24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statements of Assets and
Liabilities
December 31, 2012 (Amounts in thousands)
|
|
GE S&S
U.S. EQUITY FUND
|
|
|
GE S&S
INCOME FUND
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Investments in securities, at Fair Value (cost $3,437,470 and $2,613,421, respectively)
|
|
$
|
3,899,833
|
|
|
$
|
2,671,047
|
|
|
Short-Term Investments at Fair Value (cost $59,944 and $733,574, respectively)
|
|
|
59,944
|
|
|
|
733,642
|
|
|
Income receivables
|
|
|
2,579
|
|
|
|
13,540
|
|
|
Receivable for fund shares sold
|
|
|
47
|
|
|
|
49
|
|
|
Variation margin receivable
|
|
|
—
|
|
|
|
367
|
|
|
Other assets
|
|
|
49
|
|
|
|
32
|
|
|
Total assets
|
|
|
3,962,452
|
|
|
|
3,418,677
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
Distributions payable to shareholders
|
|
|
2
|
|
|
|
136
|
|
|
Payable for investments purchased
|
|
|
—
|
|
|
|
484,344
|
|
|
Payable for fund shares redeemed
|
|
|
1,753
|
|
|
|
1,358
|
|
|
Payable to GEAM
|
|
|
232
|
|
|
|
227
|
|
|
Accrued other expenses
|
|
|
454
|
|
|
|
337
|
|
|
Total liabilities
|
|
|
2,441
|
|
|
|
486,402
|
|
|
NET ASSETS
|
|
$
|
3,960,011
|
|
|
$
|
2,932,275
|
|
|
NET ASSETS CONSIST OF:
|
|
|
|
|
|
|
|
|
|
Capital paid in
|
|
$
|
3,588,732
|
|
|
$
|
2,873,656
|
|
|
Undistributed (distributions in excess of) net investment income
|
|
|
122
|
|
|
|
597
|
|
|
Accumulated net realized gain (loss)
|
|
|
(91,206
|
)
|
|
|
(1,044
|
)
|
|
Net unrealized appreciation (depreciation) on:
|
|
|
|
|
|
|
|
|
|
Investments
|
|
|
462,363
|
|
|
|
57,694
|
|
|
Futures
|
|
|
—
|
|
|
|
1,372
|
|
|
NET ASSETS
|
|
$
|
3,960,011
|
|
|
$
|
2,932,275
|
|
|
Shares outstanding ($25.00 and $10.00 par value respectively;
unlimited shares authorized)
|
|
|
89,162
|
|
|
|
249,545
|
|
|
Net asset value per share
|
|
|
$44.41
|
|
|
|
$11.75
|
|
The accompanying Notes are an integral part of these financial statements.
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statements of Operations
For the Year ended December 31, 2012 (Amounts in thousands)
|
|
GE S&S
U.S. EQUITY FUND
|
|
|
GE S&S
INCOME FUND
|
|
|
|
|
|
|
INVESTMENT INCOME
|
|
|
|
|
|
|
|
|
|
Income:
|
|
|
|
|
|
|
|
|
|
Dividend
|
|
$
|
80,223
|
|
|
$
|
54
|
|
|
Interest
|
|
|
105
|
|
|
|
69,439
|
|
|
Interest from affiliated investments
|
|
|
6
|
|
|
|
7
|
|
|
Less: Foreign taxes withheld
|
|
|
(273
|
)
|
|
|
—
|
|
|
Total Income
|
|
|
80,061
|
|
|
|
69,500
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
Advisory and administration fees
|
|
|
5,493
|
|
|
|
4,388
|
|
|
Transfer agent fees
|
|
|
382
|
|
|
|
371
|
|
|
Custody and accounting expenses
|
|
|
145
|
|
|
|
239
|
|
|
Professional fees
|
|
|
43
|
|
|
|
42
|
|
|
Other expenses
|
|
|
518
|
|
|
|
450
|
|
|
Total expenses
|
|
|
6,581
|
|
|
|
5,490
|
|
|
Net investment income
|
|
|
73,480
|
|
|
|
64,010
|
|
|
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized gain (loss) on :
|
|
|
|
|
|
|
|
|
|
Investments
|
|
|
317,495
|
|
|
|
104,833
|
|
|
Futures
|
|
|
—
|
|
|
|
(22,364
|
)
|
|
Foreign currency related transactions
|
|
|
(17
|
)
|
|
|
—
|
|
|
|
|
|
|
Increase (decrease) in unrealized appreciation/depreciation on:
|
|
|
|
|
|
|
|
|
|
Investments
|
|
|
203,068
|
|
|
|
10,180
|
|
|
Futures
|
|
|
—
|
|
|
|
5,600
|
|
|
Net realized and unrealized gain on investments
|
|
|
520,546
|
|
|
|
98,249
|
|
|
Net increase in net assets resulting from operations
|
|
$
|
594,026
|
|
|
$
|
162,259
|
|
The accompanying Notes are an integral part of these financial statements.
