,200 Wachovia Corp.................. 69,288 1,076,043 Washington Mutual, Inc......... 33,181 163,582 Wells Fargo & Co............... 107,036 2,542,105 XL Capital Ltd................. 5,700 117,192 Zions Bancorporation........... 3,700 116,513 51,625,498 NUMBER OF SHARES VALUE -------------------------------------------------------------------------------- HEALTHCARE -- 11.8% Abbott Laboratories............ 50,204 $ 2,659,306(d) Aetna, Inc..................... 16,008 648,804 Allergan, Inc.................. 9,804 510,298 AmerisourceBergen Corp......... 5,142 205,629 Amgen, Inc..................... 35,248 1,662,296(a,d) Barr Pharmaceuticals, Inc...... 3,500 157,780(a) Baxter International, Inc...... 20,729 1,325,412 Becton Dickinson & Co.......... 7,970 647,961 Biogen Idec, Inc............... 9,800 547,722(a) Boston Scientific Corp......... 44,260 543,955(a) Bristol-Myers Squibb Co........ 64,008 1,314,084(d) C.R. Bard, Inc................. 3,302 290,411 Cardinal Health, Inc........... 11,651 600,959 Celgene Corp................... 14,000 894,180(a) Cigna Corp..................... 9,289 328,738 Coventry Healthcare, Inc....... 5,100 155,142(a) Covidien Ltd................... 16,259 778,644 Eli Lilly & Co................. 32,216 1,487,091 Express Scripts, Inc........... 8,200 514,304(a) Forest Laboratories, Inc....... 10,300 357,822(a) Genzyme Corp................... 8,700 626,574(a) Gilead Sciences, Inc........... 30,349 1,606,980(a) Hospira, Inc................... 5,039 202,114(a) Humana Inc..................... 5,627 223,786(a) IMS Health Inc................. 6,057 141,128 Intuitive Surgical, Inc........ 1,260 339,444(a) Johnson & Johnson.............. 92,127 5,927,451 King Pharmaceuticals, Inc...... 8,833 92,482(a) Laboratory Corporation of America Holdings............ 3,700 257,631(a) McKesson Corp.................. 9,402 525,666 Medco Health Solutions, Inc.... 17,166 810,235(a) Medtronic, Inc................. 36,632 1,895,706 Merck & Company, Inc........... 70,350 2,651,492 Millipore Corp................. 1,745 118,416(a) Mylan, Inc..................... 8,800 106,216 Patterson Companies, Inc....... 4,100 120,499(a) PerkinElmer, Inc............... 3,610 100,538 Pfizer, Inc.................... 219,821 3,840,273 Quest Diagnostics Incorporated, ............... 5,100 247,197 Schering-Plough Corp........... 52,602 1,035,733(d) St. Jude Medical, Inc.......... 11,092 453,441(a) Stryker Corp................... 7,852 493,734 Tenet Healthcare Corp.......... 16,695 92,824(a) Thermo Fisher Scientific, Inc.. 13,528 753,915(a) UnitedHealth Group, Inc........ 40,676 1,067,745 Varian Medical Systems, Inc.... 4,100 212,585(a) Waters Corp.................... 3,300 212,850(a) Watson Pharmaceuticals, Inc.... 3,600 97,812(a) WellPoint, Inc................. 17,100 814,986(a) Wyeth.......................... 43,354 2,079,258(d) Zimmer Holdings, Inc........... 7,600 517,180(a) 43,296,429 See Notes to Schedule of Investments on page 11 and Notes to Financial Statements. 7 S&P 500 INDEX FUND Schedule of Investments June 30, 2008 (unaudited) -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE -------------------------------------------------------------------------------- INDUSTRIALS -- 11.1% Allied Waste Industries, Inc... 9,000 $ 113,580(a) Applied Biosystems Inc......... 5,603 187,588 Avery Dennison Corp............ 3,655 160,564 Boeing Co...................... 24,882 1,635,245(d) Burlington Northern Santa Fe Corp............... 9,674 966,336 Caterpillar, Inc............... 20,232 1,493,526 CH Robinson Worldwide, Inc..... 5,700 312,588 Cintas Corp.................... 4,200 111,342 Cooper Industries Ltd.......... 5,759 227,481 CSX Corp....................... 13,239 831,542 Cummins, Inc................... 6,556 429,549 Danaher Corp................... 8,400 649,320 Deere & Co..................... 14,140 1,019,918 Dover Corp..................... 6,058 293,025 Eaton Corp..................... 5,200 441,844 Emerson Electric Co............ 25,548 1,263,349 Equifax, Inc................... 4,300 144,566 Expeditors International Washington, Inc............. 6,900 296,700 FedEx Corp..................... 10,111 796,646 Fluor Corp..................... 2,852 530,700 General Dynamics Corp.......... 13,164 1,108,409 General Electric Co............ 324,362 8,657,222(f) Goodrich Corp.................. 4,101 194,633 Honeywell International Inc.... 24,343 1,223,966 Illinois Tool Works Inc........ 13,117 623,189 Ingersoll-Rand Company Ltd. (Class A)................... 10,061 376,583 ITT Corp....................... 5,926 375,294 Jacobs Engineering Group, Inc.. 3,800 306,660(a) L-3 Communications Holdings, Inc. ........................ 4,000 363,480 Lockheed Martin Corp........... 11,152 1,100,256 Masco Corp..................... 11,590 182,311 Monster Worldwide, Inc......... 4,400 90,684(a) Norfolk Southern Corp.......... 12,318 771,969 Northrop Grumman Corp.......... 11,022 737,372 PACCAR, Inc.................... 12,022 502,880 Pall Corp...................... 3,878 153,879 Parker Hannifin Corp........... 5,572 397,395 Pitney Bowes, Inc.............. 7,132 243,201 Precision Castparts Corp....... 4,500 433,665 Raytheon Co.................... 13,869 780,547 Robert Half International, Inc. ........................ 5,000 119,850 Rockwell Automation, Inc....... 4,768 208,505 Rockwell Collins, Inc.......... 5,268 252,653 RR Donnelley & Sons Co......... 7,199 213,738 Ryder System, Inc.............. 1,731 119,231 Southwest Airlines Co.......... 23,749 309,687 Terex Corp..................... 3,300 169,521(a) Textron, Inc................... 8,125 389,431 The Manitowoc Company, Inc..... 4,300 139,879 3M Co.......................... 22,980 1,599,178 Tyco International Ltd......... 15,659 626,986 Union Pacific Corp............. 16,908 1,276,554 United Parcel Service Inc. (Class B) ................... 33,596 2,065,146 NUMBER OF SHARES VALUE -------------------------------------------------------------------------------- United Technologies Corp....... 31,872 $ 1,966,502 W.W. Grainger, Inc............. 2,182 178,488 Waste Management, Inc.......... 15,903 599,702 40,764,055 INFORMATION TECHNOLOGY -- 16.2% Adobe Systems Incorporated..... 17,284 680,817(a,d) Advanced Micro Devices, Inc.... 19,574 114,116(a,d) Affiliated Computer Services, Inc. (Class A)................... 3,100 165,819(a) Agilent Technologies, Inc...... 11,785 418,839(a) Akamai Technologies, Inc....... 5,200 180,908(a) Altera Corp.................... 9,900 204,930 Analog Devices, Inc............ 9,800 311,346 Apple Computer, Inc............ 28,535 4,777,900(a) Applied Materials, Inc......... 44,400 847,596(d) Autodesk, Inc.................. 7,348 248,436(a) Automatic Data Processing, Inc. 17,080 715,652 BMC Software, Inc.............. 6,000 216,000(a) Broadcom Corp. (Class A)....... 14,950 407,985(a) CA, Inc........................ 12,300 284,007 Ciena Corp..................... 2,742 63,532(a) Cisco Systems, Inc............. 192,464 4,476,713(a,d) Citrix Systems, Inc............ 5,800 170,578(a) Cognizant Technology Solutions Corp. (Class A)............. 9,500 308,845(a) Computer Sciences Corp......... 4,682 219,305(a) Compuware Corp................. 8,800 83,952(a) Convergys Corp................. 3,600 53,496(a) Corning Incorporated........... 51,239 1,181,059 Dell, Inc...................... 66,728 1,460,009(a,d) eBay, Inc...................... 36,200 989,346(a) Electronic Arts, Inc........... 10,200 453,186(a) Electronic Data Systems Corp... 16,400 404,096 EMC Corp....................... 68,314 1,003,533(a) Fidelity National Information Services, Inc............... 5,800 214,078 Fiserv, Inc.................... 5,350 242,729(a) Google, Inc. (Class A)......... 7,529 3,963,416(a) Hewlett-Packard Co............. 80,149 3,543,387 Intel Corp..................... 186,565 4,007,416 International Business Machines Corp............... 44,730 5,301,847 Intuit Inc..................... 10,800 297,756(a) Jabil Circuit, Inc............. 6,300 103,383 JDS Uniphase Corp.............. 7,250 82,360(a) Juniper Networks, Inc.......... 16,800 372,624(a) Kla-Tencor Corp................ 5,400 219,834 Lexmark International Inc. (Class A).................... 3,300 110,319(a) Linear Technology Corp......... 7,000 227,990 LSI Corp....................... 21,092 129,505(a) MEMC Electronic Materials, Inc. 7,500 461,550(a) Microchip Technology Inc....... 5,900 180,186 Micron Technology, Inc......... 23,954 143,724(a) Microsoft Corp................. 259,954 7,151,335(d) See Notes to Schedule of Investments on page 11 and Notes to Financial Statements. 8 S&P 500 INDEX FUND Schedule of Investments June 30, 2008 (unaudited) -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE -------------------------------------------------------------------------------- Molex, Inc..................... 4,350 $ 106,183 Motorola, Inc.................. 72,950 535,453 National Semiconductor Corp.... 7,366 151,298 NetApp, Inc.................... 11,100 240,426(a) Novell, Inc.................... 12,866 75,781(a) Novellus Systems, Inc.......... 3,600 76,284(a) Nvidia Corp.................... 17,700 331,344(a) Oracle Corp.................... 128,452 2,697,492(a) Paychex, Inc................... 10,425 326,094 QLogic Corp.................... 4,100 59,819(a) QUALCOMM, Inc.................. 52,278 2,319,575 SanDisk Corp................... 7,300 136,510(a) Sun Microsystems, Inc.......... 25,090 272,979(a) Symantec Corp.................. 27,408 530,345(a) Tellabs, Inc................... 12,652 58,832(a) Teradata Corp.................. 5,800 134,212(a) Teradyne, Inc.................. 5,400 59,778(a) Texas Instruments Incorporated. 43,151 1,215,132 Total System Services, Inc..... 5,202 115,588 Tyco Electronics Ltd........... 15,925 570,434 Unisys Corp.................... 10,709 42,301(a) VeriSign, Inc.................. 6,362 240,484(a) Western Union Co............... 24,424 603,761 Xerox Corp..................... 30,290 410,732 Xilinx, Inc.................... 9,600 242,400 Yahoo! Inc..................... 43,689 902,615(a) 59,651,292 MATERIALS -- 3.8% Air Products & Chemicals, Inc.. 7,032 695,184(d) AK Steel Holding Corp.......... 3,600 248,400 Alcoa, Inc..................... 26,340 938,231(d) Allegheny Technologies Incorporated................. 3,251 192,719 Ashland, Inc................... 2,007 96,737 Ball Corp...................... 3,116 148,758 Bemis Company Inc.............. 3,062 68,650 Dow Chemical Co................ 30,394 1,061,055 E.I. du Pont de Nemours and Co. 29,161 1,250,715 Eastman Chemical Co............ 2,559 176,213 Ecolab Inc..................... 5,852 251,577 Freeport-McMoRan Copper & Gold, Inc.................... 12,455 1,459,601 Hercules, Inc.................. 4,228 71,580 International Flavors & Fragrances Inc............... 2,747 107,298 International Paper Co......... 14,075 327,947 MeadWestvaco Corp.............. 5,800 138,272 Monsanto Co.................... 17,805 2,251,264 Newmont Mining Corp............ 14,828 773,428 Nucor Corp..................... 10,036 749,388 Pactiv Corp.................... 4,248 90,185(a) PPG Industries, Inc............ 5,137 294,710 Praxair, Inc................... 10,125 954,180 Rohm & Haas Co................. 4,214 195,698 Sealed Air Corp................ 5,114 97,217 Sigma-Aldrich Corp............. 4,282 230,629 NUMBER OF SHARES VALUE -------------------------------------------------------------------------------- Titanium Metals Corp........... 3,000 $ 41,970 United States Steel Corp....... 3,865 714,175 Vulcan Materials Co............ 3,400 203,252 Weyerhaeuser Co................ 6,894 352,559 14,181,592 TELECOMMUNICATION SERVICES -- 3.3% American Tower Corp. (Class A). 13,000 549,250(a) AT&T, Inc...................... 193,515 6,519,520 CenturyTel, Inc................ 3,484 123,996 Citizens Communications Co..... 10,300 116,802 Embarq Corp.................... 4,870 230,205 Qwest Communications International, Inc.......... 51,548 202,584 Sprint Nextel Corp. (Series 1). 92,300 876,850 Verizon Communications, Inc.... 93,367 3,305,192 Windstream Corp................ 14,943 184,397 12,108,796 UTILITIES -- 3.9% Allegheny Energy, Inc.......... 5,300 265,583 Ameren Corp.................... 6,842 288,938 American Electric Power Company, Inc................ 13,125 528,019(d) Centerpoint Energy, Inc........ 10,618 170,419 CMS Energy Corp................ 7,900 117,710 Consolidated Edison, Inc....... 8,707 340,357 Constellation Energy Group, Inc. 5,803 476,426 Dominion Resources, Inc........ 18,600 883,314 DTE Energy Co.................. 5,266 223,489 Duke Energy Corp............... 41,454 720,471 Dynegy, Inc. (Class A)......... 17,100 146,205(a) Edison International........... 10,742 551,924 Entergy Corp................... 6,147 740,591 Exelon Corp.................... 21,552 1,938,818 FirstEnergy Corp............... 9,920 816,714 FPL Group, Inc................. 13,362 876,280 Integrys Energy Group, Inc..... 2,631 133,734 Nicor Inc...................... 1,543 65,716 NiSource, Inc.................. 8,715 156,173 Pepco Holdings, Inc............ 6,700 171,855 PG&E Corp...................... 11,554 458,578 Pinnacle West Capital Corp..... 3,500 107,695 PPL Corp....................... 11,944 624,313 Progress Energy, Inc........... 8,456 353,714 Public Service Enterprise Group, Inc.................. 16,618 763,265 Questar Corp................... 5,600 397,824 Sempra Energy.................. 8,375 472,769 Southern Co.................... 24,658 861,057 TECO Energy, Inc............... 6,700 143,983 The AES Corp................... 21,600 414,936(a) Xcel Energy, Inc............... 13,780 276,565 14,487,435 TOTAL COMMON STOCK (COST $346,871,485)........... 363,916,591 See Notes to Schedule of Investments on page 11 and Notes to Financial Statements. 9 S&P 500 INDEX FUND Schedule of Investments June 30, 2008 (unaudited) -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE -------------------------------------------------------------------------------- OTHER INVESTMENTS -- 0.0%* -------------------------------------------------------------------------------- GEI Investment Fund (COST $170,628)............. $ 129,677(e) TOTAL INVESTMENTS IN SECURITIES (COST $347,042,113).......... 364,046,268 -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 1.6% -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 1.5% GE Money Market Fund Institutional Class 1.93%...................... 5,367,815(b,g) Money Market Obligation Trust 2.55% 12/31/30........... 456 456(h) 2.64% 12/31/30........... 9 9(h) 465 PRINCIPAL AMOUNT ------------------------------------------- U.S. GOVERNMENT-- 0.1% U. S. Treasury Bill 1.90% 09/11/08........... $456,000 454,468 TOTAL SHORT-TERM INVESTMENTS (COST $5,822,547)............ 5,822,748 TOTAL INVESTMENTS (COST $352,864,660).......... 369,869,016 LIABILITIES IN EXCESS OF OTHER ASSETS, NET-- (0.4)%............... (1,648,878) ------------ NET ASSETS-- 100.0% .......... $368,220,138 ============ -------------------------------------------------------------------------------- OTHER INFORMATION -------------------------------------------------------------------------------- The GEI S&P 500 Fund Index had the following long futures contracts open at June 30, 2008 (unaudited): NUMBER CURRENT EXPIRATION OF NOTIONAL UNREALIZED DESCRIPTION DATE CONTRACTS VALUE DEPRECIATION -------------------------------------------------------------------------------- S&P Mini 500 Index Futures September 2008 123 $7,878,765 $(349,997) * Less than 0.1% See Notes to Schedule of Investments on page 11 and Notes to Financial Statements. 10 Notes to Schedule of Investments June 30, 2008 (unaudited) -------------------------------------------------------------------------------- The views expressed in this document reflect our judgment as of the publication date and are subject to change at any time without notice. The securities cited may not represent current or future holdings and should not be considered as a recommendation to purchase or sell a particular security. See the prospectus for complete descriptions of investment objectives, policies, risks and permissible investments. (a) Non-income producing security. (b) Coupon amount represents effective yield. (c) State Street Corp. is the parent company of State Street Bank & Trust Co., the Fund's custodian and accounting agent. (d) At June 30, 2008, all or a portion of this security was pledged to cover collateral requirements for futures, options, forward foreign currency contracts and/or TBA's. (e) GE Asset Management ("GEAM"), is the investment adviser of the Fund, also serves as investment adviser of the GEI Invetment Fund. (f) General Electric Co. is the parent company of GE Asset Management Incorporated, the Fund's investment Advisor. (g) GEAM, the investment adviser of the Fund, also serves as investment adviser of the GE Money Market Fund. (h) Managed by SSgA Funds Management, Inc., the Fund's sub-adviser. * Less than 0.1%. + Percentages are based on net assets as of June 30, 2008. Abbreviations: REIT Real Estate Investment Trust 11
Financial Highlights Selected data based on a share outstanding throughout the periods indicated ------------------------------------------------------------------------------------------------------------------------------------ S&P 500 INDEX FUND 6/30/08+ 12/31/07 12/31/06 12/31/05 12/31/04 12/31/03 ------------------------------------------------------------------------------------------------------------------------------------ INCEPTION DATE -- -- -- -- -- 4/15/85 Net asset value, beginning of period......... $26.52 $26.06 $22.94 $22.30 $20.51 $16.18 INCOME/(LOSS) FROM INVESTMENT OPERATIONS: Net investment income .................... 0.21 0.47 0.42 0.36 0.36 0.24 Net realized and unrealized gains/(losses) on investments.......... (3.43) 0.86 3.12 0.65 1.79 4.33 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INCOME/(LOSS) FROM INVESTMENT OPERATIONS ................................ (3.22) 1.33 3.54 1.01 2.15 4.57 ------------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS FROM: Net investment income..................... -- 0.47 0.42 0.37 0.36 0.24 Net realized gains........................ -- 0.40 -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------------ TOTAL DISTRIBUTIONS.......................... -- 0.87 0.42 0.37 0.36 0.24 ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, END OF PERIOD............... $23.30 $26.52 $26.06 $22.94 $22.30 $20.51 ==================================================================================================================================== TOTAL RETURN (a)............................. (12.14)% 5.10% 15.43% 4.51% 10.46% 28.27% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands).. $368,220 $447,426 $497,105 $531,015 $601,008 $597,185 Ratios to average net assets: Net investment income*................. 1.72% 1.62% 1.58% 1.47% 1.62% 1.41% Expenses*.............................. 0.40% 0.39% 0.40% 0.40% 0.40% 0.37% Portfolio turnover rate................... 6% 6% 4% 4% 5% 5%
NOTES TO FINANCIAL HIGHLIGHTS (a) Total returns are historical and assume changes in share price and reinvestment of dividends and capital gains and do not include the effect of insurance contract charges. * Annualized for periods less than one year. + Unaudited See Notes to Financial Statements. 12
Statement of Assets and Liabilities JUNE 30, 2008 (UNAUDITED) ------------------------------------------------------------------------------------------------------------------------------------ S&P 500 INDEX FUND ------------------------------------------------------------------------------------------------------------------------------------ ASSETS Investments in securities, at market (cost $334,028,365)............................................... $355,259,369 Investments in affiliated securities, at market (cost $13,013,748)..................................... 8,786,899 Short-term Investments (at amortized cost)............................................................. 454,933 Short-term affiliated investments (at amortized cost).................................................. 5,367,815 Income receivables..................................................................................... 497,685 Variation margin receivable............................................................................ 6,578 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL ASSETS....................................................................................... 370,373,279 ------------------------------------------------------------------------------------------------------------------------------------ LIABILITIES Payable for investments purchased...................................................................... 248,354 Payable for fund shares redeemed....................................................................... 1,617,798 Payable to GEAM........................................................................................ 214,486 Accrued other expenses................................................................................. 70,731 Other liabilities...................................................................................... 1,772 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL LIABILITIES.................................................................................. 2,153,141 ------------------------------------------------------------------------------------------------------------------------------------ NET ASSETS................................................................................................ $368,220,138 ==================================================================================================================================== NET ASSETS CONSIST OF: Capital paid in........................................................................................ 355,536,791 Undistributed (distribution in excess of) net investment income........................................ 3,446,845 Accumulated net realized gain (loss)................................................................... (7,417,677) Net unrealized appreciation/(depreciation) on: Investments......................................................................................... 17,004,155 Futures............................................................................................. (349,997) Foreign currency related transactions............................................................... 21 ------------------------------------------------------------------------------------------------------------------------------------ NET ASSETS................................................................................................ $368,220,138 ==================================================================================================================================== NET ASSETS................................................................................................ 368,220,138 Shares outstanding ($0.01 par value; unlimited shares authorized)......................................... 15,800,803 Net asset value per share................................................................................. $23.30
See Notes to Financial Statements. 13
Statement of Operations FOR THE SIX MONTHS ENDED JUNE 30, 2008 (UNAUDITED) ------------------------------------------------------------------------------------------------------------------------------------ S&P 500 INDEX FUND ------------------------------------------------------------------------------------------------------------------------------------ INVESTMENT INCOME INCOME: Dividend ............................................................................... $ 3,898,645 Dividend from affiliated investments ................................................... 204,565 Interest ............................................................................... 39,378 Interest from affiliated investments ................................................... 82,879 Less: Foreign taxes withheld ........................................................... (224) ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INCOME ............................................................................. 4,225,243 ------------------------------------------------------------------------------------------------------------------------------------ EXPENSES: Advisory and administrative fees ....................................................... 702,252 Transfer agent ......................................................................... 23 Trustee's fees ......................................................................... 5,449 Custody and accounting expenses ........................................................ 27,560 Professional fees ...................................................................... 19,287 Registration expenses .................................................................. 30,089 Other expenses ......................................................................... 13,203 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL EXPENSES BEFORE WAIVER AND REIMBURSEMENT ........................................... 797,863 ------------------------------------------------------------------------------------------------------------------------------------ Less: Expenses reimbursed by the adviser (waiver related to Fund of Fund Investment) ... (4,772) ------------------------------------------------------------------------------------------------------------------------------------ Net expenses ........................................................................... 793,091 ------------------------------------------------------------------------------------------------------------------------------------ NET INVESTMENT INCOME (LOSS) ............................................................. 3,432,152 ==================================================================================================================================== NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS REALIZED GAIN (LOSS) ON: Investments ......................................................................... 132,312 Futures ............................................................................. (973,424) INCREASE (DECREASE) IN UNREALIZED APPRECIATION/ (DEPRECIATION) ON: Investments ......................................................................... (55,257,726) Futures ............................................................................. (341,950) Foreign currency transactions ....................................................... 21 ------------------------------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments ................................. (56,440,767) ------------------------------------------------------------------------------------------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .......................... $(53,008,615) ====================================================================================================================================
See Notes to Financial Statements. 14
Statements of Changes in Net Assets ------------------------------------------------------------------------------------------------------------------------------------ S&P 500 INDEX FUND ------------------------------------------------------------------------------------------------------------------------------------ SIX MONTHS ENDED YEAR ENDED JUNE 30, 2008 DECEMBER 31, (UNAUDITED) 2007 ------------------------------------------------------------------------------------------------------------------------------------ INCREASE (DECREASE) IN NET ASSETS OPERATIONS: Net investments income (loss)..................................................... $ 3,432,152 $ 7,754,470 Net realized gain (loss) on investments, futures, written options, and foreign currency transactions............................................... (841,112) 9,156,721 Net increase (decrease) in unrealized appreciation/(depreciation) on investments, futures, written options, and foreign currency translation............................................................ (55,599,655) 8,030,021 ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) from operations........................................... (53,008,615) 24,941,212 ------------------------------------------------------------------------------------------------------------------------------------ DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income............................................................. -- (7,752,640) Net realized gains................................................................ -- (6,536,642) ------------------------------------------------------------------------------------------------------------------------------------ TOTAL DISTRIBUTIONS................................................................. -- (14,289,282) ------------------------------------------------------------------------------------------------------------------------------------ Increase (decrease) in net assets from operations and distributions................. (53,008,615) 10,651,930 ------------------------------------------------------------------------------------------------------------------------------------ SHARE TRANSACTIONS: Proceeds from sale of shares...................................................... 3,706,201 19,505,679 Value of distributions reinvested................................................. -- 14,289,211 Cost of shares redeemed........................................................... (29,903,177) (94,126,068) ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) from share transactions................................... (26,196,976) (60,331,178) ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INCREASE (DECREASE) IN NET ASSETS............................................. (79,205,591) (49,679,248) NET ASSETS Beginning of period................................................................. 447,425,729 497,104,977 ------------------------------------------------------------------------------------------------------------------------------------ End of period ...................................................................... $368,220,138 $447,425,729 ==================================================================================================================================== UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD................................................ $ 3,446,845 $ 14,693 ------------------------------------------------------------------------------------------------------------------------------------ CHANGES IN FUND SHARES Shares sold....................................................................... 150,806 718,872 Issued for distributions reinvested............................................... -- 535,778 Shares redeemed................................................................... (1,221,291) (3,460,599) ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in fund shares................................................. (1,070,485) (2,205,949) ====================================================================================================================================
See Notes to Financial Statements. 15 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- 1. ORGANIZATION OF THE COMPANY GE Investments Funds, Inc. (the "Company") was incorporated under the laws of the Commonwealth of Virginia on May 14, 1984 and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company. The Company is composed of thirteen investment portfolios (collectively the "Funds"), although only the following eleven are currently being offered: U.S. Equity Fund, S&P 500 Index Fund (the "Fund"), Premier Growth Equity Fund, Core Value Equity Fund, Mid-Cap Equity Fund, Small-Cap Equity Fund, International Equity Fund, Total Return Fund, Income Fund, Money Market Fund and Real Estate Securities Fund. Shares of the Funds of the Company are offered only to insurance company separate accounts that fund certain variable life insurance contracts and variable annuity contracts. These insurance companies may include insurance companies affiliated with GE Asset Management Incorporated ("GEAM"), the investment adviser and administrator of each of the Funds. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results may differ from those estimates. The following summarizes the significant accounting policies of the Fund: SECURITY VALUATION AND TRANSACTIONS The Fund's portfolio securities are valued generally on the basis of market quotations. Equity securities generally are valued at the last reported sales price on the primary market in which they are traded. Portfolio securities listed on NASDAQ are valued using the NASDAQ Official Closing Price, which may not necessarily represent the last sale price. If no sales occurred on the exchange or NASDAQ that day, the portfolio security generally is valued using the last reported bid price. Debt securities (other than short-term securities described below) generally are valued at an evaluated bid as reported by an independent pricing service. Values obtained from pricing services are based on various factors such as market transactions, dealer supplied valuations, security characteristics and other market data. In the absence of a reliable price from such a pricing service, debt securities may be valued based on dealer supplied valuations or quotations. The Fund's written or purchased options are valued at the last sales price, or if no sales occurred that day, at the last reported bid price. Short-term investments with remaining maturities of sixty days or less at the time of purchase are valued on the basis of amortized cost, which approximates market value. All assets and liabilities of the Fund initially expressed in foreign currency values will be converted into U.S. dollars at the WM/Reuters exchange rate computed at 11:00 a.m., Eastern time. If prices are not readily available for a portfolio security, or if it is believed that a price for a portfolio security does not represent its fair value, the security may be valued using procedures approved by the Fund's Board of Directors that are designed to establish its "fair" value. Those procedures require that the fair value of a security be established by the fair valuation committee. The fair valuation committee follows different protocols for different types of investments and circumstances. The fair value procedures may be used to value any investment by the Fund in the appropriate circumstances. Examples of the types of securities that may be fair valued include: thinly traded or illiquid investments, high-yield securities or foreign securities. Foreign securities may be valued with the assistance of an independent fair value pricing service in circumstances where it is believed that they have been or would be materially affected by events occurring after the close of the portfolio security's primary market and before the close of regular trading on the NYSE. This independent fair value pricing service uses a computerized system to appraise affected securities and portfolios taking into consideration various factors and the fair value of such securities may be something other than the last available quotation or other market price. GEAM may also separately monitor portfolio securities and, consistent with the Fund's fair value procedures, apply a different value to a portfolio security than would be applied had it been priced using market quotations or by an independent fair value pricing service. 16 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- Determining the fair value of securities involves the application of both subjective and objective considerations. Security values may differ depending on the methodology used to determine their values, and may differ from the last quoted sale or closing price. No assurance can be given that use of these fair value procedures will always better represent the price at which the Fund could sell the affected portfolio security. Security transactions are accounted for as of the trade date. Realized gains and losses on investments sold are recorded on the basis of identified cost for both financial statement and federal tax purposes. The Fund adopted FASB Statement No. 157, FAIR VALUE MEASUREMENTS (FAS 157). FAS 157 establishes a single definition of fair value, a framework for measuring fair value, and expanded disclosures about fair value measurements. Various inputs are used in determining the value of the Fund's investments. These inputs are classified into three broad levels: Level 1 includes quoted prices in active markets of securities identical to those of the Fund. Level 2 includes: 1) quoted prices in active markets for similar securities to those of the Fund; 2) quoted prices for identical or similar securities to those of the Fund that trade in markets in which there are few transactions or the quoted prices are not current; 3) prices based on observable market data such as interest rates and yield curves, volatilities, bond prepayment speeds, and credit risk and; 4) prices based principally on observable market data by use of correlation techniques or other means. Level 3 includes unobservable market inputs used to fair value securities. These inputs are based on assumptions that market participants would use to price securities and may include the adviser's own assumptions. Other financial instruments are derivative instruments that are not reflected in TOTAL INVESTMENTS, such as futures, forwards, swaps, and written options contracts, which are valued based on the unrealized appreciation/depreciation of the instrument.
Level 1 Level 2 Level 3 Total ----------------------------------------------------------------------------------------------------------------------------- Investments in Securities $369,739,339 $129,677 $-- $369,869,016 Other Financial Instruments $ (349,997) $ -- $-- $ (349,997)
REPURCHASE AGREEMENTS The Fund may enter into repurchase agreement transactions with respect to instruments that are consistent with the Fund's investment objectives or policies. The Fund's custodian or a third party custodian takes possession of the collateral pledged for investments in repurchase agreements on behalf of the Fund. The Fund values the underlying collateral daily on a mark-to-market basis to determine that the value, including accrued interest, is at least equal to 102% of the repurchase price. In the event the seller defaults and the value of the security declines, or if the seller enters an insolvency proceeding, realization of the collateral by the Fund may be delayed or limited. SECURITY LENDING The Fund may loan securities to brokers, dealers, and financial institutions determined by GEAM to be creditworthy, subject to certain limitations. The Fund continues to receive the interest and dividends on the loaned securities during the term of the loan. The loans of securities are secured by collateral in the form of cash or other liquid assets, which are segregated and maintained with the custodian in an amount at least equal to 102% of the current market value of the loaned securities. During the term of the loan, the Fund will record any gain or loss in the market value of its loaned securities and of securities in which cash collateral is invested. The Fund will also earn interest, net of any rebate, from securities in which cash collateral is invested. In the event the counterparty (borrower) does not meet its contracted obligation to return the securities, the Fund may be exposed to the risk of loss of reacquiring the loaned securities at prevailing market prices using the proceeds of the sale of the collateral. FOREIGN CURRENCY Accounting records of the Fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange on a daily basis (on days the New York Stock Exchange is open). Purchases and sales of securities, income receipts and expense payments denominated in foreign currencies are translated into U.S. dollars at the prevailing exchange rate on the respective dates of such transactions. 17 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- The Fund does not isolate the portion of the results of operations resulting from changes in foreign exchange rates from the fluctuations arising from changes in the market prices of securities during the period. Such fluctuations are included in the net realized or unrealized gain or loss from investments. Net realized gains or losses on foreign currency transactions represent net gains or losses on sales and maturities of foreign currency contracts, disposition of foreign currencies, the difference between the amount of net investment income and withholding taxes accrued and the U.S. dollar amount actually received or paid, and gains or losses between the trade and settlement date on purchases and sales of securities. Net unrealized foreign exchange gains and losses arising from changes in the value of other assets and liabilities as a result of changes in foreign exchange rates are included as increases or decreases in unrealized appreciation/depreciation on foreign currency related transactions. FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or bond index futures contracts subject to certain limitations. The Fund may invest in futures contracts to manage its exposure to the stock and bond markets and fluctuations in currency values. Buying futures tends to increase the Fund's exposure to the underlying instrument while selling futures tends to decrease the Fund's exposure to the underlying instrument, or hedge other Fund investments. The Fund will not enter into a transaction involving futures for speculative purposes. The Fund's risks in using these contracts include changes in the value of the underlying instruments, non-performance of the counterparties under the contracts' terms and changes in the liquidity of the secondary market for the contracts. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they principally trade. Upon entering into a futures contract, the Fund is required to pledge to the broker an amount of cash and/or other assets equal to a certain percentage of the contract amount, known as initial margin deposit. Subsequent payments, known as variation margin, are made or received by the Fund each day, depending on the daily fluctuation in the fair value of the underlying security. The Fund records an unrealized gain or loss equal to the daily variation margin. Should market conditions move unexpectedly, the Fund may not achieve the anticipated benefits of the futures contracts and may incur a loss. The Fund recognizes a realized gain or loss on the expiration or closing of a futures contract. OPTIONS The Fund may purchase and write options, subject to certain limitations. The Fund may invest in options contracts to manage its exposure to the stock and bond markets and fluctuations in foreign currency values. Writing puts and buying calls tend to increase the Fund's exposure to the underlying instrument while buying puts and writing calls tend to decrease the Fund's exposure to the underlying instrument, or hedge other Fund investments. The Fund will not enter into a transaction involving options for speculative purposes. The Fund's risks in using these contracts include changes in the value of the underlying instruments, non-performance of the counterparties under the contracts' terms and changes in the liquidity of the secondary market for the contracts. Options are valued at the last sale price, or if no sales occurred on that day, at the last quoted bid price. When the Fund writes an option, the amount of the premium received is recorded as a liability and is subsequently adjusted to the current fair value of the option written. Premiums received from writing options that expire unexercised are treated by the Fund on the expiration date as realized gains from investments. The difference between the premium and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium is less than the amount paid for the closing purchase, as a realized loss. When an option is exercised, the proceeds from the sale of the underlying security or the cost basis of the securities purchased is adjusted by the original premium received or paid. INVESTMENTS IN FOREIGN MARKETS Investments in foreign markets may involve special risks and considerations not typically associated with investing in the United States. These risks include revaluation of currencies, high rates of inflation, repatriation on income and capital, and adverse political and economic developments. Moreover, securities issued in these markets may be less liquid, subject to government ownership controls, tariffs and taxes, subject to delays in settlements, and their prices may be more volatile. The Fund may be subject to capital gains and repatriation taxes imposed by certain countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued based upon net investment income, net realized gains and net unrealized appreciation as income and/or capital gains are earned. 18 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- INCOME TAXES The Fund intends to comply with all sections of the Internal Revenue Code applicable to regulated investment companies including the distribution of substantially all of its taxable net investment income and net realized capital gains to its shareholders. Therefore, no provision for federal income tax has been made. The Fund is treated as a separate taxpayer for federal income tax purposes. At June 30, 2008, information on the tax cost of investments is as follows:
Net Tax Cost of Gross Tax Gross Tax Appreciation Investments for Unrealized Unrealized (Depreciation) Tax Purposes Appreciation Depreciation on Investments ------------------------------------------------------------------------------------------------------------------------------- $347,584,053 $97,551,182 $(88,279,967) $9,271,215
As of December 31, 2007, the Fund has no capital loss carryovers. During the year ended December 31, 2007, the Fund utilized approximately $3,373,386 of capital loss carryovers. Any net capital and currency losses incurred after October 31, within the Fund's tax year, are deemed to arise on the first day of the Fund's next tax year if the Fund so elects to defer such losses. The Fund incurred no such losses after October 31, 2007. The tax composition of distributions paid during the years ended December 31, 2007 and December 31, 2006 were as follows: Ordinary Long-Term Income Capital Gains Total ---------------------------------------------------------------- 2007 $7,666,833 $6,622,449 $14,289,282 2006 7,912,831 -- 7,912,831 DISTRIBUTIONS TO SHAREHOLDERS The Fund declares and pays dividends from net investment income annually. The Fund declares and pays net realized capital gains in excess of capital loss carryforwards distributions annually. The character of income and gains to be distributed is determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences include (but are not limited to) futures, distributions from Real Estate Investment Trusts (REITS), and losses deferred due to wash sale transactions. Reclassifications due to permanent book/tax differences are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. These reclassifications have no impact on net investment income, realized gains or losses, or the net asset value of the Fund. The calculation of net investment income per share in the Financial Highlights table excludes these adjustments. The reclassifications for the year ended December 31, 2007 were as follows: Undistributed (Distribution in Excess of) Net Investment Accumulated Income Net Realized Gain ---------------------------------------------------------------- $4,250 $(4,250) On June 29, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in Income Taxes." FIN48 provides guidance for how certain uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN48 requires evaluation of tax positions taken or expected to be taken in the course of preparing the Fund's tax returns to determine whether the tax positions are "more likely than not" of being sustained by the applicable tax authority. The adoption of FIN48 did not have an impact on the Fund's net assets and financial statements. The Funds' 2004, 2005, 2006 and 2007 calendar years tax returns are still open to examination by the Federal and applicable state tax authorities. INVESTMENT INCOME Corporate actions (including cash dividends) are recorded on the ex-dividend date, net of applicable withholding taxes, except for certain foreign corporate actions, which are recorded as soon after ex-dividend date as such information becomes available. Interest income is recorded on the accrual basis. All discounts and premiums on bonds are accreted and amortized, respectively, to call or maturity date, whichever is shorter, using the effective yield method. 19 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- EXPENSES Expenses of the Company which are directly identifiable to the Fund are allocated to the portfolio. Expenses which are not directly identifiable to the Fund are allocated in such a manner as deemed equitable, taking into consideration the nature and type of expenses and relative size of the Fund. All expenses of the Fund are paid by GEAM and reimbursed by the Fund. 3. AMOUNTS PAID TO AFFILIATES GEAM, a registered investment adviser, was retained by the Company's Board of Directors effective May 1, 1997 to act as investment adviser and administrator of the Fund. GEAM's compensation for investment advisory and administrative services is paid monthly based on the average daily net assets of the Fund at an annualized rate of 0.35%. GENPACT performs certain accounting and certain administration services not provided by GEAM. For the period ending June 30, 2008, $3,276 was charged to the Fund. DIRECTORS' COMPENSATION The Fund pays no compensation to its directors who are officers or employees of GEAM or its affiliates. Directors who are not such officers or employees also serve in a similar capacity for other funds advised by GEAM. Compensation paid to unaffiliated directors are reflected on the Statement of Operations. These fees are allocated pro rata across all of the mutual fund platforms and share classes served by the directors, including the Fund, and are based upon the relative net assets of each fund within such platforms. (For additional information about directors compensation please refer to the Statement of Additional Information). 4. SUB-ADVISORY FEES Pursuant to an investment sub-advisory agreement with GEAM, SSgA Funds Management, Inc. ("SSgA") is the Sub-Adviser to the S&P 500 Index Fund. SSgA is responsible for the day-to-day portfolio management of the assets of the Fund, including the responsibility for making decisions to buy, sell or hold a particular security, under the general supervision of GEAM and the Board. For its services, GEAM pays SSgA monthly sub-advisory fees which are calculated as a percentage of the average daily net assets of the Fund. 5. INVESTMENT TRANSACTIONS PURCHASES AND SALES OF SECURITIES The cost of purchases and the proceeds from sales of investments, other than short-term securities and options, for the period ended June 30, 2008 were as follows: Purchases Sales ------------------------------------------------------------------ $4,830,540 $24,554,012 20 Additional Information (unaudited) -------------------------------------------------------------------------------- INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS: The business and affairs of the Company are managed under the direction of the Company's Board of Directors. Information pertaining to the Directors and officers of the Company is set forth below. INTERESTED DIRECTORS AND EXECUTIVE OFFICERS -------------------------------------------------------------------------------- MICHAEL J. COSGROVE -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 59 POSITION(S) HELD WITH FUND Chairman of the Board and President TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 10 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President - GEAM since February 1997; President and Chief Executive Officer - Mutual Funds at GEAM since March 2007; Vice President, GE Capital Corporation, an indirect wholly-owned subsidiary of GE, since December 1999; Executive Vice President - Sales and Marketing of GEAM, a wholly-owned subsidiary of GE that is registered as an investment adviser under the Investment Advisers Act of 1940, as amended, since March 1993; Director of GEAM since 1988. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48 OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception; Trustee of Elfun Funds, GE Savings & Security Funds and General Electric Pension Trust since 1988; Trustee of Fordham University since 2003; Trustee of Elfun Foundation; Treasurer of GE Foundation; Director, GE Asset Management (Ireland) since February 1999; Director, GE Asset Management Funds Plc, GE Asset Canada Company, GE Asset Management Limited, and GE Volunteers. -------------------------------------------------------------------------------- MATTHEW J. SIMPSON -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 47 POSITION(S) HELD WITH FUND Executive Vice President TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - less than one year PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General Counsel and Secretary of GEAM since July 2007; Senior Vice President and General Counsel - Marketing and Client Services (formerly Asset Management Services), at GEAM and Senior Vice President and General Counsel of GEAMS from February 1997 to June 2007; Vice President and Associate General Counsel of GEAM from October 1992 to February 1997; Secretary of Fund from 1997 to June 2007; Vice President of Fund from September 2003 to June 2007; Vice President of GE Institutional Funds and GE LifeStyle Funds from September 2003 to June 2007; Secretary of GE Institutional Funds and GE LifeStyle Funds from 1997 to June 2007; Vice President of Elfun Funds and GE Savings & Security Funds from October 2003 to June 2007; Assistant Secretary of Elfun Funds and GE Savings & Security Funds from 1998 to June 2007. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional Funds, GE LifeStyle Funds, Elfun Funds and GE Savings & Security Funds since July 2007. 21 Additional Information (unaudited) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SCOTT H. RHODES -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 49 POSITION(S) HELD WITH FUND Treasurer TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 2 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds Operations Manager since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle Funds and GE Investments Funds since November 2005 and Elfun Funds and GE Savings & Security Funds since September 2005; from August 2004 to September 2005 Vice President, U.S. Trust Company, N.A. and Assistant Treasurer of Excelsior Funds, Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds, Inc.; from January 2004 to August 2004, Vice President BlackRock Financial Management, Inc.; from December 1996 to November 2003, Controller - Mutual Funds, American Skandia Investment Services, Inc. and Assistant Treasurer of American Skandia Trust and American Skandia Advisor Funds, Inc. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A -------------------------------------------------------------------------------- JEANNE M. LAPORTA -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 42 POSITION(S) HELD WITH FUND Vice President and Secretary TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 2 years (Vice President); less than one year (Secretary) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Senior Vice President and Deputy General Counsel at GE Asset Management since October 2007; Vice President and Associate General Counsel - Marketing and Client Services (formerly Asset Management Services) at GEAM from May 1997 to October 2007; Vice President and Assistant Secretary of GE Funds, GE Institutional Funds and GE LifeStyle Funds since September 2003; Vice President and Assistant Secretary of Elfun Funds and GE Savings & Security Funds since October 2003; Assistant Secretary from September 2003 to June 2007 and Secretary since July 2007. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A 22 Additional Information (unaudited) -------------------------------------------------------------------------------- NON-INTERESTED DIRECTORS -------------------------------------------------------------------------------- JOHN R. COSTANTINO -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 62 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC since 2006; Managing Director, Walden Partners, Ltd., consultants and investors, since August 1992. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE Institutional Funds and GE LifeStyle Funds since their inception; Trustee of Fordham University since 2002 and Marymount College from 2001 through 2002; Neuroscience Research Institute since 1986; Diocesan Finance Counsel of the Dioceses of Brooklyn & Queens since 2001; Gregorian University Foundation since 1994. -------------------------------------------------------------------------------- WILLIAM J. LUCAS -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 60 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Treasurer of Fairfield University since 1983. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception. -------------------------------------------------------------------------------- ROBERT P. QUINN -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 72 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon Brothers Inc. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception. -------------------------------------------------------------------------------- The Statement of Additional Information for the Fund includes additional information about the Directors and Officers and is available, without charge, upon request by calling 1-800-242-0134. 23 Investment Team -------------------------------------------------------------------------------- INVESTMENT ADVISER AND ADMINISTRATOR GE Asset Management Incorporated BOARD OF DIRECTORS Michael J. Cosgrove, CHAIRMAN John R. Costantino William J. Lucas Robert P. Quinn Matthew J. Simpson SECRETARY Jeanne M. LaPorta ASSISTANT SECRETARIES Joseph A. Carucci Joon Won Choe TREASURER Scott H. Rhodes ASSISTANT TREASURERS Scott R. Fuchs Christopher M. Isaacs DISTRIBUTOR GE Investment Distributors, Inc. Member FINRA and SIPC COUNSEL Sutherland, Asbill & Brennan, LLP CUSTODIAN State Street Bank & Trust Company INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM KPMG LLP OFFICERS OF THE INVESTMENT ADVISER James W. Ireland, CHIEF EXECUTIVE OFFICER Daniel O. Colao, EVP, CHIEF FINANCIAL OFFICER (AS OF JULY 28, 2008) Michael J. Cosgrove, EVP, PRESIDENT AND CHIEF EXECUTIVE OFFICER - MUTUAL FUNDS Paul M. Colonna, EVP, PRESIDENT - FIXED INCOME Kathryn D. Karlic, EVP, PRESIDENT - INSTITUTIONAL SALES AND MARKETING Ralph R. Layman, EVP, PRESIDENT - INTERNATIONAL EQUITIES Matthew J. Simpson, EVP, GENERAL COUNSEL AND SECRETARY Judith A. Studer, EVP, PRESIDENT - U.S. EQUITIES Don W. Torey, EVP, PRESIDENT - ALTERNATIVE INVESTMENTS AND REAL ESTATE John J. Walker, EVP, CHIEF OPERATING OFFICER (AS OF JANUARY 31, 2008) David Wiederecht, EVP, PRESIDENT - INVESTMENT STRATEGIES 24 [This page intentionally left blank.] INVESTMENT ADVISER GE ASSET MANAGEMENT INCORPORATED 3001 SUMMER STREET PO BOX 7900 STAMFORD, CT 06904-7900 DISTRIBUTOR GE INVESTMENT DISTRIBUTORS, INC. MEMBER FINRA AND SIPC 3001 SUMMER STREET PO BOX 7900 STAMFORD, CT 06904-7900 The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities is available without charge (i) upon request, by calling 1-800-242-0134; (ii) on the Fund's website at HTTP://WWW.GEFUNDS.COM; and (iii) on the Commission's website at HTTP://WWW.SEC.GOV. The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC - information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Information (if any) regarding how the Fund voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through the Fund's website at HTTP://WWW.GEFUNDS.COM; and (ii) on the Commission's website at HTTP://WWW.SEC.GOV. [GE logo omitted] GE Investments Funds, Inc. Premier Growth Equity Fund Semi-Annual Report JUNE 30, 2008 [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, 2008 (unaudited) -------------------------------------------------------------------------------- Total returns take into account changes in share price and assume reinvestment of all dividends and capital gains distributions, if any. The performance data quoted represent past performance; past performance does not guarantee future results. Investment return and principal value will fluctuate so your shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data quoted. Periods less than one year are not annualized. Please call 800-242-0134 for the most recent month-end performance data. Total returns shown are net of Fund expenses but do not reflect fees and charges associated with the variable contracts such as administrative fees, account charges and surrender charges, which, if reflected, would reduce the Fund's total returns for all periods shown. Shares of the Fund are neither insured nor guaranteed by the U.S. Government, and their prices will fluctuate with market conditions. The Standard & Poor's ("S&P") 500(R) Composite Price Index of stocks (S&P 500 Index) is an unmanaged index and does not reflect the actual cost of investing in the instruments that comprise the index. The S&P 500 Index is a market capitalization-weighted index of stocks of 500 large U.S. companies, which is widely used as a measure of large-cap stock market performance. The results shown for the foregoing index assume the reinvestment of net dividends or interest. The peer universe of the underlying annuity funds used in our peer ranking calculation is based on the blend of Lipper peer categories, as shown. Lipper is an independent mutual fund rating service. A Fund's performance may be compared to or ranked within a universe of mutual funds with investment objectives and policies similar but not necessarily identical to the Fund's. Such comparisons or rankings are made on the basis of several factors, including the Fund's objectives and policies, management style and strategy, and portfolio composition, and may change over time if any of those factors change. -------------------- GE INVESTMENT DISTRIBUTORS, INC., MEMBER OF FINRA & SIPC, IS THE PRINCIPAL UNDERWRITER AND DISTRIBUTOR OF THE GE INVESTMENT FUNDS, INC. AND A WHOLLY OWNED SUBSIDIARY OF GE ASSET MANAGEMENT INCORPORATED, THE INVESTMENT ADVISER OF THE FUNDS. 1 Premier Growth Equity Fund -------------------------------------------------------------------------------- DAVID B. CARLSON IS AN EXECUTIVE VICE PRESIDENT AND CHIEF INVESTMENT OFFICER - U.S. EQUITIES AT GE ASSET MANAGEMENT. HE MANAGES THE OVERALL U.S. EQUITY INVESTMENTS FOR GE ASSET MANAGEMENT. MR. CARLSON IS PORTFOLIO MANAGER FOR THE PREMIER GROWTH EQUITY FUND AND HAS SERVED IN THAT CAPACITY SINCE THE FUND'S COMMENCEMENT. MR. CARLSON JOINED GE ASSET MANAGEMENT IN 1982 AS A SECURITIES ANALYST FOR INVESTMENT OPERATIONS. HE BECAME A VICE PRESIDENT FOR MUTUAL FUND PORTFOLIOS IN 1987, A SENIOR VICE PRESIDENT IN 1989 AND A DIRECTOR AND EXECUTIVE VICE PRESIDENT IN 2003. Q. HOW DID THE PREMIER GROWTH EQUITY FUND PERFORM COMPARED TO ITS BENCHMARK AND LIPPER PEER GROUP FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2008? A. For the six-month period ended June 30, 2008, the Premier Growth Equity Fund returned -6.93% for the Class 1 shares and -6.48% for the Class 4 shares. The S&P 500 Index, the Fund's benchmark, returned -11.91% and the Fund's Lipper peer group of 207 Large-Cap Growth funds returned an average of -10.06% for the same period. Q. WHAT MARKET CONDITIONS IMPACTED FUND PERFORMANCE? A. The six-month period proved challenging for U.S. equity investors, as the housing recession, skyrocketing commodity prices and tight credit conditions threatened the outlook for economic growth and corporate profits. Policymaker response was significant during the period as the Federal Reserve lowered interest rates and opened up its discount window to investment banks. Despite these actions, credit remained scarce, impeding economic growth and contributing to stock market volatility. Consumers began to receive the government's fiscal stimulus checks, but investors feared that the windfall might be consumed at the gas pump in an environment of $140 per barrel of oil. Only the inflationary energy (+9%) and materials (+1%) sectors had positive returns during the period. Financials (-30%) was by far the worst performing sector, followed by telecommunications (-17%), industrials (-14%), consumer discretionary (-13%) and technology (-13%). Health care (-13%), traditionally a defensive sector, has also lagged as it has exhibited some discretionary characteristics, and suffered regulatory uncertainty stemming from the upcoming presidential elections. Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE? A. Financials, information technology and industrials have each suffered double-digit declines year-to-date. Fortunately, strong stock selection in these volatile sectors has benefited the Fund's relative performance. We have dodged many of the credit-related land mines within financials with an underweight positioning, and the Fund's financials returned approximately -9% versus a decline of almost 30% for the benchmark sector. AFLAC (+1%) and Liberty Media Capital (-6%) -- the Liberty Entertainment tracking stock that falls within the financial sector -- have been key contributors. Qualcomm (+13.5%) led our tech stocks higher in part because China announced it was opening its wireless telephony market to 3G-technology. Western Union (+2%) also demonstrated resilience amid strengthening fundamentals. The S&P 500 industrials {photo omitted] 2 Q&A -------------------------------------------------------------------------------- sector also lagged due to commodity cost pressures and slowing global economic growth. In this environment, our sole industrials holding, Dover (+6%) exhibited strength in its energy-related businesses and as a result of its multi-year restructuring initiatives. The two key factors that worked against performance during the period were 1) an underweight in energy as oil hurtled towards $140 a barrel and 2) underperformance within consumer oriented names. In 2008, the rising cost of energy and commodity inputs has punished many consumer stocks, including PepsiCo (-15%). However we have added to Pepsi on the pullback, continuing to like its brand leadership and its potential for global growth. Carnival Corp. (-24%) has also lagged amid high fuel costs, but we believe the company is well positioned to flourish as baby boomers seek economical travel options. During the year-to-date period, not owning defensive utilities has also weighed on returns, but we continued to believe the sector lacks sustainable double-digit earnings growth. UnitedHealth (-40%) has pressured results, and we eliminated the position during the period. Q. WERE THERE ANY SIGNIFICANT CHANGES TO THE FUND OVER THE PERIOD? A. There were no significant changes in the Fund during the period, and we ended the period with 37 holdings in the portfolio. We continued to favor companies we believe can weather an economic slowdown -- high quality leaders with double-digit earnings growth prospects. Our bottom-up process has led us to overweight's in technology, consumer discretionary (with a focus in media and specialty retail) and healthcare. Technology stocks make up about 35% of the portfolio, with consumer discretionary and health care at about 15% each. In the past six months we initiated positions in two healthcare companies, Genentech in the biotech space and VCA Antech in the area of animal health. We also initiated a position in specialty metals company, Allegheny Technologies -- a company that stands to benefit from the trend towards lighter, more fuel-efficient aircraft. With economic growth slowing, the forecast for corporate profits has slowed significantly. This deterioration in the macro environment may lead to a change in stock market leadership where the more cyclically tied companies cool off, and the steady growers start to outperform. Our stock selection continues to be focused on industry leaders, with financial strength and above-average long-term growth prospects. We believe these characteristics will lead to strong performance over the long term. 3 Premier Growth Equity Fund -------------------------------------------------------------------------------- Understanding Your Fund's Expenses As a shareholder of the Fund you incur ongoing expenses, which include portfolio management fees, professional fees, administrative fees and other Fund expenses. The following example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the period. The information in the following table is based on an investment of $1,000, which is invested at the beginning of the period and held for the entire six-month period ended June 30, 2008. ACTUAL EXPENSES The first section of the table provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your class under the heading "Expenses Paid During Period." HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second section of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholders reports of other funds. Please note that the expenses shown in the table do not reflect any transaction costs, such as sales charges or redemption fees.
JANUARY 1, 2008 - JUNE 30, 2008 ------------------------------------------------------------------------------------------------------------------------------------ ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($)* ------------------------------------------------------------------------------------------------------------------------------------ ACTUAL FUND RETURN** ------------------------------------------------------------------------------------------------------------------------------------ Class 1 1,000.00 930.72 3.48 Class 4 1,000.00 935.18 5.56 ------------------------------------------------------------------------------------------------------------------------------------ HYPOTHETICAL 5% RETURN (2.5% FOR THE PERIOD) ------------------------------------------------------------------------------------------------------------------------------------ Class 1 1,000.00 1,021.01 3.67 Class 4 1,000.00 1,019.06 5.76 ------------------------------------------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.73% FOR CLASS 1 AND 1.14% FOR CLASS 4, (FROM PERIOD JANUARY 1, 2008 - JUNE 30, 2008), MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY 182/366 (TO REFLECT THE ONE-HALF YEAR PERIOD). ** ACTUAL FUND RETURNS FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2008 WERE AS FOLLOWS: (6.93)% FOR CLASS 1 SHARES, AND SINCE INCEPTION (6.48)% FOR CLASS 4 SHARES. 4 Premier Growth Equity Fund (unaudited) -------------------------------------------------------------------------------- CHANGE IN VALUE OF A $10,000 INVESTMENT CLASS 1 SHARES -------------------------------------------------------------------------------- [Line chart omitted -- plot points are as follows:] GEI PREMIER GROWTH EQUITY S&P 500 INDEX 06/98 10,000.00 10,000.00 12/98 11,585.08 10,930.80 12/99 15,785.94 13,233.69 12/00 14,960.44 12,018.37 12/01 13,593.26 10,586.75 12/02 10,736.62 8,246.88 12/03 13,841.02 10,616.05 12/04 14,814.25 11,771.22 12/05 15,005.68 12,350.19 12/06 16,366.52 14,300.58 12/07 17,239.87 15,086.47 06/08 16,045.41 13,289.09 AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2008 -------------------------------------------------------------------------------- CLASS 1 SHARES (Inception date: 12/12/97) -------------------------------------------------------------------------------- SIX ONE FIVE TEN ENDING VALUE OF A MONTHS YEAR YEAR YEAR $10,000 INVESTMENT -------------------------------------------------------------------------------- Premier Growth Equity Fund -6.93% -7.32% 5.77% 4.84% $16,045 -------------------------------------------------------------------------------- S&P 500 Index -11.91% -13.12% 7.59% 2.88% $13,289 -------------------------------------------------------------------------------- Lipper peer group average* -10.06% -5.21% 7.53% 2.35% -------------------------------------------------------------------------------- CLASS 4 SHARES -------------------------------------------------------------------------------- [Line chart omitted -- plot points are as follows:] GEI PREMIER GROWTH EQUITY S&P 500 INDEX 05/08 10,000.00 10,000.00 06/08 9,351.76 9,275.57 AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2008 -------------------------------------------------------------------------------- CLASS 4 SHARES (Inception date: 5/1/08) -------------------------------------------------------------------------------- ONE SINCE ENDING VALUE OF A MONTH INCEPTION $10,000 INVESTMENT -------------------------------------------------------------------------------- Premier Growth Equity Fund -7.12% -6.48% $9,352 -------------------------------------------------------------------------------- S&P 500 Index -8.43% -7.24% $9,276 -------------------------------------------------------------------------------- Lipper peer group average** -7.07% N/A -------------------------------------------------------------------------------- INVESTMENT PROFILE A fund designed for investors who seek long-term growth of capital and future income rather than current income by investing at least 80% of its net assets in equity securities under normal circumstances. The Fund invests primarily in a limited number of large- and medium-sized companies that the portfolio manager believes have above-average growth histories and/or growth potential. PORTFOLIO COMPOSITION AS OF JUNE 30, 2008 as a % of Market Value -------------------------------------------------------------------------------- Market Value of $80,081 (in thousands) [Pie chart omitted -- plot points are as follows:] Information Technology 35.1% Consumer Discretionary 16.5% Healthcare 12.7% Financials 10.7% Energy 8.6% Materials 3.9% Industrials 3.8% Consumer Staples 3.7% Short-Term 2.8% Telecommunication Services 2.2% Other Investments 0.0%*** TOP TEN LARGEST HOLDINGS AS OF JUNE 30, 2008 as a % of Market Value -------------------------------------------------------------------------------- Western Union Co. 4.39% -------------------------------------------------------------------------------- Schlumberger Ltd. 4.31% -------------------------------------------------------------------------------- Transocean, Inc. 4.30% -------------------------------------------------------------------------------- QUALCOMM, Inc. 4.27% -------------------------------------------------------------------------------- Intuit Inc. 3.82% -------------------------------------------------------------------------------- Dover Corp. 3.78% -------------------------------------------------------------------------------- PepsiCo, Inc. 3.71% -------------------------------------------------------------------------------- Liberty Media Entertainment Corp. (Series A) 3.63% -------------------------------------------------------------------------------- Cisco Systems, Inc. 3.57% -------------------------------------------------------------------------------- AFLAC Incorporated 3.21% -------------------------------------------------------------------------------- * LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR THE SIX MONTHS, ONE YEAR, FIVE-YEAR, AND TEN-YEAR PERIODS INDICATED IN THE LARGE-CAP GROWTH FUNDS PEER GROUP CONSISTING OF 207, 205, 173 AND 59 UNDERLYING ANNUITY FUNDS, RESPECTIVELY. ** LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR THE ONE MONTH PERIOD INDICATED IN THE LARGE-CAP GROWTH FUNDS PEER GROUP CONSISTING OF 219 UNDERLYING ANNUITY FUND, RESPECTIVELY. *** LESS THAN 0.1%. SEE NOTES TO PERFORMANCE ON PAGE 1 FOR FURTHER INFORMATION, INCLUDING AN EXPLANATION OF LIPPER PEER CATEGORIES. PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE AND THE GRAPH AND TABLE DO NOT REFLECT THE DEDUCTION OF TAXES. 5 PREMIER GROWTH EQUITY FUND Schedule of Investments June 30, 2008 (unaudited) -------------------------------------------------------------------------------- PREMIER GROWTH EQUITY FUND -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE -------------------------------------------------------------------------------- COMMON STOCK -- 97.7% + -------------------------------------------------------------------------------- CONSUMER DISCRETIONARY -- 16.6% Bed Bath & Beyond, Inc......... 76,004 $ 2,135,712(a) Carnival Corp.................. 69,183 2,280,272 Comcast Corp. (Class A)........ 133,493 2,504,329 Liberty Global, Inc. (Series C) 67,039 2,035,304(a) Liberty Media Entertainment Corp. (Series A)................... 119,852 2,904,014(a) Lowe's Companies, Inc.......... 65,285 1,354,664 13,214,295 CONSUMER STAPLES -- 3.7% PepsiCo, Inc................... 46,771 2,974,168 ENERGY -- 8.7% Schlumberger Ltd............... 32,155 3,454,412 Transocean, Inc................ 22,606 3,444,928 6,899,340 FINANCIALS -- 10.7% AFLAC Incorporated............. 40,925 2,570,090 CB Richard Ellis Group, Inc. (Class A) 97,440 1,870,848(a) Goldman Sachs Group, Inc....... 9,354 1,636,015 State Street Corp.............. 38,976 2,494,074(c) 8,571,027 HEALTHCARE -- 12.8% Amgen, Inc..................... 39,951 1,884,089(a) Genentech Inc.................. 18,514 1,405,213(a) Johnson & Johnson.............. 27,283 1,755,388 Lincare Holdings Inc........... 46,771 1,328,296(a) Medtronic, Inc................. 47,746 2,470,855 VCA Antech, Inc................ 17,929 498,068(a) Zimmer Holdings, Inc........... 12,667 861,989(a) 10,203,898 INDUSTRIALS -- 3.8% Dover Corp..................... 62,557 3,025,882 INFORMATION TECHNOLOGY -- 35.3% Analog Devices, Inc............ 43,458 1,380,661 Cisco Systems, Inc............. 122,775 2,855,747(a,d) Corning Incorporated........... 75,614 1,742,903 eBay, Inc...................... 67,234 1,837,505(a) Intuit Inc..................... 111,082 3,062,531(a,d) Iron Mountain Incorporated..... 49,695 1,319,402(a) Microsoft Corp................. 86,722 2,385,722 Molex, Inc. (Class A).......... 79,316 1,817,130(d) NUMBER OF SHARES VALUE -------------------------------------------------------------------------------- Paychex, Inc................... 76,004 $ 2,377,405 QUALCOMM, Inc.................. 76,978 3,415,514 Research In Motion Ltd......... 14,616 1,708,610(a) Western Union Co............... 142,263 3,516,741 Yahoo! Inc..................... 33,130 684,466(a) 28,104,337 MATERIALS -- 3.9% Allegheny Technologies Incorporated................. 14,811 877,996 Monsanto Co.................... 17,539 2,217,631 3,095,627 TELECOMMUNICATION SERVICES -- 2.2% American Tower Corp. (Class A). 41,899 1,770,233(a) TOTAL COMMAN STOCK (COST $74,947,148)........... 77,858,807 -------------------------------------------------------------------------------- OTHER INVESTMENTS -- 0.0%* -------------------------------------------------------------------------------- GEI Investment Fund (COST $6,520)................ 4,955(e) TOTAL INVESTMENTS IN SECURITIES (COST $74,953,668)........... 77,863,762 -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 2.8% -------------------------------------------------------------------------------- GE Money Market Fund Institutional Class 1.93%........................ 2,217,111(b,f) (COST $2,217,111) TOTAL INVESTMENTS (COST $77,170,779)........... 80,080,873 LIABILITIES IN EXCESS OF OTHER ASSETS, NET-- (0.5)%................. (433,323) ----------- NET ASSETS-- 100.0% ........... $79,647,550 =========== -------------------------------------------------------------------------------- OTHER INFORMATION -------------------------------------------------------------------------------- The GEI Premier Growth Equity had the following long futures contracts open at June 30, 2008 (unaudited): NUMBER CURRENT EXPIRATION OF NOTIONAL UNREALIZED DESCRIPTION DATE CONTRACTS VALUE DEPRECIATION -------------------------------------------------------------------------------- S&P 500 Index Futures September 2008 2 $640,550 $(22,949) See Notes to Schedule of Investments on page 7 and Notes to Financial Statements. 6 Notes to Schedule of Investments June 30, 2008 (unaudited) -------------------------------------------------------------------------------- The views expressed in this document reflect our judgment as of the publication date and are subject to change at any time without notice. The securities cited may not represent current or future holdings and should not be considered as a recommendation to purchase or sell a particular security. See the prospectus for complete descriptions of investment objectives, policies, risks and permissible investments. (a) Non-income producing security. (b) Coupon amount represents effective yield. (c) State Street Corp. is the parent company of State Street Bank & Trust Co., the Fund's custodian and accounting agent. (d) At June 30, 2008, all or a portion of this security was pledged to cover collateral requirements for futures, options, forward foreign currency contracts and/or TBA's. (e) GE Asset Management ("GEAM"), the investment adviser of the Fund, also serves as investment adviser of the GEI Investment Fund. (f) GEAM, the investment adviser of the Fund, also serves as investment adviser of the GE Money Market Fund. * Less than 0.1%. + Percentages are based on net assets as of June 30, 2008. 7
Financial Highlights Selected data based on a share outstanding throughout the periods indicated ------------------------------------------------------------------------------------------------------------------------------------ PREMIER GROWTH EQUITY FUND --------------------------------------------------------------------- ------------- CLASS 1 CLASS 4 --------------------------------------------------------------------- ------------- 6/30/08+ 12/31/07 12/31/06 12/31/05 12/31/04 12/31/03 6/30/08+ --------------------------------------------------------------------- ------------- INCEPTION DATE -- -- -- -- -- 12/12/97 5/1/08 Net asset value, beginning of period.... $78.95 $82.17 $75.65 $74.95 $70.46 $54.74 $78.52 INCOME/(LOSS) FROM INVESTMENT OPERATIONS: Net investment income................ 0.09 0.23 0.35 0.24 0.47 0.11 (0.01) Net realized and unrealized gains/(losses) on investments..... (5.56) 4.19 6.51 0.73 4.48 15.72 (5.08) ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INCOME/(LOSS) FROM INVESTMENT OPERATIONS................ (5.47) 4.42 6.86 0.97 4.95 15.83 (5.09) ------------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS FROM: Net investment income................ -- 0.23 0.34 0.27 0.46 0.11 -- Net realized gains................... -- 7.41 -- -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------------ TOTAL DISTRIBUTIONS..................... -- 7.64 0.34 0.27 0.46 0.11 -- ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, END OF PERIOD.......... $73.48 $78.95 $82.17 $75.65 $74.95 $70.46 $73.43 ==================================================================================================================================== TOTAL RETURN (A)........................ (6.93)% 5.34% 9.07% 1.29% 7.03% 28.91% (6.48)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $79,638 $94,720 $110,538 $126,682 $137,801 $143,202 $9 Ratios to average net assets: Net investment income*............ 0.24% 0.24% 0.41% 0.30% 0.62% 0.20% (0.06)% Expenses*......................... 0.73% 0.72% 0.71% 0.71% 0.71% 0.70% 1.14% Portfolio turnover rate.............. 11% 29% 27% 34% 22% 24% 11%
NOTES TO FINANCIAL HIGHLIGHTS -------------------------------------------------------------------------------- (a) Total returns are historical and assume changes in share price and reinvestment of dividends and capital gains and do not include the effect of insurance contract charges. * Annualized for periods less than one year. + Unaudited See Notes to Financial Statements. 8
Statement of Assets and Liabilities JUNE 30, 2008 (UNAUDITED) ------------------------------------------------------------------------------------------------------------------------------------ PREMIER GROWTH EQUITY FUND ------------------------------------------------------------------------------------------------------------------------------------ ASSETS Investments in securities, at market (cost $74,947,148)................................................ $77,858,807 Investments in affiliated securities, at market (cost $6,520).......................................... 4,955 Short-term affiliated investments (at amortized cost).................................................. 2,217,111 Income receivables..................................................................................... 26,441 Variation margin receivable............................................................................ 2,615 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL ASSETS....................................................................................... 80,109,929 ------------------------------------------------------------------------------------------------------------------------------------ LIABILITIES Payable for fund shares redeemed....................................................................... 362,728 Payable to GEAM........................................................................................ 52,429 Accrued other expenses................................................................................. 46,749 Other liabilities...................................................................................... 473 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL LIABILITIES................................................................................. 462,379 ------------------------------------------------------------------------------------------------------------------------------------ NET ASSETS................................................................................................ $79,647,550 ==================================================================================================================================== NET ASSETS CONSIST OF: Capital paid in........................................................................................ 73,841,191 Undistributed (distribution in excess of) net investment income............................................................................... 111,709 Accumulated net realized gain (loss)................................................................... 2,807,505 Net unrealized appreciation/(depreciation) on: Investments......................................................................................... 2,910,094 Futures............................................................................................. (22,949) NET ASSETS................................................................................................ $79,647,550 CLASS 1: NET ASSETS................................................................................................ 79,638,198 Shares outstanding ($0.01 par value; unlimited shares authorized)......................................... 1,083,819 Net asset value per share................................................................................. $73.48 CLASS 4: NET ASSETS................................................................................................ 9,352 Shares outstanding ($0.01 par value; unlimited shares authorized)......................................... 127 Net asset value per share................................................................................. $73.43
See Notes to Financial Statements. 9
Statement of Operations FOR THE SIX MONTHS ENDED JUNE 30, 2008 (UNAUDITED) ------------------------------------------------------------------------------------------------------------------------------------ PREMIER GROWTH EQUITY FUND ------------------------------------------------------------------------------------------------------------------------------------ INVESTMENT INCOME INCOME: Dividend ............................................................................... $ 393,326 Interest ............................................................................... 355 Interest from affiliated investments ................................................... 17,401 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INCOME ............................................................................. 411,082 ------------------------------------------------------------------------------------------------------------------------------------ EXPENSES: Advisory and administrative fees ....................................................... 278,683 Distributors Fees (Note 4) Class 4 ............................................................................. 7 Transfer agent ......................................................................... 59 Trustee's fees ......................................................................... 1,152 Custody and accounting expenses ........................................................ 16,698 Professional fees ...................................................................... 9,752 Registration expenses 2,312 Other expenses ......................................................................... 3,085 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL EXPENSES BEFORE WAIVER AND REIMBURSEMENT ........................................... 311,748 ------------------------------------------------------------------------------------------------------------------------------------ Less: Expenses reimbursed by the adviser (waiver related to Fund of Fund Investment) ... (1,006) ------------------------------------------------------------------------------------------------------------------------------------ Net expenses ........................................................................... 310,742 ------------------------------------------------------------------------------------------------------------------------------------ NET INVESTMENT INCOME (LOSS) ............................................................. 100,340 ==================================================================================================================================== NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS REALIZED GAIN (LOSS) ON: Investments ......................................................................... 2,655,471 Futures ............................................................................. 144,906 INCREASE (DECREASE) IN UNREALIZED APPRECIATION/ (DEPRECIATION) ON: Investments ......................................................................... (9,263,547) Futures ............................................................................. (26,236) ------------------------------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments ................................. (6,489,406) ------------------------------------------------------------------------------------------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .......................... $(6,389,066) ====================================================================================================================================
See Notes to Financial Statements. 10
Statements of Changes in Net Assets ------------------------------------------------------------------------------------------------------------------------------------ PREMIER GROWTH EQUITY FUND ------------------------------------------------------------------------------------------------------------------------------------ SIX MONTHS ENDED YEAR ENDED JUNE 30, 2008 DECEMBER 31, (UNAUDITED) 2007 ------------------------------------------------------------------------------------------------------------------------------------ INCREASE (DECREASE) IN NET ASSETS OPERATIONS: Net investments income (loss).................................................... $ 100,340 $ 249,761 Net realized gain (loss) on investments, futures, written options, and foreign currency transactions............................................... 2,800,377 10,488,507 Net increase (decrease) in unrealized appreciation/(depreciation) on investments, futures, written options, and foreign currency translation...... (9,289,783) (5,067,710) ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) from operations........................................... (6,389,066) 5,670,558 ------------------------------------------------------------------------------------------------------------------------------------ DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Class 1......................................................................... -- (256,356) Class 4......................................................................... -- -- Net realized gains Class 1......................................................................... -- (8,134,986) Class 4......................................................................... -- -- ------------------------------------------------------------------------------------------------------------------------------------ TOTAL DISTRIBUTIONS................................................................. -- (8,391,342) ------------------------------------------------------------------------------------------------------------------------------------ Increase (decrease) in net assets from operations and distributions................. (6,389,066) (2,720,784) ------------------------------------------------------------------------------------------------------------------------------------ SHARE TRANSACTIONS: Proceeds from sale of shares Class 1......................................................................... 1,312,868 1,994,787 Class 4......................................................................... 10,000 Value of distributions reinvested Class 1......................................................................... -- 8,391,337 Class 4......................................................................... -- -- Cost of shares redeemed Class 1......................................................................... (10,006,695) (23,483,075) Class 4......................................................................... -- -- ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) from share transactions................................... (8,683,827) (13,096,951) ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INCREASE (DECREASE) IN NET ASSETS............................................. (15,072,893) (15,817,735) NET ASSETS Beginning of period................................................................. 94,720,443 110,538,178 ------------------------------------------------------------------------------------------------------------------------------------ End of period....................................................................... $ 79,647,550 $ 94,720,443 ==================================================================================================================================== UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD......... $ 111,709 $ 11,369 ------------------------------------------------------------------------------------------------------------------------------------ CHANGES IN FUND SHARES CLASS 1 Shares sold............................................................................ 17,508 23,508 Issued for distributions reinvested.................................................... -- 105,818 Shares redeemed........................................................................ (133,414) (274,777) ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in fund shares................................................. (115,906) (145,451) ==================================================================================================================================== CLASS 4 Shares sold............................................................................ 127 -- Issued for distributions reinvested.................................................... -- -- Shares redeemed........................................................................ -- -- ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in fund shares................................................. 127 -- ====================================================================================================================================
See Notes to Financial Statements. 11 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- 1. ORGANIZATION OF THE COMPANY GE Investments Funds, Inc. (the "Company") was incorporated under the laws of the Commonwealth of Virginia on May 14, 1984 and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company. The Company is composed of thirteen investment portfolios (collectively the "Funds"), although only the following eleven are currently being offered: U.S. Equity Fund, S&P 500 Index Fund, Premier Growth Equity Fund (the "Fund"), Core Value Equity Fund, Mid-Cap Equity Fund, Small-Cap Equity Fund, International Equity Fund, Total Return Fund, Income Fund, Money Market Fund and Real Estate Securities Fund. Shares of the Funds of the Company are offered only to insurance company separate accounts that fund certain variable life insurance contracts and variable annuity contracts. These insurance companies may include insurance companies affiliated with GE Asset Management Incorporated ("GEAM"), the investment adviser and administrator of each of the Funds. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results may differ from those estimates. The following summarizes the significant accounting policies of the Fund: SECURITY VALUATION AND TRANSACTION The Fund's portfolio securities are valued generally on the basis of market quotations. Equity securities generally are valued at the last reported sales price on the primary market in which they are traded. Portfolio securities listed on NASDAQ are valued using the NASDAQ Official Closing Price, which may not necessarily represent the last sale price. If no sales occurred on the exchange or NASDAQ that day, the portfolio security generally is valued using the last reported bid price. Debt securities (other than short-term securities described below) generally are valued at an evaluated bid as reported by an independent pricing service. Values obtained from pricing services are based on various factors such as market transactions, dealer supplied valuations, security characteristics and other market data. In the absence of a reliable price from such a pricing service, debt securities may be valued based on dealer supplied valuations or quotations. The Fund's written or purchased options are valued at the last sales price, or if no sales occurred that day, at the last reported bid price. Short-term investments with remaining maturities of sixty days or less at the time of purchase are valued on the basis of amortized cost, which approximates market value. All assets and liabilities of the Fund initially expressed in foreign currency values will be converted into U.S. dollars at the WM/Reuters exchange rate computed at 11:00 a.m., Eastern time. If prices are not readily available for a portfolio security, or if it is believed that a price for a portfolio security does not represent its fair value, the security may be valued using procedures approved by the Fund's Board of Directors that are designed to establish its "fair" value. Those procedures require that the fair value of a security be established by the fair valuation committee. The fair valuation committee follows different protocols for different types of investments and circumstances. The fair value procedures may be used to value any investment by the Fund in the appropriate circumstances. Examples of the types of securities that may be fair valued include: thinly traded or illiquid investments, high-yield securities or foreign securities. Foreign securities may be valued with the assistance of an independent fair value pricing service in circumstances where it is believed that they have been or would be materially affected by events occurring after the close of the portfolio security's primary market and before the close of regular trading on the NYSE. This independent fair value pricing service uses a computerized system to appraise affected securities and portfolios taking into consideration various factors and the fair value of such securities may be something other than the last available quotation or other market price. GEAM may also separately monitor portfolio securities and, consistent with the Fund's fair value procedures, apply a different value to a portfolio security than would be applied had it been priced using market quotations or by an independent fair value pricing service. 12 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- Determining the fair value of securities involves the application of both subjective and objective considerations. Security values may differ depending on the methodology used to determine their values, and may differ from the last quoted sale or closing price. No assurance can be given that use of these fair value procedures will always better represent the price at which the Fund could sell the affected portfolio security. Security transactions are accounted for as of the trade date. Realized gains and losses on investments sold are recorded on the basis of identified cost for both financial statement and federal tax purposes. The Fund adopted FASB Statement No. 157, FAIR VALUE MEASUREMENTS (FAS 157). FAS 157 establishes a single definition of fair value, a framework for measuring fair value, and expanded disclosures about fair value measurements. Various inputs are used in determining the value of the Fund's investments. These inputs are classified into three broad levels: Level 1 includes quoted prices in active markets of securities identical to those of the Fund. Level 2 includes: 1) quoted prices in active markets for similar securities to those of the Fund; 2) quoted prices for identical or similar securities to those of the Fund that trade in markets in which there are few transactions or the quoted prices are not current; 3) prices based on observable market data such as interest rates and yield curves, volatilities, bond prepayment speeds, and credit risk and; 4) prices based principally on observable market data by use of correlation techniques or other means. Level 3 includes unobservable market inputs used to fair value securities. These inputs are based on assumptions that market participants would use to price securities and may include the adviser's own assumptions. Other financial instruments are derivative instruments that are not reflected in TOTAL INVESTMENTS, such as futures, forwards, swaps, and written options contracts, which are valued based on the unrealized appreciation/depreciation of the instrument.
