| þ | ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] |
| o | TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] |
| Page | ||||
Report of
Independent Registered Public Accounting Firm |
1 | |||
Financial Statements: |
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Statements of Net Assets Available for Benefits as of December 31, 2008 and 2007 |
2 | |||
Statements of Changes in Net Assets Available for Benefits for the years ended
December 31, 2008 and 2007 |
3 | |||
Notes to Financial Statements |
4 — 10 | |||
Supplemental Schedule |
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Schedule H, Line 4i — Schedule of Assets (Held at End of Year) as of December 31, 2008 |
11 | |||
| 2008 | 2007 | |||||||
Investments, at fair value |
$ | 114,601,924 | $ | 158,166,993 | ||||
Receivables: |
||||||||
Participant loans |
4,358,170 | 4,387,616 | ||||||
Employee contribution |
653 | 5,918 | ||||||
Employer contribution |
177,738 | 186,931 | ||||||
Accrued income |
126,894 | 68,812 | ||||||
Liability: |
||||||||
Excess employee contributions payable |
52,196 | 40,976 | ||||||
Net assets available for benefits, before adjustments
from fair value to contract value |
119,213,183 | 162,775,294 | ||||||
Adjustments from fair value to contract value for fully
benefit-responsive contracts |
3,703,809 | 138,741 | ||||||
Net assets available for benefits |
$ | 122,916,992 | $ | 162,914,035 | ||||
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| 2008 | 2007 | |||||||
Additions (reductions) to net assets attributed to: |
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Investment (loss) income: |
||||||||
Net depreciation in fair value of investments |
$ | (49,291,771 | ) | $ | (218,292 | ) | ||
Interest income |
1,467,903 | 1,236,410 | ||||||
Dividends |
3,636,333 | 9,180,359 | ||||||
Total investment (loss) income |
(44,187,535 | ) | 10,198,477 | |||||
Contributions: |
||||||||
Rollover |
1,055,599 | 612,331 | ||||||
Employee |
12,648,425 | 12,684,737 | ||||||
Employer, net of forfeitures |
4,059,870 | 4,032,912 | ||||||
Total contributions |
17,763,894 | 17,329,980 | ||||||
Total (reductions) additions |
(26,423,641 | ) | 27,528,457 | |||||
Deductions from net assets attributed to: |
||||||||
Benefits paid to participants |
13,535,550 | 17,230,177 | ||||||
Administrative expenses |
37,852 | 20,527 | ||||||
Total deductions |
13,573,402 | 17,250,704 | ||||||
Net (decrease) increase in
net assets |
(39,997,043 | ) | 10,277,753 | |||||
Net assets available for benefits: |
||||||||
Beginning of year |
162,914,035 | 152,636,282 | ||||||
End of year |
$ | 122,916,992 | $ | 162,914,035 | ||||
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| (1) | Description of the Plan | |
| The following description of the GE Security, Inc. 401(k) Retirement Plan (the Plan), a defined contribution plan, sponsored by GE Security, Inc. (formerly GE Interlogix, Inc.) (the Company or Employer or Plan administrator), is provided for general information purposes only. The Plan is subject to applicable provisions of the Employee Retirement Income Security Act of 1974, as amended (ERISA). Any employee of the Company who has attained the required ERISA age is eligible to participate in the Plan on the first day of the month after the employee’s three-month anniversary. The Plan is administered by the Company and advised by a committee whose members are appointed by the Board of Directors of the Company (the Plan Committee). The Company has entered into an agreement with New York Life Trust Company (the Trustee) who acts as the trustee and record keeper of the Plan’s assets. Participants should refer to the Plan document for complete information regarding the Plan’s definitions, benefits, eligibility and other matters. |
| (a) | Contributions | ||
| Each year, participants may elect to contribute pretax annual compensation, as defined by the Plan. For nonhighly compensated employees, contributions are limited to an aggregate of 50% of the participant’s pretax annual compensation. Highly compensated employees are limited in their contributions to an aggregate of 20% of the participant’s pretax annual compensation. The total amount of participant pretax contribution is limited to $15,500 for 2008 and 2007. Participants may also contribute amounts representing distributions from other qualified plans or individual retirement accounts (IRAs) into the Plan, as specified in the plan document. | |||
| Matching contributions by the Company for the benefit of participants are discretionary. For 2008 and 2007, Company matching contributions were equal to 50% of each participant’s contributions, up to 6% of eligible compensation. The Company also has the option to make a discretionary profit-sharing contribution to the Plan, which is allocated to participants based on the participants’ relative compensation as defined by the Plan. During 2008 and 2007, the Company did not make a discretionary profit-sharing contribution to the Plan. | |||