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statements of Changes
in Net Assets
For the year ended
December 31, 2012 and 2011 (Amounts in thousands)
|
|
GE S&S
U.S. EQUITY FUND
|
|
|
GE S&S
INCOME FUND
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
|
INCREASE (DECREASE) IN NET ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
$
|
73,480
|
|
|
$
|
55,054
|
|
|
$
|
64,010
|
|
|
$
|
91,833
|
|
|
Net realized gain on investments, futures and foreign currency related transactions
|
|
|
317,478
|
|
|
|
193,271
|
|
|
|
82,469
|
|
|
|
100,280
|
|
|
Net increase (decrease) in unrealized appreciation (depreciation) on investments and
futures
|
|
|
203,068
|
|
|
|
(324,970
|
)
|
|
|
15,780
|
|
|
|
13,018
|
|
|
Net increase (decrease) from operations
|
|
|
594,026
|
|
|
|
(76,645
|
)
|
|
|
162,259
|
|
|
|
205,131
|
|
|
Distributions to shareholders from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
(73,342
|
)
|
|
|
(55,602
|
)
|
|
|
(64,329
|
)
|
|
|
(91,605
|
)
|
|
Net realized gains
|
|
|
—
|
|
|
|
—
|
|
|
|
(80,596
|
)
|
|
|
(21,111
|
)
|
|
Total distributions
|
|
|
(73,342
|
)
|
|
|
(55,602
|
)
|
|
|
(144,925
|
)
|
|
|
(112,716
|
)
|
|
Increase (decrease) in net assets from operations and distributions
|
|
|
520,684
|
|
|
|
(132,247
|
)
|
|
|
17,334
|
|
|
|
92,415
|
|
|
Share transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of shares
|
|
|
86,086
|
|
|
|
81,384
|
|
|
|
137,454
|
|
|
|
86,700
|
|
|
Value of distributions reinvested
|
|
|
68,771
|
|
|
|
52,060
|
|
|
|
139,674
|
|
|
|
107,981
|
|
|
Cost of shares redeemed
|
|
|
(311,252
|
)
|
|
|
(335,651
|
)
|
|
|
(117,557
|
)
|
|
|
(153,401
|
)
|
|
Net increase (decrease) from share transactions
|
|
|
(156,395
|
)
|
|
|
(202,207
|
)
|
|
|
159,571
|
|
|
|
41,280
|
|
|
Total increase (decrease) in net assets
|
|
|
364,289
|
|
|
|
(334,454
|
)
|
|
|
176,905
|
|
|
|
133,695
|
|
|
|
|
|
|
|
|
NET ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of year
|
|
|
3,595,722
|
|
|
|
3,930,176
|
|
|
|
2,755,370
|
|
|
|
2,621,675
|
|
|
End of year
|
|
$
|
3,960,011
|
|
|
$
|
3,595,722
|
|
|
$
|
2,932,275
|
|
|
$
|
2,755,370
|
|
|
Undistributed (distributions in excess of)
net investment income (end of period)
|
|
$
|
122
|
|
|
$
|
—
|
|
|
$
|
597
|
|
|
$
|
(912
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CHANGES IN FUND SHARES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares sold
|
|
|
1,999
|
|
|
|
2,029
|
|
|
|
11,529
|
|
|
|
7,488
|
|
|
Issued for distributions reinvested
|
|
|
1,558
|
|
|
|
1,354
|
|
|
|
11,806
|
|
|
|
9,359
|
|
|
Shares redeemed
|
|
|
(7,196
|
)
|
|
|
(8,275
|
)
|
|
|
(9,824
|
)
|
|
|
(13,426
|
)
|
|
Net increase (decrease) in fund shares
|
|
|
(3,639
|
)
|
|
|
(4,892
|
)
|
|
|
13,511
|
|
|
|
3,421
|
|
The accompanying Notes are an integral part of these financial statements.
27
December 31, 2012
|
1.
|
Organization of the Funds
|
The GE S&S U.S. Equity Fund
and GE S&S Income Fund (collectively, the “Funds”) are registered under the Investment Company Act of 1940, as amended, (the “1940 Act”) as open-end management investment companies. The Funds are two of the investment options
offered under the GE Savings & Security Program (the “Program”). The Program, through a trust, owns 69% of the GE S&S U.S. Equity Fund and 75% of the GE S&S Income Fund. The Funds operate as Employees’ Securities
Companies (as defined in the 1940 Act) and as such are exempt from certain provisions of the 1940 Act.
GE Asset Management Incorporated (GEAM) is the
Funds’ investment adviser and a wholly-owned subsidiary of General Electric Company.
|
2.
|
Summary of Significant Accounting Policies
|
The preparation
of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) 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.
Subsequent events after the balance sheet date through the date the financial statements were issued, have been evaluated in the preparation of the financial
statements. There are not items to report.
The following summarizes the significant accounting policies of the Funds:
Securities Valuation and Transactions
.
All investments in securities are recorded at their estimated fair value, as described in Note 3.
Securities 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.
Foreign Currency
Accounting records of the Funds are maintained in U.S.
dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated to U.S. dollars at the prevailing rates of exchange at period end. Purchases and sales of securities, income receipts and expense
payments denominated in foreign currencies are translated into U.S. dollars at the prevailing exchange rate on the respective dates of such transactions.
All assets and liabilities of the Funds initially expressed in foreign currency values will be converted into U.S. dollars at the WM/Reuter exchange rate computed
at 11:00 a.m., Eastern time.
The Funds do 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 year. 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 foreign securities. Net unrealized foreign exchange gains and losses arising from changes in the value of other assets and liabilities (including
foreign currencies and open foreign currency contracts) as a result of changes in foreign exchange rates are included as increases or decreases in unrealized appreciation/depreciation on foreign currency related transactions.
Derivatives
The Funds are subject to equity price risk, interest rate risk, credit risk, and foreign currency exchange rate risk in the normal
course of pursuing their investment objectives. The GE S&S Income Fund entered into derivative transactions to manage the duration of fixed-income investments.