Level 1 Level 2 Level 3 Total --------------------------------------------------------------------------------------------------------------------------- Investments in Securities $ 80,075,918 $4,955 $ -- $80,080,873 Other Financial Instruments $ (22,949) $ -- $ -- $ (22,949)
REPURCHASE AGREEMENTS The Fund may enter into repurchase agreement transactions with respect to instruments that are consistent with the Fund's investment objectives or policies. The Fund's custodian or a third party custodian takes possession of the collateral pledged for investments in repurchase agreements on behalf of the Fund. The Fund values the underlying collateral daily on a mark-to-market basis to determine that the value, including accrued interest, is at least equal to 102% of the repurchase price. In the event the seller defaults and the value of the security declines, or if the seller enters an insolvency proceeding, realization of the collateral by the Fund may be delayed or limited. SECURITY LENDING The Fund may loan securities to brokers, dealers, and financial institutions determined by GEAM to be creditworthy, subject to certain limitations. The Fund continues to receive the interest and dividends on the loaned securities during the term of the loan. The loans of securities are secured by collateral in the form of cash or other liquid assets, which are segregated and maintained with the custodian in an amount at least equal to 102% of the current market value of the loaned securities. During the term of the loan, the Fund will record any gain or loss in the market value of its loaned securities and of securities in which cash collateral is invested. The Fund will also earn interest, net of any rebate, from securities in which cash collateral is invested. In the event the counterparty (borrower) does not meet its contracted obligation to return the securities, the Fund may be exposed to the risk of loss of reacquiring the loaned securities at prevailing market prices using the proceeds of the sale of the collateral. FOREIGN CURRENCY Accounting records of the Fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange on a daily basis (on days the New York Stock Exchange is open). Purchases and sales of securities, income receipts and expense payments denominated in foreign currencies are translated into U.S. dollars at the prevailing exchange rate on the respective dates of such transactions. 13 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- The Fund does not isolate the portion of the results of operations resulting from changes in foreign exchange rates from the fluctuations arising from changes in the market prices of securities during the period. Such fluctuations are included in the net realized or unrealized gain or loss from investments. Net realized gains or losses on foreign currency transactions represent net gains or losses on sales and maturities of foreign currency contracts, disposition of foreign currencies, the difference between the amount of net investment income and withholding taxes accrued and the U.S. dollar amount actually received or paid, and gains or losses between the trade and settlement date on purchases and sales of securities. Net unrealized foreign exchange gains and losses arising from changes in the value of other assets and liabilities as a result of changes in foreign exchange rates are included as increases or decreases in unrealized appreciation/depreciation on foreign currency related transactions. FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or bond index futures contracts subject to certain limitations. The Fund may invest in futures contracts to manage its exposure to the stock and bond markets and fluctuations in currency values. Buying futures tends to increase the Fund's exposure to the underlying instrument while selling futures tends to decrease the Fund's exposure to the underlying instrument, or hedge other Fund investments. The Fund will not enter into a transaction involving futures for speculative purposes. The Fund's risks in using these contracts include changes in the value of the underlying instruments, non-performance of the counterparties r the contracts' terms and changes in the liquidity of the secondary market for the contracts. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they principally trade. Upon entering into a futures contract, the Fund is required to pledge to the broker an amount of cash and/or other assets equal to a certain percentage of the contract amount, known as initial margin deposit. Subsequent payments, known as variation margin, are made or received by the Fund each day, depending on the daily fluctuation in the fair value of the underlying security. The Fund records an unrealized gain or loss equal to the daily variation margin. Should market conditions move unexpectedly, the Fund may not achieve the anticipated benefits of the futures contracts and may incur a loss. The Fund recognizes a realized gain or loss on the expiration or closing of a futures contract. OPTIONS The Fund may purchase and write options, subject to certain limitations. The Fund may invest in options contracts to manage its exposure to the stock and bond markets and fluctuations in foreign currency values. Writing puts and buying calls tend to increase the Fund's exposure to the underlying instrument while buying puts and writing calls tend to decrease the Fund's exposure to the underlying instrument, or hedge other Fund investments. The Fund will not enter into a transaction involving options for speculative purposes. The Fund's risks in using these contracts include changes in the value of the underlying instruments, non-performance of the counterparties under the contracts' terms and changes in the liquidity of the secondary market for the contracts. Options are valued at the last sale price, or if no sales occurred on that day, at the last quoted bid price. When the Fund writes an option, the amount of the premium received is recorded as a liability and is subsequently adjusted to the current fair value of the option written. Premiums received from writing options that expire unexercised are treated by the Fund on the expiration date as realized gains from investments. The difference between the premium and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium is less than the amount paid for the closing purchase, as a realized loss. When an option is exercised, the proceeds from the sale of the underlying security or the cost basis of the securities purchased is adjusted by the original premium received or paid. INVESTMENTS IN FOREIGN MARKETS Investments in foreign markets may involve special risks and considerations not typically associated with investing in the United States. These risks include revaluation of currencies, high rates of inflation, repatriation on income and capital, and adverse political and economic developments. Moreover, securities issued in these markets may be less liquid, subject to government ownership controls, tariffs and taxes, subject to delays in settlements, and their prices may be more volatile. The Fund may be subject to capital gains and repatriation taxes imposed by certain countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued based upon net investment income, net realized gains and net unrealized appreciation as income and/or capital gains are earned. 14 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- INCOME TAXES The Fund intends to comply with all sections of the Internal Revenue Code applicable to regulated investment companies including the distribution of substantially all of its taxable net investment income and net realized capital gains to its shareholders. Therefore, no provision for federal income tax has been made. The Fund is treated as a separate taxpayer for federal income tax purposes. At June 30, 2008, information on the tax cost of investments is as follows:
Cost of Gross Tax Gross Tax Net Tax Appreciation/ Investments for Unrealized Unrealized (Depreciation) Tax Purposes Appreciation Depreciation on Investments --------------------------------------------------------------------------------------------------------------------------- $78,576,474 $9,905,986 $(8,381,666) $1,524,320
As of December 31, 2007, the Fund has no capital loss carryovers as indicated below. Capital loss carryovers are available to offset future realized capital gains to the extent provided in the Internal Revenue Code and regulations thereunder. To the extent that these carryover losses are used to offset future capital gains, it is probable that the gains so offset will not be distributed to shareholders because they would be taxable as ordinary income. Any net capital and currency losses incurred after October 31, within the Fund's tax year, are deemed to arise on the first day of the Fund's next tax year if the Fund so elects to defer such losses. The Fund incurred no such losses after October 31, 2007. The tax composition of distributions paid during the years ended December 31, 2007 and December 31, 2006 were as follows: Ordinary Long-Term Income Capital Gains Total ----------------------------------------------------------------- 2007 $477,858 $7,913,484 $8,391,342 2006 460,461 -- 460,461 DISTRIBUTIONS TO SHAREHOLDERS The Fund declares and pays dividends from net investment income annually. The Fund declares and pays net realized capital gains in excess of capital loss carryforwards distributions annually. The character of income and gains to be distributed is determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences include (but are not limited to) futures and losses deferred due to wash sale transactions. Reclassifications due to permanent book/tax differences are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. These reclassifications have no impact on net investment income, realized gains or losses, or the net asset value of the Fund. The calculation of net investment income per share in the Financial Highlights table excludes these adjustments. On June 29, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in Income Taxes." FIN48 provides guidance for how certain uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN48 requires evaluation of tax positions taken or expected to be taken in the course of preparing the Fund's tax returns to determine whether the tax positions are "more likely than not" of being sustained by the applicable tax authority. The adoption of FIN48 did not have an impact on the Fund's net assets and financial statements. The Funds' 2004, 2005, 2006 and 2007 calendar years tax returns are still open to examination by the Federal and applicable state tax authorities. INVESTMENT INCOME Corporate actions (including cash dividends) are recorded on the ex-dividend date, net of applicable withholding taxes, except for certain foreign corporate actions, which are recorded as soon after ex-dividend date as such information becomes available. Interest income is recorded on the accrual basis. All discounts and premiums on bonds are accreted and amortized, respectively, to call or maturity date, whichever is shorter, using the effective yield method. EXPENSES Expenses of the Company which are directly identifiable to the Fund are allocated to the portfolio. Expenses which are not directly identifiable to the Fund are allocated in such a manner as deemed equitable, taking into consideration the nature and type of expenses and relative size of the Fund. All expenses of the Fund are paid by GEAM and reimbursed by the Fund. 15 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- 3. LINE OF CREDIT The Company shares a revolving credit facility of up to $150 million with a number of its affiliates. The credit facility is with its custodian bank, State Street Bank and Trust Company. The revolving credit facility requires the payment of a commitment fee equal to 0.09% per annum on the daily unused portion of the credit facility, payable quarterly. The portion borne by the Funds generally is borne proportionally based upon net assets. In addition, the Company has a $100 million uncommitted, unsecured line of credit with State Street. Generally, borrowings under the credit facilities would accrue interest at the Federal Funds Rate plus 50 basis points and would be borne by the borrowing Fund. The maximum amount allowed to be borrowed by any one Fund is the lesser of (i) its prospectus limitation or (ii) 20% of its net assets. The credit facilities were not utilized by the Fund during the period ended June 30, 2008. 4. AMOUNTS PAID TO AFFILIATES GEAM, a registered investment adviser, was retained by the Company's Board of Directors effective May 1, 1997 to act as investment adviser and administrator of the Fund. GEAM's compensation for investment advisory and administrative services is paid monthly based on the average daily net assets of the Fund at an annualized rate of 0.65%. GENPACT performs certain accounting and certain administration services not provided by GEAM. For the period ending June 30, 2008, $696 was charged to the Fund. DISTRIBUTION AND SHAREHOLDER SERVICING FEES The Fund has adopted a Shareholder Servicing and Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act with respect to the Class 4 shares of the Fund. The Fund pays GE Investment Distributors, Inc. ("GEID"), a wholly-owned subsidiary of GEAM and the Fund's principal underwriter, a monthly fee for distribution and/or shareholder services provided, at an annual rate of the average daily net assets attributable to each applicable class of shares. The annual rate applicable is 0.45% for the Class 4 shares. Currently, Class 1 shares are not subject to a Rule 12b-1 fee. DIRECTORS' COMPENSATION The Fund pays no compensation to its directors who are officers or employees of GEAM or its affiliates. Directors who are not such officers or employees also serve in a similar capacity for other funds advised by GEAM. Compensation paid to unaffiliated directors are reflected on the Statement of Operations. These fees are allocated pro rata across all of the mutual fund platforms and share classes served by the directors, including the Fund, and are based upon the relative net assets of each fund within such platforms. (For additional information about directors compensation please refer to the Statement of Additional Information.) 5. INVESTMENT TRANSACTIONS PURCHASES AND SALES OF SECURITIES The cost of purchases and the proceeds from sales of investments, other than short-term securities and options, for the period ended June 30, 2008 were as follows: Purchases Sales ----------------------------------------------------------------- $9,490,641 $17,852,289 SECURITY LENDING At June 30, 2008, the Fund did not participate in securities lending. 16 Additional Information (unaudited) -------------------------------------------------------------------------------- INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS: The business and affairs of the Company are managed under the direction of the Company's Board of Directors. Information pertaining to the Directors and officers of the Company is set forth below. INTERESTED DIRECTORS AND EXECUTIVE OFFICERS -------------------------------------------------------------------------------- MICHAEL J. COSGROVE -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 59 POSITION(S) HELD WITH FUND Chairman of the Board and President TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 10 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President - GEAM since February 1997; President and Chief Executive Officer - Mutual Funds at GEAM since March 2007; Vice President, GE Capital Corporation, an indirect wholly-owned subsidiary of GE, since December 1999; Executive Vice President - Sales and Marketing of GEAM, a wholly-owned subsidiary of GE that is registered as an investment adviser under the Investment Advisers Act of 1940, as amended, since March 1993; Director of GEAM since 1988. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48 OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception; Trustee of Elfun Funds, GE Savings & Security Funds and General Electric Pension Trust since 1988; Trustee of Fordham University since 2003; Trustee of Elfun Foundation; Treasurer of GE Foundation; Director, GE Asset Management (Ireland) since February 1999; Director, GE Asset Management Funds Plc, GE Asset Canada Company, GE Asset Management Limited, and GE Volunteers. -------------------------------------------------------------------------------- MATTHEW J. SIMPSON -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 47 POSITION(S) HELD WITH FUND Executive Vice President TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - less than one year PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General Counsel and Secretary of GEAM since July 2007; Senior Vice President and General Counsel - Marketing and Client Services (formerly Asset Management Services), at GEAM and Senior Vice President and General Counsel of GEAMS from February 1997 to June 2007; Vice President and Associate General Counsel of GEAM from October 1992 to February 1997; Secretary of Fund from 1997 to June 2007; Vice President of Fund from September 2003 to June 2007; Vice President of GE Institutional Funds and GE LifeStyle Funds from September 2003 to June 2007; Secretary of GE Institutional Funds and GE LifeStyle Funds from 1997 to June 2007; Vice President of Elfun Funds and GE Savings & Security Funds from October 2003 to June 2007; Assistant Secretary of Elfun Funds and GE Savings & Security Funds from 1998 to June 2007. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional Funds, GE LifeStyle Funds, Elfun Funds and GE Savings & Security Funds since July 2007. 17 Additional Information (unaudited) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SCOTT H. RHODES -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 49 POSITION(S) HELD WITH FUND Treasurer TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 2 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds Operations Manager since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle Funds and GE Investments Funds since November 2005 and Elfun Funds and GE Savings & Security Funds since September 2005; from August 2004 to September 2005 Vice President, U.S. Trust Company, N.A. and Assistant Treasurer of Excelsior Funds, Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds, Inc.; from January 2004 to August 2004, Vice President BlackRock Financial Management, Inc.; from December 1996 to November 2003, Controller - Mutual Funds, American Skandia Investment Services, Inc. and Assistant Treasurer of American Skandia Trust and American Skandia Advisor Funds, Inc. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A -------------------------------------------------------------------------------- JEANNE M. LAPORTA -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 42 POSITION(S) HELD WITH FUND Vice President and Secretary TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 2 years (Vice President); less than one year (Secretary) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Senior Vice President and Deputy General Counsel at GE Asset Management since October 2007; Vice President and Associate General Counsel - Marketing and Client Services (formerly Asset Management Services) at GEAM from May 1997 to October 2007; Vice President and Assistant Secretary of GE Funds, GE Institutional Funds and GE LifeStyle Funds since September 2003; Vice President and Assistant Secretary of Elfun Funds and GE Savings & Security Funds since October 2003; Assistant Secretary from September 2003 to June 2007 and Secretary since July 2007. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A 18 Additional Information (unaudited) -------------------------------------------------------------------------------- NON-INTERESTED DIRECTORS -------------------------------------------------------------------------------- JOHN R. COSTANTINO -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 62 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC since 2006; Managing Director, Walden Partners, Ltd., consultants and investors, since August 1992. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE Institutional Funds and GE LifeStyle Funds since their inception; Trustee of Fordham University since 2002 and Marymount College from 2001 through 2002; Neuroscience Research Institute since 1986; Diocesan Finance Counsel of the Dioceses of Brooklyn & Queens since 2001; Gregorian University Foundation since 1994. -------------------------------------------------------------------------------- WILLIAM J. LUCAS -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 60 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Treasurer of Fairfield University since 1983. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception. -------------------------------------------------------------------------------- ROBERT P. QUINN -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 72 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon Brothers Inc. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception. -------------------------------------------------------------------------------- The Statement of Additional Information for the Fund includes additional information about the Directors and Officers and is available, without charge, upon request by calling 1-800-242-0134. 19 Investment Team -------------------------------------------------------------------------------- INVESTMENT ADVISER AND ADMINISTRATOR GE Asset Management Incorporated BOARD OF DIRECTORS Michael J. Cosgrove, CHAIRMAN John R. Costantino William J. Lucas Robert P. Quinn Matthew J. Simpson SECRETARY Jeanne M. LaPorta ASSISTANT SECRETARIES Joseph A. Carucci Joon Won Choe TREASURER Scott H. Rhodes ASSISTANT TREASURERS Scott R. Fuchs Christopher M. Isaacs DISTRIBUTOR GE Investment Distributors, Inc. Member FINRA and SIPC COUNSEL Sutherland, Asbill & Brennan, LLP CUSTODIAN State Street Bank & Trust Company INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM KPMG LLP OFFICERS OF THE INVESTMENT ADVISER James W. Ireland, CHIEF EXECUTIVE OFFICER Daniel O. Colao, EVP, CHIEF FINANCIAL OFFICER (AS OF JULY 28, 2008) Michael J. Cosgrove, EVP, PRESIDENT AND CHIEF EXECUTIVE OFFICER - MUTUAL FUNDS Paul M. Colonna, EVP, PRESIDENT - FIXED INCOME Kathryn D. Karlic, EVP, PRESIDENT - INSTITUTIONAL SALES AND MARKETING Ralph R. Layman, EVP, PRESIDENT - INTERNATIONAL EQUITIES Matthew J. Simpson, EVP, GENERAL COUNSEL AND SECRETARY Judith A. Studer, EVP, PRESIDENT - U.S. EQUITIES Don W. Torey, EVP, PRESIDENT - ALTERNATIVE INVESTMENTS AND REAL ESTATE John J. Walker, EVP, CHIEF OPERATING OFFICER (AS OF JANUARY 31, 2008) David Wiederecht, EVP, PRESIDENT - INVESTMENT STRATEGIES 20 [This page intentionally left blank.] INVESTMENT ADVISER GE ASSET MANAGEMENT INCORPORATED 3001 SUMMER STREET PO BOX 7900 STAMFORD, CT 06904-7900 DISTRIBUTOR GE INVESTMENT DISTRIBUTORS, INC. MEMBER FINRA AND SIPC 3001 SUMMER STREET PO BOX 7900 STAMFORD, CT 06904-7900 The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities is available without charge (i) upon request, by calling 1-800-242-0134; (ii) on the Fund's website at HTTP://WWW.GEFUNDS.COM; and (iii) on the Commission's website at HTTP://WWW.SEC.GOV. The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC - information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Information (if any) regarding how the Fund voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through the Fund's website at HTTP://WWW.GEFUNDS.COM; and (ii) on the Commission's website at HTTP://WWW.SEC.GOV. [GE logo omitted] GE Investments Funds, Inc. Core Value Equity Fund Semi-Annual Report JUNE 30, 2008 [GE LOGO OMITTED] GE Investments Funds, Inc. Core Value Equity Fund -------------------------------------------------------------------------------- Contents NOTES TO PERFORMANCE................................................... 1 MANAGER REVIEW AND SCHEDULE OF INVESTMENTS............................. 2 NOTES TO SCHEDULE OF INVESTMENTS....................................... 8 FINANCIAL STATEMENTS Financial Highlights............................................. 9 Statement of Assets and Liabilities............................... 10 Statement of Operations........................................... 11 Statements of Changes in Net Assets............................... 12 Notes to Financial Statements..................................... 13 ADDITIONAL INFORMATION................................................. 18 INVESTMENT TEAM........................................................ 21 This report is prepared for Policyholders of certain variable contracts and may be distributed to others only if preceded or accompanied by the variable contract's current prospectus and the current prospectus of the Funds available for investments thereunder. Notes to Performance June 30, 2008 (unaudited) -------------------------------------------------------------------------------- Total returns take into account changes in share price and assume reinvestment of all dividends and capital gains distributions, if any. The performance data quoted represent past performance; past performance does not guarantee future results. Investment return and principal value will fluctuate so your shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data quoted. Periods less than one year are not annualized. Please call 800-242-0134 for the most recent month-end performance data. Total returns shown are net of Fund expenses but do not reflect fees and charges associated with the variable contracts such as administrative fees, account charges and surrender charges, which, if reflected, would reduce the Fund's total returns for all periods shown. Shares of the Fund are neither insured nor guaranteed by the U.S. Government, and their prices will fluctuate with market conditions. The Standard & Poor's ("S&P") 500(R) Composite Price Index of stocks (S&P 500 Index) is an unmanaged index and does not reflect the actual cost of investing in the instruments that comprise the index. The S&P 500 Index is an unmanaged, market capitalization-weighted index of stocks of 500 large U.S. companies, which is widely used as a measure of large-cap stock market performance. The results shown for the foregoing index assume the reinvestment of net dividends or interest. The peer universe of the underlying annuity funds used in our peer ranking calculation is based on the blend of Lipper peer categories, as shown. Lipper is an independent mutual fund rating service. A Fund's performance may be compared to or ranked within a universe of mutual funds with investment objectives and policies similar but not necessarily identical to the Fund's. Such comparisons or rankings are made on the basis of several factors, including the Fund's objectives and policies, management style and strategy, and portfolio composition, and may change over time if any of those factors change. ------------------- GE INVESTMENT DISTRIBUTORS, INC., MEMBER OF FINRA & SIPC, IS THE PRINCIPAL UNDERWRITER AND DISTRIBUTOR OF THE GE INVESTMENT FUNDS, INC. AND A WHOLLY OWNED SUBSIDIARY OF GE ASSET MANAGEMENT INCORPORATED, THE INVESTMENT ADVISER OF THE FUNDS. 1 Core Value Equity Fund -------------------------------------------------------------------------------- THE CORE VALUE EQUITY FUND IS CO-MANAGED BY PAUL C. REINHARDT AND STEPHEN V. GELHAUS. MESSRS. REINHARDT AND GELHAUS BOTH MANAGE THE FUND AS A COLLABORATIVE TEAM. BOTH PORTFOLIO MANAGERS HAVE THE AUTHORITY TO INCREASE OR DECREASE EXISTING POSITIONS IN THE FUND; HOWEVER, MR. REINHARDT, AS LEAD MANAGER, IS VESTED WITH THE AUTHORITY TO PURCHASE SECURITIES THAT ARE NEW TO THE FUND OR TO DIVEST THE FUND OF ITS ENTIRE POSITION IN A SECURITY. MR. REINHARDT ALSO HAS VETO AUTHORITY OVER MR. GELHAUS' TRADE DECISIONS. PAUL REINHARDT (PICTURED BELOW) IS A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT AND LEAD PORTFOLIO MANAGER OF THE CORE VALUE EQUITY FUND. HE HAS SERVED IN THIS CAPACITY SINCE APRIL 2002. MR. REINHARDT JOINED GE ASSET MANAGEMENT IN 1982 AS AN EQUITY ANALYST AND HAS BEEN A PORTFOLIO MANAGER SINCE 1987. STEPHEN V. GELHAUS IS A VICE PRESIDENT OF GE ASSET MANAGEMENT. HE HAS BEEN A MEMBER OF THE PORTFOLIO MANAGEMENT TEAM FOR THE CORE VALUE EQUITY FUND SINCE JANUARY 2002. MR. GELHAUS JOINED GE ASSET MANAGEMENT IN JUNE 1991 AND WAS A RESEARCH ANALYST IN U.S. EQUITIES GROUP FROM 1995 THROUGH 2001 AND BECAME AN ASSOCIATE PORTFOLIO MANAGER FOR THE CORE VALUE EQUITY FUND IN AUGUST 1999. Q. HOW DID THE CORE VALUE EQUITY FUND PERFORM COMPARED TO ITS BENCHMARK AND LIPPER PEER GROUP FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2008? A. For the six-month period ended June 30, 2008, the Core Value Equity Fund returned -8.96% for the Class 1 shares and -5.80% for the Class 4 shares. The S&P 500 Index, the Fund's benchmark, returned -11.91% and the Fund's Lipper peer group of 207 Large-Cap Core funds returned an average of -11.56% for the same period. Q. WHAT MARKET CONDITIONS IMPACTED FUND PERFORMANCE? A. The first half of the year proved challenging for U.S. equity investors, as the housing recession, skyrocketing commodity prices and tight credit conditions threatened the outlook for economic growth and corporate profits. Policymaker response was significant during the period as the Federal Reserve lowered interest rates and opened up its discount window to investment banks. Despite these actions, credit remained scarce, impeding economic growth and contributing to stock market volatility. Consumers began to receive the government's fiscal stimulus checks, but investors feared that the windfall might be consumed at the gas pump in a $140 per barrel of oil environment. Only the inflationary energy (+9%) and materials (+1%) sectors had positive returns during the period. Financials (-30%) was by far the worst performing sector, followed by telecommunications (-17%), industrials (-14%), consumer discretionary (-13%) and technology (-13%). Healthcare (-13%), traditionally a defensive sector, also lagged as it exhibited some discretionary characteristics, and suffered regulatory uncertainty stemming from the upcoming presidential elections. Q. WHAT WERE THE PRIMARY DRIVERS FUND PERFORMANCE? A. The most significant contributions to Fund performance came from the financials and technology sectors. Underweighting credit-sensitive banks and capital markets companies during the continuing fallout from the subprime collapse benefited Fund [PHOTO OMITTED] 2 Q&A -------------------------------------------------------------------------------- performance in financials. Exiting AIG also aided returns during the period, and AON (-3%) was a strong relative performer. Within technology, a new position in Apple helped Fund performance as the company rallied +40% on its announcement of its new iPhone product since we initiated our position in the stock. Many large technology companies have fared relatively well year to date, as they tend to spend less on fuel as a percentage of costs and benefit from overseas economic growth as well as a weak dollar, some of the same factors that have pushed up oil prices in 2008. Some of our technology holdings that have benefited from these tailwinds included IBM (+11%), Affiliated Computer Services (+19%), Taiwan Semiconductor (+10%), and Western Union (+2%). During a strong period of relative performance, there were a number of detractors in the Fund. First of all, underweighting road and rail companies that rallied 26% year-to-date weighed negatively on returns. Our underweight in the energy sector also hurt Fund performance. Although the Fund had profited from the energy sector year-to-date as oil prices have continued to soar, our underweight in this sector more than offset our positive stock selection in the sector, i.e. the Fund's energy holdings returned +15% versus +9% for the benchmark sector. Weakness in individual holdings, including Microsoft and Viacom (both down 22%) and Freddie Mac (-20%) was more than offset by strength among other holdings in their sectors (technology, media and financials, respectively). Q. WERE THERE ANY SIGNIFICANT CHANGES TO THE FUND OVER THE PERIOD? A. There were no significant changes to the Fund over the period. Our process has remained consistent, and we continued to employ a bottom-up relative value discipline to seek out underappreciated stocks with catalysts for growth or improving fundamentals. The Fund remained positioned for an economic slowdown. As of the end of the second quarter, we were positioned with overweight's in both consumer nondiscretionary and technology. At the same time, we have underweighted energy and financials for valuation and fundamental reasons. We remain focused on a long-term investment horizon and continue to utilize a bottom-up, research-driven, fundamental approach to stock selection. The Fund also continues to emphasize larger companies that can compete globally. Over the past six months, many of these holdings were selling at discounts or on par with smaller, more U.S.-centric companies. Our objective for many of our holdings is for both valuation improvement and earnings growth to drive relative stock appreciation. 3 Core Value Equity Fund -------------------------------------------------------------------------------- Understanding Your Fund's Expenses As a shareholder of the Fund you incur ongoing expenses, which include portfolio management fees, professional fees, administrative fees and other Fund expenses. The following example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the period. The information in the following table is based on an investment of $1,000, which is invested at the beginning of the period and held for the entire six-month period ended June 30, 2008. ACTUAL EXPENSES The first section of the table provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your class under the heading "Expenses Paid During Period." HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second section of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholders reports of other funds. Please note that the expenses shown in the table do not reflect any transaction costs, such as sales charges or redemption fees.
JANUARY 1, 2008 - JUNE 30, 2008 ------------------------------------------------------------------------------------------------------------------------------------ ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($)* ------------------------------------------------------------------------------------------------------------------------------------ ACTUAL FUND RETURN** ------------------------------------------------------------------------------------------------------------------------------------ Class 1 1,000.00 910.43 3.93 Class 4 1,000.00 941.96 6.07 ------------------------------------------------------------------------------------------------------------------------------------ HYPOTHETICAL 5% RETURN (2.5% FOR THE PERIOD) ------------------------------------------------------------------------------------------------------------------------------------ Class 1 1,000.00 1,020.47 4.22 Class 4 1,000.00 1,018.58 6.26 ------------------------------------------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.84% FOR CLASS 1 AND 1.24% FOR CLASS 4, (FROM PERIOD JANUARY 1, 2008 - JUNE 30, 2008), MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY 182/366 (TO REFLECT THE ONE-HALF YEAR PERIOD). ** ACTUAL FUND RETURNS FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2008 WERE AS FOLLOWS: (8.96)% FOR CLASS 1 SHARES, AND SINCE INCEPTION (5.80)% FOR CLASS 4 SHARES. 4 Core Value Equity Fund (unaudited) -------------------------------------------------------------------------------- CHANGE IN VALUE OF A $10,000 INVESTMENT CLASS 1 SHARES [Line chart omitted -- plot points are as follows:] GEI CORE VALUE EQUITY FUND S&P 500 INDEX 04/28/00 10,000.00 10,000.00 12/00 9,978.58 9,215.42 12/01 9,105.15 8,118.23 12/02 7,505.73 6,324.32 12/03 9,310.99 8,142.00 12/04 10,202.12 9,027.22 12/05 10,616.30 9,469.75 12/06 12,511.41 10,965.42 12/07 13,774.88 11,568.17 06/08 12,541.12 10,190.27
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2008 --------------------------------------------------------------------------------------------- CLASS 1 SHARES (Inception date: 4/28/00) --------------------------------------------------------------------------------------------- SIX ONE FIVE SINCE ENDING VALUE OF A MONTHS YEAR YEAR INCEPTION $10,000 INVESTMENT --------------------------------------------------------------------------------------------- Core Value Equity Fund -8.96% -7.06% 8.82% 2.81% $12,541 --------------------------------------------------------------------------------------------- S&P 500 Index -11.91% -13.12% 7.59% 0.15% $10,190 --------------------------------------------------------------------------------------------- Lipper peer group average* -11.56% -12.51% 7.31% N/A ---------------------------------------------------------------------------------------------
CLASS 4 SHARES (Inception date: 5/1/08) [Line chart omitted -- plot points are as follows:] GEI CORE VALUE EQUITY FUND S&P 500 INDEX 04/28/00 10,000.00 10,000.00 05/08 10,000.00 10,000.00 06/08 9,419.55 9,275.57 AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2008 -------------------------------------------------------------------------------- CLASS 4 SHARES (Inception date: 5/1/08) -------------------------------------------------------------------------------- ONE SINCE ENDING VALUE OF A MONTH INCEPTION $10,000 INVESTMENT -------------------------------------------------------------------------------- Core Value Equity Fund -6.75% -5.80% $9,420 -------------------------------------------------------------------------------- S&P 500 Index -8.43% -7.24% $9,276 -------------------------------------------------------------------------------- Lipper peer group average** -8.12% N/A -------------------------------------------------------------------------------- INVESTMENT PROFILE A fund designed for investors who seek long-term growth of capital and future income by investing at least 80% of its net assets in equity securities under normal circumstances. The Fund invests primarily in U.S. companies that the portfolio manager believes are undervalued by the market but have solid growth prospects. PORTFOLIO COMPOSITION AS OF JUNE 30, 2008 as a % of Market Value -------------------------------------------------------------------------------- Market Value of $31,179 (in thousands) [Pie chart omitted -- plot points are as follows:] Information Technology 20.0% Consumer Staples 15.0% Energy 12.3% Financials 12.0% Healthcare 11.3% Consumer Discretionary 9.1% Industrials 7.4% Utilities 4.9% Materials 4.4% Telecommunication Services 2.2% Short-Term 1.4% Other Investments 0.0% TOP TEN LARGEST HOLDINGS AS OF JUNE 30, 2008 as a % of Market Value -------------------------------------------------------------------------------- Exxon Mobil Corp. 3.41% -------------------------------------------------------------------------------- Microsoft Corp. 2.96% -------------------------------------------------------------------------------- PepsiCo, Inc. 2.49% -------------------------------------------------------------------------------- Kimberly-Clark Corp. 2.44% -------------------------------------------------------------------------------- Omnicom Group, Inc. 2.31% -------------------------------------------------------------------------------- Oracle Corp. 2.06% -------------------------------------------------------------------------------- Cisco Systems, Inc. 2.06% -------------------------------------------------------------------------------- Dominion Resources, Inc. 2.04% -------------------------------------------------------------------------------- Hess Corp. 1.93% -------------------------------------------------------------------------------- Amgen, Inc. 1.92% -------------------------------------------------------------------------------- * LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR THE SIX MONTHS, ONE YEAR AND FIVE-YEAR PERIODS INDICATED IN THE LARGE-CAP CORE FUNDS PEER GROUP CONSISTING OF 207, 207 AND 166 UNDERLYING ANNUITY FUNDS, RESPECTIVELY. ** LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR THE ONE MONTH PERIOD INDICATED IN THE LARGE-CAP CORE FUNDS PEER GROUP CONSISTING OF 210 UNDERLYING ANNUITY FUNDS, RESPECTIVELY. *** LESS THAN 0.1%. SEE NOTES TO PERFORMANCE ON PAGE 1 FOR FURTHER INFORMATION, INCLUDING AN EXPLANATION OF LIPPER PEER CATEGORIES. PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE AND THE GRAPH AND TABLE DO NOT REFLECT THE DEDUCTION OF TAXES. 5 CORE VALUE EQUITY FUND Schedule of Investments June 30, 2008 (unaudited) -------------------------------------------------------------------------------- CORE VALUE EQUITY FUND -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE -------------------------------------------------------------------------------- COMMON STOCK -- 96.7% + CONSUMER DISCRETIONARY -- 9.1% Bed Bath & Beyond, Inc......... 7,836 $ 220,192(a) Cablevision Systems Corp....... 6,813 153,974(a) Comcast Corp. (Class A)........ 15,670 293,969 Darden Restaurants, Inc........ 3,417 109,139 Lowe's Companies, Inc.......... 2,085 43,264 News Corp. (Class A)........... 13,626 204,935 Omnicom Group, Inc............. 16,079 721,626 The Walt Disney Co............. 7,018 218,962 Time Warner, Inc............... 39,857 589,884(c) Viacom Inc. (Class B).......... 9,061 276,723(a) 2,832,668 CONSUMER STAPLES -- 15.1% Altria Group, Inc.............. 9,585 197,068 Clorox Co...................... 7,017 366,287 Diageo PLC ADR................. 3,133 231,435 General Mills, Inc............. 6,133 372,702 Kimberly-Clark Corp............ 12,740 761,597 McCormick & Company, Inc....... 10,084 359,595 Nestle S.A. ADR................ 2,424 273,548 Pepsi Bottling Group, Inc...... 5,655 157,888 PepsiCo, Inc................... 12,196 775,544 Procter & Gamble Co............ 9,401 571,675 Sara Lee Corp.................. 9,197 112,663 The Estee Lauder Companies Inc. (Class A).................... 4,769 221,520 Wal-Mart Stores, Inc........... 4,974 279,539 4,681,061 ENERGY -- 12.4% Apache Corp.................... 1,636 227,404 Exxon Mobil Corp............... 12,059 1,062,760(c) Halliburton Co................. 9,948 527,940 Hess Corp...................... 4,769 601,800 Marathon Oil Corp.............. 6,541 339,282 Nabors Industries Ltd.......... 4,088 201,252(a) National Oilwell Varco, Inc.... 2,725 241,762(a) Suncor Energy, Inc............. 1,362 79,159 Transocean, Inc................ 2,248 342,573 Valero Energy Corp............. 5,451 224,472 3,848,404 FINANCIALS -- 11.6% ACE Ltd........................ 4,633 255,232 Allstate Corp.................. 3,066 139,779 American Express Co............ 11,244 423,561 NUMBER OF SHARES VALUE -------------------------------------------------------------------------------- Ameriprise Financial, Inc...... 6,541 $ 266,022 AON Corp....................... 7,426 341,150 Bank of New York Mellon Corp... 10,560 399,485 BlackRock, Inc................. 681 120,537 Chubb Corp..................... 7,018 343,952 JP Morgan Chase & Co........... 12,945 444,143 Marsh & McLennan Companies, Inc............... 4,769 126,617 Metlife, Inc................... 8,176 431,448 Prudential Financial, Inc...... 1,372 81,963 US Bancorp..................... 8,516 237,511 3,611,400 HEALTHCARE -- 11.4% Abbott Laboratories............ 3,551 188,096 Aetna, Inc..................... 3,134 127,021 Amgen, Inc..................... 12,683 598,130(a) Baxter International, Inc...... 4,088 261,387 Boston Scientific Corp......... 27,254 334,952(a) Bristol-Myers Squibb Co........ 15,194 311,933 Covidien Ltd................... 2,520 120,683 Johnson & Johnson.............. 2,725 175,326 McKesson Corp.................. 6,133 342,896 Merck & Company, Inc........... 6,473 243,967 Thermo Fisher Scientific, Inc.. 2,086 116,253(a) UnitedHealth Group, Inc........ 5,042 132,352 Wyeth.......................... 12,059 578,350 3,531,346 INDUSTRIALS -- 5.5% ABB Ltd. ADR................... 9,019 255,418(a) Cooper Industries Ltd.......... 6,131 242,174 Deere & Co..................... 2,521 181,840 Eaton Corp..................... 2,862 243,184 General Dynamics Corp.......... 3,406 286,785 ITT Corp....................... 3,680 233,054 Koninklijke Philips Electronics N.V. 2,656 89,773 Rockwell Collins, Inc.......... 1,704 81,724 Siemens AG ADR................. 937 103,192 1,717,144 INFORMATION TECHNOLOGY -- 20.1% Affiliated Computer Services, Inc. (Class A).................... 4,429 236,907(a) Analog Devices, Inc............ 7,154 227,283(c) Cisco Systems, Inc............. 27,593 641,813(a,c) Corning Incorporated........... 6,813 157,040 Dell, Inc...................... 7,699 168,454(a) Fidelity National Information Services, Inc................ 4,292 158,418 Hewlett-Packard Co............. 10,424 460,845 Intel Corp..................... 25,549 548,793 International Business Machines Corp................ 3,884 460,371 Intuit Inc..................... 4,633 127,732(a) See Notes to Schedule of Investments on page 8 and Notes to Financial Statements. 6 CORE VALUE EQUITY FUND Schedule of Investments June 30, 2008 (unaudited) -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE -------------------------------------------------------------------------------- Lam Research Corp............... 4,837 $ 174,858(a) Maxim Integrated Products, Inc. 10,484 221,737 Microchip Technology Inc....... 1,390 42,451 Microsoft Corp................. 33,539 922,658(c) National Semiconductor Corp.... 7,766 159,514 Oracle Corp.................... 30,656 643,776(a,c) Taiwan Semiconductor Manufacturing Company Ltd. ADR............. 19,758 215,559(a) Texas Instruments Incorporated. 12,537 353,042 Western Union Co............... 12,263 303,141 6,224,392 MATERIALS -- 4.4% Alcoa, Inc..................... 6,030 214,789 Allegheny Technologies Incorporated................. 2,725 161,538 Barrick Gold Corp.............. 9,266 421,603 Dow Chemical Co................ 3,202 111,782 Freeport-McMoRan Copper & Gold, Inc.................... 2,180 255,474 Praxair, Inc................... 487 45,895 Vulcan Materials Co............ 2,725 162,900 1,373,981 TELECOMMUNICATION SERVICES -- 2.2% AT&T, Inc...................... 4,292 144,597 Verizon Communications, Inc.... 11,542 408,587 Vodafone Group, PLC ADR........ 4,088 120,432 673,616 UTILITIES -- 4.9% American Electric Power Company, Inc................. 7,018 282,334 Dominion Resources, Inc........ 13,423 637,458 Edison International........... 7,358 378,054 Entergy Corp................... 1,908 229,876 1,527,722 TOTAL COMMON STOCK (COST $28,792,566)........... 30,021,734 EXCHANGE TRADED FUNDS -- 2.3% Financial Select Sector SPDR Fund.................... 6,686 135,458(e) Industrial Select Sector SPDR Fund.................... 17,051 579,904(c,e) TOTAL EXCHANGE TRADED FUNDS (COST $719,059).............. 715,362 VALUE -------------------------------------------------------------------------------- OTHER INVESTMENTS -- 0.0%* -------------------------------------------------------------------------------- GEI Investment Fund (COST $19,083)............... $ 14,503(d) TOTAL INVESTMENTS IN SECURITIES (COST $29,530,708)........... 30,751,599 -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 1.4% -------------------------------------------------------------------------------- GE Money Market Fund Institutional Class 1.93%........................ 426,963(b,f) (COST $426,963) TOTAL INVESTMENTS (COST $29,957,671)........... 31,178,562 LIABILITIES IN EXCESS OF OTHER ASSETS, NET-- (0.4)%................. (130,268) ----------- NET ASSETS-- 100.0% ........... $31,048,294 =========== -------------------------------------------------------------------------------- OTHER INFORMATION -------------------------------------------------------------------------------- The GEI Core Value Equity Fund had the following long futures contracts open at June 30, 2008 (unaudited): NUMBER CURRENT EXPIRATION OF NOTIONAL UNREALIZED DESCRIPTION DATE CONTRACTS VALUE DEPRECIATION -------------------------------------------------------------------------------- S&P 500 Index Futures September 2008 1 $320,275 $(19,645) See Notes to Schedule of Investments on page 8 and Notes to Financial Statements. 7 Notes to Schedule of Investments June 30, 2008 (unaudited) -------------------------------------------------------------------------------- The views expressed in this document reflect our judgment as of the publication date and are subject to change at any time without notice. The securities cited may not represent current or future holdings and should not be considered as a recommendation to purchase or sell a particular security. See the prospectus for complete descriptions of investment objectives, policies, risks and permissible investments. (a) Non-income producing security. (b) Coupon amount represents effective yield. (c) At June 30, 2008, all or a portion of this security was pledged to cover collateral requirements for futures, options, forward foreign currency contracts and/or TBA's. (d) GE Asset Management ("GEAM"), the investment adviser of the Fund, also serves as investment adviser of the GEI Invstment Fund. (e) Sponsored by SSgA Funds Management, Inc., an affiliate of State Street Bank & Trust Co., the Fund's custodian and accounting agent. (f) GEAM, the investment adviser of the Fund, also serves as investment adviser of the GE Money Market Fund. * Less than 0.1%. + Percentages are based on net assets as of June 30, 2008. Abbreviations: ADR American Depository Receipt SPDR Standard & Poors Depository Receipts 8
Financial Highlights Selected data based on a share outstanding throughout the periods indicated ------------------------------------------------------------------------------------------------------------------------------------ CORE VALUE EQUITY FUND ------------------------------------------------------------------------------------ CLASS 1 CLASS 4 -------------------------------------------------------------------- -------------- 6/30/08+ 12/31/07 12/31/06 12/31/05 12/31/04 12/31/03 6/30/08+ -------------------------------------------------------------------- -------------- INCEPTION DATE -- -- -- -- -- 4/28/00 5/1/08 Net asset value, beginning of period.... $10.16 $10.70 $10.01 $9.77 $9.02 $7.36 $9.82 INCOME/(LOSS) FROM INVESTMENT OPERATIONS: Net investment income................ 0.04 0.12 0.17 0.11 0.11 0.11 0.01 Net realized and unrealized gains/(losses) on investments..... (0.95) 0.97 1.62 0.29 0.75 1.66 (0.58) TOTAL INCOME/(LOSS) FROM INVESTMENT OPERATIONS................ (0.91) 1.09 1.79 0.40 0.86 1.77 (0.57) LESS DISTRIBUTIONS FROM: Net investment income................ -- 0.12 0.17 0.12 0.11 0.11 -- Net realized gains................... -- 1.51 0.93 0.04 -- -- -- TOTAL DISTRIBUTIONS..................... -- 1.63 1.10 0.16 0.11 0.11 -- NET ASSET VALUE, END OF PERIOD.......... $9.25 $10.16 $10.70 $10.01 $9.77 $9.02 $9.25 TOTAL RETURN (A)........................ (8.96)% 10.10% 17.85% 4.06% 9.57% 24.05% (5.80)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $31,039 $37,765 $39,683 $37,115 $37,128 $29,989 $9 Ratios to average net assets: Net investment income*............ 0.90% 0.96% 1.55% 1.13% 1.26% 1.16% 0.53% Expenses*......................... 0.84% 0.81% 0.81% 0.80% 0.80% 0.73% 1.24% Portfolio turnover rate.............. 30% 45% 42% 36% 53% 78% 30%
NOTES TO FINANCIAL HIGHLIGHTS -------------------------------------------------------------------------------- (a) Total returns are historical and assume changes in share price and reinvestment of dividends and capital gains and do not include the effect of insurance contract charges. * Annualized for periods less than one year. + Unaudited See Notes to Financial Statements. 9
Statement of Assets and Liabilities JUNE 30, 2008 (UNAUDITED) ------------------------------------------------------------------------------------------------------------------------------- CORE VALUE EQUITY FUND ------------------------------------------------------------------------------------------------------------------------------- ASSETS Investments in securities, at market (cost $29,511,625).............................................. $30,737,096 Investments in affiliated securities, at market (cost $19,083)........................................ 14,503 Short-term affiliated investments (at amortized cost).................................................. 426,963 Income receivables..................................................................................... 40,647 Variation margin receivable............................................................................ 280 ------------------------------------------------------------------------------------------------------------------------------- TOTAL ASSETS....................................................................................... 31,219,489 ------------------------------------------------------------------------------------------------------------------------------- LIABILITIES Payable for investments purchased...................................................................... 98,311 Payable for fund shares redeemed....................................................................... 11,389 Payable to GEAM........................................................................................ 8,676 Accrued other expenses................................................................................. 52,615 Other liabilities...................................................................................... 204 ------------------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES.................................................................................. 171,195 ------------------------------------------------------------------------------------------------------------------------------- NET ASSETS................................................................................................ $31,048,294 =============================================================================================================================== NET ASSETS CONSIST OF: Capital paid in........................................................................................ 28,745,846 Undistributed (distribution in excess of) net investment income............................................................................... 154,516 Accumulated net realized gain (loss)................................................................... 946,686 Net unrealized appreciation/(depreciation) on: Investments......................................................................................... 1,220,891 Futures............................................................................................. (19,645) ------------------------------------------------------------------------------------------------------------------------------- NET ASSETS................................................................................................ $31,048,294 =============================================================================================================================== CLASS 1: NET ASSETS................................................................................................ 31,038,874 Shares outstanding ($0.01 par value; unlimited shares authorized)......................................... 3,354,421 Net asset value per share................................................................................. $9.25 CLASS 4: NET ASSETS................................................................................................ 9,420 Shares outstanding ($0.01 par value; unlimited shares authorized)......................................... 1,018 Net asset value per share................................................................................. $9.25
See Notes to Financial Statements. 10
Statement of Operations FOR THE SIX MONTHS ENDED JUNE 30, 2008 (UNAUDITED) ------------------------------------------------------------------------------------------------------------------ CORE VALUE EQUITY FUND ------------------------------------------------------------------------------------------------------------------ INVESTMENT INCOME INCOME: Dividend .............................................................................. $ 284,854 Interest .............................................................................. 1,557 Interest from affiliated investments .................................................. 6,047 Less: Foreign taxes withheld .......................................................... (3,307) ------------------------------------------------------------------------------------------------------------------ TOTAL INCOME ............................................................................ 289,151 ------------------------------------------------------------------------------------------------------------------ EXPENSES: Advisory and administrative fees ...................................................... 108,422 Distributors Fees (Note 4) Class 4 ............................................................................ 7 Transfer agent ........................................................................ 23 Trustee's fees ........................................................................ 457 Custody and accounting expenses ....................................................... 19,603 Professional fees ..................................................................... 8,662 Registration expenses ................................................................. 1,727 Other expenses ........................................................................ 1,281 ------------------------------------------------------------------------------------------------------------------ TOTAL EXPENSES BEFORE WAIVER AND REIMBURSEMENT .......................................... 140,182 ------------------------------------------------------------------------------------------------------------------ Less: Expenses reimbursed by the adviser (waiver related to Fund of Fund Investment) .. (350) ------------------------------------------------------------------------------------------------------------------ Net expenses .......................................................................... 139,832 ------------------------------------------------------------------------------------------------------------------ NET INVESTMENT INCOME (LOSS) ............................................................ 149,319 ================================================================================================================== NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS REALIZED GAIN (LOSS) ON: Investments ........................................................................ 699,813 Futures ............................................................................ 22,215 Foreign currency transactions ...................................................... (2) INCREASE (DECREASE) IN UNREALIZED APPRECIATION/ (DEPRECIATION) ON: Investments ........................................................................ (4,136,238) Futures ............................................................................ (19,610) ------------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments ................................ (3,433,862) ------------------------------------------------------------------------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ......................... $(3,284,543) ==================================================================================================================
See Notes to Financial Statements. 11
Statements of Changes in Net Assets ------------------------------------------------------------------------------------------------------------------------------------ CORE VALUE EQUITY FUND ------------------------------------------------------------------------------------------------------------------------------------ SIX MONTHS ENDED YEAR ENDED JUNE 30, 2008 DECEMBER 31, (UNAUDITED) 2007 ------------------------------------------------------------------------------------------------------------------------------------ INCREASE (DECREASE) IN NET ASSETS OPERATIONS: Net investments income (loss).................................................... $ 149,319 $ 380,874 Net realized gain (loss) on investments, futures, written options, and foreign currency transactions............................................... 722,026 4,802,982 Net increase (decrease) in unrealized appreciation/(depreciation) on investments, futures, written options, and foreign currency translation............................................................ (4,155,888) (1,343,366) ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) from operations........................................... (3,284,543) 3,840,490 ------------------------------------------------------------------------------------------------------------------------------------ DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Class 1......................................................................... -- (375,677) Class 4......................................................................... -- Net realized gains Class 1......................................................................... -- (4,867,273) Class 4......................................................................... -- ------------------------------------------------------------------------------------------------------------------------------------ TOTAL DISTRIBUTIONS................................................................. -- (5,242,950) ------------------------------------------------------------------------------------------------------------------------------------ Increase (decrease) in net assets from operations and distributions................. (3,284,543) (1,402,460) ------------------------------------------------------------------------------------------------------------------------------------ SHARE TRANSACTIONS: Proceeds from sale of shares Class 1......................................................................... 293,138 1,494,210 Class 4......................................................................... 10,000 Value of distributions reinvested Class 1......................................................................... -- 5,242,950 Class 4......................................................................... -- -- Cost of shares redeemed Class 1......................................................................... (3,735,732) (7,251,969) Class 4......................................................................... -- -- ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) from share transactions................................... (3,432,594) (514,809) ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INCREASE (DECREASE) IN NET ASSETS............................................. (6,717,137) (1,917,269) NET ASSETS Beginning of period................................................................. 37,765,431 39,682,700 ------------------------------------------------------------------------------------------------------------------------------------ End of period....................................................................... $31,048,294 $37,765,431 ==================================================================================================================================== UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD......... $ 154,516 $ 5,197 ------------------------------------------------------------------------------------------------------------------------------------ CHANGES IN FUND SHARES CLASS 1 Shares sold............................................................................ 30,576 133,227 Issued for distributions reinvested.................................................... -- 513,512 Shares redeemed........................................................................ (393,992) (638,176) ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in fund shares................................................. (363,416) 8,563 ==================================================================================================================================== CLASS 4 Shares sold............................................................................ 1,018 -- Issued for distributions reinvested.................................................... -- -- Shares redeemed........................................................................ -- -- ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in fund shares................................................. 1,018 -- ====================================================================================================================================
See Notes to Financial Statements. 12 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- 1. ORGANIZATION OF THE COMPANY GE Investments Funds, Inc. (the "Company") was incorporated under the laws of the Commonwealth of Virginia on May 14, 1984 and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company. The Company is composed of thirteen investment portfolios (collectively the "Funds"), although only the following eleven are currently being offered: U.S. Equity Fund, S&P 500 Index Fund, Premier Growth Equity Fund, Core Value Equity Fund (the "Fund"), Mid-Cap Equity Fund, Small-Cap Equity Fund, International Equity Fund, Total Return Fund, Income Fund, Money Market Fund and Real Estate Securities Fund. Shares of the Funds of the Company are offered only to insurance company separate accounts that fund certain variable life insurance contracts and variable annuity contracts. These insurance companies may include insurance companies affiliated with GE Asset Management Incorporated ("GEAM"), the investment adviser and administrator of each of the Funds. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results may differ from those estimates. The following summarizes the significant accounting policies of the Fund: SECURITY VALUATION AND TRANSACTIONS The Fund's portfolio securities are valued generally on the basis of market quotations. Equity securities generally are valued at the last reported sales price on the primary market in which they are traded. Portfolio securities listed on NASDAQ are valued using the NASDAQ Official Closing Price, which may not necessarily represent the last sale price. If no sales occurred on the exchange or NASDAQ that day, the portfolio security generally is valued using the last reported bid price. Debt securities (other than short-term securities described below) generally are valued at an evaluated bid as reported by an independent pricing service. Values obtained from pricing services are based on various factors such as market transactions, dealer supplied valuations, security characteristics and other market data. In the absence of a reliable price from such a pricing service, debt securities may be valued based on dealer supplied valuations or quotations. The Fund's written or purchased options are valued at the last sales price, or if no sales occurred that day, at the last reported bid price. Short-term investments with remaining maturities of sixty days or less at the time of purchase are valued on the basis of amortized cost, which approximates market value. All assets and liabilities of the Fund initially expressed in foreign currency values will be converted into U.S. dollars at the WM/Reuters exchange rate computed at 11:00 a.m., Eastern time. If prices are not readily available for a portfolio security, or if it is believed that a price for a portfolio security does not represent its fair value, the security may be valued using procedures approved by the Fund's Board of Directors that are designed to establish its "fair" value. Those procedures require that the fair value of a security be established by the fair valuation committee. The fair valuation committee follows different protocols for different types of investments and circumstances. The fair value procedures may be used to value any investment by the Fund in the appropriate circumstances. Examples of the types of securities that may be fair valued include: thinly traded or illiquid investments, high-yield securities or foreign securities. Foreign securities may be valued with the assistance of an independent fair value pricing service in circumstances where it is believed that they have been or would be materially affected by events occurring after the close of the portfolio security's primary market and before the close of regular trading on the NYSE. This independent fair value pricing service uses a computerized system to appraise affected securities and portfolios taking into consideration various factors and the fair value of such securities may be something other than the last available quotation or other market price. GEAM may also separately monitor portfolio securities and, consistent with the Fund's fair value procedures, apply a different value to a portfolio security than would be applied had it been priced using market quotations or by an independent fair value pricing service. 13 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- Determining the fair value of securities involves the application of both subjective and objective considerations. Security values may differ depending on the methodology used to determine their values, and may differ from the last quoted sale or closing price. No assurance can be given that use of these fair value procedures will always better represent the price at which the Fund could sell the affected portfolio security. Security transactions are accounted for as of the trade date. Realized gains and losses on investments sold are recorded on the basis of identified cost for both financial statement and federal tax purposes. The Fund adopted FASB Statement No. 157, FAIR VALUE MEASUREMENTS (FAS 157). FAS 157 establishes a single definition of fair value, a framework for measuring fair value, and expanded disclosures about fair value measurements. Various inputs are used in determining the value of the Fund's investments. These inputs are classified into three broad levels: Level 1 includes quoted prices in active markets of securities identical to those of the Fund. Level 2 includes: 1) quoted prices in active markets for similar securities to those of the Fund; 2) quoted prices for identical or similar securities to those of the Fund that trade in markets in which there are few transactions or the quoted prices are not current; 3) prices based on observable market data such as interest rates and yield curves, volatilities, bond prepayment speeds, and credit risk and; 4) prices based principally on observable market data by use of correlation techniques or other means. Level 3 includes unobservable market inputs used to fair value securities. These inputs are based on assumptions that market participants would use to price securities and may include the adviser's own assumptions. Other financial instruments are derivative instruments that are not reflected in TOTAL INVESTMENTS, such as futures, forwards, swaps, and written options contracts, which are valued based on the unrealized appreciation/depreciation of the instrument.
Level 1 Level 2 Level 3 Total -------------------------------------------------------------------------------------------------------------------------- Investments in Securities $31,164,059 $14,503 $-- $31,178,562 Other Financial Instruments $ -- $ -- $-- $ --
REPURCHASE AGREEMENTS The Fund may enter into repurchase agreement transactions with respect to instruments that are consistent with the Fund's investment objectives or policies. The Fund's custodian or a third party custodian takes possession of the collateral pledged for investments in repurchase agreements on behalf of the Fund. The Fund values the underlying collateral daily on a mark-to-market basis to determine that the value, including accrued interest, is at least equal to 102% of the repurchase price. In the event the seller defaults and the value of the security declines, or if the seller enters an insolvency proceeding, realization of the collateral by the Fund may be delayed or limited. SECURITY LENDING The Fund may loan securities to brokers, dealers, and financial institutions determined by GEAM to be creditworthy, subject to certain limitations. The Fund continues to receive the interest and dividends on the loaned securities during the term of the loan. The loans of securities are secured by collateral in the form of cash or other liquid assets, which are segregated and maintained with the custodian in an amount at least equal to 102% of the current market value of the loaned securities. During the term of the loan, the Fund will record any gain or loss in the market value of its loaned securities and of securities in which cash collateral is invested. The Fund will also earn interest, net of any rebate, from securities in which cash collateral is invested. In the event the counterparty (borrower) does not meet its contracted obligation to return the securities, the Fund may be exposed to the risk of loss of reacquiring the loaned securities at prevailing market prices using the proceeds of the sale of the collateral. FOREIGN CURRENCY Accounting records of the Fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange on a daily basis (on days the New York Stock Exchange is open). Purchases and sales of securities, income receipts and expense payments denominated in foreign currencies are translated into U.S. dollars at the prevailing exchange rate on the respective dates of such transactions. 14 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- The Fund does not isolate the portion of the results of operations resulting from changes in foreign exchange rates from the fluctuations arising from changes in the market prices of securities during the period. Such fluctuations are included in the net realized or unrealized gain or loss from investments. Net realized gains or losses on foreign currency transactions represent net gains or losses on sales and maturities of foreign currency contracts, disposition of foreign currencies, the difference between the amount of net investment income and withholding taxes accrued and the U.S. dollar amount actually received or paid, and gains or losses between the trade and settlement date on purchases and sales of securities. Net unrealized foreign exchange gains and losses arising from changes in the value of other assets and liabilities as a result of changes in foreign exchange rates are included as increases or decreases in unrealized appreciation/depreciation on foreign currency related transactions. FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or bond index futures contracts subject to certain limitations. The Fund may invest in futures contracts to manage its exposure to the stock and bond markets and fluctuations in currency values. Buying futures tends to increase the Fund's exposure to the underlying instrument while selling futures tends to decrease the Fund's exposure to the underlying instrument, or hedge other Fund investments. The Fund will not enter into a transaction involving futures for speculative purposes. The Fund's risks in using these contracts include changes in the value of the underlying instruments, non-performance of the counterparties under the contracts' terms and changes in the liquidity of the secondary market for the contracts. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they principally trade. Upon entering into a futures contract, the Fund is required to pledge to the broker an amount of cash and/or other assets equal to a certain percentage of the contract amount, known as initial margin deposit. Subsequent payments, known as variation margin, are made or received by the Fund each day, depending on the daily fluctuation in the fair value of the underlying security. The Fund records an unrealized gain or loss equal to the daily variation margin. Should market conditions move unexpectedly, the Fund may not achieve the anticipated benefits of the futures contracts and may incur a loss. The Fund recognizes a realized gain or loss on the expiration or closing of a futures contract. OPTIONS The Fund may purchase and write options, subject to certain limitations. The Fund may invest in options contracts to manage its exposure to the stock and bond markets and fluctuations in foreign currency values. Writing puts and buying calls tend to increase the Fund's exposure to the underlying instrument while buying puts and writing calls tend to decrease the Fund's exposure to the underlying instrument, or hedge other Fund investments. The Fund will not enter into a transaction involving options for speculative purposes. The Fund's risks in using these contracts include changes in the value of the underlying instruments, non-performance of the counterparties under the contracts' terms and changes in the liquidity of the secondary market for the contracts. Options are valued at the last sale price, or if no sales occurred on that day, at the last quoted bid price. When the Fund writes an option, the amount of the premium received is recorded as a liability and is subsequently adjusted to the current fair value of the option written. Premiums received from writing options that expire unexercised are treated by the Fund on the expiration date as realized gains from investments. The difference between the premium and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium is less than the amount paid for the closing purchase, as a realized loss. When an option is exercised, the proceeds from the sale of the underlying security or the cost basis of the securities purchased is adjusted by the original premium received or paid. INVESTMENTS IN FOREIGN MARKETS Investments in foreign markets may involve special risks and considerations not typically associated with investing in the United States. These risks include revaluation of currencies, high rates of inflation, repatriation on income and capital, and adverse political and economic developments. Moreover, securities issued in these markets may be less liquid, subject to government ownership controls, tariffs and taxes, subject to delays in settlements, and their prices may be more volatile. The Fund may be subject to capital gains and repatriation taxes imposed by certain countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued based upon net investment income, net realized gains and net unrealized appreciation as income and/or capital gains are earned. 15 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- INCOME TAXES The Fund intends to comply with all sections of the Internal Revenue Code applicable to regulated investment companies including the distribution of substantially all of its taxable net investment income and net realized capital gains to its shareholders. Therefore, no provision for federal income tax has been made. The Fund is treated as a separate taxpayer for federal income tax purposes. At June 30, 2008, information on the tax cost of investments is as follows:
Cost of Gross Tax Gross Tax Investments for Unrealized Unrealized Net Tax Appreciation Tax Purposes Appreciation Depreciation on Investments ----------------------------------------------------------------------------------------------------------------------- $30,052,243 $3,316,097 $(2,208,861) $1,107,236
As of December 31, 2007, the Fund has no capital loss carryovers. Capital loss carryovers are available to offset future realized capital gains to the extent provided in the Internal Revenue Code and regulations thereunder. To the extent that these carryover losses are used to offset future capital gains, it is probable that the gains so offset will not be distributed to shareholders because they would be taxable as ordinary income. Any net capital and currency losses incurred after October 31, within the Fund's tax year, are deemed to arise on the first day of the Fund's next tax year if the Fund so elects to defer such losses. The Fund incurred no such losses after October 31, 2007. The tax composition of distributions paid during the years ended December 31, 2007 and December 31, 2006 were as follows: Long-Term Ordinary Capital Income Gains Total -------------------------------------------------------------------------- 2007 $741,446 $4,501,504 $5,242,950 2006 671,827 3,043,707 3,715,534 DISTRIBUTIONS TO SHAREHOLDERS The Fund declares and pays dividends from net investment income annually. The Fund declares and pays net realized capital gains in excess of capital loss carryforwards distributions annually. The character of income and gains to be distributed is determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences include (but are not limited to) futures and losses deferred due to wash sale transactions. Reclassifications due to permanent book/tax differences are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. These reclassifications have no impact on net investment income, realized gains or losses, or the net asset value of the Fund. The calculation of net investment income per share in the Financial Highlights table excludes these adjustments. There were no reclassifications for the year ended December 31, 2007. On June 29, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in Income Taxes." FIN48 provides guidance for how certain uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN48 requires evaluation of tax positions taken or expected to be taken in the course of preparing the Fund's tax returns to determine whether the tax positions are "more likely than not" of being sustained by the applicable tax authority. The adoption of FIN48 did not have an impact on the Fund's net assets and financial statements. The Funds' 2004, 2005, 2006 and 2007 calendar years tax returns are still open to examination by the Federal and applicable state tax authorities. INVESTMENT INCOME Corporate actions (including cash dividends) are recorded on the ex-dividend date, net of applicable withholding taxes, except for certain foreign corporate actions, which are recorded as soon after ex-dividend date as such information becomes available. Interest income is recorded on the accrual basis. All discounts and premiums on bonds are accreted and amortized, respectively, to call or maturity date, whichever is shorter, using the effective yield method. EXPENSES Expenses of the Company which are directly identifiable to the Fund are allocated to the portfolio. Expenses which are not directly identifiable to the Fund are allocated in such a manner as deemed equitable, taking into consideration the nature and type of expenses and relative size of the Fund. All expenses of the Fund are paid by GEAM and reimbursed by the Fund. 16 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- 3. LINE OF CREDIT The Company shares a revolving credit facility of up to $150 million with a number of its affiliates. The credit facility is with its custodian bank, State Street Bank and Trust Company. The revolving credit facility requires the payment of a commitment fee equal to 0.09% per annum on the daily unused portion of the credit facility, payable quarterly. The portion borne by the Funds generally is borne proportionally based upon net assets. In addition, the Company has a $100 million uncommitted, unsecured line of credit with State Street. Generally, borrowings under the credit facilities would accrue interest at the Federal Funds Rate plus 50 basis points and would be borne by the borrowing Fund. The maximum amount allowed to be borrowed by any one Fund is the lesser of (i) its prospectus limitation or (ii) 20% of its net assets. The credit facilities were not utilized by the Fund during the period ended June 30, 2008. 4. AMOUNTS PAID TO AFFILIATES ADVISORY AND ADMINISTRATION FEES GEAM, a registered investment adviser, was retained by the Company's Board of Directors effective May 1, 1997 to act as investment adviser and administrator of the Fund. GEAM's compensation for investment advisory and administrative services is paid monthly based on the average daily net assets of the Fund at an annualized rate of 0.65%. GENPACT performs certain accounting and certain administration services not provided by GEAM. For the period ending June 30, 2008, $281 was charged to the Fund. DISTRIBUTION AND SHAREHOLDER SERVICING FEES The Fund has adopted a Shareholder Servicing and Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act with respect to the Class 4 shares of the Fund. The Fund pays GE Investment Distributors, Inc. ("GEID"), a wholly-owned subsidiary of GEAM and the Fund's principal underwriter, a monthly fee for distribution and/or shareholder services provided, at an annual rate of the average daily net assets attributable to each applicable class of shares. The annual rate applicable is 0.45% for the Class 4 shares. Currently, Class 1 shares are not subject to a Rule 12b-1 fee. DIRECTORS' COMPENSATION The Fund pays no compensation to its directors who are officers or employees of GEAM or its affiliates. Directors who are not such officers or employees also serve in a similar capacity for other funds advised by GEAM. Compensation paid to unaffiliated directors are reflected on the Statement of Operations. These fees are allocated pro rata across all of the mutual fund platforms and share classes served by the directors, including the Fund, and are based upon the relative net assets of each fund within such platforms. (For additional information about directors compensation please refer to the Statement of Additional Information.) 5. INVESTMENT TRANSACTIONS PURCHASES AND SALES OF SECURITIES The cost of purchases and the proceeds from sales of investments, other than short-term securities and options, for the period ended June 30, 2008 were as follows: Purchases Sales ------------------------------------------------------------------------------- $9,961,550 $13,418,291 SECURITY LENDING At June 30, 2008, the Fund did not participate in securities lending. 17 Additional Information (unaudited) -------------------------------------------------------------------------------- INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS: The business and affairs of the Company are managed under the direction of the Company's Board of Directors. Information pertaining to the Directors and officers of the Company is set forth below. INTERESTED DIRECTORS AND EXECUTIVE OFFICERS -------------------------------------------------------------------------------- MICHAEL J. COSGROVE -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 59 POSITION(S) HELD WITH FUND Chairman of the Board and President TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 10 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President - GEAM since February 1997; President and Chief Executive Officer - Mutual Funds at GEAM since March 2007; Vice President, GE Capital Corporation, an indirect wholly-owned subsidiary of GE, since December 1999; Executive Vice President - Sales and Marketing of GEAM, a wholly-owned subsidiary of GE that is registered as an investment adviser under the Investment Advisers Act of 1940, as amended, since March 1993; Director of GEAM since 1988. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48 OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception; Trustee of Elfun Funds, GE Savings & Security Funds and General Electric Pension Trust since 1988; Trustee of Fordham University since 2003; Trustee of Elfun Foundation; Treasurer of GE Foundation; Director, GE Asset Management (Ireland) since February 1999; Director, GE Asset Management Funds Plc, GE Asset Canada Company, GE Asset Management Limited, and GE Volunteers. -------------------------------------------------------------------------------- MATTHEW J. SIMPSON -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 47 POSITION(S) HELD WITH FUND Executive Vice President TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - less than one year PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General Counsel and Secretary of GEAM since July 2007; Senior Vice President and General Counsel - Marketing and Client Services (formerly Asset Management Services), at GEAM and Senior Vice President and General Counsel of GEAMS from February 1997 to June 2007; Vice President and Associate General Counsel of GEAM from October 1992 to February 1997; Secretary of Fund from 1997 to June 2007; Vice President of Fund from September 2003 to June 2007; Vice President of GE Institutional Funds and GE LifeStyle Funds from September 2003 to June 2007; Secretary of GE Institutional Funds and GE LifeStyle Funds from 1997 to June 2007; Vice President of Elfun Funds and GE Savings & Security Funds from October 2003 to June 2007; Assistant Secretary of Elfun Funds and GE Savings & Security Funds from 1998 to June 2007. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional Funds, GE LifeStyle Funds, Elfun Funds and GE Savings & Security Funds since July 2007. 18 Additional Information (unaudited) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SCOTT H. RHODES -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 49 POSITION(S) HELD WITH FUND Treasurer TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 2 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds Operations Manager since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle Funds and GE Investments Funds since November 2005 and Elfun Funds and GE Savings & Security Funds since September 2005; from August 2004 to September 2005 Vice President, U.S. Trust Company, N.A. and Assistant Treasurer of Excelsior Funds, Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds, Inc.; from January 2004 to August 2004, Vice President BlackRock Financial Management, Inc.; from December 1996 to November 2003, Controller - Mutual Funds, American Skandia Investment Services, Inc. and Assistant Treasurer of American Skandia Trust and American Skandia Advisor Funds, Inc. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A -------------------------------------------------------------------------------- JEANNE M. LAPORTA -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 42 POSITION(S) HELD WITH FUND Vice President and Secretary TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 2 years (Vice President); less than one year (Secretary) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Senior Vice President and Deputy General Counsel at GE Asset Management since October 2007; Vice President and Associate General Counsel - Marketing and Client Services (formerly Asset Management Services) at GEAM from May 1997 to October 2007; Vice President and Assistant Secretary of GE Funds, GE Institutional Funds and GE LifeStyle Funds since September 2003; Vice President and Assistant Secretary of Elfun Funds and GE Savings & Security Funds since October 2003; Assistant Secretary from September 2003 to June 2007 and Secretary since July 2007. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A 19 Additional Information (unaudited) -------------------------------------------------------------------------------- NON-INTERESTED DIRECTORS -------------------------------------------------------------------------------- JOHN R. COSTANTINO -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 62 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC since 2006; Managing Director, Walden Partners, Ltd., consultants and investors, since August 1992. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE Institutional Funds and GE LifeStyle Funds since their inception; Trustee of Fordham University since 2002 and Marymount College from 2001 through 2002; Neuroscience Research Institute since 1986; Diocesan Finance Counsel of the Dioceses of Brooklyn & Queens since 2001; Gregorian University Foundation since 1994. -------------------------------------------------------------------------------- WILLIAM J. LUCAS -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 60 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Treasurer of Fairfield University since 1983. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception. -------------------------------------------------------------------------------- ROBERT P. QUINN -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 72 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon Brothers Inc. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception. The Statement of Additional Information for the Fund includes additional information about the Directors and Officers and is available, without charge, upon request by calling 1-800-242-0134. 20 Investment Team -------------------------------------------------------------------------------- INVESTMENT ADVISER AND ADMINISTRATOR GE Asset Management Incorporated BOARD OF DIRECTORS Michael J. Cosgrove, CHAIRMAN John R. Costantino William J. Lucas Robert P. Quinn Matthew J. Simpson SECRETARY Jeanne M. LaPorta ASSISTANT SECRETARIES Joseph A. Carucci Joon Won Choe TREASURER Scott H. Rhodes ASSISTANT TREASURERS Scott R. Fuchs Christopher M. Isaacs DISTRIBUTOR GE Investment Distributors, Inc. Member FINRA and SIPC COUNSEL Sutherland, Asbill & Brennan, LLP CUSTODIAN State Street Bank & Trust Company INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM KPMG LLP OFFICERS OF THE INVESTMENT ADVISER James W. Ireland, CHIEF EXECUTIVE OFFICER Daniel O. Colao, EVP, CHIEF FINANCIAL OFFICER (AS OF JULY 28, 2008) Michael J. Cosgrove, EVP, PRESIDENT AND CHIEF EXECUTIVE OFFICER - MUTUAL FUNDS Paul M. Colonna, EVP, PRESIDENT - FIXED INCOME Kathryn D. Karlic, EVP, PRESIDENT - INSTITUTIONAL SALES AND MARKETING Ralph R. Layman, EVP, PRESIDENT - INTERNATIONAL EQUITIES Matthew J. Simpson, EVP, GENERAL COUNSEL AND SECRETARY Judith A. Studer, EVP, PRESIDENT - U.S. EQUITIES Don W. Torey, EVP, PRESIDENT - ALTERNATIVE INVESTMENTS AND REAL ESTATE John J. Walker, EVP, CHIEF OPERATING OFFICER (AS OF JANUARY 31, 2008) David Wiederecht, EVP, PRESIDENT - INVESTMENT STRATEGIES 21 [This page intentionally left blank.] [This page intentionally left blank.] [This page intentionally left blank.] [This page intentionally left blank.] INVESTMENT ADVISER GE ASSET MANAGEMENT INCORPORATED 3001 SUMMER STREET PO BOX 7900 STAMFORD, CT 06904-7900 DISTRIBUTOR GE INVESTMENT DISTRIBUTORS, INC. MEMBER FINRA AND SIPC 3001 SUMMER STREET PO BOX 7900 STAMFORD, CT 06904-7900 The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities is available without charge (i) upon request, by calling 1-800-242-0134; (ii) on the Fund's website at HTTP://WWW.GEFUNDS.COM; and (iii) on the Commission's website at HTTP://WWW.SEC.GOV. The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC - information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Information (if any) regarding how the Fund voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through the Fund's website at HTTP://WWW.GEFUNDS.COM; and (ii) on the Commission's website at HTTP://WWW.SEC.GOV. [GE LOGO OMITTED] GE Investments Funds, Inc. Mid-Cap Equity Fund Semi-Annual Report JUNE 30, 2008 [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, 2008 (unaudited) -------------------------------------------------------------------------------- Total returns take into account changes in share price and assume reinvestment of all dividends and capital gains distributions, if any. The performance data quoted represent past performance; past performance does not guarantee future results. Investment return and principal value will fluctuate so your shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data quoted. Periods less than one year are not annualized. Please call 800-242-0134 for the most recent month-end performance data. Total returns shown are net of Fund expenses but do not reflect fees and charges associated with the variable contracts such as administrative fees, account charges and surrender charges, which, if reflected, would reduce the Fund's total returns for all periods shown. Shares of the Fund are neither insured nor guaranteed by the U.S. Government, and their prices will fluctuate with market conditions. The Russell* Mid-Cap Index (Russell Mid-Cap Index) is an unmanaged index and does not reflect the actual cost of investing in the instruments that comprise the index. Russell Mid-Cap Index is a market capitalization-weighted index of the smallest 800 companies included in the Russell 1000 Index that represent approximately 25% of the total market capitalization of the Russell 1000 Index. The Russell 1000 Index comprises the 1,000 largest U.S. domiciled companies. The results shown for the foregoing index assume the reinvestment of net dividends or interest. The peer universe of the underlying annuity funds used in our peer ranking calculation is based on the blend of Lipper peer categories, as shown. Lipper is an independent mutual fund rating service. A Fund's performance may be compared to or ranked within a universe of mutual funds with investment objectives and policies similar but not necessarily identical to the Fund's. Such comparisons or rankings are made on the basis of several factors, including the Fund's objectives and policies, management style and strategy, and portfolio composition, and may change over time if any of those factors change. -------------------- GE INVESTMENT DISTRIBUTORS, INC., MEMBER OF FINRA & SIPC, IS THE PRINCIPAL UNDERWRITER AND DISTRIBUTOR OF THE GE INVESTMENT FUNDS, INC. AND A WHOLLY OWNED SUBSIDIARY OF GE ASSET MANAGEMENT INCORPORATED, THE INVESTMENT ADVISER OF THE FUNDS. * RUSSELL INVESTMENT GROUP OWNS THE RUSSELL INDEX DATA, INCLUDING ALL APPLICABLE TRADEMARKS AND COPYRIGHTS, USED BY GE ASSET MANAGEMENT IN THESE MATERIALS. ANY UNAUTHORIZED USE OR REDISTRIBUTION OF SUCH RUSSELL INDEX DATA IS STRICTLY PROHIBITED. RUSSELL INVESTMENT GROUP IS NOT RESPONSIBLE FOR THE CONFIGURATION OF THIS MATERIAL OR FOR ANY INACCURACY IN GE ASSET MANAGEMENT'S PRESENTATION THEREOF. 1 Mid-Cap Equity Fund -------------------------------------------------------------------------------- DIANE M. WEHNER IS A VICE PRESIDENT OF GE ASSET MANAGEMENT AND PORTFOLIO MANAGER OF THE MID-CAP EQUITY FUND. SHE HAS SERVED IN THIS CAPACITY SINCE SEPTEMBER 2004. BEFORE JOINING GE ASSET MANAGEMENT, MS. WEHNER WAS A VICE PRESIDENT AND SENIOR PORTFOLIO MANAGER FROM JANUARY 1997 TO JUNE 2001, AND ASSOCIATE PORTFOLIO MANAGER FROM MAY 1995 TO JANUARY 1997, WITH BENEFIT CAPITAL MANAGEMENT CORPORATION. MS. WEHNER HAS SERVED AS AN ANALYST/PORTFOLIO MANAGER IN THE INVESTMENT MANAGEMENT INDUSTRY SINCE 1985. Q. HOW DID THE MID-CAP EQUITY FUND PERFORM COMPARED TO ITS BENCHMARK AND LIPPER PEER GROUP FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2008? A. For the six-month period ended June 30, 2008, the Mid-Cap Equity Fund returned -6.47% for the Class 1 shares and -4.04% for the Class 4 shares. The Russell Mid-Cap Index, the Fund's benchmark, returned -7.57% and the Fund's Lipper peer group of 146 Mid-Cap Growth funds returned an average of -8.57% for the same period. Q. WHAT MARKET CONDITIONS IMPACTED FUND PERFORMANCE? A. During the first half of 2008, the Fund's growth-at-a-reasonable-price approach benefited performance as the growth style of investing outperformed value. Soaring energy prices, continued credit concerns at financial institutions and generally negative economic news resulted in increased market volatility and lower stock prices. In this environment, the Fund's overweight in consumer staples, healthcare and energy contributed positively to performance. Within the consumer staples sector, our exposure to these defensive companies (companies which generally offer products that are less discretionary and therefore can deliver continued earnings growth in a difficult macroeconomic environment) was additive to performance. Moreover, healthcare companies with their defensive growth qualities and good earnings visibility enhanced performance for the Fund. The rise in oil and natural gas prices resulted in strong performance within the energy sector. The Fund benefited from an underweight in financial companies, which continued to be weak. More specifically, the Fund maintained an underweight in regional banks, which are experiencing earnings pressure from deteriorating credit quality, and the need for additions to reserves for non-performing loans. We maintained the Fund's underweight in the consumer discretionary sector, which had a positive impact on performance. Higher food and energy prices are squeezing out consumer discretionary purchases. In addition, increasing foreclosure rates, declining home prices and higher unemployment continues to weigh on consumer confidence and spending. Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE? A. Relative to the Russell Mid-Cap Index, the Fund outperformed during the six-month period, largely due to solid stock selection within the energy, materials, and healthcare sectors. Specifically Southwestern Energy (+71%), gained from a strong natural gas pricing environment, while Weatherford International (+45%) benefited from robust demand for oil exploration and technology services. Within the materials sector, Intrepid Potash (+31%), a recent IPO, performed well due to continued supply/demand imbalances in the booming fertilizer market. Meanwhile, healthcare services company Psychiatric Solutions (+16%) benefited from increased occupancy and favorable pricing. Lifecell (+17%) was acquired by Kinetic Concepts. The Fund's overweight and stock selection in the information technology sector detracted from [photo omitted] 2 Q&A -------------------------------------------------------------------------------- relative performance. Specifically, Juniper Networks (-33%) suffered in part due to concerns about slowing in the U.S. carrier business. Neustar, a telecom services and software company (-25%) slightly reduced its 2008 revenue forecast due to the slower ramp of a new service offering. Within healthcare, detracting from performance was Hologic (-36%) as concerns arose about the benefits of their recent Cytec acquisition. Life Time Fitness (-41%) fell due to financing concerns and slower membership growth rates. Q. WERE THERE ANY SIGNIFICANT CHANGES TO THE FUND OVER THE PERIOD? A. During the period we increased the Fund's exposure in the consumer discretionary, financials and materials sectors where we find attractively valued growth companies. We took profits and reduced our exposure to the healthcare and energy sectors. We are focused on investing in attractively valued companies with solid earnings prospects, strong market share and superior long-term fundamentals. With an emphasis on growth, we continue to look to invest in innovative companies that provide prospects for above-average earnings growth. Therefore, healthcare and information technology companies represent a meaningful percentage of the Fund's portfolio. 3 Mid-Cap Equity Fund -------------------------------------------------------------------------------- Understanding Your Fund's Expenses As a shareholder of the Fund you incur ongoing expenses, which include portfolio management fees, professional fees, administrative fees and other Fund expenses. The following example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the period. The information in the following table is based on an investment of $1,000, which is invested at the beginning of the period and held for the entire six-month period ended June 30, 2008. ACTUAL EXPENSES The first section of the table provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your class under the heading "Expenses Paid During Period." HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second section of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholders reports of other funds. Please note that the expenses shown in the table do not reflect any transaction costs, such as sales charges or redemption fees.