| Participants who are age 50 or older before the close of the plan year may elect to make a catch-up contribution, subject to certain limitations under the Internal Revenue Code (IRC) ($5,000 per participant in 2008 and 2007). The Company does not match employee catch-up contributions. | |||
| (b) | Participant Accounts | ||
| Participants direct the investment of their contributions among several mutual funds, a pooled separate account, and General Electric Company (GE) common stock. The allocation of a participant’s contributions to these investment funds is selected by the participant and may be changed daily. Each participant’s account is credited with the participant’s contributions, a share of Company matching and discretionary profit-sharing contributions, and the Plan’s earnings or losses, net of administrative expenses. Allocation of investment income or losses is based on the value of the participant’s account at the close of each day. |
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| (c) | Vesting | |
| Participants are vested immediately in their contributions, Company contributions (except as noted below) and related net investment earnings. Forfeitures of nonvested Company employer matching contributions are used to reduce future Company contributions. During 2008 and 2007, forfeitures totaling approximately $7,200 and $10,200, respectively, were used to reduce employer contributions. At December 31, 2008 and 2007, forfeitures totaling approximately $14,600 and $7,200, respectively, were available to reduce future contributions. Balances transferred prior to 2000 into the Plan from the Aritech Corporation Employee Stock Ownership Plan vest as follows: |
| Vested | ||||
| Years of service | percentage | |||
Less than 3 years |
— | |||
3 years but less than 4 |
20 | |||
4 years but less than 5 |
40 | |||
5 years but less than 6 |
60 | |||
6 years but less than 7 |
80 | |||
7 years and thereafter |
100 | |||
| (d) | Participant Loans | |
| A participant may borrow from his or her account a minimum of $500 up to a maximum equal to the lesser of $50,000 reduced by the highest outstanding loan balance in the participant’s account during the prior 12-month period or 50% of the participant’s vested account balance. Loan terms range from one to five years or up to 15 years for the purchase of a primary residence. The loans are secured by the balance in the participant’s account and bear interest at a rate commensurate with prevailing rates as determined by the Plan administrator. Interest rates range from 4.25% to 10.50% on loans outstanding at December 31, 2008. Principal and interest is paid ratably through biweekly payroll deductions. Loan administration charges are charged to the participant’s account electing the loan. | ||
| (e) | Payments of Benefits | |
| Distributions to participants may be made upon death, retirement or termination of employment. Participants may elect payment in a lump sum or in the form of an annuity or in-kind distribution of GE common stock as described in the Plan document. Distributions are also permitted for reasons of proven financial hardship as outlined in the Plan document. Participant benefit payments may be subject to federal income tax. | ||
| (f) | Plan Termination | |
| Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants will become or remain 100% vested in their accounts. |
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| (2) | Summary of Significant Accounting Policies |
| (a) | Basis of Accounting | ||
| The accompanying financial statements have been prepared using the accrual basis of accounting. | |||
| (b) | Investment Valuation and Income Recognition | ||
| Purchases and sales of securities are recorded on a trade-date basis. Interest and dividend income are recorded as earned on an accrual basis. Dividends are recorded on the ex-dividend date. | |||
| As described in Financial Accounting Standards Board Staff Position (FSP) AAG INV-1 and SOP 94-4-1, Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined-Contribution Health and Welfare and Pension Plans (the FSP), investment contracts held by a defined contribution plan are required to be reported at fair value. However, contract value is the relevant measurement attribute for that portion of the net assets available for benefits of a defined contribution plan attributable to fully benefit-responsive investment contracts because contract value is the amount participants would receive if they were to initiate permitted transactions under the terms of the plan. The plan invests in investment contracts through a pooled separate account, the New York Life Anchor Account III (Anchor Account III) at December 31, 2008 and 2007. As required by the FSP, the statements of net assets available for benefits presents the fair value of the investment in the pooled separate account as well as the adjustment