Futures Contracts
A futures contract represents a commitment for the future purchase or sale of an asset at a specified price on a specified date. The GE S&S Income Fund entered into interest
rate, or bond index futures contracts subject to certain limitations. The GE S&S Income Fund entered into futures for a variety of portfolio management purposes such as hedging against the effects of changes in the value of portfolio securities
due to anticipated changes in interest rates and/or market conditions, gaining market exposure for accumulating and residual cash positions, for duration
28
December 31, 2012
management, or when the transactions were economically appropriate to the reduction of risks inherent in the management of the Funds. Buying futures tends to increase a Fund’s exposure to
the underlying instrument while selling futures tends to decrease a Fund’s exposure to the underlying instrument, or to hedge other Fund investments. With futures contracts, there is minimal counterparty credit risk to the Funds since futures
contracts are exchange traded and the exchange’s clearinghouse, as counterparty to all traded futures, guarantees the futures against default. A 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 financial futures contract, the Funds are 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 Funds each day, depending on the daily fluctuation
in the fair value of the underlying security. The Funds record an unrealized gain or loss equal to the daily variation margin. Should market conditions move unexpectedly, the Funds may not achieve the anticipated benefits of the futures contracts
and may incur a loss. The Funds recognize a realized gain or loss on the expiration or closing of a futures contract.
When-Issued Securities and
Forward Commitments
Certain Funds purchase or sell securities on a when-issued or forward commitment basis. These transactions are arrangements in which the Funds purchase and sell securities with payment and delivery scheduled a month or more
after entering into the transaction. 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 commitments. In connection with such purchases, the Funds maintain cash or liquid assets in an amount equal to the purchase commitments for such underlying securities until
settlement date and for sales commitments the Funds maintain 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 commitments are recorded as unrealized gains or losses. The Funds will not enter into such commitments for the purpose of investment leverage.
Investments in Foreign Markets
Investments in foreign markets involve special risks and considerations not typically associated with investing in the United States. These risks include revaluation
of currencies, high rates of inflation, restrictions on repatriation of 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 Funds may be subject to capital gains and repatriation
taxes imposed by certain countries in which they invest. Such taxes are generally based upon income and/or capital gains earned or repatriated. Taxes are accrued based on net investment income, net realized gains and net unrealized appreciation as
income and/or capital gains are earned.
Investment Income
Corporate actions (including cash dividends) are recorded on 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. Withholding taxes in foreign dividends have been provided for in
accordance with the Funds’ understanding of the applicable country’s tax rules and rates.
Interest income is recorded on the accrual basis.
Accretion of discounts and amortization premiums on taxable bonds are to the call or maturity date, whichever is shorter, using the effective yield method.
Expenses
Fund specific expenses are charged to the Fund that incurs such expenses. Such expenses may include custodial fees, legal and accounting fees, printing costs and registration fees.
Expenses that are not fund specific are allocated pro rata across the Funds. Expenses of the Fund are generally paid directly by the Fund; however, expenses may be paid by GEAM and reimbursed by the Funds.
Federal Income Taxes
The Funds intend to comply with all sections of the Internal Revenue Code applicable to regulated investment companies
including the
29
December 31, 2012
distribution of substantially all of their taxable net investment income and net realized capital gains to their shareholders. Therefore, no provision for federal income tax has been made. Each
Fund is treated as a separate taxpayer for federal income tax purposes.
The Funds utilize various methods to
measure the fair value of most of its investments on a recurring basis. GAAP establishes a framework for measuring fair value and providing related disclosures. Broadly, the 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 principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. In the absence
of active markets for the identical assets or 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. It also establishes a three-level valuation hierarchy based upon observable and non-observable inputs.
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 inputs are observable or whose significant value drivers are observable.
Level 3 - Significant inputs to the valuation
model are unobservable.
Policies and procedures are maintained to value investments using the best and most relevant data available. In addition,
pricing vendors are utilized to assist in valuing investments. GEAM performs periodic reviews of the methodologies used by independent pricing services including price validation of individual securities.
Fair Value Measurement
The following section describes the valuation methodologies the Funds use to measure different financial investments at
fair value.
A Fund’s portfolio securities are valued generally on the basis of market quotations. Equity securities generally are valued at the
last reported sale price on the primary market in which they are traded. Portfolio securities listed on NASDAQ are valued using the NASDAQ Official Closing Price, Level 1 securities primarily include publicly-traded equity securities. If no sales
occurred on the exchange or NASDAQ that day, the portfolio security generally is valued using the last reported bid price. In those circumstances the Fund classifies the investment securities in Level 2.
Debt securities (other than short-term securities described below) generally are valued at an evaluated bid price as reported by independent pricing services. The
pricing services use various pricing models for each asset class. The inputs and assumptions to the model of the pricing services are derived from market observable sources, including: benchmark yields, reported trades, broker/dealer quotes, issuer
spreads, benchmark securities, bids, offers, and other market related data. Since many fixed income securities do not trade on a daily basis, the methodology of the pricing service uses other available information as applicable such as benchmark
curves, benchmarking of similar securities, sector groupings, and matrix pricing. Thus, certain securities may not be priced using quoted prices, but rather determined from market observable information. These investments are included in Level 2 and
are primarily comprised of corporate fixed income, government, mortgage and asset-backed securities. In the absence of a reliable bid price from such a pricing service, debt securities may be valued based on broker or dealer supplied valuations or
quotations. In these infrequent circumstances, pricing services may provide the Fund with valuations that are based on significant unobservable inputs, and in those circumstances the investment securities are classified as Level 3.
A Fund may use non-binding broker or dealer quotes for valuation when there is limited or no relevant market activity for a specific investment or for other
investments that share similar characteristics and a price is not provided by a pricing service or is deemed not to be reliable. The Funds have not adjusted the prices obtained. Investment securities priced using non-binding broker or dealer quotes
are included in Level 3.