JANUARY 1, 2008 - JUNE 30, 2008 ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($)* ------------------------------------------------------------------------------------------------------------------------------------ ACTUAL FUND RETURN** ------------------------------------------------------------------------------------------------------------------------------------ Class 1 1,000.00 935.26 3.29 Class 4 1,000.00 959.64 5.55 ------------------------------------------------------------------------------------------------------------------------------------ HYPOTHETICAL 5% RETURN (2.5% FOR THE PERIOD) ------------------------------------------------------------------------------------------------------------------------------------ Class 1 1,000.00 1,021.16 3.52 Class 4 1,000.00 1,019.16 5.66 ------------------------------------------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.70% FOR CLASS 1 AND 1.12% FOR CLASS 4, (FROM PERIOD JANUARY 1, 2008 - JUNE 30, 2008), MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY 182/366 (TO REFLECT THE ONE-HALF YEAR PERIOD). ** ACTUAL FUND RETURNS FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2008 WERE AS FOLLOWS: (6.47)% FOR CLASS 1 SHARES, AND SINCE INCEPTION (4.04)% FOR CLASS 4 SHARES. 4 Mid-Cap Equity Fund (unaudited) -------------------------------------------------------------------------------- CHANGE IN VALUE OF A $10,000 INVESTMENT CLASS 1 SHARES -------------------------------------------------------------------------------- [Line chart omitted -- plot points are as follows:] GEI MID-CAP EQUITY RUSSELL MIDCAP INDEX 06/98 10,000.00 10,000.00 12/98 9,444.01 10,084.35 12/99 11,074.42 11,918.98 12/00 11,992.30 12,902.74 12/01 12,031.39 12,175.48 12/02 10,375.33 10,205.28 12/03 13,792.80 14,296.76 12/04 16,002.81 17,178.64 12/05 17,881.47 19,351.42 12/06 19,383.25 22,308.54 12/07 21,826.51 23,560.43 06/08 20,413.48 21,776.19 AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2008 -------------------------------------------------------------------------------- CLASS 1 SHARES (Inception date: 5/1//97) -------------------------------------------------------------------------------- SIX ONE FIVE TEN ENDING VALUE OF A MONTHS YEAR YEAR YEAR $10,000 INVESTMENT ------------------------------------------------------------------------------- Mid-Cap Equity Fund -6.47% -5.12% 11.83% 7.40% $20,413 ------------------------------------------------------------------------------- Russell Midcap Index -7.57% -11.19% 13.07% 8.10% $21,776 ------------------------------------------------------------------------------- Lipper peer group average* -8.57% -5.01% 11.74% 5.21% ------------------------------------------------------------------------------- CLASS 4 SHARES ------------------------------------------------------------------------------- [Line chart omitted -- plot points are as follows:] GEI MID-CAP EQUITY RUSSELL MIDCAP INDEX 05/08 10,000.00 10,000.00 06/08 9,596.44 9,617.28 AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2008 ------------------------------------------------------------------------------- CLASS 4 SHARES (Inception date: 5/1/08) ------------------------------------------------------------------------------- ONE SINCE ENDING VALUE OF A MONTH INCEPTION $10,000 INVESTMENT ------------------------------------------------------------------------------- Mid-Cap Equity Fund -6.91% -4.04% $9,596 ------------------------------------------------------------------------------- Russell Midcap Index -7.99% -3.83% $9,617 ------------------------------------------------------------------------------- Lipper peer group average** -6.36% N/A ------------------------------------------------------------------------------- INVESTMENT PROFILE A fund designed for investors who seek long-term growth of capital and future income by investing at least 80% of its net assets in equity securities of mid-cap companies under normal circumstances. The Fund invests primarily in mid-cap companies that the portfolio manager believes are undervalued by the market and have above-average growth potential. PORTFOLIO COMPOSITION AS OF JUNE 30, 2008 as a % of Market Value ------------------------------------------------------------------------------- Market Value of $166,964 (in thousands) [Pie chart omitted -- plot points are as follows:] Information Technology 16.6% Healthcare 16.4% Consumer Discretionary 11.5% Energy 11.1% Financials 10.7% Industrials 9.6% Materials 7.0% Consumer Staples 6.0% Utilities 5.7% Telecommunication Services 3.2% Short-Term 2.2% Other Investments 0.0%*** TOP TEN LARGEST HOLDINGS AS OF JUNE 30, 2008 as a % of Market Value ------------------------------------------------------------------------------- Masimo Corp. 2.50% ------------------------------------------------------------------------------- Thermo Fisher Scientific, Inc. 2.30% ------------------------------------------------------------------------------- Harsco Corp. 2.15% ------------------------------------------------------------------------------- McCormick & Company, Inc. 2.11% ------------------------------------------------------------------------------- ITC Holdings Corp. 2.08% ------------------------------------------------------------------------------- Weatherford International Ltd. 2.06% ------------------------------------------------------------------------------- Psychiatric Solutions, Inc 2.04% ------------------------------------------------------------------------------- Activision, Inc. 1.98% ------------------------------------------------------------------------------- Alberto-Culver Co. 1.86% ------------------------------------------------------------------------------- HCC Insurance Holdings, Inc. 1.75% ------------------------------------------------------------------------------- * LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR THE SIX MONTHS, ONE YEAR, FIVE-YEAR, AND TEN-YEAR PERIODS INDICATED IN THE MID-CAP GROWTH FUNDS PEER GROUP CONSISTING OF 146, 145, 120 AND 38 UNDERLYING ANNUITY FUNDS, RESPECTIVELY. ** LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR THE ONE MONTH PERIOD INDICATED IN THE MID-CAP GROWTH FUNDS PEER GROUP CONSISTING OF 155 UNDERLYING ANNUITY FUNDS, RESPECTIVELY. *** LESS THAN 0.1%. SEE NOTES TO PERFORMANCE ON PAGE 1 FOR FURTHER INFORMATION, INCLUDING AN EXPLANATION OF LIPPER PEER CATEGORIES. PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE AND THE GRAPH AND TABLE DO NOT REFLECT THE DEDUCTION OF TAXES. 5 MID-CAP EQUITY FUND Schedule of Investments June 30, 2008 (unaudited) ------------------------------------------------------------------------------- MID-CAP EQUITY FUND ------------------------------------------------------------------------------- NUMBER OF SHARES VALUE ------------------------------------------------------------------------------- COMMON STOCK -- 98.1% + ------------------------------------------------------------------------------- CONSUMER DISCRETIONARY -- 11.5% Bed Bath & Beyond, Inc......... 70,836 $ 1,990,492(a,c) Coach, Inc..................... 52,754 1,523,536(a) Focus Media Holding Ltd. ADR... 56,863 1,576,242(a) Kohl's Corp.................... 22,453 899,018(a) Liberty Global, Inc. (Series C) 77,070 2,339,845(a) Liberty Media Entertainment Corp. (Series A).................. 54,636 1,323,830(a) Life Time Fitness, Inc......... 53,146 1,570,464(a) Mercadolibre, Inc.............. 50,063 1,726,673(a) O'Reilly Automotive, Inc....... 84,540 1,889,469(a) Penn National Gaming, Inc...... 34,156 1,098,115(a) Regal Entertainment Group, (Class A)................... 138,921 2,122,713 The Cheesecake Factory......... 71,901 1,143,945(a) 19,204,342 CONSUMER STAPLES -- 6.0% Alberto-Culver Co.............. 118,133 3,103,354 General Mills, Inc............. 44,158 2,683,482 McCormick & Company, Inc....... 98,793 3,522,958 The Estee Lauder Companies Inc. (Class A)................... 14,969 695,310 10,005,104 ENERGY -- 11.1% Dresser-Rand Group, Inc........ 60,668 2,372,119(a) Hess Corp...................... 17,978 2,268,644 HIS, Inc. (Class A)............ 4,491 312,574 Noble Corp..................... 31,364 2,037,405 Peabody Energy Corp............ 31,504 2,773,927 Southwestern Energy Co......... 46,229 2,200,963(a) Sunoco, Inc.................... 23,950 974,526 Tesco Corp..................... 66,797 2,134,164(a) Weatherford International Ltd.. 69,237 3,433,463(a) 18,507,785 FINANCIALS -- 10.7% Affiliated Managers Group, Inc. 21,980 1,979,519(a) CB Richard Ellis Group, Inc. (Class A)................... 117,815 2,262,048(a,c) CVB Financial Corp............. 96,060 906,806 Douglas Emmett, Inc. (REIT).... 46,764 1,027,405 DuPont Fabros Technology, Inc. (REIT)...................... 77,231 1,439,586 Fortress Investment Group LLC (Class A)................... 110,757 1,364,526 NUMBER OF SHARES VALUE -------------------------------------------------------------------------------- Greenhill & Company, Inc....... 24,895 $ 1,340,845 HCC Insurance Holdings, Inc.... 138,369 2,925,121 Legg Mason, Inc................ 24,422 1,064,067 Nymex Holdings, Inc............ 16,466 1,391,048 Prologis (REIT)................ 18,711 1,016,943 SunTrust Banks, Inc............ 10,478 379,513 Zions Bancorporation........... 23,148 728,931 17,826,358 HEALTHCARE -- 16.5% Alcon, Inc..................... 12,274 1,998,084 Amylin Pharmaceuticals, Inc.... 69,544 1,765,722(a) Arthrocare Corp................ 43,393 1,770,868(a) Barr Pharmaceuticals, Inc...... 41,490 1,870,369(a) DENTSPLY International, Inc.... 59,912 2,204,762 Gen-Probe Incorporated......... 39,907 1,894,784(a) Hologic, Inc................... 125,802 2,742,484(a) Masimo Corp.................... 121,575 4,176,101(a) Psychiatric Solutions, Inc..... 90,133 3,410,633(a) Thermo Fisher Scientific, Inc.. 68,844 3,836,676(a,c) Vertex Pharmaceuticals Inc..... 52,390 1,753,493(a) 27,423,976 INDUSTRIALS -- 9.7% Alliant Techsystems, Inc....... 729 74,125(a) Cooper Industries Ltd.......... 20,855 823,773 Corrections Corporation of America.................. 84,396 2,318,358(a) Harsco Corp.................... 65,847 3,582,735 Hexcel Corp.................... 97,087 1,873,779(a) ITT Corp....................... 34,428 2,180,325 Joy Global, Inc................ 36,497 2,767,568 Textron, Inc................... 50,893 2,439,302 16,059,965 INFORMATION TECHNOLOGY -- 16.6% Activision, Inc................ 96,906 3,301,587(a,c) Affiliated Computer Services, Inc. (Class A)................... 32,931 1,761,479(a) Alibaba.com Ltd................ 287,759 405,947(a) Blackboard, Inc................ 38,376 1,467,115(a) Citrix Systems, Inc............ 71,101 2,091,080(a) Cogent, Inc.................... 103,894 1,181,275(a) DST Systems, Inc............... 26,677 1,468,569(a) Fidelity National Information Services, Inc............... 51,642 1,906,106 Harris Corp.................... 17,670 892,158(c) Hittite Microwave Corp......... 62,868 2,239,358(a) Juniper Networks, Inc.......... 94,278 2,091,086(a) Macrovision Solutions Corp..... 173,767 2,599,554(a) Marvell Technology Group Ltd... 106,614 1,882,803(a) Mettler Toledo International Inc. 17,597 1,669,251(a) Neustar, Inc. (Class A)........ 125,523 2,706,276(a) 27,663,644 See Notes to Schedule of Investments on page 8 and Notes to Financial Statements. 6 MID-CAP EQUITY FUND Schedule of Investments June 30, 2008 (unaudited) -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE -------------------------------------------------------------------------------- MATERIALS -- 7.1% Allegheny Technologies Incorporated................ 33,680 $ 1,996,550 Intrepid Potash, Inc........... 40,285 2,649,947(a) Martin Marietta Materials, Inc. 15,567 1,612,586 Monsanto Co.................... 21,044 2,660,803(c) Praxair, Inc................... 29,833 2,811,462 11,731,348 TELECOMMUNICATION SERVICES -- 3.2% American Tower Corp. (Class A). 42,823 1,809,272(a) NII Holdings Inc. (Class B).... 46,435 2,205,198(a) Syniverse Holdings, Inc........ 82,862 1,342,364(a) 5,356,834 UTILITIES -- 5.7% American Water Works Company, Inc................ 79,521 1,763,776(a) DTE Energy Co.................. 29,587 1,255,672 ITC Holdings Corp.............. 68,112 3,481,204 PPL Corp....................... 31,128 1,627,061 SCANA Corp..................... 36,094 1,335,478 9,463,191 TOTAL COMMON STOCK (COST $150,108,500) ......... 163,242,547 -------------------------------------------------------------------------------- OTHER INVESTMENTS -- 0.0%* -------------------------------------------------------------------------------- GEI Investment Fund (COST $48,839).............. 37,118(d) TOTAL INVESTMENTS IN SECURITIES (COST $150,157,339).......... 163,279,665 -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 2.2% -------------------------------------------------------------------------------- GE Money Market Fund Institutional Class 1.93% ..................... 3,684,810(b,e) (COST $3,684,810) TOTAL INVESTMENTS (COST $153,842,149).......... 166,964,475 LIABILITIES IN EXCESS OF OTHER ASSETS, NET-- (0.3)%............... (495,906) ------------ NET ASSETS-- 100.0% .......... $166,468,569 ============ -------------------------------------------------------------------------------- OTHER INFORMATION -------------------------------------------------------------------------------- The GEI Mid-Cap Equity had the following long futures contracts open at June 30, 2008 (unaudited): NUMBER CURRENT EXPIRATION OF NOTIONAL UNREALIZED DESCRIPTION DATE CONTRACTS VALUE DEPRECIATION -------------------------------------------------------------------------------- S&P 400 Midcap Futures September 2008 3 $1,231,800 $(49,991) See Notes to Schedule of Investments on page 8 and Notes to Financial Statements. 7 Notes to Schedule of Investments June 30, 2008 (unaudited) -------------------------------------------------------------------------------- The views expressed in this document reflect our judgment as of the publication date and are subject to change at any time without notice. The securities cited may not represent current or future holdings and should not be considered as a recommendation to purchase or sell a particular security. See the prospectus for complete descriptions of investment objectives, policies, risks and permissible investments. (a) Non-income producing security. (b) Coupon amount represents effective yield. (c) At June 30, 2008, all or a portion of this security was pledged to cover collateral requirements for futures, options, forward foreign currency contracts and/or TBA's. (d) GE Asset Management ("GEAM"), the investment adviser of the Fund, also serves as investment adviser of the GEI Investment Fund. (e) GEAM, the investment adviser of the Fund, also serves as investment adviser of the GE Money Market Fund. * Less than 0.1%. + Percentages are based on net assets as of June 30, 2008. Abbreviations: ADR American Depository Receipt REIT Real Estate Investment Trust 8
Financial Highlights Selected data based on a share outstanding throughout the periods indicated ------------------------------------------------------------------------------------------------------------------------------------ MID-CAP EQUITY FUND --------------------------------------------------------------------- ------------- CLASS 1 CLASS 4 --------------------------------------------------------------------- ------------- 6/30/08+ 12/31/07 12/31/06 12/31/05 12/31/04 12/31/03 6/30/08+ --------------------------------------------------------------------- ------------- INCEPTION DATE -- -- -- -- -- 5/1/97 5/1/08 Net asset value, beginning of period.... $17.30 $18.19 $19.22 $18.33 $17.48 $13.30 $16.85 INCOME/(LOSS) FROM INVESTMENT OPERATIONS: Net investment income................ 0.06 0.08 0.23 0.05 0.17 0.19 -- Net realized and unrealized gains/(losses) on investments..... (1.18) 2.23 1.40 2.11 2.63 4.19 (0.68) ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INCOME/(LOSS) FROM INVESTMENT OPERATIONS................ (1.12) 2.31 1.63 2.16 2.80 4.38 (0.68) ------------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS FROM: Net investment income................ -- 0.07 0.22 0.06 0.14 0.18 -- Net realized gains................... -- 3.13 2.44 1.21 1.81 0.02 -- ------------------------------------------------------------------------------------------------------------------------------------ TOTAL DISTRIBUTIONS..................... -- 3.20 2.66 1.27 1.95 0.20 -- ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, END OF PERIOD.......... $16.18 $17.30 $18.19 $19.22 $18.33 $17.48 $16.17 ==================================================================================================================================== TOTAL RETURN (A)........................ (6.47)% 12.60%(B) 8.40% 11.74% 16.02% 32.94% (4.04)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $166,459 $191,339 $199,311 $229,097 $239,831 $226,929 $10 Ratios to average net assets: Net investment income*............ 0.27% 0.35% 1.01% 0.24% 0.89% 1.36% 0.04% Expenses*......................... 0.70% 0.70% 0.69% 0.70% 0.70% 0.69% 1.12% Portfolio turnover rate.............. 25% 65% 29% 27% 78% 28% 25%
NOTES TO FINANCIAL HIGHLIGHTS -------------------------------------------------------------------------------- (a) Total returns are historical and assume changes in share price and reinvestment of dividends and capital gains and do not include the effect of insurance contract charges. * Annualized for periods less than one year. + Unaudited See Notes to Financial Statements. 9
Statement of Assets and Liabilities JUNE 30, 2008 (UNAUDITED) ------------------------------------------------------------------------------------------------------------------------------------ MID-CAP EQUITY FUND ------------------------------------------------------------------------------------------------------------------------------------ ASSETS Investments in securities, at market (cost $150,108,500)............................................... $163,242,547 Investments in affiliated securities, at market (cost $48,839)......................................... 37,118 Short-term affiliated investments (at amortized cost).................................................. 3,684,810 Income receivables..................................................................................... 161,060 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL ASSETS....................................................................................... 167,125,535 ------------------------------------------------------------------------------------------------------------------------------------ LIABILITIES Payable for investments purchased...................................................................... 459,072 Payable for fund shares redeemed....................................................................... 31,784 Payable to GEAM........................................................................................ 106,386 Accrued other expenses................................................................................. 56,247 Variation margin payable............................................................................... 2,700 Other liabilities...................................................................................... 777 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL LIABILITIES.................................................................................. 656,966 ------------------------------------------------------------------------------------------------------------------------------------ NET ASSETS................................................................................................ $166,468,569 ==================================================================================================================================== NET ASSETS CONSIST OF: Capital paid in........................................................................................ 141,885,644 Undistributed (distribution in excess of) net investment income............................................................................... 251,042 Accumulated net realized gain (loss)................................................................... 11,259,548 Net unrealized appreciation/(depreciation) on: Investments......................................................................................... 13,122,326 Futures............................................................................................. (49,991) ------------------------------------------------------------------------------------------------------------------------------------ NET ASSETS................................................................................................ $166,468,569 ==================================================================================================================================== CLASS 1: NET ASSETS................................................................................................ 166,458,974 Shares outstanding ($0.01 par value; unlimited shares authorized)......................................... 10,290,298 Net asset value per share................................................................................. $16.18 CLASS 4: NET ASSETS................................................................................................ 9,595 Shares outstanding ($0.01 par value; unlimited shares authorized)......................................... 593 Net asset value per share................................................................................. $16.17
See Notes to Financial Statements. 10
Statement of Operations FOR THE SIX MONTHS ENDED JUNE 30, 2008 (UNAUDITED) ------------------------------------------------------------------------------------------------------------------------------------ MID-CAP EQUITY FUND ------------------------------------------------------------------------------------------------------------------------------------ INVESTMENT INCOME INCOME: Dividend ............................................................................... $ 795,843 Interest ............................................................................... 1,251 Interest from affliated investments .................................................... 39,267 Less: Foreign taxes withheld ........................................................... (4,176) ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INCOME ............................................................................. 832,185 ------------------------------------------------------------------------------------------------------------------------------------ EXPENSES: Advisory and administrative fees ....................................................... 561,212 Distributors Fees (Note 4) Class 4 ............................................................................. 7 Transfer agent ......................................................................... 36 Trustee's fees ......................................................................... 2,308 Custody and accounting expenses ........................................................ 20,647 Professional fees ...................................................................... 11,153 Registration expenses .................................................................. 3,064 Other expenses ......................................................................... 7,772 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL EXPENSES BEFORE WAIVER AND REIMBURSEMENT ........................................... 606,199 ------------------------------------------------------------------------------------------------------------------------------------ Less: Expenses reimbursed by the adviser (waiver related to Fund of Fund Investment) ... (2,496) ------------------------------------------------------------------------------------------------------------------------------------ Net expenses ........................................................................... 603,703 ------------------------------------------------------------------------------------------------------------------------------------ NET INVESTMENT INCOME (LOSS) ............................................................. 228,482 ==================================================================================================================================== NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS REALIZED GAIN (LOSS) ON: Investments ......................................................................... 10,301,191 Futures ............................................................................. (246,232) Foreign currency transactions ....................................................... 90 INCREASE (DECREASE) IN UNREALIZED APPRECIATION/ (DEPRECIATION) ON: Investments ......................................................................... (22,525,766) Futures ............................................................................. (50,030) ------------------------------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments ................................. (12,520,747) ------------------------------------------------------------------------------------------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .......................... $(12,292,265) ====================================================================================================================================
See Notes to Financial Statements. 11
Statements of Changes in Net Assets ------------------------------------------------------------------------------------------------------------------------------------ MID-CAP EQUITY FUND ------------------------------------------------------------------------------------------------------------------------------------ SIX MONTHS ENDED YEAR ENDED JUNE 30, 2008 DECEMBER 31, (UNAUDITED) 2007 ------------------------------------------------------------------------------------------------------------------------------------ INCREASE (DECREASE) IN NET ASSETS OPERATIONS: Net investments income (loss)..................................................... $ 228,482 $ 653,690 Net realized gain (loss) on investments, futures, written options, and foreign currency transactions............................................... 10,055,049 27,316,305 Net increase (decrease) in unrealized appreciation/(depreciation) on investments, futures, written options, and foreign currency translation............................................................ (22,575,796) (4,058,715) ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) from operations........................................... (12,292,265) 23,911,280 ------------------------------------------------------------------------------------------------------------------------------------ DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Class 1......................................................................... -- (620,613) Class 4......................................................................... -- -- Net realized gains Class 1......................................................................... -- (29,362,977) Class 4......................................................................... -- -- ------------------------------------------------------------------------------------------------------------------------------------ TOTAL DISTRIBUTIONS................................................................... -- (29,983,590) ------------------------------------------------------------------------------------------------------------------------------------ Increase (decrease) in net assets from operations and distributions................. (12,292,265) (6,072,310) ------------------------------------------------------------------------------------------------------------------------------------ SHARE TRANSACTIONS: Proceeds from sale of shares Class 1........................................................................ 2,962,211 11,021,978 Class 4......................................................................... 10,000 -- Value of distributions reinvested Class 1......................................................................... -- 29,983,527 Class 4......................................................................... -- -- Cost of shares redeemed Class 1......................................................................... (15,550,832) (42,904,477) Class 4......................................................................... -- -- ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) from share transactions................................... (12,578,621) (1,898,972) ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INCREASE (DECREASE) IN NET ASSETS............................................. (24,870,886) (7,971,282) NET ASSETS Beginning of period................................................................. 191,339,455 199,310,737 ------------------------------------------------------------------------------------------------------------------------------------ End of period....................................................................... $166,468,569 $191,339,455 ==================================================================================================================================== UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD........ $ 251,042 $ 22,560 ------------------------------------------------------------------------------------------------------------------------------------ CHANGES IN FUND SHARES CLASS 1 Shares sold............................................................................ 188,631 561,616 Issued for distributions reinvested.................................................... -- 1,725,174 Shares redeemed........................................................................ (956,403) (2,184,057) ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in fund shares................................................ (767,772) 102,733 ==================================================================================================================================== CLASS 4 Shares sold............................................................................ 593 -- Issued for distributions reinvested.................................................... -- -- Shares redeemed........................................................................ -- -- ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in fund shares................................................. 593 -- ====================================================================================================================================
See Notes to Financial Statements. 12 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- 1. ORGANIZATION OF THE COMPANY GE Investments Funds, Inc. (the "Company") was incorporated under the laws of the Commonwealth of Virginia on May 14, 1984 and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company. The Company is composed of thirteen investment portfolios (collectively the "Funds"), although only the following eleven are currently being offered: U.S. Equity Fund, S&P 500 Index Fund, Premier Growth Equity Fund, Core Value Equity Fund, Mid-Cap Equity Fund (the "Fund"), Small-Cap Equity Fund, International Equity Fund, Total Return Fund, Income Fund, Money Market Fund and Real Estate Securities Fund. Shares of the Funds of the Company are offered only to insurance company separate accounts that fund certain variable life insurance contracts and variable annuity contracts. These insurance companies may include insurance companies affiliated with GE Asset Management Incorporated ("GEAM"), the investment adviser and administrator of each of the Funds. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results may differ from those estimates. The following summarizes the significant accounting policies of the Fund: SECURITY VALUATION AND TRANSACTIONS The Fund's portfolio securities are valued generally on the basis of market quotations. Equity securities generally are valued at the last reported sales price on the primary market in which they are traded. Portfolio securities listed on NASDAQ are valued using the NASDAQ Official Closing Price, which may not necessarily represent the last sale price. If no sales occurred on the exchange or NASDAQ that day, the portfolio security generally is valued using the last reported bid price. Debt securities (other than short-term securities described below) generally are valued at an evaluated bid as reported by an independent pricing service. Values obtained from pricing services are based on various factors such as market transactions, dealer supplied valuations, security characteristics and other market data. In the absence of a reliable price from such a pricing service, debt securities may be valued based on dealer supplied valuations or quotations. The Fund's written or purchased options are valued at the last sales price, or if no sales occurred that day, at the last reported bid price. Short-term investments with remaining maturities of sixty days or less at the time of purchase are valued on the basis of amortized cost, which approximates market value. All assets and liabilities of the Fund initially expressed in foreign currency values will be converted into U.S. dollars at the WM/Reuters exchange rate computed at 11:00 a.m., Eastern time. If prices are not readily available for a portfolio security, or if it is believed that a price for a portfolio security does not represent its fair value, the security may be valued using procedures approved by the Fund's Board of Directors that are designed to establish its "fair" value. Those procedures require that the fair value of a security be established by the fair valuation committee. The fair valuation committee follows different protocols for different types of investments and circumstances. The fair value procedures may be used to value any investment by the Fund in the appropriate circumstances. Examples of the types of securities that may be fair valued include: thinly traded or illiquid investments, high-yield securities or foreign securities. Foreign securities may be valued with the assistance of an independent fair value pricing service in circumstances where it is believed that they have been or would be materially affected by events occurring after the close of the portfolio security's primary market and before the close of regular trading on the NYSE. This independent fair value pricing service uses a computerized system to appraise affected securities and portfolios taking into consideration various factors and the fair value of such securities may be something other than the last available quotation or other market price. GEAM may also separately monitor portfolio securities and, consistent with the Fund's fair value procedures, apply a different value to a portfolio security than would be applied had it been priced using market quotations or by an independent fair value pricing service. 13 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- Determining the fair value of securities involves the application of both subjective and objective considerations. Security values may differ depending on the methodology used to determine their values, and may differ from the last quoted sale or closing price. No assurance can be given that use of these fair value procedures will always better represent the price at which the Fund could sell the affected portfolio security. Security transactions are accounted for as of the trade date. Realized gains and losses on investments sold are recorded on the basis of identified cost for both financial statement and federal tax purposes. The Fund adopted FASB Statement No. 157, FAIR VALUE MEASUREMENTS (FAS 157). FAS 157 establishes a single definition of fair value, a framework for measuring fair value, and expanded disclosures about fair value measurements. Various inputs are used in determining the value of the Fund's investments. These inputs are classified into three broad levels: Level 1 includes quoted prices in active markets of securities identical to those of the Fund. Level 2 includes: 1) quoted prices in active markets for similar securities to those of the Fund; 2) quoted prices for identical or similar securities to those of the Fund that trade in markets in which there are few transactions or the quoted prices are not current; 3) prices based on observable market data such as interest rates and yield curves, volatilities, bond prepayment speeds, and credit risk and; 4) prices based principally on observable market data by use of correlation techniques or other means. Level 3 includes unobservable market inputs used to fair value securities. These inputs are based on assumptions that market participants would use to price securities and may include the adviser's own assumptions. Other financial instruments are derivative instruments that are not reflected in TOTAL INVESTMENTS, such as futures, forwards, swaps, and written options contracts, which are valued based on the unrealized appreciation/depreciation of the instrument.
Level 1 Level 2 Level 3 Total ------------------------------------------------------------------------------------------------------------------------------------ Investments in Securities $166,521,411 $443,064 $-- $166,964,475 Other Financial Instruments $ (49,991) $ -- $-- $ (49,991)
REPURCHASE AGREEMENTS The Fund may enter into repurchase agreement transactions with respect to instruments that are consistent with the Fund's investment objectives or policies. The Fund's or a third party custodian takes possession of the collateral pledged for investments in repurchase agreements on behalf of the Fund. The Fund values the underlying collateral daily on a mark-to-market basis to determine that the value, including accrued interest, is at least equal to 102% of the repurchase price. In the event the seller defaults and the value of the security declines, or if the seller enters an insolvency proceeding, realization of the collateral by the Fund may be delayed or limited. SECURITY LENDING The Fund may loan securities to brokers, dealers, and financial institutions determined by GEAM to be creditworthy, subject to certain limitations. The Fund continues to receive the interest and dividends on the loaned securities during the term of the loan. The loans of securities are secured by collateral in the form of cash or other liquid assets, which are segregated and maintained with the custodian in an amount at least equal to 102% of the current market value of the loaned securities. During the term of the loan, the Fund will record any gain or loss in the market value of its loaned securities and of securities in which cash collateral is invested. The Fund will also earn interest, net of any rebate, from securities in which cash collateral is invested. In the event the counterparty (borrower) does not meet its contracted obligation to return the securities, the Fund may be exposed to the risk of loss of reacquiring the loaned securities at prevailing market prices using the proceeds of the sale of the collateral. FOREIGN CURRENCY Accounting records of the Fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange on a daily basis (on days the New York Stock Exchange is open). Purchases and sales of securities, income receipts and expense payments denominated in foreign currencies are translated into U.S. dollars at the prevailing exchange rate on the respective dates of such transactions. The Fund does not isolate the portion of the results of operations resulting from changes in foreign exchange rates from the fluctuations arising from changes in the 14 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- market prices of securities during the period. Such fluctuations are included in the net realized or unrealized gain or loss from investments. Net realized gains or losses on foreign currency transactions represent net gains or losses on sales and maturities of foreign currency contracts, disposition of foreign currencies, the difference between the amount of net investment income and withholding taxes accrued and the U.S. dollar amount actually received or paid, and gains or losses between the trade and settlement date on purchases and sales of securities. Net unrealized foreign exchange gains and losses arising from changes in the value of other assets and liabilities as a result of changes in foreign exchange rates are included as increases or decreases in unrealized appreciation/depreciation on foreign currency related transactions. FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or bond index futures contracts subject to certain limitations. The Fund may invest in futures contracts to manage its exposure to the stock and bond markets and fluctuations in currency values. Buying futures tends to increase the Fund's exposure to the underlying instrument while selling futures tends to decrease the Fund's exposure to the underlying instrument, or hedge other Fund investments. The Fund will not enter into a transaction involving futures for speculative purposes. The Fund's risks in using these contracts include changes in the value of the underlying instruments, non-performance of the counterparties under the contracts' terms and changes in the liquidity of the secondary market for the contracts. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they principally trade. Upon entering into a futures contract, the Fund is required to pledge to the broker an amount of cash and/or other assets equal to a certain percentage of the contract amount, known as initial margin deposit. Subsequent payments, known as variation margin, are made or received by the Fund each day, depending on the daily fluctuation in the fair value of the underlying security. The Fund records an unrealized gain or loss equal to the daily variation margin. Should market conditions move unexpectedly, the Fund may not achieve the anticipated benefits of the futures contracts and may incur a loss. The Fund recognizes a realized gain or loss on the expiration or closing of a futures contract. OPTIONS The Fund may purchase and write options, subject to certain limitations. The Fund may invest in options contracts to manage its exposure to the stock and bond markets and fluctuations in foreign currency values. Writing puts and buying calls tend to increase the Fund's exposure to the underlying instrument while buying puts and writing calls tend to decrease the Fund's exposure to the underlying instrument, or hedge other Fund investments. The Fund will not enter into a transaction involving options for speculative purposes. The Fund's risks in using these contracts include changes in the value of the underlying instruments, non-performance of the counterparties under the contracts' terms and changes in the liquidity of the secondary market for the contracts. Options are valued at the last sale price, or if no sales occurred on that day, at the last quoted bid price. When the Fund writes an option, the amount of the premium received is recorded as a liability and is subsequently adjusted to the current fair value of the option written. Premiums received from writing options that expire unexercised are treated by the Fund on the expiration date as realized gains from investments. The difference between the premium and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium is less than the amount paid for the closing purchase, as a realized loss. When an option is exercised, the proceeds from the sale of the underlying security or the cost basis of the securities purchased is adjusted by the original premium received or paid. INVESTMENTS IN FOREIGN MARKETS Investments in foreign markets may involve special risks and considerations not typically associated with investing in the United States. These risks include revaluation of currencies, high rates of inflation, repatriation on income and capital, and adverse political and economic developments. Moreover, securities issued in these markets may be less liquid, subject to government ownership controls, tariffs and taxes, subject to delays in settlements, and their prices may be more volatile. The Fund may be subject to capital gains and repatriation taxes imposed by certain countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued based upon net investment income, net realized gains and net unrealized appreciation as income and/or capital gains are earned. 15 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- INCOME TAXES The Fund intends to comply with all sections of the Internal Revenue Code applicable to regulated investment companies including the distribution of substantially all of its taxable net investment income and net realized capital gains to its shareholders. Therefore, no provision for federal income tax has been made. The Fund is treated as a separate taxpayer for federal income tax purposes. At June 30, 2008, information on the tax cost of investments is as follows:
Cost of Gross Tax Gross Tax Net Tax Appreciation/ Investments for Unrealized Unrealized (Depreciation) Tax Purposes Appreciation Depreciation on Investments ------------------------------------------------------------------------------------------------------------------------------------ $154,140,034 $30,537,387 $(17,761,785) $12,775,602
As of December 31, 2007, the Fund has no capital loss carryovers. Capital loss carryovers are available to offset future realized capital gains to the extent provided in the Internal Revenue Code and regulations thereunder. To the extent that these carryover losses are used to offset future capital gains, it is probable that the gains so offset will not be distributed to shareholders because they would be taxable as ordinary income. Any net capital and currency losses incurred after October 31, within the Fund's tax year, are deemed to arise on the first day of the Fund's next tax year if the Fund so elects to defer such losses. The Fund incurred no such losses after October 31, 2007. The tax composition of distributions paid during the years ended December 31, 2007 and December 31, 2006 were as follows: Long-Term Ordinary Capital Income Gains Total -------------------------------------------------------------------------------- 2007 $3,939,151 $26,044,439 $29,983,590 2006 3,072,947 22,389,383 25,462,330 DISTRIBUTIONS TO SHAREHOLDERS The Fund declares and pays dividends from net investment income annually. The Fund declares and pays net realized capital gains in excess of capital loss carryforwards distributions annually. The character of income and gains to be distributed is determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences include (but are not limited to) futures, distributions from Real Estate Investment Trusts (REITS), and losses deferred due to wash sale transactions. Reclassifications due to permanent book/tax differences are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. These reclassifications have no impact on net investment income, realized gains or losses, or the net asset value of the Fund. The calculation of net investment income per share in the Financial Highlights table excludes these adjustments. The reclassifications for the year ended December 31, 2007 were as follows: Undistributed (Distribution in Excess of) Net Investment Accumulated Income Net Realized Gain -------------------------------------------------------------------------------- $(27,302) $27,302 On June 29, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in Income Taxes." FIN48 provides guidance for how certain uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN48 requires evaluation of tax positions taken or expected to be taken in the course of preparing the Fund's tax returns to determine whether the tax positions are "more likely than not" of being sustained by the applicable tax authority. The adoption of FIN48 did not have an impact on the Fund's net assets and financial statements. The Funds' 2004, 2005, 2006 and 2007 calendar years tax returns are still open to examination by the Federal and applicable state tax authorities. INVESTMENT INCOME Corporate actions (including cash dividends) are recorded on the ex-dividend date, net of applicable withholding taxes, except for certain foreign corporate actions, which are recorded as soon after ex-dividend date as such information becomes available. Interest income is recorded on the accrual basis. All 16 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- discounts and premiums on bonds are accreted and amortized, respectively, to call or maturity date, whichever is shorter, using the effective yield method. EXPENSES Expenses of the Company which are directly identifiable to the Fund are allocated to the portfolio. Expenses which are not directly identifiable to the Fund are allocated in such a manner as deemed equitable, taking into consideration the nature and type of expenses and relative size of the Fund. All expenses of the Fund are paid by GEAM and reimbursed by the Fund. 3. LINE OF CREDIT The Company shares a revolving credit facility of up to $150 million with a number of its affiliates. The credit facility is with its custodian bank, State Street Bank and Trust Company. The revolving credit facility requires the payment of a commitment fee equal to 0.09% per annum on the daily unused portion of the credit facility, payable quarterly. The portion borne by the Funds generally is borne proportionally based upon net assets. In addition, the Company has a $100 million uncommitted, unsecured line of credit with State Street. Generally, borrowings under the credit facilities would accrue interest at the Federal Funds Rate plus 50 basis points and would be borne by the borrowing Fund. The maximum amount allowed to be borrowed by any one Fund is the lesser of (i) its prospectus limitation or (ii) 20% of its net assets. The credit facilities were not utilized by the Fund during the period ended June 30, 2008. 4. AMOUNTS PAID TO AFFILIATES GEAM, a registered investment adviser, was retained by the Company's Board of Directors effective May 1, 1997 to act as investment adviser and administrator of the Fund. GEAM's compensation for investment advisory and administrative services is paid monthly based on the average daily net assets of the Fund at an annualized rate of 0.65%. GENPACT performs certain accounting and certain administration services not provided by GEAM. For the period ending June 30, 2008, $1,376 was charged to the Fund. DISTRIBUTION AND SHAREHOLDER SERVICING FEES The Fund has adopted a Shareholder Servicing and Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act with respect to the Class 4 shares of the Fund. The Fund pays GE Investment Distributors, Inc. ("GEID"), a wholly-owned subsidiary of GEAM and the Fund's principal underwriter, a monthly fee for distribution and/or shareholder services provided, at an annual rate of the average daily net assets attributable to each applicable class of shares. The annual rate applicable is 0.45% for the Class 4 shares. Currently, Class 1 shares are not subject to a Rule 12b-1 fee. DIRECTORS' COMPENSATION The Fund pays no compensation to its directors who are officers or employees of GEAM or its affiliates. Directors who are not such officers or employees also serve in a similar capacity for other funds advised by GEAM. Compensation paid to unaffiliated directors are reflected on the Statement of Operations. These fees are allocated pro rata across all of the mutual fund platforms and share classes served by the directors, including the Fund, and are based upon the relative net assets of each fund within such platforms. (For additional information about directors compensation please refer to the Statement of Additional Information.) 5. INVESTMENT TRANSACTIONS PURCHASES AND SALES OF SECURITIES The cost of purchases and the proceeds from sales of investments, other than short-term securities and options, for the period ended June 30, 2008 were as follows: Purchases Sales -------------------------------------------------------------------------------- $42,105,016 $56,624,807 SECURITY LENDING At June 30, 2008 the Fund did not participate in securities lending. 17 Additional Information (unaudited) -------------------------------------------------------------------------------- INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS: The business and affairs of the Company are managed under the direction of the Company's Board of Directors. Information pertaining to the Directors and officers of the Company is set forth below. INTERESTED DIRECTORS AND EXECUTIVE OFFICERS -------------------------------------------------------------------------------- MICHAEL J. COSGROVE -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 59 POSITION(S) HELD WITH FUND Chairman of the Board and President TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 10 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President - GEAM since February 1997; President and Chief Executive Officer - Mutual Funds at GEAM since March 2007; Vice President, GE Capital Corporation, an indirect wholly-owned subsidiary of GE, since December 1999; Executive Vice President - Sales and Marketing of GEAM, a wholly-owned subsidiary of GE that is registered as an investment adviser under the Investment Advisers Act of 1940, as amended, since March 1993; Director of GEAM since 1988. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48 OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception; Trustee of Elfun Funds, GE Savings & Security Funds and General Electric Pension Trust since 1988; Trustee of Fordham University since 2003; Trustee of Elfun Foundation; Treasurer of GE Foundation; Director, GE Asset Management (Ireland) since February 1999; Director, GE Asset Management Funds Plc, GE Asset Canada Company, GE Asset Management Limited, and GE Volunteers. -------------------------------------------------------------------------------- MATTHEW J. SIMPSON -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 47 POSITION(S) HELD WITH FUND Executive Vice President TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - less than one year PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General Counsel and Secretary of GEAM since July 2007; Senior Vice President and General Counsel - Marketing and Client Services (formerly Asset Management Services), at GEAM and Senior Vice President and General Counsel of GEAMS from February 1997 to June 2007; Vice President and Associate General Counsel of GEAM from October 1992 to February 1997; Secretary of Fund from 1997 to June 2007; Vice President of Fund from September 2003 to June 2007; Vice President of GE Institutional Funds and GE LifeStyle Funds from September 2003 to June 2007; Secretary of GE Institutional Funds and GE LifeStyle Funds from 1997 to June 2007; Vice President of Elfun Funds and GE Savings & Security Funds from October 2003 to June 2007; Assistant Secretary of Elfun Funds and GE Savings & Security Funds from 1998 to June 2007. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional Funds, GE LifeStyle Funds, Elfun Funds and GE Savings & Security Funds since July 2007. 18 Additional Information (unaudited) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SCOTT H. RHODES -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 49 POSITION(S) HELD WITH FUND Treasurer TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 2 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds Operations Manager since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle Funds and GE Investments Funds since November 2005 and Elfun Funds and GE Savings & Security Funds since September 2005; from August 2004 to September 2005 Vice President, U.S. Trust Company, N.A. and Assistant Treasurer of Excelsior Funds, Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds, Inc.; from January 2004 to August 2004, Vice President BlackRock Financial Management, Inc.; from December 1996 to November 2003, Controller - Mutual Funds, American Skandia Investment Services, Inc. and Assistant Treasurer of American Skandia Trust and American Skandia Advisor Funds, Inc. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A -------------------------------------------------------------------------------- JEANNE M. LAPORTA -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 42 POSITION(S) HELD WITH FUND Vice President and Secretary TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 2 years (Vice President); less than one year (Secretary) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Senior Vice President and Deputy General Counsel at GE Asset Management since October 2007; Vice President and Associate General Counsel - Marketing and Client Services (formerly Asset Management Services) at GEAM from May 1997 to October 2007; Vice President and Assistant Secretary of GE Funds, GE Institutional Funds and GE LifeStyle Funds since September 2003; Vice President and Assistant Secretary of Elfun Funds and GE Savings & Security Funds since October 2003; Assistant Secretary from September 2003 to June 2007 and Secretary since July 2007. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A 19 Additional Information (unaudited) -------------------------------------------------------------------------------- NON-INTERESTED DIRECTORS -------------------------------------------------------------------------------- JOHN R. COSTANTINO -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 62 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC since 2006; Managing Director, Walden Partners, Ltd., consultants and investors, since August 1992. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE Institutional Funds and GE LifeStyle Funds since their inception; Trustee of Fordham University since 2002 and Marymount College from 2001 through 2002; Neuroscience Research Institute since 1986; Diocesan Finance Counsel of the Dioceses of Brooklyn & Queens since 2001; Gregorian University Foundation since 1994. -------------------------------------------------------------------------------- WILLIAM J. LUCAS -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 60 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Treasurer of Fairfield University since 1983. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception. -------------------------------------------------------------------------------- ROBERT P. QUINN -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 72 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon Brothers Inc. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception. The Statement of Additional Information for the Fund includes additional information about the Directors and Officers and is available, without charge, upon request by calling 1-800-242-0134. 20 Investment Team -------------------------------------------------------------------------------- INVESTMENT ADVISER AND ADMINISTRATOR GE Asset Management Incorporated BOARD OF DIRECTORS Michael J. Cosgrove, CHAIRMAN John R. Costantino William J. Lucas Robert P. Quinn Matthew J. Simpson SECRETARY Jeanne M. LaPorta ASSISTANT SECRETARIES Joseph A. Carucci Joon Won Choe TREASURER Scott H. Rhodes ASSISTANT TREASURERS Scott R. Fuchs Christopher M. Isaacs DISTRIBUTOR GE Investment Distributors, Inc. Member FINRA and SIPC COUNSEL Sutherland, Asbill & Brennan, LLP CUSTODIAN State Street Bank & Trust Company INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM KPMG LLP OFFICERS OF THE INVESTMENT ADVISER James W. Ireland, CHIEF EXECUTIVE OFFICER Daniel O. Colao, EVP, CHIEF FINANCIAL OFFICER (AS OF JULY 28, 2008) Michael J. Cosgrove, EVP, PRESIDENT AND CHIEF EXECUTIVE OFFICER - MUTUAL FUNDS Paul M. Colonna, EVP, PRESIDENT - FIXED INCOME Kathryn D. Karlic, EVP, PRESIDENT - INSTITUTIONAL SALES AND MARKETING Ralph R. Layman, EVP, PRESIDENT - INTERNATIONAL EQUITIES Matthew J. Simpson, EVP, GENERAL COUNSEL AND SECRETARY Judith A. Studer, EVP, PRESIDENT - U.S. EQUITIES Don W. Torey, EVP, PRESIDENT - ALTERNATIVE INVESTMENTS AND REAL ESTATE John J. Walker, EVP, CHIEF OPERATING OFFICER (AS OF JANUARY 31, 2008) David Wiederecht, EVP, PRESIDENT - INVESTMENT STRATEGIES 21 [This page intentionally left blank.] [This page intentionally left blank.] [This page intentionally left blank.] [This page intentionally left blank.] INVESTMENT ADVISER GE ASSET MANAGEMENT INCORPORATED 3001 SUMMER STREET PO BOX 7900 STAMFORD, CT 06904-7900 DISTRIBUTOR GE INVESTMENT DISTRIBUTORS, INC. MEMBER FINRA AND SIPC 3001 SUMMER STREET PO BOX 7900 STAMFORD, CT 06904-7900 The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities is available without charge (i) upon request, by calling 1-800-242-0134; (ii) on the Fund's website at HTTP://WWW.GEFUNDS.COM; and (iii) on the Commission's website at HTTP://WWW.SEC.GOV. The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC - information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Information (if any) regarding how the Fund voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through the Fund's website at HTTP://WWW.GEFUNDS.COM; and (ii) on the Commission's website at HTTP://WWW.SEC.GOV. [GE logo omitted] GE Investments Funds, Inc. Small-Cap Equity Fund Semi-Annual Report JUNE 30, 2008 [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................................................... 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, 2008 (unaudited) -------------------------------------------------------------------------------- Total returns take into account changes in share price and assume reinvestment of all dividends and capital gains distributions, if any. The performance data quoted represent past performance; past performance does not guarantee future results. Investment return and principal value will fluctuate so your shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data quoted. Periods less than one year are not annualized. Please call 800-242-0134 for the most recent month-end performance data. Total returns shown are net of Fund expenses but do not reflect fees and charges associated with the variable contracts such as administrative fees, account charges and surrender charges, which, if reflected, would reduce the Fund's total returns for all periods shown. Shares of the Fund are neither insured nor guaranteed by the U.S. Government, and their prices will fluctuate with market conditions. The Russell 2000 Index (Russell 2000(R))* is an unmanaged index and does not reflect the actual cost of investing in the instruments that comprise the index. The Russell 2000 Index is a market capitalization-weighted index consisting of 2,000 of the smallest U.S.-domiciled publicly traded common stocks that are included in the Russell 3000(R) Index. The Russell 3000(R) Index is comprised of the 3,000 largest U.S. domiciled companies. The results shown for the foregoing index assume the reinvestment of net dividends or interest. The peer universe of the underlying annuity funds used in our peer ranking calculation is based on the blend of Lipper peer categories, as shown. Lipper is an independent mutual fund rating service. A Fund's performance may be compared to or ranked within a universe of mutual funds with investment objectives and policies similar but not necessarily identical to the Fund's. Such comparisons or rankings are made on the basis of several factors, including the Fund's objectives and policies, management style and strategy, and portfolio composition, and may change over time if any of those factors change. ----------------------- GE INVESTMENT DISTRIBUTORS, INC., MEMBER OF FINRA & SIPC, IS THE PRINCIPAL UNDERWRITER AND DISTRIBUTOR OF THE GE INVESTMENT FUNDS, INC. AND A WHOLLY OWNED SUBSIDIARY OF GE ASSET MANAGEMENT INCORPORATED, THE INVESTMENT ADVISER OF THE FUNDS. * RUSSELL INVESTMENT GROUP OWNS THE RUSSELL INDEX DATA, INCLUDING ALL APPLICABLE TRADEMARKS AND COPYRIGHTS, USED BY GE ASSET MANAGEMENT IN THESE MATERIALS. ANY UNAUTHORIZED USE OR REDISTRIBUTION OF SUCH RUSSELL INDEX DATA IS STRICTLY PROHIBITED. RUSSELL INVESTMENT GROUP IS NOT RESPONSIBLE FOR THE CONFIGURATION OF THIS MATERIAL OR FOR ANY INACCURACY IN GE ASSET MANAGEMENT'S PRESENTATION THEREOF. 1 Small-Cap Equity Fund -------------------------------------------------------------------------------- PALISADE CAPITAL MANAGEMENT, L.L.C. ("PALISADE") HAS A HISTORY OF MANAGING SMALL-CAP EQUITY PORTFOLIOS AND FOR SEVERAL YEARS HAS PROVIDED PENSION FUND SERVICES TO GE. PALISADE TRANSLATES ITS EXPERIENCE FROM VARIOUS INSTITUTIONAL AND PRIVATE ACCOUNTS TO MUTUAL FUND PORTFOLIOS IT SUB-ADVISES FOR GE ASSET MANAGEMENT. PALISADE HAS MANAGED THE SMALL-CAP EQUITY FUND SINCE ITS INCEPTION. SMALL-CAP EQUITY FUND IS MANAGED BY JACK FEILER, JEFFREY SCHWARTZ AND DENNISON T. ("DAN") VERU, MEMBERS OF PALISADE'S INVESTMENT POLICY COMMITTEE. MR. FEILER, MR. SCHWARTZ AND MR. VERU ARE JOINTLY AND PRIMARILY RESPONSIBLE FOR THE STRATEGY OF THE FUND AND THE DAY-TO-DAY MANAGEMENT OF THE FUND IS EXECUTED BY MR. SCHWARTZ. JACK FEILER, PRESIDENT AND CHIEF INVESTMENT OFFICER, HAS DAY-TO-DAY RESPONSIBILITY FOR MANAGING THE SMALL-CAP EQUITY FUND. MR. FEILER HAS MORE THAN 33 YEARS OF INVESTMENT EXPERIENCE AND HAS SERVED AS THE PRINCIPAL SMALL-CAP PORTFOLIO MANAGER AT PALISADE SINCE THE COMMENCEMENT OF PALISADE'S OPERATIONS IN APRIL 1995. HE HAS SERVED AS A PORTFOLIO MANAGER OF THE SMALL-CAP EQUITY FUND SINCE ITS INCEPTION. PRIOR TO JOINING PALISADE, MR. FEILER WAS A SENIOR VICE PRESIDENT-INVESTMENTS AT SMITH BARNEY FROM 1990 TO 1995. JEFFREY SCHWARTZ, SENIOR PORTFOLIO MANAGER, JOINED PALISADE IN OCTOBER 2004. PRIOR TO JOINING PALISADE, MR. SCHWARTZ WAS VICE PRESIDENT AND SENIOR PORTFOLIO MANAGER OF SAFECO ASSET MANAGEMENT FROM SEPTEMBER 2003 TO SEPTEMBER 2004. FROM JUNE 2001 TO AUGUST 2003, MR. SCHWARTZ FOUNDED NANTUCKET INVESTMENT RESEARCH IN FARMINGTON HILLS, MI, CONDUCTED INDEPENDENT INVESTMENT RESEARCH AND WAS A PRIVATE INVESTOR. FROM JUNE 1992 UNTIL MAY 2001, MR. SCHWARTZ WAS AT MUNDER CAPITAL MANAGEMENT, MOST RECENTLY AS A SENIOR PORTFOLIO MANAGER AND PRINCIPAL. DENNISON T. ("DAN") VERU IS AN EXECUTIVE VICE-PRESIDENT AND CO-INVESTMENT OFFICER OF PALISADE. SINCE JOINING PALISADE IN MARCH 2000, MR. VERU HAS BEEN A MEMBER OF THE INVESTMENT POLICY COMMITTEE. MR. VERU BECAME A PRINCIPAL OF PALISADE IN JULY 2004. PRIOR TO JOINING PALISADE, HE WAS PRESIDENT AND DIRECTOR OF RESEARCH OF AWAD ASSET MANAGEMENT, A DIVISION OF RAYMOND JAMES & ASSOCIATES. MR. VERU HAS BEEN A FREQUENT GUEST ON CNBC, CNN AND BLOOMBERG TELEVISION. PRIOR TO AWAD, MR. VERU WORKED WITH THE PALISADE TEAM FROM 1984 THROUGH 1992. Q. HOW DID THE SMALL-CAP EQUITY FUND PERFORM COMPARED TO ITS BENCHMARK FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2008? A. For the six-month period ended June 30, 2008, the Small-Cap Equity Fund returned -5.42% for the Class 1 shares and -4.64% for the Class 4 shares. The Russell 2000 Index, the Fund's benchmark, returned -9.37% and the Fund's Lipper peer group of 141 Small-Cap Core Funds returned an average of -8.67% for the same period. Q. WHAT MARKET CONDITIONS IMPACTED FUND PERFORMANCE? A. Over the past six months, U.S. financial markets continued to face significant challenges due to ever-higher commodity prices, housing market problems, and slowing domestic economic growth. Energy was the only sector in the Russell 2000 Index that registered a gain over the past six-month period. All other sectors posted losses with the worst performers being Consumer Discretionary (-19%), Financials (-17%), and Healthcare (-17%). Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE? A. The main contributor to the Fund's relative outperformance was a strong stock selection in the Consumer Discretionary sector. Despite being the worst performing sector in the Russell 2000 Index, good decision making in the sector helped to overcome the weakness in the Index. The top performers were Aeropostale (+18%), Bright Horizons Family Solutions (+24%), and Arbitron (+15%). The Fund also received solid results from its selection of stocks in the Industrials sector. The key name was DRS Technologies (+46%), which rose following the news that it will be acquired by a foreign competitor. The main area of weakness came from the Fund's holdings in the Healthcare sector. Much of the weakness came from healthcare providers Healthways (-49%) and Molina Healthcare (-37%). Additionally, disposable medical products concern Medical Action Industries (-50%) detracted notably from relative results. 2 Q&A -------------------------------------------------------------------------------- Q. WERE THERE ANY SIGNIFICANT CHANGES TO THE FUND DURING THE PERIOD? A. There were no significant changes to the Fund during the most recent six-month period. We have slightly reduced our holdings in the Consumer Discretionary, Financials, Healthcare and Industrials sectors, and have increased our Energy exposure. Many of our holdings benefit from the weaker dollar as they have significant international exposure. This should bode well for the Fund as we enter earnings season in the next few weeks. We remain focused on companies with strong fundamentals whose earnings visibility and consistency are paramount. Although earnings estimates have been pared for 2008, earnings expectations for smaller stocks have held up better than for those of large caps. We believe positive employment data is the key factor keeping the economy intact. However, economic news remains challenging. The unemployment rate is at 5.5%, the economy has registered six straight months of job losses, and employment numbers turned negative on a year-over-year basis for the first time since November 2003. Additionally, headwinds created by the hyperinflationary rise in oil prices and other commodities pose further threats to an already fragile economy. We believe price volatility will continue to characterize the current market uncertainty and that the Federal Reserve will continue to act as a catalyst for market action. The current environment shares similarities to the recession of 1990, where banks and brokerage firms were under intense pressure, oil prices were rising, and a consumer-led recession took place leaving retailers struggling. Despite this backdrop, 1991 proved to be a very strong year for small caps with the Russell 2000 Index soaring 46%. We take a bottom-up approach and look for companies with modest valuations that are capable of growing earnings regardless of the economic environment. Stocks that are candidates for our portfolio demonstrate characteristics such as increasing net income, improving free cash flow, and increasing return on invested capital. As a result of our quality focus, we believe the portfolio is well positioned for periods where economic activity slows and earnings growth becomes more challenging. 3 Small-Cap Equity Fund -------------------------------------------------------------------------------- Understanding Your Fund's Expenses As a shareholder of the Fund you incur ongoing expenses, which include portfolio management fees, professional fees, administrative fees and other Fund expenses. The following example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the period. The information in the following table is based on an investment of $1,000, which is invested at the beginning of the period and held for the entire six-month period ended June 30, 2008. ACTUAL EXPENSES The first section of the table provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your class under the heading "Expenses Paid During Period." HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second section of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholders reports of other funds. Please note that the expenses shown in the table do not reflect any transaction costs, such as sales charges or redemption fees.
JANUARY 1, 2008 - JUNE 30, 2008 ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($)* ------------------------------------------------------------------------------------------------------------------------------------ ACTUAL FUND RETURN** ------------------------------------------------------------------------------------------------------------------------------------ Class 1 1,000.00 945.77 4.21 Class 4 1,000.00 953.57 6.33 ------------------------------------------------------------------------------------------------------------------------------------ HYPOTHETICAL 5% RETURN (2.5% FOR THE PERIOD) ------------------------------------------------------------------------------------------------------------------------------------ Class 1 1,000.00 1,020.28 4.42 Class 4 1,000.00 1,018.38 6.46 ------------------------------------------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.88% FOR CLASS 1 AND 1.28% FOR CLASS 4, (FROM PERIOD JANUARY 1, 2008 - JUNE 30, 2008), MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY 182/366 (TO REFLECT THE ONE-HALF YEAR PERIOD). ** ACTUAL FUND RETURNS FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2008 WERE AS FOLLOWS: (5.42)% FOR CLASS 1 SHARES, AND SINCE INCEPTION (4.64)% FOR CLASS 4 SHARES. 4 Small-Cap Equity Fund (unaudited) -------------------------------------------------------------------------------- CHANGE IN VALUE OF A $10,000 INVESTMENT CLASS 1 SHARES -------------------------------------------------------------------------------- [Line chart omitted -- plot points are as follows:] GEI SMALL-CAP EQUITY RUSSELL 2000 INDEX 04/28/00 10,000.00 10,000.00 12/00 11,325.90 9,649.74 12/01 12,455.21 9,896.04 12/02 10,729.52 7,876.02 12/03 13,316.93 11,602.26 12/04 15,334.17 13,729.45 12/05 16,795.59 14,350.16 12/06 19,023.86 16,983.06 12/07 19,478.46 16,712.35 06/08 18,422.11 15,145.36 AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2008 -------------------------------------------------------------------------------- CLASS 1 SHARES (Inception date: 4/28/00) -------------------------------------------------------------------------------- SIX ONE FIVE SINCE ENDING VALUE OF A MONTHS YEAR YEAR INCEPTION $10,000 INVESTMENT -------------------------------------------------------------------------------- Small-Cap Equity Fund -5.42% -11.19% 10.63% 7.76% $18,422 -------------------------------------------------------------------------------- Russell 2000 Index -9.37% -16.20% 10.27% 5.21% $15,145 -------------------------------------------------------------------------------- Lipper peer group average* -8.67% -16.78% 9.98% N/A -------------------------------------------------------------------------------- CLASS 4 SHARES -------------------------------------------------------------------------------- [Line chart omitted -- plot points are as follows:] GEI SMALL-CAP EQUITY RUSSELL 2000 INDEX 05/08 10,000.00 10,000.00 06/08 9,535.65 9,654.09 AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2008 -------------------------------------------------------------------------------- CLASS 4 SHARES (Inception date: 5/1/08) -------------------------------------------------------------------------------- ONE SINCE ENDING VALUE OF A MONTH INCEPTION $10,000 INVESTMENT -------------------------------------------------------------------------------- Small-Cap Equity Fund -7.56% -4.64% $9,536 -------------------------------------------------------------------------------- Russell 2000 Index -7.70% -3.46% $9,654 -------------------------------------------------------------------------------- Lipper peer group average** -7.87% N/A -------------------------------------------------------------------------------- INVESTMENT PROFILE A fund designed for investors who seek long-term growth of capital by investing at least 80% of its net assets in equity securities of small-cap companies under normal circumstances. The Fund invests primarily in small-cap companies that the portfolio managers believe are undervalued by the market but have solid growth prospects. PORTFOLIO COMPOSITION AS OF JUNE 30, 2008 as a % of Market Value Market Value of $85,903 (in thousands) -------------------------------------------------------------------------------- [Pie chart omitted -- plot points are as follows:] Industrials 22.7% Financials 17.6% Consumer Discretionary 14.1% Information Technology 11.8% Healthcare 11.8% Energy 9.4% Materials 5.5% Consumer Staples 4.6% Utilities 1.7% Short-Term 0.8% Other Investments 0.0%*** TOP TEN LARGEST HOLDINGS AS OF JUNE 30, 2008 as a % of Market Value -------------------------------------------------------------------------------- Oil States International, Inc. 3.56% -------------------------------------------------------------------------------- Central European Distribution Corp. 3.56% -------------------------------------------------------------------------------- Arbitron, Inc. 2.94% -------------------------------------------------------------------------------- Harsco Corp. 2.93% -------------------------------------------------------------------------------- Teledyne Technologies Inc. 2.66% -------------------------------------------------------------------------------- Quanta Services, Inc. 2.61% -------------------------------------------------------------------------------- Dril-Quip Inc. 2.57% -------------------------------------------------------------------------------- Varian, Inc. 2.49% -------------------------------------------------------------------------------- Interactive Data Corp. 2.48% -------------------------------------------------------------------------------- Aeropostale, Inc. 2.46% -------------------------------------------------------------------------------- * LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR THE SIX MONTHS, ONE YEAR AND FIVE-YEAR PERIODS INDICATED IN THE SMALL-CAP CORE FUNDS PEER GROUP CONSISTING OF 141, 140 AND 99 UNDERLYING ANNUITY FUNDS, RESPECTIVELY. ** LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR THE ONE MONTH PERIOD INDICATED IN THE SMALL-CAP CORE FUNDS PEER GROUP CONSISTING OF 144 UNDERLYING ANNUITY FUNDS, RESPECTIVELY. *** LESS THAN 0.1%. SEE NOTES TO PERFORMANCE ON PAGE 1 FOR FURTHER INFORMATION, INCLUDING AN EXPLANATION OF LIPPER PEER CATEGORIES. PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE AND THE GRAPH AND TABLE DO NOT REFLECT THE DEDUCTION OF TAXES. 5 SMALL-CAP EQUITY FUND Schedule of Investments June 30, 2008 (unaudited) -------------------------------------------------------------------------------- SMALL-CAP EQUITY FUND -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE -------------------------------------------------------------------------------- COMMON STOCK -- 98.9% + -------------------------------------------------------------------------------- CONSUMER DISCRETIONARY -- 14.1% Aaron Rents, Inc............... 71,700 $ 1,601,061 Aeropostale, Inc............... 67,500 2,114,775(a) American Eagle Outfitters, Inc. 19,000 258,970 Arbitron, Inc.................. 53,100 2,522,250 CBRL Group, Inc................ 26,700 654,417 Interactive Data Corp.......... 84,900 2,133,537 Jarden Corp.................... 41,600 758,784(a) LKQ Corp....................... 95,200 1,720,264(a) Triarc Companies, Inc. (Class B) (Series 1).................. 59,800 378,534 12,142,592 CONSUMER STAPLES -- 4.6% Central European Distribution Corp........... 41,200 3,054,980(a) Smithfield Foods, Inc.......... 45,300 900,564(a) 3,955,544 ENERGY -- 9.4% Dril-Quip Inc.................. 35,000 2,205,000(a) NATCO Group, Inc. (Class A).... 22,800 1,243,284(a) Oil States International, Inc.. 48,200 3,057,808(a) St. Mary Land & Exploration Co. 25,200 1,628,928 8,135,020 FINANCIALS -- 17.5% BioMed Realty Trust, Inc. (REIT) 85,300 2,092,409 Cullen/Frost Bankers, Inc...... 17,900 892,315 DCT Industrial Trust, Inc. (REIT) 72,300 598,644 Digital Realty Trust, Inc. (REIT) 28,100 1,149,571 Federal Realty Investment Trust (REIT)...................... 15,200 1,048,800 GFI Group, Inc................. 75,700 682,057 Global Cash Access Holdings, Inc. 108,200 742,252(a) HCC Insurance Holdings, Inc.... 73,800 1,560,132 Hilb Rogal & Hobbs Co.......... 15,600 677,976 Jones Lang LaSalle Inc......... 8,100 487,539 Omega Healthcare Investors, Inc. (REIT)...................... 115,300 1,919,745 Raymond James Financial, Inc... 75,000 1,979,250 Sandy Spring Bancorp, Inc...... 14,400 238,752 Sterling Bancorp............... 24,200 289,190 Westamerica Bancorporation..... 13,900 731,001 15,089,633 HEALTHCARE -- 11.7% AMN Healthcare Services, Inc... 47,900 810,468(a) Computer Programs and Systems, Inc................ 31,600 547,628 Cubist Pharmaceuticals, Inc.... 27,100 484,006(a) NUMBER OF SHARES VALUE -------------------------------------------------------------------------------- Healthways, Inc................ 28,000 $ 828,800(a) HMS Holdings Corp.............. 24,100 517,427(a) inVentiv Health, Inc........... 39,100 1,086,589(a) KV Pharmaceutical Co. (Class A) 67,500 1,304,775(a) Medical Action Industries Inc.. 84,700 878,339(a) Molina Healthcare, Inc......... 48,800 1,187,792(a) Thoratec Corp.................. 18,800 326,932(a) Varian, Inc.................... 41,900 2,139,414(a) 10,112,170 INDUSTRIALS -- 22.6% Applied Industrial Technologies, Inc. 35,400 855,618 Baldor Electric Co............. 36,900 1,290,762 Comfort Systems USA, Inc....... 55,200 741,888 Genesee & Wyoming Inc. (Class A) 54,500 1,854,090(a) Harsco Corp.................... 46,300 2,519,183 Healthcare Services Group...... 32,800 498,888 Herman Miller Inc.............. 37,200 925,908 Mueller Industries, Inc........ 52,000 1,674,400 NCI Building Systems, Inc...... 14,300 525,239(a) Old Dominion Freight Line, Inc. 33,100 993,662(a) Oshkosh Corp................... 44,200 914,498 Quanta Services, Inc........... 67,400 2,242,398(a) Teledyne Technologies Inc...... 46,900 2,288,251(a) Universal Technical Institute, Inc. 3,300 41,118(a) Woodward Governor Co........... 59,000 2,103,940 19,469,843 INFORMATION TECHNOLOGY -- 11.8% ACI Worldwide, Inc............. 21,900 385,221(a) BigBand Networks, Inc.......... 34,000 160,820(a) Blackbaud, Inc................. 72,000 1,540,800 CommScope, Inc................. 35,000 1,846,950(a) Micros Systems, Inc............ 59,700 1,820,253(a) Microsemi Corp................. 17,200 433,096(a) Parametric Technology Corp..... 81,400 1,356,938(a) Rudolph Technologies, Inc...... 66,000 508,200(a) Semtech Corp................... 69,600 979,272(a) SRA International, Inc. (Class A) 8,200 184,172(a) Varian Semiconductor Equipment Associates, Inc............. 7,400 257,668(a) Zebra Technologies Corp. (Class A) 21,200 691,968(a) 10,165,358 MATERIALS -- 5.5% Commercial Metals Co........... 55,500 2,092,350 Compass Minerals International, Inc.......... 11,400 918,384 Packaging Corporation of America 64,200 1,380,942 Pioneer Drilling Co............ 19,100 359,271(a) 4,750,947 UTILITIES -- 1.7% IDACORP, Inc................... 49,500 1,430,055 TOTAL INVESTMENTS IN SECURITIES (COST $84,730,336)........... 85,251,162 See Notes to Schedule of Investments on page 8 and Notes to Financial Statements. 6 SMALL-CAP EQUITY FUND Schedule of Investments June 30, 2008 (unaudited) -------------------------------------------------------------------------------- VALUE -------------------------------------------------------------------------------- OTHER INVESTMENTS -- 0.0%* -------------------------------------------------------------------------------- GEI Investment Fund (COST $24)................... $ 19 (c) TOTAL INVESTMENTS IN SECURITIES (COST $84,730,360)........... 85,251,181 -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 0.7% -------------------------------------------------------------------------------- GE Money Market Fund Institutional Class 1.93%....................... 651,607(b,d) (COST $651,607) TOTAL INVESTMENTS (COST $85,381,967)........... 85,902,788 OTHER ASSETS AND LIABILITIES, NET-- 0.4%.................. 318,747 ----------- NET ASSETS-- 100.0% ........... $86,221,535 =========== See Notes to Schedule of Investments on page 8 and Notes to Financial Statements. 7 Notes to Schedule of Investments June 30, 2008 (unaudited) -------------------------------------------------------------------------------- The views expressed in this document reflect our judgment as of the publication date and are subject to change at any time without notice. The securities cited may not represent current or future holdings and should not be considered as a recommendation to purchase or sell a particular security. See the prospectus for complete descriptions of investment objectives, policies, risks and permissible investments. (a) Non-income producing security. (b) Coupon amount represents effective yield. (c) GE Asset Management ("GEAM") the investment adviser of the Fund, also serves as investment adviser of the GEI Investment Fund. (d) GEAM, the investment adviser of the Fund, also serves as investment adviser of the GE Money Market Fund. + Percentages are based on net assets as of June 30, 2008. Abbreviations: REIT Real Estate Investment Trust 8
Financial Highlights Selected data based on a share outstanding throughout the periods indicated ------------------------------------------------------------------------------------------------------------------------------------ SMALL-CAP EQUITY FUND ---------------------------------------------------------------------- -------------- CLASS 1 CLASS 4 ---------------------------------------------------------------------- -------------- 6/30/08+ 12/31/07 12/31/06 12/31/05 12/31/04 12/31/03 6/30/08+ ---------------------------------------------------------------------- -------------- INCEPTION DATE -- -- -- -- -- 4/28/00 5/1/08 Net asset value, beginning of period.... $ 12.17 $ 14.39 $ 14.44 $ 13.62 $ 12.74 $ 10.27 $12.06 INCOME/(LOSS) FROM INVESTMENT OPERATIONS: Net investment income................ 0.06 0.06 0.05 0.02 0.08 0.02 0.02 Net realized and unrealized gains/(losses) on investments..... (0.72) 0.31 1.87 1.28 1.85 2.46 (0.58) ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INCOME/(LOSS) FROM INVESTMENT OPERATIONS................ (0.66) 0.36 1.92 1.30 1.93 2.48 (0.56) ------------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS FROM: Net investment income................ -- 0.06 0.04 0.03 0.07 0.01 -- Net realized gains................... -- 2.53 1.93 0.45 0.98 -- -- ------------------------------------------------------------------------------------------------------------------------------------ TOTAL DISTRIBUTIONS..................... -- 2.59 1.97 0.48 1.05 0.01 -- ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, END OF PERIOD.......... $ 11.51 $ 12.17 $ 14.39 $ 14.44 $ 13.62 $ 12.74 $11.50 ==================================================================================================================================== TOTAL RETURN (A)........................ (5.42)% 2.39% 13.27% 9.53% 15.15% 24.11% (4.64)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $86,212 $104,010 $127,381 $128,142 $117,158 $86,330 $ 10 Ratios to average net assets: Net investment income*............ 0.47% 0.31% 0.31% 0.11% 0.67% 0.17% (0.06)% Expenses*......................... 0.88% 0.87% 0.86% 0.86% 0.88% 0.86% 1.28% Portfolio turnover rate.............. 9% 25% 52% 33% 101% 119% 9%
NOTES TO FINANCIAL HIGHLIGHTS -------------------------------------------------------------------------------- (a) Total returns are historical and assume changes in share price and reinvestment of dividends and capital gains and do not include the effect of insurance contract charges. * Annualized for periods less than one year. + Unaudited. See Notes to Financial Statements. 9
Statement of Assets and Liabilities JUNE 30, 2008 (UNAUDITED) ------------------------------------------------------------------------------------------------------------------------------------ SMALL-CAP EQUITY FUND ------------------------------------------------------------------------------------------------------------------------------------ ASSETS Investments in securities, at market (cost $84,730,336)................................................ $85,251,162 Investments in affiliated securities, at market (cost $24)............................................. 19 Short-term affiliated investments (at amortized cost).................................................. 651,607 Receivable for investments sold........................................................................ 593,729 Income receivables..................................................................................... 86,848 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL ASSETS....................................................................................... 86,583,365 ------------------------------------------------------------------------------------------------------------------------------------ LIABILITIES Payable for fund shares redeemed....................................................................... 243,623 Payable to GEAM........................................................................................ 69,994 Accrued other expenses................................................................................. 47,686 Other liabilities...................................................................................... 527 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL LIABILITIES.................................................................................. 361,830 ------------------------------------------------------------------------------------------------------------------------------------ NET ASSETS................................................................................................ $86,221,535 ==================================================================================================================================== NET ASSETS CONSIST OF: Capital paid in........................................................................................ 81,818,435 Undistributed (distribution in excess of) net investment income............................................................................... 253,290 Accumulated net realized gain (loss)................................................................... 3,628,989 Net unrealized appreciation/(depreciation) on: Investments......................................................................................... 520,821 ------------------------------------------------------------------------------------------------------------------------------------ NET ASSETS................................................................................................ $86,221,535 ==================================================================================================================================== CLASS 1: NET ASSETS................................................................................................ 86,211,995 Shares outstanding ($0.01 par value; unlimited shares authorized)......................................... 7,487,008 Net asset value per share................................................................................. $11.51 CLASS 4: NET ASSETS................................................................................................ 9,540 Shares outstanding ($0.01 par value; unlimited shares authorized)......................................... 829 Net asset value per share................................................................................. $11.50
See Notes to Financial Statements. 10
Statement of Operations FOR THE SIX MONTHS ENDED JUNE 30, 2008 (UNAUDITED) ------------------------------------------------------------------------------------------------------------------------------------ SMALL-CAP EQUITY FUND ------------------------------------------------------------------------------------------------------------------------------------ INVESTMENT INCOME INCOME: Dividend .................................................................................. $ 609,977 Interest .................................................................................. (40) Interest from affliated investments ....................................................... 10,668 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INCOME ................................................................................ 620,605 ------------------------------------------------------------------------------------------------------------------------------------ EXPENSES: Advisory and administrative fees .......................................................... 369,718 Distributors Fees (Note 4) Class 4 ................................................................................ 7 Transfer agent ............................................................................ 23 Trustee's fees ............................................................................ 1,297 Custody and accounting expenses ........................................................... 17,005 Professional fees ......................................................................... 10,169 Registration expenses ..................................................................... 2,403 Other expenses ............................................................................ 4,287 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL EXPENSES BEFORE WAIVER AND REIMBURSEMENT .............................................. 404,909 ------------------------------------------------------------------------------------------------------------------------------------ Less: Expenses reimbursed by the adviser (waiver related to Fund of Fund Investment) ...... (1,134) ------------------------------------------------------------------------------------------------------------------------------------ Net expenses .............................................................................. 403,775 ------------------------------------------------------------------------------------------------------------------------------------ NET INVESTMENT INCOME (LOSS) ................................................................ 216,830 ==================================================================================================================================== NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS REALIZED GAIN (LOSS) ON: Investments ............................................................................ 3,307,240 INCREASE (DECREASE) IN UNREALIZED APPRECIATION/ (DEPRECIATION) ON: Investments ............................................................................ (9,059,794) ------------------------------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments .................................... (5,752,554) ------------------------------------------------------------------------------------------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ............................. $(5,535,724) ====================================================================================================================================
See Notes to Financial Statements. 11
Statements of Changes in Net Assets ------------------------------------------------------------------------------------------------------------------------------------ SMALL-CAP EQUITY FUND ------------------------------------------------------------------------------------------------------------------------------------ SIX MONTHS ENDED YEAR ENDED JUNE 30, 2008 DECEMBER 31, (UNAUDITED) 2007 ------------------------------------------------------------------------------------------------------------------------------------ INCREASE (DECREASE) IN NET ASSETS OPERATIONS: Net investments income (loss)..................................................... $ 216,830 $ 284,288 Net realized gain (loss) on investments, futures, written options, and foreign currency transactions............................................... 3,307,240 10,756,527 Net increase (decrease) in unrealized appreciation/(depreciation) on investments, futures, written options, and foreign currency translation............................................................ (9,059,794) (7,235,808) ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) from operations........................................... (5,535,724) 3,805,007 ------------------------------------------------------------------------------------------------------------------------------------ DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Class 1......................................................................... -- (410,572) Class 4......................................................................... -- -- Net realized gains Class 1......................................................................... -- (17,923,908) Class 4......................................................................... -- -- Return of Capital................................................................. -- -- ------------------------------------------------------------------------------------------------------------------------------------ TOTAL DISTRIBUTIONS................................................................. -- (18,334,480) ------------------------------------------------------------------------------------------------------------------------------------ Increase (decrease) in net assets from operations and distributions................. (5,535,724) (14,529,473) ------------------------------------------------------------------------------------------------------------------------------------ SHARE TRANSACTIONS: Proceeds from sale of shares Class 1......................................................................... 2,359,892 2,430,205 Class 4......................................................................... 10,000 -- Value of distributions reinvested Class 1......................................................................... -- 18,334,520 Class 4......................................................................... -- -- Cost of shares redeemed Class 1......................................................................... (14,622,790) (29,605,821) Class 4......................................................................... -- -- ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) from share transactions................................... (12,252,898) (8,841,096) ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INCREASE (DECREASE) IN NET ASSETS............................................. (17,788,622) (23,370,569) NET ASSETS Beginning of period................................................................ 104,010,157 127,380,726 ------------------------------------------------------------------------------------------------------------------------------------ End of period...................................................................... $ 86,221,535 $104,010,157 ==================================================================================================================================== UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD........ $ 253,290 $ 36,460 ------------------------------------------------------------------------------------------------------------------------------------ CHANGES IN FUND SHARES CLASS 1 Shares sold............................................................................ 207,808 159,845 Issued for distributions reinvested.................................................... -- 1,494,256 Shares redeemed........................................................................ (1,266,759) (1,960,515) ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in fund shares................................................. (1,058,951) (306,414) ==================================================================================================================================== CLASS 4 Shares sold............................................................................ 829 -- Issued for distributions reinvested.................................................... -- -- Shares redeemed........................................................................ -- -- ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in fund shares................................................. 829 -- ====================================================================================================================================
See Notes to Financial Statements. 12 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- 1. ORGANIZATION OF THE COMPANY GE Investments Funds, Inc. (the "Company") was incorporated under the laws of the Commonwealth of Virginia on May 14, 1984 and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company. The Company is composed of thirteen investment portfolios (collectively the "Funds"), although only the following eleven are currently being offered: U.S. Equity Fund, S&P 500 Index Fund, Premier Growth Equity Fund, Value Equity Fund, Mid-Cap Equity Fund, Small-Cap Equity Fund (the "Fund"), International Equity Fund, Total Return Fund, Income Fund, Money Market Fund and Real Estate Securities Fund. Shares of the Funds of the Company are offered only to insurance company separate accounts that fund certain variable life insurance contracts and variable annuity contracts. These insurance companies may include insurance companies affiliated with GE Asset Management Incorporated ("GEAM"), the investment adviser and administrator of each of the Funds. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results may differ from those estimates. The following summarizes the significant accounting policies of the Fund: SECURITY VALUATION AND TRANSACTIONS The Fund's portfolio securities are valued generally on the basis of market quotations. Equity securities generally are valued at the last reported sales price on the primary market in which they are traded. Portfolio securities listed on NASDAQ are valued using the NASDAQ Official Closing Price, which may not necessarily represent the last sale price. If no sales occurred on the exchange or NASDAQ that day, the portfolio security generally is valued using the last reported bid price. Debt securities (other than short-term securities described below) generally are valued at an evaluated bid as reported by an independent pricing service. Values obtained from pricing services are based on various factors such as market transactions, dealer supplied valuations, security characteristics and other market data. In the absence of a reliable price from such a pricing service, debt securities may be valued based on dealer supplied valuations or quotations. The Fund's written or purchased options are valued at the last sales price, or if no sales occurred that day, at the last reported bid price. Short-term investments with remaining maturities of sixty days or less at the time of purchase are valued on the basis of amortized cost, which approximates market value. All assets and liabilities of the Fund initially expressed in foreign currency values will be converted into U.S. dollars at the WM/Reuters exchange rate computed at 11:00 a.m., Eastern time. If prices are not readily available for a portfolio security, or if it is believed that a price for a portfolio security does not represent its fair value, the security may be valued using procedures approved by the Fund's Board of Directors that are designed to establish its "fair" value. Those procedures require that the fair value of a security be established by the fair valuation committee. The fair valuation committee follows different protocols for different types of investments and circumstances. The fair value procedures may be used to value any investment by the Fund in the appropriate circumstances. Examples of the types of securities that may be fair valued include: thinly traded or illiquid investments, high-yield securities or foreign securities. Foreign securities may be valued with the assistance of an independent fair value pricing service in circumstances where it is believed that they have been or would be materially affected by events occurring after the close of the portfolio security's primary market and before the close of regular trading on the NYSE. This independent fair value pricing service uses a computerized system to appraise affected securities and portfolios taking into consideration various factors and the fair value of such securities may be something other than the last available quotation or other market price. GEAM may also separately monitor portfolio securities and, consistent with the Fund's fair value procedures, apply a different value to a portfolio security than would be applied had it been priced using market quotations or by an independent fair value pricing service. 13 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- Determining the fair value of securities involves the application of both subjective and objective considerations. Security values may differ depending on the methodology used to determine their values, and may differ from the last quoted sale or closing price. No assurance can be given that use of these fair value procedures will always better represent the price at which the Fund could sell the affected portfolio security. Security transactions are accounted for as of the trade date. Realized gains and losses on investments sold are recorded on the basis of identified cost for both financial statement and federal tax purposes. The Fund adopted FASB Statement No. 157, FAIR VALUE MEASUREMENTS (FAS 157). FAS 157 establishes a single definition of fair value, a framework for measuring fair value, and expanded disclosures about fair value measurements. Various inputs are used in determining the value of the Fund's investments. These inputs are classified into three broad levels: Level 1 includes quoted prices in active markets of securities identical to those of the Funs. Level 2 includes: 1) quoted prices in active markets for similar securities to those of the Fund; 2) quoted prices for identical or similar securities to those of the Fund that trade in markets in which there are few transactions or the quoted prices are not current; 3) prices based on observable market data such as interest rates and yield curves, volatilities, bond prepayment speeds, and credit risk and; 4) prices based principally on observable market data by use of correlation techniques or other means. Level 3 includes unobservable market inputs used to fair value securities. These inputs are based on assumptions that market participants would use to price securities and may include the adviser's own assumptions. Other financial instruments are derivative instruments that are not reflected in TOTAL INVESTMENTS, such as futures, forwards, swaps, and written options contracts, which are valued based on the unrealized appreciation/depreciation of the instrument.