of the investment in the pooled separate account from the fair value to contract value relating to the investment contracts. The statements of changes in net assets available for benefits is prepared on a contract value basis. The fair value of the fully benefit-responsive investment contracts are calculated using a discounting method developed by the trustee. The fair value and contract value of the Anchor Account III was $23,895,367 and $27,599,176, respectively, at December 31, 2008. The fair value and contract value of the Anchor III was $20,264,292 and $20,403,033, respectively, at December 31, 2007. The average yield for 2008 and 2007 was 4.79% and 4.79%, respectively. For the years ended December 31, 2008 and 2007, the crediting interest rate to participants in the Plan was 4.62% and 4.72%, respectively. There were no valuation reserves recorded that were associated with the pooled separate account in 2008 and 2007. Interest is credited daily to the account and is guaranteed to be not less than 0% before any deduction for expenses. | |||
| On December 31, 2000, the Plan received benefit-responsive investments in guaranteed insurance contracts in conjunction with the merger of the Interactive Technologies, Inc. 401(k) Investment Plan (the ITI Plan merger). The contracts are included in the financial statements at contract value as reported to the Plan. Contract value represents contributions made under the contracts, plus interest accrued at the current rate, less participant withdrawals and administrative expenses. Participants may ordinarily direct the withdrawal or transfer of all or a portion of their investment at contract value. There are no reserves against the contract value of the guaranteed insurance contracts for credit risk of the contract issuer or otherwise. The average yield and crediting interest rates ranged from approximately 4.0% and 4.0% for 2008 and 2007. The crediting interest rate is based on a formula agreed upon with the issuer, but may not be less than a specified rate, which was 4.0% and 4.0% as of December 31, 2008 and 2007, respectively. Such interest rates are reviewed on an annual |
6
| basis for resetting. The fair values of these contracts as of December 31, 2008 and 2007 equaled the contract value. | |||
| Certain events limit the ability of the Plan to transact at contract value with the issuer. Such events include the following: (a) amendments to the plan documents (including complete or partial plan termination or merger with another plan) (b) changes to the Plan’s prohibition on competing investment options or deletion of equity wash provisions; (c) bankruptcy of the plan sponsor or other plan sponsor events (e.g. divestitures or spin-offs of a subsidiary) which cause a significant withdrawal from the Plan or (d) the failure of the trust to qualify for exemption from federal income taxes or any required prohibited transaction exemption under ERISA. The plan administrator does not believe that the occurrence of any such value event, which would limit the Plan’s ability to transact at contract value with participants, is probable. | |||
| (d) | Net Depreciation in Fair Value of Investments | ||
| Net depreciation in fair value of investments included in the statements of changes in net assets available for benefits consists of realized gains or losses on investments sold and the unrealized appreciation (depreciation) on investments held at the end of the year. | |||
| (e) | Plan Expenses | ||
| The Company pays all Plan administrative expenses other than loan administration charges and commissions and fees on transactions involving GE common stock. Loan administration charges and common stock commissions and fees are charged to the participant’s account electing the loan or common stock transaction. | |||
| (f) | Payment of Benefits | ||
| Benefit payments are recorded when paid. | |||
| (g) | Use of Estimates | ||
| The preparation of the Plan’s financial statements in conformity with U.S. generally accepted accounting principles requires the Plan administrator to make estimates and assumptions that affect the reported amounts of assets and liabilities and changes therein and disclosure of contingent assets and liabilities. Actual results could differ from those estimates. | |||
| (h) | Risks and Uncertainties | ||
| The Plan invests in a variety of investments. Investment securities are exposed to various risks including, but not limited to, interest rate, market and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term. | |||
| The Plan invests in securities with contractual cash flows, such as asset-backed securities, collateralized mortgage obligations and commercial mortgage backed securities, including securities backed by subprime mortgage loans. The value, liquidity, and related income of these securities are sensitive to changes in economic conditions, including real estate value, delinquencies or defaults, or |
7