30
December 31, 2012
Short-term investments of sufficient credit quality with remaining maturities of sixty days or less at the time of purchase are typically valued on the basis of amortized cost which approximates fair value and
these are included in Level 2.
If it is determined that amortized cost does not approximate fair value, securities may be valued based on dealer
supplied valuations or quotations. In these infrequent circumstances, pricing services may provide the Fund with valuations that are based on significant unobservable inputs, and in those circumstances the investment securities are classified in
Level 3.
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 Funds’ Board of Trustees that are designed to establish its “fair” value. These securities are typically classified in Level 3. Those procedures require that the
fair value of a security be established by a valuation committee of GEAM. The valuation committee follows different protocols for different types of investments and circumstances. The fair value procedures may be used to value any investment of any
Fund in the appropriate circumstances.
Fair value determinations generally are used for securities whose value is affected by a significant event that
will materially affect the value of a security and which occurs subsequent to the time of the close of the principal market on which such security trades but prior to the calculation of the Fund’s NAV.
The value established for such a portfolio security may be different than what would be produced through the use of market quotations or another methodology.
Portfolio securities that are valued using techniques other than market quotations, including “fair valued” securities, may be subject to greater fluctuation in their value from one day to the next than would be the case if market
quotations were used. In addition, there is no assurance that a Fund could sell a portfolio security for the value established for it at any time and it is possible that the Fund would incur a loss because a portfolio security is sold at a discount
to its established value.
Other financial investments are derivative instruments that are not reflected in total investments, such as futures, forwards,
swaps, and written options contracts, which are valued based on fair value as discussed above.
The Funds use closing prices for derivatives included in
Level 1, which are traded either on exchanges or liquid over-the counter markets. Derivative assets and liabilities included in Level 2 primarily represent interest rate swaps, cross-currency swaps and foreign currency and commodity forward and
option contracts. Derivative assets and liabilities included in Level 3 primarily represent interest rate products that contain embedded optionality or prepayment features.
The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.
The following tables present the Funds' investments measured at fair value on a recurring basis
at December 31, 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund
|
|
Investments
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
GE S&S U.S. Equity Fund
|
|
Investments in Securities†
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
$
|
3,899,833
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,899,833
|
|
|
|
|
Short-Term Investments
|
|
|
—
|
|
|
|
59,944
|
|
|
|
—
|
|
|
|
59,944
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investments in Securities
|
|
$
|
3,899,833
|
|
|
$
|
59,944
|
|
|
$
|
—
|
|
|
$
|
3,959,777
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31
December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund
|
|
Investments
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
GE S&S Income Fund
|
|
Investments in Securities†
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasuries
|
|
$
|
—
|
|
|
$
|
806,954
|
|
|
$
|
—
|
|
|
$
|
806,954
|
|
|
|
|
Agency Mortgage Backed
|
|
|
—
|
|
|
|
871,202
|
|
|
|
—
|
|
|
|
871,202
|
|
|
|
|
Agency CMOs
|
|
|
—
|
|
|
|
22,892
|
|
|
|
—
|
|
|
|
22,892
|
|
|
|
|
Asset Backed
|
|
|
—
|
|
|
|
7,204
|
|
|
|
—
|
|
|
|
7,204
|
|
|
|
|
Corporate Notes
|
|
|
—
|
|
|
|
824,021
|
|
|
|
—
|
|
|
|
824,021
|
|
|
|
|
Non-Agency CMOs
|
|
|
—
|
|
|
|
84,206
|
|
|
|
—
|
|
|
|
84,206
|
|
|
|
|
Sovereign Bonds
|
|
|
—
|
|
|
|
39,811
|
|
|
|
—
|
|
|
|
39,811
|
|
|
|
|
Municipal Notes and Bonds
|
|
|
—
|
|
|
|
14,757
|
|
|
|
—
|
|
|
|
14,757
|
|
|
|
|
Short-Term Investments
|
|
|
—
|
|
|
|
733,642
|
|
|
|
—
|
|
|
|
733,642
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investments in Securities
|
|
$
|
—
|
|
|
$
|
3,404,689
|
|
|
$
|
—
|
|
|
$
|
3,404,689
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Financial Instruments*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures Contracts — Unrealized
Appreciation
|
|
$
|
3,219
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,219
|
|
|
|
|
Futures Contracts — Unrealized
Depreciation
|
|
|
(1,847
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,847
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other Financial Instruments
|
|
$
|
1,372
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,372
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
†
|
See Schedules of Investments for industry classification
|
|
*
|
Other financial instruments include derivative instruments such as futures contracts. Amounts shown represent unrealized appreciation (depreciation), at period end.
|
There were no transfers between fair value levels. Transfers between fair value levels are considered to occur at the beginning of the
period.
|
4.
|
Derivatives Transactions
|
(Dollars in thousands)
Shown below are the derivative contracts entered into by the S&S Income Fund, summarized by primary risk exposure as they appear on the
Statement of Assets and Liabilities, all of which are not accounted for as hedging instruments under FASB Accounting Standards Codification (“ASC”) No. 815 Derivatives and Hedging as of December 31, 2012.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Derivatives
December 31, 2012
|
|
|
Liability Derivatives December 31, 2012
|
|
|
Derivatives not accounted for as hedging
instruments under ASC 815
|
|
Location in the Statements
of Assets and Liabilities
|
|
Fair
Value ($)
|
|
|
Location in the Statements
of Assets and Liabilities
|
|
Fair
Value ($)
|
|
|
GE S&S Income Fund
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Contracts
|
|
Assets, Net Assets — Net Unrealized Appreciation/ (Depreciation) on Futures
|
|
|
3,219
|
*
|
|
Liabilities, Net Assets — Net Unrealized Appreciation/ (Depreciation) on Futures
|
|
|
(1,847
|
)*
|
|
* Includes cumulative unrealized appreciation/(depreciation) of futures contracts as reported in the
Schedule of Investments and within the components of the net assets section of the Statement of Assets and Liabilities. Only the current day’s variation margin is reported within the receivables and/or payables of the Statement of Assets and
Liabilities.