Level 1 Level 2 Level 3 Total ------------------------------------------------------------------------------------------------------------------------------------ Investments in Securities $85,902,769 $19 $-- $85,902,788 Other Financial Instruments $ -- $-- $-- $ --
REPURCHASE AGREEMENTS The Fund may enter into repurchase agreement transactions with respect to instruments that are consistent with the Funds's investment objectives or policies. The Fund's custodian or a third party custodian takes possession of the collateral pledged for investments in repurchase agreements on behalf of the Fund. The Fund values the underlying collateral daily on a mark-to-market basis to determine that the value, including accrued interest, is at least equal to 102% of the repurchase price. In the event the seller defaults and the value of the security declines, or if the seller enters an insolvency proceeding, realization of the collateral by the Fund may be delayed or limited. SECURITY LENDING The Fund may loan securities to brokers, dealers, and financial institutions determined by GEAM to be creditworthy, subject to certain limitations. The Fund continues to receive the interest and dividends on the loaned securities during the term of the loan. The loans of securities are secured by collateral in the form of cash or other liquid assets, which are segregated and maintained with the custodian in an amount at least equal to 102% of the current market value of the loaned securities. During the term of the loan, the Fund will record any gain or loss in the market value of its loaned securities and of securities in which cash collateral is invested. The Fund will also earn interest, net of any rebate, from securities in which cash collateral is invested. In the event the counterparty (borrower) does not meet its contracted obligation to return the securities, the Fund may be exposed to the risk of loss of reacquiring the loaned securities at prevailing market prices using the proceeds of the sale of the collateral. FOREIGN CURRENCY Accounting records of the Fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange on a daily basis (on days the New York Stock Exchange is open). Purchases and sales of securities, income receipts and expense payments denominated in foreign currencies are translated into U.S. dollars at the prevailing exchange rate on the respective dates of such transactions. The Fund does not isolate the portion of the results of operations resulting from changes in foreign exchange rates from the fluctuations arising from changes in the 14 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- market prices of securities during the period. Such fluctuations are included in the net realized or unrealized gain or loss from investments. Net realized gains or losses on foreign currency transactions represent net gains or losses on sales and maturities of foreign currency contracts, disposition of foreign currencies, the difference between the amount of net investment income and withholding taxes accrued and the U.S. dollar amount actually received or paid, and gains or losses between the trade and settlement date on purchases and sales of securities. Net unrealized foreign exchange gains and losses arising from changes in the value of other assets and liabilities as a result of changes in foreign exchange rates are included as increases or decreases in unrealized appreciation/depreciation on foreign currency related transactions. INVESTMENTS IN FOREIGN MARKETS Investments in foreign markets may involve special risks and considerations not typically associated with investing in the United States. These risks include revaluation of currencies, high rates of inflation, repatriation on income and capital, and adverse political and economic developments. Moreover, securities issued in these markets may be less liquid, subject to government ownership controls, tariffs and taxes, subject to delays in settlements, and their prices may be more volatile. The Fund may be subject to capital gains and repatriation taxes imposed by certain countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued based upon net investment income, net realized gains and net unrealized appreciation as income and/or capital gains are earned. INCOME TAXES The Fund intends to comply with all sections of the Internal Revenue Code applicable to regulated investment companies including the distribution of substantially all of its taxable net investment income and net realized capital gains to its shareholders. Therefore, no provision for federal income tax has been made. The Fund is treated as a separate taxpayer for federal income tax purposes. At June 30, 2008, information on the tax cost of investments is as follows:
Net Tax Cost of Gross Tax Gross Tax Appreciation/ Investments for Unrealized Unrealized (Depreciation) Tax Purposes Appreciation Depreciation on Investments ------------------------------------------------------------------------------------------------------------------------------------ $85,439,279 $13,745,459 $(13,281,974) $463,485
As of December 31, 2007, the Fund has no capital loss carryovers. Capital loss carryovers are available to offset future realized capital gain to the extent provided in the Internal Revenue Code and regulations thereunder. To the extent that these carryover losses are used to offset future capital gains, it is probable that gains so offset will not be distributed to shareholders because they would be taxable as ordinary income. Any net capital and currency losses incurred after October 31, within the Fund's tax year, are deemed to arise on the first day of the Fund's next tax year if the Fund so elects to defer such losses. The Fund incurred no such losses after October 31, 2007. The tax composition of distributions paid during the years ended December 31, 2007 and December 31, 2006 were as follows: Long-Term Ordinary Capital Income Gains Total -------------------------------------------------------------------------------- 2007 $3,273,697 $15,060,783 $18,334,480 2006 966,332 14,459,092 15,425,424 DISTRIBUTIONS TO SHAREHOLDERS The Fund declares and pays dividends from net investment income annually. The Fund declares and pays net realized capital gains in excess of capital loss carryforwards distributions annually. The character of income and gains to be distributed is determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences include (but are not limited to) distributions from Real Estate Investment Trusts (REITS) and losses deferred due to wash sale transactions. Reclassifications due to permanent book/tax differences are made to the Fund's capital accounts to reflect income and gains available for distribution (or 15 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- available capital loss carryovers) under income tax regulations. These reclassifications have no impact on net investment income, realized gains or losses, or the net asset value of the Fund. The calculation of net investment income per share in the Financial Highlights table excludes these adjustments. The reclassifications for the year ended December 31, 2007 were as follows: Undistributed (Distribution in Excess of) Net Investment Accumulated Income Net Realized Gain -------------------------------------------------------------------------------- $126,587 $(126,587) On June 29, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in Income Taxes." FIN48 provides guidance for how certain uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN48 requires evaluation of tax positions taken or expected to be taken in the course of preparing the Fund's tax returns to determine whether the tax positions are "more likely than not" of being sustained by the applicable tax authority. The adoption of FIN48 did not have an impact on the Fund's net assets and financial statements. The Funds' 2004, 2005, 2006 and 2007 calendar years tax returns are still open to examination by the Federal and applicable state tax authorities. INVESTMENT INCOME Corporate actions (including cash dividends) are recorded on the ex-dividend date, net of applicable withholding taxes, except for certain foreign corporate actions, which are recorded as soon after ex-dividend date as such information becomes available. Interest income is recorded on the accrual basis. All discounts and premiums on bonds are accreted and amortized, respectively, to call or maturity date, whichever is shorter, using the effective yield method. EXPENSES Expenses of the Company which are directly identifiable to the Fund are allocated to the portfolio. Expenses which are not directly identifiable to the Fund are allocated in such a manner as deemed equitable, taking into consideration the nature and type of expenses and relative size of the Fund. All expenses of the Fund are paid by GEAM and reimbursed by the Fund. 3. LINE OF CREDIT The Company shares a revolving credit facility of up to $150 million with a number of its affiliates. The credit facility is with its custodian bank, State Street Bank and Trust Company. The revolving credit facility requires the payment of a commitment fee equal to 0.09% per annum on the daily unused portion of the credit facility, payable quarterly. The portion borne by the Funds generally is borne proportionally based upon net assets. In addition, the Company has a $100 million uncommitted, unsecured line of credit with State Street. Generally, borrowings under the credit facilities would accrue interest at the Federal Funds Rate plus 50 basis points and would be borne by the borrowing Fund. The maximum amount allowed to be borrowed by any one Fund is the lesser of (i) its prospectus limitation or (ii) 20% of its net assets. The credit facilities were not utilized by the Fund during the period ended June 30, 2008. 4. AMOUNTS PAID TO AFFILIATES GEAM, a registered investment adviser, was retained by the Company's Board of Directors effective May 1, 1997 to act as investment adviser and administrator of the Fund. GEAM's compensation for investment advisory and administrative services is paid monthly based on the average daily net assets of the Fund at an annualized rate of 0.80%. GENPACT performs certain accounting and certain administration services not provided by GEAM. For the period ending June 30, 2008, $795 was charged to the Fund. DISTRIBUTION AND SHAREHOLDER SERVICING FEES The Fund has adopted a Shareholder Servicing and Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act with respect to the Class 4 shares of the Fund. The Fund pays GE Investment Distributors, Inc. ("GEID"), a wholly-owned subsidiary of GEAM and the Fund's principal underwriter, a monthly fee for distribution and/or shareholder services provided, at an annual rate of the average daily net assets attributable to each applicable class of shares. The annual rate applicable is 0.45% for the Class 4 shares. Currently, Class 1 shares are not subject to a Rule 12b-1 fee. 16 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- DIRECTORS' COMPENSATION The Fund pays no compensation to its directors who are officers or employees of GEAM or its affiliates. Directors who are not such officers or employees also serve in a similar capacity for other funds advised by GEAM. Compensation paid to unaffiliated directors are reflected on the Statement of Operations. These fees are allocated pro rata across all of the mutual fund platforms and share classes served by the directors, including the Fund, and are based upon the relative net assets of each fund within such platforms. (For additional information about directors compensation please refer to the Statement of Additional Information.) 5. SUB-ADVISORY FEES Pursuant to an investment sub-advisory agreement with GEAM, Palisade Capital Management, LLC ("Palisade") is the sub-adviser to the Small-Cap Equity Fund. Palisade is responsible for the day-to-day portfolio management of the assets of the Fund, including the responsibility for making decisions to buy, sell or hold a particular security, under the general supervision of GEAM and the Board. For their services, GEAM pays Palisade monthly sub-advisory fees which are calculated as a percentage of the average daily net assets of the Fund. 6. INVESTMENT TRANSACTIONS PURCHASES AND SALES OF SECURITIES The cost of purchases and the proceeds from sales of investments, other than short-term securities and options, for the period ended June 30, 2008 were as follows: Purchases Sales -------------------------------------------------------------------------------- $8,386,751 $21,412,180 SECURITY LENDING At June 30, 2008, the Fund did not participate in securities lending. 17 Additional Information (unaudited) -------------------------------------------------------------------------------- INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS: The business and affairs of the Company are managed under the direction of the Company's Board of Directors. Information pertaining to the Directors and officers of the Company is set forth below. INTERESTED DIRECTORS AND EXECUTIVE OFFICERS -------------------------------------------------------------------------------- MICHAEL J. COSGROVE -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 59 POSITION(S) HELD WITH FUND Chairman of the Board and President TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 10 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President - GEAM since February 1997; President and Chief Executive Officer - Mutual Funds at GEAM since March 2007; Vice President, GE Capital Corporation, an indirect wholly-owned subsidiary of GE, since December 1999; Executive Vice President - Sales and Marketing of GEAM, a wholly-owned subsidiary of GE that is registered as an investment adviser under the Investment Advisers Act of 1940, as amended, since March 1993; Director of GEAM since 1988. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48 OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception; Trustee of Elfun Funds, GE Savings & Security Funds and General Electric Pension Trust since 1988; Trustee of Fordham University since 2003; Trustee of Elfun Foundation; Treasurer of GE Foundation; Director, GE Asset Management (Ireland) since February 1999; Director, GE Asset Management Funds Plc, GE Asset Canada Company, GE Asset Management Limited, and GE Volunteers. -------------------------------------------------------------------------------- MATTHEW J. SIMPSON -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 47 POSITION(S) HELD WITH FUND Executive Vice President TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - less than one year PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General Counsel and Secretary of GEAM since July 2007; Senior Vice President and General Counsel - Marketing and Client Services (formerly Asset Management Services), at GEAM and Senior Vice President and General Counsel of GEAMS from February 1997 to June 2007; Vice President and Associate General Counsel of GEAM from October 1992 to February 1997; Secretary of Fund from 1997 to June 2007; Vice President of Fund from September 2003 to June 2007; Vice President of GE Institutional Funds and GE LifeStyle Funds from September 2003 to June 2007; Secretary of GE Institutional Funds and GE LifeStyle Funds from 1997 to June 2007; Vice President of Elfun Funds and GE Savings & Security Funds from October 2003 to June 2007; Assistant Secretary of Elfun Funds and GE Savings & Security Funds from 1998 to June 2007. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional Funds, GE LifeStyle Funds, Elfun Funds and GE Savings & Security Funds since July 2007. 18 Additional Information (unaudited) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SCOTT H. RHODES -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 49 POSITION(S) HELD WITH FUND Treasurer TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 2 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds Operations Manager since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle Funds and GE Investments Funds since November 2005 and Elfun Funds and GE Savings & Security Funds since September 2005; from August 2004 to September 2005 Vice President, U.S. Trust Company, N.A. and Assistant Treasurer of Excelsior Funds, Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds, Inc.; from January 2004 to August 2004, Vice President BlackRock Financial Management, Inc.; from December 1996 to November 2003, Controller - Mutual Funds, American Skandia Investment Services, Inc. and Assistant Treasurer of American Skandia Trust and American Skandia Advisor Funds, Inc. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A -------------------------------------------------------------------------------- JEANNE M. LAPORTA -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 42 POSITION(S) HELD WITH FUND Vice President and Secretary TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 2 years (Vice President); less than one year (Secretary) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Senior Vice President and Deputy General Counsel at GE Asset Management since October 2007; Vice President and Associate General Counsel - Marketing and Client Services (formerly Asset Management Services) at GEAM from May 1997 to October 2007; Vice President and Assistant Secretary of GE Funds, GE Institutional Funds and GE LifeStyle Funds since September 2003; Vice President and Assistant Secretary of Elfun Funds and GE Savings & Security Funds since October 2003; Assistant Secretary from September 2003 to June 2007 and Secretary since July 2007. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A 19 Additional Information (unaudited) -------------------------------------------------------------------------------- NON-INTERESTED DIRECTORS -------------------------------------------------------------------------------- JOHN R. COSTANTINO -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 62 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC since 2006; Managing Director, Walden Partners, Ltd., consultants and investors, since August 1992. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE Institutional Funds and GE LifeStyle Funds since their inception; Trustee of Fordham University since 2002 and Marymount College from 2001 through 2002; Neuroscience Research Institute since 1986; Diocesan Finance Counsel of the Dioceses of Brooklyn & Queens since 2001; Gregorian University Foundation since 1994. -------------------------------------------------------------------------------- WILLIAM J. LUCAS -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 60 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Treasurer of Fairfield University since 1983. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception. -------------------------------------------------------------------------------- ROBERT P. QUINN -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 72 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon Brothers Inc. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception. The Statement of Additional Information for the Fund includes additional information about the Directors and Officers and is available, without charge, upon request by calling 1-800-242-0134. 20 Investment Team -------------------------------------------------------------------------------- INVESTMENT ADVISER AND ADMINISTRATOR GE Asset Management Incorporated BOARD OF DIRECTORS Michael J. Cosgrove, CHAIRMAN John R. Costantino William J. Lucas Robert P. Quinn Matthew J. Simpson SECRETARY Jeanne M. LaPorta ASSISTANT SECRETARIES Joseph A. Carucci Joon Won Choe TREASURER Scott H. Rhodes ASSISTANT TREASURERS Scott R. Fuchs Christopher M. Isaacs DISTRIBUTOR GE Investment Distributors, Inc. Member FINRA and SIPC COUNSEL Sutherland, Asbill & Brennan, LLP CUSTODIAN State Street Bank & Trust Company INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM KPMG LLP OFFICERS OF THE INVESTMENT ADVISER James W. Ireland, CHIEF EXECUTIVE OFFICER Daniel O. Colao, EVP, CHIEF FINANCIAL OFFICER (AS OF JULY 28, 2008) Michael J. Cosgrove, EVP, PRESIDENT AND CHIEF EXECUTIVE OFFICER - MUTUAL FUNDS Paul M. Colonna, EVP, PRESIDENT - FIXED INCOME Kathryn D. Karlic, EVP, PRESIDENT - INSTITUTIONAL SALES AND MARKETING Ralph R. Layman, EVP, PRESIDENT - INTERNATIONAL EQUITIES Matthew J. Simpson, EVP, GENERAL COUNSEL AND SECRETARY Judith A. Studer, EVP, PRESIDENT - U.S. EQUITIES Don W. Torey, EVP, PRESIDENT - ALTERNATIVE INVESTMENTS AND REAL ESTATE John J. Walker, EVP, CHIEF OPERATING OFFICER (AS OF JANUARY 31, 2008) David Wiederecht, EVP, PRESIDENT - INVESTMENT STRATEGIES 21 [This page intentionally left blank.] [This page intentionally left blank.] INVESTMENT ADVISER GE ASSET MANAGEMENT INCORPORATED 3001 SUMMER STREET PO BOX 7900 STAMFORD, CT 06904-7900 DISTRIBUTOR GE INVESTMENT DISTRIBUTORS, INC. MEMBER FINRA AND SIPC 3001 SUMMER STREET PO BOX 7900 STAMFORD, CT 06904-7900 The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities is available without charge (i) upon request, by calling 1-800-242-0134; (ii) on the Fund's website at HTTP://WWW.GEFUNDS.COM; and (iii) on the Commission's website at HTTP://WWW.SEC.GOV. The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC - information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Information (if any) regarding how the Fund voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through the Fund's website at HTTP://WWW.GEFUNDS.COM; and (ii) on the Commission's website at HTTP://WWW.SEC.GOV. [GE logo omitted] GE Investments Funds, Inc. International Equity Fund Semi-Annual Report JUNE 30, 2008 [GE logo omitted] GE Investments Funds, Inc. International Equity Fund -------------------------------------------------------------------------------- Contents NOTES TO PERFORMANCE................................................ 1 MANAGER REVIEW AND SCHEDULE OF INVESTMENTS.......................... 2 NOTES TO SCHEDULE OF INVESTMENTS.................................... 9 FINANCIAL STATEMENTS Financial Highlights........................................... 10 Statement of Assets and Liabilities............................ 11 Statement of Operations........................................ 12 Statements of Changes in Net Assets............................ 13 Notes to Financial Statements.................................. 14 ADDITIONAL INFORMATION.............................................. 20 INVESTMENT TEAM..................................................... 23 This report is prepared for Policyholders of certain variable contracts and may be distributed to others only if preceded or accompanied by the variable contract's current prospectus and the current prospectus of the Funds available for investments thereunder. Notes to Performance June 30, 2008 (unaudited) -------------------------------------------------------------------------------- Total returns take into account changes in share price and assume reinvestment of all dividends and capital gains distributions, if any. The performance data quoted represent past performance; past performance does not guarantee future results. Investment return and principal value will fluctuate so your shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data quoted. Periods less than one year are not annualized. Please call 800-242-0134 for the most recent month-end performance data. Total returns shown are net of Fund expenses but do not reflect fees and charges associated with the variable contracts such as administrative fees, account charges and surrender charges, which, if reflected, would reduce the Fund's total returns for all periods shown. Shares of the Fund are neither insured nor guaranteed by the U.S. Government, and their prices will fluctuate with market conditions. The Morgan Stanley Capital International EAFE Index (MSCI(R) EAFE(R) Index) is an unmanaged index and do not reflect the actual cost of investing in the instruments that comprise the index. The MSCI(R) EAFE(R) Index is a market capitalization-weighted index of equity securities of companies domiciled in various countries. The Index is designed to represent the performance of developed stock markets outside the U.S. and Canada and excludes certain market segments unavailable to U.S. based investors. The results shown for the foregoing index assume the reinvestment of net dividends or interest. The peer universe of the underlying annuity funds used in our peer ranking calculation is based on the blend of Lipper peer categories, as shown. Lipper is an independent mutual fund rating service. A Fund's performance may be compared to or ranked within a universe of mutual funds with investment objectives and policies similar but not necessarily identical to the Fund's. Such comparisons or rankings are made on the basis of several factors, including the Fund's objectives and policies, management style and strategy, and portfolio composition, and may change over time if any of those factors change. -------------------- GE INVESTMENT DISTRIBUTORS, INC., MEMBER OF FINRA & SIPC, IS THE PRINCIPAL UNDERWRITER AND DISTRIBUTOR OF THE GE INVESTMENT FUNDS, INC. AND A WHOLLY OWNED SUBSIDIARY OF GE ASSET MANAGEMENT INCORPORATED, THE INVESTMENT ADVISER OF THE FUNDS. 1 International Equity Fund -------------------------------------------------------------------------------- THE INTERNATIONAL EQUITY FUND IS MANAGED BY A TEAM OF PORTFOLIO MANAGERS THAT INCLUDES BRIAN HOPKINSON, RALPH R. LAYMAN, PAUL NESTRO, JONATHAN L. PASSMORE, MICHAEL J. SOLECKI AND MAKOTO SUMINO. AS LEAD PORTFOLIO MANAGER FOR THE FUND, MR. LAYMAN (PICTURED BELOW) OVERSEES THE ENTIRE TEAM AND ASSIGNS A PORTION OF THE FUND TO EACH MANAGER, INCLUDING HIMSELF. EACH PORTFOLIO MANAGER IS LIMITED TO THE MANAGEMENT OF HIS OR HER PORTION OF THE FUND, THE SIZE OF THE PORTION WHICH MR. LAYMAN DETERMINES ON AN ANNUAL BASIS. THE PORTFOLIO MANAGERS DO NOT OPERATE INDEPENDENTLY OF EACH OTHER, RATHER, THE TEAM OPERATES COLLABORATIVELY, COMMUNICATING PURCHASES OR SALES OF SECURITIES ON BEHALF OF THE FUND. RALPH R. LAYMAN IS A DIRECTOR AND EXECUTIVE VICE PRESIDENT OF GE ASSET MANAGEMENT AND PRESIDENT - INTERNATIONAL EQUITIES AT GE ASSET MANAGEMENT. HE MANAGES THE OVERALL INTERNATIONAL EQUITY INVESTMENTS FOR GE ASSET MANAGEMENT. MR. LAYMAN HAS LED THE TEAM OF PORTFOLIO MANAGERS FOR THE INTERNATIONAL EQUITY FUND SINCE 1997. MR. LAYMAN JOINED GE ASSET MANAGEMENT IN 1991 AS SENIOR VICE PRESIDENT FOR INTERNATIONAL INVESTMENTS AND BECAME AN EXECUTIVE VICE PRESIDENT IN 1992 AND PRESIDENT - INTERNATIONAL EQUITIES IN MARCH 2007. BRIAN HOPKINSON IS A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT. HE HAS BEEN A PORTFOLIO MANAGER FOR THE FUND SINCE OCTOBER 1996. PRIOR TO JOINING GE ASSET MANAGEMENT, MR. HOPKINSON WORKED FOR FIDUCIARY TRUST INTERNATIONAL IN BOTH LONDON AND NEW YORK. PAUL NESTRO IS A VICE PRESIDENT OF GE ASSET MANAGEMENT. HE HAS BEEN A MEMBER OF THE PORTFOLIO MANAGEMENT TEAM FOR THE INTERNATIONAL EQUITY FUND SINCE FEBRUARY 2007. MR. NESTRO JOINED GE ASSET MANAGEMENT IN 1993 AS A PERFORMANCE AND ATTRIBUTION ANALYST IN U.S. EQUITIES. HE BECAME A SENIOR PERFORMANCE AND ATTRIBUTION ANALYST IN 1994 AND SINCE 1996 HAS BEEN AN ANALYST AND PORTFOLIO MANAGER IN THE INTERNATIONAL EQUITIES GROUP. JONATHAN L. PASSMORE IS A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT. HE HAS SERVED AS A PORTFOLIO MANAGER OF THE INTERNATIONAL EQUITY FUND SINCE JANUARY 2002. PRIOR TO JOINING GE ASSET MANAGEMENT IN JANUARY 2001, HE WAS WITH MERRILL LYNCH FOR SIX YEARS, MOST RECENTLY AS DIRECTOR, INTERNATIONAL EQUITY. MICHAEL J. SOLECKI IS A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT. HE HAS SERVED AS A PORTFOLIO MANAGER OF THE INTERNATIONAL EQUITY FUND SINCE SEPTEMBER 1997. HE JOINED GE ASSET MANAGEMENT IN 1990 AS AN INTERNATIONAL EQUITY ANALYST. HE BECAME A VICE PRESIDENT FOR INTERNATIONAL EQUITY PORTFOLIOS IN 1996 AND SENIOR VICE PRESIDENT IN 2000. MAKOTO SUMINO IS A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT. HE HAS BEEN A MEMBER OF THE PORTFOLIO MANAGEMENT TEAM FOR THE INTERNATIONAL EQUITY FUND SINCE FEBRUARY 2007. MR. SUMINO JOINED GE ASSET MANAGEMENT IN SEPTEMBER 1996 AS A SECURITIES ANALYST AND PORTFOLIO MANAGER. HE BECAME DEPUTY DIRECTOR OF THE INTERNATIONAL EQUITY RESEARCH TEAM IN JANUARY 2001 AND DIRECTOR IN APRIL 2005. Q. HOW DID THE INTERNATIONAL EQUITY FUND PERFORM COMPARED TO ITS BENCHMARK AND LIPPER PEER GROUP FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2008? A. For the six-month period ended June 30, 2008, the International Equity Fund returned -9.61% for the Class 1 shares and -7.66% for the Class 4 shares. The MSCI EAFE Index, the Fund's benchmark, returned -10.96% and the Fund's Lipper peer group of 139 International Core funds returned an average of -10.69% for the same period. [photo omitted] 2 Q&A -------------------------------------------------------------------------------- Q. WHAT MARKET CONDITIONS IMPACTED FUND PERFORMANCE? A. Growing concerns about the sustainability of earnings for companies around the world: contributing factors include rising input costs caused by higher raw materials prices, for example, combined with lower consumption expectations caused by a slowing global economy and diminishing disposable income. In addition, the difficulties for individuals and businesses to access credit from an over-stressed banking system are exacerbating a slowdown in the U.S. economy, with ripple effects overseas. Q. WHAT DOMESTIC OR WORLD EVENTS HAD A MAJOR IMPACT ON THE FINANCIAL MARKETS? A. In addition to the credit crisis referred to above, a disturbing rise in inflation, worldwide, is having a dampening effect on economic activity, severe enough to change behaviors in some countries. Gasoline at almost $5/gallon in the United States is compelling users to look for alternative means of transportation. In the developing world, especially in Asia, the removal of expensive subsidies from energy prices might give rise to a substantial drop in demand growth, at least in the short run. Q. WHICH STOCKS AND SECTORS SIGNIFICANTLY AFFECTED FUND PERFORMANCE? A. Holdings in materials and energy made strong contributions while the absence of specific banking stocks and a general underweight in the challenged consumer discretionary sector also proved positive. Specifically, agricultural chemicals and basic resources continue to offer good returns while oil and oil service companies continue to benefit from strong demand. Some negative contribution came from holdings in IT and telecom services where competition in an increasingly difficult economic environment has anecdotally proved costly. Q. DID THE WEIGHTINGS/COUNTRY ALLOCATIONS OF THE FUND CHANGE? WHY? A. When market conditions were appropriate, modest additions to existing holdings in the financial sector were executed, reducing the extent of the underweight. Modest additions were also made to the energy holdings although these were more focused on oil sands and uranium than conventional E&P stocks. Holdings in industrials were slightly reduced, notably in construction related stocks and our already underweight posture in consumer discretionary was enhanced by the sale of hotel, media and retail holdings. Q. WHAT WERE THE MAJOR BUYS AND SELLS FOR THE PERIOD AND WHY? A. Existing positions in BNP Paribas, Royal Bank of Scotland and Lloyds TSB were increased to take advantage of distressed valuations in the banking sector while new positions were established in Suncor (Canada - oil sands), Cameco (Canada - uranium) and Essilor (France - healthcare equipment). Oil sands represent a major source of energy while uranium assets are gaining popularity as nuclear power generation comes back as a potential power source. Reed (UK - media) and Esprit (Hong Kong) were eliminated for valuation and outlook reasons while Schneider (France - electrical equipment) was sold for its proximity to the U.S. housing market. 3 International Equity Fund -------------------------------------------------------------------------------- Understanding Your Fund's Expenses As a shareholder of the Fund you incur ongoing expenses, which include portfolio management fees, professional fees, administrative fees and other Fund expenses. The following example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the period. The information in the following table is based on an investment of $1,000, which is invested at the beginning of the period and held for the entire six-month period ended June 30, 2008. ACTUAL EXPENSES The first section of the table provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your class under the heading "Expenses Paid During Period." HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second section of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholders reports of other funds. Please note that the expenses shown in the table do not reflect any transaction costs, such as sales charges or redemption fees.
JANUARY 1, 2008 - JUNE 30, 2008 ------------------------------------------------------------------------------------------------------------------------------------ ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($)* ------------------------------------------------------------------------------------------------------------------------------------ ACTUAL FUND RETURN** ------------------------------------------------------------------------------------------------------------------------------------ Class 1 1,000.00 903.89 5.61 Class 4 1,000.00 923.40 7.81 ------------------------------------------------------------------------------------------------------------------------------------ HYPOTHETICAL 5% RETURN (2.5% FOR THE PERIOD) ------------------------------------------------------------------------------------------------------------------------------------ Class 1 1,000.00 1,018.77 5.97 Class 4 1,000.00 1,016.76 8.12 ------------------------------------------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 1.19% FOR CLASS 1 AND 1.61% FOR CLASS 4, (FROM PERIOD JANUARY 1, 2008 - JUNE 30, 2008), MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY 182/366 (TO REFLECT THE ONE-HALF YEAR PERIOD). ** ACTUAL FUND RETURNS FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2008 WERE AS FOLLOWS: (9.61)% FOR CLASS 1 SHARES, AND SINCE INCEPTION (7.66)% FOR CLASS 4 SHARES. 4 International Equity Fund (unaudited) -------------------------------------------------------------------------------- CHANGE IN VALUE OF A $10,000 INVESTMENT CLASS 1 SHARES -------------------------------------------------------------------------------- [Line chart omitted -- plot points are as follows:] GEI INTERNATIONAL EQUITY MSCI EAFE INDEX 06/98 10,000.00 10,000.00 12/98 9,784.05 10,350.66 12/99 12,751.47 13,141.70 12/00 11,129.56 11,279.88 12/01 8,808.12 8,841.85 12/02 6,709.13 7,432.46 12/03 9,252.39 10,300.33 12/04 10,718.78 12,385.86 12/05 12,669.04 14,062.35 12/06 15,797.24 17,766.45 12/07 19,426.75 19,752.83 06/08 17,559.56 17,588.35 AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2008 -------------------------------------------------------------------------------- CLASS 1 SHARES (Inception date: 5/1/95) -------------------------------------------------------------------------------- SIX ONE FIVE TEN ENDING VALUE OF A MONTHS YEAR YEAR YEAR $10,000 INVESTMENT -------------------------------------------------------------------------------- International Equity Fund -9.61% -1.13% 18.87% 5.79% $17,560 -------------------------------------------------------------------------------- MSCI EAFE Index -10.96% -10.60% 16.66% 5.81% $17,588 -------------------------------------------------------------------------------- Lipper peer group average* -10.69% -9.06% 16.13% 6.13% -------------------------------------------------------------------------------- CLASS 4 SHARES -------------------------------------------------------------------------------- [Line chart omitted -- plot points are as follows:] GEI INTERNATIONAL EQUITY MSCI EAFE INDEX 05/08 10,000.00 10,000.00 06/08 9,233.98 9,271.53 AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2008 -------------------------------------------------------------------------------- CLASS 4 SHARES (Inception date: 5/1/08) -------------------------------------------------------------------------------- ONE SINCE ENDING VALUE OF A MONTH INCEPTION $10,000 INVESTMENT -------------------------------------------------------------------------------- International Equity Fund -8.11% -7.66% $9,234 -------------------------------------------------------------------------------- MSCI EAFE Index -8.18% -7.28% $9,272 -------------------------------------------------------------------------------- Lipper peer group average** -8.23% N/A -------------------------------------------------------------------------------- INVESTMENT PROFILE A fund designed for investors who seek long-term growth of capital by investing at least 80% of its net assets in equity securities under normal circumstances. The Fund invests primarily in developed and developing countries outside the United States. PORTFOLIO COMPOSITION AS OF JUNE 30, 2008 as a % of Market Value -------------------------------------------------------------------------------- Market Value of $50,162 (in thousands) [Pie chart omitted -- plot points are as follows:] Continental Europe 47.1% Japan 17.7% United Kingdom 15.6% Latin America 4.3% Pacific Rim 3.6% Emerging Asia 3.2% Canada 3.2% Emerging Europe 2.7% United States 2.6% TOP TEN LARGEST HOLDINGS AS OF JUNE 30, 2008 as a % of Market Value -------------------------------------------------------------------------------- Roche Holding AG 3.11% -------------------------------------------------------------------------------- Nestle S.A. (Regd.) 2.98% -------------------------------------------------------------------------------- Potash Corporation of Saskatchewan 2.56% -------------------------------------------------------------------------------- BHP Billiton PLC 2.41% -------------------------------------------------------------------------------- Telenor ASA 2.30% -------------------------------------------------------------------------------- Saipem S.p.A. 2.20% -------------------------------------------------------------------------------- Nomura Holdings, Inc. 2.13% -------------------------------------------------------------------------------- E.ON AG 2.07% -------------------------------------------------------------------------------- Vodafone Group Public Limited Co. 2.05% -------------------------------------------------------------------------------- Mitsubishi UFJ Financial Group, Inc. 1.99% -------------------------------------------------------------------------------- * LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR THE SIX MONTHS, ONE YEAR, FIVE-YEAR, AND TEN-YEAR PERIODS INDICATED IN THE INTERNATIONAL CORE PEER GROUP CONSISTING OF 139, 137, 117 AND 49 UNDERLYING ANNUITY FUNDS, RESPECTIVELY. ** LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR THE ONE MONTH PERIOD INDICATED IN THE INTERNATIONAL CORE PEER GROUP CONSISTING OF 150 UNDERLYING ANNUITY FUNDS, RESPECTIVELY. SEE NOTES TO PERFORMANCE ON PAGE 1 FOR FURTHER INFORMATION, INCLUDING AN EXPLANATION OF LIPPER PEER CATEGORIES. PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE AND THE GRAPH AND TABLE DO NOT REFLECT THE DEDUCTION OF TAXES. 5 INTERNATIONAL EQUITY FUND Schedule of Investments June 30, 2008 (unaudited) -------------------------------------------------------------------------------- INTERNATIONAL EQUITY FUND -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE -------------------------------------------------------------------------------- COMMON STOCK -- 95.6% + -------------------------------------------------------------------------------- AUSTRALIA -- 1.9% Brambles Ltd................... 50,501 $ 423,130 Paladin Energy Ltd............. 84,675 517,526(a) 940,656 BRAZIL -- 1.0% Petroleo Brasileiro S.A. ADR... 8,522 493,850(d) CANADA -- 3.2% Cameco Corp.................... 3,775 162,974 Potash Corporation of Saskatchewan................. 5,504 1,283,270 Suncor Energy, Inc............. 2,513 146,636 1,592,880 CHINA -- 0.5% China COSCO Holdings Company Ltd................. 96,500 236,169 DENMARK -- 0.5% Group 4 Securicor PLC.......... 51,275 204,151 Novozymes (Series B)........... 417 37,566 241,717 FINLAND -- 1.7% Nokia Oyj...................... 34,817 851,622 FRANCE -- 13.5% Alstom......................... 2,503 574,352 AXA S.A........................ 12,157 358,466 BNP Paribas.................... 10,911 982,859(d) Cie Generale d'Optique Essilor International S.A........... 5,788 353,310 Credit Agricole S.A............ 24,085 490,002 Groupe Danone.................. 13,042 913,238 LVMH Moet Hennessy Louis Vuitton S.A........... 2,158 225,272 Renault S.A.................... 1,584 129,006 Suez S.A....................... 8,726 591,926 Total S.A...................... 9,745 830,057 Unibail-Rodamco (REIT)......... 1,264 291,273 Veolia Environnement........... 11,839 661,399 Vinci S.A...................... 5,722 349,651 6,750,811 NUMBER OF SHARES VALUE -------------------------------------------------------------------------------- GERMANY -- 8.7% Allianz AG (Regd.)............. 465 $ 81,852 Bayer AG....................... 10,898 917,578 Daimler AG (Regd.)............. 3,231 200,545 E.ON AG........................ 5,146 1,037,869 Linde AG....................... 5,300 744,959 Metro AG....................... 4,425 282,488 RWE AG......................... 1,352 170,817 Siemens AG (Regd.)............. 8,234 913,458 4,349,566 GREECE -- 0.9% Hellenic Telecommunications Organization S.A............. 18,868 475,640(a) HONG KONG -- 0.3% Sun Hung Kai Properties Ltd.... 12,930 175,767 INDIA -- 0.3% Larsen & Toubro Ltd............ 3,490 176,232 ITALY -- 4.5% Banca Intesa S.p.A............. 85,096 484,095 Saipem S.p.A................... 23,514 1,099,754 UniCredit S.p.A................ 109,762 668,131(d) 2,251,980 JAPAN -- 17.8% Asahi Glass Company Ltd........ 27,003 327,479 Bank of Yokohama Ltd........... 39,506 273,659 East Japan Railway Co.......... 80 652,731 Ibiden Company Ltd............. 8,899 324,618 Komatsu Ltd.................... 15,811 442,289 Mitsubishi Estate Company Ltd.. 36,982 848,126 Mitsubishi Heavy Industries Ltd. 97,000 464,085 Mitsubishi UFJ Financial Group, Inc. 112,564 996,467 Nidec Corp..................... 3,567 237,999 Nintendo Company Ltd........... 600 340,821 Nomura Holdings, Inc........... 71,999 1,067,998 Shiseido Company Ltd........... 32,000 734,588 Sony Financial Holdings, Inc... 184 742,026 Sumitomo Realty & Development Company Ltd................. 6,000 119,561 Toray Industries Inc........... 138,999 747,270 Toyota Motor Corp.............. 11,804 558,142 8,877,859 MEXICO -- 1.0% America Movil S.A. de C.V. ADR (Series L).............. 9,633 508,141(d) See Notes to Schedule of Investments on page 9 and Notes to Financial Statements. 6 INTERNATIONAL EQUITY FUND Schedule of Investments June 30, 2008 (unaudited) -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE -------------------------------------------------------------------------------- NETHERLANDS -- 1.7% Koninklijke Philips Electronics N.V. ........................ 24,659 $ 835,668 NORWAY -- 3.9% Acergy S.A..................... 25,093 559,098 Orkla ASA...................... 16,903 216,575 Telenor ASA.................... 61,442 1,153,342 1,929,015 RUSSIA -- 1.3% Gazprom OAO ADR................ 11,065 641,770(d) SINGAPORE -- 1.4% CapitaLand Ltd................. 63,000 265,101 Singapore Telecommunications Ltd. 156,314 417,274 682,375 SOUTH AFRICA -- 1.4% Anglo Platinum Ltd............. 1,534 255,175 MTN Group Limited.............. 29,088 460,542 715,717 SOUTH KOREA -- 1.3% Kookmin Bank................... 2,290 134,589 Kookmin Bank ADR............... 2,899 169,620(d) Samsung Electronics Company Ltd................. 90 53,769 Samsung Electronics Company Ltd. GDR............ 1,075 316,856(b,d) 674,834 SPAIN -- 2.0% ACS Actividades de Construccion y Servicios S.A............... 2,760 138,205 Banco Santander S.A. (Regd.)... 45,872 837,476(d) 975,681 SWEDEN -- 0.6% Sandvik AB..................... 20,986 285,463 SWITZERLAND -- 9.4% ABB Ltd. (Regd.)............... 28,637 812,942(a) Nestle S.A. (Regd.)............ 32,920 1,491,839 Roche Holding AG............... 8,644 1,558,452 Swatch Group AG................ 1,422 354,614 Syngenta AG.................... 1,532 497,763 4,715,610 TAIWAN -- 1.1% Taiwan Semiconductor Manufacturing Company Ltd... 250,061 531,344(a) NUMBER OF SHARES VALUE -------------------------------------------------------------------------------- UNITED KINGDOM -- 15.7% BG Group PLC................... 30,704 $ 797,243 BHP Billiton PLC............... 31,518 1,207,692(d) Diageo PLC..................... 49,296 902,395 Group 4 Securicor PLC.......... 51,792 207,852 Lloyds TSB Group, PLC.......... 118,947 729,152(d) National Grid PLC.............. 26,005 340,595 Prudential PLC................. 49,206 518,573(d) Rio Tinto PLC (Regd.).......... 5,722 688,499 Royal Bank of Scotland Group PLC................... 202,519 861,420(d) Tesco PLC...................... 72,317 528,500 Vodafone Group Public Limited Co.................. 349,185 1,027,936 7,809,857 TOTAL COMMON STOCK (COST $42,945,439)........... 47,720,224 -------------------------------------------------------------------------------- PREFERRED STOCK -- 2.3% -------------------------------------------------------------------------------- All America Latina Logistica S.A. 17,600 228,285 Cia Vale do Rio Doce ADR....... 30,734 917,104(d) TOTAL PREFERRED STOCK (COST $605,899).............. 1,145,389 -------------------------------------------------------------------------------- OTHER INVESTMENTS -- 0.0%* -------------------------------------------------------------------------------- GEI Investment Fund (COST $24,361)............... 18,514(e) TOTAL INVESTMENTS IN SECURITIES (COST $43,575,699)........... 48,884,127 -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 2.6% -------------------------------------------------------------------------------- GE Money Market Fund Institutional Class 1.93%........................ 1,277,963(c,f) (COST $1,277,963) TOTAL INVESTMENTS (COST $44,853,663)........... 50,162,090 LIABILITIES IN EXCESS OF OTHER ASSETS, NET-- (0.5)%................. (274,262) ----------- NET ASSETS-- 100.0% ........... $49,887,828 =========== See Notes to Schedule of Investments on page 9 and Notes to Financial Statements. 7 INTERNATIONAL EQUITY FUND Schedule of Investments June 30, 2008 (unaudited) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- OTHER INFORMATION -------------------------------------------------------------------------------- The GEI International Equity Fund had the following short futures contracts open at June 30, 2008 (unaudited): NUMBER CURRENT EXPIRATION OF NOTIONAL UNREALIZED DESCRIPTION DATE CONTRACTS VALUE APPRECIATION -------------------------------------------------------------------------------- DJ Euro Stoxx 50 Index Futures September 2008 10 $(532,536) $17,639 FTSE 100 Index Futures September 2008 2 (224,807) 3,712 Topix Index Futures September 2008 2 (248,762) 9,028 ------- $30,379 ======= GEI International Equity was invested in the following sectors at June 30, 2008 (unaudited): SECTOR PERCENTAGE (BASED ON MARKET VALUE) -------------------------------------------------------------------------------- Financials 21.96% Materials 14.90% Industrials 13.29% Energy 10.16% Consumer Staples 9.69% Telecommunication Services 8.08% Utilities 5.60% Information Technology 5.31% Consumer Discretionary 4.60% Healthcare 3.82% Short-Term 2.55% Other Investments 0.04% ------ 100.00% ====== See Notes to Schedule of Investments on page 9 and Notes to Financial Statements. 8 Notes to Schedule of Investments June 30, 2008 (unaudited) -------------------------------------------------------------------------------- The views expressed in this document reflect our judgment as of the publication date and are subject to change at any time without notice. The securities cited may not represent current or future holdings and should not be considered as a recommendation to purchase or sell a particular security. See the prospectus for complete descriptions of investment objectives, policies, risks and permissible investments. (a) Non-income producing security. (b) Pursuant to Rule 144A of the Securities Act of 1933, these securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2008, these securities amounted to $316,856; or 0.64% of net assets for the GE Investments International Equity Fund. These securities have been determined to be liquid using procedures established by the Board of Trustees. (c) Coupon amount represents effective yield. (d) At June 30, 2008, all or a portion of this security was pledged to cover collateral requirements for futures, options, forward foreign currency contracts and/or TBA's. (e) GE Asset Management ("GEAM"), the investment adviser of the Fund, also serves as investment adviser of the GEI Investment Fund. (f) GEAM, the investment adviser of the Fund, also serves as investment adviser of the GE Money Market Fund. * Less than 0.1%. + Percentages are based on net assets as of June 30, 2008. Abbreviations: ADR American Depository Receipt GDR Global Depository Receipt REGD. Registered REIT Real Estate Investment Trust 9
Financial Highlights Selected data based on a share outstanding throughout the periods indicated ------------------------------------------------------------------------------------------------------------------------------------ INTERNATIONAL EQUITY FUND --------------------------------------------------------------------- ------------- CLASS 1 CLASS 4 --------------------------------------------------------------------- ------------- 6/30/08+ 12/31/07 12/31/06 12/31/05 12/31/04 12/31/03 6/30/08+ --------------------------------------------------------------------- ------------- INCEPTION DATE -- -- -- -- -- 5/1/95 5/1/08 Net asset value, beginning of period.... $14.67 $14.08 $11.42 $9.76 $8.52 $6.23 $14.36 INCOME/(LOSS) FROM INVESTMENT OPERATIONS: Net investment income................ 0.23 0.23 0.15 0.13 0.11 0.07 0.09 Net realized and unrealized gains/(losses) on investments..... (1.64) 2.98 2.67 1.65 1.24 2.29 (1.19) ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INCOME/(LOSS) FROM INVESTMENT OPERATIONS................ (1.41) 3.21 2.82 1.78 1.35 2.36 (1.10) ------------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS FROM: Net investment income................ -- 0.23 0.16 0.12 0.11 0.07 -- Net realized gains................... -- 2.39 -- -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------------ TOTAL DISTRIBUTIONS..................... -- 2.62 0.16 0.12 0.11 0.07 -- ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, END OF PERIOD.......... $13.26 $14.67 $14.08 $11.42 $9.76 $8.52 $13.26 ==================================================================================================================================== TOTAL RETURN (A)........................ (9.61)% 22.98% 24.69% 18.19% 15.85% 37.91% (7.66)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $49,879 $84,272 $80,648 $65,450 $55,714 $45,198 $9 Ratios to average net assets: Net investment income*............ 3.32% 1.30% 1.16% 1.19% 1.31% 1.13% 4.07% Expenses*......................... 1.19% 1.13% 1.13% 1.25% 1.15% 1.07% 1.61% Portfolio turnover rate.............. 18% 32% 34% 53% 38% 35% 18%
NOTES TO FINANCIAL HIGHLIGHTS -------------------------------------------------------------------------------- (a) Total returns are historical and assume changes in share price and reinvestment of dividends and capital gains and do not include the effect of insurance contract charges. * Annualized for periods less than one year. + Unaudited See Notes to Financial Statements. 10
Statement of Assets and Liabilities JUNE 30, 2008 (UNAUDITED) ------------------------------------------------------------------------------------------------------------------------------------ INTERNATIONAL EQUITY FUND ------------------------------------------------------------------------------------------------------------------------------------ ASSETS Investments in securities, at market (cost $43,551,338)................................................ $48,865,613 Investments in affiliated securities, at market (cost $24,361)......................................... 18,514 Short-term affiliated investments (at amortized cost).................................................. 1,277,963 Foreign cash (cost $174,528).......................................................................... 175,366 Income receivables..................................................................................... 127,370 Variation margin receivable............................................................................ 3,640 Other assets........................................................................................... 65,659 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL ASSETS....................................................................................... 50,534,125 ------------------------------------------------------------------------------------------------------------------------------------ LIABILITIES Payable for investments purchased...................................................................... 467,378 Payable for fund shares redeemed....................................................................... 36,116 Payable to GEAM........................................................................................ 46,886 Accrued other expenses................................................................................. 95,917 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL LIABILITIES.................................................................................. 646,297 ------------------------------------------------------------------------------------------------------------------------------------ NET ASSETS................................................................................................ $49,887,828 ==================================================================================================================================== NET ASSETS CONSIST OF: Capital paid in........................................................................................ 28,471,464 Undistributed (distribution in excess of) net investment income .............................................................................. 979,842 Accumulated net realized gain (loss)................................................................... 15,091,002 Net unrealized appreciation/(depreciation) on: Investments......................................................................................... 5,308,428 Futures............................................................................................. 30,379 Foreign currency related transactions............................................................... 6,713 ------------------------------------------------------------------------------------------------------------------------------------ NET ASSETS................................................................................................ $49,887,828 ==================================================================================================================================== CLASS 1: NET ASSETS................................................................................................ 49,878,595 Shares outstanding ($0.01 par value; unlimited shares authorized)......................................... 3,760,728 Net asset value per share................................................................................. $13.26 CLASS 4: NET ASSETS................................................................................................ 9,233 Shares outstanding ($0.01 par value; unlimited shares authorized)......................................... 696 Net asset value per share................................................................................. $13.26
See Notes to Financial Statements. 11
Statement of Operations FOR THE SIX MONTHS ENDED JUNE 30, 2008 (UNAUDITED) ------------------------------------------------------------------------------------------------------------------------------------ INTERNATIONAL EQUITY FUND ------------------------------------------------------------------------------------------------------------------------------------ INVESTMENT INCOME INCOME: Dividend .............................................................................. $1,456,323 Interest .............................................................................. 20,801 Interest from affliated investments ................................................... 12,131 Less: Foreign taxes withheld .......................................................... (123,295) ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INCOME ............................................................................ 1,365,960 ------------------------------------------------------------------------------------------------------------------------------------ EXPENSES: Advisory and administrative fees ...................................................... 304,722 Distributors Fees (Note 4) . Class 4 ............................................................................ 7 Transfer agent ........................................................................ 48 Director's fees ....................................................................... 1,015 Custody and accounting expenses ....................................................... 36,202 Professional fees ..................................................................... 9,666 Registration expenses ................................................................. 2,039 Other expenses 5,966 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL EXPENSES BEFORE WAIVER AND REIMBURSEMENT .......................................... 359,665 ------------------------------------------------------------------------------------------------------------------------------------ Less: Expenses reimbursed by the adviser (waiver related to Fund of Fund Investment) .. (594) ------------------------------------------------------------------------------------------------------------------------------------ Net expenses .......................................................................... 359,071 ------------------------------------------------------------------------------------------------------------------------------------ NET INVESTMENT INCOME (LOSS) ............................................................ 1,006,889 ==================================================================================================================================== NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS REALIZED GAIN (LOSS) ON: Investments ........................................................................ 12,153,211 Futures ............................................................................ (310,329) Foreign currency transactions ...................................................... 84,818 INCREASE (DECREASE) IN UNREALIZED APPRECIATION/ (DEPRECIATION) ON: Investments ........................................................................ (19,876,600) Futures ............................................................................ 32,809 Foreign currency transactions (2,646) ------------------------------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments ................................ (7,918,737) ------------------------------------------------------------------------------------------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ......................... $(6,911,848) ====================================================================================================================================
See Notes to Financial Statements. 12
Statements of Changes in Net Assets ------------------------------------------------------------------------------------------------------------------------------------ INTERNATIONAL EQUITY FUND ------------------------------------------------------------------------------------------------------------------------------------ SIX MONTHS ENDED YEAR ENDED JUNE 30, 2008 DECEMBER 31, (UNAUDITED) 2007 ------------------------------------------------------------------------------------------------------------------------------------ INCREASE (DECREASE) IN NET ASSETS OPERATIONS: Net investments income (loss)..................................................... $ 1,006,889 $ 1,114,623 Net realized gain (loss) on investments, futures, written options, and foreign currency transactions............................................... 11,927,700 14,671,900 Net increase (decrease) in unrealized appreciation/(depreciation) on investments, futures, written options, and foreign currency translation............................................................ (19,846,437) 2,248,768 ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) from operations........................................... (6,911,848) 18,035,291 ------------------------------------------------------------------------------------------------------------------------------------ DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Class 1......................................................................... -- (1,127,887) Class 4......................................................................... -- -- Net realized gains Class 1......................................................................... -- (11,637,475) Class 4......................................................................... -- -- ------------------------------------------------------------------------------------------------------------------------------------ TOTAL DISTRIBUTIONS................................................................. -- (12,765,362) ------------------------------------------------------------------------------------------------------------------------------------ Increase (decrease) in net assets from operations and distributions................. (6,911,848) 5,269,929 ------------------------------------------------------------------------------------------------------------------------------------ SHARE TRANSACTIONS: Proceeds from sale of shares Class 1......................................................................... 11,970,478 21,702,440 Class 4......................................................................... 10,000 -- Value of distributions reinvested Class 1......................................................................... -- 12,765,354 Class 4......................................................................... -- -- Cost of shares redeemed Class 1......................................................................... (39,453,163) (36,113,216) Class 4......................................................................... -- -- ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) from share transactions................................... (27,472,685) (1,645,422) ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INCREASE (DECREASE) IN NET ASSETS............................................. (34,384,533) 3,624,507 NET ASSETS Beginning of period................................................................. 84,272,361 80,647,854 ------------------------------------------------------------------------------------------------------------------------------------ End of period....................................................................... $ 49,887,828 $ 84,272,361 ==================================================================================================================================== UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD........ $ 979,842 $ (27,047) ------------------------------------------------------------------------------------------------------------------------------------ CHANGES IN FUND SHARES CLASS 1 Shares sold............................................................................ 868,981 1,420,389 Issued for distributions reinvested.................................................... -- 877,947 Shares redeemed........................................................................ (2,854,514) (2,280,758) ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in fund shares................................................. (1,985,533) 17,578 ==================================================================================================================================== CLASS 4 Shares sold............................................................................ 696 -- Issued for distributions reinvested.................................................... -- -- Shares redeemed........................................................................ -- -- ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in fund shares................................................. 696 -- ====================================================================================================================================
See Notes to Financial Statements. 13 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- 1. ORGANIZATION OF THE COMPANY GE Investments Funds, Inc. (the "Company") was incorporated under the laws of the Commonwealth of Virginia on May 14, 1984 and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company. The Company is composed of thirteen investment portfolios (collectively the "Funds"), although only the following eleven are currently being offered: U.S. Equity Fund, S&P 500 Index Fund, Premier Growth Equity Fund, Core Value Equity Fund, Mid-Cap Equity Fund, Small-Cap Equity Fund, International Equity Fund (the "Fund"), Total Return Fund, Income Fund, Money Market Fund and Real Estate Securities Fund. Shares of the Funds of the Company are offered only to insurance company separate accounts that fund certain variable life insurance contracts and variable annuity contracts. These insurance companies may include insurance companies affiliated with GE Asset Management Incorporated ("GEAM"), the investment adviser and administrator of each of the Funds. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results may differ from those estimates. The following summarizes the significant accounting policies of the Fund: SECURITY VALUATION AND TRANSACTIONS The Fund's portfolio securities are valued generally on the basis of market quotations. Equity securities generally are valued at the last reported sales price on the primary market in which they are traded. Portfolio securities listed on NASDAQ are valued using the NASDAQ Official Closing Price, which may not necessarily represent the last sale price. If no sales occurred on the exchange or NASDAQ that day, the portfolio security generally is valued using the last reported bid price. Debt securities (other than short-term securities described below) generally are valued at an evaluated bid as reported by an independent pricing service. Values obtained from pricing services are based on various factors such as market transactions, dealer supplied valuations, security characteristics and other market data. In the absence of a reliable price from such a pricing service, debt securities may be valued based on dealer supplied valuations or quotations. The Fund's written or purchased options are valued at the last sales price, or if no sales occurred that day, at the last reported bid price. Short-term investments with remaining maturities of sixty days or less at the time of purchase are valued on the basis of amortized cost, which approximates market value. All assets and liabilities of the Fund initially expressed in foreign currency values will be converted into U.S. dollars at the WM/Reuters exchange rate computed at 11:00 a.m., Eastern time. If prices are not readily available for a portfolio security, or if it is believed that a price for a portfolio security does not represent its fair value, the security may be valued using procedures approved by the Fund's Board of Directors that are designed to establish its "fair" value. Those procedures require that the fair value of a security be established by the fair valuation committee. The fair valuation committee follows different protocols for different types of investments and circumstances. The fair value procedures may be used to value any investment by the Fund in the appropriate circumstances. Examples of the types of securities that may be fair valued include: thinly traded or illiquid investments, high-yield securities or foreign securities. Foreign securities may be valued with the assistance of an independent fair value pricing service in circumstances where it is believed that they have been or would be materially affected by events occurring after the close of the portfolio security's primary market and before the close of regular trading on the NYSE. This independent fair value pricing service uses a computerized system to appraise affected securities and portfolios taking into consideration various factors and the fair value of such securities may be something other than the last available quotation or other market price. GEAM may also separately monitor portfolio securities and, consistent with the Fund's fair value procedures, apply a different value to a portfolio security than would be applied had it been priced using market quotations or by an independent fair value pricing service. 14 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- Determining the fair value of securities involves the application of both subjective and objective considerations. Security values may differ depending on the methodology used to determine their values, and may differ from the last quoted sale or closing price. No assurance can be given that use of these fair value procedures will always better represent the price at which the Fund could sell the affected portfolio security. Security transactions are accounted for as of the trade date. Realized gains and losses on investments sold are recorded on the basis of identified cost for both financial statement and federal tax purposes. The Fund adopted FASB Statement No. 157, FAIR VALUE MEASUREMENTS (FAS 157). FAS 157 establishes a single definition of fair value, a framework for measuring fair value, and expanded disclosures about fair value measurements. Various inputs are used in determining the value of the Fund's investments. These inputs are classified into three broad levels: Level 1 includes quoted prices in active markets of securities identical to those of the Fund. Level 2 includes: 1) quoted prices in active markets for similar securities to those of the Fund; 2) quoted prices for identical or similar securities to those of the Fund that trade in markets in which there are few transactions or the quoted prices are not current; 3) prices based on observable market data such as interest rates and yield curves, volatilities, bond prepayment speeds, and credit risk and; 4) prices based principally on observable market data by use of correlation techniques or other means. Level 3 includes unobservable market inputs used to fair value securities. These inputs are based on assumptions that market participants would use to price securities and may include the adviser's own assumptions. Other financial instruments are derivative instruments that are not reflected in TOTAL INVESTMENTS, such as futures, forwards, swaps, and written options contracts, which are valued based on the unrealized appreciation/depreciation of the instrument.
Level 1 Level 2 Level 3 Total --------------------------------------------------------------------------------------------------------------------------------- Investments in Securities $8,586,638 $ 41,575,452 $ -- $50,162,090 Other Financial Instruments $ 30,379 $ -- $ -- $ 30,379
REPURCHASE AGREEMENTS The Fund may enter into repurchase agreement transactions with respect to instruments that are consistent with the Fund's investment obectives or policies. The Fund's custodian or a third party custodian takes possession of the collateral pledged for investments in repurchase agreements on behalf of the Fund. The Fund values the underlying collateral daily on a mark-to-market basis to determine that the value, including accrued interest, is at least equal to 102% of the repurchase price. In the event the seller defaults and the value of the security declines, or if the seller enters an insolvency proceeding, realization of the collateral by the Fund may be delayed or limited. SECURITY LENDING The Fund may loan securities to brokers, dealers, and financial institutions determined by GEAM to be creditworthy, subject to certain limitations. The Fund continues to receive the interest and dividends on the loaned securities during the term of the loan. The loans of securities are secured by collateral in the form of cash or other liquid assets, which are segregated and maintained with the custodian in an amount at least equal to 102% of the current market value of the loaned securities. During the term of the loan, the Fund will record any gain or loss in the market value of its loaned securities and of securities in which cash collateral is invested. The Fund will also earn interest, net of any rebate, from securities in which cash collateral is invested. In the event the counterparty (borrower) does not meet its contracted obligation to return the securities, the Fund may be exposed to the risk of loss of reacquiring the loaned securities at prevailing market prices using the proceeds of the sale of the collateral. FOREIGN CURRENCY Accounting records of the Fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange on a daily basis (on days the New York Stock Exchange is open). Purchases and sales of securities, income receipts and expense payments denominated in foreign currencies are translated into U.S. dollars at the prevailing exchange rate on the respective dates of such transactions. 15 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- The Fund does not isolate the portion of the results of operations resulting from changes in foreign exchange rates from the fluctuations arising from changes in the market prices of securities during the period. Such fluctuations are included in the net realized or unrealized gain or loss from investments. Net realized gains or losses on foreign currency transactions represent net gains or losses on sales and maturities of foreign currency contracts, disposition of foreign currencies, the difference between the amount of net investment income and withholding taxes accrued and the U.S. dollar amount actually received or paid, and gains or losses between the trade and settlement date on purchases and sales of securities. Net unrealized foreign exchange gains and losses arising from changes in the value of other assets and liabilities as a result of changes in foreign exchange rates are included as increases or decreases in unrealized appreciation/depreciation on foreign currency related transactions. FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or bond index futures contracts subject to certain limitations. The Fund may invest in futures contracts to manage its exposure to the stock and bond markets and fluctuations in currency values. Buying futures tends to increase the Fund's exposure to the underlying instrument while selling futures tends to decrease the Fund's exposure to the underlying instrument, or hedge other Fund investments. The Fund will not enter into a transaction involving futures for speculative purposes. The Fund's risks in using these contracts include changes in the value of the underlying instruments, non-performance of the counterparties under the contracts' terms and changes in the liquidity of the secondary market for the contracts. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they principally trade. Upon entering into a futures contract, the Fund is required to pledge to the broker an amount of cash and/or other assets equal to a certain percentage of the contract amount, known as initial margin deposit. Subsequent payments, known as variation margin, are made or received by the Fund each day, depending on the daily fluctuation in the fair value of the underlying security. The Fund records an unrealized gain or loss equal to the daily variation margin. Should market conditions move unexpectedly, the Fund may not achieve the anticipated benefits of the futures contracts and may incur a loss. The Fund recognizes a realized gain or loss on the expiration or closing of a futures contract. OPTIONS The Fund may purchase and write options, subject to certain limitations. The Fund may invest in options contracts to manage its exposure to the stock and bond markets and fluctuations in foreign currency values. Writing puts and buying calls tend to increase the Fund's exposure to the underlying instrument while buying puts and writing calls tend to decrease the Fund's exposure to the underlying instrument, or hedge other Fund investments. The Fund will not enter into a transaction involving options for speculative purposes. The Fund's risks in using these contracts include changes in the value of the underlying instruments, non-performance of the counterparties under the contracts' terms and changes in the liquidity of the secondary market for the contracts. Options are valued at the last sale price, or if no sales occurred on that day, at the last quoted bid price. When the Fund writes an option, the amount of the premium received is recorded as a liability and is subsequently adjusted to the current fair value of the option written. Premiums received from writing options that expire unexercised are treated by the Fund on the expiration date as realized gains from investments. The difference between the premium and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium is less than the amount paid for the closing purchase, as a realized loss. When an option is exercised, the proceeds from the sale of the underlying security or the cost basis of the securities purchased is adjusted by the original premium received or paid. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS The Fund may enter into forward foreign currency exchange contracts to facilitate transactions in foreign denominated securities and to manage the Fund's currency exposure. Forward foreign currency exchange contracts are valued at the mean between the bid and the offered forward rates as last quoted by a recognized dealer. The aggregate principal amounts of the contracts are not recorded in the Fund's financial statements. Such amounts appear under the caption forward foreign currency contracts in the Schedule of Investments. Fluctuations in the value of the contracts are recorded in the Statement of Assets and Liabilities as an asset (or liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, 16 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- when they are recorded as realized gains or losses on foreign currency related transactions. The Fund's risks in using these contracts include changes in the value of foreign currency or the possibility that the counterparties do not perform under the contracts' terms. When the Fund enters into a forward foreign currency exchange contract, it is required to segregate cash or liquid securities with its custodian in an amount equal to the value of the Fund's total assets committed to the consummation of the forward contract. If the value of the segregated securities declines, additional cash or securities is segregated so that the value of the account will equal the amount of the Fund's commitment with respect to the contract. INVESTMENTS IN FOREIGN MARKETS Investments in foreign markets may involve special risks and considerations not typically associated with investing in the United States. These risks include revaluation of currencies, high rates of inflation, repatriation on income and capital, and adverse political and economic developments. Moreover, securities issued in these markets may be less liquid, subject to government ownership controls, tariffs and taxes, subject to delays in settlements, and their prices may be more volatile. The Fund may be subject to capital gains and repatriation taxes imposed by certain countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued based upon net investment income, net realized gains and net unrealized appreciation as income and/or capital gains are earned. INCOME TAXES The Fund intends to comply with all sections of the Internal Revenue Code applicable to regulated investment companies including the distribution of substantially all of its taxable net investment income and net realized capital gains to its shareholders. Therefore, no provision for federal income tax has been made. The Fund is treated as a separate taxpayer for federal income tax purposes. At June 30, 2008, information on the tax cost of investments is as follows:
Cost of Gross Tax Gross Tax Net Tax Investments for Unrealized Unrealized Appreciation Tax Purposes Appreciation Depreciation on Investments ----------------------------------------------------------------------------------------------------------------------------- $44,934,906 $8,747,235 $(3,544,412) $5,202,823
As of December 31, 2007, the Fund has no capital loss carryovers. Capital loss carryovers are available to offset future realized capital gains to the extent provided in the Internal Revenue Code and regulations thereunder. To the extent that these carryover losses are used to offset future capital gains, it is probable that the gains so offset will not be distributed to shareholders because they would be taxable as ordinary income. Any net capital and currency losses incurred after October 31, within the Fund's tax year, are deemed to arise on the first day of the Fund's next tax year if the Fund so elects to defer such losses. The Fund elected to defer losses incurred after October 31, 2007 as follows: Capital Currency ----------------------------------------------------------------- $-- $30,307 The tax composition of distributions paid during the years ended December 31, 2007 and December 31, 2006 were as follows: Ordinary Long-Term Income Capital Gains Total ----------------------------------------------------------------- 2007 $1,502,823 $11,262,539 $12,765,362 2006 892,355 10,696 903,051 DISTRIBUTIONS TO SHAREHOLDERS The Fund declares and pays dividends from net investment income annually. The Fund declares and pays net realized capital gains in excess of capital loss carryforwards distributions annually. The character of income and gains to be distributed is determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences include (but are not limited to) futures, treatment of realized gains and losses on foreign currency contracts, and losses deferred due to wash sale transactions. Reclassifications due to permanent book/tax 17 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- differences are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. These reclassifications have no impact on net investment income, realized gains or losses, or the net asset value of the Fund. The calculation of net investment income per share in the Financial Highlights table excludes these adjustments. The reclassifications for the year ended December 31, 2007 were as follows: Undistributed (Distribution in Excess of) Net Investment Accumulated Income Net Realized Gain ------------------------------------------------------------------------- $(1,821) $1,821 On June 29, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in Income Taxes." FIN48 provides guidance for how certain uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN48 requires evaluation of tax positions taken or expected to be taken in the course of preparing the Fund's tax returns to determine whether the tax positions are "more likely than not" of being sustained by the applicable tax authority. The adoption of FIN48 did not have an impact on the Fund's net assets and financial statements. The Funds' 2004, 2005, 2006 and 2007 calendar years tax returns are still open to examination by the Federal and applicable state tax authorities. INVESTMENT INCOME Corporate actions (including cash dividends) are recorded on the ex-dividend date, net of applicable withholding taxes, except for certain foreign corporate actions, which are recorded as soon after ex-dividend date as such information becomes available. Interest income is recorded on the accrual basis. All discounts and premiums on bonds are accreted and amortized, respectively, to call or maturity date, whichever is shorter, using the effective yield method. EXPENSES Expenses of the Company which are directly identifiable to the Fund are allocated to the portfolio. Expenses which are not directly identifiable to the Fund are allocated in such a manner as deemed equitable, taking into consideration the nature and type of expenses and relative size of the Fund. All expenses of the Fund are paid by GEAM and reimbursed by the Fund. 3. LINE OF CREDIT The Company shares a revolving credit facility of up to $150 million with a number of its affiliates. The credit facility is with its custodian bank, State Street Bank and Trust Company. The revolving credit facility requires the payment of a commitment fee equal to 0.09% per annum on the daily unused portion of the credit facility, payable quarterly. The portion borne by the Funds generally is borne proportionally based upon net assets. In addition, the Company has a $100 million uncommitted, unsecured line of credit with State Street. Generally, borrowings under the credit facilities would accrue interest at the Federal Funds Rate plus 50 basis points and would be borne by the borrowing Fund. The maximum amount allowed to be borrowed by any one Fund is the lesser of (i) its prospectus limitation or (ii) 20% of its net assets. The credit facilities were not utilized by the Fund during the period ended June 30, 2008. 4. AMOUNTS PAID TO AFFILIATES GEAM, a registered investment adviser, was retained by the Company's Board of Directors effective May 1, 1997 to act as investment adviser and administrator of the Fund. Compensation of GEAM for investment advisory and administrative services is paid monthly based on the average daily net assets of the Fund. The advisory and administrative fee is stated in the following schedule: Annualized based on average daily net assets -------------------------------------------------------------- Average Daily Advisory and Net Assets Administration of Fund Fees -------------------------------------------------------------- First $100 million 1.00% Next $100 million 0.95% Over $200 million 0.90% GENPACT performs certain accounting and certain administration services not provided by GEAM. For the period ending June 30, 2008, $630 was charged to the Fund. DISTRIBUTION AND SHAREHOLDER SERVICING FEES The Fund has adopted a Shareholder Servicing and Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act with respect to the Class 4 shares of the Fund. The Fund 18 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- pays GE Investment Distributors, Inc. ("GEID"), a wholly-owned subsidiary of GEAM and the Fund's principal underwriter, a monthly fee for distribution and/or shareholder services provided, at an annual rate of the average daily net assets attributable to each applicable class of shares. The annual rate applicable is 0.45% for the Class 4 shares. Currently, Class 1 shares are not subject to a Rule 12b-1 fee. DIRECTORS' COMPENSATION The Fund pays no compensation to its directors who are officers or employees of GEAM or its affiliates. Directors who are not such officers or employees also serve in a similar capacity for other funds advised by GEAM. Compensation paid to unaffiliated directors are reflected on the Statement of Operations. These fees are allocated pro rata across all of the mutual fund platforms and share classes served by the directors, including the Fund, and are based upon the relative net assets of each fund within such platforms. (For additional information about directors compensation please refer to the Statement of Additional Information.) 5. INVESTMENT TRANSACTIONS PURCHASES AND SALES OF SECURITIES The cost of purchases and the proceeds from sales of investments, other than short-term securities and options, for the period ended June 30, 2008 were as follows: Purchases Sales -------------------------------------------------------------- $11,009,932 $36,570,783 SECURITY LENDING At June 30, 2008, the Fund did not participate in securities lending. 19 Additional Information (unaudited) -------------------------------------------------------------------------------- INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS: The business and affairs of the Company are managed under the direction of the Company's Board of Directors. Information pertaining to the Directors and officers of the Company is set forth below. INTERESTED DIRECTORS AND EXECUTIVE OFFICERS -------------------------------------------------------------------------------- MICHAEL J. COSGROVE -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 59 POSITION(S) HELD WITH FUND Chairman of the Board and President TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 10 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President - GEAM since February 1997; President and Chief Executive Officer - Mutual Funds at GEAM since March 2007; Vice President, GE Capital Corporation, an indirect wholly-owned subsidiary of GE, since December 1999; Executive Vice President - Sales and Marketing of GEAM, a wholly-owned subsidiary of GE that is registered as an investment adviser under the Investment Advisers Act of 1940, as amended, since March 1993; Director of GEAM since 1988. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48 OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception; Trustee of Elfun Funds, GE Savings & Security Funds and General Electric Pension Trust since 1988; Trustee of Fordham University since 2003; Trustee of Elfun Foundation; Treasurer of GE Foundation; Director, GE Asset Management (Ireland) since February 1999; Director, GE Asset Management Funds Plc, GE Asset Canada Company, GE Asset Management Limited, and GE Volunteers. -------------------------------------------------------------------------------- MATTHEW J. SIMPSON -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 47 POSITION(S) HELD WITH FUND Executive Vice President TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - less than one year PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General Counsel and Secretary of GEAM since July 2007; Senior Vice President and General Counsel - Marketing and Client Services (formerly Asset Management Services), at GEAM and Senior Vice President and General Counsel of GEAMS from February 1997 to June 2007; Vice President and Associate General Counsel of GEAM from October 1992 to February 1997; Secretary of Fund from 1997 to June 2007; Vice President of Fund from September 2003 to June 2007; Vice President of GE Institutional Funds and GE LifeStyle Funds from September 2003 to June 2007; Secretary of GE Institutional Funds and GE LifeStyle Funds from 1997 to June 2007; Vice President of Elfun Funds and GE Savings & Security Funds from October 2003 to June 2007; Assistant Secretary of Elfun Funds and GE Savings & Security Funds from 1998 to June 2007. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional Funds, GE LifeStyle Funds, Elfun Funds and GE Savings & Security Funds since July 2007. 20 Additional Information (unaudited) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SCOTT H. RHODES -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 49 POSITION(S) HELD WITH FUND Treasurer TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 2 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds Operations Manager since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle Funds and GE Investments Funds since November 2005 and Elfun Funds and GE Savings & Security Funds since September 2005; from August 2004 to September 2005 Vice President, U.S. Trust Company, N.A. and Assistant Treasurer of Excelsior Funds, Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds, Inc.; from January 2004 to August 2004, Vice President BlackRock Financial Management, Inc.; from December 1996 to November 2003, Controller - Mutual Funds, American Skandia Investment Services, Inc. and Assistant Treasurer of American Skandia Trust and American Skandia Advisor Funds, Inc. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A -------------------------------------------------------------------------------- JEANNE M. LAPORTA -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 42 POSITION(S) HELD WITH FUND Vice President and Secretary TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 2 years (Vice President); less than one year (Secretary) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Senior Vice President and Deputy General Counsel at GE Asset Management since October 2007; Vice President and Associate General Counsel - Marketing and Client Services (formerly Asset Management Services) at GEAM from May 1997 to October 2007; Vice President and Assistant Secretary of GE Funds, GE Institutional Funds and GE LifeStyle Funds since September 2003; Vice President and Assistant Secretary of Elfun Funds and GE Savings & Security Funds since October 2003; Assistant Secretary from September 2003 to June 2007 and Secretary since July 2007. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A 21 Additional Information (unaudited) -------------------------------------------------------------------------------- NON-INTERESTED DIRECTORS -------------------------------------------------------------------------------- JOHN R. COSTANTINO -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 62 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC since 2006; Managing Director, Walden Partners, Ltd., consultants and investors, since August 1992. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE Institutional Funds and GE LifeStyle Funds since their inception; Trustee of Fordham University since 2002 and Marymount College from 2001 through 2002; Neuroscience Research Institute since 1986; Diocesan Finance Counsel of the Dioceses of Brooklyn & Queens since 2001; Gregorian University Foundation since 1994. -------------------------------------------------------------------------------- WILLIAM J. LUCAS -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 60 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Treasurer of Fairfield University since 1983. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception. -------------------------------------------------------------------------------- ROBERT P. QUINN -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 72 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon Brothers Inc. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception. The Statement of Additional Information for the Fund includes additional information about the Directors and Officers and is available, without charge, upon request by calling 1-800-242-0134. 22 Investment Team -------------------------------------------------------------------------------- INVESTMENT ADVISER AND ADMINISTRATOR GE Asset Management Incorporated BOARD OF DIRECTORS Michael J. Cosgrove, CHAIRMAN John R. Costantino William J. Lucas Robert P. Quinn Matthew J. Simpson SECRETARY Jeanne M. LaPorta ASSISTANT SECRETARIES Joseph A. Carucci Joon Won Choe TREASURER Scott H. Rhodes ASSISTANT TREASURERS Scott R. Fuchs Christopher M. Isaacs DISTRIBUTOR GE Investment Distributors, Inc. Member FINRA and SIPC COUNSEL Sutherland, Asbill & Brennan, LLP CUSTODIAN State Street Bank & Trust Company INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM KPMG LLP OFFICERS OF THE INVESTMENT ADVISER James W. Ireland, CHIEF EXECUTIVE OFFICER Daniel O. Colao, EVP, CHIEF FINANCIAL OFFICER (AS OF JULY 28, 2008) Michael J. Cosgrove, EVP, PRESIDENT AND CHIEF EXECUTIVE OFFICER - MUTUAL FUNDS Paul M. Colonna, EVP, PRESIDENT - FIXED INCOME Kathryn D. Karlic, EVP, PRESIDENT - INSTITUTIONAL SALES AND MARKETING Ralph R. Layman, EVP, PRESIDENT - INTERNATIONAL EQUITIES Matthew J. Simpson, EVP, GENERAL COUNSEL AND SECRETARY Judith A. Studer, EVP, PRESIDENT - U.S. EQUITIES Don W. Torey, EVP, PRESIDENT - ALTERNATIVE INVESTMENTS AND REAL ESTATE John J. Walker, EVP, CHIEF OPERATING OFFICER (AS OF JANUARY 31, 2008) David Wiederecht, EVP, PRESIDENT - INVESTMENT STRATEGIES 23 [This page intentionally left blank.] [This page intentionally left blank.] INVESTMENT ADVISER GE ASSET MANAGEMENT INCORPORATED 3001 SUMMER STREET PO BOX 7900 STAMFORD, CT 06904-7900 DISTRIBUTOR GE INVESTMENT DISTRIBUTORS, INC. MEMBER FINRA AND SIPC 3001 SUMMER STREET PO BOX 7900 STAMFORD, CT 06904-7900 The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities is available without charge (i) upon request, by calling 1-800-242-0134; (ii) on the Fund's website at HTTP://WWW.GEFUNDS.COM; and (iii) on the Commission's website at HTTP://WWW.SEC.GOV. The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC - information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Information (if any) regarding how the Fund voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through the Fund's website at HTTP://WWW.GEFUNDS.COM; and (ii) on the Commission's website at HTTP://WWW.SEC.GOV. [GE logo omitted] GE Investments Funds, Inc. Total Return Fund Semi-Annual Report JUNE 30, 2008 [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........................................ 19 FINANCIAL STATEMENTS Financial Highlights............................................... 20 Statement of Assets and Liabilities................................ 22 Statement of Operations............................................ 23 Statements of Changes in Net Assets................................ 24 Notes to Financial Statements...................................... 26 ADDITIONAL INFORMATION.................................................. 33 INVESTMENT TEAM......................................................... 36 This report is prepared for Policyholders of certain variable contracts and may be distributed to others only if preceded or accompanied by the variable contract's current prospectus and the current prospectus of the Funds available for investments thereunder. Notes to Performance June 30, 2008 (unaudited) -------------------------------------------------------------------------------- Total returns take into account changes in share price and assume reinvestment of all dividends and capital gains distributions, if any. The performance data quoted represent past performance; past performance does not guarantee future results. Investment return and principal value will fluctuate so your shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data quoted. Periods less than one year are not annualized. Please call 800-242-0134 for the most recent month-end performance data. Total returns shown are net of Fund expenses but do not reflect fees and charges associated with the variable contracts such as administrative fees, account charges and surrender charges, which, if reflected, would reduce the Fund's total returns for all periods shown. Shares of the Fund are neither insured nor guaranteed by the U.S. Government, and their prices will fluctuate with market conditions. The Standard & Poor's ("S&P") 500(R) Composite Price Index of stocks (S&P 500 Index) and Lehman Brothers Aggregate Bond Index (LB Aggregate Bond Index) are unmanaged indices and do not reflect the actual cost of investing in the instruments that comprise each index. The S&P 500 Index is an unmanaged, market capitalization-weighted index of stocks of 500 large U.S. companies, which is widely used as a measure of large-cap stock market performance. The LB Aggregate Bond Index is a market value-weighted index of taxable investment-grade debt issues, including government, corporate, asset-backed and mortgage-backed securities, with maturities of one year or more. This index is designed to represent the performance of the U.S. investment-grade first rate bond market. The results shown for the foregoing indices assume the reinvestment of net dividends or interest. The peer universe of the underlying annuity funds used in our peer ranking calculation is based on the blend of Lipper peer categories, as shown. Lipper is an independent mutual fund rating service. A Fund's performance may be compared to or ranked within a universe of mutual funds with investment objectives and policies similar but not necessarily identical to the Fund's. Such comparisons or rankings are made on the basis of several factors, including the Fund's objectives and policies, management style and strategy, and portfolio composition, and may change over time if any of those factors change. -------------------- GE INVESTMENT DISTRIBUTORS, INC., MEMBER OF FINRA & SIPC, IS THE PRINCIPAL UNDERWRITER AND DISTRIBUTOR OF THE GE INVESTMENT FUNDS, INC. AND A WHOLLY OWNED SUBSIDIARY OF GE ASSET MANAGEMENT INCORPORATED, THE INVESTMENT ADVISER OF THE FUNDS. 1 Total Return Fund -------------------------------------------------------------------------------- THE TOTAL RETURN FUND IS MANAGED BY A TEAM OF PORTFOLIO MANAGERS THAT INCLUDES PAUL M. COLONNA, RALPH R. LAYMAN, THOMAS R. LINCOLN, JUDITH A. STUDER AND DIANE M. WEHNER. MS. STUDER IS VESTED WITH OVERSIGHT AUTHORITY FOR DETERMINING ASSET ALLOCATIONS FOR THE FUND. EACH OF THE FOREGOING PORTFOLIO MANAGERS IS RESPONSIBLE FOR MANAGING ONE OF FOUR SUB-PORTFOLIOS: U.S. EQUITY, U.S. MID-CAP EQUITY, INTERNATIONAL EQUITY AND FIXED INCOME. MR. LINCOLN MANAGES THE U.S. EQUITY PORTION, MS. WEHNER MANAGES THE U.S. MID-CAP EQUITY PORTION, MR. LAYMAN MANAGES THE INTERNATIONAL EQUITY PORTION AND MR. COLONNA MANAGES THE FIXED INCOME PORTION, EACH WITH A TEAM OF PORTFOLIO MANAGERS AND ANALYSTS. THE SUB-PORTFOLIOS UNDERLYING THE FUND ARE MANAGED INDEPENDENTLY OF EACH OTHER AND THE PORTFOLIO MANAGERS HAVE FULL DISCRETION OVER THEIR PARTICULAR SUB-PORTFOLIO; HOWEVER, THE PORTFOLIO MANAGEMENT TEAM IS COLLABORATIVE TO ENSURE STRICT ADHERENCE TO THE FUND'S OBJECTIVES. JUDITH A. STUDER IS A DIRECTOR AND EXECUTIVE VICE PRESIDENT OF GE ASSET MANAGEMENT AND PRESIDENT - U.S. EQUITIES AT GE ASSET MANAGEMENT. SHE HAS LED THE TEAM OF PORTFOLIO MANAGERS FOR THE TOTAL RETURN FUND SINCE JULY 2004. MS. STUDER JOINED GE ASSET MANAGEMENT IN AUGUST 1984. SHE BECAME SENIOR VICE PRESIDENT - U.S. EQUITIES IN 1991, SENIOR VICE PRESIDENT - INTERNATIONAL EQUITIES IN 1995, PRESIDENT - INVESTMENT STRATEGIES IN JULY 2006 AND PRESIDENT - U.S. EQUITIES IN JUNE 2007. PAUL M. COLONNA IS A DIRECTOR AND EXECUTIVE VICE PRESIDENT OF GE ASSET MANAGEMENT AND PRESIDENT - FIXED INCOME AT GE ASSET MANAGEMENT. SINCE JANUARY 2005, HE HAS BEEN RESPONSIBLE FOR THE FIXED INCOME PORTION OF THE TOTAL RETURN FUND. PRIOR TO JOINING GE ASSET MANAGEMENT IN FEBRUARY 2000, MR. COLONNA WAS A SENIOR PORTFOLIO MANAGER WITH THE FEDERAL HOME LOAN MORTGAGE CORPORATION, OVERSEEING THE MORTGAGE INVESTMENT GROUP. MR. COLONNA BECAME PRESIDENT - FIXED INCOME IN MARCH 2007. RALPH R. LAYMAN IS A DIRECTOR AND EXECUTIVE VICE PRESIDENT OF GE ASSET MANAGEMENT AND PRESIDENT - INTERNATIONAL EQUITIES AT GE ASSET MANAGEMENT. HE MANAGES THE OVERALL INTERNATIONAL EQUITY INVESTMENTS FOR GE ASSET MANAGEMENT. MR. LAYMAN HAS BEEN RESPONSIBLE FOR THE INTERNATIONAL EQUITY PORTION OF THE TOTAL RETURN FUND SINCE 1997. MR. LAYMAN JOINED GE ASSET MANAGEMENT IN 1991 AS SENIOR VICE PRESIDENT FOR INTERNATIONAL INVESTMENTS AND BECAME AN EXECUTIVE VICE PRESIDENT IN 1992 AND PRESIDENT - INTERNATIONAL EQUITIES IN MARCH 2007. THOMAS R. LINCOLN IS A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT. HE HAS BEEN A MEMBER OF THE PORTFOLIO MANAGEMENT TEAM FOR THE TOTAL RETURN FUND SINCE MAY 2007. MR. LINCOLN JOINED GE ASSET MANAGEMENT IN 1994 AS A FINANCIAL ANALYST IN U.S. EQUITIES. MR. LINCOLN BECAME PART OF THE INVESTMENT MANAGEMENT TEAM FOR U.S. EQUITIES IN 1997 AND PORTFOLIO MANAGER FOR U.S. EQUITIES IN 2003. PICTURED FROM LEFT TO RIGHT: RALPH R. LAYMAN, JUDITH A. STUDER, DIANE M. WEHNER, PAUL M. COLONNA AND THOMAS R. LINCOLN. [photo omitted] 2 Q&A -------------------------------------------------------------------------------- DIANE M. WEHNER IS A VICE PRESIDENT OF GE ASSET MANAGEMENT. SHE HAS BEEN A PORTFOLIO MANAGER OF THE TOTAL RETURN FUND SINCE JANUARY 2006. BEFORE JOINING GE ASSET MANAGEMENT, MS. WEHNER WAS A VICE PRESIDENT AND SENIOR PORTFOLIO MANAGER FROM JANUARY 1997 TO JUNE 2001, AND ASSOCIATE PORTFOLIO MANAGER FROM MAY 1995 TO JANUARY 1997, WITH BENEFIT CAPITAL MANAGEMENT CORPORATION. MS. WEHNER HAS SERVED AS AN ANALYST/ PORTFOLIO MANAGER IN THE INVESTMENT MANAGEMENT INDUSTRY SINCE 1985. Q. HOW DID THE TOTAL RETURN FUND PERFORM COMPARED TO ITS BENCHMARK AND LIPPER PEER GROUP FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2008? A. For the six-month period ended June 30, 2008, the Total Return Fund returned -6.93% for the Class 1 shares, -7.00% for Class 2 shares, -6.99% for Class 3 shares and -7.04% for Class 4 shares. The Fund's broad based benchmarks, the S&P 500 Index and the Lehman Brothers Aggregate Bond Index returned -11.91% and 1.13% respectively. The Fund's Lipper peer group of 198 Mixed-Asset Target Allocation Growth funds returned an average of -7.66% for the same period. Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE AND WHAT MARKET CONDITIONS IMPACTED THE PERFORMANCE OF THE FUND? A. The performance of the Total Return Fund for the six-month period ended June 30, 2008 was primarily driven by the Fund's overweight in international equities and its underweight position in fixed income. The Fund benefited from the Tactical Asset Allocation Committee's decision to reduce domestic equity exposure and to continue to increase the Fund's cash position during the equity market weakness. The six-month period proved challenging for U.S. equity investors, as the housing recession, skyrocketing commodity prices and tight credit conditions threatened the outlook for economic growth and corporate profits. Policymaker response was significant during the period as the Federal Reserve lowered interest rates and opened up its discount window to investment banks. Despite these actions, credit remained scarce, impeding economic growth and contributing to stock market volatility. Consumers began to receive the government's fiscal stimulus checks, but investors feared that the windfall might be consumed at the gas pump in an environment of $140 per barrel of oil. The U.S. equity markets ended this period on the brink of a bear market, with the Dow Jones Industrial Average and the S&P 500 Index down 18% and 17%, respectively, from their October 2007 highs. U.S. equity performance suffered due to oil price shocks, housing prices in free-fall, a weak dollar, and negative consumer sentiment. The credit crisis also persisted, contributing to fears that deepening mortgage losses will force more banks to cut dividends or sell shares at a discount to shore up their balance sheets. Year-to-date U.S. equity performance is negative across the board, although small and mid-caps have outperformed large-caps, and growth has outperformed value due to the larger weighting of financial stocks within the value indices. The Fund's U.S. equity performance generally tracked its benchmark in the large-cap space and exceeded its benchmark in the mid-cap segment. The large-cap equity portfolio benefited from strong stock selection in the information technology sector, positive positioning within financials, and strong telecom and media stock selection. The key factors detracting from relative performance during the period were lagging stock selections within industrials, poor performing healthcare services companies, and underweighting energy. The mid-cap equity portfolio outperformed its relevant benchmark as well as the large-cap equity portfolio. Mid-cap equity benefited from an overweight in consumer staples, healthcare, and energy. The underweight in financials and in the consumer discretionary sector also had a positive impact on performance. The international equity markets were down during the first half of this year as the MSCI EAFE Index returned -10.96%. Concerns about global economic growth slowing led to the questions about the sustainability of earnings for companies around the 3 Total Return Fund -------------------------------------------------------------------------------- Q&A world. Contributing factors included rising input costs caused by higher raw materials prices and lower consumption expectations caused by slowing growth and diminishing disposable income. Additionally, the difficulties for individuals and businesses to access credit from an overstressed banking system are exacerbating a slowdown in the U.S. economy with ripple effects overseas. The credit crisis, along with a disturbing rise in inflation worldwide, is having a dampening effect on economic activity, which is severe enough to change behaviors in some countries. The international equity portfolio exceeded its benchmark. Holdings in materials and energy made strong contributions while the absence of specific banking stocks and a general underweight in the challenged consumer discretionary sector also proved positive. Specifically, agricultural chemicals and basic resources continued to offer good returns while oil and oil service companies benefited from strong demand. Some negative contribution came from holdings in information technology and telecom services where competition in an increasingly difficult economic environment has proved costly. In the fixed income market, the credit crisis born in 2007 deepened this year, threatening the existence of an 85-year old investment bank/broker-dealer. The Federal Reserve moved aggressively to provide liquidity through typical means such as reducing the fed funds rate target by 225 basis points to 2.00%, and introducing certain new measures including allowing investment banks access to discount window borrowing. Consumer spending was crimped by higher gas prices, lower home prices, and job losses. The rise in energy prices along with other commodities pushed inflation fears higher, especially at the Federal Reserve. Interest rates at the longer end of the maturity spectrum were little changed from the end of last year. Shorter maturity note yields dropped significantly more, especially during the first quarter, as the Federal Reserve was reducing rates. The decline in interest rates translated to positive returns for Treasury securities for the first six months. Credit sensitive sectors, however, posted negative returns in the same period as credit concerns deepened. In general, higher quality paper performed better than lower quality. Declining valuations in sub-prime and alt-a asset-backed securities held in the fixed income portfolio dragged performance below that of the benchmark. Although the market value of these securities is small as a percentage of the total portfolio, the continued price dislocation in this market had a large impact. Portfolio performance was enhanced by yield curve positioning throughout the period and the underweight to high-grade corporate bonds where there was general credit spread widening. Q. WERE THERE ANY SIGNIFICANT CHANGES TO THE FUND DURING THE PERIOD? A. During the first six months of this year we continued to lower the Fund's exposure to equity and increase its exposure to cash. This defensive positioning helped to reduce volatility and preserve capital. Within U.S. equities we reduced exposure to large-cap growth and increased our allocation to core value to increase diversification. In the mid-cap equity portfolio we increased exposure to the consumer discretionary, financials, and materials sectors where we found attractively valued growth companies, and we took profits and reduced our exposure to the healthcare and energy sectors. Within international equities, modest additions to existing holdings in the financial sector were executed, reducing the extent of the underweight. Modest additions were also made to the energy holdings. Holdings in industrials were slightly reduced and our already underweight posture in consumer discretionary was enhanced by the sale of hotel, media, and retail holdings. 4 Total Return Fund -------------------------------------------------------------------------------- Understanding Your Fund's Expenses As a shareholder of the Fund you incur ongoing expenses, which include portfolio management fees, distribution and service fees (for shareholders of Classes 2, 3 and 4), professional fees, administrative fees and other Fund expenses. The following example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the period. The information in the following table is based on an investment of $1,000, which is invested at the beginning of the period and held for the entire six-month period ended June 30, 2008. ACTUAL EXPENSES The first section of the table provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your class under the heading "Expenses Paid During Period." HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second section of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholders reports of other funds. Please note that the expenses shown in the table do not reflect any transaction costs, such as sales charges or redemption fees.