| both, and may be adversely affected by shifts in the market’s perception of the issuers and changes in interest rates. | |||
| (i) | Participant Loans | ||
| Participant loans are carried at amortized cost plus accrued interest. The fair value of participant loans was approximately $4,600,000 and $4,400,000 at December 31, 2008 and 2007, respectively. | |||
| (j) | Reclassifications | ||
| Certain prior year balances have been reclassified to conform with the current year presentation. |
| (3) | Investments | |
| The following tables present investments that represent 5% or more of the Plan’s net assets as of December 31, 2008 and 2007. |
| 2008 | 2007 | |||||||
New York Life Insurance Anchor Account III, at
contract value |
$ | 27,599,176 | $ | 20,403,033 | ||||
PIMCO Total Return Fund (Admin) |
14,113,017 | 13,123,519 | ||||||
The Growth Fund of America R4 |
11,105,791 | 19,867,668 | ||||||
Davis New York Venture Fund (A) |
9,201,556 | 18,100,017 | ||||||
Mainstay Balanced Fund I |
8,452,168 | 13,463,914 | ||||||
Mainstay
S&P 500 Index Fund I |
8,093,809 | 13,502,984 | ||||||
Fidelity Advisor Diversified International T |
8,064,224 | 16,013,453 | ||||||
JP Morgan Mid Cap Value Fund A |
6,746,830 | 11,759,981 | ||||||
General Electric Company common stock |
6,630,935 | 8,228,613 | ||||||
Artisan Mid Cap |
— | 8,905,124 | ||||||
| During 2008 and 2007, the Plan’s investments (including investments bought, sold, and held during the year) depreciated in value as follows: |
| 2008 | 2007 | |||||||
General Electric Company common stock |
$ | (5,729,336 | ) | $ | (24,836 | ) | ||
Mutual funds |
(43,562,435 | ) | (193,456 | ) | ||||
Net depreciation in fair value of investments |
$ | (49,291,771 | ) | $ | (218,292 | ) | ||
| (4) | Fair Value Measurements | |
| Effective January 1, 2008, the Plan adopted Financial Accounting Standards Board Statement of Financial Accounting Standards 157, Fair Value Measurements (SFAS 157), for all financial instruments accounted for at fair value on a recurring basis. SFAS 157 establishes a new framework for measuring fair value and expands related disclosures. Broadly, the SFAS 157 framework requires fair value to be determined based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the |
8
| principal or most advantageous market for the asset or liability in an orderly transaction between market participants. SFAS 157 establishes a three-level valuation hierarchy based upon observable and non-observable inputs. | ||
| For financial assets and liabilities, fair value is the price received to sell an asset or pay to transfer a liability in an orderly transaction with a market participant at the measurement date. In the absence of active markets for the identical assets and liabilities, such measurements involve developing assumptions based on market observable data and, in the absence of such data, internal information that is consistent with what market participants would use in a hypothetical transaction that occurs at the measurement date. | ||
| Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions. Preference is given to observable inputs. These two types of inputs create the following fair value hierarchy: | ||
| Level 1 — Quoted prices for identical investments in active markets. | ||
| Level 2 — Quoted prices for similar investments in active markets; quoted prices for identical or similar investments in markets that are not active; and model-derived valuations whose significant value drivers are observable. | ||
| Level 3 — Significant inputs to the valuation model are unobservable. | ||
| The Company maintains policies and procedures to value investments using the best and most relevant data available. The following section describes the valuation methodologies used to measure investments at fair value. | ||
| When available, quoted market prices are used to determine the fair value of investment securities, and they are included in Level 1. Level 1 securities primarily include the GE common stock, the money market fund and mutual funds. | ||
| When quoted market prices are unobservable, quotes from independent pricing vendors are utilized based on recent trading activity and other relevant information including market interest rate curves, referenced credit spreads and estimated prepayment rates where applicable. These investments are included in Level 2. In infrequent circumstances, our pricing vendors may provide us with valuations that are based on significant unobservable inputs, and in those circumstances the investment securities are classified in Level 3. | ||
| The Plan’s ownership in the pooled separate account is carried at fair value based on the investment’s net asset value per unit and included in Level 2. | ||
| Guaranteed investment contracts are valued at fair value by discounting the related cash flows based on current yields of similar instruments with comparable durations considering the credit-worthiness of the issuer (see note 2(b)) and are included in Level 2. |