|
|
32
December 31, 2012
Shown below are the effects of derivative
instruments on the Fund’s Statement of Operations, summarized by primary risk exposure all of which are not accounted for as hedging investments under ASC 815.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not accounted
for as hedging instruments
under ASC 815
|
|
Location in the Statements
of Operations
|
|
Total
Notional Amount
of Futures Contracts
Purchased/(Sold) ($)
|
|
|
Realized Gain (Loss) on
Derivatives Recognized
in Income($)
|
|
|
Change in Unrealized
Appreciation (Depreciation)
on
Derivatives
Recognized in Income($)
|
|
|
GE S&S Income Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Contracts
|
|
Realized gain (loss) on futures, Increase (decrease) in unrealized appreciation (depreciation) on Futures
|
|
|
5,861,152/
(5,762,332
|
)
|
|
|
(22,364
|
)
|
|
|
5,601
|
|
The Trust 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 (“State Street”). The revolving credit facility requires the payment of a commitment fee equal to
0.100% per annum on the daily unused portion of the credit facility, payable quarterly. The portion borne by the Funds generally is borne proportionally based upon net assets. In addition, the Trust has a $100 million uncommitted, unsecured line of
credit with State Street. 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 its prospectus limitation, 20% of its net assets, or $150 million. The credit facilities were not utilized by the Trust during the period ended December 31, 2012.
|
6.
|
Compensation and Fees Paid to Affiliates
|
Advisory
and Administration Expenses
During 2012, the Funds incurred expenses for the cost of services rendered by GEAM as investment adviser and for
services GEAM rendered as shareholder servicing agent. These expenses are included as advisory and administration expenses and shareholder servicing agent expense in the Statements of Operations. The Trustees received no compensation as trustees for
the Funds.
|
7.
|
Investment Transactions
|
Purchases and Sales of
Securities
The cost of purchases and the proceeds from sales of investments, other than short-term securities, for the period ended
December 31, 2012, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands):
|
|
U.S. Government
Securities
|
|
|
Other Securities
|
|
|
Fund
|
|
Purchases
|
|
|
Sales
|
|
|
Purchases
|
|
|
Sales
|
|
|
GE S&S U.S. Equity Fund
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,586,851
|
|
|
$
|
2,747,951
|
|
|
GE S&S Income Fund
|
|
|
8,905,915
|
|
|
|
8,481,647
|
|
|
|
1,325,179
|
|
|
|
1,631,891
|
|
The Funds are subject to ASC 740,
Income
Taxes
. ASC 740 provides guidance for financial accounting and reporting for the effects of income taxes that result from an entity’s activities during the year. ASC 740 also provides guidance regarding how certain tax positions should be
recognized, measured, presented and disclosed in the financial statements. ASC 740 requires evaluation of tax positions taken or expected to be taken in the course of preparing the Funds’ tax returns to determine whether the tax positions are
“more likely than not” of being sustained by the applicable tax authority. There are no adjustments to the Funds’ net assets required under ASC 740. The Funds’ 2009, 2010, 2011 and 2012 fiscal years tax returns are still open to
examination by the Federal and applicable state tax authorities.
33
December 31, 2012
At December 31, 2012, information on the tax
components of capital was as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Unrealized Tax
|
|
|
Net Tax Appreciation /
(Depreciation)
|
|
|
Undistributed
|
|
|
|
|
|
Fund
|
|
Cost of
Investments
For Tax
Purposes
|
|
|
Appreciation
|
|
|
Depreciation
|
|
|
Investments
|
|
|
Derivatives /
Currency
|
|
|
Income
|
|
|
Accumulated
Capital Loss
|
|
|
Late-Year
Losses
|
|
|
GE S&S U.S. Equity Fund
|
|
$
|
3,523,617
|
|
|
$
|
525,506
|
|
|
$
|
(89,346
|
)
|
|
$
|
436,160
|
|
|
$
|
—
|
|
|
$
|
122
|
|
|
$
|
(65,003
|
)
|
|
$
|
—
|
|
|
GE S&S Income Fund
|
|
|
3,352,169
|
|
|
|
66,944
|
|
|
|
(14,424
|
)
|
|
|
52,520
|
|
|
|
—
|
|
|
|
6,363
|
|
|
|
—
|
|
|
|
(265
|
)
|
As of December 31, 2012, the S&S U.S. Equity Fund has
capital loss carryovers as indicated below. The capital loss carryover is 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount (In thousands)
|
|
|
|
|
|
Fund
|
|
Short-Term
|
|
|
Long-Term
|
|
|
Expires
|
|
|
GE S&S U.S. Equity Fund
|
|
$
|
49,949
|
|
|
$
|
—
|
|
|
|
12/31/2017
|
|
|
|
|
|
15,054
|
|
|
|
—
|
|
|
|
12/31/2018
|
|
These amounts will be available to offset future taxable capital gains. Under the recently enacted Regulated Investment Company
Modernization Act of 2010, the Funds will be permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. However, any losses incurred during those future years will be required to be
utilized prior to the losses incurred in pre-enactment tax years. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital losses that are carried forward
will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.