JANUARY 1, 2008 - JUNE 30, 2008 ------------------------------------------------------------------------------------------------------------------------------------ ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING PERIOD ($)* ------------------------------------------------------------------------------------------------------------------------------------ ACTUAL FUND RETURN** ------------------------------------------------------------------------------------------------------------------------------------ Class 1 1,000.00 930.68 2.44 Class 2 1,000.00 929.96 2.68 Class 3 1,000.00 930.07 2.92 Class 4 1,000.00 929.61 3.64 ------------------------------------------------------------------------------------------------------------------------------------ HYPOTHETICAL 5% RETURN (2.5% FOR THE PERIOD) ------------------------------------------------------------------------------------------------------------------------------------ Class 1 1,000.00 1,022.08 2.57 Class 2 1,000.00 1,021.84 2.82 Class 3 1,000.00 1,021.59 3.07 Class 4 1,000.00 1,020.86 3.83 ------------------------------------------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.51% FOR CLASS 1, 0.56% FOR CLASS 2, 0.61% FOR CLASS 3, AND 0.76% FOR CLASS 4 (FROM PERIOD JANUARY 1, 2008 - JUNE 30, 2008), MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY 181/366 (TO REFLECT THE SIX MONTH PERIOD). ** ACTUAL FUND RETURNS FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2008 WERE AS FOLLOWS: (6.93)% FOR CLASS 1 SHARES, (7.00)% FOR CLASS 2 SHARES, (6.99)% FOR CLASS 3 SHARES, AND (7.04)% FOR CLASS 4 SHARES. 5 Total Return Fund (unaudited) -------------------------------------------------------------------------------- INVESTMENT PROFILE A fund designed for investors who seek the highest total return, composed of current income and capital appreciation, as is consistent with prudent investment risk by investing primarily in a combination of equity securities and investment grade debt securities. TOP TEN LARGEST HOLDINGS (EXCLUDING SHORT-TERM HOLDINGS) AS OF JUNE 30, 2008 as a % of Market Value -------------------------------------------------------------------------------- Federal National Mortgage Assoc. 5.50% TBA 4.05% -------------------------------------------------------------------------------- U.S. Treasury Notes 3.63% 10/31/09 - 12/31/12 2.72% -------------------------------------------------------------------------------- Federal National Mortgage Assoc. 6.00% TBA 1.19% -------------------------------------------------------------------------------- U.S. Treasury Notes 2.63% 05/31/10 1.09% -------------------------------------------------------------------------------- Cisco Systems, Inc. 1.01% -------------------------------------------------------------------------------- QUALCOMM, Inc. 0.94% -------------------------------------------------------------------------------- Schlumberger Ltd. 0.91% -------------------------------------------------------------------------------- NII Holdings Inc. (Class B) 0.88% ------------------------------------------------------------------------------- Amgen, Inc. 0.86% -------------------------------------------------------------------------------- Transocean, Inc. 0.82% -------------------------------------------------------------------------------- LIPPER PERFORMANCE COMPARISON Mixed-Asset Target Allocation Growth Funds Based on average annual total returns for the periods ended 6/30/08 SIX ONE FIVE TEN MONTHS YEAR YEAR YEAR ------ ---- ---- ---- Number of Funds in peer group: 198 191 89 49 ------------------------------------------------ Peer group average annual total return: -7.66% -7.19% 7.14% 4.26% ------------------------------------------------ CHANGE IN VALUE OF A $10,000 INVESTMENT CLASS 1 SHARES -------------------------------------------------------------------------------- [Line chart omitted -- plot points are as follows:] GEI TOTAL RETURN S&P 500 INDEX LB AGGREGATE BOND INDEX 06/98 10,000.00 10,000.00 10,000.00 12/98 10,551.83 10,930.80 10,457.85 12/99 11,949.95 13,233.69 10,371.95 12/00 12,540.72 12,018.37 11,577.80 12/01 12,178.34 10,586.75 12,555.37 12/02 11,044.28 8,246.88 13,842.93 12/03 13,287.78 10,616.05 14,411.11 12/04 14,375.82 11,771.22 15,036.38 12/05 14,903.35 12,350.19 15,401.54 12/06 16,952.15 14,300.58 16,069.01 12/07 18,931.67 15,086.47 17,188.47 06/08 17,619.37 13,289.09 17,382.00 AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2008 ENDING VALUE OF A SIX ONE FIVE TEN $10,000 MONTHS YEAR YEAR YEAR INVESTMENT ------ ---- ---- ---- ----------- Total Return Fund -6.93% -3.18% 7.81% 5.83% $17,619 S&P 500 Index -11.91% -13.12% 7.59% 2.88% $13,289 LB Aggregate Bond Index 1.13% 7.12% 3.85% 5.68% $17,382 Inception date 7/1/85 -------------------------------------------------------------------------------- CLASS 2 SHARES -------------------------------------------------------------------------------- [Line chart omitted -- plot points are as follows:] GEI TOTAL RETURN S&P 500 INDEX LB AGGREGATE BOND INDEX 05/06 10,000.00 10,000.00 10,000.00 06/06 9,700.53 9,725.39 10,010.49 09/06 10,099.82 10,276.45 10,391.65 12/06 10,704.55 10,964.86 10,520.34 03/07 10,874.08 11,035.19 10,678.50 06/07 11,491.65 11,728.19 10,623.19 09/07 11,988.13 11,966.13 10,925.35 12/07 11,949.89 11,567.44 11,253.25 03/08 11,196.58 10,474.94 11,497.24 06/08 11,112.88 10,189.31 11,379.95 AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2008 ENDING VALUE OF A SIX ONE SINCE $10,000 MONTHS YEAR INCEPTION INVESTMENT ------ ---- --------- ----------- Total Return Fund -7.00% -3.30% 4.98% $11,113 S&P 500 Index -11.91% -13.12% 0.87% $10,189 LB Aggregate Bond Index 1.13% 7.12% 6.15% $11,380 Inception date 5/1/06 -------------------------------------------------------------------------------- CLASS 3 SHARES -------------------------------------------------------------------------------- [Line chart omitted -- plot points are as follows:] GEI TOTAL RETURN S&P 500 INDEX LB AGGREGATE BOND INDEX 05/06 10,000.00 10,000.00 10,000.00 06/06 9,700.53 9,725.39 10,010.49 09/06 10,105.70 10,276.45 10,391.65 12/06 10,717.44 10,964.86 10,520.34 03/07 10,874.96 11,035.19 10,678.50 06/07 11,498.98 11,728.19 10,623.19 09/07 11,995.78 11,966.13 10,925.35 12/07 11,956.45 11,567.44 11,253.25 03/08 11,197.51 10,474.94 11,497.24 06/08 11,120.33 10,189.31 11,379.95 AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2008 ENDING VALUE OF A SIX ONE SINCE $10,000 MONTHS YEAR INCEPTION INVESTMENT ------ ---- --------- ----------- Total Return Fund -6.99% -3.29% 5.02% $11,120 S&P 500 Index -11.91% -13.12% 0.87% $10,189 LB Aggregate Bond Index 1.13% 7.12% 6.15% $11,380 Inception date 5/1/06 -------------------------------------------------------------------------------- CLASS 4 SHARES -------------------------------------------------------------------------------- [Line chart omitted -- plot points are as follows:] GEI TOTAL RETURN S&P 500 INDEX LB AGGREGATE BOND INDEX 05/06 10,000.00 10,000.00 10,000.00 06/06 9,688.78 9,725.39 10,010.49 09/06 10,088.08 10,276.45 10,391.65 12/06 10,688.52 10,964.86 10,520.34 03/07 10,845.80 11,035.19 10,678.50 06/07 11,468.84 11,728.19 10,623.19 09/07 11,970.90 11,966.13 10,925.35 12/07 11,936.60 11,567.44 11,253.25 03/08 11,179.74 10,474.94 11,497.24 06/08 11,096.35 10,189.31 11,379.95 AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2008 ENDING VALUE OF A SIX ONE SINCE $10,000 MONTHS YEAR INCEPTION INVESTMENT ------ ---- --------- ----------- Total Return Fund -7.04% -3.25% 4.91% $11,096 S&P 500 Index -11.91% -13.12% 0.87% $10,189 LB Aggregate Bond Index 1.13% 7.12% 6.15% $11,380 Inception date 5/1/06 SEE NOTES TO PERFORMANCE ON PAGE 1 FOR FURTHER INFORMATION, INCLUDING AN EXPLANATION OF LIPPER PEER CATEGORIES. PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE AND THE GRAPHS AND TABLES DO NOT REFLECT THE DEDUCTION OF TAXES. 6 TOTAL RETURN FUND Schedule of Investments June 30, 2008 (unaudited) -------------------------------------------------------------------------------- TOTAL RETURN FUND -------------------------------------------------------------------------------- Portfolio Composition as a % of the Market Value of $3,019,389 (in thousands) as of June 30, 2008 [Pie chart omitted -- plot points are as follows:] Domestic Equity 35.6% Foreign Equity 25.2% Bonds & Notes 22.7% Other Investements 0.3% Short-Term & Others 16.2% NUMBER OF SHARES VALUE -------------------------------------------------------------------------------- DOMESTIC EQUITY -- 38.1% + -------------------------------------------------------------------------------- CONSUMER DISCRETIONARY -- 4.6% Bed Bath & Beyond, Inc......... 576,417 $ 16,197,317(a,h) Cablevision Systems Corp....... 55,600 1,256,560(a) Carnival Corp.................. 312,241 10,291,463 Coach, Inc..................... 69,954 2,020,271(a) Comcast Corp. (Class A)........ 1,210,416 22,707,406 Darden Restaurants, Inc........ 27,800 887,932 Kohl's Corp.................... 124,080 4,968,163(a) Liberty Global, Inc. (Series C) 262,269 7,962,486(a) Liberty Media Entertainment Corp. (Series A)............ 410,698 9,951,212(a) Life Time Fitness, Inc......... 70,474 2,082,507(a) Lowe's Companies, Inc.......... 476,293 9,883,080 Mercadolibre, Inc.............. 80,529 2,777,445(a) News Corp. (Class A)........... 111,201 1,672,463 Omnicom Group, Inc............. 285,931 12,832,583 O'Reilly Automotive, Inc....... 112,104 2,505,524(a) Penn National Gaming, Inc...... 45,293 1,456,170(a) Regal Entertainment Group, (Class A).................... 184,215 2,814,805 Target Corp.................... 136,744 6,357,228 The Cheesecake Factory......... 95,344 1,516,923(a) The Walt Disney Co............. 57,268 1,786,762 Time Warner, Inc............... 325,262 4,813,878 Viacom Inc. (Class B).......... 73,948 2,258,372(a) 129,000,550 CONSUMER STAPLES -- 2.7% Alberto-Culver Co.............. 330,185 8,673,960 Altria Group, Inc.............. 77,840 1,600,390 Clorox Co...................... 57,268 2,989,390 NUMBER OF SHARES VALUE -------------------------------------------------------------------------------- General Mills, Inc............. 108,595 $ 6,599,318 Kimberly-Clark Corp............ 136,322 8,149,329 McCormick & Company, Inc....... 213,292 7,605,993 Pepsi Bottling Group, Inc...... 46,148 1,288,452 PepsiCo, Inc................... 365,105 23,217,027 Procter & Gamble Co............ 76,729 4,665,890 Sara Lee Corp.................. 75,061 919,497 The Estee Lauder Companies Inc. (Class A)................... 113,781 5,285,127 Wal-Mart Stores, Inc........... 40,588 2,281,046 73,275,419 ENERGY -- 4.3% Apache Corp.................... 35,349 4,913,511 Dresser-Rand Group, Inc........ 80,448 3,145,517(a) Exxon Mobil Corp............... 192,719 16,984,326(h) Halliburton Co................. 81,177 4,308,063 Hess Corp...................... 62,760 7,919,685 HIS, Inc. (Class A)............ 5,955 414,468(a) Marathon Oil Corp.............. 179,118 9,290,850 Nabors Industries Ltd.......... 33,360 1,642,313(a) National Oilwell Varco, Inc.... 22,240 1,973,133(a) Noble Corp..................... 41,589 2,701,621 Peabody Energy Corp............ 41,775 3,678,289 Schlumberger Ltd............... 255,980 27,499,931 Southwestern Energy Co......... 61,301 2,918,541(a) Sunoco, Inc.................... 31,759 1,292,274 Transocean, Inc................ 162,168 24,712,782 Valero Energy Corp............. 44,480 1,831,686 Weatherford International Ltd.. 91,811 4,552,907(a) 119,779,897 FINANCIALS -- 4.3% ACE Ltd........................ 37,808 2,082,843 Affiliated Managers Group, Inc. 29,146 2,624,889(a) Allstate Corp.................. 25,020 1,140,662 American Express Co............ 91,740 3,455,846 Ameriprise Financial, Inc...... 53,376 2,170,802 AON Corp....................... 60,604 2,784,148 Bank of New York Mellon Corp... 86,181 3,260,227 BlackRock, Inc................. 5,560 984,120 CB Richard Ellis Group, Inc. (Class A)................... 570,229 10,948,397(a) Chubb Corp..................... 57,268 2,806,705 Citigroup, Inc................. 439,959 7,373,713 CME Group Inc.................. 16,384 6,278,185 CVB Financial Corp............. 127,379 1,202,458 Douglas Emmett, Inc. (REIT).... 62,011 1,362,382 DuPont Fabros Technology, Inc. (REIT)...................... 102,412 1,908,960 Federal National Mortgage Assoc. 219,780 4,287,908 Fortress Investment Group LLC (Class A)................... 146,869 1,809,426 Goldman Sachs Group, Inc....... 70,090 12,258,741 Greenhill & Company, Inc....... 33,012 1,778,026 HCC Insurance Holdings, Inc.... 290,918 6,150,007 JP Morgan Chase & Co........... 105,641 3,624,543 See Notes to Schedule of Investments on page 19 and Notes to Financial Statements. 7 TOTAL RETURN FUND Schedule of Investments June 30, 2008 (unaudited) -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE -------------------------------------------------------------------------------- Legg Mason, Inc................ 32,385 $ 1,411,014 Marsh & McLennan Companies, Inc.............. 38,920 1,033,326 Metlife, Inc................... 134,231 7,083,369 Nymex Holdings, Inc............ 21,834 1,844,536 Prologis (REIT)................ 24,811 1,348,478 Prudential Financial, Inc...... 11,120 664,309 State Street Corp.............. 313,400 20,054,466(e) SunTrust Banks, Inc............ 95,470 3,457,924 US Bancorp..................... 69,500 1,938,355 Zions Bancorporation........... 30,695 966,585 120,095,350 HEALTHCARE -- 6.4% Abbott Laboratories............ 293,400 15,541,398(h) Aetna, Inc..................... 205,851 8,343,141 Alcon, Inc..................... 16,276 2,649,570 Amgen, Inc..................... 549,761 25,926,729(a) Amylin Pharmaceuticals, Inc.... 92,219 2,341,440(a) Arthrocare Corp................ 57,542 2,348,289(a) Barr Pharmaceuticals, Inc...... 55,017 2,480,166(a) Baxter International, Inc...... 33,360 2,133,038 Boston Scientific Corp......... 222,401 2,733,308(a) Bristol-Myers Squibb Co........ 123,989 2,545,494 Covidien Ltd................... 20,331 973,652 DENTSPLY International, Inc.... 79,445 2,923,576 Genentech Inc.................. 210,246 15,957,671(a) Gen-Probe Incorporated......... 52,918 2,512,547(a) Gilead Sciences, Inc........... 202,509 10,722,851(a) Hologic, Inc................... 506,322 11,037,819(a) Johnson & Johnson.............. 22,240 1,430,922 Masimo Corp.................... 161,213 5,537,668(a) McKesson Corp.................. 50,040 2,797,736 Medtronic, Inc................. 289,373 14,975,053 Merck & Company, Inc........... 52,820 1,990,786 Psychiatric Solutions, Inc..... 119,521 4,522,675(a) Resmed, Inc.................... 197,632 7,063,368(a) Thermo Fisher Scientific, Inc.. 108,311 6,036,172(a) UnitedHealth Group, Inc........ 502,606 13,193,408 Vertex Pharmaceuticals Inc..... 69,472 2,325,228(a) Wyeth.......................... 98,413 4,719,887 175,763,592 INDUSTRIALS -- 2.1% Alliant Techsystems, Inc....... 966 98,223(a) Cooper Industries Ltd.......... 77,695 3,068,952 Corrections Corporation of America.................. 111,913 3,074,250(a) Deere & Co..................... 20,572 1,483,858 Dover Corp..................... 28,476 1,377,384 Eaton Corp..................... 23,352 1,984,219 General Dynamics Corp.......... 27,800 2,340,760 Harsco Corp.................... 87,317 4,750,918 Hexcel Corp.................... 356,340 6,877,362(a) ITT Corp....................... 75,677 4,792,624 Joy Global, Inc................ 48,396 3,669,869 NUMBER OF SHARES VALUE -------------------------------------------------------------------------------- Monster Worldwide, Inc......... 159,108 $ 3,279,216(a) Rockwell Collins, Inc.......... 13,900 666,644 Textron, Inc................... 411,944 19,744,476 57,208,755 INFORMATION TECHNOLOGY -- 9.8% Activision, Inc................ 128,502 4,378,063(a) Affiliated Computer Services, Inc. (Class A)................... 79,808 4,268,930(a) Analog Devices, Inc............ 58,380 1,854,733 Apple Computer, Inc............ 450 75,348(a) Automatic Data Processing, Inc. 196,908 8,250,445 Blackboard, Inc................ 50,888 1,945,448(a) Cisco Systems, Inc............. 1,309,738 30,464,506(a,h) Citrix Systems, Inc............ 94,283 2,772,863(a) Cogent, Inc.................... 137,768 1,566,422(a) Cognizant Technology Solutions Corp. (Class A)............. 39,586 1,286,941(a) Corning Incorporated........... 280,638 6,468,706 Dell, Inc...................... 62,828 1,374,677(a) DST Systems, Inc............... 35,375 1,947,394(a) Fidelity National Information Services, Inc............... 103,508 3,820,480 Google, Inc. (Class A)......... 25,149 13,238,937(a) Harris Corp.................... 23,432 1,183,082 Hewlett-Packard Co............. 85,069 3,760,900 Hittite Microwave Corp......... 83,366 2,969,497(a) Intel Corp..................... 930,101 19,978,569(h) International Business Machines Corp............... 31,692 3,756,453 Intuit Inc..................... 494,495 13,633,227(a) Iron Mountain Incorporated..... 220,048 5,842,274(a) Juniper Networks, Inc.......... 125,017 2,772,877(a) Lam Research Corp.............. 39,476 1,427,057(a) Macrovision Solutions Corp..... 230,093 3,442,191(a) Marvell Technology Group Ltd... 141,349 2,496,223(a) Maxim Integrated Products, Inc. 85,560 1,809,594 Mettler Toledo International Inc. 23,335 2,213,558(a) Microchip Technology Inc....... 11,120 339,605 Microsoft Corp................. 808,164 22,232,591(h) Molex, Inc. (Class A).......... 343,183 7,862,322 National Semiconductor Corp.... 63,384 1,301,907 Neustar, Inc. (Class A)........ 166,449 3,588,640(a) Oracle Corp.................... 1,037,835 21,794,535(a,h) Paychex, Inc................... 401,760 12,567,053 QUALCOMM, Inc.................. 642,696 28,516,421 Texas Instruments Incorporated. 102,305 2,880,909 Western Union Co............... 785,040 19,406,188 269,489,566 MATERIALS -- 1.7% Alcoa, Inc..................... 49,206 1,752,718 Allegheny Technologies Incorporated................ 207,203 12,282,994 Dow Chemical Co................ 26,132 912,268 Freeport-McMoRan Copper & Gold, Inc................... 17,792 2,085,044 See Notes to Schedule of Investments on page 19 and Notes to Financial Statements. 8 TOTAL RETURN FUND Schedule of Investments June 30, 2008 (unaudited) -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE -------------------------------------------------------------------------------- Intrepid Potash, Inc........... 53,420 $ 3,513,968(a) Martin Marietta Materials, Inc. 20,642 2,138,305 Monsanto Co.................... 140,178 17,724,106 Praxair, Inc................... 43,452 4,094,916 Vulcan Materials Co............ 22,240 1,329,507 45,833,826 TELECOMMUNICATION SERVICES -- 1.3% American Tower Corp. (Class A). 56,785 2,399,166(a) AT&T, Inc...................... 35,028 1,180,093 NII Holdings Inc. (Class B).... 557,986 26,498,755(a) Syniverse Holdings, Inc........ 109,879 1,780,040(a) Verizon Communications, Inc.... 94,187 3,334,220 35,192,274 UTILITIES -- 0.9% American Electric Power Company, Inc................. 57,268 2,303,892 American Water Works Company, Inc................ 105,449 2,338,859(a) Dominion Resources, Inc........ 109,533 5,201,722 DTE Energy Co.................. 39,233 1,665,048 Edison International........... 60,048 3,085,266 Entergy Corp................... 15,568 1,875,633 ITC Holdings Corp.............. 90,320 4,616,255 PPL Corp....................... 41,277 2,157,549 SCANA Corp..................... 47,862 1,770,894 25,015,118 TOTAL DOMESTIC EQUITY (COST $1,104,819,689)........ 1,050,654,347 -------------------------------------------------------------------------------- FOREIGN EQUITY -- 27.6% -------------------------------------------------------------------------------- COMMON STOCK -- 26.9% CONSUMER DISCRETIONARY -- 1.2% AGTech Holdings Ltd............ 2,421,779 249,898(a) Alsea SAB de C.V............... 376,203 474,281(a) China Travel International Inv. 1,260,063 341,540 Daimler AG (Regd.)............. 41,345 2,566,245 Focus Media Holding Ltd. ADR... 75,402 2,090,143(a) Gafisa S.A..................... 38,575 670,848 Koninklijke Philips Electronics N.V. 315,592 10,695,089 LVMH Moet Hennessy Louis Vuitton S.A........... 27,618 2,883,028 Prajay Engineers Syndicate Ltd. 75,862 178,422 Renault S.A.................... 20,268 1,650,692 Swatch Group AG................ 18,195 4,537,418 Toyota Motor Corp.............. 150,588 7,120,423 Urbi Desarrollos Urbanos S.A. de C.V................. 190,237 658,202(a) 34,116,229 NUMBER OF SHARES VALUE -------------------------------------------------------------------------------- CONSUMER STAPLES -- 2.5% China Mengniu Dairy Company Ltd................. 308,000 $ 871,888 Diageo PLC..................... 630,855 11,548,213 Diageo PLC ADR................. 25,576 1,889,299 Groupe Danone.................. 166,920 11,688,220 IOI Corp....................... 427,550 976,708 ITC Ltd........................ 200,977 868,186 Metro AG....................... 56,637 3,615,653 Nestle S.A. (Regd.)............ 421,380 19,095,720 Nestle S.A. ADR................ 19,780 2,232,173 Shinsegae Company Ltd.......... 640 344,200 Shiseido Company Ltd........... 408,000 9,366,000 Tesco PLC...................... 925,498 6,763,638 Uni-President Enterprises Corp. 633,000 759,394 70,019,292 ENERGY -- 3.4% Acergy S.A..................... 307,910 6,860,554 BG Group PLC................... 392,983 10,203,975 CAT Oil AG..................... 30,890 437,738(a) China Shenhua Energy Company Ltd................. 140,500 552,949 Gazprom OAO ADR................ 251,298 14,575,284 LUKOIL ADR..................... 16,248 1,602,053 Paladin Energy Ltd............. 1,083,705 6,623,509(a) PetroChina Company Ltd......... 66,000 85,318 Petroleo Brasileiro S.A. ADR... 206,723 11,979,598 Saipem S.p.A................... 300,961 14,076,005 Suncor Energy, Inc............. 11,120 646,294 Suncor Energy, Inc............. 32,178 1,877,618 Suncor Energy, Inc............. 157,177 9,135,127 Tesco Corp..................... 88,576 2,830,003(a) Total S.A...................... 124,732 10,624,389 92,110,414 FINANCIALS -- 5.5% Akbank TAS..................... 102,833 357,234 Allianz AG (Regd.)............. 5,951 1,047,530 AXA S.A........................ 155,589 4,587,759 Banca Intesa S.p.A............. 1,089,097 6,195,661 Banco do Brasil S.A............ 46,992 772,613 Banco Santander S.A. (Regd.)... 587,082 10,718,240 Bank of Yokohama Ltd........... 498,012 3,449,735 BNP Paribas.................... 139,649 12,579,534 CapitaLand Ltd................. 786,000 3,307,457 Chinatrust Financial Holding Company Ltd................. 1,775,000 1,712,202(a) Credit Agricole S.A............ 308,258 6,271,401 Dubai Islamic Bank............. 338,777 743,035 Egyptian Financial Group- Hermes Holding.............. 74,047 669,792 Emaar Properties............... 290,601 861,092 Hung Poo Real Estate Development Corp............. 502,860 687,285 See Notes to Schedule of Investments on page 19 and Notes to Financial Statements. 9 TOTAL RETURN FUND Schedule of Investments June 30, 2008 (unaudited) -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE -------------------------------------------------------------------------------- Industrial & Commercial Bank of China............... 587,382 $ 401,598 Kookmin Bank................... 84,251 4,951,635 Kotak Mahindra Bank Ltd........ 35,169 373,919(a) Lloyds TSB Group, PLC.......... 1,522,175 9,331,018 Metropolitan Bank & Trust...... 523,700 383,527 Mitsubishi Estate Company Ltd.. 473,982 10,870,060 Mitsubishi UFJ Financial Group, Inc. 1,441,503 12,760,831 Nomura Holdings, Inc........... 922,095 13,677,902 Plaza Centers N.V.............. 106,632 339,542 Prudential PLC................. 629,759 6,636,910 Royal Bank of Scotland Group PLC 2,524,526 10,738,140 Samsung Fire & Marine Insurance Company Ltd................. 5,780 1,207,202 Shenzhen Investment Ltd........ 883,957 319,038 Siam Commercial Bank PCL....... 389,700 903,297 Sony Financial Holdings, Inc... 2,360 9,517,295 Standard Bank Group Ltd........ 41,899 406,764 State Bank of India Ltd........ 7,444 192,038 State Bank of India Ltd. GDR... 5,284 284,279 Sumitomo Realty & Development Company Ltd................. 78,000 1,554,295 Sun Hung Kai Properties Ltd.... 168,476 2,290,213 Tisco Bank PCL................. 510,830 311,409 Tisco Bank PCL NVDR............ 6,193 3,708 Unibail-Rodamco (REIT)......... 16,177 3,727,790 UniCredit S.p.A................ 1,404,773 8,550,973 Woori Investment & Securities Company Ltd................. 34,590 627,329 154,321,282 HEALTHCARE -- 1.0% Cie Generale d'Optique Essilor International S.A........... 74,053 4,520,324 Roche Holding AG............... 110,635 19,946,705 Teva Pharmaceutical Industries Ltd. ADR.................... 34,325 1,572,085 WuXi PharmaTech Cayman, Inc. ADR.................... 21,906 444,692(a) Yuhan Corp..................... 3,189 667,446 27,151,252 INDUSTRIALS -- 4.0% ABB Ltd. (Regd.)............... 366,501 10,404,164(a) ABB Ltd. ADR................... 73,600 2,084,352(a) ACS Actividades de Construccion y Servicios S.A............. 35,325 1,768,855 Alstom......................... 32,039 7,351,846 Asahi Glass Company Ltd........ 353,005 4,281,068 Brambles Ltd................... 646,184 5,414,141 CAE, Inc....................... 878,622 9,976,566 China Communications Construction Company Ltd.... 545,080 934,441 China COSCO Holdings Company Ltd................. 1,382,500 3,383,454 NUMBER OF SHARES VALUE -------------------------------------------------------------------------------- China High Speed Transmission Equipment Group Company Ltd. 375,000 $ 769,620 Doosan Heavy Industries and Construction Company Ltd.... 14,180 1,340,101 East Japan Railway Co.......... 1,028 8,387,591 Elbit Systems Ltd.............. 12,002 711,821 Empresas ICA Sociedad Controladora S.A. de C.V.... 175,756 1,101,572(a) Enka Insaat ve Sanayi AS....... 96,786 1,117,279 Group 4 Securicor PLC.......... 656,234 2,612,795 Group 4 Securicor PLC.......... 662,854 2,660,174 Hyundai Development Co......... 12,364 626,008 Hyunjin Materials Company Ltd.. 22,560 1,011,500 Italian-Thai Development PCL... 3,151,765 544,406 IVRCL Infrastructures & Projects Ltd................ 53,140 365,533 Komatsu Ltd.................... 206,075 5,764,645 Koninklijke Philips Electronics N.V. 21,736 734,677 Larsen & Toubro Ltd............ 45,342 2,289,598 Mitsubishi Heavy Industries Ltd. 1,248,000 5,970,914 Murray & Roberts Holdings Ltd.. 108,214 1,197,487 Orascom Construction Industries 419 29,043 Orkla ASA...................... 216,325 2,771,734 Pacific Basin Shipping Ltd..... 454,618 650,485 Sandvik AB..................... 268,794 3,656,283 Siemens AG (Regd.)............. 105,385 11,691,132 Siemens AG ADR................. 7,223 795,469 Suntech Power Holdings Company Ltd. ADR............ 66,043 2,473,971(a) United Tractors Tbk PT......... 608,000 802,464 Vinci S.A...................... 73,212 4,473,727 110,148,916 INFORMATION TECHNOLOGY -- 2.1% Delta Electronics Inc.......... 289,207 803,441 HON HAI Precision Industry Company Ltd................. 136,240 669,973 Ibiden Company Ltd............. 114,095 4,161,942 Kingdee International Software Group Company Ltd........... 1,332 274 MediaTek Inc................... 71,245 820,182 Nidec Corp..................... 46,671 3,114,000 Nintendo Company Ltd........... 8,500 4,828,306 Nokia Oyj...................... 445,740 10,902,772 Research In Motion Ltd......... 128,393 15,009,142(a) Samsung Electronics Company Ltd................. 11,420 6,822,742 Sohu.com Inc................... 6,441 453,704(a) Taiwan Semiconductor Manufacturing Company Ltd... 3,383,914 7,190,334(a) Taiwan Semiconductor Manufacturing Company Ltd. ADR............ 161,241 1,759,139(a) Unimicron Technology Corp...... 506,000 574,272 57,110,223 See Notes to Schedule of Investments on page 19 and Notes to Financial Statements. 10 TOTAL RETURN FUND Schedule of Investments June 30, 2008 (unaudited) -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE -------------------------------------------------------------------------------- MATERIALS -- 3.6% Anglo American PLC............. 10,122 $ 705,205 Anglo Platinum Ltd............. 24,977 4,154,827 Barrick Gold Corp.............. 75,616 3,440,528 Bayer AG....................... 139,479 11,743,699 BHP Billiton PLC............... 403,408 15,457,602 Cameco Corp.................... 48,318 2,085,977 China Grand Forestry Resources Group Ltd......... 4,151,153 361,764(a) China Molybdenum Company Ltd... 313,000 267,589 Eurasian Natural Resources Corp. 40,691 1,071,204(a) Impala Platinum Holdings Ltd... 11,967 470,407 Israel Chemicals Ltd........... 85,233 1,981,821 Linde AG....................... 67,830 9,534,070 Makhteshim-Agan Industries Ltd. 104,586 972,031 New World Resources N.V. (Class A) 47,463 1,681,360(a) Novozymes (Series B)........... 5,341 481,153 POSCO.......................... 3,500 1,822,652 Potash Corporation of Saskatchewan................ 70,425 16,421,505 Rio Tinto PLC (Regd.).......... 73,226 8,810,914 Sinofert Holdings Ltd.......... 1,315,469 1,021,788 Syngenta AG.................... 19,607 6,370,528 Taiwan Fertilizer Company Ltd.. 185,000 693,568 Toray Industries Inc........... 1,784,998 9,596,296 99,146,488 TELECOMMUNICATION SERVICES -- 2.2% America Movil S.A. de C.V. ADR (Series L).............. 152,235 8,030,397 Bharti Airtel Ltd.............. 59,850 1,005,906(a) China Mobile Ltd............... 85,474 1,147,274 Hellenic Telecommunications Organization S.A............ 241,475 6,087,295(a) Mobile Telesystems OJSC ADR.... 7,555 578,788 MTN Group Limited.............. 475,884 7,534,543 Orascom Telecom Holding SAE.... 55,555 722,324 Philippine Long Distance Telephone Co................ 3,240 173,221 Singapore Telecommunications Ltd. 1,928,003 5,146,728 Telekomunikasi Indonesia Tbk PT (Series B)........... 696,000 555,858 Telenor ASA.................... 785,624 14,747,128 Turkcell Iletisim Hizmet AS ADR 20,382 296,558 Vodafone Group Public Limited Co. 4,469,007 13,155,926 Vodafone Group, PLC ADR........ 33,360 982,786 60,164,732 UTILITIES -- 1.4% CEZ............................ 16,349 1,450,733 E.ON AG........................ 65,863 13,283,555 Huaneng Power International Inc. 143,887 99,839 National Grid PLC.............. 332,816 4,358,941 Pan Asia Environmental Protection Group Ltd.................... 1,316,000 470,877 NUMBER OF SHARES VALUE -------------------------------------------------------------------------------- PNOC Energy Development Corp... 3,935,985 $ 454,793 RWE AG......................... 17,303 2,186,129 Suez S.A....................... 111,638 7,572,933 Veolia Environnement........... 151,517 8,464,663 38,342,463 TOTAL COMMON STOCK (COST $693,130,623).......... 742,631,291 -------------------------------------------------------------------------------- PREFERRED STOCK -- 0.7% -------------------------------------------------------------------------------- All America Latina Logistica S.A. 285,000 3,696,668 Cia Vale do Rio Doce........... 99,103 2,972,155 Cia Vale do Rio Doce ADR....... 415,802 12,407,531 NET Servicos de Comunicacao S.A. 43,632 556,887(a) Petroleo Brasileiro S.A........ 11,796 342,718 TOTAL PREFERRED STOCK (COST $11,169,123)........... 19,975,959 TOTAL FOREIGN EQUITY (COST $704,299,746).......... 762,607,250 PRINCIPAL AMOUNT VALUE -------------------------------------------------------------------------------- BONDS AND NOTES -- 23.6% -------------------------------------------------------------------------------- U.S. TREASURIES -- 6.4% U.S. Treasury Bonds 4.38% 02/15/38............ $ 6,935,400 6,759,851 4.50% 02/15/36............ 265,000 263,116 4.75% 02/15/37............ 5,185,600 5,354,941 U.S. Treasury Notes 2.63% 05/31/10............ 32,824,000 32,844,515(h,j) 2.75% 02/28/13............ 9,092,100 8,876,163 3.50% 02/15/18............ 23,434,200 22,557,245(j) 3.63% 10/31/09 - 12/31/12. 80,749,700 81,991,727(j) 4.63% 11/15/09 - 10/31/11. 17,235,000 17,774,972 176,422,530 FEDERAL AGENCIES -- 0.3% Federal Home Loan Mortgage Corp. 4.13% 12/21/12............ 6,725,000 6,748,221 4.88% 02/09/10............ 610,000 627,622 7,375,843 See Notes to Schedule of Investments on page 19 and Notes to Financial Statements. 11 TOTAL RETURN FUND Schedule of Investments June 30, 2008 (unaudited) -------------------------------------------------------------------------------- PRINCIPAL AMOUNT VALUE -------------------------------------------------------------------------------- AGENCY MORTGAGE BACKED -- 9.5% Federal Home Loan Mortgage Corp. 4.50% 06/01/33 - 02/01/35. $ 260,024 $ 241,477 (h) 5.00% 07/01/35 - 10/01/35. 7,436,860 7,151,239 (h) 5.50% 05/01/20 - 03/01/38. 5,855,454 5,788,642 (h) 6.00% 04/01/17 - 11/01/37. 5,316,599 5,378,021 (h) 6.50% 01/01/27 - 08/01/36. 851,800 880,840 (h) 7.00% 10/01/25 - 08/01/36. 261,654 275,189 (h) 7.50% 11/01/09 - 09/01/33. 35,320 38,138 (h) 8.00% 01/01/30 - 11/01/30. 16,026 17,353 (h) 9.00% 10/01/25............ 614 683 (h) Federal National Mortgage Assoc. 4.00% 05/01/19 - 06/01/19. 226,108 214,266 (h) 4.50% 05/01/18 - 02/01/35. 1,645,770 1,574,639 (h) 5.00% 07/01/20 - 08/01/35. 4,293,406 4,134,971 (h) 5.26% 04/01/37............ 554,014 561,286 (i) 5.47% 04/01/37............ 41,693 42,364 (i) 5.50% 04/01/14 - 04/01/38. 13,754,782 13,601,739 (h) 5.52% 04/01/37............ 486,438 495,680 (i) 5.53% 04/01/37............ 219,511 223,844 (i) 5.55% 04/01/37............ 526,192 536,372 (i) 5.59% 04/01/37............ 615,849 628,948 (i) 5.62% 03/01/37............ 45,035 45,866 (i) 5.68% 04/01/37 - 05/01/37. 827,043 845,190 (i) 5.70% 04/01/37............ 725,112 741,063 (i) 5.71% 04/01/37............ 232,998 238,313 (i) 5.84% 06/01/37............ 1,178,376 1,202,519 (i) 6.00% 09/01/19 - 03/01/38. 17,187,694 17,371,129 (h) 6.03% 10/01/37............ 990,520 1,017,308 (i) 6.50% 09/01/17 - 08/01/36. 2,097,599 2,169,771 (h) 7.00% 04/01/17 - 06/01/36. 357,695 377,144 (h) 7.50% 12/01/09 - 03/01/34. 84,496 90,204 (h) 8.00% 12/01/11 - 11/01/33. 29,632 31,820 (h) 8.50% 06/01/30............ 211 232 (h) 9.00% 06/01/09 - 12/01/22. 9,495 10,123 (h) 5.00% TBA................. 20,865,000 20,302,899 (c) 5.50% TBA................. 123,859,000 122,279,522 (c) 6.00% TBA................. 35,532,000 35,858,456 (c) 6.50% TBA................. 15,044,000 15,485,918 (c) Government National Mortgage Assoc. 4.50% 08/15/33 - 09/15/34. 416,123 389,037 (h) 6.00% 04/15/27 - 09/15/36. 599,631 611,099 (h) 6.50% 04/15/24 - 09/15/36. 569,331 589,873 (h) 7.00% 03/15/12 - 10/15/36. 521,460 549,371 (h) 8.00% 03/15/30............ 3,324 3,642 (h) 9.00% 11/15/16 - 12/15/21. 16,944 18,461 (h) 262,014,651 AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.5% Federal Home Loan Mortgage Corp. 3.53% 11/15/37............ 3,150,087 216,591(d,g,i) 4.18% 05/15/36 - 11/15/36. 5,811,921 516,615(d,g,i) 4.33% 04/15/38............ 2,820,097 247,894(d,g,i) 4.50% 04/15/13 - 03/15/19. 318,221 23,677(d,g,h) 4.83% 09/15/35............ 2,204,149 242,241(d,g,i) 5.00% 04/15/14 - 12/01/34. 6,025,565 1,305,168(d,g,h) PRINCIPAL AMOUNT VALUE -------------------------------------------------------------------------------- 5.00% 07/15/28............ $ 400,000 $ 404,207 5.50% 04/15/17 - 06/15/33. 175,530 24,546(d,g,h) 6.91% 11/15/37............ 1,335,589 926,018(d,f) 7.14% 12/15/33............ 45,000 40,018(h,i) 7.50% 01/15/16............ 6,401 6,671 (h) 7.50% 07/15/27............ 5,356 1,327(d,g,h) 8.00% 02/01/23 - 07/01/24. 3,716 995(d,g,h) 35.45% 09/25/43............ 368,556 2,703(d,g,h) Federal Home Loan Mortgage STRIPS 5.39% 08/01/27............ 864 717(d,f,h) Federal National Mortgage Assoc. 1.18% 12/25/42............ 198,358 7,134(d,g,h) 3.97% 05/25/37 - 06/25/37. 16,536,918 1,461,213(d,g,i) 4.27% 10/25/35............ 5,501,222 510,373(d,g,i) 4.50% 05/25/18............ 95,441 6,740(d,g,h) 4.50% 03/25/38............ 2,744,836 279,069(d,g,i) 4.72% 07/25/37............ 4,984,166 571,769(d,g,i) 4.75% 11/25/14............ 18,029 779(d,g,h) 5.00% 02/25/32............ 2,034,028 283,953(d,g,h) 5.00% 10/25/35............ 423,718 370,439 5.12% 09/25/42............ 198,849 20,879(d,g,h,i) 5.22% 08/25/16............ 54,476 3,048(d,g,h,i) 5.50% 01/25/33............ 609,696 580,340 8.00% 07/25/14............ 7,997 8,056 (h) 31.49% 04/25/38............ 3,261,990 264,267(d,g,i) 40.07% 05/25/38............ 4,978,514 427,114(d,g,i) Federal National Mortgage Assoc. (Class 1) 4.50% 09/01/35 - 01/01/36. 4,617,506 1,087,014(d,g) 5.00% 05/25/38............ 1,480,000 462,745(d,g) Federal National Mortgage Assoc. (Class 2) 5.00% 09/01/33 - 03/25/38. 2,864,044 820,564(d,g) 5.50% 12/01/33............ 368,143 92,602(d,g) Federal National Mortgage Assoc. REMIC 4.50% 11/25/13............ 41,000 749(d,g,h) 5.00% 10/25/22............ 93,964 14,650(d,g,h) 11.15% 03/25/31............ 65,465 67,153(h,i) Federal National Mortgage Assoc. REMIC (Class J) 1080.91%03/25/22............ 1 2(d,g,h) Federal National Mortgage Assoc. REMIC (Class K) 1008.00%05/25/22............ 5 100(d,g,h) Federal National Mortgage Assoc. STRIPS (Class 2) 5.00% 08/01/34............ 10,661,906 2,760,434(d,g) 7.50% 11/01/23............ 17,259 3,810(d,g,h) 8.00% 08/01/23 - 07/01/24. 8,057 2,220(d,g,h) 14,066,604 ASSET BACKED -- 1.8% American Express Credit Account Master Trust (Class A) 2.46% 12/17/12............ 5,000,000 4,944,356(h,i) BA Credit Card Trust 2.47% 08/15/12............ 9,500,000 9,343,398(h,i) See Notes to Schedule of Investments on page 19 and Notes to Financial Statements. 12 TOTAL RETURN FUND Schedule of Investments June 30, 2008 (unaudited) -------------------------------------------------------------------------------- PRINCIPAL AMOUNT VALUE -------------------------------------------------------------------------------- Bear Stearns Asset Backed Securities Trust (Class A) 2.85% 01/25/34............ $ 14,031 $ 11,864 (h,i) Capital Auto Receivables Asset Trust 2.53% 05/15/11............ 7,351,730 7,301,187(h,i) Capital One Auto Finance Trust 2.47% 04/15/12............ 3,000,000 2,844,450(h,i) Capital One Multi-Asset Execution Trust (Class A) 2.50% 03/16/15............ 490,000 473,585(h,i) Carmax Auto Owner Trust 4.35% 03/15/10............ 90,310 90,636 (h) Ford Credit Auto Owner Trust (Class A) 2.51% 02/15/12............ 7,125,000 7,020,089(h,i) Ford Credit Floorplan Master Owner Trust (Class A) 5.03% 06/15/11............ 3,600,000 3,520,485(d,i) Honda Auto Receivables Owner Trust (Class A) 4.15% 10/15/10............ 94,265 94,557 (h) Indymac Residential Asset Backed Trust 2.65% 10/25/35............ 1,249,492 1,242,407(h,i) Indymac Residential Asset Backed Trust (Class M) 4.48% 04/25/37............ 189,000 18,548(h,i,n) JP Morgan Mortgage Acquisition Corp. 2.63% 03/01/37............ 1,500,000 1,260,000 (i) Long Beach Mortgage Loan Trust 2.76% 09/25/35............ 530,700 516,826(h,i) Mid-State Trust 7.54% 07/01/35............ 4,679 4,590(h,n) Option One Mortgage Loan Trust 2.61% 07/25/37............ 4,000,000 3,068,922(h,i) Peco Energy Transition Trust 6.52% 12/31/10............ 50,000 52,385 (h) Residential Asset Mortgage Products, Inc. 2.72% 03/25/34............ 4,006 3,925(h,i) Residential Asset Securities Corp. 2.73% 01/25/36............ 1,624,337 1,274,850(h,i) 2.98% 07/25/32............ 6,654 5,783(h,i) Residential Asset Securities Corp. (Class A) 4.16% 07/25/30............ 58,670 57,752 (h) SLM Student Loan Trust (Class A) 2.83% 06/15/18............ 172,260 170,147(h,i) Swift Master Auto Receivables Trust (Class A) 2.57% 06/15/12............ 4,250,000 3,988,359 (i) Triad Auto Receivables Owner Trust (Class A) 2.54% 02/12/14............ 2,000,000 1,898,459 (i) Wells Fargo Home Equity Trust 3.97% 05/25/34............ 35,424 34,540 (h) 49,242,100 PRINCIPAL AMOUNT VALUE -------------------------------------------------------------------------------- CORPORATE NOTES -- 2.9% Abbey National PLC 7.95% 10/26/29............ $ 219,000 $ 222,737(h) American Electric Power Company, Inc. (Series C) 5.38% 03/15/10............ 2,125,000 2,147,323 (h) American International Group, Inc. 5.85% 01/16/18............ 686,000 642,681 Archer-Daniels-Midland Co. 6.45% 01/15/38............ 687,000 688,777 Arizona Public Service Co. 6.25% 08/01/16............ 370,000 352,459 (h) AT&T, Inc. 4.13% 09/15/09............ 1,800,000 1,802,104 (h) BAC Capital Trust VI 5.63% 03/08/35............ 925,000 753,203 (h) Bank of America Corp. 8.00% 12/29/49............ 744,000 697,031 Bank of America Corp. (Series L) 5.65% 05/01/18............ 2,250,000 2,100,571 (h) Bear Stearns Companies Inc. 5.85% 07/19/10............ 688,000 698,676 (h) 6.95% 08/10/12............ 1,330,000 1,382,897 (h) BellSouth Corp. 4.20% 09/15/09............ 735,000 736,498 (h) 6.55% 06/15/34............ 510,000 492,547 (h) Bristol-Myers Squibb Co. 5.45% 05/01/18............ 800,000 789,175 5.88% 11/15/36............ 420,000 391,797 (h) British Telecommunications PLC 8.63% 12/15/10............ 170,000 182,538 (h) Burlington Northern Santa Fe Corp. 6.75% 07/15/11............ 1,000,000 1,048,725 (h) Cardinal Health, Inc. 5.50% 06/15/13............ 552,000 550,774 (h) Carolina Power & Light Co. 5.15% 04/01/15............ 810,000 807,745 (h) 5.70% 04/01/35............ 155,000 144,486 (h) 6.13% 09/15/33............ 190,000 186,913 (h) Chubb Corp. 6.50% 05/15/38............ 159,000 151,939 (h) Citigroup, Inc. 5.50% 04/11/13............ 1,092,000 1,066,993 (h) 6.13% 11/21/17............ 2,820,000 2,706,362 (h) 8.40% 04/29/49............ 810,000 769,994 (h) Consolidated Edison Co of New York, Inc. 5.85% 04/01/18............ 770,000 772,869 COX Communications, Inc. 7.13% 10/01/12............ 240,000 250,502 (h) 7.75% 11/01/10............ 375,000 395,132 (h) Credit Suisse 6.00% 02/15/18............ 764,000 735,669 CSX Transportation, Inc. 9.75% 06/15/20............ 1,021,000 1,229,257 (h) CVS Caremark Corp. 5.75% 06/01/17............ 1,474,000 1,449,754 (h) See Notes to Schedule of Investments on page 19 and Notes to Financial Statements. 13 TOTAL RETURN FUND Schedule of Investments June 30, 2008 (unaudited) -------------------------------------------------------------------------------- PRINCIPAL AMOUNT VALUE -------------------------------------------------------------------------------- Diageo Capital PLC 5.20% 01/30/13............ $ 454,000 $ 454,519 Dominion Resources, Inc. (Series B) 6.30% 09/30/66............ 1,505,000 1,377,456 (h) Dover Corp. 6.50% 02/15/11............ 375,000 393,359 (h) Duke Energy Carolinas LLC 5.38% 01/01/09............ 160,000 161,207 (h) Duke Realty LP 6.25% 05/15/13............ 530,000 519,822 EI Du Pont de Nemours & Co. 4.88% 04/30/14............ 325,000 325,688 (h) El Paso Electric Co. 6.00% 05/15/35............ 270,000 227,704 (h) GlaxoSmithKline Capital Inc. 4.85% 05/15/13............ 529,000 528,287 6.38% 05/15/38............ 265,000 263,047 Goldman Sachs Group, Inc. 5.95% 01/18/18............ 246,000 236,149 6.60% 01/15/12............ 3,195,000 3,285,361 (h) 6.88% 01/15/11............ 900,000 934,277 (h) GTE Corp. 7.51% 04/01/09............ 165,000 169,412 (h) Hewlett-Packard Co. 5.50% 03/01/18............ 721,000 706,154 Honeywell International, Inc. 5.30% 03/01/18............ 682,000 671,827 HSBC Bank USA N.A. 3.88% 09/15/09............ 1,175,000 1,160,611 (h) 4.63% 04/01/14............ 585,000 555,595 7.00% 01/15/39............ 1,500,000 1,467,634 HSBC Finance Corp. 6.75% 05/15/11............ 405,000 420,887 (h) HSBC Holdings PLC 6.50% 05/02/36............ 100,000 92,977 (h) Hydro Quebec 8.05% 07/07/24............ 820,000 1,078,990 (h) 8.50% 12/01/29............ 1,585,000 2,241,788 (h) ING Capital Funding TR III 8.44% 12/29/49............ 960,000 969,983 (h) ING Groep N.V. 5.78% 12/29/49............ 528,000 438,228 (h) International Business Machines Corp. 4.75% 11/29/12............ 1,300,000 1,317,992 (h) International Steel Group Inc. 6.50% 04/15/14............ 415,000 420,732 John Deere Capital Corp. 4.50% 04/03/13............ 1,029,000 1,016,151 JP Morgan Chase & Co. 6.40% 05/15/38............ 827,000 767,072 7.00% 11/15/09............ 1,130,000 1,155,041 (h) JP Morgan Chase Bank 5.88% 06/13/16............ 825,000 805,588 Kroger Co. 6.15% 01/15/20............ 820,000 811,320 Lehman Brothers Holdings, Inc. 2.85% 12/23/08............ 133,000 130,454 (i) PRINCIPAL AMOUNT VALUE -------------------------------------------------------------------------------- 3.00% 10/22/08............ $ 292,000 $ 290,899 (i) 5.00% 01/14/11............ 1,150,000 1,115,091 (h) 5.63% 01/24/13............ 451,000 426,874 6.20% 09/26/14............ 375,000 357,926 6.88% 05/02/18............ 1,091,000 1,056,203 Markel Corp. 7.35% 08/15/34............ 312,000 305,481 (h) McDonald's Corp. 5.80% 10/15/17............ 450,000 459,341 6.30% 03/01/38............ 725,000 718,192 Merck & Company, Inc. 5.75% 11/15/36............ 445,000 425,226 (h) Mizuho Financial Group Cayman Ltd. 8.38% 12/29/49............ 595,000 596,196 Morgan Stanley 6.00% 04/28/15............ 800,000 764,815 Morgan Stanley (Series F) 6.63% 04/01/18............ 700,000 663,268 Munich Re America Corp. (Series B) 7.45% 12/15/26............ 315,000 315,514 (h) Nevada Power Company (Series I) 6.50% 04/15/12............ 515,000 531,683 (h) Norfolk Southern Corp. 8.63% 05/15/10............ 485,000 519,616 (h) Norfolk Southern Railway Co. 9.75% 06/15/20............ 64,000 78,218 (h) NorthWestern Corp. 5.88% 11/01/14............ 200,000 196,845 (h) Pacific Bell Telephone Co. 7.13% 03/15/26............ 39,000 39,354 (h) Pacific Gas & Electric Co. 5.80% 03/01/37............ 500,000 466,162 Pacificorp 6.25% 10/15/37............ 375,000 370,832 Parker Hannifin Corp. 5.50% 05/15/18............ 554,000 555,742 Pemex Finance Ltd. 9.03% 02/15/11............ 145,750 155,588 (h) Pemex Project Funding Master Trust 7.88% 02/01/09............ 158,000 162,235 PepsiCo, Inc. 5.00% 06/01/18............ 1,352,000 1,319,094 Pitney Bowes, Inc. 3.88% 06/15/13............ 618,000 582,393 Prudential Financial, Inc. 5.70% 12/14/36............ 485,000 411,291 (h) 6.10% 06/15/17............ 415,000 413,348 Public Service Company of Colorado 7.88% 10/01/12............ 520,000 579,926 (h) Puget Sound Energy, Inc. 5.48% 06/01/35............ 130,000 109,215 (h) Puget Sound Energy, Inc. (Series A) 6.97% 06/01/67............ 830,000 713,131 Royal Bank of Scotland Group PLC 5.00% 10/01/14............ 375,000 359,367 (h) Sprint Capital Corp. 7.63% 01/30/11............ 296,000 290,820 See Notes to Schedule of Investments on page 19 and Notes to Financial Statements. 14 TOTAL RETURN FUND Schedule of Investments June 30, 2008 (unaudited) -------------------------------------------------------------------------------- PRINCIPAL AMOUNT VALUE -------------------------------------------------------------------------------- Standard Chartered Bank Hong Kong Ltd. 4.38% 12/03/14............ $ 380,000 $ 373,882 Suncor Energy, Inc. 6.10% 06/01/18............ 550,000 551,666 Telecom Italia Capital S.A. 6.20% 07/18/11............ 989,000 1,008,505 Telefonica Emisiones SAU 5.86% 02/04/13............ 600,000 604,008 The Travelers Companies Inc. 5.80% 05/15/18............ 820,000 797,824 Time Warner Cable, Inc. 6.20% 07/01/13............ 792,000 805,359 6.75% 07/01/18............ 792,000 797,252 Transocean, Inc. 6.00% 03/15/18............ 701,000 702,049 UBS Preferred Funding Trust I 8.62% 10/29/49............ 495,000 497,396 United Technologies Corp. 6.13% 07/15/38............ 554,000 556,501 Verizon Global Funding Corp. 7.25% 12/01/10............ 788,000 836,580 Verizon Pennsylvania, Inc. 8.35% 12/15/30............ 210,000 235,837 (h) 8.75% 08/15/31............ 165,000 192,887 (h) Wachovia Corp. (Series K) 7.98% 12/31/49............ 500,000 459,200 Wal-Mart Stores, Inc. 5.80% 02/15/18............ 496,000 513,555 6.20% 04/15/38............ 524,000 513,822 6.88% 08/10/09............ 1,000,000 1,036,761 (h) Wells Fargo & Co. 5.63% 12/11/17............ 240,000 232,210 Westar Energy, Inc. 7.13% 08/01/09............ 420,000 430,996 (h) Xerox Corp. 6.35% 05/15/18............ 810,000 799,551 XTO Energy, Inc. 6.38% 06/15/38............ 523,000 495,507 79,244,674 NON-AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 2.1% Banc of America Commercial Mortgage Inc. 5.32% 09/10/47............ 1,300,000 1,279,132 (h) Banc of America Commercial Mortgage Inc. (Class A) 5.49% 02/10/51............ 2,750,000 2,553,741 6.48% 06/10/49............ 2,480,000 2,344,384(d,i) Banc of America Commercial Mortgage Inc. (Class C) 5.88% 04/10/17............ 400,000 288,200(h,n) Banc of America Funding Corp. 5.73% 03/20/36............ 193,524 78,545(h,i,n) 5.80% 02/20/36............ 345,189 144,421(h,n) PRINCIPAL AMOUNT VALUE -------------------------------------------------------------------------------- Banc of America Mortgage Securities Inc. (Class B) 5.38% 01/25/36............ $ 198,238 $ 116,008(h,i) 5.55% 02/25/36............ 158,350 94,602(h,i) Bear Stearns Asset Backed Securities Trust (Class A) 2.64% 07/25/36............ 6,844,324 6,018,282(h,i) Bear Stearns Commercial Mortgage Securities 5.48% 10/12/41............ 1,500,000 1,482,349 (h) 5.53% 10/12/41............ 1,500,000 1,450,382 (h) 5.58% 03/11/39............ 1,000,000 997,759 (h) 6.02% 02/14/31............ 68,275 68,546 (h) Bear Stearns Commercial Mortgage Securities (Class A) 5.63% 04/12/38............ 700,000 699,617 (h) Citigroup Commercial Mortgage Trust 5.89% 12/10/49............ 2,100,000 1,995,548 Countrywide Alternative Loan Trust 5.98% 05/25/36............ 73,190 1,464(h,n) 6.00% 03/25/36 - 08/25/36. 422,046 36,340(h,n) Countrywide Alternative Loan Trust (Class B) 6.00% 05/25/36 - 08/25/36. 226,128 24,319(h,n) Credit Suisse Mortgage Capital Certificates 5.47% 09/15/39............ 682,000 648,288 (h) Credit Suisse Mortgage Capital Certificates (Class C) 5.65% 02/25/36............ 111,931 31,838(h,n) Crusade Global Trust (Class A) 2.92% 01/17/34............ 1,887,307 1,790,565(h,i) CS First Boston Mortgage Securities Corp. 5.25% 08/25/34............ 207,089 194,355 (h) 5.34% 10/25/35............ 166,566 66,626(h,n) 6.13% 04/15/37............ 50,000 51,026 (h) DLJ Commercial Mortgage Corp. (Class A) 7.62% 06/10/33............ 2,892,701 3,006,445 (h) GMAC Commercial Mortgage Securities, Inc. 6.42% 05/15/35............ 73,879 73,766 (h) 6.47% 04/15/34............ 395,244 405,106 (h) GMAC Commercial Mortgage Securities, Inc. (Class X) 6.68% 12/10/41............ 3,076,059 47,846(d,h,n) Greenwich Capital Commercial Funding Corp. 5.12% 04/10/37............ 500,000 498,973 (h) GS Mortgage Securities Corp II (Class A) 5.99% 08/10/45............ 2,570,000 2,457,451 Impac CMB Trust 2.74% 04/25/35............ 305,586 243,678(h,i) Indymac INDA Mortgage Loan Trust 5.16% 01/25/36............ 99,700 62,233(h,n) See Notes to Schedule of Investments on page 19 and Notes to Financial Statements. 15 TOTAL RETURN FUND Schedule of Investments June 30, 2008 (unaudited) -------------------------------------------------------------------------------- PRINCIPAL AMOUNT VALUE -------------------------------------------------------------------------------- Indymac INDA Mortgage Loan Trust (Class B) 5.16% 01/25/36........... $ 107,676 $ 71,601(h,n) JP Morgan Chase Commercial Mortgage Securities Corp. 6.26% 02/15/51........... 1,830,000 1,700,191 6.47% 11/15/35........... 40,000 41,094 (h) LB-UBS Commercial Mortgage Trust 4.06% 09/15/27........... 71,273 70,682 (h) 5.42% 02/15/40........... 359,000 333,942 5.66% 03/15/39........... 1,000,000 969,249 (h) 6.23% 03/15/26........... 53,000 53,459 (h) 6.62% 01/18/12........... 4,222,223 80,157(d,h,n) LB-UBS Commercial Mortgage Trust (Class F) 6.45% 07/15/40........... 475,000 315,333 (n) LB-UBS Commercial Mortgage Trust (Class X) 7.07% 09/15/39........... 20,981,588 530,427(d,h,n) MASTR Alternative Loans Trust 5.00% 08/25/18........... 44,734 6,934(d,g,h) Medallion Trust (Class A) 2.70% 08/22/36........... 1,199,816 1,138,936(h,i) Merrill Lynch Mortgage Trust (Class A) 5.80% 05/12/39........... 1,000,000 1,000,439 (h) Merrill Lynch/Countrywide Commercial Mortgage Trust 5.42% 08/12/48........... 850,000 753,929 5.81% 06/12/50........... 1,900,000 1,801,641 Merrill Lynch/Countrywide Commercial Mortgage Trust (Class A) 5.49% 03/12/51........... 2,700,000 2,514,452 MLCC Mortgage Investors, Inc. 5.37% 02/25/36........... 164,986 137,499 (h) Morgan Stanley Capital I 5.28% 12/15/43........... 1,500,000 1,475,776 (h) 5.33% 12/15/43........... 1,500,000 1,410,706 (h) 5.39% 11/12/41........... 2,000,000 1,607,843 (h) 5.44% 02/12/44........... 1,000,000 957,481 (b) 5.45% 02/12/44........... 1,000,000 928,740 5.69% 04/15/49........... 1,850,000 1,744,539 5.71% 07/12/44........... 300,000 295,626 (h) 6.53% 03/15/31........... 174,569 175,477 (h) 7.11% 04/15/33........... 64,399 65,599 (h) Morgan Stanley Capital I (Class A) 5.36% 02/12/44........... 1,000,000 976,678 Morgan Stanley Dean Witter Capital I 7.20% 10/15/33........... 39,288 40,654 (h) MortgageIT Trust (Class A) 2.78% 08/25/35........... 2,175,085 1,813,850(h,i) Nomura Asset Securities Corp. (Class A) 6.59% 03/15/30........... 34,088 34,247 (h) Opteum Mortgage Acceptance Corp. 2.78% 02/25/35........... 190,010 167,148(h,i) PRINCIPAL AMOUNT VALUE -------------------------------------------------------------------------------- Residential Accredit Loans, Inc. 6.00% 01/25/36............ $ 241,367 $ 129,801(h,n) 6.04% 01/25/36............ 108,186 11,984(h,n) Residential Asset Securitization Trust (Class A) 2.88% 05/25/35............ 696,397 505,935(h,i) Residential Funding Mortgage Securities I 5.75% 01/25/36............ 97,498 57,726 (h) 5.75% 01/25/36............ 129,673 91,181(h,n) Wachovia Bank Commercial Mortgage Trust 5.93% 06/15/49............ 2,570,000 2,438,558 Wachovia Bank Commercial Mortgage Trust (Class A) 6.22% 01/15/45............ 1,380,000 1,317,744(d,i) Wachovia Bank Commercial Mortgage Trust (Class E) 6.10% 02/15/51............ 1,485,000 987,585 (n) WaMu Mortgage Pass Through Certificates 2.82% 01/25/45............ 110,548 89,640(h,i) Wells Fargo Mortgage Backed Securities Trust 5.39% 08/25/35............ 471,091 406,746(h,i) 5.50% 01/25/36 - 03/25/36. 568,968 346,154 (h) Wells Fargo Mortgage Backed Securities Trust (Class B) 5.50% 03/25/36............ 969,950 674,907 (h) 59,524,125 SOVEREIGN BONDS -- 0.1% Government of Brazil 8.00% 01/15/18............ 530,000 588,565 (h) Government of Canada 7.50% 09/15/29............ 495,000 632,405 Government of Manitoba Canada 4.90% 12/06/16............ 330,000 337,811 (h) 1,558,781 TOTAL BONDS AND NOTES (COST $658,780,209).......... 649,449,308 NUMBER OF SHARES -------------------------------------------------------------------------------- EXCHANGE TRADED FUNDS -- 0.8% -------------------------------------------------------------------------------- Financial Select Sector SPDR Fund.................... 203,363 4,120,135 (l) Industrial Select Sector SPDR Fund.................... 514,848 17,509,981 (l) iShares MSCI Emerging Markets Index Fund................... 9,890 1,340,886 (o) TOTAL EXCHANGE TRADED FUNDS (COST $25,663,869)........... 22,971,002 See Notes to Schedule of Investments on page 19 and Notes to Financial Statements. 16 TOTAL RETURN FUND Schedule of Investments June 30, 2008 (unaudited) -------------------------------------------------------------------------------- PRINCIPAL AMOUNT VALUE -------------------------------------------------------------------------------- SECURITIES PURCHASED WITH COLLATERAL FROM SECURITIES ON LOAN -- 1.3% ASSET BACKED -- 1.0% Bear Stearns Asset Backed Securities Trust 2.70% 11/25/35.......... $3,515,276 $ 3,393,115(h,i) Countrywide Asset-Backed Certificates 2.59% 06/25/35.......... 954,941 890,306(h,i) Countrywide Asset-Backed Certificates (Class M) 3.53% 06/26/33.......... 605,665 401,803(h,i) Discover Card Master Trust I 2.48% 04/15/10.......... 3,000,000 2,954,483(h,i) GSAA Trust 2.54% 10/25/36.......... 5,323,069 4,742,989(h,i) GSAMP Trust 2.59% 05/25/36.......... 923,808 831,428(b,h,i) GSR Mortgage Loan Trust 2.68% 11/25/30.......... 1,697,938 912,357(h,i) Indymac Residential Asset Backed Trust 2.60% 06/25/36.......... 4,275,362 4,200,360(h,i) Indymac Seconds Asset Backed Trust (Class A) 2.64% 02/25/37.......... 4,138,984 2,959,708(h,i) Nissan Auto Lease Trust 2.54% 02/15/13.......... 6,310,000 6,189,163 (i) 27,475,712 CORPORATE NOTES -- 0.2% Countrywide Financial Corp. 7.30% 09/02/08.......... 4,000,000 3,969,400(d,h,i) Morgan Stanley 2.82% 05/07/09.......... 1,100,000 1,082,843 (i) 5,052,243 NON-AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.1% JP Morgan Alternative Loan Trust 2.54% 08/25/36.......... 610,781 606,261(h,i) Residential Accredit Loans, Inc. 2.66% 07/25/36.......... 3,040,068 2,077,358(h,i) 2,683,619 TOTAL SECURITIES PURCHASED WITH COLLATERAL FROM SECURITIES ON LOAN (COST $39,497,999)........... 35,211,574 -------------------------------------------------------------------------------- OTHER INVESTMENTS -- 0.3% -------------------------------------------------------------------------------- GEI Investment Fund (COST $11,874,019)........... 9,024,255 (k) TOTAL INVESTMENTS IN SECURITIES (COST $2,544,935,531)........ 2,529,917,735 PRINCIPAL AMOUNT VALUE -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 17.8% * -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 1.6% GE Money Market Fund Institutional Class 1.93%........................ $44,541,662(d,m) U.S. GOVERNMENTS -- 13.1% Federal Home Loan Bank Discount Notes 1.99% 07/02/08............ $ 4,137,000 4,136,772 (d) 2.08% 07/23/08............ 50,800,000 50,733,518 (d) 2.09% 10/03/08............ 5,000,000 4,968,405 (d) 2.10% 07/25/08 - 10/17/08. 25,000,000 24,876,100 (d) 2.13% 09/22/08............ 10,602,000 10,544,802 (d) 2.16% 08/22/08............ 16,000,000 15,949,105 (d) 2.20% 08/06/08............ 5,000,000 4,989,025 (d) 2.25% 07/21/08............ 7,000,000 6,991,250 (d) Federal Home Loan Mortgage Corp. Discount Notes 2.10% 08/18/08 - 11/03/08. 44,760,000 44,460,771 (d) 2.12% 08/25/08............ 41,668,000 41,534,723 (d) 2.24% 08/04/08............ 39,983,000 39,905,637 (d) Federal National Mortgage Assoc. 2.06% 07/09/08............ 16,400,000 16,392,784 (d) 2.12% 08/06/08............ 15,000,000 14,967,000 (d) Federal National Mortgage Assoc. Discount Notes 2.08% 10/03/08............ 26,700,000 26,531,283 (d) 2.09% 07/16/08............ 5,000,000 4,995,677 (d) 2.13% 10/22/08............ 35,500,000 35,230,342 (d) 2.20% 07/25/08............ 14,000,000 13,979,560 (d) 361,186,754 U.S. TREASURIES -- 1.9% U.S. Treasury Bill 1.88% 07/10/08............ 52,000,000 51,975,664 (d) SHORT-TERM SECURITIES PURCHASED WITH COLLATERAL FROM SECURITIES ON LOAN -- 1.2% GE Money Market Fund Institutional Class 1.93%....................... 33,053,787(d,m) TOTAL SHORT-TERM INVESTMENTS (COST $490,882,576)........... 490,757,867 TOTAL INVESTMENTS (COST $3,035,818,107)......... 3,020,675,602 LIABILITIES IN EXCESS OF OTHER ASSETS, NET-- (9.5)%................. (262,981,548) NET ASSETS-- 100.0% ........... $2,757,694,054 See Notes to Schedule of Investments on page 19 and Notes to Financial Statements. 17 TOTAL RETURN FUND Schedule of Investments June 30, 2008 (unaudited) -------------------------------------------------------------------------------- OTHER INFORMATION -------------------------------------------------------------------------------- The GEI Total Return Fund had the following long futures contracts open at June 30, 2008 (unaudited): NUMBER CURRENT UNREALIZED EXPIRATION OF NOTIONAL APPRECIATION/ DESCRIPTION DATE CONTRACTS VALUE DEPRECIATION -------------------------------------------------------------------------------- DJ Euro Stoxx 50 Index Futures September 2008 55 $ 2,928,947 $ (87,459) Euro Schatz Futures September 2008 51 8,222,126 (52,726) FTSE 100 Index Futures September 2008 12 1,348,843 (18,168) S&P 500 Index Futures September 2008 15 4,804,125 (141,210) S&P 500 Index Futures September 2008 5 1,601,375 (44,800) Topix Index Futures September 2008 12 1,492,571 (49,007) U.S.Treasury Notes 2 Yr. Futures September 2008 621 131,157,140 687,370 U.S.Treasury Notes 5 Yr. Futures September 2008 8 884,438 369 The GEI Total Return Fund had the following short futures contracts open at June 30, 2008 (unaudited): NUMBER CURRENT UNREALIZED EXPIRATION OF NOTIONAL APPRECIATION/ DESCRIPTION DATE CONTRACTS VALUE DEPRECIATION -------------------------------------------------------------------------------- S&P 400 Midcap Index Futures September 2008 2 $ (821,200) $ 28,482 U.S.Treasury Notes 10 Yr. Futures September 2008 93 (10,594,734) (161,365) ----------- $ 161,486 ============ * The financial statement figure presented above for Short-Term Investments includes collateral received from transactions such as loans of portfolio securities and amounts held pending settlement of securities transactions. In evaluating the Fund's net cash level, portfolio management takes into account certain of the Fund's liabilities in excess of other assets, such as liabilities associated with loans of portfolio securities and securities pending settlement, and equitized cash. The Fund's net cash level is not expected to exceed 10%. See Notes to Schedule of Investments on page 19 and Notes to Financial Statements. 18 Notes to Schedule of Investments June 30, 2008 (unaudited) -------------------------------------------------------------------------------- The views expressed in this document reflect our judgment as of the publication date and are subject to change at any time without notice. The securities cited may not represent current or future holdings and should not be considered as a recommendation to purchase or sell a particular security. See the prospectus for complete descriptions of investment objectives, policies, risks and permissible investments. (a) Non-income producing security. (b) Pursuant to Rule 144A of the Securities Act of 1933, these securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2008, these securities amounted to $1,788,909 or 0.06% of net assets for the GE Investments Total Return Fund. These securities have been determined to be liquid using procedures established by the Board of Trustees. (c) Settlement is on a delayed delivery or when-issued basis with final maturity to be announced (TBA) in the future. (d) Coupon amount represents effective yield. (e) State Street Corp. is the parent company of State Street Bank & Trust Co., the Fund's custodian and accounting agent. (f) Principal only securities represent the right to receive the monthly principal payments on an underlying pool of mortgages. No payments of interest on the pool are passed through to the "principal only" holder. (g) Interest only securities represent the right to receive the monthly interest payments on an underlying pool of mortgages. Payments of principal on the pool reduce the value of the "interest only" holding. (h) At June 30, 2008, all or a portion of this security was pledged to cover collateral requirements for futures, options, forward foreign currency contracts and/or TBA's. (i) Variable or floating rate security. The stated rate represents the rate at June 30, 2008. (j) All or a portion of the security is out on loan. (k) GE Asset Management ("GEAM"), the investment adviser of the Fund, also serves as the investment adviser of the GEI Investment Fund. (l) Sponsored by SSgA Funds Management, Inc., an affiliate of State Street Bank & Trust Co., the Fund's custodian and accounting agent. (m) GEAM, the investment adviser of the Fund, also serves as investment adviser of the GE Money Market Fund. (n) Illiquid securities. (o) Sponsored by Barclay's Global Investors, an affiliate of State Street Bank & Trust Co., the Fund's custodian and accounting agent. * Less than 0.1%. + Percentages are based on net assets as of June 30, 2008. Abbreviations: ADR American Depository Receipt GDR Global Depository Receipt NVDR Non-Voting Depository Receipt REGD. Registered REIT Real Estate Investment Trust REMIC Real Estate Mortgage Investment Conduit SPDR Standard & Poor's Depository Receipts STRIPS Separate Trading of Registered Interest and Principal of Security TBA To be Announced 19
Financial Highlights Selected data based on a share outstanding throughout the periods indicated ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN FUND ------------------------------------------------------------------------- CLASS 1 ------------------------------------------------------------------------- 6/30/08+ 12/31/07 12/31/06 12/31/05 12/31/04 12/31/03 ------------------------------------------------------------------------- INCEPTION DATE -- -- -- -- -- 7/1/85 Net asset value, beginning of period.................. $18.61 $17.69 $16.04 $15.97 $15.09 $12.68 INCOME/(LOSS) FROM INVESTMENT OPERATIONS: Net investment income............................... 0.21 0.35 0.36 0.23 0.20 0.16 Net realized and unrealized gains/(losses) on investments (1.50) 1.71 1.84 0.36 1.04 2.41 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INCOME/(LOSS) FROM INVESTMENT OPERATIONS........ (1.29) 2.06 2.20 0.59 1.24 2.57 ------------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS FROM: Net investment income............................... -- 0.35 0.31 0.23 0.20 0.16 Net realized gains.................................. -- 0.79 0.24 0.29 0.16 -- ------------------------------------------------------------------------------------------------------------------------------------ TOTAL DISTRIBUTIONS................................... -- 1.14 0.55 0.52 0.36 0.16 ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, END OF PERIOD........................ $17.32 $18.61 $17.69 $16.04 $15.97 $15.09 ==================================================================================================================================== TOTAL RETURN (A)...................................... (6.93)% 11.68%(b) 13.75% 3.67% 8.19% 20.31% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands)............ $1,376,005 1,525,002 $1,390,230 $959,531 $515,506 $225,867 Ratios to average net assets: Net investment income............................. 2.36% 2.20% 2.33% 1.89% 1.81% 1.58% Net Expenses...................................... 0.51% 0.52% 0.48% 0.45% 0.49% 0.53% Gross Expenses.................................... 0.54% 0.56% 0.53% 0.45% 0.49% 0.53% Portfolio turnover rate............................. 93% 176% 138% 146% 141% 115%
------------------------------------ -------------------------------- CLASS 2 CLASS 3 ------------------------------------ -------------------------------- 6/30/08+ 12/31/07 12/31/06 6/30/08+ 12/31/07 12/31/06 ------------------------------------ -------------------------------- INCEPTION DATE -- -- 5/1/06 -- -- 5/1/06 Net asset value, beginning of period................. $18.56 $17.68 $17.03 $18.59 $17.69 $17.03 INCOME/(LOSS) FROM INVESTMENT OPERATIONS: Net investment income.............................. 0.22 0.38 0.26 0.21 0.35 0.12 Net realized and unrealized gains/(losses) on investments (1.52) 1.67 0.94 (1.52) 1.69 1.10 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INCOME/(LOSS) FROM INVESTMENT OPERATIONS....... (1.30) 2.05 1.20 (1.31) 2.04 1.22 ------------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS FROM: Net investment income.............................. -- 0.38 0.31 -- 0.35 0.32 Net realized gains................................. -- 0.79 0.24 -- 0.79 0.24 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL DISTRIBUTIONS.................................. -- 1.17 0.55 -- 1.14 0.56 ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, END OF PERIOD....................... $17.26 $18.56 $17.68 $17.28 $18.59 $17.69 ==================================================================================================================================== TOTAL RETURN (A)..................................... (7.00)% 11.63%(b) 7.05% (6.99)% 11.56%(b) 7.17% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands)........... $16,392 $15,281 $1 $1,365,287 $1,173,708 $396,349 Ratios to average net assets: Net investment income*........................... 2.34% 1.75% 2.33% 2.28% 2.04% 2.09% Net Expenses*.................................... 0.56% 0.56% 0.57% 0.61% 0.61% 0.62% Gross Expenses*.................................. 0.58% 0.59% 0.64% 0.63% 0.65% 0.69% Portfolio turnover rate............................ 93% 176% 138% 93% 176% 138%