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| The following table presents our investments at fair value on a recurring basis at December 31, 2008: |
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Common stock |
$ | 6,630,935 | — | — | 6,630,935 | |||||||||||
Money market fund |
391,154 | — | — | 391,154 | ||||||||||||
Mutual funds |
83,307,119 | — | — | 83,307,119 | ||||||||||||
Pooled separate account |
— | 23,895,367 | — | 23,895,367 | ||||||||||||
Guaranteed insurance
contracts |
— | 377,349 | — | 377,349 | ||||||||||||
Total investments |
$ | 90,329,208 | 24,272,716 | — | 114,601,924 | |||||||||||
| Transfers in and out of Level 3 are considered to occur at the beginning of the period. There were no transfers during the period. | ||
| (5) | Concentration of Investments | |
| The Plan’s investment in GE common stock represents approximately 5% of total investments as of December 31, 2008 and 2007. GE is a diversified technology, media and financial services company, with products and services ranging from aircraft engines, power generation, water processing and security technology to medical imaging, business and consumer financing, media content and advanced materials. GE serves customers in more than 100 countries. | ||
| (6) | Party-in-Interest Transactions | |
| The Plan engages in investment transactions with funds managed by the Trustee, a party-in-interest with respect to the Plan. The Plan also has investments in GE common stock. The Company is the Plan administrator; therefore, these transactions are party-in-interest transactions. These transactions are covered by an exemption from the “prohibited transaction” provisions of ERISA and IRC. | ||
| (7) | Tax Status | |
| The Internal Revenue Service has determined and informed the Plan administrator by a letter dated September 24, 2002 that the Plan and related trust are designed in accordance with applicable sections of the IRC. The Plan has been amended since receiving the determination letter; however, the Plan administrator believes that the Plan is designed and is currently operated in compliance with the applicable requirements of the IRC and the related trust was tax exempt as of December 31, 2008 and 2007. |
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| Number of | Current | |||||||||
| Identity of issue | Description of investment | shares | value | |||||||
Corporate Stocks — Common: |
||||||||||
General Electric Company* |
General Electric Company common stock | 409,317 | $ | 6,630,935 | ||||||
Money Market Fund: |
||||||||||
New York Life Trust Company* |
Mainstay Cash Reserves Fund I | 391,154 | 391,154 | |||||||
Mutual Funds: |
||||||||||
American Funds |
The Growth Fund of America R4 | 546,545 | 11,105,791 | |||||||
Davis Funds |
Davis New York Venture Fund (A) | 389,566 | 9,201,556 | |||||||
Fidelity Investments |
Fidelity Advisor Diversified International T | 666,465 | 8,064,224 | |||||||
New York Life Trust Company* |
Mainstay S&P 500 Index Fund I | 391,383 | 8,093,809 | |||||||
New York Life Trust Company* |
Mainstay Balanced Fund I | 440,447 | 8,452,168 | |||||||
PIMCO Funds |
PIMCO Total Return Fund (Admin) | 1,391,816 | 14,113,017 | |||||||
JP Morgan |
JP Morgan Mid Cap Value Fund A | 439,819 | 6,746,830 | |||||||
Artisan Funds |
Artisan Mid Cap Fund | 254,753 | 4,333,341 | |||||||
Van Kampen |
Van Kampen Growth and Income A | 360,640 | 5,095,843 | |||||||
Aston |
Optimum Mid Cap Fund | 138,548 | 2,179,360 | |||||||
PIMCO Funds |
PIMCO Real Return Admin Fund | 408,929 | 3,864,376 | |||||||
Royce |
Micro Cap Fund | 80,854 | 717,173 | |||||||
New York Life Trust Company* |
Mainstay Retirement 2010 Fund | 45,257 | 353,458 | |||||||
New York Life Trust Company* |
Mainstay Retirement 2020 Fund | 74,325 | 532,908 | |||||||
New York Life Trust Company* |
Mainstay Retirement 2030 Fund | 45,698 | 302,062 | |||||||
New York Life Trust Company* |
Mainstay Retirement 2040 Fund | 14,484 | 92,840 | |||||||
New York Life Trust Company* |
Mainstay Retirement 2050 Fund | 9,429 | 58,363 | |||||||
Pooled Separate Account: |
||||||||||
New York Life Trust Company* |
New York Life Insurance Anchor Account III | 27,599,176 | ||||||||
Guaranteed Insurance Contracts: |
||||||||||
American Founders Life Insurance Company |
Bradford National Life Insurance Company Guarantee #2990002645, 4.0%, maturing January 28, 2044 |
246,913 | ||||||||
Conseco Life Insurance Company |
American Life and Casualty Insurance Company Contract, #ON890313, 4.0% maturing April 1, 2019 |
130,436 | ||||||||
Participant loans* |
Interest rates from 4.25% to 10.50%, maturing through 2026 |
4,358,170 | ||||||||
| $ | 122,663,903 | |||||||||
| * | Denotes party in interest |
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| By: | /s/ LAURIE BEVIER | |||
| Laurie Bevier | ||||
| Plan Administrator |
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