During
the year ended December 31, 2012, the Funds utilized prior year capital loss carryovers as follows:
|
|
|
|
|
|
|
Fund (In Thousands)
|
|
Amount
|
|
|
GE S&S U.S. Equity Fund
|
|
$
|
298,865
|
|
Any qualified late-year loss is deemed to arise on the first day of the Funds’ next tax year (if the Funds elect to defer such
loss). Under this regime, generally, the Funds can elect to defer any post-October capital loss and/or any late-year ordinary loss as defined by the Internal Revenue Code.
|
|
|
|
|
|
|
|
|
|
|
Fund
|
|
Capital
|
|
|
Ordinary
|
|
|
GE S&S Income Fund
|
|
$
|
265
|
|
|
$
|
—
|
|
The tax character of distributions paid during the year ended December 31, 2012 was as follows:
|
|
|
|
|
|
|
|
|
|
|
Fund
|
|
Year
|
|
|
Ordinary
Income
|
|
|
GE S&S U.S. Equity Fund
|
|
|
2012
|
|
|
$
|
73,342
|
|
|
|
|
|
2011
|
|
|
|
55,602
|
|
|
GE S&S Income Fund
|
|
|
2012
|
|
|
|
144,925
|
|
|
|
|
|
2011
|
|
|
|
112,716
|
|
Distributions to Shareholders
GE S&S Income Fund declares investment income dividends daily and pays them monthly. The GE S&S U.S. Equity Fund declares and pays dividends from investment
income annually. The Funds declare and pay 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) treatment of realized and unrealized gains and losses on foreign currency contracts, futures, investments organized as partnerships for tax
purposes, losses deferred on offsetting positions, and losses deferred due to wash sale transactions. Reclassifications are made to the Funds’ capital accounts to reflect income and gains available for distribution (or available capital loss
carryovers) under income tax regulations. These reclassifications have no
34
December 31, 2012
impact on net investment income, realized gains or losses, or net asset value of the Funds. The calculation of net investment income per share in the Financial Highlights table excludes these
adjustments.
The reclassifications for the year ended December 31, 2012 were as follows:
|
|
|
|
|
|
|
|
|
|
|
Fund
|
|
Undistributed
Net Investment
Income
|
|
|
Realized Gain
(Loss)
|
|
|
GE S&S U.S. Equity Fund
|
|
$
|
(16
|
)
|
|
$
|
16
|
|
|
GE S&S Income Fund
|
|
|
1,828
|
|
|
|
(1,828
|
)
|
35
The Shareholders and Board of Directors
GE S&S Funds
We have audited the accompanying statements of assets and liabilities, including the
schedules of investments, of the GE S&S U.S. Equity Fund and GE S&S Income Fund (collectively, the “Funds”), as of December 31, 2012, and the related statement of operations for the year then ended, statements of changes in net
assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended. These financial statements and financial highlights are the responsibility of the Fund’s
management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our
audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2012
by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our
opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the GE S&S U.S. Equity Fund and GE S&S Income Fund as of December 31, 2012, the results of its
operations, changes in its net assets and financial highlights for each of the years described above, in conformity with U.S. generally accepted accounting principles.
Boston, Massachusetts
February 22, 2013
36
For the year ended December 31, 2012
In Thousands
Summary
For the fiscal year ended December 31, 2012 certain dividends paid by the fund may be subject to
a maximum income tax rate of 15%. The following represent the amounts that may be considered qualified dividend income:
|
|
|
|
|
|
|
Fund name
|
|
Qualified Dividend
Income (In Thousands)
|
|
|
GE S&S U.S. Equity Fund
|
|
$
|
73,342
|
|
For corporate shareholders, of the ordinary dividends paid, the following represent the amounts that may be eligible for the
dividends received deduction:
|
|
|
|
|
|
|
Fund name
|
|
Dividends Received
Deduction
|
|
|
GE S&S U.S. Equity Fund
|
|
|
97.03%
|
|
The amounts presented herein may differ from amounts presented elsewhere in the financial statements due to differences between tax
and financial accounting principles. Please consult a tax advisor if you have any questions about Federal or State income tax laws or on how to prepare your tax returns. If you have specific questions about your Fund account, please consult your
investment representative or call 1-800-242-0134.
37
The Board of Trustees of the GE
S&S Mutual Funds
1
(the “Board”) considered and all those that
were present unanimously approved the continuance of the investment advisory agreements with GE Asset Management Incorporated (“GEAM”) at a meeting held on December 11, 2012.
In considering whether to approve the Funds’ investment advisory agreements, the Board members considered and discussed a substantial amount of information and analysis provided by GEAM personnel. The Board
members also considered detailed information regarding performance and expenses of other investment companies, including those with similar investment strategies and sizes, which was prepared by independent third party provider Morningstar, Inc.
(“Morningstar”). The Board members reviewed the fees charged by GEAM for other mutual funds and investment products other than mutual funds that employ the same investment strategies as the Funds. The Board had the opportunity to ask
questions and request additional information in connection with its considerations.
Before approving each Fund’s investment advisory agreement, the
Board members received and considered memoranda prepared by GEAM personnel that set forth detailed information, including numerous exhibits and other materials related to GEAM’s business and the services it provides to each Fund. The Board
members also reviewed materials discussing the legal standards for the consideration of the proposed continuances. The Board members reviewed and discussed the proposed continuance of the agreements with GEAM personnel, including representatives
from the legal, compliance and finance departments and senior members of each relevant investment group (
e.g.