See Notes to Financial Statements. 20
Financial Highlights Selected data based on a share outstanding throughout the periods indicated ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN FUND ---------------------------------------- CLASS 4 ---------------------------------------- 6/30/08+ 12/31/07 12/31/06 -------------- -------- -------- INCEPTION DATE -- -- 5/1/06 Net asset value, beginning of period................................................ $18.62 $17.68 $17.03 INCOME/(LOSS) FROM INVESTMENT OPERATIONS: Net investment income............................................................. 0.22 0.33 0.26 Net realized and unrealized gains/(losses) on investments......................... (1.54) 1.73 0.92 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INCOME/(LOSS) FROM INVESTMENT OPERATIONS...................................... (1.32) 2.06 1.18 ------------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS FROM: Net investment income............................................................. -- 0.33 0.29 Net realized gains................................................................ -- 0.79 0.24 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL DISTRIBUTIONS................................................................. -- 1.12 0.53 ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, END OF PERIOD...................................................... $17.30 $18.62 $17.68 ==================================================================================================================================== TOTAL RETURN (A).................................................................... (7.04)% 11.68%(b) 6.89% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands).......................................... $10 $1 $1 Ratios to average net assets: Net investment income*.......................................................... 2.20% 2.06% 2.17% Net Expenses*................................................................... 0.76% 0.67% 0.77% Gross Expenses*................................................................. 0.79% 0.73% 0.84% Portfolio turnover rate........................................................... 93% 176% 138%
NOTES TO FINANCIAL HIGHLIGHTS -------------------------------------------------------------------------------- (a) Total returns are historical and assume changes in share price and reinvestment of dividends and capital gains and do not include the effect of insurance contract charges. (b) The total return includes 0.07% related to the purchases and sales of initial public offerings. * Annualized for periods less than one year. + Unaudited See Notes to Financial Statements. 21
Statement of Assets and Liabilities JUNE 30, 2008 (UNAUDITED) ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN FUND ------------------------------------------------------------------------------------------------------------------------------------ ASSETS Investments in securities, at market* (cost $2,533,061,512)............................................ $2,520,893,480 Investments in affiliated securities, at market (cost $11,874,019)..................................... 9,024,255 Short-term Investments (at amortized cost)............................................................. 413,162,419 Short-term affiliated investments (at amortized cost).................................................. 77,595,448 Foreign cash (cost $1,975,650)......................................................................... 1,990,578 Income receivables..................................................................................... 6,616,243 Receivable for fund shares sold........................................................................ 2,896,624 Variation margin receivable............................................................................ 26,718 Other assets........................................................................................... 697,029 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL ASSETS....................................................................................... 3,032,902,794 ------------------------------------------------------------------------------------------------------------------------------------ LIABILITIES Payable upon return of securities loaned............................................................... 68,265,361 Payable for investments purchased...................................................................... 205,670,299 Payable to GEAM........................................................................................ 1,273,080 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL LIABILITIES.................................................................................. 275,208,740 ------------------------------------------------------------------------------------------------------------------------------------ NET ASSETS................................................................................................ $2,757,694,054 ==================================================================================================================================== NET ASSETS CONSIST OF: Capital paid in........................................................................................ 2,697,882,934 Undistributed (distribution in excess of) net investment income............................................................................... 31,546,496 Accumulated net realized gain (loss)................................................................... 43,082,212 Net unrealized appreciation/(depreciation) on: Investments......................................................................................... (15,017,796) Futures............................................................................................. 161,486 Foreign currency related transactions............................................................... 38,722 ------------------------------------------------------------------------------------------------------------------------------------ NET ASSETS................................................................................................ $2,757,694,054 ==================================================================================================================================== CLASS 1: NET ASSETS................................................................................................ 1,376,004,922 Shares outstanding ($0.01 par value; unlimited shares authorized)......................................... 79,468,918 Net asset value per share................................................................................. $17.32 CLASS 2: NET ASSETS................................................................................................ 16,392,413 Shares outstanding ($0.01 par value; unlimited shares authorized)......................................... 949,496 Net asset value per share................................................................................. $17.26 CLASS 3: NET ASSETS................................................................................................ 1,365,286,743 Shares outstanding ($0.01 par value; unlimited shares authorized)......................................... 78,987,430 Net asset value per share................................................................................. $17.28 CLASS 4: NET ASSETS................................................................................................ 9,976 Shares outstanding ($0.01 par value; unlimited shares authorized)......................................... 577 Net asset value per share................................................................................. $17.30
* Includes $66,634,057 of securities on loan. See Notes to Financial Statements. 22
Statement of Operations FOR THE SIX MONTHS ENDED JUNE 30, 2008 (UNAUDITED) ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN FUND ------------------------------------------------------------------------------------------------------------------------------------ INVESTMENT INCOME INCOME: Dividend ............................................................................................. $ 24,475,488 Interest ............................................................................................. 11,705,781 Interest from affiliated investments* ................................................................ 4,366,554 Less: Foreign taxes withheld ......................................................................... (1,600,531) ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INCOME ........................................................................................... 38,947,292 ------------------------------------------------------------------------------------------------------------------------------------ EXPENSES: Advisory and administrative fees ..................................................................... 4,319,286 Distributors Fees (Note 4) Service Class Class 1 ........................................................................................... 1,430,387 Class 2 ........................................................................................... 20,147 Class 3 ........................................................................................... 1,881,259 Class 4 ........................................................................................... 20 Transfer agent ....................................................................................... 17,952 Director's fees 31,188 Custody and accounting expenses ...................................................................... 240,139 Professional fees .................................................................................... 34,666 Registration expenses ................................................................................ 15,780 Other expenses ....................................................................................... 58,320 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL EXPENSES BEFORE WAIVER AND REIMBURSEMENT ......................................................... 8,049,144 ------------------------------------------------------------------------------------------------------------------------------------ Less: Expenses waived or borne by the adviser (waiver related to Fund of Fund Investment) ............ (173,179) Less: Expenses reimbursed by the adviser ............................................................. (396,106) ------------------------------------------------------------------------------------------------------------------------------------ Net expenses ......................................................................................... 7,479,859 ------------------------------------------------------------------------------------------------------------------------------------ NET INVESTMENT INCOME (LOSS) ........................................................................... 31,467,433 ==================================================================================================================================== NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS REALIZED GAIN (LOSS) ON: Investments ....................................................................................... 37,802,280 Futures ........................................................................................... (3,958,519) Foreign currency transactions ..................................................................... (190,961) INCREASE (DECREASE) IN UNREALIZED APPRECIATION/ (DEPRECIATION) ON: Investments ....................................................................................... (261,374,604) Futures 220,474 Foreign currency transactions ..................................................................... 6,366 ------------------------------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments ............................................... (227,494,964) ------------------------------------------------------------------------------------------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ........................................ $(196,027,531) ====================================================================================================================================
* Income attributable to security lending, net of rebate expenses, for the Total Return Fund was $574,808. See Notes to Financial Statements. 23
Statements of Changes in Net Assets ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN FUND ------------------------------------------------------------------------------------------------------------------------------------ SIX MONTHS ENDED YEAR ENDED JUNE 30, 2008 DECEMBER 31, (UNAUDITED) 2007 ------------------------------------------------------------------------------------------------------------------------------------ INCREASE (DECREASE) IN NET ASSETS OPERATIONS: Net investments income (loss)..................................................... $ 31,467,433 $ 48,294,960 Net realized gain (loss) on investments, futures, written options, and foreign currency transactions.............................................. 33,652,800 102,937,090 Net increase (decrease) in unrealized appreciation/(depreciation) on investments, futures, written options, and foreign currency translation............................................................ (261,184,855) 88,839,192 ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) from operations........................................... (196,027,531) 240,071,242 ------------------------------------------------------------------------------------------------------------------------------------ DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Class 1......................................................................... -- (27,215,414) Class 2......................................................................... -- (294,066) Class 3......................................................................... -- (20,800,343) Class 4......................................................................... -- (20) Net realized gains Class 1......................................................................... -- (60,978,922) Class 2......................................................................... -- (605,496) Class 3......................................................................... -- (46,682,897) Class 4......................................................................... -- (48) ------------------------------------------------------------------------------------------------------------------------------------ TOTAL DISTRIBUTIONS................................................................. -- (156,577,206) ------------------------------------------------------------------------------------------------------------------------------------ Increase (decrease) in net assets from operations and distributions................. (196,242,537) 83,494,036 ------------------------------------------------------------------------------------------------------------------------------------ SHARE TRANSACTIONS: Proceeds from sale of shares Class 1......................................................................... 8,337,752 46,393,598 Class 2......................................................................... 4,993,572 15,917,245 Class 3......................................................................... 282,836,122 702,792,548 Class 4......................................................................... 9,000 -- Value of distributions reinvested Class 1......................................................................... -- 88,194,336 Class 2......................................................................... -- 899,559 Class 3......................................................................... -- 67,483,240 Class 4......................................................................... -- 68 Cost of shares redeemed Class 1......................................................................... (51,900,026) (73,733,321) Class 2......................................................................... (2,784,566) (941,263) Class 3......................................................................... (1,761,853) (3,089,360) Class 4......................................................................... -- -- ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) from share transactions................................... 239,730,001 843,916,650 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INCREASE (DECREASE) IN NET ASSETS............................................. 43,702,470 927,410,686 NET ASSETS Beginning of period................................................................. 2,713,991,584 1,786,580,898 ------------------------------------------------------------------------------------------------------------------------------------ End of period....................................................................... $2,757,694,054 $2,713,991,584 ==================================================================================================================================== UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD........ $ 31,546,496 $ 79,063 ------------------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements. 24
Statements of Changes in Net Assets (continued) Changes in Fund Shares ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN FUND ------------------------------------------------------------------------------------------------------------------------------------ SIX MONTHS ENDED YEAR ENDED JUNE 30, 2008 DECEMBER 31, (UNAUDITED) 2007 ------------------------------------------------------------------------------------------------------------------------------------ CLASS 1 Shares sold............................................................................ 473,123 2,467,981 Issued for distributions reinvested.................................................... -- 4,749,306 Shares redeemed........................................................................ (2,931,153) (3,869,587) ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in fund shares................................................. (2,458,030) 3,347,700 ==================================================================================================================================== CLASS 2 Shares sold............................................................................ 281,247 822,308 Issued for distributions reinvested.................................................... -- 48,572 Shares redeemed........................................................................ (154,940) (47,752) ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in fund shares................................................. 126,307 823,128 ==================================================================================================================================== CLASS 3 Shares sold............................................................................ 15,950,124 37,246,423 Issued for distributions reinvested.................................................... -- 3,637,911 Shares redeemed....................................................................... (97,809) (158,444) ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in fund shares................................................. 15,852,315 40,725,890 ==================================================================================================================================== CLASS 4 Shares sold............................................................................ 513 -- Issued for distributions reinvested.................................................... -- 4 Shares redeemed........................................................................ -- -- ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in fund shares................................................. 513 4 ====================================================================================================================================
See Notes to Financial Statements. 25 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- 1. ORGANIZATION OF THE COMPANY GE Investments Funds, Inc. (the "Company") was incorporated under the laws of the Commonwealth of Virginia on May 14, 1984 and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company. The Company is composed of thirteen investment portfolios (collectively the "Funds"), although only the following eleven are currently being offered: U.S. Equity Fund, S&P 500 Index Fund, Premier Growth Equity Fund, Core Value Equity Fund, Mid-Cap Equity Fund, Small-Cap Equity Fund, International Equity Fund, Total Return Fund (the "Fund"), Income Fund, Money Market Fund and Real Estate Securities Fund. The Fund presently offers four classes of shares. Shares of the Funds of the Company are offered only to insurance company separate accounts that fund certain variable life insurance contracts and variable annuity contracts. These insurance companies may include insurance companies affiliated with GE Asset Management Incorporated ("GEAM"), the investment adviser and administrator of each of the Funds. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results may differ from those estimates. The following summarizes the significant accounting policies of the Fund: SECURITY VALUATION AND TRANSACTIONS The Fund's portfolio securities are valued generally on the basis of market quotations. Equity securities generally are valued at the last reported sales price on the primary market in which they are traded. Portfolio securities listed on NASDAQ are valued using the NASDAQ Official Closing Price, which may not necessarily represent the last sale price. If no sales occurred on the exchange or NASDAQ that day, the portfolio security generally is valued using the last reported bid price. Debt securities (other than short-term securities described below) generally are valued at an evaluated bid as reported by an independent pricing service. Values obtained from pricing services are based on various factors such as market transactions, dealer supplied valuations, security characteristics and other market data. In the absence of a reliable price from such a pricing service, debt securities may be valued based on dealer supplied valuations or quotations. The Fund's written or purchased options are valued at the last sales price, or if no sales occurred that day, at the last reported bid price. Short-term investments with remaining maturities of sixty days or less at the time of purchase are valued on the basis of amortized cost, which approximates market value. All assets and liabilities of the Fund initially expressed in foreign currency values will be converted into U.S. dollars at the WM/Reuters exchange rate computed at 11:00 a.m., Eastern time. If prices are not readily available for a portfolio security, or if it is believed that a price for a portfolio security does not represent its fair value, the security may be valued using procedures approved by the Fund's Board of Directors that are designed to establish its "fair" value. Those procedures require that the fair value of a security be established by the fair valuation committee. The fair valuation committee follows different protocols for different types of investments and circumstances. The fair value procedures may be used to value any investment by the Fund in the appropriate circumstances. Examples of the types of securities that may be fair valued include: thinly traded or illiquid investments, high-yield securities or foreign securities. Foreign securities may be valued with the assistance of an independent fair value pricing service in circumstances where it is believed that they have been or would be materially affected by events occurring after the close of the portfolio security's primary market and before the close of regular trading on the NYSE. This independent fair value pricing service uses a computerized system to appraise affected securities and portfolios taking into consideration various factors and the fair value of such securities may be something other than the last available quotation or other market price. GEAM may also separately monitor portfolio securities and, consistent with the Fund's fair value procedures, apply a different value to a portfolio security than would be applied had it been priced using market quotations or by an independent fair value pricing service. 26 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- Determining the fair value of securities involves the application of both subjective and objective considerations. Security values may differ depending on the methodology used to determine their values, and may differ from the last quoted sale or closing price. No assurance can be given that use of these fair value procedures will always better represent the price at which the Fund could sell the affected portfolio security. Security transactions are accounted for as of the trade date. Realized gains and losses on investments sold are recorded on the basis of identified cost for both financial statement and federal tax purposes. The Fund adopted FASB Statement No. 157, FAIR VALUE MEASUREMENTS (FAS 157). FAS 157 establishes a single definition of fair value, a framework for measuring fair value, and expanded disclosures about fair value measurements. Various inputs are used in determining the value of the Fund's investments. These inputs are classified into three broad levels: Level 1 includes quoted prices in active markets of securities identical to those of the Fund. Level 2 includes: 1) quoted prices in active markets for similar securities to those of the Fund; 2) quoted prices for identical or similar securities to those of the Fund that trade in markets in which there are few transactions or the quoted prices are not current; 3) prices based on observable market data such as interest rates and yield curves, volatilities, bond prepayment speeds, and credit risk and; 4) prices based principally on observable market data by use of correlation techniques or other means. Level 3 includes unobservable market inputs used to fair value securities. These inputs are based on assumptions that market participants would use to price securities and may include the adviser's own assumptions. Other financial instruments are derivative instruments that are not reflected in TOTAL INVESTMENTS, such as futures, forwards, swaps, and written options contracts, which are valued based on the unrealized appreciation/depreciation of the instrument.
Level 1 Level 2 Level 3 Total ------------------------------------------------------------------------------------------------------------------------------------ Investments in Securities $1,514,176,033 $1,476,023,922 $29,188,614 $ 3,019,388,569 Other Financial Instruments $ 161,486 $ -- $ -- $ 161,486
Following is a reconciliation of securities activity based on Level 3 inputs for which unobservable market inputs were used to determine fair value.
Investments Other Financial in Securities Instruments ------------------------------------------------------------------------------------------------------------------------------------ Balance at 12/31/07 $ 34,124,210 $-- Accrued discounts/premiums (262,197) -- Realized gain (loss) 1,080,929 -- Change in unrealized appreciation (depreciation) (806,534) -- Net purchases (sales) (3,042,148) -- Net transfers in and out of Level 3 (1,905,646) -- ------------------------------------------------------------------------------------------------------------------------------------ Balance at 6/30/08 $ 29,188,614 $--
REPURCHASE AGREEMENTS The Fund may enter into repurchase agreement transactions with respect to instruments that are consistent with the Fund's investment objectives or policies. The Fund's custodian or a third party custodian takes possession of the collateral pledged for investments in repurchase agreements on behalf of the Fund. The Fund values the underlying collateral daily on a mark-to-market basis to determine that the value, including accrued interest, is at least equal to 102% of the repurchase price. In the event the seller defaults and the value of the security declines, or if the seller enters an insolvency proceeding, realization of the collateral by the Fund may be delayed or limited. SECURITY LENDING The Fund may loan securities to brokers, dealers, and financial institutions determined by GEAM to be creditworthy, subject to certain limitations. The Fund continues to receive the interest and dividends 27 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- on the loaned securities during the term of the loan. The loans of securities are secured by collateral in the form of cash or other liquid assets, which are segregated and maintained with the custodian in an amount at least equal to 102% of the current market value of the loaned securities. During the term of the loan, the Fund will record any gain or loss in the market value of its loaned securities and of securities in which cash collateral is invested. The Fund will also earn interest, net of any rebate, from securities in which cash collateral is invested. In the event the counterparty (borrower) does not meet its contracted obligation to return the securities, the Fund may be exposed to the risk of loss of reacquiring the loaned securities at prevailing market prices using the proceeds of the sale of the collateral. FOREIGN CURRENCY Accounting records of the Fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange on a daily basis (on days the New York Stock Exchange is open). Purchases and sales of securities, income receipts and expense payments denominated in foreign currencies are translated into U.S. dollars at the prevailing exchange rate on the respective dates of such transactions. The Fund does not isolate the portion of the results of operations resulting from changes in foreign exchange rates from the fluctuations arising from changes in the market prices of securities during the period. Such fluctuations are included in the net realized or unrealized gain or loss from investments. Net realized gains or losses on foreign currency transactions represent net gains or losses on sales and maturities of foreign currency contracts, disposition of foreign currencies, the difference between the amount of net investment income and withholding taxes accrued and the U.S. dollar amount actually received or paid, and gains or losses between the trade and settlement date on purchases and sales of securities. Net unrealized foreign exchange gains and losses arising from changes in the value of other assets and liabilities as a result of changes in foreign exchange rates are included as increases or decreases in unrealized appreciation/depreciation on foreign currency related transactions. FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or bond index futures contracts subject to certain limitations. The Fund may invest in futures contracts to manage its exposure to the stock and bond markets and fluctuations in currency values. Buying futures tends to increase the Fund's exposure to the underlying instrument while selling futures tends to decrease the Fund's exposure to the underlying instrument, or hedge other Fund investments. The Fund will not enter into a transaction involving futures for speculative purposes. The Fund's risks in using these contracts include changes in the value of the underlying instruments, non-performance of the counterparties under the contracts' terms and changes in the liquidity of the secondary market for the contracts. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they principally trade. Upon entering into a futures contract, the Fund is required to pledge to the broker an amount of cash and/or other assets equal to a certain percentage of the contract amount, known as initial margin deposit. Subsequent payments, known as variation margin, are made or received by the Fund each day, depending on the daily fluctuation in the fair value of the underlying security. The Fund records an unrealized gain or loss equal to the daily variation margin. Should market conditions move unexpectedly, the Fund may not achieve the anticipated benefits of the futures contracts and may incur a loss. The Fund recognizes a realized gain or loss on the expiration or closing of a futures contract. OPTIONS The Fund may purchase and write options, subject to certain limitations. The Fund may invest in options contracts to manage its exposure to the stock and bond markets and fluctuations in foreign currency values. Writing puts and buying calls tend to increase the Fund's exposure to the underlying instrument while buying puts and writing calls tend to decrease the Fund's exposure to the underlying instrument, or hedge other Fund investments. The Fund will not enter into a transaction involving options for speculative purposes. The Fund's risks in using these contracts include changes in the value of the underlying instruments, non-performance of the counterparties under the contracts' terms and changes in the liquidity of the secondary market for the contracts. Options are valued at the last sale price, or if no sales occurred on that day, at the last quoted bid price. When the Fund writes an option, the amount of the premium received is recorded as a liability and is subsequently adjusted to the current fair value of the option written. Premiums received from writing options that expire unexercised are treated by the Fund on the expiration date as realized gains from investments. The difference between the premium and the amount paid on 28 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium is less than the amount paid for the closing purchase, as a realized loss. When an option is exercised, the proceeds from the sale of the underlying security or the cost basis of the securities purchased is adjusted by the original premium received or paid. SWAP CONTRACTS As part of the investment strategy, the Fund may invest in swap agreements, which are agreements to exchange the return generated by one instrument for the return generated by another instrument. Total return swap agreements involve commitments to pay interest in exchange for a market linked return based upon a notional principal amount. To the extent the total return of the security or index underlying the agreement exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty. Swaps are marked to market daily based upon the underlying security or index. Payments received or made are recorded as realized gain or loss in the Statement of Operations. Entering into swap agreements involves, to varying degrees, elements of credit and market risk in excess of the amounts recognized on the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparty to the agreements may default on its obligation to perform and that there may be unfavorable changes in the value of the index or securities underlying the agreement. Notional principal amounts are used to express the extent of involvement in these transactions, but the amounts potentially subject to credit risk are much smaller. WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS The Fund may purchase or sell securities on a when-issued or forward commitment basis. These transactions are arrangements in which the Fund purchases and sells securities with payment and delivery scheduled a month or more after entering into the transactions. The price of the underlying securities and the date when these securities will be delivered and paid for are fixed at the time the transaction is negotiated. Losses may arise due to changes in the market value of the underlying securities or if the counterparty does not perform under the contracts. In connection with such purchases, the Fund maintains cash or liquid assets in an amount equal to purchase commitments for such underlying securities until settlement date and for sales commitments, the Fund maintains equivalent deliverable securities as "cover" for the transaction. Unsettled commitments are valued at the current market value of the underlying security. Daily fluctuations in the value of such contracts are recorded as unrealized gains or losses. The Fund will not enter into such commitments for the purpose of investment leverage. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS The Fund may enter into forward foreign currency exchange contracts to facilitate transactions in foreign denominated securities and to manage the Fund's currency exposure. Forward foreign currency exchange contracts are valued at the mean between the bid and the offered forward rates as last quoted by a recognized dealer. The aggregate principal amounts of the contracts are not recorded in the Fund's financial statements. Such amounts appear under the caption forward foreign currency contracts in the Schedule of Investments. Fluctuations in the value of the contracts are recorded in the Statement of Assets and Liabilities as an asset (or liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized gains or losses on foreign currency related transactions. The Fund's risks in using these contracts include changes in the value of foreign currency or the possibility that the counterparties do not perform under the contracts' terms. When the Fund enters into a forward foreign currency exchange contract, it is required to segregate cash or liquid securities with its custodian in an amount equal to the value of the Fund's total assets committed to the consummation of the forward contract. If the value of the segregated securities declines, additional cash or securities is segregated so that the value of the account will equal the amount of the Fund's commitment with respect to the contract. INVESTMENTS IN FOREIGN MARKETS Investments in foreign markets may involve special risks and considerations not typically associated with investing in the United States. These risks include revaluation of currencies, high rates of inflation, repatriation on income and capital, and adverse political and economic developments. Moreover, securities issued in these markets may be less liquid, subject to government ownership controls, tariffs and taxes, subject to delays in settlements, and their prices may be more volatile. The Fund may be subject to capital gains and repatriation taxes imposed by certain countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued based upon net investment income, net realized gains and net unrealized appreciation as income and/or capital gains are earned. 29 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- INCOME TAXES The Fund intends to comply with all sections of the Internal Revenue Code applicable to regulated investment companies including the distribution of substantially all of its taxable net investment income and net realized capital gains to its shareholders. Therefore, no provision for federal income tax has been made. The Fund is treated as a separate taxpayer for federal income tax purposes. At June 30, 2008, information on the tax cost of investments is as follows:
Net Tax Cost of Gross Tax Gross Tax Appreciation/ Investments for Unrealized Unrealized (Depreciation) Tax Purposes Appreciation Depreciation on Investments ------------------------------------------------------------------------------------------------------------------------------------ $3,025,811,736 $189,828,134 $(206,838,287) $(17,010,153)
As of December 31, 2007, the Fund has no capital loss carryovers. Any net capital and currency losses incurred after October 31, within the Fund's tax year, are deemed to arise on the first day of the Fund's next tax year if the Fund so elects to defer such losses. The Fund elected to defer losses incurred after October 31, 2007 as follows: Capital Currency -------------------------------------------------------------------------------- $-- $56,233 The tax composition of distributions paid during the years ended December 31, 2007 and December 31, 2006 were as follows: Ordinary Long-Term Income Capital Gains Total -------------------------------------------------------------------------------- 2007 $63,569,771 $93,007,435 $156,577,206 2006 31,461,661 22,853,704 54,315,365 DISTRIBUTIONS TO SHAREHOLDERS The Fund declares and pays net realized capital gains in excess of capital loss carryforwards distributions annually. The character of income and gains to be distributed is determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences include (but are not limited to) futures, treatment of realized gains and losses on foreign currency transactions, and losses deferred due to wash sale transactions. Reclassifications due to permanent book/tax differences are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. These reclassifications have no impact on net investment income, realized gains or losses, or the net asset value of the Fund. The calculation of net investment income per share in the Financial Highlights table excludes these adjustments. The reclassifications for the year ended December 31, 2007 were as follows: Undistributed (Distribution in Excess of) Net Investment Accumulated Income Net Realized Gain -------------------------------------------------------------------------------- $(183,366) $183,366 On June 29, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in Income Taxes." FIN48 provides guidance for how certain uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN48 requires evaluation of tax positions taken or expected to be taken in the course of preparing the Fund's tax returns to determine whether the tax positions are "more likely than not" of being sustained by the applicable tax authority. The adoption of FIN48 did not have an impact on the Fund's net assets and financial statements. The Funds' 2004, 2005, 2006 and 2007 calendar years tax returns are still open to examination by the Federal and applicable state tax authorities. INVESTMENT INCOME Corporate actions (including cash dividends) are recorded on the ex-dividend date, net of applicable withholding taxes, except for certain foreign corporate actions, which are recorded as soon after ex-dividend date as such information becomes available. Interest income is recorded on the accrual basis. All discounts and premiums on bonds are accreted and amortized respectively to call or maturity date, whichever is shorter, using the effective yield method. 30 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- EXPENSES Expenses of the Company which are directly identifiable to the Fund are allocated to the portfolio. Expenses which are not directly identifiable to the Fund are allocated in such a manner as deemed equitable, taking into consideration the nature and type of expenses and relative size of the Fund. All expenses of the Fund are paid by GEAM and reimbursed by the Fund. 3. LINE OF CREDIT The Company shares a revolving credit facility of up to $150 million with a number of its affiliates. The credit facility is with its custodian bank, State Street Bank and Trust Company. The revolving credit facility requires the payment of a commitment fee equal to 0.09% per annum on the daily unused portion of the credit facility, payable quarterly. The portion borne by the Funds generally is borne proportionally based upon net assets. In addition, the Company has a $100 million uncommitted, unsecured line of credit with State Street. Generally, borrowings under the credit facilities would accrue interest at the Federal Funds Rate plus 50 basis points and would be borne by the borrowing Fund. The maximum amount allowed to be borrowed by any one Fund is the lesser of (i) its prospectus limitation or (ii) 20% of its net assets. The credit facilities were not utilized by the Fund during the period ended June 30, 2008. 4. AMOUNTS PAID TO AFFILIATES GEAM, a registered investment adviser, was retained by the Company's Board of Directors effective May 1, 1997 to act as investment adviser and administrator of the Fund. GEAM's compensation for investment advisory and administrative services is paid monthly based on the average daily net assets of the Fund. The advisory and administrative fee is stated in the following schedule: Annualized based on average daily net assets -------------------------------------------------------------------------------- Average Daily Advisory and Net Assets Administration of Fund Fees -------------------------------------------------------------------------------- First $100 million 0.50% Next $100 million 0.45% Next $100 million 0.40% Next $100 million 0.35% Over $400 million 0.30% Pursuant to an expense limitation agreement with the Fund, GEAM has agreed to limit total operating expenses charged to Fund assets attributable to each class of shares (excluding class specific expenses such as Investor Service Plan Fees (for Class 1 shares), Distribution and Service (12b-1) Fees, and excluding interest, taxes, brokerage commissions, other expenditures that are capitalized in accordance with generally accepted accounting principles, and other extraordinary expenses not incurred in the ordinary course of the Fund's business) to 0.32% of the average daily net assets of the Fund attributable to such shares, in each case on an annual basis. Under the agreement, this expense limitation will continue until April 30, 2009, unless extended. The expense limitation agreement will terminate upon termination of the management agreement, or by the Fund without payment of penalty upon sixty (60) days written notice to GEAM. The agreement can only be changed with the approval of both the Fund's Board of Directors and GEAM. GENPACT performs certain accounting and certain administration services not provided by GEAM. For the period ending June 30, 2008, $19,494 was charged to the Fund. INVESTOR SERVICE PLAN -- CLASS 1 SHARES The Company adopted an Investor Service Plan (the "Services Plan") on December 9, 2005 with respect to Class 1 shares of the Total Return Fund. The Services Plan was not adopted pursuant to Rule 12b-1 under the 1940 Act. The Services Plan provides that during any fiscal year, the amount of compensation paid under the Services Plan by the Total Return Fund Class 1 shares may not exceed the annual rate of 20% of the average daily net assets of the Total Return Fund attributable to such class shares. DISTRIBUTION AND SHAREHOLDER SERVICING FEES The Fund has adopted a Shareholder Servicing and Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act with respect to Class 2, 3 and 4 shares of the Fund. The Fund pays GE Investment Distributors, Inc. ("GEID"), a wholly-owned subsidiary of GEAM and the Fund's principal underwriter, a monthly fee for distribution and/or shareholder services provided, at an annual rate of the average daily net assets attributable to each applicable class of shares. The annual rates applicable are 0.25% for Class 2 shares, 0.30% for Class 3 shares and 0.45% for Class 4 shares. Currently, Class 1 shares are not subject to a Rule 12b-1 fee. 31 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- DIRECTORS' COMPENSATION The Fund pays no compensation to its Directors who are officers or employees of GEAM or its affiliates. Directors who are not such officers or employees also serve in a similar capacity for other funds advised by GEAM. Compensation paid to unaffiliated directors are reflected on the Statement of Operations. These fees are allocated pro rata across all of the mutual Fund platforms and share classes served by the directors, including the Fund, and are based upon the relative net assets of each fund within such platforms. (For additional information about directors compensation please refer to the Statement of Additional Information.) 5. INVESTMENT TRANSACTIONS PURCHASES AND SALES OF SECURITIES The cost of purchases and the proceeds from sales of investments, other than short-term securities and options, for the period ended June 30, 2008, were as follows: Purchases Sales -------------------------------------------------------------------------------- $2,520,482,603 $2,346,635,878 SECURITY LENDING At June 30, 2008, the Fund participated in securities lending: Loaned securities at Cash market value collateral -------------------------------------------------------------------------------- $66,634,057 $68,265,361 32 Additional Information (unaudited) -------------------------------------------------------------------------------- INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS: The business and affairs of the Company are managed under the direction of the Company's Board of Directors. Information pertaining to the Directors and officers of the Company is set forth below. INTERESTED DIRECTORS AND EXECUTIVE OFFICERS -------------------------------------------------------------------------------- MICHAEL J. COSGROVE -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 59 POSITION(S) HELD WITH FUND Chairman of the Board and President TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 10 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President - GEAM since February 1997; President and Chief Executive Officer - Mutual Funds at GEAM since March 2007; Vice President, GE Capital Corporation, an indirect wholly-owned subsidiary of GE, since December 1999; Executive Vice President - Sales and Marketing of GEAM, a wholly-owned subsidiary of GE that is registered as an investment adviser under the Investment Advisers Act of 1940, as amended, since March 1993; Director of GEAM since 1988. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48 OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception; Trustee of Elfun Funds, GE Savings & Security Funds and General Electric Pension Trust since 1988; Trustee of Fordham University since 2003; Trustee of Elfun Foundation; Treasurer of GE Foundation; Director, GE Asset Management (Ireland) since February 1999; Director, GE Asset Management Funds Plc, GE Asset Canada Company, GE Asset Management Limited, and GE Volunteers. -------------------------------------------------------------------------------- MATTHEW J. SIMPSON -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 47 POSITION(S) HELD WITH FUND Executive Vice President TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - less than one year PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General Counsel and Secretary of GEAM since July 2007; Senior Vice President and General Counsel - Marketing and Client Services (formerly Asset Management Services), at GEAM and Senior Vice President and General Counsel of GEAMS from February 1997 to June 2007; Vice President and Associate General Counsel of GEAM from October 1992 to February 1997; Secretary of Fund from 1997 to June 2007; Vice President of Fund from September 2003 to June 2007; Vice President of GE Institutional Funds and GE LifeStyle Funds from September 2003 to June 2007; Secretary of GE Institutional Funds and GE LifeStyle Funds from 1997 to June 2007; Vice President of Elfun Funds and GE Savings & Security Funds from October 2003 to June 2007; Assistant Secretary of Elfun Funds and GE Savings & Security Funds from 1998 to June 2007. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional Funds, GE LifeStyle Funds, Elfun Funds and GE Savings & Security Funds since July 2007. 33 Additional Information (unaudited) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SCOTT H. RHODES -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 49 POSITION(S) HELD WITH FUND Treasurer TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 2 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds Operations Manager since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle Funds and GE Investments Funds since November 2005 and Elfun Funds and GE Savings & Security Funds since September 2005; from August 2004 to September 2005 Vice President, U.S. Trust Company, N.A. and Assistant Treasurer of Excelsior Funds, Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds, Inc.; from January 2004 to August 2004, Vice President BlackRock Financial Management, Inc.; from December 1996 to November 2003, Controller - Mutual Funds, American Skandia Investment Services, Inc. and Assistant Treasurer of American Skandia Trust and American Skandia Advisor Funds, Inc. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A -------------------------------------------------------------------------------- JEANNE M. LAPORTA -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 42 POSITION(S) HELD WITH FUND Vice President and Secretary TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 2 years (Vice President); less than one year (Secretary) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Senior Vice President and Deputy General Counsel at GE Asset Management since October 2007; Vice President and Associate General Counsel - Marketing and Client Services (formerly Asset Management Services) at GEAM from May 1997 to October 2007; Vice President and Assistant Secretary of GE Funds, GE Institutional Funds and GE LifeStyle Funds since September 2003; Vice President and Assistant Secretary of Elfun Funds and GE Savings & Security Funds since October 2003; Assistant Secretary from September 2003 to June 2007 and Secretary since July 2007. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A 34 Additional Information (unaudited) -------------------------------------------------------------------------------- NON-INTERESTED DIRECTORS -------------------------------------------------------------------------------- JOHN R. COSTANTINO -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 62 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC since 2006; Managing Director, Walden Partners, Ltd., consultants and investors, since August 1992. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE Institutional Funds and GE LifeStyle Funds since their inception; Trustee of Fordham University since 2002 and Marymount College from 2001 through 2002; Neuroscience Research Institute since 1986; Diocesan Finance Counsel of the Dioceses of Brooklyn & Queens since 2001; Gregorian University Foundation since 1994. -------------------------------------------------------------------------------- WILLIAM J. LUCAS -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 60 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Treasurer of Fairfield University since 1983. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception. -------------------------------------------------------------------------------- ROBERT P. QUINN -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 72 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon Brothers Inc. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception. The Statement of Additional Information for the Fund includes additional information about the Directors and Officers and is available, without charge, upon request by calling 1-800-242-0134. 35 Investment Team -------------------------------------------------------------------------------- INVESTMENT ADVISER AND ADMINISTRATOR GE Asset Management Incorporated BOARD OF DIRECTORS Michael J. Cosgrove, CHAIRMAN John R. Costantino William J. Lucas Robert P. Quinn Matthew J. Simpson SECRETARY Jeanne M. LaPorta ASSISTANT SECRETARIES Joseph A. Carucci Joon Won Choe TREASURER Scott H. Rhodes ASSISTANT TREASURERS Scott R. Fuchs Christopher M. Isaacs DISTRIBUTOR GE Investment Distributors, Inc. Member FINRA and SIPC COUNSEL Sutherland, Asbill & Brennan, LLP CUSTODIAN State Street Bank & Trust Company INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM KPMG LLP OFFICERS OF THE INVESTMENT ADVISER James W. Ireland, CHIEF EXECUTIVE OFFICER Daniel O. Colao, EVP, CHIEF FINANCIAL OFFICER (AS OF JULY 28, 2008) Michael J. Cosgrove, EVP, PRESIDENT AND CHIEF EXECUTIVE OFFICER - MUTUAL FUNDS Paul M. Colonna, EVP, PRESIDENT - FIXED INCOME Kathryn D. Karlic, EVP, PRESIDENT - INSTITUTIONAL SALES AND MARKETING Ralph R. Layman, EVP, PRESIDENT - INTERNATIONAL EQUITIES Matthew J. Simpson, EVP, GENERAL COUNSEL AND SECRETARY Judith A. Studer, EVP, PRESIDENT - U.S. EQUITIES Don W. Torey, EVP, PRESIDENT - ALTERNATIVE INVESTMENTS AND REAL ESTATE John J. Walker, EVP, CHIEF OPERATING OFFICER (AS OF JANUARY 31, 2008) David Wiederecht, EVP, PRESIDENT - INVESTMENT STRATEGIES 36 [This page intentionally left blank.] INVESTMENT ADVISER GE ASSET MANAGEMENT INCORPORATED 3001 SUMMER STREET PO BOX 7900 STAMFORD, CT 06904-7900 DISTRIBUTOR GE INVESTMENT DISTRIBUTORS, INC. MEMBER FINRA AND SIPC 3001 SUMMER STREET PO BOX 7900 STAMFORD, CT 06904-7900 The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities is available without charge (i) upon request, by calling 1-800-242-0134; (ii) on the Fund's website at HTTP://WWW.GEFUNDS.COM; and (iii) on the Commission's website at HTTP://WWW.SEC.GOV. The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC - information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Information (if any) regarding how the Fund voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through the Fund's website at HTTP://WWW.GEFUNDS.COM; and (ii) on the Commission's website at HTTP://WWW.SEC.GOV. [GE logo omitted] GE Investments Funds, Inc.~ Income Fund Semi-Annual Report JUNE 30, 2008 [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.................................... 13 FINANCIAL STATEMENTS Financial Highlights........................................... 14 Statement of Assets and Liabilities............................ 15 Statement of Operations........................................ 16 Statements of Changes in Net Assets............................ 17 Notes to Financial Statements.................................. 18 ADDITIONAL INFORMATION.............................................. 24 INVESTMENT TEAM..................................................... 27 This report is prepared for Policyholders of certain variable contracts and may be distributed to others only if preceded or accompanied by the variable contract's current prospectus and the current prospectus of the Funds available for investments thereunder. Notes to Performance June 30, 2008 (unaudited) -------------------------------------------------------------------------------- Total returns take into account changes in share price and assume reinvestment of all dividends and capital gains distributions, if any. The performance data quoted represent past performance; past performance does not guarantee future results. Investment return and principal value will fluctuate so your shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data quoted. Periods less than one year are not annualized. Please call 800-242-0134 for the most recent month-end performance data. Total returns shown are net of Fund expenses but do not reflect fees and charges associated with the variable contracts such as administrative fees, account charges and surrender charges, which, if reflected, would reduce the Fund's total returns for all periods shown. Shares of the Fund are neither insured nor guaranteed by the U.S. Government, and their prices will fluctuate with market conditions. The Lehman Brothers Aggregate Bond Index (LB Aggregate Bond Index) is an unmanaged index and do not reflect the actual cost of investing in the instruments that comprise the index. The LB Aggregate Bond Index is a market value-weighted index of investment-grade debt issues, including government, corporate, asset-backed and mortgage-backed securities, with maturities of one year or more. This index is designed to represent the performance of the U.S. investment-grade first rate bond market. The results shown for the foregoing index assume the reinvestment of net dividends or interest. The peer universe of the underlying annuity funds used in our peer ranking calculation is based on the blend of Lipper peer categories, as shown. Lipper is an independent mutual fund rating service. A Fund's performance may be compared to or ranked within a universe of mutual funds with investment objectives and policies similar but not necessarily identical to the Fund's. Such comparisons or rankings are made on the basis of several factors, including the Fund's objectives and policies, management style and strategy, and portfolio composition, and may change over time if any of those factors change. -------------------- GE INVESTMENT DISTRIBUTORS, INC., MEMBER OF FINRA & SIPC, IS THE PRINCIPAL UNDERWRITER AND DISTRIBUTOR OF THE GE INVESTMENT FUNDS, INC. AND A WHOLLY OWNED SUBSIDIARY OF GE ASSET MANAGEMENT INCORPORATED, THE INVESTMENT ADVISER OF THE FUNDS. Income Fund -------------------------------------------------------------------------------- THE INCOME FUND IS MANAGED BY A TEAM OF PORTFOLIO MANAGERS THAT INCLUDES PAUL M. COLONNA, WILLIAM M. HEALEY, MARK H. JOHNSON, JAMES F. PALMIERI, LEWIS TATANANNI AND VITA MARIE PIKE. AS LEAD PORTFOLIO MANAGER FOR THE INCOME FUND, MR. COLONNA (PICTURED BELOW) IS VESTED WITH OVERSIGHT AUTHORITY. EACH PORTFOLIO MANAGER IS ASSIGNED A CLASS OF ASSETS, THE SIZE OF WHICH ARE DETERMINED BY TEAM CONSENSUS AND ADJUSTED ON A MONTHLY BASIS, IF NECESSARY. ALTHOUGH EACH PORTFOLIO MANAGER MANAGES HIS OR HER ASSET CLASS INDEPENDENT OF THE OTHER TEAM MEMBERS, THE TEAM IS HIGHLY COLLABORATIVE AND COMMUNICATIVE. PAUL M. COLONNA IS AN EXECUTIVE VICE PRESIDENT OF GE ASSET MANAGEMENT AND PRESIDENT - FIXED INCOME AT GE ASSET MANAGEMENT. SINCE JANUARY 2005, HE HAS LED THE TEAM OF PORTFOLIO MANAGERS FOR THE INCOME FUND. PRIOR TO JOINING GE ASSET MANAGEMENT IN FEBRUARY 2000, MR. COLONNA WAS A SENIOR PORTFOLIO MANAGER WITH THE FEDERAL HOME LOAN MORTGAGE CORPORATION, OVERSEEING THE MORTGAGE INVESTMENT GROUP. WILLIAM M. HEALEY IS A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT. HE HAS SERVED ON THE PORTFOLIO MANAGEMENT TEAM FOR THE INCOME FUND SINCE SEPTEMBER 1997. PRIOR TO JOINING GE ASSET MANAGEMENT, MR. HEALEY SPENT OVER 10 YEARS IN THE FIXED INCOME GROUP AT METLIFE. MARK H. JOHNSON IS A SENIOR VICE PRESIDENT OF GE ASSET MANAGEMENT AND SENIOR PORTFOLIO MANAGER OF STRUCTURED PRODUCTS. HE HAS BEEN A MEMBER OF THE PORTFOLIO MANAGEMENT TEAM FOR THE INCOME FUND SINCE SEPTEMBER 2007. MR. JOHNSON JOINED GE ELECTRIC COMPANY (GE) IN 1998 IN ITS EMPLOYERS REINSURANCE CORPORATION AS A TAXABLE INCOME PORTFOLIO MANAGER. MR. JOHNSON JOINED GE ASSET MANAGEMENT AS A VICE PRESIDENT AND PORTFOLIO MANAGER IN 2002 AND BECAME A SENIOR VICE PRESIDENT AND SENIOR PORTFOLIO MANAGER OF STRUCTURED PRODUCTS IN 2007. JAMES F. PALMIERI IS A PORTFOLIO MANAGER OF GE ASSET MANAGEMENT. SINCE MARCH 2006, HE HAS MANAGED THE MORTGAGE-BACKED SECURITIES SECTOR FOR THE INCOME FUND. PRIOR TO JOINING GE ASSET MANAGEMENT, MR. PALMIERI WAS A DIRECTOR OF INVESTMENTS FOR CONSTITUTION CORPORATE FEDERAL CREDIT UNION FROM FEBRUARY 2005 TO MARCH 2006 AND A PORTFOLIO MANAGER FOR CIGNA INVESTMENT MANAGEMENT FROM JANUARY 2000 TO FEBRUARY 2005. LEWIS TATANANNI IS A SENIOR CORPORATE TRADER AT GE ASSET MANAGEMENT. HE HAS BEEN A MEMBER OF THE PORTFOLIO MANAGEMENT TEAM FOR THE INCOME FUND SINCE DECEMBER 2007. MR. TATANANNI JOINED GE ASSET MANAGEMENT IN OCTOBER 2002 AND WAS RESPONSIBLE FOR EXECUTING THE INTEREST RATE DERIVATIVE HEDGING PROGRAMS FOR GE ASSET MANAGEMENT'S INSURANCE CLIENTS. MR. TATANANNI JOINED GE IN 1999 AS AN ASSOCIATE AT GE CAPITAL TREASURY AND WAS RESPONSIBLE FOR DEBT ORIGINATION AND DERIVATIVE EXECUTION. VITA MARIE PIKE IS A VICE PRESIDENT OF GE ASSET MANAGEMENT. SHE HAS SERVED ON THE PORTFOLIO MANAGEMENT TEAM FOR THE INCOME FUND SINCE JUNE 2004. PRIOR TO JOINING GE ASSET MANAGEMENT IN JANUARY 2001, SHE WAS WITH ALLIANCE CAPITAL FOR OVER NINE YEARS SERVING IN A NUMBER OF DIFFERENT CAPACITIES INCLUDING PORTFOLIO MANAGER. Q. HOW DID THE INCOME FUND PERFORM COMPARED TO ITS BENCHMARK AND LIPPER PEER GROUP FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2008? A. For the six-month period ended June 30, 2008, the Income Fund returned -0.43% for the Class 1 shares and -1.04% for the Class 4 shares. The Lehman [photo omitted] 2 Q&A -------------------------------------------------------------------------------- Brothers Aggregate Bond Index, the Fund's benchmark, returned 1.13% and the Fund's Lipper peer group of 64 Intermediate Investment Grade Debt Funds returned an average of -0.14% for the same period. Q. DESCRIBE WHAT HAPPENED IN THE U.S. ECONOMY DURING THE SIX-MONTH PERIOD ENDING JUNE 30, 2008. A. About the only positive thing that can be said for the first half of 2008 is that it is over. The credit crisis born in 2007 deepened in the first quarter of this year, threatening the existence of an 85-year old investment bank/broker-dealer. The Federal Reserve moved aggressively to provide liquidity through typical means such as reducing the federal funds rate target by 225 basis points to 2.00%, and introducing certain new measures including allowing investment banks access to discount window borrowing. The U.S. economy, similar to the global economy, showed little growth. 438,000 jobs were lost in the first six months as reported by the Bureau of Labor Statistics (change in non-farm payrolls). Consumer spending ability have been reduced by higher gas prices, lower home prices and job losses. The rise in energy prices along with other commodities has pushed inflation fears higher, especially at the Federal Reserve. Interest rates at the longer end of the maturity spectrum were little changed from the end of last year. The U.S. Treasury 10-year note yield fell 5 bps to 3.97%. Shorter maturity note yields dropped significantly more, especially during the first quarter, as the Federal Reserve was reducing rates. The yield on the U.S. Treasury 2-year note fell 43 bps to 2.62%. The decline in interest rates translated to positive returns for treasury securities for the first six months. Credit sensitive sectors, however, posted negative returns in the same period as credit concerns deepened. In general, higher quality paper performed better than lower quality. Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE? A. Declining valuations in sub-prime and Alt-A asset-backed securities held in the Fund portfolio dragged performance below that of the benchmark. Although the market value of these securities constituted a small percentage of the Fund's total portfolio, the continued price dislocation in the market resulted in a large adverse impact to Fund performance. The negative impact to Fund performance was partially offset by timely yield curve positioning throughout the period and the underweight to high-grade corporate bonds, which benefited from general credit spread widening. 3 Income Fund -------------------------------------------------------------------------------- Understanding Your Fund's Expenses As a shareholder of the Fund you incur ongoing expenses, which include portfolio management fees, professional fees, administrative fees and other Fund expenses. The following example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the period. The information in the following table is based on an investment of $1,000, which is invested at the beginning of the period and held for the entire six-month period ended June 30, 2008. ACTUAL EXPENSES The first section of the table provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your class under the heading "Expenses Paid During Period." HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second section of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholders reports of other funds. Please note that the expenses shown in the table do not reflect any transaction costs, such as sales charges or redemption fees.
JANUARY 1, 2008 - JUNE 30, 2008 ------------------------------------------------------------------------------------------------------------------------------------ ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($)* ------------------------------------------------------------------------------------------------------------------------------------ ACTUAL FUND RETURN** ------------------------------------------------------------------------------------------------------------------------------------ Class 1 1,000.00 995.65 3.00 Class 4 1,000.00 989.62 4.85 ------------------------------------------------------------------------------------------------------------------------------------ HYPOTHETICAL 5% RETURN (2.5% FOR THE PERIOD) ------------------------------------------------------------------------------------------------------------------------------------ Class 1 1,000.00 1,021.64 3.02 Class 4 1,000.00 1,019.85 4.95 ------------------------------------------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.60% FOR CLASS 1 AND 0.98% FOR CLASS 4, (FROM PERIOD JANUARY 1, 2008 - JUNE 30, 2008), MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY 182/366 (TO REFLECT THE ONE-HALF YEAR PERIOD). ** ACTUAL FUND RETURNS FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2008 WERE AS FOLLOWS: (0.43)% FOR CLASS 1 SHARES, AND SINCE INCEPTION (1.04)% FOR CLASS 4 SHARES. 4 Income Fund (unaudited) -------------------------------------------------------------------------------- CHANGE IN VALUE OF A $10,000 INVESTMENT CLASS 1 SHARES -------------------------------------------------------------------------------- [Line chart omitted -- plot points are as follows:] GEI INCOME LB AGGREGATE BOND INDEX 06/98 10,000.00 10,000.00 12/98 10,383.23 10,457.85 12/99 10,235.20 10,371.95 12/00 11,334.44 11,577.80 12/01 12,176.27 12,555.37 12/02 13,379.92 13,842.93 12/03 13,861.59 14,411.11 12/04 14,335.65 15,036.38 12/05 14,627.72 15,401.54 12/06 15,267.12 16,069.01 12/07 16,004.07 17,188.47 06/08 15,934.49 17,382.00 AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2008 -------------------------------------------------------------------------------- CLASS 1 SHARES (Inception date: 1/3/95) -------------------------------------------------------------------------------- SIX ONE FIVE TEN ENDING VALUE OF A MONTHS YEAR YEAR YEAR $10,000 INVESTMENT -------------------------------------------------------------------------------- Income Fund -0.43% 3.32% 2.79% 4.77% $15,934 -------------------------------------------------------------------------------- LB Aggregate Bond Index 1.13% 7.12% 3.85% 5.68% $17,382 -------------------------------------------------------------------------------- Lipper peer group average* -0.14% 5.35% 3.47% 5.09% -------------------------------------------------------------------------------- CLASS 4 SHARES -------------------------------------------------------------------------------- [Line chart omitted -- plot points are as follows:] GEI INCOME LB AGGREGATE BOND INDEX 05/08 10,000.00 10,000.00 06/08 9,896.19 9,918.70 AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2008 -------------------------------------------------------------------------------- CLASS 4 SHARES (Inception date: 5/1/08) -------------------------------------------------------------------------------- ONE SINCE ENDING VALUE OF A MONTH INCEPTION $10,000 INVESTMENT -------------------------------------------------------------------------------- Income Fund -0.35% -1.04% $9,896 -------------------------------------------------------------------------------- LB Aggregate Bond Index -0.08% -0.81% $9,919 -------------------------------------------------------------------------------- Lipper peer group average** -0.58% N/A -------------------------------------------------------------------------------- INVESTMENT PROFILE A fund designed for investors who seek maximum income consistent with prudent investment management and the preservation of capital by investing at least 80% of its net assets in debt securities under normal circumstances. PORTFOLIO COMPOSITION AS OF JUNE 30, 2008 as a % of Market Value -------------------------------------------------------------------------------- Market Value of $113,275 (in thousands) [Pie chart omitted -- plot points are as follows:] Mortgage-Backed 39.8% Asset-Backed and Other 21.8% Corporate Notes 17.8% U.S. Treasuries 17.5% Federal Agencies 2.7% Other Investments 0.4% QUALITY RATINGS AS OF JUNE 30, 2008 as a % of Market Value -------------------------------------------------------------------------------- MOODY'S/S&P/ PERCENTAGE OF FITCH RATING*** MARKET VALUE -------------------------------------------------------------------------------- Aaa / AAA 80.35% -------------------------------------------------------------------------------- Aa / AA 4.42% -------------------------------------------------------------------------------- A / A 4.65% -------------------------------------------------------------------------------- Baa / BBB 4.36% -------------------------------------------------------------------------------- Ba / BB and lower 6.22% -------------------------------------------------------------------------------- * LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR THE SIX MONTHS, ONE YEAR, FIVE-YEAR, AND TEN-YEAR PERIODS INDICATED IN THE INTERMEDIATE INVESTMENT GRADE DEBT FUNDS PEER GROUP CONSISTING OF 64, 64, 52 AND 22 UNDERLYING ANNUITY FUNDS, RESPECTIVELY. ** LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR THE ONE MONTH PERIOD INDICATED IN THE INTERMEDIATE INVESTMENT GRADE DEBT FUNDS PEER GROUP CONSISTING OF 68 UNDERLYING ANNUITY FUNDS, RESPECTIVELY. *** MOODY'S INVESTORS SERVICES INC., STANDARD & POOR'S AND FITCH ARE NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATIONS. SEE NOTES TO PERFORMANCE ON PAGE 1 FOR FURTHER INFORMATION, INCLUDING AN EXPLANATION OF LIPPER PEER CATEGORIES. PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE AND THE GRAPH AND TABLE DO NOT REFLECT THE DEDUCTION OF TAXES. 5 INCOME FUND Schedule of Investments June 30, 2008 (unaudited) -------------------------------------------------------------------------------- INCOME FUND -------------------------------------------------------------------------------- PRINCIPAL AMOUNT VALUE -------------------------------------------------------------------------------- BONDS AND NOTES -- 102.0% + U.S. TREASURIES -- 22.4% U.S. Treasury Bonds 4.38% 02/15/38............ $ 617,700 $ 602,065 (f) 4.50% 02/15/36............ 135,000 134,040 4.75% 02/15/37............ 711,800 735,045 U.S. Treasury Notes 2.63% 05/31/10............ 1,847,000 1,848,154 (h) 2.75% 02/28/13............ 1,161,900 1,134,305 3.50% 02/15/18............ 4,858,100 4,676,300 (h) 3.63% 10/31/09 - 12/31/12. 7,483,400 7,597,527 (h) 4.50% 11/15/10 - 05/15/17. 95,000 98,937 4.63% 11/15/09 - 10/31/11. 2,880,000 2,976,932 (f) 19,803,305 FEDERAL AGENCIES -- 3.4% Federal Home Loan Mortgage Corp. 4.13% 12/21/12............ 1,070,000 1,073,695 4.88% 02/09/10............ 1,805,000 1,857,145 8.25% 06/01/26............ 60,000 77,342 (f,i) 3,008,182 AGENCY MORTGAGE BACKED -- 36.0% Federal Home Loan Mortgage Corp. 4.50% 06/01/33 - 02/01/35. 260,024 241,477 (f) 5.00% 07/01/35 - 10/01/35. 401,823 386,443 (f) 5.50% 05/01/20 - 03/01/38. 852,055 843,390 (f) 6.00% 04/01/17 - 11/01/37. 1,480,294 1,500,847 (f) 6.50% 01/01/27 - 08/01/36. 498,338 516,230 (f) 7.00% 10/01/16 - 08/01/36. 173,390 182,836 (f) 7.50% 11/01/09 - 09/01/33. 21,685 23,218 (f) 8.00% 11/01/30............ 22,573 24,438 (f) 8.50% 04/01/30 - 05/01/30. 26,517 29,400 (f) Federal National Mortgage Assoc. 4.00% 05/01/19 - 06/01/19. 241,274 228,637 (f) 4.50% 05/01/18 - 12/01/34. 1,014,595 977,995 (f) 5.00% 03/01/34 - 08/01/35. 533,576 513,508 (f) 5.26% 04/01/37............ 147,220 149,153 (g) 5.47% 04/01/37............ 11,209 11,390 (g) 5.50% 12/01/13 - 04/01/38. 2,350,680 2,331,682 (f) 5.52% 04/01/37............ 129,265 131,721 (g) 5.53% 04/01/37............ 59,010 60,174 (g) 5.55% 04/01/37............ 139,829 142,534 (g) 5.59% 04/01/37............ 163,654 167,135 (g) 5.62% 03/01/37............ 12,108 12,332 (g) 5.68% 04/01/37 - 05/01/37. 217,771 222,552 (g) 5.70% 04/01/37............ 195,648 199,952 (g) 5.71% 04/01/37............ 62,637 64,065 (g) 5.84% 06/01/37............ 311,637 318,021 (g) 6.00% 06/01/14 - 03/01/38. 3,321,507 3,361,302 (f) PRINCIPAL AMOUNT VALUE -------------------------------------------------------------------------------- 6.03% 10/01/37............ $ 149,078 $ 153,110 (g) 6.50% 07/01/17 - 02/01/35. 1,788,144 1,851,184 (f) 7.00% 03/01/15 - 06/01/36. 600,073 633,279 (f) 7.50% 12/01/09 - 03/01/34. 154,325 165,703 (f) 8.00% 12/01/12 - 11/01/33. 111,956 121,263 (f) 8.50% 05/01/31............ 5,554 6,113 (f) 9.00% 04/01/16 - 12/01/22. 15,461 16,690 (f) 5.00% TBA................. 5,336,000 5,148,023 (b) 5.50% TBA................. 8,825,000 8,698,141 (b) 6.00% TBA................. 745,000 751,519 (b) Government National Mortgage Assoc. 4.50% 08/15/33 - 09/15/34. 455,745 426,083 (f) 5.13% 11/20/22 - 12/20/24. 4,935 4,958 (f,g) 5.38% 02/20/23 - 02/20/26. 12,729 12,772 (f,g) 6.00% 04/15/27 - 09/15/36. 446,165 454,696 (f) 6.50% 04/15/19 - 08/15/36. 404,310 419,690 (f) 7.00% 03/15/12 - 10/15/36. 249,678 264,660 (f) 7.50% 11/15/31 - 10/15/33. 9,927 10,656 (f) 8.00% 12/15/29............ 3,653 4,000 (f) 8.50% 10/15/17............ 19,432 21,198 (f) 9.00% 11/15/16 - 12/15/21. 47,960 52,256 (f) 31,856,426 AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 4.9% Federal Home Loan Mortgage Corp. 3.53% 11/15/37............ 426,328 29,313 (c,e,g) 4.18% 05/15/36 - 11/15/36. 801,938 71,287 (c,e,g) 4.33% 04/15/38............ 363,723 31,972 (c,e,g) 4.50% 04/15/13 - 03/15/19. 541,350 49,635 (c,e,f) 4.83% 09/15/35............ 303,439 33,349 (c,e,g) 5.00% 04/15/14 - 06/15/28. 4,280,119 904,155 (c,e,f) 5.00% 07/15/28............ 275,000 277,892 5.50% 04/15/17 - 06/15/33. 501,227 94,013 (c,e,f) 6.91% 11/15/37............ 210,145 145,702 (c,d) 7.14% 12/15/33............ 150,000 133,395 (f,g) 7.50% 01/15/16............ 35,207 36,689 (f) 7.50% 07/15/27............ 12,486 3,093 (c,e,f) 8.00% 02/01/23 - 07/01/24. 6,077 1,628 (c,e,f) 35.45% 09/25/43............ 1,517,585 11,130 (c,e,f) Federal Home Loan Mortgage STRIPS 5.39% 08/01/27............ 1,522 1,263 (c,d,f) Federal National Mortgage Assoc. 1.18% 12/25/42............ 99,179 3,567 (c,e,f) 3.97% 05/25/37 - 06/25/37. 2,174,575 192,190 (c,e,g) 4.00% 02/25/28............ 14,979 14,973 (f) 4.27% 10/25/35............ 755,146 70,058 (c,e,g) 4.41% 05/25/38............ 670,089 57,488 (c,e,g) 4.50% 05/25/18............ 104,117 7,353 (c,e,f) 4.50% 03/25/38............ 371,593 37,780 (c,e,g) 4.52% 10/25/29............ 439,243 37,914(c,e,f,g) 4.72% 07/25/37............ 646,249 74,136 (c,e,g) 4.75% 11/25/14............ 54,087 2,336 (c,e,f) 5.00% 08/25/17 - 02/25/32. 425,983 51,957 (c,e,f) 5.00% 10/25/35............ 66,090 57,780 5.11% 05/25/18............ 704,363 66,681(c,e,f,g) 5.12% 09/25/42............ 1,046,571 109,890(c,e,f,g) See Notes to Schedule of Investments on page 13 and Notes to Financial Statements. 6 INCOME FUND Schedule of Investments June 30, 2008 (unaudited) -------------------------------------------------------------------------------- PRINCIPAL AMOUNT VALUE -------------------------------------------------------------------------------- 5.22% 08/25/16............ $ 235,639 $ 13,184(c,e,f,g) 5.50% 01/25/33............ 140,699 133,925 (f) 8.00% 07/25/14............ 37,021 37,296 (f) 31.49% 04/25/38............ 432,200 35,014 (c,e,g) Federal National Mortgage Assoc. (Class 1) 4.50% 09/01/35 - 01/01/36. 644,098 151,629 (c,e) 5.00% 05/25/38............ 197,565 61,772 (c,e) 5.48% 11/01/34............ 336,788 246,156 (c,d,f) Federal National Mortgage Assoc. (Class 2) 5.00% 09/01/33 - 03/25/38. 394,090 112,488 (c,e) 5.50% 12/01/33............ 89,313 22,466 (c,e,f) Federal National Mortgage Assoc. REMIC 4.50% 11/25/13............ 76,092 1,390 (c,e,f) 5.00% 10/25/22............ 111,049 17,313 (c,e,f) 7.00% 09/25/20............ 812 839 (f) 11.15% 03/25/31............ 358,130 367,364 (f,g) Federal National Mortgage Assoc. REMIC (Class B) 4.23% 12/25/22............ 394 346 (c,d,f) Federal National Mortgage Assoc. REMIC (Class J) 1080.91%03/25/22............ 1 2 (c,e,f) Federal National Mortgage Assoc. REMIC (Class K) 1008.00%05/25/22............ 9 199 (c,e,f) Federal National Mortgage Assoc. STRIPS (Class 2) 5.00% 08/01/34............ 2,098,513 543,318 (c,e,f) 7.50% 11/01/23............ 38,530 8,507 (c,e,f) 8.00% 08/01/23 - 07/01/24. 13,505 3,716 (c,e,f) 8.50% 07/25/22............ 633 147 (c,e,f) 9.00% 05/25/22............ 413 129 (c,e,f) 4,365,819 ASSET BACKED -- 4.5% Capital Auto Receivables Asset Trust (Class A) 3.25% 01/15/10............ 215,000 213,690 (a,g) Capital One Master Trust (Class C) 6.70% 06/15/11............ 200,000 200,698 (a,f,i) Carmax Auto Owner Trust 4.35% 03/15/10............ 76,822 77,100 (f) Chase Funding Mortgage Loan Asset-Backed Certificates 3.04% 02/25/33............ 47,476 47,078 (f,g) 5.75% 05/25/32............ 28,126 16,876 (f) Countrywide Asset-Backed Certificates 3.34% 05/25/33............ 14,089 13,913 (f,g) Ford Credit Floorplan Master Owner Trust (Class A) 5.03% 06/15/11............ 500,000 488,956 (c,g) GSAA Trust 2.54% 10/25/36............ 1,064,614 948,598 (f,g) PRINCIPAL AMOUNT VALUE -------------------------------------------------------------------------------- Honda Auto Receivables Owner Trust (Class A) 4.15% 10/15/10............ $ 99,730 $ 100,039 (f) JP Morgan Mortgage Acquisition Corp. 2.63% 03/01/37............ 1,000,000 840,000 (f,g) Mid-State Trust 7.54% 07/01/35............ 2,339 2,295 (f,i) Option One Mortgage Loan Trust 2.61% 07/25/37............ 1,000,000 767,231 (f,g) Peco Energy Transition Trust 6.52% 12/31/10............ 192,000 201,158 (f) Residential Asset Securities Corp. 2.98% 07/25/32............ 6,049 5,257 (f,g) Wells Fargo Home Equity Trust 3.97% 05/25/34............ 50,095 48,845 (f) 3,971,734 CORPORATE NOTES -- 22.3% Abbey National PLC 7.95% 10/26/29............ 65,000 66,109 (f) AES Ironwood LLC 8.86% 11/30/25............ 250,443 259,835 (f) Air Jamaica Ltd. 9.38% 07/08/15............ 130,000 132,600 (a,f) American International Group, Inc. 5.85% 01/16/18............ 111,000 103,991 American Railcar Industries, Inc. 7.50% 03/01/14............ 60,000 55,800 (f) ARAMARK Corp. 8.50% 02/01/15............ 194,000 190,120 Archer-Daniels-Midland Co. 6.45% 01/15/38............ 109,000 109,282 Arizona Public Service Co. 6.25% 08/01/16............ 165,000 157,178 (f) BAC Capital Trust VI 5.63% 03/08/35............ 180,000 146,569 (f) Bank of America Corp. 8.00% 12/29/49............ 116,000 108,677 Bank of America Corp. (Series L) 5.65% 05/01/18............ 250,000 233,397 Bear Stearns Companies Inc. 5.85% 07/19/10............ 153,000 155,374 (f) 6.95% 08/10/12............ 175,000 181,960 (f) BellSouth Corp. 4.20% 09/15/09............ 100,000 100,204 (f) 6.55% 06/15/34............ 85,000 82,091 (f) Bertin LTDA 10.25% 10/05/16............ 100,000 103,000 (a,f) Bristol-Myers Squibb Co. 5.45% 05/01/18............ 118,000 116,403 5.88% 11/15/36............ 100,000 93,285 (f) British Telecommunications PLC 8.63% 12/15/10............ 65,000 69,794 (f) Cardinal Health, Inc. 5.50% 06/15/13............ 78,000 77,827 See Notes to Schedule of Investments on page 13 and Notes to Financial Statements. 7 INCOME FUND Schedule of Investments June 30, 2008 (unaudited) -------------------------------------------------------------------------------- PRINCIPAL AMOUNT VALUE -------------------------------------------------------------------------------- Cargill Inc. 5.20% 01/22/13............ $162,000 $ 160,445 (a,f) 6.00% 11/27/17............ 191,000 189,904 (a) Carolina Power & Light Co. 5.15% 04/01/15............ 80,000 79,777 (f) 5.70% 04/01/35............ 45,000 41,948 (f) 6.13% 09/15/33............ 135,000 132,807 (f) Chesapeake Energy Corp. 7.25% 12/15/18............ 194,000 188,665 Chubb Corp. 6.50% 05/15/38............ 22,000 21,023 Citigroup, Inc. 5.50% 04/11/13............ 161,000 157,313 8.40% 04/29/49............ 118,000 112,172 Clarendon Alumina Production Ltd. 8.50% 11/16/21............ 255,000 257,550 (a,f) Community Health Systems, Inc. 8.88% 07/15/15............ 194,000 195,213 Consolidated Edison Co of New York, Inc. 5.85% 04/01/18............ 113,000 113,421 Constellation Brands, Inc. 7.25% 05/15/17............ 194,000 181,390 COX Communications, Inc. 6.25% 06/01/18............ 165,000 161,072 (a) 7.13% 10/01/12............ 57,000 59,494 (f) 7.75% 11/01/10............ 130,000 136,979 (f) Credit Suisse 6.00% 02/15/18............ 116,000 111,698 CSC Holdings, Inc. 8.50% 06/15/15............ 194,000 190,605 (a) CSX Transportation, Inc. 9.75% 06/15/20............ 105,000 126,417 (f) CVS Caremark Corp. 5.75% 06/01/17............ 214,000 210,480 Dominion Resources, Inc. (Series B) 6.30% 09/30/66............ 395,000 361,525 (f) Dover Corp. 6.50% 02/15/11............ 90,000 94,406 (f) DP World Ltd. 6.85% 07/02/37............ 100,000 85,807 (a,f) Duke Energy Carolinas LLC 5.38% 01/01/09............ 50,000 50,377 (f) Duke Realty LP 6.25% 05/15/13............ 76,000 74,541 Dynegy Holdings, Inc. 7.50% 06/01/15............ 194,000 178,965 Echostar DBS Corp. 7.75% 05/31/15............ 194,000 188,665 (a) EI Du Pont de Nemours & Co. 4.88% 04/30/14............ 110,000 110,233 (f) El Paso Electric Co. 6.00% 05/15/35............ 90,000 75,901 (f) Empresa Energetica de Sergipe and Sociedade Anonima de Eletrificaao da Paraiba 10.50% 07/19/13............ 57,000 63,555 (a,f) PRINCIPAL AMOUNT VALUE -------------------------------------------------------------------------------- Ford Motor Credit Company LLC 7.88% 06/15/10............ $194,000 $ 167,452 Galaxy Entertainment Finance Company Ltd. 9.88% 12/15/12............ 100,000 97,000 (f) GlaxoSmithKline Capital Inc. 4.85% 05/15/13............ 76,000 75,898 6.38% 05/15/38............ 38,000 37,720 Globo Comunicacoe e Participacoes S.A. 7.25% 04/26/22............ 100,000 99,000 (a) GMAC LLC 6.88% 09/15/11............ 194,000 139,403 Goldman Sachs Group, Inc. 5.95% 01/18/18............ 38,000 36,478 6.15% 04/01/18............ 42,000 40,747 6.60% 01/15/12............ 200,000 205,656 (f) 6.88% 01/15/11............ 100,000 103,808 Harrah's Operating Company Inc. 10.75% 02/01/16............ 194,000 161,020 (a) HCA Inc. 9.25% 11/15/16............ 194,000 199,820 Hewlett-Packard Co. 5.50% 03/01/18............ 108,000 105,776 Hexion US Finance Corp/Hexion Nova Scotia Finance ULC 9.75% 11/15/14............ 260,000 235,300 (f) Honeywell International, Inc. 5.30% 03/01/18............ 98,000 96,538 HSBC Bank USA N.A. 4.63% 04/01/14............ 50,000 47,487 7.00% 01/15/39............ 250,000 244,606 HSBC Capital Funding LP (Series 1) 9.55% 12/29/49............ 44,000 45,909 (a,f) HSBC Finance Corp. 6.75% 05/15/11............ 95,000 98,727 HSBC Holdings PLC 6.50% 05/02/36............ 100,000 92,977 (f) Hydro Quebec 8.50% 12/01/29............ 75,000 106,078 (f) IIRSA Norte Finance Ltd. 8.75% 05/30/24............ 156,388 173,591 (a,f) ING Capital Funding TR III 8.44% 12/29/49............ 175,000 176,820 ING Groep N.V. 5.78% 12/29/49............ 35,000 29,049 Intergen N.V. 9.00% 06/30/17............ 197,000 203,895 (a) International Steel Group Inc. 6.50% 04/15/14............ 145,000 147,003 Interoceanica IV Finance Ltd. 4.31% 11/30/18............ 150,000 96,165 (a,c) 4.53% 11/30/25............ 147,635 67,661 (a,c) Iron Mountain Inc. 8.00% 06/15/20............ 195,000 192,075 John Deere Capital Corp. 4.50% 04/03/13............ 148,000 146,152 See Notes to Schedule of Investments on page 13 and Notes to Financial Statements. 8 INCOME FUND Schedule of Investments June 30, 2008 (unaudited) -------------------------------------------------------------------------------- PRINCIPAL AMOUNT VALUE -------------------------------------------------------------------------------- JP Morgan Chase Bank 5.88% 06/13/16............ $ 25,000 $ 24,412 JPMorgan Chase & Co. 6.40% 05/15/38............ 117,000 108,522 Kroger Co. 6.15% 01/15/20............ 118,000 116,751 Lehman Brothers Holdings, Inc. 2.85% 12/23/08............ 20,000 19,617 (g) 3.00% 10/22/08............ 43,000 42,838 (g) 5.63% 01/24/13............ 71,000 67,202 6.88% 05/02/18............ 155,000 150,056 Lippo Karawaci Finance BV 8.88% 03/09/11............ 150,000 145,595 LyondellBasell Industries AF SCA 8.38% 08/15/15............ 300,000 190,500 (a) Marfrig Overseas Ltd. 9.63% 11/16/16............ 140,000 134,400 (a) Markel Corp. 7.35% 08/15/34............ 55,000 53,851 (f) McDonald's Corp. 5.80% 10/15/17............ 80,000 81,661 6.30% 03/01/38............ 109,000 107,976 Mediacom LLC/Mediacom Capital Corp. 9.50% 01/15/13............ 230,000 216,775 (f) Merck & Company, Inc. 5.75% 11/15/36............ 70,000 66,890 (f) Merrill Lynch & Company, Inc. 6.88% 04/25/18............ 82,000 78,042 Midamerican Energy Holdings Co. 6.13% 04/01/36............ 115,000 110,430 (f) Mizuho Financial Group Cayman Ltd. 8.38% 12/29/49............ 75,000 75,151 Morgan Stanley 6.00% 04/28/15............ 100,000 95,602 Morgan Stanley (Series F) 6.63% 04/01/18............ 100,000 94,753 Munich Re America Corp. (Series B) 7.45% 12/15/26............ 105,000 105,171 (f) NAK Naftogaz Ukrainy 8.13% 09/30/09............ 100,000 97,500 Nakilat Inc. 6.07% 12/31/33............ 215,000 190,152 (a,f) 6.27% 12/31/33............ 130,000 115,479 (a,f) Nelnet, Inc. 5.13% 06/01/10............ 205,000 186,912 (f) NGPL PipeCo LLC 7.12% 12/15/17............ 81,000 82,787 (a) Norfolk Southern Corp. 8.63% 05/15/10............ 155,000 166,063 (f) Norfolk Southern Railway Co. 9.75% 06/15/20............ 170,000 207,766 (f) Northern States Power 6.25% 06/01/36............ 65,000 66,445 (f) NorthWestern Corp. 5.88% 11/01/14............ 85,000 83,659 (f) NRG Energy, Inc. 7.38% 02/01/16............ 195,000 183,544 PRINCIPAL AMOUNT VALUE -------------------------------------------------------------------------------- OPTI Canada Inc. 8.25% 12/15/14............ $132,000 $ 131,340 Pacific Bell Telephone Co. 7.13% 03/15/26............ 60,000 60,545 (f) Pacific Gas & Electric Co. 5.80% 03/01/37............ 105,000 97,894 Parker Hannifin Corp. 5.50% 05/15/18............ 78,000 78,245 Pemex Finance Ltd. 9.03% 02/15/11............ 35,750 38,163 (f) Pemex Project Funding Master Trust 5.75% 03/01/18............ 30,000 29,625 (a) 7.88% 02/01/09............ 53,000 54,421 PepsiCo, Inc. 5.00% 06/01/18............ 194,000 189,278 Pitney Bowes, Inc. 3.88% 06/15/13............ 89,000 83,872 PNC Preferred Funding Trust I 6.52% 12/31/49............ 125,000 99,666 (a) Potomac Edison Co. 5.35% 11/15/14............ 95,000 93,100 (f) Puget Sound Energy, Inc. 5.48% 06/01/35............ 110,000 92,413 (f) Puget Sound Energy, Inc. (Series A) 6.97% 06/01/67............ 210,000 180,431 Rock-Tenn Co. 8.20% 08/15/11............ 285,000 293,550 Royal Bank of Scotland Group PLC 5.00% 10/01/14............ 115,000 110,206 (f) Sabine Pass LNG LP 7.25% 11/30/13............ 185,000 168,350 7.50% 11/30/16............ 265,000 238,500 Security Benefit Life Insurance 8.75% 05/15/16............ 120,000 125,317 (a) Sierra Pacific Resources 8.63% 03/15/14............ 150,000 157,247 Skandinaviska Enskilda Banken AB 7.50% 03/29/49............ 250,000 250,518 (a,f) Southern Copper Corp. 7.50% 07/27/35............ 29,000 28,397 Sprint Capital Corp. 7.63% 01/30/11............ 54,000 53,055 Standard Chartered Bank Hong Kong Ltd. 4.38% 12/03/14............ 210,000 206,619 Stewart Enterprises, Inc. 6.25% 02/15/13............ 135,000 128,250 (f) Suncor Energy, Inc. 6.10% 06/01/18............ 78,000 78,236 Telecom Italia Capital S.A. 6.20% 07/18/11............ 81,000 82,597 Telefonica Emisiones SAU 5.86% 02/04/13............ 150,000 151,002 Tenneco, Inc. 8.63% 11/15/14............ 194,000 171,205 Tesco PLC 5.50% 11/15/17............ 100,000 97,299 (a) See Notes to Schedule of Investments on page 13 and Notes to Financial Statements. 9 INCOME FUND Schedule of Investments June 30, 2008 (unaudited) -------------------------------------------------------------------------------- PRINCIPAL AMOUNT VALUE -------------------------------------------------------------------------------- The Travelers Companies Inc. 5.80% 05/15/18............ $116,000 $ 112,863 Time Warner Cable, Inc. 6.20% 07/01/13............ 116,000 117,957 6.75% 07/01/18............ 116,000 116,769 Titan Petrochemicals Group Ltd. 8.50% 03/18/12............ 35,000 18,550 (a) TNK-BP Finance S.A. 6.63% 03/20/17............ 100,000 88,500 (a) Transocean, Inc. 6.00% 03/15/18............ 109,000 109,163 Tronox Worldwide LLC 9.50% 12/01/12............ 180,000 146,700 (f) UBS Preferred Funding Trust I 8.62% 10/29/49............ 125,000 125,605 United Technologies Corp. 6.13% 07/15/38............ 79,000 79,357 Verizon Global Funding Corp. 7.25% 12/01/10............ 193,000 204,898 Verizon Pennsylvania, Inc. 8.35% 12/15/30............ 70,000 78,612 (f) 8.75% 08/15/31............ 110,000 128,591 (f) VTB Capital S.A. 3.38% 08/01/08............ 115,000 113,850 (a,f,g) Wachovia Corp. (Series K) 7.98% 12/31/49............ 76,000 69,798 Wal-Mart Stores, Inc. 5.80% 02/15/18............ 78,000 80,761 6.20% 04/15/38............ 120,000 117,669 Weatherford International, Inc. 5.95% 06/15/12............ 70,000 71,383 Wells Fargo & Co. 5.63% 12/11/17............ 40,000 38,702 Westar Energy, Inc. 7.13% 08/01/09............ 100,000 102,618 (f) Westlake Chemical Corp. 6.63% 01/15/16............ 250,000 210,000 (f) Xerox Corp. 6.35% 05/15/18............ 116,000 114,504 XTO Energy, Inc. 6.38% 06/15/38............ 76,000 72,005 19,680,353 NON-AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 8.0% Banc of America Commercial Mortgage Inc. 5.32% 09/10/47............ 148,000 145,624 (f) Banc of America Commercial Mortgage Inc. (Class A) 5.49% 02/10/51............ 360,000 334,308 6.48% 06/10/49............ 320,000 302,501 (c,g) Banc of America Commercial Mortgage Inc. (Class C) 5.88% 04/10/17............ 100,000 72,050 (f,i) Banc of America Funding Corp. 5.73% 03/20/36............ 69,470 28,196 (f,g,i) 5.80% 02/20/36............ 174,087 79,004 (f,i) PRINCIPAL AMOUNT VALUE -------------------------------------------------------------------------------- Banc of America Mortgage Securities Inc. (Class B) 5.38% 01/25/36............ $ 74,340 $ 43,489 (f,g) Bear Stearns Commercial Mortgage Securities 5.48% 10/12/41............ 245,000 242,117 (f) 5.53% 10/12/41............ 245,000 236,896 (f) 6.02% 02/14/31............ 273,100 274,183 (f) Bear Stearns Commercial Mortgage Securities (Class D) 6.18% 09/11/42............ 20,000 12,292 (a,i) Countrywide Alternative Loan Trust 5.98% 05/25/36............ 24,397 488 (f,i) 6.00% 03/25/36 - 08/25/36. 131,676 11,164 (f,i) Countrywide Alternative Loan Trust (Class B) 6.00% 05/25/36 - 08/25/36. 63,895 6,311 (f,i) Credit Suisse Mortgage Capital Certificates 5.47% 09/15/39............ 217,000 206,273 (f) Credit Suisse Mortgage Capital Certificates (Class C) 5.65% 02/25/36............ 38,932 11,074 (f,i) Crusade Global Trust (Class A) 3.00% 09/18/34............ 80,002 78,677 (f,g) CS First Boston Mortgage Securities Corp. 1.57% 03/15/35............ 2,982,484 64,926 (a,f,i) 5.25% 08/25/34............ 57,865 54,307 (f) 5.34% 10/25/35............ 73,485 29,394 (f,i) 6.13% 04/15/37............ 175,000 178,592 (f) 6.79% 07/15/37............ 2,378,726 46,615(a,c,f,i) First Union-Lehman Brothers- Bank of America 6.56% 11/18/35............ 1 1 GMAC Commercial Mortgage Securities, Inc. 6.42% 05/15/35............ 53,341 53,259 (f) 6.47% 04/15/34............ 157,110 161,030 (f) GMAC Commercial Mortgage Securities, Inc. (Class X) 6.68% 12/10/41............ 3,518,652 54,730 (c,f,i) Greenwich Capital Commercial Funding Corp. 5.12% 04/10/37............ 301,000 300,382 (f) Indymac INDA Mortgage Loan Trust 5.16% 01/25/36............ 99,700 62,233 (f,i) Indymac INDA Mortgage Loan Trust (Class B) 5.16% 01/25/36............ 99,700 66,297 (f,i) JP Morgan Chase Commercial Mortgage Securities Corp. 1.27% 01/12/39............ 2,252,534 53,276 (a,f,i) 6.40% 02/12/51............ 40,000 26,298 (a,i) 6.47% 11/15/35............ 190,000 195,198 (f) LB-UBS Commercial Mortgage Trust 4.06% 09/15/27............ 326,666 323,959 (f) 6.23% 03/15/26............ 130,000 131,126 (f) 6.62% 01/18/12............ 2,978,356 56,543 (c,f,i) See Notes to Schedule of Investments on page 13 and Notes to Financial Statements. 10 INCOME FUND Schedule of Investments June 30, 2008 (unaudited) -------------------------------------------------------------------------------- PRINCIPAL AMOUNT VALUE -------------------------------------------------------------------------------- 11.40% 10/15/35............ $ 754,533 $ 27,179(a,c,f,i) 12.31% 03/15/36............ 3,164,794 71,218(a,c,f,i) 12.51% 02/15/40............ 2,685,261 46,464(a,c,f,i) LB-UBS Commercial Mortgage Trust (Class A) 6.13% 12/15/30............ 172,000 175,352 (f) LB-UBS Commercial Mortgage Trust (Class B) 6.65% 07/14/16............ 34,000 35,144 (a,f) LB-UBS Commercial Mortgage Trust (Class F) 6.45% 07/15/40............ 70,000 46,470 (i) LB-UBS Commercial Mortgage Trust (Class X) 7.07% 09/15/39............ 6,676,493 168,786 (c,f,i) MASTR Alternative Loans Trust 5.00% 08/25/18............ 148,499 23,017 (c,e,f) MLCC Mortgage Investors, Inc. 5.37% 02/25/36............ 59,995 50,000 (f) Morgan Stanley Capital I 5.28% 12/15/43............ 102,000 100,353 (f) 5.33% 12/15/43............ 102,000 95,928 (f) 5.39% 11/12/41............ 280,000 225,098 (f) 5.44% 02/12/44............ 250,000 239,370 (a) 5.69% 04/15/49............ 600,000 565,796 (f) 5.71% 07/12/44............ 100,000 98,542 (f) 7.11% 04/15/33............ 452,560 460,987 (f) Morgan Stanley Capital I (Class A) 5.36% 02/12/44............ 175,000 170,919 Morgan Stanley Dean Witter Capital I 7.20% 10/15/33............ 156,367 161,801 (f) Morgan Stanley Dean Witter Capital I (Class A) 6.54% 02/15/31............ 10,192 10,440 (f) Nomura Asset Securities Corp. (Class A) 6.59% 03/15/30............ 34,088 34,247 (f) Residential Funding Mortgage Securities I 5.75% 01/25/36............ 97,498 68,557 (f,i) 5.75% 01/25/36............ 97,498 57,726 (f) Wells Fargo Mortgage Backed Securities Trust 5.39% 08/25/35............ 105,897 104,325 (f,g) 5.50% 01/25/36............ 149,991 100,457 (f) 7,080,989 SOVEREIGN BONDS -- 0.5% Banco Nacional de Desenvolvimento Economico e Social 6.37% 06/16/18............ 100,000 99,500 (a) Government of Brazil 8.00% 01/15/18............ 76,000 84,398 Government of Jamaica 8.00% 06/24/19............ 100,000 91,000 Government of Korea Railroad Corp. 5.38% 05/15/13............ 100,000 99,063 (a) PRINCIPAL AMOUNT VALUE -------------------------------------------------------------------------------- Government of Panama 6.70% 01/26/36............ $ 105,000 $ 106,575 480,536 TOTAL BONDS AND NOTES (COST $92,785,618)........... 90,247,344 -------------------------------------------------------------------------------- SECURITIES PURCHASED WITH COLLATERAL FROM SECURITIES ON LOAN -- 13.5% -------------------------------------------------------------------------------- ASSET BACKED -- 10.9% Bear Stearns Asset Backed Securities Trust 2.70% 11/25/35............ 1,406,110 1,357,246 (f,g) Countrywide Asset-Backed Certificates 2.59% 06/25/35............ 318,314 296,769 (f,g) Fleet Home Equity Loan Trust (Class A) 2.73% 01/20/33............ 223,217 155,438 (f,g) Nissan Auto Lease Trust 2.54% 02/15/13............ 1,340,000 1,314,339 (f,g) RAAC Series (Class A) 2.65% 08/25/36............ 4,353,000 3,769,984 (f,g) Residential Asset Mortgage Products, Inc. 2.68% 04/25/35............ 2,878,816 2,673,019 (f,g) 3.14% 12/25/33............ 3,725 3,722 (f,g) Residential Asset Mortgage Products, Inc. (Class A) 3.04% 06/25/32............ 30,339 25,956 (f,g) 9,596,473 CORPORATE NOTES -- 0.6% Morgan Stanley 2.82% 05/07/09............ 550,000 541,422 (g) NON-AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 2.0% JP Morgan Alternative Loan Trust 2.54% 08/25/36............ 458,085 454,695 (f,g) Puma Finance Ltd. (Class A) 2.91% 10/11/34............ 112,505 108,726 (f,g) Residential Accredit Loans, Inc. 2.66% 07/25/36............ 1,824,041 1,246,415 (f,g) 1,809,836 TOTAL SECURITIES PURCHASED WITH COLLATERAL FROM SECURITIES ON LOAN (COST $13,498,165)............ 11,947,731 See Notes to Schedule of Investments on page 13 and Notes to Financial Statements. 11 INCOME FUND Schedule of Investments June 30, 2008 (unaudited) -------------------------------------------------------------------------------- VALUE -------------------------------------------------------------------------------- OTHER INVESTMENTS -- 0.5% -------------------------------------------------------------------------------- GEI Investment Fund (COST $554,067).............. $ 421,091(j) TOTAL INVESTMENT IN SECURITIES (COST $106,837,850).......... 102,616,166 -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 12.1% * -------------------------------------------------------------------------------- GE Money Market Fund Institutional Class 1.93%........................ 10,658,729(c,k) (COST $10,658,729) TOTAL INVESTMENTS (COST $117,496,579).......... 113,274,895 LIABILITIES IN EXCESS OF OTHER ASSETS, NET-- (28.1)%................ (24,830,421) ------------ NET ASSETS-- 100.0% ........... $ 88,444,474 ============ -------------------------------------------------------------------------------- OTHER INFORMATION -------------------------------------------------------------------------------- The GEI Income Fund had the following long futures contracts open at June 30,2008 (unaudited): NUMBER CURRENT UNREALIZED EXPIRATION OF NOTIONAL APPRECIATION/ DESCRIPTION DATE CONTRACTS VALUE (DEPRECIATION) -------------------------------------------------------------------------------- Euro Schatz Futures September 2008 8 $ 1,289,745 $ (1,933) U.S. Treasury Notes 2 Yr. Futures September 2008 63 13,305,797 72,030 U.S. Treasury Notes 5 Yr. Futures September 2008 19 2,100,539 823 The GEI Income Fund had the following short futures contracts open at June 30,2008 (unaudited): NUMBER CURRENT EXPIRATION OF NOTIONAL UNREALIZED DESCRIPTION DATE CONTRACTS VALUE DEPRECIATION -------------------------------------------------------------------------------- U.S. Treasury Notes 10 Yr. Futures September 2008 40 $(4,556,875) $(38,884) -------- $ 32,131 ======== * The financial statement figure presented above for Short-Term Investments includes collateral received from transactions such as loans of portfolio securities and amounts held pending settlement of securities transactions. In evaluating the Fund's net cash level, portfolio management takes into account certain of the Fund's liabilities in excess of other assets, such as liabilities associated with loans of portfolio securities and securities pending settlement, and equitized cash. The Fund's net cash level is not expected to exceed 5%. See Notes to Schedule of Investments on page 13 and Notes to Financial Statements. 12 Notes to Schedule of Investments June 30, 2008 (unaudited) -------------------------------------------------------------------------------- The views expressed in this document reflect our judgment as of the publication date and are subject to change at any time without notice. The securities cited may not represent current or future holdings and should not be considered as a recommendation to purchase or sell a particular security. See the prospectus for complete descriptions of investment objectives, policies, risks and permissible investments. (a) Pursuant to Rule 144A of the Securities Act of 1933, these securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2008, these securities amounted to $5,152,820 or 5.83% of net assets for the GE Investments Income Fund. These securities have been determined to be liquid using procedures established by the Board of Trustees. (b) Settlement is on a delayed delivery or when-issued basis with final maturity to be announced (TBA) in the future. (c) Coupon amount represents effective yield. (d) Principal only securities represent the right to receive the monthly principal payments on an underlying pool of mortgages. No payments of interest on the pool are passed through to the "principal only" holder. (e) Interest only securities represent the right to receive the monthly interest payments on an underlying pool of mortgages. Payments of principal on the pool reduce the value of the "interest only" holding. (f) At June 30, 2008, all or a portion of this security was pledged to cover collateral requirements for futures, options, forward foreign currency contracts and/or TBA's. (g) Variable or floating rate security. The stated rate represents the rate at June 30, 2008. (h) All or a portion of the security is out on loan. (i) Step coupon bond. Security becomes interest bearing at a future date. (j) GE Asset Management ("GEAM"), the investment adviser of the Fund, also serves as investment adviser of the GEI Investment Fund. (k) GEAM, the investment adviser of the Fund, also serves as investment adviser of the GE Money Market Fund. (l) Illiquid securities. * Less than 0.1%. + Percentages are based on net assets as of June 30, 2008. Abbreviations: REMIC Real Estate Mortgage Investment Conduit STRIPS Separate Trading of Registered Interest and Principal of Security TBA To be Announced 13
Financial Highlights Selected data based on a share outstanding throughout the periods indicated ------------------------------------------------------------------------------------------------------------------------------------ INCOME FUND CLASS 1 CLASS 4 ---------------------------------------------------------------------- ------------ 6/30/08+ 12/31/07 12/31/06 12/31/05 12/31/04 12/31/03 6/30/08+ ---------------------------------------------------------------------- ------------ INCEPTION DATE -- -- -- -- -- 1/3/95 5/1/08 Net asset value, beginning of period.... $11.50 $11.80 $11.84 $12.25 $12.61 $12.93 $11.56 INCOME/(LOSS) FROM INVESTMENT OPERATIONS: Net investment income................ 0.20 0.81 0.56 0.61 0.55 0.51 0.12 Net realized and unrealized gains/(losses) on investments..... (0.25) (0.25) (0.04) (0.36) (0.12) (0.04) (0.24) ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INCOME FROM INVESTMENT OPERATIONS. (0.05) 0.56 0.52 0.25 0.43 0.47 (0.12) ------------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS FROM: Net investment income................ -- 0.86 0.56 0.61 0.57 0.56 -- Net realized gains................... -- -- -- 0.05 0.22 0.23 -- Return of capital.................... -- -- -- 0.00(b) -- -- -- ------------------------------------------------------------------------------------------------------------------------------------ TOTAL DISTRIBUTIONS..................... -- 0.86 0.56 0.66 0.79 0.79 -- ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, END OF PERIOD.......... $11.45 $11.50 $11.80 $11.84 $12.25 $12.61 $11.44 ==================================================================================================================================== TOTAL RETURN (a)........................ (0.43)% 4.83% 4.37% 2.04% 3.42% 3.60% (1.04)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $88,435 $93,480 $126,732 $116,558 $135,172 $189,318 $10 Ratios to average net assets: Net investment income*............ 4.55% 5.07% 5.07% 4.49% 3.82% 3.24% 4.04% Expenses*......................... 0.60% 0.61% 0.61% 0.60% 0.59% 0.55% 0.98% Portfolio turnover rate.............. 181% 448% 270% 311% 343% 419% 181%
NOTES TO FINANCIAL HIGHLIGHTS (a) Total returns are historical and assume changes in share price and reinvestment of dividends and capital gains and do not include the effect of insurance contract charges. (b) Less than $0.01 per share. * Annualized for periods less than one year + Unaudited See Notes to Financial Statements. 14
Statement of Assets and Liabilities JUNE 30, 2008 (UNAUDITED) ------------------------------------------------------------------------------------------------------------------------------------ INCOME FUND ------------------------------------------------------------------------------------------------------------------------------------ ASSETS Investments in securities, at market* (cost $106,283,783).............................................. $102,195,075 Investments in affiliated securities, at market (cost $554,067)........................................ 421,091 Short-term affiliated investments (at amortized cost).................................................. 10,658,729 Cash................................................................................................... 4,067 Foreign cash (cost $14,519)............................................................................ 14,684 Income receivables..................................................................................... 831,574 Variation margin receivable............................................................................ 2,239 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL ASSETS....................................................................................... 114,127,459 ------------------------------------------------------------------------------------------------------------------------------------ LIABILITIES Payable upon return of securities loaned............................................................... 11,350,437 Payable for investments purchased...................................................................... 14,120,679 Payable for fund shares redeemed....................................................................... 150,789 Payable to GEAM........................................................................................ 43,473 Accrued other expenses................................................................................. 17,090 Other liabilities...................................................................................... 517 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL LIABILITIES.................................................................................. 25,682,985 ------------------------------------------------------------------------------------------------------------------------------------ NET ASSETS................................................................................................ $ 88,444,474 ==================================================================================================================================== NET ASSETS CONSIST OF: Capital paid in........................................................................................ 94,913,077 Undistributed (distribution in excess of) net investment income............................................................................... 2,078,490 Accumulated net realized gain (loss)................................................................... (4,357,705) Net unrealized appreciation/(depreciation) on: Investments......................................................................................... (4,221,684) Futures............................................................................................. 32,131 Foreign currency related transactions............................................................... 165 ------------------------------------------------------------------------------------------------------------------------------------ NET ASSETS................................................................................................ $ 88,444,474 ==================================================================================================================================== CLASS 1: NET ASSETS................................................................................................ 88,434,579 Shares outstanding ($0.01 par value; unlimited shares authorized)......................................... 7,724,220 Net asset value per share................................................................................. $11.45 CLASS 4: NET ASSETS................................................................................................ 9,895 Shares outstanding ($0.01 par value; unlimited shares authorized)......................................... 865 Net asset value per share................................................................................. $11.44 * Includes $11,066,993 of securities on loan.
See Notes to Financial Statements. 15
Statement of Operations FOR THE SIX MONTHS ENDED JUNE 30, 2008 (UNAUDITED) ------------------------------------------------------------------------------------------------------------------------------------ INCOME FUND ------------------------------------------------------------------------------------------------------------------------------------ INVESTMENT INCOME INCOME: Interest ............................................................................. $ 2,122,829 Interest from affliated investments* ................................................. 231,871 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INCOME ........................................................................... 2,354,700 ------------------------------------------------------------------------------------------------------------------------------------ EXPENSES: Advisory and administrative fees ..................................................... 229,225 Distributors Fees (Note 4) Class 4 ........................................................................... 7 Transfer agent ....................................................................... 36 Director's fees ...................................................................... 1,140 Custody and accounting expenses ...................................................... 38,034 Professional fees .................................................................... 9,970 Registration expenses ................................................................ 2,250 Other expenses ....................................................................... 3,692 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL EXPENSES BEFORE WAIVER AND REIMBURSEMENT ......................................... 284,354 ------------------------------------------------------------------------------------------------------------------------------------ Less: Expenses reimbursed by the adviser (waiver related to Fund of Fund Investment) . (8,476) ------------------------------------------------------------------------------------------------------------------------------------ Net expenses ......................................................................... 275,878 ------------------------------------------------------------------------------------------------------------------------------------ NET INVESTMENT INCOME (LOSS) ........................................................... 2,078,822 ==================================================================================================================================== NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS REALIZED GAIN (LOSS) ON: Investments ....................................................................... 191,378 Futures ........................................................................... (106,425) Foreign currency transactions ..................................................... 19,947 INCREASE (DECREASE) IN UNREALIZED APPRECIATION/ (DEPRECIATION) ON: Investments ....................................................................... (2,517,173) Futures ........................................................................... 12,683 Foreign currency transactions ..................................................... (11,544) ------------------------------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments ............................... (2,411,134) ------------------------------------------------------------------------------------------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ........................ $ (332,312) ====================================================================================================================================
* Income attributable to security lending, net of rebate expenses, for the Income Fund was $116,219. See Notes to Financial Statements. 16
Statements of Changes in Net Assets ------------------------------------------------------------------------------------------------------------------------------------ INCOME FUND ------------------------------------------------------------------------------------------------------------------------------------ SIX MONTHS ENDED YEAR ENDED JUNE 30, 2008 DECEMBER 31, (UNAUDITED) 2007 ------------------------------------------------------------------------------------------------------------------------------------ INCREASE (DECREASE) IN NET ASSETS OPERATIONS: Net investments income (loss)..................................................... $ 2,078,822 $ 6,063,136 Net realized gain (loss) on investments, futures, written options, and foreign currency transactions............................................... 104,900 (1,836,297) Net increase (decrease) in unrealized appreciation/(depreciation) on investments, futures, written options, and foreign currency translation............................................................ (2,516,034) 869,126 ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) from operations........................................... (332,312) 5,095,965 ------------------------------------------------------------------------------------------------------------------------------------ DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Class 1......................................................................... -- (6,474,080) Class 4......................................................................... -- -- Net realized gains Class 1......................................................................... -- -- Class 4......................................................................... -- -- ------------------------------------------------------------------------------------------------------------------------------------ TOTAL DISTRIBUTIONS................................................................. -- (6,474,080) ------------------------------------------------------------------------------------------------------------------------------------ Increase (decrease) in net assets from operations and distributions................. (332,312) (1,378,115) ------------------------------------------------------------------------------------------------------------------------------------ SHARE TRANSACTIONS: Proceeds from sale of shares Class 1......................................................................... 5,531,231 17,556,568 Class 4......................................................................... 10,000 -- Value of distributions reinvested Class 1......................................................................... -- 6,474,080 Class 4......................................................................... -- -- Cost of shares redeemed Class 1......................................................................... (10,244,543) (55,904,876) Class 4......................................................................... -- -- ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) from share transactions................................... (4,703,312) (31,874,228) ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INCREASE (DECREASE) IN NET ASSETS............................................. (5,035,624) (33,252,343) NET ASSETS Beginning of period................................................................. 93,480,098 126,732,441 ------------------------------------------------------------------------------------------------------------------------------------ End of period ...................................................................... $ 88,444,474 $ 93,480,098 ==================================================================================================================================== UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD........ $ 2,078,490 $ (332) ------------------------------------------------------------------------------------------------------------------------------------ CHANGES IN FUND SHARES CLASS 1 Shares sold............................................................................ 477,494 1,471,130 Issued for distributions reinvested.................................................... -- 567,904 Shares redeemed........................................................................ (885,396) (4,649,537) ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in fund shares................................................. (407,902) (2,610,503) ==================================================================================================================================== CLASS 4 Shares sold............................................................................ 865 -- Issued for distributions reinvested.................................................... -- -- Shares redeemed........................................................................ -- -- ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in fund shares................................................. 865 -- ====================================================================================================================================
See Notes to Financial Statements. 17 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- 1. ORGANIZATION OF THE COMPANY GE Investments Funds, Inc. (the "Company") was incorporated under the laws of the Commonwealth of Virginia on May 14, 1984 and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company. The Company is composed of thirteen investment portfolios (collectively the "Funds"), although only the following eleven are currently being offered: U.S. Equity Fund, S&P 500 Index Fund, Premier Growth Equity Fund, Core Value Equity Fund, Mid-Cap Equity Fund, Small-Cap Equity Fund, International Equity Fund, Total Return Fund, Income Fund (the "Fund"), Money Market Fund and Real Estate Securities Fund. Shares of the Funds of the Company are offered only to insurance company separate accounts that fund certain variable life insurance contracts and variable annuity contracts. These insurance companies may include insurance companies affiliated with GE Asset Management Incorporated ("GEAM"), the investment adviser and administrator of each of the Funds. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results may differ from those estimates. The following summarizes the significant accounting policies of the Fund: SECURITY VALUATION AND TRANSACTIONS The Fund's portfolio securities are valued generally on the basis of market quotations. Equity securities generally are valued at the last reported sales price on the primary market in which they are traded. Portfolio securities listed on NASDAQ are valued using the NASDAQ Official Closing Price, which may not necessarily represent the last sale price. If no sales occurred on the exchange or NASDAQ that day, the portfolio security generally is valued using the last reported bid price. Debt securities (other than short-term securities described below) generally are valued at an evaluated bid as reported by an independent pricing service. Values obtained from pricing services are based on various factors such as market transactions, dealer supplied valuations, security characteristics and other market data. In the absence of a reliable price from such a pricing service, debt securities may be valued based on dealer supplied valuations or quotations. The Fund's written or purchased options are valued at the last sales price, or if no sales occurred that day, at the last reported bid price. Any short-term securities held by the Fund with remaining maturities of sixty days or less at the time of purchase are valued on the basis of amortized cost, which approximates market value. All assets and liabilities of the Fund initially expressed in foreign currency values will be converted into U.S. dollars at the WM/Reuters exchange rate computed at 11:00 a.m., Eastern time. If prices are not readily available for a portfolio security, or if it is believed that a price for a portfolio security does not represent its fair value, the security may be valued using procedures approved by the Fund's Board of Directors that are designed to establish its "fair" value. Those procedures require that the fair value of a security be established by the fair valuation committee. The fair valuation committee follows different protocols for different types of investments and circumstances. The fair value procedures may be used to value any investment by the Fund in the appropriate circumstances. Examples of the types of securities that may be fair valued include: thinly traded or illiquid investments, high-yield securities or foreign securities. Foreign securities may be valued with the assistance of an independent fair value pricing service in circumstances where it is believed that they have been or would be materially affected by events occurring after the close of the portfolio security's primary market and before the close of regular trading on the NYSE. This independent fair value pricing service uses a computerized system to appraise affected securities and portfolios taking into consideration various factors and the fair value of such securities may be something other than the last available quotation or other market price. GEAM may also separately monitor portfolio securities and, consistent with the Fund's fair value procedures, apply a different value to a portfolio security than would be applied had it been priced using market quotations or by an independent fair value pricing service. 18 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- Determining the fair value of securities involves the application of both subjective and objective considerations. Security values may differ depending on the methodology used to determine their values, and may differ from the last quoted sale or closing price. No assurance can be given that use of these fair value procedures will always better represent the price at which the Fund could sell the affected portfolio security. Security transactions are accounted for as of the trade date. Realized gains and losses on investments sold are recorded on the basis of identified cost for both financial statement and federal tax purposes. The Fund adopted FASB Statement No. 157, FAIR VALUE MEASUREMENTS (FAS 157). FAS 157 establishes a single definition of fair value, a framework for measuring fair value, and expanded disclosures about fair value measurements. Various inputs are used in determining the value of the Funds' investments. These inputs are classified into three broad levels: Level 1 includes quoted prices in active markets of securities identical to those of the Fund. Level 2 includes: 1) quoted prices in active markets for similar securities to those of the Fund; 2) quoted prices for identical or similar securities to those of the Fund that trade in markets in which there are few transactions or the quoted prices are not current; 3) prices based on observable market data such as interest rates and yield curves, volatilities, bond prepayment speeds, and credit risk and; 4) prices based principally on observable market data by use of correlation techniques or other means. Level 3 includes unobservable market inputs used to fair value securities. These inputs are based on assumptions that market participants would use to price securities and may include the adviser's own assumptions. Other financial instruments are derivative instruments that are not reflected in TOTAL INVESTMENTS, such as futures, forwards, swaps, and written options contracts, which are valued based on the unrealized appreciation/depreciation of the instrument.
Level 1 Level 2 Level 3 Total ---------------------------------------------------------------------------------------------------------------------------------- Investments in Securities $33,957,331 $ 75,199,116 $4,118,448 $ 113,274,895 Other Financial Instruments $ 32,131 $ -- $ -- $ 32,131
Following is a reconciliation of securities activity based on Level 3 inputs for which unobservable market inputs were used to determine fair value.
Investments Other Financial in Securities Instruments -------------------------------------------------------------------------------------------------------- Balance at 12/31/07 $ 5,928,445 $ -- Accrued discounts/premiums (291,687) -- Realized gain (loss) (106,327) -- Change in unrealized appreciation (depreciation) 755,113 -- Net purchases (sales) (1,956,528) -- Net transfers in and out of Level 3 (210,568) -- -------------------------------------------------------------------------------------------------------- Balance at 6/30/08 $ 4,118,448 $ --
REPURCHASE AGREEMENTS The Fund may enter into repurchase agreement transactions with respect to instuments that are consistent with the Fund's investment objectives or policies. The Fund's custodian or a third party custodian takes possession of the collateral pledged for investments in repurchase agreements on behalf of the Fund. The Fund values the underlying collateral daily on a mark-to-market basis to determine that the value, including accrued interest, is at least equal to 102% of the repurchase price. In the event the seller defaults and the value of the security declines, or if the seller enters an insolvency proceeding, realization of the collateral by the Fund may be delayed or limited. SECURITY LENDING The Fund may loan securities to brokers, dealers, and financial institutions determined by GEAM to be creditworthy, subject to certain limitations. The Fund continues to receive the interest and dividends on the loaned securities during the term of the loan. The loans of securities are secured by collateral in the form of 19 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- cash or other liquid assets, which are segregated and maintained with the custodian in an amount at least equal to 102% of the current market value of the loaned securities. During the term of the loan, the Fund will record any gain or loss in the market value of its loaned securities and of securities in which cash collateral is invested. The Fund will also earn interest, net of any rebate, from securities in which cash collateral is invested. In the event the counterparty (borrower) does not meet its contracted obligation to return the securities, the Fund may be exposed to the risk of loss of reacquiring the loaned securities at prevailing market prices using the proceeds of the sale of the collateral. FOREIGN CURRENCY Accounting records of the Fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange on a daily basis (on days the New York Stock Exchange is open). Purchases and sales of securities, income receipts and expense payments denominated in foreign currencies are translated into U.S. dollars at the prevailing exchange rate on the respective dates of such transactions. The Fund does not isolate the portion of the results of operations resulting from changes in foreign exchange rates from the fluctuations arising from changes in the market prices of securities during the period. Such fluctuations are included in the net realized or unrealized gain or loss from investments. Net realized gains or losses on foreign currency transactions represent net gains or losses on sales and maturities of foreign currency contracts, disposition of foreign currencies, the difference between the amount of net investment income and withholding taxes accrued and the U.S. dollar amount actually received or paid, and gains or losses between the trade and settlement date on purchases and sales of securities. Net unrealized foreign exchange gains and losses arising from changes in the value of other assets and liabilities as a result of changes in foreign exchange rates are included as increases or decreases in unrealized appreciation/depreciation on foreign currency related transactions. FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or bond index futures contracts subject to certain limitations. The Fund may invest in futures contracts to manage its exposure to the stock and bond markets and fluctuations in currency values. Buying futures tends to increase the Fund's exposure to the underlying instrument while selling futures tends to decrease the Fund's exposure to the underlying instrument, or hedge other Fund investments. The Fund will not enter into a transaction involving futures for speculative purposes. The Fund's risks in using these contracts include changes in the value of the underlying instruments, non-performance of the counterparties under the contracts' terms and changes in the liquidity of the secondary market for the contracts. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they principally trade. Upon entering into a futures contract, the Fund is required to pledge to the broker an amount of cash and/or other assets equal to a certain percentage of the contract amount, known as initial margin deposit. Subsequent payments, known as variation margin, are made or received by the Fund each day, depending on the daily fluctuation in the fair value of the underlying security. The Fund records an unrealized gain or loss equal to the daily variation margin. Should market conditions move unexpectedly, the Fund may not achieve the anticipated benefits of the futures contracts and may incur a loss. The Fund recognizes a realized gain or loss on the expiration or closing of a futures contract. OPTIONS The Fund may purchase and write options, subject to certain limitations. The Fund may invest in options contracts to manage its exposure to the stock and bond markets and fluctuations in foreign currency values. Writing puts and buying calls tend to increase the Fund's exposure to the underlying instrument while buying puts and writing calls tend to decrease the Fund's exposure to the underlying instrument, or hedge other Fund investments. The Fund will not enter into a transaction involving options for speculative purposes. The Fund's risks in using these contracts include changes in the value of the underlying instruments, non-performance of the counterparties under the contracts' terms and changes in the liquidity of the secondary market for the contracts. Options are valued at the last sale price, or if no sales occurred on that day, at the last quoted bid price. When the Fund writes an option, the amount of the premium received is recorded as a liability and is subsequently adjusted to the current fair value of the option written. Premiums received from writing options that expire unexercised are treated by the Fund on the expiration date as realized gains from investments. The difference between the premium and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, 20 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- or if the premium is less than the amount paid for the closing purchase, as a realized loss. When an option is exercised, the proceeds from the sale of the underlying security or the cost basis of the securities purchased is adjusted by the original premium received or paid. SWAP CONTRACTS As part of the investment strategy, the Fund may invest in swap agreements, which are agreements to exchange the return generated by one instrument for the return generated by another instrument. Total return swap agreements involve commitments to pay interest in exchange for a market linked return based upon a notional principal amount. To the extent the total return of the security or index underlying the agreement exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty. Swaps are marked to market daily based upon the underlying security or index. Payments received or made are recorded as realized gain or loss in the Statement of Operations. Entering into swap agreements involves, to varying degrees, elements of credit and market risk in excess of the amounts recognized on the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparty to the agreements may default on its obligation to perform and that there may be unfavorable changes in the value of the index or securities underlying the agreement. Notional principal amounts are used to express the extent of involvement in these transactions, but the amounts potentially subject to credit risk are much smaller. WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS The Fund may purchase or sell securities on a when-issued or forward commitment basis. These transactions are arrangements in which the Fund purchases and sells securities with payment and delivery scheduled a month or more after entering into the transactions. The price of the underlying securities and the date when these securities will be delivered and paid for are fixed at the time the transaction is negotiated. Losses may arise due to changes in the market value of the underlying securities or if the counterparty does not perform under the contracts. In connection with such purchases, the Fund maintains cash or liquid assets in an amount equal to purchase commitments for such underlying securities until settlement date and for sales commitments, the Fund maintains equivalent deliverable securities as "cover" for the transaction. Unsettled commitments are valued at the current market value of the underlying security. Daily fluctuations in the value of such contracts are recorded as unrealized gains or losses. The Fund will not enter into such commitments for the purpose of investment leverage. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS The Fund may enter into forward foreign currency exchange contracts to facilitate transactions in foreign denominated securities and to manage the Fund's currency exposure. Forward foreign currency exchange contracts are valued at the mean between the bid and the offered forward rates as last quoted by a recognized dealer. The aggregate principal amounts of the contracts are not recorded in the Fund's financial statements. Such amounts appear under the caption forward foreign currency contracts in the Schedule of Investments. Fluctuations in the value of the contracts are recorded in the Statement of Assets and Liabilities as an asset (or liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized gains or losses on foreign currency related transactions. The Fund's risks in using these contracts include changes in the value of foreign currency or the possibility that the counterparties do not perform under the contracts' terms. When the Fund enters into a forward foreign currency exchange contract, it is required to segregate cash or liquid securities with its custodian in an amount equal to the value of the Fund's total assets committed to the consummation of the forward contract. If the value of the segregated securities declines, additional cash or securities is segregated so that the value of the account will equal the amount of the Fund's commitment with respect to the contract. INVESTMENTS IN FOREIGN MARKETS Investments in foreign markets may involve special risks and considerations not typically associated with investing in the United States. These risks include revaluation of currencies, high rates of inflation, repatriation on income and capital, and adverse political and economic developments. Moreover, securities issued in these markets may be less liquid, subject to government ownership controls, tariffs and taxes, subject to delays in settlements, and their prices may be more volatile. The Fund may be subject to capital gains and repatriation taxes imposed by certain countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued based upon net investment income, net realized gains and net unrealized appreciation as income and/or capital gains are earned. 21 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- INCOME TAXES The Fund intends to comply with all sections of the Internal Revenue Code applicable to regulated investment companies including the distribution of substantially all of its taxable net investment income and net realized capital gains to its shareholders. Therefore, no provision for federal income tax has been made. The Fund is treated as a separate taxpayer for federal income tax purposes. At June 30, 2008, information on the tax cost of investments is as follows:
Cost of Gross Tax Gross Tax Net Tax Investments for Unrealized Unrealized Depreciation Tax Purposes Appreciation Depreciation on Investments ------------------------------------------------------------------------------------------------------------------------ $117,045,518 $905,596 $(5,230,286) $(4,324,690)
As of December 31, 2007, the Fund has capital loss carryovers as indicated below. Capital loss carryovers are available to offset future realized capital gains to the extent provided in the Internal Revenue Code and regulations thereunder. To the extent that these carryover losses are used to offset future capital gains, it is probable that the gains so offset will not be distributed to shareholders because they would be taxable as ordinary income. Amount Expires --------------------------------------------------------------------- $1,055,894 12/31/13 1,322,182 12/31/14 1,315,125 12/31/15 Any net capital and currency losses incurred after October 31, within the Fund's tax year, are deemed to arise on the first day of the Fund's next tax year if the Fund so elects to defer such losses. The Fund elected to defer losses incurred after October 31, 2007 as follows: Capital Currency --------------------------------------------------------------------- $647,022 $332 The tax composition of distributions paid during the years ended December 31, 2007 and December 31, 2006 were as follows: Long-Term Return Ordinary Capital of Income Gains Capital Total -------------------------------------------------------------------------------- 2007 $6,169,021 $-- $305,059 $6,474,080 2006 5,692,439 -- -- 5,692,439 DISTRIBUTIONS TO SHAREHOLDERS The Fund declares and pays dividends from net investment income annually. The Fund declares and pays net realized capital gains in excess of capital loss carryforwards distributions annually. The character of income and gains to be distributed is determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences include (but are not limited to) futures, treatment of realized gains and losses on foreign currency contracts and losses deferred due to wash sale transactions. Reclassifications due to permanent book/tax differences are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. These reclassifications have no impact on net investment income, realized gains or losses, or the net asset value of the Fund. The calculation of net investment income per share in the Financial Highlights table excludes these adjustments. The reclassifications for the year ended December 31, 2007 were as follows: Undistributed (Distribution in Excess of) Net Investment Accumulated Paid in Income Net Realized Gain Capital -------------------------------------------------------------------------------- $335,829 $(30,770) $(305,059) On June 29, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in Income Taxes." FIN48 provides guidance for how certain uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN48 requires evaluation of tax positions taken or expected to be taken in the course of 22 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- preparing the Fund's tax returns to determine whether the tax positions are "more likely than not" of being sustained by the applicable tax authority. The adoption of FIN48 did not have an impact on the Fund's net assets and financial statements. The Funds' 2004, 2005, 2006 and 2007 calendar years tax returns are still open to examination by the Federal and applicable state tax authorities. INVESTMENT INCOME Corporate actions (including cash dividends) are recorded on the ex-dividend date, net of applicable withholding taxes, except for certain foreign corporate actions, which are recorded as soon after ex-dividend date as such information becomes available. Interest income is recorded on the accrual basis. All discounts and premiums on bonds are accreted and amortized, respectively, to call or maturity date, whichever is shorter, using the effective yield method. EXPENSES Expenses of the Company which are directly identifiable to the Fund are allocated to the portfolio. Expenses which are not directly identifiable to the Fund are allocated in such a manner as deemed equitable, taking into consideration the nature and type of expenses and relative size of the Fund. All expenses of the Fund are paid by GEAM and reimbursed by the Fund. 3. LINE OF CREDIT The Company shares a revolving credit facility of up to $150 million with a number of its affiliates. The credit facility is with its custodian bank, State Street Bank and Trust Company. The revolving credit facility requires the payment of a commitment fee equal to 0.09% per annum on the daily unused portion of the credit facility, payable quarterly. The portion borne by the Funds generally is borne proportionally based upon net assets. In addition, the Company has a $100 million uncommitted, unsecured line of credit with State Street. Generally, borrowings under the credit facilities would accrue interest at the Federal Funds Rate plus 50 basis points and would be borne by the borrowing Fund. The maximum amount allowed to be borrowed by any one Fund is the lesser of (i) its prospectus limitation or (ii) 20% of its net assets. The credit facilities were not utilized by the Fund during the period ended June 30, 2008. 4. AMOUNTS PAID TO AFFILIATES ADVISORY AND ADMINISTRATION FEES GEAM, a registered investment adviser, was retained by the Company's Board of Directors effective May 1, 1997 to act as investment adviser and administrator of the Fund. Compensation of GEAM for investment advisory and administrative services is paid monthly based on the average daily net assets of the Fund at an annualized rate of .50%. GENPACT performs certain accounting and certain administration services not provided by GEAM. For the period ended June 30, 2008, $730 was charged to the Fund. DISTRIBUTION AND SHAREHOLDER SERVICING FEES The Fund has adopted a Shareholder Servicing and Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act with respect to the Class 4 shares of the Fund. The Fund pays GE Investment Distributors, Inc. ("GEID"), a wholly-owned subsidiary of GEAM and the Fund's principal underwriter, a monthly fee for distribution and/or shareholder services provided, at an annual rate of the average daily net assets attributable to each applicable class of shares. The annual rate applicable is 0.45% for the Class 4 shares. Currently, Class 1 shares are not subject to a Rule 12b-1 fee. DIRECTORS' COMPENSATION The Fund pays no compensation to its directors who are officers or employees of GEAM or its affiliates. Directors who are not such officers or employees also serve in a similar capacity for other funds advised by GEAM. Compensation paid to unaffiliated directors are reflected on the Statement of Operations. These fees are allocated pro rata across all of the mutual fund platforms and share classes served by the directors, including the Fund, and are based upon the relative net assets of each fund within such platforms. (For additional information about directors compensation please refer to the Statement of Additional Information.) 5. INVESTMENT TRANSACTIONS PURCHASES AND SALES OF SECURITIES The cost of purchases and the proceeds from sales of investments, other than short-term securities and options, for the period ended June 30, 2008 were as follows: Purchases Sales -------------------------------------------------------------------------------- $192,362,312 $187,018,544 SECURITY LENDING At June 30, 2008, the Fund participated in securities lending: Loaned securities at Cash market value collateral -------------------------------------------------------------------------------- $11.066,993 $11,350,437 23 Additional Information (unaudited) -------------------------------------------------------------------------------- INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS: The business and affairs of the Company are managed under the direction of the Company's Board of Directors. Information pertaining to the Directors and officers of the Company is set forth below. INTERESTED DIRECTORS AND EXECUTIVE OFFICERS -------------------------------------------------------------------------------- MICHAEL J. COSGROVE -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 59 POSITION(S) HELD WITH FUND Chairman of the Board and President TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 10 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President - GEAM since February 1997; President and Chief Executive Officer - Mutual Funds at GEAM since March 2007; Vice President, GE Capital Corporation, an indirect wholly-owned subsidiary of GE, since December 1999; Executive Vice President - Sales and Marketing of GEAM, a wholly-owned subsidiary of GE that is registered as an investment adviser under the Investment Advisers Act of 1940, as amended, since March 1993; Director of GEAM since 1988. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48 OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception; Trustee of Elfun Funds, GE Savings & Security Funds and General Electric Pension Trust since 1988; Trustee of Fordham University since 2003; Trustee of Elfun Foundation; Treasurer of GE Foundation; Director, GE Asset Management (Ireland) since February 1999; Director, GE Asset Management Funds Plc, GE Asset Canada Company, GE Asset Management Limited, and GE Volunteers. -------------------------------------------------------------------------------- MATTHEW J. SIMPSON -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 47 POSITION(S) HELD WITH FUND Executive Vice President TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - less than one year PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General Counsel and Secretary of GEAM since July 2007; Senior Vice President and General Counsel - Marketing and Client Services (formerly Asset Management Services), at GEAM and Senior Vice President and General Counsel of GEAMS from February 1997 to June 2007; Vice President and Associate General Counsel of GEAM from October 1992 to February 1997; Secretary of Fund from 1997 to June 2007; Vice President of Fund from September 2003 to June 2007; Vice President of GE Institutional Funds and GE LifeStyle Funds from September 2003 to June 2007; Secretary of GE Institutional Funds and GE LifeStyle Funds from 1997 to June 2007; Vice President of Elfun Funds and GE Savings & Security Funds from October 2003 to June 2007; Assistant Secretary of Elfun Funds and GE Savings & Security Funds from 1998 to June 2007. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional Funds, GE LifeStyle Funds, Elfun Funds and GE Savings & Security Funds since July 2007. 24 Additional Information (unaudited) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SCOTT H. RHODES -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 49 POSITION(S) HELD WITH FUND Treasurer TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 2 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds Operations Manager since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle Funds and GE Investments Funds since November 2005 and Elfun Funds and GE Savings & Security Funds since September 2005; from August 2004 to September 2005 Vice President, U.S. Trust Company, N.A. and Assistant Treasurer of Excelsior Funds, Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds, Inc.; from January 2004 to August 2004, Vice President BlackRock Financial Management, Inc.; from December 1996 to November 2003, Controller - Mutual Funds, American Skandia Investment Services, Inc. and Assistant Treasurer of American Skandia Trust and American Skandia Advisor Funds, Inc. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A -------------------------------------------------------------------------------- JEANNE M. LAPORTA -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 42 POSITION(S) HELD WITH FUND Vice President and Secretary TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 2 years (Vice President); less than one year (Secretary) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Senior Vice President and Deputy General Counsel at GE Asset Management since October 2007; Vice President and Associate General Counsel - Marketing and Client Services (formerly Asset Management Services) at GEAM from May 1997 to October 2007; Vice President and Assistant Secretary of GE Funds, GE Institutional Funds and GE LifeStyle Funds since September 2003; Vice President and Assistant Secretary of Elfun Funds and GE Savings & Security Funds since October 2003; Assistant Secretary from September 2003 to June 2007 and Secretary since July 2007. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A 25 Additional Information (unaudited) -------------------------------------------------------------------------------- NON-INTERESTED DIRECTORS -------------------------------------------------------------------------------- JOHN R. COSTANTINO -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 62 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC since 2006; Managing Director, Walden Partners, Ltd., consultants and investors, since August 1992. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE Institutional Funds and GE LifeStyle Funds since their inception; Trustee of Fordham University since 2002 and Marymount College from 2001 through 2002; Neuroscience Research Institute since 1986; Diocesan Finance Counsel of the Dioceses of Brooklyn & Queens since 2001; Gregorian University Foundation since 1994. -------------------------------------------------------------------------------- WILLIAM J. LUCAS -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 60 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Treasurer of Fairfield University since 1983. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception. -------------------------------------------------------------------------------- ROBERT P. QUINN -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 72 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon Brothers Inc. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception. -------------------------------------------------------------------------------- The Statement of Additional Information for the Fund includes additional information about the Directors and Officers and is available, without charge, upon request by calling 1-800-242-0134. 26 Investment Team -------------------------------------------------------------------------------- INVESTMENT ADVISER AND ADMINISTRATOR GE Asset Management Incorporated BOARD OF DIRECTORS Michael J. Cosgrove, CHAIRMAN John R. Costantino William J. Lucas Robert P. Quinn Matthew J. Simpson SECRETARY Jeanne M. LaPorta ASSISTANT SECRETARIES Joseph A. Carucci Joon Won Choe TREASURER Scott H. Rhodes ASSISTANT TREASURERS Scott R. Fuchs Christopher M. Isaacs DISTRIBUTOR GE Investment Distributors, Inc. Member FINRA and SIPC COUNSEL Sutherland, Asbill & Brennan, LLP CUSTODIAN State Street Bank & Trust Company INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM KPMG LLP OFFICERS OF THE INVESTMENT ADVISER James W. Ireland, CHIEF EXECUTIVE OFFICER Daniel O. Colao, EVP, CHIEF FINANCIAL OFFICER (AS OF JULY 28, 2008) Michael J. Cosgrove, EVP, PRESIDENT AND CHIEF EXECUTIVE OFFICER - MUTUAL FUNDS Paul M. Colonna, EVP, PRESIDENT - FIXED INCOME Kathryn D. Karlic, EVP, PRESIDENT - INSTITUTIONAL SALES AND MARKETING Ralph R. Layman, EVP, PRESIDENT - INTERNATIONAL EQUITIES Matthew J. Simpson, EVP, GENERAL COUNSEL AND SECRETARY Judith A. Studer, EVP, PRESIDENT - U.S. EQUITIES Don W. Torey, EVP, PRESIDENT - ALTERNATIVE INVESTMENTS AND REAL ESTATE John J. Walker, EVP, CHIEF OPERATING OFFICER (AS OF JANUARY 31, 2008) David Wiederecht, EVP, PRESIDENT - INVESTMENT STRATEGIES 27 [This page intentionally left blank.] [This page intentionally left blank.] INVESTMENT ADVISER GE ASSET MANAGEMENT INCORPORATED 3001 SUMMER STREET PO BOX 7900 STAMFORD, CT 06904-7900 DISTRIBUTOR GE INVESTMENT DISTRIBUTORS, INC. MEMBER FINRA AND SIPC 3001 SUMMER STREET PO BOX 7900 STAMFORD, CT 06904-7900 The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities is available without charge (i) upon request, by calling 1-800-242-0134; (ii) on the Fund's website at HTTP://WWW.GEFUNDS.COM; and (iii) on the Commission's website at HTTP://WWW.SEC.GOV. The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC - information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Information (if any) regarding how the Fund voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through the Fund's website at HTTP://WWW.GEFUNDS.COM; and (ii) on the Commission's website at HTTP://WWW.SEC.GOV. [GE logo omitted] GE Investments Funds, Inc. Money Market Fund Semi-Annual Report JUNE 30, 2008 [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 ........................................ 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, 2008 (unaudited) -------------------------------------------------------------------------------- Total returns take into account changes in share price and assume reinvestment of all dividends and capital gains distributions, if any. The performance data quoted represent past performance; past performance does not guarantee future results. Investment return and principal value will fluctuate so your shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data quoted. Periods less than one year are not annualized. Please call 800-242-0134 for the most recent month-end performance data. Total returns shown are net of Fund expenses but do not reflect fees and charges associated with the variable contracts such as administrative fees, account charges and surrender charges, which, if reflected, would reduce the Fund's total returns for all periods shown. Shares of the Fund are neither insured nor guaranteed by the U.S. Government, and their prices will fluctuate with market conditions. The 90 Day T-Bill is an unmanaged measure/index of the performance of U.S. Treasury bills currently available in the marketplace having a remaining maturity of 90 days. The peer universe of the underlying annuity funds used in our peer ranking calculation is based on the blend of Lipper peer categories, as shown. Lipper is an independent mutual fund rating service. A Fund's performance may be compared to or ranked within a universe of mutual funds with investment objectives and policies similar but not necessarily identical to the Fund's. Such comparisons or rankings are made on the basis of several factors, including the Fund's objectives and policies, management style and strategy, and portfolio composition, and may change over time if any of those factors change. ------------------ GE INVESTMENT DISTRIBUTORS, INC., MEMBER OF FINRA & SIPC, IS THE PRINCIPAL UNDERWRITER AND DISTRIBUTOR OF THE GE INVESTMENT FUNDS, INC. AND A WHOLLY OWNED SUBSIDIARY OF GE ASSET MANAGEMENT INCORPORATED, THE INVESTMENT ADVISER OF THE FUNDS. 1 Money Market Fund -------------------------------------------------------------------------------- THE MONEY MARKET FUND IS MANAGED BY A TEAM OF PORTFOLIO MANAGERS THAT INCLUDES JAMES C. GANNON, MICHAEL E. MARTINI AND ANDREW A. MASELLI. AS LEAD PORTFOLIO MANAGER FOR THE MONEY MARKET FUND, MR. MARTINI (PICTURED BELOW) HAS OVERSIGHT RESPONSIBILITIES OVER THE FUND. MICHAEL E. MARTINI IS A PORTFOLIO MANAGER AT GE ASSET MANAGEMENT. HE HAS SERVED ON THE PORTFOLIO MANAGEMENT TEAM FOR THE MONEY MARKET FUND SINCE JOINING GE ASSET MANAGEMENT IN MARCH OF 2008. PRIOR TO JOINING GE ASSET MANAGEMENT, MR. MARTINI WAS A VICE PRESIDENT AT CERES CAPITAL PARTNERS LLC, WHERE HE WORKED AT THE FIRM'S TREASURY DESK FROM MARCH 2006 TO JANUARY 2008, AND A SENIOR VICE PRESIDENT AT PACIFIC INVESTMENT MANAGEMENT COMPANY (PIMCO) FROM 1996 TO 2004, WHERE HE WAS A PORTFOLIO MANAGER AT THE FIRM'S MONEY MARKET/SHORT-TERM DESK. ANDREW A. MASELLI IS AN ASSISTANT PORTFOLIO MANAGER OF GE ASSET MANAGEMENT. HE HAS SERVED ON THE PORTFOLIO MANAGEMENT TEAM FOR THE MONEY MARKET FUND SINCE APRIL 2003. MR. MASELLI JOINED GE ASSET MANAGEMENT IN 1998 AS A DATA INTEGRITY ANALYST IN TRADE OPERATIONS, WHERE HE HELD VARIOUS POSITIONS BOTH IN EQUITIES AND FIXED INCOME SUPPORT. IN 2002, HE WAS PROMOTED TO SENIOR TRADE SUPPORT SPECIALIST WORKING ON THE SHORT-TERM DESK AND BECAME AN ASSISTANT PORTFOLIO MANAGER IN JUNE 2005. JAMES C. GANNON IS AN ASSISTANT PORTFOLIO MANAGER OF GE ASSET MANAGEMENT. HE HAS SERVED ON THE PORTFOLIO MANAGEMENT TEAM FOR THE MONEY MARKET FUND SINCE DECEMBER 2000. SINCE JOINING GE ASSET MANAGEMENT IN 1995, MR. GANNON SERVED IN VARIOUS POSITIONS AT GE ASSET MANAGEMENT INCLUDING TRADE OPERATIONS SPECIALIST IN FIXED INCOME, AND BECAME AN ASSISTANT PORTFOLIO MANAGER IN FEBRUARY 2003. Q. HOW DID THE MONEY MARKET FUND PERFORM COMPARED TO ITS BENCHMARK AND LIPPER PEER GROUP FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2008? A. For the six-month period ended June 30, 2008, the Money Market Fund returned 1.38%. The 90-day Treasury Bill, the Fund's benchmark, returned 0.94% and the Fund's Lipper peer group of 108 Money Market funds returned an average of 1.35% for the same period. Q. DESCRIBE WHAT HAPPENED IN THE U.S. ECONOMY DURING THE SIX-MONTH PERIOD ENDING JUNE 30, 2008. A. About the only positive thing that can be said for the first half of 2008 is that it is over. The credit crisis born in 2007 deepened in the first quarter of this year, threatening the existence of an 85-year old investment bank/broker-dealer. The Federal Reserve moved aggressively to provide liquidity through typical means such as reducing the federal funds rate target by 225 basis points to 2.00%, and introducing [PHOTO OMITTED] 2 Q&A -------------------------------------------------------------------------------- certain new measures including allowing investment banks access to discount window borrowing. The U.S. economy, similar to that of the global economy, showed little growth. 438,000 jobs were lost in the first six months as reported by the Bureau of Labor Statistics (change in non-farm payrolls). Consumer spending ability have been reduced by higher gas prices, lower home prices and job losses. The rise in energy prices along with other commodities has pushed inflation fears higher, especially at the Federal Reserve. Interest rates at the longer end of the maturity spectrum were little changed from the end of last year. The U.S. Treasury 10-year note yield fell 5 bps to 3.97%. Shorter maturity note yields dropped significantly more, especially during the first quarter, as the Federal Reserve was reducing rates. The yield on the U.S. Treasury 2-year note fell 43 bps to 2.62%. The decline in interest rates translated to positive returns for treasury securities for the first six months. Credit sensitive sectors, however, posted negative returns in the same period as credit concerns deepened. In general, higher quality paper performed better than lower quality. Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE? A. Positioning along the short end of the maturity spectrum was the primary driver of the Fund's return. The average portfolio maturity was extended to take advantage of falling short-term yields as the Federal Reserve continued its aggressive monetary policy of lowering the fed funds rate target. 3 Money Market Fund -------------------------------------------------------------------------------- Understanding Your Fund's Expenses As a shareholder of the Fund you incur ongoing expenses, which include portfolio management fees, professional fees, administrative fees and other Fund expenses. The following example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the period. The information in the following table is based on an investment of $1,000, which is invested at the beginning of the period and held for the entire six-month period ended June 30, 2008. ACTUAL EXPENSES The first section of the table provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your class under the heading "Expenses Paid During Period." HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second section of the table provides infor mation about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholders reports of other funds. Please note that the expenses shown in the table do not reflect any transaction costs, such as sales charges or redemption fees.
JANUARY 1, 2008 - JUNE 30, 2008 ------------------------------------------------------------------------------------------------------------------------------------ ACCOUNT VALUE AT ACCOUNT VALUE EXPENSES THE BEGINNING OF AT THE END OF PAID DURING THE PERIOD ($) THE PERIOD ($) THE PERIOD ($)* ------------------------------------------------------------------------------------------------------------------------------------ Actual Fund Return** 1,000.00 1,013.84 2.26 ------------------------------------------------------------------------------------------------------------------------------------ Hypothetical 5% Return (2.5% for the period) 1,000.00 1,022.37 2.27 ------------------------------------------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.45% (FROM PERIOD JANUARY 1, 2008 - JUNE 30, 2008), MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY 182/366 (TO REFLECT THE SIX MONTH PERIOD). ** ACTUAL FUND RETURN FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2008 WAS: 1.38%. 4 Money Market Fund (unaudited) -------------------------------------------------------------------------------- CHANGE IN VALUE OF A $10,000 INVESTMENT -------------------------------------------------------------------------------- [Line chart omitted -- plot points are as follows:] GEI MONEY MARKET 90 DAY T-BILL 06/98 10,000.00 10,000.00 12/98 10,256.75 10,231.96 12/99 10,769.84 10,720.51 12/00 11,441.41 11,364.30 12/01 11,897.49 11,757.74 12/02 12,074.14 11,949.45 12/03 12,168.41 12,072.17 12/04 12,283.44 12,240.90 12/05 12,626.61 12,634.66 12/06 13,213.44 13,243.53 12/07 13,864.11 13,832.61 06/08 14,056.01 13,964.54 Money Market Fund (ending value $14,056) 90-Day T-Bill (ending value $13,965)
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2008 ---------------------------------------------------------------------------------------------- SIX ONE FIVE TEN MONTHS YEAR YEAR YEAR ---------------------------------------------------------------------------------------------- Money Market Fund 1.38% 3.84% 2.99% 3.46% ---------------------------------------------------------------------------------------------- 90 Day T-Bill 0.94% 2.93% 3.05% 3.40% ---------------------------------------------------------------------------------------------- Lipper peer group average* 1.35% 3.72% 2.87% 3.34% ---------------------------------------------------------------------------------------------- Inception date 7/1/85 ----------------------------------------------------------------------------------------------
FUND YIELD AT JUNE 30, 2008 -------------------------------------------------------------------------------- FUND IBC'S MONEY FUND** -------------------------------------------------------------------------------- 7-DAY CURRENT 1.78%+ 1.84% -------------------------------------------------------------------------------- 7-DAY EFFECTIVE 1.80% 1.86% -------------------------------------------------------------------------------- CURRENT YIELD REPRESENTS INCOME EARNED ON AN INVESTMENT IN THE MONEY MARKET FUND FOR A SEVEN DAY PERIOD AND THEN ANNUALIZED. EFFECTIVE YIELD IS CALCULATED SIMILARLY BUT COULD BE SLIGHTLY HIGHER BECAUSE IT REFLECTS THE COMPOUNDING EFFECT OF EARNINGS ON REINVESTED DIVIDENDS. + THE SEVEN DAY CURRENT YIELD, RATHER THAN THE TOTAL RETURN, MORE CLOSELY REFLECTS THE CURRENT EARNINGS OF THE MONEY MARKET FUND AT JUNE 30, 2008. ** IBC'S MONEY FUND REPORT PROVIDES AVERAGE YIELD FOR ALL MAJOR MONEY MARKET FUNDS. AN INVESTMENT IN THE MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE FUND SEEKS TO PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUND. INVESTMENT PROFILE A fund designed for investors who seek a high level of current income consistent with the preservation of capital and maintenance of liquidity by investing primarily in short-term U.S. dollar-denominated money market instruments. * LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR THE SIX MONTHS, ONE YEAR, FIVE-YEAR, AND TEN-YEAR PERIODS INDICATED IN THE MONEY MARKET FUNDS PEER GROUP CONSISTING OF 108, 108, 99 AND 70 UNDERLYING ANNUITY FUNDS, RESPECTIVELY. SEE NOTES TO PERFORMANCE ON PAGE 1 FOR FURTHER INFORMATION, INCLUDING AN EXPLANATION OF LIPPER PEER CATEGORIES. PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE AND THE GRAPH AND TABLE DO NOT REFLECT THE DEDUCTION OF TAXES. 5 MONEY MARKET FUND Schedule of Investments June 30, 2008 (unaudited) -------------------------------------------------------------------------------- MONEY MARKET FUND -------------------------------------------------------------------------------- Portfolio Composition based on a Market Value of $398,885 (in thousands) as of June 30, 2008 [Pie chart omitted -- plot points are as follows:] U.S. Governments 63.9% Repurchase Agreements 26.9% Corporate Notes 6.5% Certificates Of Deposit 2.7% Time Deposit 0.0%* * less than 0.1% PRINCIPAL AMORTIZED AMOUNT COST -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 98.7% + -------------------------------------------------------------------------------- U.S. GOVERNMENTS -- 63.0% U.S. AGENCIES Federal Home Loan Bank Discount Notes 2.08% 07/23/08 $ 8,660,000 $ 8,649,072(a) 2.10% 07/25/08 6,450,000 6,441,034(a) 2.15% 08/15/08 7,810,000 7,789,108(a) 2.18% 11/14/08 2,840,000 2,816,826(a) 2.19% 07/11/08 11,900,000 11,892,761(a) 2.19% 07/16/08 13,060,000 13,048,083(a) 2.21% 07/18/08 4,000,000 3,995,826(a) 2.22% 07/30/08 11,810,000 11,788,975(a) 2.23% 08/29/08 11,520,000 11,478,086(a) Federal Home Loan Bank 2.03% 04/23/09 9,350,000 9,350,000 2.52% 04/21/09 6,000,000 5,999,400 Federal Home Loan Mortgage Discount Notes 2.06% 07/01/08 16,020,000 16,020,000(a) 2.10% 11/03/08 9,920,000 9,848,140(a) 2.14% 07/17/08 16,000,000 15,984,818(a) 2.20% 07/03/08 13,860,000 13,858,306(a) 2.25% 07/23/08 9,620,000 9,606,784(a) 2.26% 07/31/08 9,530,000 9,512,052(a) Federal Home Loan Mortgage 2.06% 03/24/09 13,850,000 13,850,000 PRINCIPAL AMORTIZED AMOUNT COST -------------------------------------------------------------------------------- Federal National Mortgage Assoc. Discount Notes 2.06% 07/09/08 $ 9,000,000 $ 8,995,900(a) 2.09% 09/10/08 15,150,000 15,088,150(a) 2.12% 08/06/08 4,210,000 4,201,159(a) 2.13% 10/22/08 5,000,000 4,966,963(a) 2.14% 09/24/08 6,500,000 6,467,541(a) 2.14% 10/08/08 5,530,000 5,497,760(a) 2.18% 11/12/08 3,000,000 2,975,880(a) 2.20% 07/25/08 18,610,000 18,582,829(a) 2.31% 11/05/08 6,090,000 6,040,909(a) 254,746,362 REPURCHASE AGREEMENTS -- 26.5% Goldman Sachs 2.40% dated 06/30/08, to be repurchased at $33,902,260 on 07/01/08 collateralized by $34,578,043 U.S. Government Agency Bonds, 6.00%, maturing 02/15/26 07/01/08 33,900,000 33,900,000 HSBC 2.50% dated 06/30/08, to be repurchased at $22,002,082 on 07/01/08 collateralized by $22,442,122 U.S. Government Agency Bonds, 4.50% and 4.75%, maturing 10/09/09 and 11/19/12 07/01/08 22,000,000 22,000,000 Morgan Stanley 2.40% dated 06/30/08, to be repurchased at $13,870,925 on 07/01/08 collateralized by $14,166,435 U.S. Government Agency Bonds, 0.00%, maturing 10/31/2008 07/01/08 13,870,000 13,870,000 Barclays Bank 2.50% dated 06/30/08, to be repurchased at $11,600,806 on 07/01/08 collateralized by $11,832,482 U.S. Government Agency Bonds, 5.51%, maturing 01/23/23 07/01/08 11,600,000 11,600,000 Deutsche Bank 2.50% dated 06/30/08, to be repurchased at $25,901,799 on 07/01/08 collateralized by $26,418,662 U.S. Government Agency Bonds, 5.75%, maturing 01/24/23 07/01/08 25,900,000 25,900,000 107,270,000 See Notes to Schedule of Investments on page 8 and Notes to Financial Statements. 6 MONEY MARKET FUND Schedule of Investments June 30, 2008 (unaudited) -------------------------------------------------------------------------------- PRINCIPAL AMORTIZED AMOUNT COST -------------------------------------------------------------------------------- CORPORATE NOTES -- 6.5% Merrill Lynch & Company, Inc. 2.64% 08/22/08 $15,000,000 $ 15,000,000(c) Morgan Stanley Group Inc. (Series F) 2.61% 03/02/09 11,130,000 11,130,000(c) 26,130,000 TIME DEPOSIT -- 0.1% State Street Corp. 1.40% 07/01/08 158,922 158,922(b) CERTIFICATES OF DEPOSIT -- 2.6% Canadian Imperial Bank 2.49% 10/22/08 10,580,000 10,580,000(c) TOTAL SHORT-TERM INVESTMENTS (COST $398,885,284) 398,885,284 OTHER ASSETS AND LIABILITIES, NET-- 1.3% 5,451,361 ------------ NET ASSETS-- 100.0% $404,336,645 ============ See Notes to Schedule of Investments on page 8 and Notes to Financial Statements. 7 Notes to Schedule of Investments June 30, 2008 (unaudited) -------------------------------------------------------------------------------- The views expressed in this document reflect our judgment as of the publication date and are subject to change at any time without notice. The securities cited may not represent current or future holdings and should not be considered as a recommendation to purchase or sell a particular security. See the prospectus for complete descriptions of investment objectives, policies, risks and permissible investments. (a) Coupon amount represents effective yield. (b) State Street Corp. is the parent company of State Street Bank & Trust Co., the Fund's custodian and accounting agent. (c) Variable or floating rate security. The stated rate represents the rate at June 30, 2008. * Less than 0.1%. + Percentages are based on net assets as of June 30, 2008. 8
Financial Highlights Selected data based on a share outstanding throughout the periods indicated ------------------------------------------------------------------------------------------------------ MONEY MARKET FUND 6/30/08+ 12/31/07 12/31/06 ------------------------------------------------------------------------------------------------------ INCEPTION DATE -- -- -- Net asset value, beginning of period ........... 1.00 $1.00 $1.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income ....................... 0.01 0.05 0.05 Net realized and unrealized gains on investments ..................... -- -- -- ------------------------------------------------------------------------------------------------------ TOTAL INCOME FROM INVESTMENT OPERATIONS ........ 0.01 0.05 0.05 ------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS FROM: Net investment income ....................... 0.01 0.05 0.05 Return of capital ........................... -- -- -- ------------------------------------------------------------------------------------------------------ TOTAL DISTRIBUTIONS ............................ 0.01 0.05 0.05 ------------------------------------------------------------------------------------------------------ NET ASSET VALUE, END OF PERIOD ................. $1.00 $1.00 $1.00 ====================================================================================================== TOTAL RETURN (A) ............................... 1.38% 4.92% 4.65% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) .... $404,337 $340,690 $279,622 Ratios to average net assets: Net investment income* ................... 2.76% 4.81% 4.58% Net expenses* ............................ 0.45% 0.48% 0.49% Gross expenses* .......................... 0.45% 0.48% 0.49%
Financial Highlights Selected data based on a share outstanding throughout the periods indicated ------------------------------------------------------------------------------------------------------ MONEY MARKET FUND 12/31/05 12/31/04 12/31/03 -------------------------------------------------------------------------------------------------- INCEPTION DATE -- -- 7/1/85 Net asset value, beginning of period ........... $1.00 $1.00 $1.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income ....................... 0.03 0.01 0.01 Net realized and unrealized gains on investments ..................... -- -- 0.00(b) -------------------------------------------------------------------------------------------------- TOTAL INCOME FROM INVESTMENT OPERATIONS ........ 0.03 0.01 0.01 -------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS FROM: Net investment income ....................... 0.03 0.01 0.01 Return of capital ........................... 0.00(b) -- -- -------------------------------------------------------------------------------------------------- TOTAL DISTRIBUTIONS ............................ 0.03 0.01 0.01 -------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD ................. $1.00 $1.00 $1.00 ================================================================================================== TOTAL RETURN (A) ............................... 2.79% 0.95% 0.78% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) .... $250,149 $278,703 $392,533 Ratios to average net assets: Net investment income* ................... 2.74% 0.92% 0.80% Net expenses* ............................ 0.49% 0.47% 0.43% Gross expenses* .......................... 0.49% 0.47% 0.43%
NOTES TO FINANCIAL HIGHLIGHTS -------------------------------------------------------------------------------- (a) Total returns are historical and assume changes in share price and reinvestment of dividends and capital gains and do not include the effect of insurance contract charges. (b) Less than $0.01 per share. * Annualized for periods less than one year. + Unaudited See Notes to Financial Statements. 9
STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 2008 (UNAUDITED) ---------------------------------------------------------------------------------------------------------------------- MONEY MARKET FUND ---------------------------------------------------------------------------------------------------------------------- ASSETS Short-term Investments (at amortized cost) ..................................................... $398,885,284 Income receivables ............................................................................. 236,864 Receivable for fund shares sold ................................................................ 5,423,347 ---------------------------------------------------------------------------------------------------------------------- TOTAL ASSETS ............................................................................... 404,545,495 ---------------------------------------------------------------------------------------------------------------------- LIABILITIES Payable to GEAM ................................................................................ 153,283 Accrued other expenses ......................................................................... 54,556 Other liabilities .............................................................................. 1,011 ---------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES .......................................................................... 208,850 ---------------------------------------------------------------------------------------------------------------------- NET ASSETS ........................................................................................ $404,336,645 ====================================================================================================================== NET ASSETS CONSIST OF: Capital paid in ................................................................................ 404,400,366 Undistributed (distribution in excess of) net investment income ................................ 148 Accumulated net realized gain (loss) ........................................................... (63,869) ---------------------------------------------------------------------------------------------------------------------- NET ASSETS ........................................................................................ $404,336,645 ====================================================================================================================== NET ASSETS ........................................................................................ 404,336,645 Shares outstanding ($0.01 par value; unlimited shares authorized) ................................. 404,390,200 Net asset value per share ......................................................................... $1.00
See Notes to Financial Statements. 10
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2008 (UNAUDITED) ------------------------------------------------------------------------------------------------------------------ MONEY MARKET FUND ------------------------------------------------------------------------------------------------------------------ INVESTMENT INCOME INCOME: Interest ......................................................................... $ 6,447,487 ------------------------------------------------------------------------------------------------------------------ TOTAL INCOME ....................................................................... 6,447,487 ------------------------------------------------------------------------------------------------------------------ EXPENSES: Advisory and administrative fees ................................................. 850,698 Transfer agent ................................................................... 36 Trustee's fees ................................................................... 4,090 Custody and accounting expenses .................................................. 19,992 Professional fees ................................................................ 12,139 Registration expenses ............................................................ 3,736 Other expenses ................................................................... 8,306 ------------------------------------------------------------------------------------------------------------------ NET EXPENSES .................................................................... 898,997 ------------------------------------------------------------------------------------------------------------------ NET INVESTMENT INCOME (LOSS) ....................................................... 5,548,490 ================================================================================================================== NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .................... $5,548,490 ==================================================================================================================
See Notes to Financial Statements. 11
Statements of Changes in Net Assets ------------------------------------------------------------------------------------------------------------------------------------ MONEY MARKET FUND ------------------------------------------------------------------------------------------------------------------------------------ SIX MONTHS ENDED YEAR ENDED JUNE 30, 2008 DECEMBER 31, (UNAUDITED) 2007 ------------------------------------------------------------------------------------------------------------------------------------ INCREASE (DECREASE) IN NET ASSETS OPERATIONS: Net investments income (loss) .................................................... $ 5,548,490 $ 15,052,575 ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) from operations .......................................... 5,548,490 15,052,575 ------------------------------------------------------------------------------------------------------------------------------------ DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income ............................................................ (5,548,490) (15,052,427) ------------------------------------------------------------------------------------------------------------------------------------ TOTAL DISTRIBUTIONS ................................................................ (5,548,490) (15,052,427) ------------------------------------------------------------------------------------------------------------------------------------ Increase (decrease) in net assets from operations and distributions ................ -- 148 ------------------------------------------------------------------------------------------------------------------------------------ SHARE TRANSACTIONS: Proceeds from sale of shares ..................................................... 178,687,317 248,224,006 Value of distributions reinvested ................................................ 5,548,490 15,052,427 Cost of shares redeemed .......................................................... (120,589,578) (202,208,593) ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) from share transactions .................................. 63,646,229 61,067,840 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INCREASE (DECREASE) IN NET ASSETS ............................................ 63,646,229 61,067,988 NET ASSETS Beginning of period ................................................................ 340,690,416 279,622,428 ------------------------------------------------------------------------------------------------------------------------------------ End of period ...................................................................... $ 404,336,645 $ 340,690,416 ==================================================================================================================================== UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD ........ $ 148 $ 148 CHANGES IN FUND SHARES Shares sold ...................................................................... 178,687,317 248,224,004 Issued for distributions reinvested .............................................. 5,548,490 15,052,426 Shares redeemed .................................................................. (120,589,578) (202,208,593) ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in fund shares ................................................ 63,646,229 61,067,837 ====================================================================================================================================
See Notes to Financial Statements. 12 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- 1. ORGANIZATION OF THE COMPANY GE Investments Funds, Inc. (the "Company") was incorporated under the laws of the Commonwealth of Virginia on May 14, 1984 and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company. The Company is composed of thirteen investment portfolios (collectively the "Funds"), although only the following eleven are currently being offered: U.S. Equity Fund, S&P 500 Index Fund, Premier Growth Equity Fund, Core Value Equity Fund, Mid-Cap Equity Fund, Small-Cap Equity Fund, International Equity Fund, Total Return Fund, Income Fund, Money Market Fund (the "Fund") and Real Estate Securities Fund. Shares of the Funds of the Company are offered only to insurance company separate accounts that fund certain variable life insurance contracts and variable annuity contracts. These insurance companies may include insurance companies affiliated with GE Asset Management Incorporated ("GEAM"), the investment adviser and administrator of each of the Funds. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results may differ from those estimates. The following summarizes the significant accounting policies of the Fund: SECURITY VALUATION AND TRANSACTIONS The Fund's portfolio securities are valued generally on the basis of market quotations. Equity securities generally are valued at the last reported sales price on the primary market in which they are traded. Portfolio securities listed on NASDAQ are valued using the NASDAQ Official Closing Price, which may not necessarily represent the last sale price. If no sales occurred on the exchange or NASDAQ that day, the portfolio security generally is valued using the last reported bid price. Debt securities (other than short-term securities described below) generally are valued at an evaluated bid as reported by an independent pricing service. Values obtained from pricing services are based on various factors such as market transactions, dealer supplied valuations, security characteristics and other market data. In the absence of a reliable price from such a pricing service, debt securities may be valued based on dealer supplied valuations or quotations. The Fund's written or purchased options are valued at the last sales price, or if no sales occurred that day, at the last reported bid price. All portfolio securities of the Money Market Fund and any short-term securities held by any other Fund with remaining maturities of sixty days or less at the time of purchase are valued on the basis of amortized cost, which approximates market value. All assets and liabilities of the Fund initially expressed in foreign currency values will be converted into U.S. dollars at the WM/Reuters exchange rate computed at 11:00 a.m., Eastern time. If prices are not readily available for a portfolio security, or if it is believed that a price for a portfolio security does not represent its fair value, the security may be valued using procedures approved by the Fund's Board of Directors that are designed to establish its "fair" value. Those procedures require that the fair value of a security be established by the fair valuation committee. The fair valuation committee follows different protocols for different types of investments and circumstances. The fair value procedures may be used to value any investment by the Fund in the appropriate circumstances. Examples of the types of securities that may be fair valued include: thinly traded or illiquid investments, high-yield securities or foreign securities. Foreign securities may be valued with the assistance of an independent fair value pricing service in circumstances where it is believed that they have been or would be materially affected by events occurring after the close of the portfolio security's primary market and before the close of regular trading on the NYSE. This independent fair value pricing service uses a computerized system to appraise affected securities and portfolios taking into consideration various factors and the fair value of such securities may be something other than the last available quotation or other market price. GEAM may also separately monitor portfolio securities and, consistent with the Fund's fair value procedures, apply a different value to a portfolio security than would 13 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- be applied had it been priced using market quotations or by an independent fair value pricing service. Determining the fair value of securities involves the application of both subjective and objective considerations. Security values may differ depending on the methodology used to determine their values, and may differ from the last quoted sale or closing price. No assurance can be given that use of these fair value procedures will always better represent the price at which the Fund could sell the affected portfolio security. In accordance with Rule 2a-7 of the 1940 Act, GE Money Market Fund values securities initially at cost and, thereafter, securities are assumed to have a constant amortization to maturity of any discount or premium. Amortized cost approximates fair value. Security transactions are accounted for as of the trade date. Realized gains and losses on investments sold are recorded on the basis of identified cost for both financial statement and federal tax purposes. The Fund adopted FASB Statement No. 157, FAIR VALUE MEASUREMENTS (FAS 157). FAS 157 establishes a single definition of fair value, a framework for measuring fair value, and expanded disclosures about fair value measurements. Various inputs are used in determining the value of the Fund's investments. These inputs are classified into three broad levels: Level 1 includes quoted prices in active markets of securities identical to those of the Fund. Level 2 includes: 1) quoted prices in active markets for similar securities to those of the Fund; 2) quoted prices for identical or similar securities to those of the Fund that trade in markets in which there are few transactions or the quoted prices are not current; 3) prices based on observable market data such as interest rates and yield curves, volatilities, bond prepayment speeds, and credit risk and; 4) prices based principally on observable market data by use of correlation techniques or other means. Level 3 includes unobservable market inputs used to fair value securities. These inputs are based on assumptions that market participants would use to price securities and may include the adviser's own assumptions. Other financial instruments are derivative instruments that are not reflected in TOTAL INVESTMENTS, such as futures, forwards, swaps, and written options contracts, which are valued based on the unrealized appreciation/depreciation of the instrument.