, equity, fixed income). The Board members also heard presentations by these representatives, and posed questions and engaged in
substantive discussions with them concerning the Funds’ operations and the investment process employed for each Fund. The Board members took into account that many of them possess multi-year experience as Board members and that all of them
possess a great deal of knowledge about GEAM and the Funds in their capacities as senior officers of GEAM. They also took into account their consideration of these types of agreements in recent years. The information was presented in a manner to
facilitate comparison to prior periods and to reflect certain enhancements. To focus their review, the Board members asked GEAM personnel, in its oral presentations, to highlight material differences from the information presented in recent years.
In reaching their determinations relating to continuance of the Funds’ investment advisory agreements, the Board members considered all factors
that they deemed relevant, including the factors discussed below. In their deliberations, the Board members did not identify any particular information that was all-important or controlling, and each Board member may have attributed different
weights to the various factors. The Board members evaluated this information, and all other information available to them, for each Fund separately, and their determinations were made separately in respect of each Fund. In particular, the Board
members focused on the following with respect to each Fund:
The Nature, Extent And Quality Of Services Provided
The Board members reviewed the services provided by GEAM and concurred that GEAM provides high quality advisory and administrative services to the Funds. In
connection with their consideration of GEAM’s services, the Board members focused on the favorable attributes of GEAM, including (i) an investment philosophy oriented toward long-term performance; (ii) effective processes used for selecting
investments and brokers; (iii) effective processes used for providing Fund administration, including controllership and compliance functions and oversight of the performance of other companies that provide services to the Funds; (iv) highly skilled
professionals, including analysts, research professionals and portfolio managers with a depth of experience relevant to the Funds; (v) access to significant technological resources from which the Funds may benefit; and (vi) a favorable history and
reputation. The Board members noted that each Fund represents only a small amount of the overall assets managed by GEAM, but benefits from a full array of services and resources provided by GEAM. In particular, the Board members discussed that the
Funds benefit from a large staff of research analysts employed by GEAM.
In light of the foregoing, the Board members concluded that the services
provided by GEAM continue to be satisfactory.
Investment Performance Of The Funds
The Board members considered the investment performance of the Funds for various periods. The Board members reviewed detailed comparisons of the performance of the Funds with the relevant securities indices and
peer groupings of mutual funds prepared by Morningstar with respect to various periods. The Board members also engaged in discussions with GEAM personnel regarding the investment process and performance results for each Fund. These discussions
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1
The GE S&S Mutual Funds include the GE S&S Income Fund and GE S&S U.S. Equity Fund (each, a “Fund” and
collectively, the “Funds”).
focused on each Fund’s investment objective, the number and experience of portfolio management and supporting research personnel, the investment style and approach employed, the likely
market cycles for the investment style. The Board members discussed GEAM’s investment approach with respect to each Fund.
The Board members
concluded that the Funds’ performance was acceptable overall taking into consideration the factors discussed above.
Cost Of The Services
Provided To The Funds
The Board members considered the cost of the services provided by GEAM, noting that, pursuant to each investment advisory
agreement, GEAM is reimbursed for its reasonable costs incurred in providing the services contemplated by those agreements and is not paid a management fee. The Board also noted that GE Investment Distributors, Inc. (“GEID”), a subsidiary
of GEAM, is reimbursed for its reasonable costs incurred in providing services specified in its agreement with the Funds as unitholder servicing agent and is not paid a unitholder servicing fee. The Board members considered that the charges
resulting from this arrangement involve all of the expenses incurred by GEAM and GEID with respect to the management and unitholder operations of the Funds, including, without limitation, indirect allocable overhead costs and the direct and indirect
costs of GEAM and GEID personnel providing investment management and other services to the Funds. The Board members noted and discussed the additional services provided by GEAM to the Funds compared to other investment products managed by GEAM and
the charges that result from those services, and previously had been provided a study conducted by the Investment Company Institute that discusses and compares advisory fees and services for mutual funds and institutional separate accounts. The
Board members also noted that none of the charges resulting from the Funds’ arrangements with GEAM and GEID may include any element of profit.
The
Board members also noted that the Board had in prior years reviewed with GEAM personnel the underlying assumptions and methods of cost allocation used by GEAM
in allocating its costs and those of the other Fund service providers, including
GEID, to the Funds, and that such assumptions and methods used in cost allocation had not changed for this year. The Board members also discussed with GEAM personnel that the basis for their belief that the methods of allocation used by GEAM
continue to be reasonable for each area of GEAM’s business.
Based on their review, the Board members concluded that they were satisfied that the
assumptions and methods used in cost allocation and the level of expenses incurred by the Funds were not unreasonable or excessive.
The Extent To
Which Economies Of Scale Would Be Realized For The Benefit Of Fund Shareholders As The Funds Grow
The Board members considered the extent to which
economies of scale would be realized for the benefit of Fund investors as the Funds grow. The Board noted that, although none of the Funds experienced significant growth in assets over the past year, the Funds continue to enjoy fee and expense
levels within or below the group of lowest fee and expense funds in their respective peer group comparisons.
The Board members recognized the
significant benefits to the Funds resulting from their arrangement with GEAM, which causes them to bear only the reasonable costs incurred by GEAM and GEID, without any element of profit, for the substantial services they provide to the Funds. The
Board members also recognized the benefits to the Funds of being able to leverage a favorable cost structure achieved with respect to the Funds’ other operating expenses as a result of GEAM’s large overall base of assets under management
and its vendor management practices.
Comparison Of Services To Be Rendered And Costs To Be Incurred
The Board members discussed the services provided to the Funds by GEAM, and the costs incurred by the Funds for those services. The Board members reviewed
information concerning the Funds’ expense ratios, and comparative information with respect to peer groupings of mutual funds prepared by Morningstar. They discussed that, in all cases, the Funds enjoy expense levels within or below the group of
lowest cost funds in each peer group comparison. In light of this information, the Board members determined that the level of expenses incurred was reasonable in relation to the services provided to the Funds.
Fall-Out Benefits
The Board members considered other actual
and potential financial benefits that GEAM may derive from its relationship with the Funds, including, where applicable, soft dollar commission benefits generated through Fund portfolio transactions. The Board members noted, however, that the Funds
benefit from the vast array of resources available through GEAM, and that each Fund represents only a small amount of the overall assets managed by GEAM.
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Conclusion
No single factor was determinative to the Board’s decision. Based on their discussion and such other matters as were deemed relevant, the Board members
concluded that the proposed level of cost reimbursement to GEAM and projected total expense ratios for the Funds are reasonable in relation to the services provided. In view of these facts, the Board members concluded that the renewal of each
investment advisory agreement was in the best interests of the Funds and their shareholders.
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The GE S&S U.S. Equity Fund
Investments by the S&S U.S. Equity Fund are subject to the following restrictions:
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a.
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Moneys in the S&S U.S. Equity Fund will not be used in the underwriting of securities or for the purchase of real estate, interests in real estate, investment trusts,
commodities or commodity contracts, or invested in companies for the purpose of exercising control or management, or invested in securities of registered investment companies.
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b.
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Moneys in the S&S U.S. Equity Fund will not be lent to others, although they may be applied to the purchase of bonds and debt securities of a type publicly distributed or
customarily purchased by institutional investors.
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c.
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The S&S U.S. Equity Fund will not acquire any securities if immediately after such acquisition and as a result thereof (i) the S&S U.S. Equity Fund would hold more
than 10% of the outstanding voting securities of any issuer, (ii) more than 5% of the value of the total assets in the S&S U.S. Equity Fund would be represented by the securities of any one issuer (except securities of the U.S. Government
and its instrumentalities), (iii) more than 25% of the value of the total assets in the S&S U.S. Equity Fund would be invested in any particular industry, or (iv) more than 5% of the value of the total assets in the S&S U.S. Equity
Fund would be invested in issuers which (including predecessors) have not been in continuous operation for at least three years.
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d.
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The S&S U.S. Equity Fund will not invest in securities of GE or its affiliates, or in securities of the investment adviser, and will not during the existence of any
underwriting syndicate purchase any securities for which its investment adviser is acting as principal underwriter.
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e.
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The S&S U.S. Equity Fund will not purchase from or sell any of its portfolio securities to GE or its affiliates or its investment adviser or any officer or director thereof.
This investment restriction is not intended to prohibit the S&S U.S. Equity Fund from engaging in such transactions with other investment companies or accounts managed by the investment adviser or the investment adviser’s affiliates when
the transactions are entered into in accordance with the Investment Company Act and the rules thereunder.
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f.
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The S&S U.S. Equity Fund will not engage in margin transactions or short sales or participate in a joint trading account.
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g.
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The S&S U.S. Equity Fund will not invest in puts, calls or similar options.
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h.
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The S&S U.S. Equity Fund may borrow money from the GE Savings and Security Trust and secure repayment by pledging assets of the S&S U.S. Equity Fund. The S&S U.S.
Equity Fund may also borrow money as a temporary measure to meet cash or administrative needs. Except with respect to borrowings from the GE Savings and Security Trust, the S&S U.S. Equity Fund will not mortgage or pledge any of its assets.
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The GE S&S Income Fund
The
S&S Income Fund will not:
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a.
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purchase securities on margin or sell short or participate in a joint trading account;
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b.
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deal in options to buy or sell securities except to the extent permitted by law;
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c.
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borrow money or property except as a temporary measure to meet the cash or administrative needs of the S&S Income Fund. In no event will the amount of such borrowings exceed
10% of such the S&S Income Funds’ total assets taken at market value at the time of such borrowing;
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d.
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make cash loans to others except through the purchase of debt securities in accordance with the S&S Income Funds’ investment objectives;
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e.
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invest in interests in oil, gas or other mineral lease or production agreements;
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f.
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act as an underwriter of securities for other issuers except that the S&S Income Fund may acquire securities under circumstances where if they are later resold it may be
deemed to be an underwriter under the Securities Act of 1933, as amended (“Securities Act”);
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g.
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purchase securities for the purpose of exercising control or management;
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h.
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pledge, mortgage or hypothecate any of its assets except, that, to secure borrowings permitted by subparagraph c, it may pledge securities which, together with all such
securities previously so pledged, at the time of pledge, do not exceed 10% of the S&S Income Fund’s total assets;
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i.
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unless otherwise permitted by law, purchase from or sell directly to any of its officers or Trustees or the officers or directors of its investment adviser, or any other
affiliate (as defined in the Investment Company Act) of the S&S Income Fund or any affiliate of such affiliate, portfolio securities or other property of the S&S Income Fund;
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j.
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unless otherwise permitted by law, invest in securities of GE or its affiliates, or in securities of an investment adviser of the S&S Income Fund and will not during the
existence of any underwriting syndicate purchase any securities for which its investment adviser is acting as principal underwriter;
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k.
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purchase any security if as a result of such purchase more than 25% of its total assets would be invested in a particular industry;
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l.
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purchase any security if as a result of such purchase more than 25% of its total assets would be subject to legal or contractual restrictions on resale; or
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m.
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invest in the securities of registered investment companies.
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