Level 1 Level 2 Level 3 Total ------------------------------------------------------------------------------------------------------------------------------------ Investments in Securities $-- $ 398,885,284 $-- $ 398,885,284 Other Financial Instruments $-- $ -- $-- $ --
REPURCHASE AGREEMENTS The Fund may enter into repurchase agreement transactions with respect to instruments that are consistent with the Fund's investment objectives or policies. The Fund's Custodian or a third party custodian takes possession of the collateral pledged for investments in repurchase agreements on behalf of the Fund. The Fund values the underlying collateral daily on a mark-to-market basis to determine that the value, including accrued interest, is at least equal to 102% of the repurchase price. In the event the seller defaults and the value of the security declines, or if the seller enters an insolvency proceeding, realization of the collateral by the Fund may be delayed or limited. FOREIGN CURRENCY Accounting records of the Fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange on a daily basis (on days the New York Stock Exchange is open). Purchases and sales of securities, income receipts and expense payments denominated in foreign currencies are translated into U.S. dollars at the prevailing exchange rate on the respective dates of such transactions. The Fund does not isolate the portion of the results of operations resulting from changes in foreign exchange rates from the fluctuations arising from changes in the market prices of securities during the period. Such fluctuations are included in the net realized or unrealized gain or loss from investments. Net realized gains or losses on foreign currency transactions represent net gains or losses on sales and maturities of foreign currency contracts, disposition of foreign currencies, the difference between the amount of net investment income and withholding taxes accrued and the U.S. dollar amount actually received or paid, and gains or losses between the trade and settlement date on purchases and sales of 14 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- securities. Net unrealized foreign exchange gains and losses arising from changes in the value of other assets and liabilities as a result of changes in foreign exchange rates are included as increases or decreases in unrealized appreciation/depreciation on foreign currency related transactions. INVESTMENTS IN FOREIGN MARKETS Investments in foreign markets may involve special risks and considerations not typically associated with investing in the United States. These risks include revaluation of currencies, high rates of inflation, repatriation on income and capital, and adverse political and economic developments. Moreover, securities issued in these markets may be less liquid, subject to government ownership controls, tariffs and taxes, subject to delays in settlements, and their prices may be more volatile. The Fund may be subject to capital gains and repatriation taxes imposed by certain countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued based upon net investment income, net realized gains and net unrealized appreciation as income and/or capital gains are earned. INCOME TAXES The Fund intends to comply with all sections of the Internal Revenue Code applicable to regulated investment companies including the distribution of substantially all of its taxable net investment income and net realized capital gains to its shareholders. Therefore, no provision for federal income tax has been made. The Fund is treated as a separate taxpayer for federal income tax purposes. At June 30, 2008, information on the tax cost of investments is as follows:
Net Tax Cost of Gross Tax Gross Tax Appreciation/ Investments for Unrealized Unrealized (Depreciation) Tax Purposes Appreciation Depreciation on Investments ------------------------------------------------------------------------------------------------------------------------------------ $398,885,284 $-- $-- $--
As of December 31, 2007, the Fund has capital loss carryovers as indicated below. Capital loss carryovers are available to offset future realized capital gains to the extent provided in the Internal Revenue Code and regulations thereunder. To the extent that these carryover losses are used to offset future capital gains, it is probable that the gains so offset will not be distributed to shareholders because they would be taxable as ordinary income. Amount Expires -------------------------------------------------------------------------------- $63,869 12/31/10 Any net capital and currency losses incurred after October 31, within the Fund's tax year, are deemed to arise on the first day of the Fund's next tax year if the Fund so elects to defer such losses. The Fund incurred no such losses after October 31, 2007. The tax composition of distributions paid during the years ended December 31, 2007 and December 31, 2006 were as follows: Long-Term Ordinary Capital Income Gains Total -------------------------------------------------------------------------------- 2007 $15,052,427 $-- $15,052,427 2006 12,896,680 -- 12,896,680 DISTRIBUTIONS TO SHAREHOLDERS The Fund declares net investment income dividends daily and pays them monthly. The character of income and gains to be distributed is determined in accordance with income tax regulations which may differ from generally accepted accounting principles. Reclassifications due to permanent book/tax differences are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. These reclassifications have no impact on net investment income, realized gains or losses, or the net asset value of the Fund. The calculation of net investment income per share in the Financial Highlights table excludes these adjustments. There were no reclassifications for the year ended December 31, 2007. 15 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- On June 29, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in Income Taxes." FIN48 provides guidance for how certain uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN48 requires evaluation of tax positions taken or expected to be taken in the course of preparing the Fund's tax returns to determine whether the tax positions are "more likely than not" of being sustained by the applicable tax authority. The adoption of FIN48 did not have an impact on the Fund's net assets and financial statements. The Funds' 2004, 2005, 2006 and 2007 calendar years tax returns are still open to examination by the Federal and applicable state tax authorities. INVESTMENT INCOME Corporate actions (including cash dividends) are recorded on the ex-dividend date, net of applicable withholding taxes, except for certain foreign corporate actions, which are recorded as soon after ex-dividend date as such information becomes available. Interest income is recorded on the accrual basis. All discounts and premiums on bonds are accreted and amortized, respectively, to call or maturity date, whichever is shorter, using the effective yield method. EXPENSES Expenses of the Company which are directly identifiable to the Fund are allocated to the portfolio. Expenses which are not directly identifiable to the Fund are allocated in such a manner as deemed equitable, taking into consideration the nature and type of expenses and relative size of the Fund. All expenses of the Fund are paid by GEAM and reimbursed by the Fund. 3. LINE OF CREDIT The Company shares a revolving credit facility of up to $150 million with a number of its affiliates. The credit facility is with its custodian bank, State Street Bank and Trust Company. The revolving credit facility requires the payment of a commitment fee equal to 0.09% per annum on the daily unused portion of the credit facility, payable quarterly. The portion borne by the Funds generally is borne proportionally based upon net assets. In addition, the Company has a $100 million uncommitted, unsecured line of credit with State Street. Generally, borrowings under the credit facilities would accrue interest at the Federal Funds Rate plus 50 basis points and would be borne by the borrowing Fund. The maximum amount allowed to be borrowed by any one Fund is the lesser of (i) its prospectus limitation or (ii) 20% of its net assets. The credit facilities were not utilized by the Fund during the period ended June 30, 2008. 4. AMOUNTS PAID TO AFFILIATES ADVISORY AND ADMINISTRATION FEES GEAM, a registered investment adviser, was retained by the Company's Board of Directors effective May 1, 1997 to act as investment adviser and administrator of the Fund. Compensation of GEAM for investment advisory and administrative services is paid monthly based on the average daily net assets of the Fund. The advisory and administrative fee is stated in the following schedule: Annualized based on average daily net assets ----------------------------------------- Average Daily Advisory and Net Assets Administration of Fund Fees ---------------------------------------------------------------- Money Market Fund First $100 million .50% Next $100 million .45% Next $100 million .40% Next $100 million .35% Over $400 million .30% GENPACT performs certain accounting and certain administration services not provided by GEAM. For the period ending June 30, 2008, $2,427 was charged to the Fund. DIRECTORS' COMPENSATION The Fund pays no compensation to its directors who are officers or employees of GEAM or its affiliates. Directors who are not such officers or employees also serve in a similar capacity for other funds advised by GEAM. Compensation paid to unaffiliated directors are reflected on the Statement of Operations. These fees are allocated pro rata across all of the mutual fund platforms and share classes served by the directors, including the Fund, and are based upon the relative net assets of each fund within such platforms. (For additional information about directors compensation please refer to the Statement of Additional Information.) 16 Additional Information (unaudited) -------------------------------------------------------------------------------- INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS: The business and affairs of the Company are managed under the direction of the Company's Board of Directors. Information pertaining to the Directors and officers of the Company is set forth below. INTERESTED DIRECTORS AND EXECUTIVE OFFICERS -------------------------------------------------------------------------------- MICHAEL J. COSGROVE -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 59 POSITION(S) HELD WITH FUND Chairman of the Board and President TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 10 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President - GEAM since February 1997; President and Chief Executive Officer - Mutual Funds at GEAM since March 2007; Vice President, GE Capital Corporation, an indirect wholly-owned subsidiary of GE, since December 1999; Executive Vice President - Sales and Marketing of GEAM, a wholly-owned subsidiary of GE that is registered as an investment adviser under the Investment Advisers Act of 1940, as amended, since March 1993; Director of GEAM since 1988. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48 OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception; Trustee of Elfun Funds, GE Savings & Security Funds and General Electric Pension Trust since 1988; Trustee of Fordham University since 2003; Trustee of Elfun Foundation; Treasurer of GE Foundation; Director, GE Asset Management (Ireland) since February 1999; Director, GE Asset Management Funds Plc, GE Asset Canada Company, GE Asset Management Limited, and GE Volunteers. -------------------------------------------------------------------------------- MATTHEW J. SIMPSON -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 47 POSITION(S) HELD WITH FUND Executive Vice President TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - less than one year PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General Counsel and Secretary of GEAM since July 2007; Senior Vice President and General Counsel - Marketing and Client Services (formerly Asset Management Services), at GEAM and Senior Vice President and General Counsel of GEAMS from February 1997 to June 2007; Vice President and Associate General Counsel of GEAM from October 1992 to February 1997; Secretary of Fund from 1997 to June 2007; Vice President of Fund from September 2003 to June 2007; Vice President of GE Institutional Funds and GE LifeStyle Funds from September 2003 to June 2007; Secretary of GE Institutional Funds and GE LifeStyle Funds from 1997 to June 2007; Vice President of Elfun Funds and GE Savings & Security Funds from October 2003 to June 2007; Assistant Secretary of Elfun Funds and GE Savings & Security Funds from 1998 to June 2007. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional Funds, GE LifeStyle Funds, Elfun Funds and GE Savings & Security Funds since July 2007. 17 Additional Information (unaudited) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SCOTT H. RHODES -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 49 POSITION(S) HELD WITH FUND Treasurer TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 2 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds Operations Manager since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle Funds and GE Investments Funds since November 2005 and Elfun Funds and GE Savings & Security Funds since September 2005; from August 2004 to September 2005 Vice President, U.S. Trust Company, N.A. and Assistant Treasurer of Excelsior Funds, Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds, Inc.; from January 2004 to August 2004, Vice President BlackRock Financial Management, Inc.; from December 1996 to November 2003, Controller - Mutual Funds, American Skandia Investment Services, Inc. and Assistant Treasurer of American Skandia Trust and American Skandia Advisor Funds, Inc. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A -------------------------------------------------------------------------------- JEANNE M. LAPORTA -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 42 POSITION(S) HELD WITH FUND Vice President and Secretary TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 2 years (Vice President); less than one year (Secretary) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Senior Vice President and Deputy General Counsel at GE Asset Management since October 2007; Vice President and Associate General Counsel - Marketing and Client Services (formerly Asset Management Services) at GEAM from May 1997 to October 2007; Vice President and Assistant Secretary of GE Funds, GE Institutional Funds and GE LifeStyle Funds since September 2003; Vice President and Assistant Secretary of Elfun Funds and GE Savings & Security Funds since October 2003; Assistant Secretary from September 2003 to June 2007 and Secretary since July 2007. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A 18 Additional Information (unaudited) -------------------------------------------------------------------------------- NON-INTERESTED DIRECTORS -------------------------------------------------------------------------------- JOHN R. COSTANTINO -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 62 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC since 2006; Managing Director, Walden Partners, Ltd., consultants and investors, since August 1992. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE Institutional Funds and GE LifeStyle Funds since their inception; Trustee of Fordham University since 2002 and Marymount College from 2001 through 2002; Neuroscience Research Institute since 1986; Diocesan Finance Counsel of the Dioceses of Brooklyn & Queens since 2001; Gregorian University Foundation since 1994. -------------------------------------------------------------------------------- WILLIAM J. LUCAS -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 60 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Treasurer of Fairfield University since 1983. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception. -------------------------------------------------------------------------------- ROBERT P. QUINN -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 72 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon Brothers Inc. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception. -------------------------------------------------------------------------------- The Statement of Additional Information for the Fund includes additional information about the Directors and Officers and is available, without charge, upon request by calling 1-800-242-0134. 19 Investment Team -------------------------------------------------------------------------------- INVESTMENT ADVISER AND ADMINISTRATOR GE Asset Management Incorporated BOARD OF DIRECTORS Michael J.Cosgrove, CHAIRMAN John R. Costantino William J. Lucas Robert P. Quinn Matthew J. Simpson SECRETARY Jeanne M. LaPorta ASSISTANT SECRETARIES Joseph A. Carucci Joon Won Choe TREASURER Scott H. Rhodes ASSISTANT TREASURERS Scott R. Fuchs Christopher M. Isaacs DISTRIBUTOR GE Investment Distributors, Inc. Member FINRA and SIPC COUNSEL Sutherland, Asbill & Brennan, LLP CUSTODIAN State Street Bank & Trust Company INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM KPMG LLP OFFICERS OF THE INVESTMENT ADVISER James W. Ireland, CHIEF EXECUTIVE OFFICER Daniel O. Colao, EVP, CHIEF FINANCIAL OFFICER (AS OF JULY 28, 2008) Michael J. Cosgrove, EVP, PRESIDENT AND CHIEF EXECUTIVE OFFICER - MUTUAL FUNDS Paul M. Colonna, EVP, PRESIDENT - FIXED INCOME Kathryn D. Karlic, EVP, PRESIDENT - INSTITUTIONAL SALES AND MARKETING Ralph R. Layman, EVP, PRESIDENT - INTERNATIONAL EQUITIES Matthew J. Simpson, EVP, GENERAL COUNSEL AND SECRETARY Judith A. Studer, EVP, PRESIDENT - U.S. EQUITIES Don W. Torey, EVP, PRESIDENT - ALTERNATIVE INVESTMENTS AND REAL ESTATE John J. Walker, EVP, CHIEF OPERATING OFFICER (AS OF JANUARY 31, 2008) David Wiederecht, EVP, PRESIDENT - INVESTMENT STRATEGIES 20 [This page intentionally left blank.] INVESTMENT ADVISER GE ASSET MANAGEMENT INCORPORATED 3001 SUMMER STREET PO BOX 7900 STAMFORD, CT 06904-7900 DISTRIBUTOR GE INVESTMENT DISTRIBUTORS, INC. MEMBER FINRA AND SIPC 3001 SUMMER STREET PO BOX 7900 STAMFORD, CT 06904-7900 The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities is available without charge (i) upon request, by calling 1-800-242-0134; (ii) on the Fund's website at HTTP://WWW.GEFUNDS.COM; and (iii) on the Commission's website at HTTP://WWW.SEC.GOV. The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC - information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Information (if any) regarding how the Fund voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through the Fund's website at HTTP://WWW.GEFUNDS.COM; and (ii) on the Commission's website at HTTP://WWW.SEC.GOV. [GE logo omitted] GE Investments Funds, Inc. Real Estate Securities Fund Semi-Annual Report JUNE 30, 2008 [GE LOGO OMITTED] GE Investments Funds, Inc. Real Estate Securities Fund -------------------------------------------------------------------------------- Contents NOTES TO PERFORMANCE ..................................................... 1 MANAGER REVIEW AND SCHEDULE OF INVESTMENTS ............................... 2 NOTES TO SCHEDULE OF INVESTMENTS ......................................... 7 FINANCIAL STATEMENTS Financial Highlights ................................................ 8 Statement of Assets and Liabilities ................................. 9 Statement of Operations ............................................. 10 Statements of Changes in Net Assets ................................. 11 Notes to Financial Statements ....................................... 12 ADDITIONAL INFORMATION ................................................... 17 INVESTMENT TEAM .......................................................... 20 This report is prepared for Policyholders of certain variable contracts and may be distributed to others only if preceded or accompanied by the variable contract's current prospectus and the current prospectus of the Funds available for investments thereunder. Notes to Performance June 30, 2008 (unaudited) -------------------------------------------------------------------------------- Total returns take into account changes in share price and assume reinvestment of all dividends and capital gains distributions, if any. The performance data quoted represent past performance; past performance does not guarantee future results. Investment return and principal value will fluctuate so your shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data quoted. Periods less than one year are not annualized. Please call 800-242-0134 for the most recent month-end performance data. Total returns shown are net of Fund expenses but do not reflect fees and charges associated with the variable contracts such as administrative fees, account charges and surrender charges, which, if reflected, would reduce the Fund's total returns for all periods shown. Shares of the Fund are neither insured nor guaranteed by the U.S. Government, and their prices will fluctuate with market conditions. NAREIT Equity Index is an unmanaged index of all tax-qualified real estate investment trusts (REITs) listed on the New York Stock Exchange, American Stock Exchange and NASDAQ which have 75% or more of their gross invested book assets invested directly or indirectly in the equity ownership of real estate. The results shown for the foregoing indices assume the reinvestment of net dividends or interest. The peer universe of the underlying annuity funds used in our peer ranking calculation is based on the blend of Lipper peer categories, as shown. Lipper is an independent mutual fund rating service. A Fund's performance may be compared to or ranked within a universe of mutual funds with investment objectives and policies similar but not necessarily identical to the Fund's. Such comparisons or rankings are made on the basis of several factors, including the Fund's objectives and policies, management style and strategy, and portfolio composition, and may change over time if any of those factors change. ----------------- GE INVESTMENT DISTRIBUTORS, INC., MEMBER OF FINRA & SIPC, IS THE PRINCIPAL UNDERWRITER AND DISTRIBUTOR OF THE GE INVESTMENT FUNDS, INC. AND A WHOLLY OWNED SUBSIDIARY OF GE ASSET MANAGEMENT INCORPORATED, THE INVESTMENT ADVISER OF THE FUNDS. 1 Real Estate Securities Fund -------------------------------------------------------------------------------- Q&A URDANG SECURITIES MANAGEMENT, INC. (URDANG) IS THE SUB-ADVISER FOR THE REAL ESTATE SECURITIES FUND. URDANG IS A WHOLLY OWNED SUBSIDIARY OF URDANG CAPITAL MANAGEMENT, INC. (URDANG CAPITAL). URDANG CAPITAL IS WHOLLY OWNED BY THE BANK OF NEW YORK MELLON CORPORATION (BANK OF NEW YORK) AND OPERATES AS PART OF BANK OF NEW YORK'S ASSET MANAGEMENT DIVISION. AS A WHOLLY OWNED SUBSIDIARY OF URDANG CAPITAL, URDANG IS A SECOND TIER SUBSIDIARY OF BANK OF NEW YORK. URDANG IS A REGISTERED INVESTMENT ADVISER THAT WAS FORMED IN 1995 TO FOCUS EXCLUSIVELY ON OPPORTUNITIES IN THE REAL ESTATE SECURITIES MARKET, INCLUDING PUBLICLY TRADED REAL ESTATE INVESTMENT TRUSTS (REITS). THE REAL ESTATE SECURITIES FUND IS CO-MANAGED BY TODD BRIDDELL, CFA, DEAN FRANKEL, CFA AND ERIC ROTHMAN, CFA. TODD BRIDDELL IS A MANAGING DIRECTOR OF REAL ESTATE SECURITIES AND SERVES AS SENIOR PORTFOLIO MANAGER TO THE FUND. HE CO-FOUNDED URDANG SECURITIES MANAGEMENT IN 1995 AND HAS 14 YEARS OF REAL ESTATE INDUSTRY EXPERIENCE. DEAN FRANKEL JOINED THE FIRM IN 1997 AND IS A PORTFOLIO MANAGER. HE MANAGES THE FIRM'S PROPRIETARY RESEARCH EFFORT AND OVERSEES THE FIRM'S TRADING ACTIVITIES. ERIC ROTHMAN JOINED THE FIRM IN 2006 AND IS A PORTFOLIO MANAGER. IN HIS ROLE AS PORTFOLIO MANAGER, MR. ROTHMAN IS RESPONSIBLE FOR ASSISTING MR. FRANKEL FOR THE STRATEGY FOR U.S. REITS, INCLUDING MARKET RESEARCH AND ANALYSIS OF REAL ESTATE SECURITIES. PRIOR TO JOINING URDANG, MR. ROTHMAN WAS AN EQUITY RESEARCH ANALYST AT AEW CAPITAL MANAGEMENT, L.P. FROM AUGUST 2006 TO NOVEMBER 2006 AND WACHOVIA SECURITIES FROM FEBRUARY 2001 TO AUGUST 2006. Q. HOW DID THE REAL ESTATE SECURITIES FUND PERFORM COMPARED TO ITS BENCHMARK AND LIPPER PEER GROUP FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2008? A. For the six-month period ended June 30, 2008, the Real Estate Securities Fund returned -1.84% for the Class 1 shares and -12.35% for the Class 4 shares. The NAREIT Equity Index, the Fund's benchmark, returned -3.59% and the Fund's Lipper peer group of 63 Real Estate funds returned an average of -6.26% for the same period. Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE? A. The Fund outperformed the benchmark by 175 basis points (bps) for the reporting period (net of fees without load). Stock selection generated the majority of the relative outperformance, while sector selection contributed 21bps to the outperformance. Cash drag reduced relative outperformance by 48bps but the effect of intraday trading profits and losses, the timing of cash flows, rounding, and other items not directly captured by our attribution measurement system added approximately 34bps. An underweight to the hotel and industrial sectors, and overweight to the apartment sector generated the majority of sector selection outperformance (combining for 59bps). However, the sector selection alpha was offset by an overweight to the triple net lease sector and an underweight to the self-storage sector (combined reduction of 38bps). Stock selection within the apartment sector generated half of the Fund's total outperformance (87bps), and stock selection within the hotel and healthcare sectors also made positive contributions. Our weakest area was within our shopping center holdings, which negatively impacted Fund performance. Q. WERE THERE ANY SIGNIFICANT CHANGES TO THE FUND OVER THE PERIOD? A. Reflecting continuing concern about a worsening economy and diminished outlook for consumer spending we reduced the allocation to the shopping center sector from an overweight to an underweight during the period and increased our overweight to the healthcare sector, a traditional defensive sector. 2 Real Estate Securities Fund -------------------------------------------------------------------------------- Understanding Your Fund's Expenses As a shareholder of the Fund you incur ongoing expenses, which include portfolio management fees, professional fees, administrative fees and other Fund expenses. The following example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. To illustrate these ongoing costs, we have provided an example and calculated the expenses paid by investors during the period. The information in the following table is based on an investment of $1,000, which is invested at the beginning of the period and held for the entire six-month period ended June 30, 2008. ACTUAL EXPENSES The first section of the table provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your class under the heading "Expenses Paid During Period." HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second section of the table provides infor mation about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholders reports of other funds. Please note that the expenses shown in the table do not reflect any transaction costs, such as sales charges or redemption fees. START JANUARY 1, 2008 - JUNE 30, 2008
------------------------------------------------------------------------------------------------------------------------------------ ACCOUNT VALUE AT THE ACCOUNT VALUE AT THE EXPENSES PAID BEGINNING OF THE PERIOD ($) END OF THE PERIOD ($) DURING THE PERIOD ($)* ------------------------------------------------------------------------------------------------------------------------------------ ACTUAL FUND RETURN** ------------------------------------------------------------------------------------------------------------------------------------ Class 1 1,000.00 981.58 4.72 Class 4 1,000.00 876.54 6.30 ------------------------------------------------------------------------------------------------------------------------------------ HYPOTHETICAL 5% RETURN (2.5% FOR THE PERIOD) ------------------------------------------------------------------------------------------------------------------------------------ Class 1 1,000.00 1,020.04 4.67 Class 4 1,000.00 1,018.08 6.71 ------------------------------------------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.93% FOR CLASS 1 AND 1.33% FOR CLASS 4, (FROM PERIOD JANUARY 1, 2008 - JUNE 30, 2008), MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY 182/366 (TO REFLECT THE ONE-HALF YEAR PERIOD). ** ACTUAL FUND RETURNS FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2008 WERE AS FOLLOWS: (1.84)% FOR CLASS 1 SHARES, AND SINCE INCEPTION (12.35)% FOR CLASS 4 SHARES. 3 Real Estate Securities Fund (unaudited) -------------------------------------------------------------------------------- CHANGE IN VALUE OF A $10,000 INVESTMENT CLASS 1 SHARES -------------------------------------------------------------------------------- [Line chart omitted -- plot points are as follows:] GEI REAL ESTATE SECURITIES NAREIT EQUITY INDEX 06/98 10,000.00 10,000.00 12/98 8,704.34 8,686.58 12/99 8,685.43 8,285.32 12/00 11,511.76 10,469.61 12/01 12,874.45 11,928.31 12/02 12,701.19 12,383.09 12/03 17,458.75 16,982.67 12/04 23,096.15 22,347.01 12/05 25,817.15 25,064.93 12/06 34,343.85 33,852.86 12/07 29,240.61 28,540.75 06/08 28,702.11 27,514.80
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2008 ------------------------------------------------------------------------------------------------------------------------------------ CLASS 1 SHARES (Inception date: 5/1/95) ------------------------------------------------------------------------------------------------------------------------------------ SIX ONE FIVE TEN ENDING VALUE OF A MONTHS YEAR YEAR YEAR $10,000 INVESTMENT ------------------------------------------------------------------------------------------------------------------------------------ Real Estate Securities Fund -1.84% -10.83% 13.84% 11.12% $28,702 ------------------------------------------------------------------------------------------------------------------------------------ NAREIT Equity Index -3.59% -13.64% 14.30% 10.65% $27,515 ------------------------------------------------------------------------------------------------------------------------------------ Lipper peer group average* -6.27% -15.90% 14.48% 10.78% ------------------------------------------------------------------------------------------------------------------------------------
CLASS 4 SHARES -------------------------------------------------------------------------------- [Line chart omitted -- plot points are as follows:] GEI REAL ESTATE SECURITIES NAREIT EQUITY INDEX 05/08 10,000.00 10,000.00 06/08 8,765.43 8,981.15
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIODS ENDED JUNE 30, 2008 ------------------------------------------------------------------------------------------------------------------------------------ CLASS 4 SHARES (Inception date: 5/1/08) ------------------------------------------------------------------------------------------------------------------------------------ ONE SINCE ENDING VALUE OF A MONTH INCEPTION $10,000 INVESTMENT ------------------------------------------------------------------------------------------------------------------------------------ Real Estate Securities Fund -10.80% -12.35% $ 8,765 ------------------------------------------------------------------------------------------------------------------------------------ NAREIT Equity Index -10.88% -10.19% $ 8,912 ------------------------------------------------------------------------------------------------------------------------------------ Lipper peer group average** -11.07% N/A ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT PROFILE A fund designed for investors who seek maximum total return through current income and capital appreciation by investing at least 80% of its net assets in equity securities and debt securities of U.S. issuers that are principally engaged in or related to the real estate industry, including those that own significant real estate assets, under normal circumstances. PORTFOLIO COMPOSITION AS OF JUNE 30, 2008 as a % of Market Value -------------------------------------------------------------------------------- Market Value of $81,996 (in thousands) [Pie chart omitted -- plot points are as follows:] Multifamily 15.0% Office 14.8% Regional Malls 14.2% Healthcare 12.1% Shopping Centers 11.3% Diversified 8.0% Industrial 7.5% Self Storage 4.4% Hotel 4.0% Freestanding 3.2% Office/Industrial 2.3% Man. Homes 1.3% Specialty 1.3% Short-Term 0.6% Other Investments 0.0% TOP TEN LARGEST HOLDINGS AS OF JUNE 30, 2008 as a % of Market Value -------------------------------------------------------------------------------- Simon Property Group, Inc. 7.35% -------------------------------------------------------------------------------- Vornado Realty Trust 6.65% -------------------------------------------------------------------------------- General Growth Properties, Inc. 5.28% -------------------------------------------------------------------------------- Prologis 4.60% -------------------------------------------------------------------------------- Public Storage 4.40% -------------------------------------------------------------------------------- Equity Residential 4.06% -------------------------------------------------------------------------------- Nationwide Health Properties Inc. 3.90% -------------------------------------------------------------------------------- BRE Properties, Inc. 3.28% -------------------------------------------------------------------------------- Kilroy Realty Corp. 3.26% -------------------------------------------------------------------------------- Federal Realty Investment Trust 3.26% -------------------------------------------------------------------------------- * LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR THE SIX MONTHS, ONE YEAR, FIVE-YEAR, AND TEN-YEAR PERIODS INDICATED IN THE REAL ESTATE FUNDS PEER GROUP CONSISTING OF 63, 61, 41 AND 17 UNDERLYING ANNUITY FUNDS, RESPECTIVELY. ** LIPPER PERFORMANCE COMPARISONS ARE BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR THE ONE MONTH PERIOD INDICATED IN THE REAL ESTATE FUNDS PEER GROUP CONSISTING OF 68 UNDERLYING ANNUITY FUNDS, RESPECTIVELY. *** LESS THAN 0.1%. SEE NOTES TO PERFORMANCE ON PAGE 1 FOR FURTHER INFORMATION, INCLUDING AN EXPLANATION OF LIPPER PEER CATEGORIES. PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE AND THE GRAPH AND TABLE DO NOT REFLECT THE DEDUCTION OF TAXES. 4 REAL ESTATE SECURITIES FUND Schedule of Investments June 30, 2008 (unaudited) -------------------------------------------------------------------------------- REAL ESTATE SECURITIES FUND -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE -------------------------------------------------------------------------------- COMMON STOCK (REIT) -- 97.3% + -------------------------------------------------------------------------------- DIVERSIFIED -- 8.0% Cousins Properties Inc. 16,040 $ 370,524 Lexington Realty Trust 53,130 724,162 Vornado Realty Trust 61,930 5,449,840 6,544,526 FREESTANDING -- 3.2% National Retail Properties, Inc. 94,720 1,979,648 Realty Income Corp. 30,710 698,960 2,678,608 HEALTHCARE -- 12.1% HCP, Inc. 55,540 1,766,727 Health Care REIT Inc. 27,230 1,211,735 Nationwide Health Properties Inc. 101,490 3,195,920 Senior Housing Properties Trust 74,430 1,453,618 Ventas, Inc. 53,790 2,289,840 9,917,840 HOTEL -- 2.1% Host Hotels & Resorts Inc. 111,080 1,516,242 Sunstone Hotel Investors, Inc. 14,660 243,356 1,759,598 INDUSTRIAL -- 7.5% AMB Property Corp. 47,210 2,378,440 Prologis 69,410 3,772,434 6,150,874 MAN. HOMES -- 1.3% Equity Lifestyle Properties, Inc. 24,010 1,056,440 MULTIFAMILY -- 14.9% AvalonBay Communities, Inc. 22,260 1,984,702 BRE Properties, Inc. 62,190 2,691,583 Camden Property Trust 27,510 1,217,593 Education Realty Trust, Inc. 58,360 679,894 Equity Residential 86,920 3,326,428 Essex Property Trust, Inc. 11,490 1,223,685 Home Properties Inc. 23,900 1,148,634 12,272,519 OFFICE -- 14.8% Alexandria Real Estate Equities, Inc. 16,660 1,621,684 Boston Properties, Inc. 21,050 1,899,131 NUMBER OF SHARES VALUE -------------------------------------------------------------------------------- Brandywine Realty Trust 47,470 $ 748,127 Highwoods Properties, Inc. 17,210 540,738 HRPT Properties Trust 148,820 1,007,511 Kilroy Realty Corp. 56,800 2,671,304(b) Mack-Cali Realty Corp. 21,850 746,615 Maguire Properties, Inc. 46,220 562,498 Parkway Properties, Inc. 16,910 570,374 SL Green Realty Corp. 21,680 1,793,370 12,161,352 OFFICE/INDUSTRIAL -- 2.3% Duke Realty Corp. 83,360 1,871,432 REGIONAL MALLS -- 14.1% General Growth Properties, Inc. 123,480 4,325,504 Pennsylvania Real Estate Investment Trust 22,420 518,799 Simon Property Group, Inc. 67,070 6,028,922 Taubman Centers, Inc. 15,380 748,237 11,621,462 SELF STORAGE -- 4.4% Public Storage 44,620 3,604,850 SHOPPING CENTERS -- 11.3% Acadia Realty Trust 20,980 485,687 Developers Diversified Realty Corp. 12,570 436,305 Federal Realty Investment Trust 38,690 2,669,610 Kimco Realty Corp. 73,670 2,543,088 Regency Centers Corp. 40,910 2,418,599 Tanger Factory Outlet Centers 19,930 716,085 9,269,374 SPECIALTY -- 1.3% Digital Realty Trust, Inc. 25,510 1,043,614 TOTAL COMMON STOCK (REIT) (COST $87,259,371) 79,952,489 -------------------------------------------------------------------------------- COMMON STOCK -- 1.8% -------------------------------------------------------------------------------- HOTEL -- 1.8% Starwood Hotels & Resorts Worldwide, Inc. (COST $2,150,081) 37,800 1,514,646 TOTAL INVESTMENTS IN SECURITIES (COST $89,409,452) 81,467,135 See Notes to Schedule of Investments on page 7 and Notes to Financial Statements. 5 REAL ESTATE SECURITIES FUND Schedule of Investments June 30, 2008 (unaudited) -------------------------------------------------------------------------------- VALUE -------------------------------------------------------------------------------- OTHER INVESTMENTS -- 0.0%* -------------------------------------------------------------------------------- GEI Investment Fund (COST $6,312) $ 4,797(c) TOTAL INVESTMENTS IN SECURITIES (COST $89,415,764) 81,471,932 -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 0.6% -------------------------------------------------------------------------------- GE Money Market Fund Institutional Class 1.93% 524,057(a,d) (COST $524,057) TOTAL INVESTMENTS (COST $89,939,821) 81,995,989 OTHER ASSETS AND LIABILITIES, NET-- 0.3% 213,520 ----------- NET ASSETS-- 100.0% $82,209,509 =========== See Notes to Schedule of Investments on page 7 and Notes to Financial Statements. 6 Notes to Schedule of Investments June 30, 2008 (unaudited) -------------------------------------------------------------------------------- The views expressed in this document reflect our judgment as of the publication date and are subject to change at any time without notice. The securities cited may not represent current or future holdings and should not be considered as a recommendation to purchase or sell a particular security. See the prospectus for complete descriptions of investment objectives, policies, risks and permissible investments. (a) Coupon amount represents effective yield. (b) At June 30, 2008, all or a portion of this security was pledged to cover collateral requirements for futures, options, forward foreign currency contracts and/or TBA's. (c) GE Asset Management ("GEAM"), the investment adviser of the Fund, also serves as investment adviser of the GEI Investment Fund. (d) GEAM, the investment adviser of the Fund, also serves as investment adviser of the GE Money Market Fund. * Less than 0.1%. + Percentages are based on net assets as of June 30, 2008. Abbreviations: REIT Real Estate Investment Trust 7 Financial Highlights Selected data based on a share outstanding throughout the periods indicated -------------------------------------------------------------------------------- REAL ESTATE SECURITIES FUND
----------------------------------------------------------------------------- CLASS 1 ----------------------------------------------------------------------------- 6/30/08+ 12/31/07 12/31/06 12/31/05 12/31/04 12/31/03 ----------------------------------------------------------------------------- INCEPTION DATE -- -- -- -- -- 5/1/95 Net asset value, beginning of period ................. $10.87 $21.49 $19.20 $19.54 $16.78 $13.14 INCOME/(LOSS) FROM INVESTMENT OPERATIONS: Net investment income ............................. 0.89 0.72 0.65 0.70 0.65 0.50 Net realized and unrealized gains/(losses) on investments ................. (1.10) (3.87) 5.68 1.62 4.76 0.42 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INCOME/(LOSS) FROM INVESTMENT OPERATIONS ............................. (0.21) (3.15) 6.33 2.32 5.41 4.92 ------------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS FROM: Net investment income ............................. -- 0.75 0.48 0.75 0.52 0.41 Net realized gains ................................ -- 6.72 3.56 1.91 2.13 0.87 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL DISTRIBUTIONS .................................. -- 7.47 4.04 2.66 2.65 1.28 ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, END OF PERIOD ....................... $10.66 $10.87 $21.49 $19.20 $19.54 $16.78 ==================================================================================================================================== TOTAL RETURN (A) ..................................... (1.84)% (14.86)% 33.03% 11.78% 32.29% 37.38% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) .......... $82,201 $96,650 $178,317 $143,801 $146,221 $98,294 Ratios to average net assets: Net investment income* ......................... 3.61% 2.59% 3.08% 3.21% 4.15% 4.65% Expenses* ...................................... 0.93% 0.90% 0.88% 0.89% 0.90% 0.89% Portfolio turnover rate ........................... 53% 106% 92% 52% 78% 52%
----------------- CLASS 4 ----------------- 6/30/08+ ----------------- INCEPTION DATE 5/1/08 Net asset value, beginning of period ................. $12.15 INCOME/(LOSS) FROM INVESTMENT OPERATIONS: Net investment income ............................. 0.15 Net realized and unrealized gains/(losses) on investments ................. (1.65) ------------------------------------------------------------------------ TOTAL INCOME/(LOSS) FROM INVESTMENT OPERATIONS ............................. (1.50) ------------------------------------------------------------------------ LESS DISTRIBUTIONS FROM: Net investment income ............................. -- Net realized gains ................................ -- ------------------------------------------------------------------------ TOTAL DISTRIBUTIONS .................................. -- ------------------------------------------------------------------------ NET ASSET VALUE, END OF PERIOD ....................... $10.65 ======================================================================== TOTAL RETURN (A) ..................................... (12.35)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) .......... $9 Ratios to average net assets: Net investment income* ......................... 3.25% Expenses* ...................................... 1.33% Portfolio turnover rate ........................... 53% NOTES TO FINANCIAL HIGHLIGHTS -------------------------------------------------------------------------------- (a) Total returns are historical and assume changes in share price and reinvestment of dividends and capital gains and do not include the effect of insurance contract charges. * Annualize for periods less than one year. + Unaudited See Notes to Financial Statements. 8
STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 2008 (UNAUDITED) ------------------------------------------------------------------------------------------------------------------------------------ REAL ESATE SECURITIES FUND ------------------------------------------------------------------------------------------------------------------------------------ ASSETS Investments in securities, at market (cost $89,409,452) ........................................... $81,467,135 Investments in affiliated securities, at market (cost $6,312) ..................................... 4,797 Short-term affiliated investments (at amortized cost) ............................................. 524,057 Income receivables ................................................................................ 256,056 Receivable for fund shares sold ................................................................... 94,041 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL ASSETS .................................................................................. 82,346,086 ------------------------------------------------------------------------------------------------------------------------------------ LIABILITIES Payable for investments purchased ................................................................. 10,364 Payable to GEAM ................................................................................... 74,423 Accrued other expenses ............................................................................ 51,081 Other liabilities ................................................................................. 709 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL LIABILITIES ............................................................................. 136,577 ------------------------------------------------------------------------------------------------------------------------------------ NET ASSETS ........................................................................................... $82,209,509 ==================================================================================================================================== NET ASSETS CONSIST OF: Capital paid in ................................................................................... 96,852,013 Undistributed (distribution in excess of) net investment income ................................... 1,919,979 Accumulated net realized gain (loss) .............................................................. (8,618,651) Net unrealized appreciation/(depreciation) on: Investments ................................................................................... (7,943,832) ------------------------------------------------------------------------------------------------------------------------------------ NET ASSETS ........................................................................................... $82,209,509 ==================================================================================================================================== CLASS 1: NET ASSETS ........................................................................................... 82,200,741 Shares outstanding ($0.01 par value; unlimited shares authorized) .................................... 7,708,846 Net asset value per share ............................................................................ $10.66 CLASS 4: NET ASSETS ........................................................................................... 8,768 Shares outstanding ($0.01 par value; unlimited shares authorized) .................................... 823 Net asset value per share ............................................................................ $10.65
See Notes to Financial Statements. 9
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2008 (UNAUDITED) ------------------------------------------------------------------------------------------------------------------------------------ REAL ESATE SECURITIES FUND ------------------------------------------------------------------------------------------------------------------------------------ INVESTMENT INCOME INCOME: Dividend ........................................................................... $ 1,992,773 Interest ........................................................................... 48,048 Interest from affliated investments ................................................ 12,500 Less: Foreign taxes withheld ....................................................... (968) ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INCOME ......................................................................... 2,052,353 ------------------------------------------------------------------------------------------------------------------------------------ EXPENSES: Advisory and administrative fees ................................................... 381,654 Distributors Fees (Note 4) Class 1 ......................................................................... 7 Transfer agent ..................................................................... 23 Trustee's fees ..................................................................... 1,169 Custody and accounting expenses .................................................... 18,993 Professional fees .................................................................. 10,944 Registration expenses .............................................................. 2,489 Other expenses ..................................................................... 4,887 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL EXPENSES BEFORE WAIVER AND REIMBURSEMENT ....................................... 420,166 ------------------------------------------------------------------------------------------------------------------------------------ Less: Expenses reimbursed by the adviser (waiver related to Fund of Fund Investment) .................................. (939) ------------------------------------------------------------------------------------------------------------------------------------ Net expenses ....................................................................... 419,227 ------------------------------------------------------------------------------------------------------------------------------------ NET INVESTMENT INCOME (LOSS) ......................................................... 1,633,126 ==================================================================================================================================== NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS REALIZED GAIN (LOSS) ON: Investments ..................................................................... (6,537,363) INCREASE (DECREASE) IN UNREALIZED APPRECIATION/(DEPRECIATION) ON: Investments ..................................................................... 3,167,956 ------------------------------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments ............................. (3,369,407) ------------------------------------------------------------------------------------------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ...................... $(1,736,281) ====================================================================================================================================
See Notes to Financial Statements. 10
STATEMENTS OF CHANGES IN NET ASSETS ------------------------------------------------------------------------------------------------------------------------------------ REAL ESTATE SECURITIES FUND ------------------------------------------------------------------------------------------------------------------------------------ SIX MONTHS ENDED YEAR ENDED JUNE 30, 2008 DECEMBER 31, (UNAUDITED) 2007 ------------------------------------------------------------------------------------------------------------------------------------ INCREASE (DECREASE) IN NET ASSETS OPERATIONS: Net investments income (loss) ................................................ $ 1,633,126 $ 3,256,939 Net realized gain (loss) on investments, futures, written options, and foreign currency transactions .......................................... (6,537,363) 29,837,725 Net increase (decrease) in unrealized appreciation/(depreciation) on investments, futures, written options, and foreign currency translation ................................................................ 3,167,956 (51,608,095) ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) from operations ...................................... (1,736,281) (18,513,431) ------------------------------------------------------------------------------------------------------------------------------------ DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Class 1 .................................................................... -- (3,999,441) Class 4 .................................................................... -- -- Net realized gains Class 1 .................................................................... -- (35,719,010) Class 4 .................................................................... -- -- ------------------------------------------------------------------------------------------------------------------------------------ TOTAL DISTRIBUTIONS ............................................................ -- (39,718,451) ------------------------------------------------------------------------------------------------------------------------------------ Increase (decrease) in net assets from operations and distributions ............ (1,736,281) (58,231,882) ------------------------------------------------------------------------------------------------------------------------------------ SHARE TRANSACTIONS: Proceeds from sale of shares Class 1 .................................................................... 3,109,370 4,445,242 Class 4 .................................................................... 10,000 -- Value of distributions reinvested Class 1 .................................................................... -- 39,718,451 Class 4 .................................................................... -- -- Cost of shares redeemed Class 1 .................................................................... (15,823,792) (67,599,080) Class 4 .................................................................... -- -- ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) from share transactions .............................. (12,704,422) (23,435,387) ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INCREASE (DECREASE) IN NET ASSETS ........................................ (14,440,703) (81,667,269) NET ASSETS Beginning of period ............................................................ 96,650,212 178,317,481 ------------------------------------------------------------------------------------------------------------------------------------ End of period .................................................................. $ 82,209,509 $ 96,650,212 ==================================================================================================================================== UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF) NET INVESTMENT INCOME, END OF PERIOD .... $ 1,919,979 $ 286,853 ------------------------------------------------------------------------------------------------------------------------------------ CHANGES IN FUND SHARES CLASS 1 Shares sold ....................................................................... 271,115 197,070 Issued for distributions reinvested ............................................... -- 3,637,222 Shares redeemed ................................................................... (1,457,591) (3,235,096) ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in fund shares ............................................ (1,186,476) 599,196 ==================================================================================================================================== CLASS 4 Shares sold ....................................................................... 823 -- Issued for distributions reinvested ............................................... -- -- Shares redeemed ................................................................... -- -- ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in fund shares ............................................ 823 -- ====================================================================================================================================
See Notes to Financial Statements. 11 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- 1. ORGANIZATION OF THE COMPANY GE Investments Funds, Inc. (the "Company") was incorporated under the laws of the Commonwealth of Virginia on May 14, 1984 and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company. The Company is composed of thirteen investment portfolios (collectively the "Funds"), although only the following eleven are currently being offered: U.S. Equity Fund, S&P 500 Index Fund, Premier Growth Equity Fund, Core Value Equity Fund, Mid-Cap Equity Fund, Small-Cap Equity Fund, International Equity Fund, Total Return Fund, Income Fund, Money Market Fund and Real Estate Securities Fund (the "Fund"). Shares of the Funds of the Company are offered only to insurance company separate accounts that fund certain variable life insurance contracts and variable annuity contracts. These insurance companies may include insurance companies affiliated with GE Asset Management Incorporated ("GEAM"), the investment adviser and administrator of each of the Funds. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results may differ from those estimates. The following summarizes the significant accounting policies of the Fund: SECURITY VALUATION AND TRANSACTIONS The Fund's portfolio securities are valued generally on the basis of market quotations. Equity securities generally are valued at the last reported sales price on the primary market in which they are traded. Portfolio securities listed on NASDAQ are valued using the NASDAQ Official Closing Price, which may not necessarily represent the last sale price. If no sales occurred on the exchange or NASDAQ that day, the portfolio security generally is valued using the last reported bid price. Debt securities (other than short-term securities described below) generally are valued at an evaluated bid as reported by an independent pricing service. Values obtained from pricing services are based on various factors such as market transactions, dealer supplied valuations, security characteristics and other market data. In the absence of a reliable price from such a pricing service, debt securities may be valued based on dealer supplied valuations or quotations. The Fund's written or purchased options are valued at the last sales price, or if no sales occurred that day, at the last reported bid price. Short-term investments with remaining maturities of sixty days or less at the time of purchase are valued on the basis of amortized cost, which approximates market value. All assets and liabilities of the Fund initially expressed in foreign currency values will be converted into U.S. dollars at the WM/Reuters exchange rate computed at 11:00 a.m., Eastern time. If prices are not readily available for a portfolio security, or if it is believed that a price for a portfolio security does not represent its fair value, the security may be valued using procedures approved by the Fund's Board of Directors that are designed to establish its "fair" value. Those procedures require that the fair value of a security be established by the fair valuation committee. The fair valuation committee follows different protocols for different types of investments and circumstances. The fair value procedures may be used to value any investment by the Fund in the appropriate circumstances. Examples of the types of securities that may be fair valued include: thinly traded or illiquid investments, high-yield securities or foreign securities. Foreign securities may be valued with the assistance of an independent fair value pricing service in circumstances where it is believed that they have been or would be materially affected by events occurring after the close of the portfolio security's primary market and before the close of regular trading on the NYSE. This independent fair value pricing service uses a computerized system to appraise affected securities and portfolios taking into consideration various factors and the fair value of such securities may be something other than the last available quotation or other market price. GEAM may also separately monitor portfolio securities and, consistent with the Fund's fair value procedures, apply a different value to a portfolio security than would be applied had it been priced using market quotations or by an independent fair value pricing service. 12 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- Determining the fair value of securities involves the application of both subjective and objective considerations. Security values may differ depending on the methodology used to determine their values, and may differ from the last quoted sale or closing price. No assurance can be given that use of these fair value procedures will always better represent the price at which the Fund could sell the affected portfolio security. Security transactions are accounted for as of the trade date. Realized gains and losses on investments sold are recorded on the basis of identified cost for both financial statement and federal tax purposes. The Fund adopted FASB Statement No. 157, FAIR VALUE MEASUREMENTS (FAS 157). FAS 157 establishes a single definition of fair value, a framework for measuring fair value, and expanded disclosures about fair value measurements. Various inputs are used in determining the value of the Fund's investments. These inputs are classified into three broad levels: Level 1 includes quoted prices in active markets of securities identical to those of the Fund. Level 2 includes: 1) quoted prices in active markets for similar securities to those of the Fund; 2) quoted prices for identical or similar securities to those of the Fund that trade in markets in which there are few transactions or the quoted prices are not current; 3) prices based on observable market data such as interest rates and yield curves, volatilities, bond prepayment speeds, and credit risk and; 4) prices based principally on observable market data by use of correlation techniques or other means. Level 3 includes unobservable market inputs used to fair value securities. These inputs are based on assumptions that market participants would use to price securities and may include the adviser's own assumptions. Other financial instruments are derivative instruments that are not reflected in TOTAL INVESTMENTS, such as futures, forwards, swaps, and written options contracts, which are valued based on the unrealized appreciation/depreciation of the instrument.
Level 1 Level 2 Level 3 Total ------------------------------------------------------------------------------------------------------------------------------------ Investments in Securities $ 81,991,192 $4,797 $-- $81,995,989 Other Financial Instruments $ -- $ -- $-- $ --
REPURCHASE AGREEMENTS The Fund may enter into repurchase agreement transactions with respect to instruments that are consistent with the Fund's investment objectives or policies. The Fund's custodian or a third party custodian takes possession of the collateral pledged for investments in repurchase agreements on behalf of the Fund. The Fund values the underlying collateral daily on a mark-to-market basis to determine that the value, including accrued interest, is at least equal to 102% of the repurchase price. In the event the seller defaults and the value of the security declines, or if the seller enters an insolvency proceeding, realization of the collateral by the Fund may be delayed or limited. SECURITY LENDING The Fund may loan securities to brokers, dealers, and financial institutions determined by GEAM to be creditworthy, subject to certain limitations. The Fund continues to receive the interest and dividends on the loaned securities during the term of the loan. The loans of securities are secured by collateral in the form of cash or other liquid assets, which are segregated and maintained with the custodian in an amount at least equal to 102% of the current market value of the loaned securities. During the term of the loan, the Fund will record any gain or loss in the market value of its loaned securities and of securities in which cash collateral is invested. The Fund will also earn interest, net of any rebate, from securities in which cash collateral is invested. In the event the counterparty (borrower) does not meet its contracted obligation to return the securities, the Fund may be exposed to the risk of loss of reacquiring the loaned securities at prevailing market prices using the proceeds of the sale of the collateral. FOREIGN CURRENCY Accounting records of the Fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange on a daily basis (on days the New York Stock Exchange is open). Purchases and sales of securities, income receipts and expense payments denominated in foreign currencies are translated into U.S. dollars at the prevailing exchange rate on the respective dates of such transactions. 13 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- The Fund does not isolate the portion of the results of operations resulting from changes in foreign exchange rates from the fluctuations arising from changes in the market prices of securities during the period. Such fluctuations are included in the net unrealized gain or loss from investments. Net realized gains or losses on foreign currency transactions represent net gains or losses on sales and maturities of foreign currency contracts, disposition of foreign currencies, the difference between the amount of net investment income and withholding taxes accrued and the U.S. dollar amount actually received or paid, and gains or losses between the trade and settlement date on purchases and sales of securities. Net unrealized foreign exchange gains and losses arising from changes in the value of other assets and liabilities as a result of changes in foreign exchange rates are included as increases or decreases in unrealized appreciation/depreciation on foreign currency related transactions. FUTURES CONTRACTS The Fund may invest in interest rate, financial or stock or bond index futures contracts subject to certain limitations. The Fund may invest in futures contracts to manage its exposure to the stock and bond markets and fluctuations in currency values. Buying futures tends to increase the Fund's exposure to the underlying instrument while selling futures tends to decrease the Fund's exposure to the underlying instrument, or hedge other Fund investments. The Fund will not enter into a transaction involving futures for speculative purposes. The Fund's risks in using these contracts include changes in the value of the underlying instruments, non-performance of the counterparties under the contracts' terms and changes in the liquidity of the secondary market for the contracts. Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they principally trade. Upon entering into a futures contract, the Fund is required to pledge to the broker an amount of cash and/or other assets equal to a certain percentage of the contract amount, known as initial margin deposit. Subsequent payments, known as variation margin, are made or received by the Fund each day, depending on the daily fluctuation in the fair value of the underlying security. The Fund records an unrealized gain or loss equal to the daily variation margin. Should market conditions move unexpectedly, the Fund may not achieve the anticipated benefits of the futures contracts and may incur a loss. The Fund recognizes a realized gain or loss on the expiration or closing of a futures contract. OPTIONS The Fund may purchase and write options, subject to certain limitations. The Fund may invest in options contracts to manage its exposure to the stock and bond markets and fluctuations in foreign currency values. Writing puts and buying calls tend to increase the Fund's exposure to the underlying instrument while buying puts and writing calls tend to decrease the Fund's exposure to the underlying instrument, or hedge other Fund investments. The Fund will not enter into a transaction involving options for speculative purposes. The Fund's risks in using these contracts include changes in the value of the underlying instruments, non-performance of the counterparties under the contracts' terms and changes in the liquidity of the secondary market for the contracts. Options are valued at the last sale price, or if no sales occurred on that day, at the last quoted bid price. When the Fund writes an option, the amount of the premium received is recorded as a liability and is subsequently adjusted to the current fair value of the option written. Premiums received from writing options that expire unexercised are treated by the Fund on the expiration date as realized gains from investments. The difference between the premium and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium is less than the amount paid for the closing purchase, as a realized loss. When an option is exercised, the proceeds from the sale of the underlying security or the cost basis of the securities purchased is adjusted by the original premium received or paid. REAL ESTATE INVESTMENT TRUSTS Dividend income, attributable to real estate investment trusts ("REITs"), is recorded based on management's estimate of the income included in the distributions received. Distributions received in excess of this amount are recorded as a reduction of the cost of the investments. The actual amounts of income and return of capital are determined by each REIT only after its fiscal year-end, and may differ from the estimated amounts. INVESTMENTS IN FOREIGN MARKETS Investments in foreign markets may involve special risks and considerations not typically associated with investing in the United States. These risks include revaluation of currencies, high rates of inflation, repatriation on income and capital, and adverse political and economic developments. Moreover, securities issued in these markets may be less liquid, subject to government ownership controls, tariffs and taxes, subject to delays in settlements, and their prices may be more volatile. 14 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- The Fund may be subject to capital gains and repatriation taxes imposed by certain countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued based upon net investment income, net realized gains and net unrealized appreciation as income and/or capital gains are earned. INCOME TAXES The Fund intends to comply with all sections of the Internal Revenue Code applicable to regulated investment companies including the distribution of substantially all of its taxable net investment income and net realized capital gains to its shareholders. Therefore, no provision for federal income tax has been made. The Fund is treated as a separate taxpayer for federal income tax purposes. At June 30, 2008, information on the tax cost of investments is as follows:
Cost of Gross Tax Gross Tax Net Tax Appreciation/ Investments for Unrealized Unrealized (Depreciation) Tax Purposes Appreciation Depreciation on Investments ----------------------------------------------------------------------------------------------------------------------- $91,346,229 $1,132,678 $(10,489,230) $(9,356,552)
As of December 31, 2007, the Fund has no capital loss carryovers. Any net capital and currency losses incurred after October 31, within the Fund's tax year, are deemed to arise on the first day of the Fund's next tax year if the Fund so elects to defer such losses. The Fund elected to defer losses incurred after October 31, 2007 as follows: Capital Currency -------------------------------------------------------------------------------- $668,568 $-- The tax composition of distributions paid during the years ended December 31, 2007 and December 31, 2006 were as follows: Ordinary Long-Term Return of Income Capital Gains Capital Total -------------------------------------------------------------------------------- 2007 $5,956,613 $33,613,314 $148,524 $39,718,451 2006 4,582,222 23,587,670 -- 28,169,892 DISTRIBUTIONS TO SHAREHOLDERS The Fund declares and pays dividends from net investment income annually. The Fund declares and pays net realized capital gains in excess of capital loss carryforwards distributions annually. The character of income and gains to be distributed is determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences include (but are not limited to) distributions from Real Estate Investment Trusts (REITS), and losses deferred due to wash sale transactions. Reclassifications due to permanent book/tax differences are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. These reclassifications have no impact on net investment income, realized gains or losses, or the net asset value of the Fund. The calculation of net investment income per share in the Financial Highlights table excludes these adjustments. The reclassifications for the year ended December 31, 2007 were as follows: Undistributed (Distribution in Excess of) Net Investment Accumulated Paid in Income Net Realized Gain Capital -------------------------------------------------------------------------------- $691,310 $(542,786) $(148,524) On June 29, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in Income Taxes." FIN48 provides guidance for how certain uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN48 requires evaluation of tax positions taken or expected to be taken in the course of preparing the Fund's tax returns to determine whether the tax positions are "more likely than not" of being sustained by the applicable tax authority. The adoption of FIN48 did not have an impact on the Fund's net assets and financial statements. The Funds' 2004, 2005, 2006 and 2007 calendar years tax returns are still open to examination by the Federal and applicable state tax authorities. 15 Notes to Financial Statements June 30, 2008 (unaudited) -------------------------------------------------------------------------------- INVESTMENT INCOME Corporate actions (including cash dividends) are recorded on the ex-dividend date, net of applicable withholding taxes, except for certain foreign corporate actions, which are recorded as soon after ex-dividend date as such information becomes available. Interest income is recorded on the accrual basis. All discounts and premiums on bonds are accreted and amortized, respectively, to call or maturity date, whichever is shorter, using the effective yield method. EXPENSES Expenses of the Company which are directly identifiable to the Fund are allocated to the portfolio. Expenses which are not directly identifiable to the Fund are allocated in such a manner as deemed equitable, taking into consideration the nature and type of expenses and relative size of the Fund. All expenses of the Fund are paid by GEAM and reimbursed by the Fund. 3. LINE OF CREDIT The Company shares a revolving credit facility of up to $150 million with a number of its affiliates. The credit facility is with its custodian bank, State Street Bank and Trust Company. The revolving credit facility requires the payment of a commitment fee equal to 0.09% per annum on the daily unused portion of the credit facility, payable quarterly. The portion borne by the Funds generally is borne proportionally based upon net assets. In addition, the Company has a $100 million uncommitted, unsecured line of credit with State Street. Generally, borrowings under the credit facilities would accrue interest at the Federal Funds Rate plus 50 basis points and would be borne by the borrowing Fund. The maximum amount allowed to be borrowed by any one Fund is the lesser of (i) its prospectus limitation or (ii) 20% of its net assets. The credit facilities were not utilized by the Fund during the period ended June 30, 2008. 4. AMOUNTS PAID TO AFFILIATES GEAM, a registered investment adviser, was retained by the Company's Board of Directors effective May 1, 1997 to act as investment adviser and administrator of the Fund. GEAM's compensation for investment advisory and administrative services is paid monthly based on the average daily net assets of the Fund. The advisory and administrative fee is stated in the following schedule: Annualized based on average daily net assets -------------------------------------------------------------------------------- Average Daily Advisory and Net Assets Administration of Fund Fees -------------------------------------------------------------------------------- First $100 million 0.85% Next $100 million 0.80% Over $200 million 0.75% GENPACT performs certain accounting and certain administration services not provided by GEAM. For the period ending June 30, 2008, $810 was charged to the Fund. DISTRIBUTION AND SHAREHOLDER SERVICING FEES The Fund has adopted a Shareholder Servicing and Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act with respect to the Class 4 shares of the Fund. The Fund pays GE Investment Distributors, Inc. ("GEID"), a wholly-owned subsidiary of GEAM and the Fund's principal underwriter, a monthly fee for distribution and/or shareholder services provided, at an annual rate of the average daily net assets attributable to each applicable class of shares. The annual rate applicable is 0.45% for the Class 4 shares. Currently, Class 1 shares are not subject to a Rule 12b-1 fee. DIRECTORS' COMPENSATION The Fund pays no compensation to its directors who are officers or employees of GEAM or its affiliates. Directors who are not such officers or employees also serve in a similar capacity for other funds advised by GEAM. Compensation paid to unaffiliated directors are reflected on the Statement of Operations. These fees are allocated pro rata across all of the mutual fund platforms and share classes served by the directors, including the Fund, and are based upon the relative net assets of each fund within such platforms. (For additional information about directors compensation please refer to the Statement of Additional Information.) 5. SUB-ADVISORY FEES Pursuant to an investment sub-advisory agreement with GEAM, Urdang Securities Management, Inc. ("Urdang") is the Sub-Adviser to the Fund. Urdang is responsible for the day-to-day portfolio management of the assets of the Fund, including the responsibility for making decisions to buy, sell or hold a particular security, under the general supervision of GEAM and the Board. For their services, GEAM pays Urdang monthly sub-advisory fees which are calculated as a percentage of the average daily net assets of the Fund. 6. INVESTMENT TRANSACTIONS PURCHASES AND SALES OF SECURITIES The cost of purchases and the proceeds from sales of investments, other than short-term securities and short-term options, for the period ended June 30, 2008 were as follows: Purchases Sales -------------------------------------------------------------------------------- $46,758,780 $57,528,450 16 Additional Information (unaudited) -------------------------------------------------------------------------------- INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS: The business and affairs of the Company are managed under the direction of the Company's Board of Directors. Information pertaining to the Directors and officers of the Company is set forth below. INTERESTED DIRECTORS AND EXECUTIVE OFFICERS MICHAEL J. COSGROVE -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 59 POSITION(S) HELD WITH FUND Chairman of the Board and President TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 10 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President - GEAM since February 1997; President and Chief Executive Officer - Mutual Funds at GEAM since March 2007; Vice President, GE Capital Corporation, an indirect wholly-owned subsidiary of GE, since December 1999; Executive Vice President - Sales and Marketing of GEAM, a wholly-owned subsidiary of GE that is registered as an investment adviser under the Investment Advisers Act of 1940, as amended, since March 1993; Director of GEAM since 1988. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48 OTHER DIRECTORSHIPS HELD BY DIRECTOR Chairman of the Board and President of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception; Trustee of Elfun Funds, GE Savings & Security Funds and General Electric Pension Trust since 1988; Trustee of Fordham University since 2003; Trustee of Elfun Foundation; Treasurer of GE Foundation; Director, GE Asset Management (Ireland) since February 1999; Director, GE Asset Management Funds Plc, GE Asset Canada Company, GE Asset Management Limited, and GE Volunteers. -------------------------------------------------------------------------------- MATTHEW J. SIMPSON -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 47 POSITION(S) HELD WITH FUND Executive Vice President TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - less than one year PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General Counsel and Secretary of GEAM since July 2007; Senior Vice President and General Counsel - Marketing and Client Services (formerly Asset Management Services), at GEAM and Senior Vice President and General Counsel of GEAMS from February 1997 to June 2007; Vice President and Associate General Counsel of GEAM from October 1992 to February 1997; Secretary of Fund from 1997 to June 2007; Vice President of Fund from September 2003 to June 2007; Vice President of GE Institutional Funds and GE LifeStyle Funds from September 2003 to June 2007; Secretary of GE Institutional Funds and GE LifeStyle Funds from 1997 to June 2007; Vice President of Elfun Funds and GE Savings & Security Funds from October 2003 to June 2007; Assistant Secretary of Elfun Funds and GE Savings & Security Funds from 1998 to June 2007. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 48 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds, GE Institutional Funds, GE LifeStyle Funds, Elfun Funds and GE Savings & Security Funds since July 2007. 17 Additional Information (unaudited) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SCOTT H. RHODES -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 49 POSITION(S) HELD WITH FUND Treasurer TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 2 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS GEAM Mutual Funds Operations Manager since September 2005; Treasurer of GE Institutional Funds, GE LifeStyle Funds and GE Investments Funds since November 2005 and Elfun Funds and GE Savings & Security Funds since September 2005; from August 2004 to September 2005 Vice President, U.S. Trust Company, N.A. and Assistant Treasurer of Excelsior Funds, Inc., Excelsior Funds Trust, and Excelsior Tax Exempt Funds, Inc.; from January 2004 to August 2004, Vice President BlackRock Financial Management, Inc.; from December 1996 to November 2003, Controller - Mutual Funds, American Skandia Investment Services, Inc. and Assistant Treasurer of American Skandia Trust and American Skandia Advisor Funds, Inc. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A -------------------------------------------------------------------------------- JEANNE M. LAPORTA -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 42 POSITION(S) HELD WITH FUND Vice President and Secretary TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 2 years (Vice President); less than one year (Secretary) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Senior Vice President and Deputy General Counsel at GE Asset Management since October 2007; Vice President and Associate General Counsel - Marketing and Client Services (formerly Asset Management Services) at GEAM from May 1997 to October 2007; Vice President and Assistant Secretary of GE Funds, GE Institutional Funds and GE LifeStyle Funds since September 2003; Vice President and Assistant Secretary of Elfun Funds and GE Savings & Security Funds since October 2003; Assistant Secretary from September 2003 to June 2007 and Secretary since July 2007. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR N/A OTHER DIRECTORSHIPS HELD BY DIRECTOR N/A 18 Additional Information (unaudited) -------------------------------------------------------------------------------- NON-INTERESTED DIRECTORS -------------------------------------------------------------------------------- JOHN R. COSTANTINO -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 62 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS General Partner, NGN Capital LLC since 2006; Managing Director, Walden Partners, Ltd., consultants and investors, since August 1992. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, GE Institutional Funds and GE LifeStyle Funds since their inception; Trustee of Fordham University since 2002 and Marymount College from 2001 through 2002; Neuroscience Research Institute since 1986; Diocesan Finance Counsel of the Dioceses of Brooklyn & Queens since 2001; Gregorian University Foundation since 1994. -------------------------------------------------------------------------------- WILLIAM J. LUCAS -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 60 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Vice President and Treasurer of Fairfield University since 1983. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception. -------------------------------------------------------------------------------- ROBERT P. QUINN -------------------------------------------------------------------------------- ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905 AGE 72 POSITION(S) HELD WITH FUND Director TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and qualified - 9 years PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Retired since 1983 from Salomon Brothers Inc. NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR 40 OTHER DIRECTORSHIPS HELD BY DIRECTOR Trustee of GE Funds since 1993, and GE Institutional Funds and GE LifeStyle Funds since their inception. -------------------------------------------------------------------------------- The Statement of Additional Information for the Fund includes additional information about the Directors and Officers and is available, without charge, upon request by calling 1-800-242-0134. 19 Investment Team -------------------------------------------------------------------------------- INVESTMENT ADVISER AND ADMINISTRATOR GE Asset Management Incorporated BOARD OF DIRECTORS Michael J.Cosgrove, CHAIRMAN John R. Costantino William J. Lucas Robert P. Quinn Matthew J. Simpson SECRETARY Jeanne M. LaPorta ASSISTANT SECRETARIES Joseph A. Carucci Joon Won Choe TREASURER Scott H. Rhodes ASSISTANT TREASURERS Scott R. Fuchs Christopher M. Isaacs DISTRIBUTOR GE Investment Distributors, Inc. Member FINRA and SIPC COUNSEL Sutherland, Asbill & Brennan, LLP CUSTODIAN State Street Bank & Trust Company INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM KPMG LLP OFFICERS OF THE INVESTMENT ADVISER James W. Ireland, CHIEF EXECUTIVE OFFICER Daniel O. Colao, EVP, CHIEF FINANCIAL OFFICER (AS OF JULY 28, 2008) Michael J. Cosgrove, EVP, PRESIDENT AND CHIEF EXECUTIVE OFFICER - MUTUAL FUNDS Paul M. Colonna, EVP, PRESIDENT - FIXED INCOME Kathryn D. Karlic, EVP, PRESIDENT - INSTITUTIONAL SALES AND MARKETING Ralph R. Layman, EVP, PRESIDENT - INTERNATIONAL EQUITIES Matthew J. Simpson, EVP, GENERAL COUNSEL AND SECRETARY Judith A. Studer, EVP, PRESIDENT - U.S. EQUITIES Don W. Torey, EVP, PRESIDENT - ALTERNATIVE INVESTMENTS AND REAL ESTATE John J. Walker, EVP, CHIEF OPERATING OFFICER (AS OF JANUARY 31, 2008) David Wiederecht, EVP, PRESIDENT - INVESTMENT STRATEGIES 20 [This page intentionally left blank.] INVESTMENT ADVISER GE ASSET MANAGEMENT INCORPORATED 3001 SUMMER STREET PO BOX 7900 STAMFORD, CT 06904-7900 DISTRIBUTOR GE INVESTMENT DISTRIBUTORS, INC. MEMBER FINRA AND SIPC 3001 SUMMER STREET PO BOX 7900 STAMFORD, CT 06904-7900 The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities is available without charge (i) upon request, by calling 1-800-242-0134; (ii) on the Fund's website at HTTP://WWW.GEFUNDS.COM; and (iii) on the Commission's website at HTTP://WWW.SEC.GOV. The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC - information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Information (if any) regarding how the Fund voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through the Fund's website at HTTP://WWW.GEFUNDS.COM; and (ii) on the Commission's website at HTTP://WWW.SEC.GOV. [GE LOGO OMITTED] ITEM 2. CODE OF ETHICS. Applicable only to an annual filing. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Applicable only to an annual filing. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Applicable only to an annual filing. ITEM 5. Audit Committee of Listed Registrants Applicable only to Closed-End Management Investment Companies. ITEM 6. Schedule of Investments. Attached as part of ITEM 1. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Applicable only to Closed-End Management Investment Companies. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Applicable only to Closed-End Management Investment Companies. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Applicable only to Closed-End Management Investment Companies. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. No material changes. ITEM 11. CONTROLS AND PROCEDURES. The officers providing the certifications in this report in accordance with Rule 30a-3 under the Investment Company Act of 1940 have concluded, based on their evaluation of the registrant's disclosure controls and procedures (as such term is defined in such rule), that such controls and procedures are adequate and reasonably designed to achieve the purpose described in paragraph (c) of such rule. There were no significant changes in the registrant's internal controls or in other factors that could significantly affect these controls subsequent to the date of their last evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. ITEM 12. EXHIBITS. (a) Not applicable. (b) Attached hereto as Exhibit 1 and Exhibit 2 are the Certifications of Michael J. Cosgrove and Scott Rhodes as principal executive officer and principal financial officer, respectively, as required by Rule 30a-2 under the Investment Company Act of 1940. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. GE INVESTMENTS FUNDS, INC By: /S/MICHAEL J. COSGROVE Michael J. Cosgrove Chairman, GE INVESTMENTS FUNDS, INC. Date: September 04, 2008 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. By: /S/MICHAEL J. COSGROVE Michael J. Cosgrove Chairman, GE INVESTMENTS FUNDS, INC. Date: September 04, 2008 By: /S/SCOTT RHODES Scott Rhodes TREASURER, GE INVESTMENTS FUNDS, INC. Date: September 04, 2008 EXHIBIT INDEX (b)(1) Certifications of principal executive officer and principal financial officer as required by Rule 30a-2 under the Investment Company Act of 1940. (b)(2) Certification of principal executive officer and principal financial officer as required by Section 906 of the Sarbanes-Oxley Act of 2002.