ELFUN FUNDS
ANNUAL REPORT
December 31, 1997
<PAGE>
Understanding Your Report
Chairman's Letter 1
John Myers on market events
Review of Performance and
Schedules of Investments
Portfolio managers discuss your Funds' results in 1997
Elfun Global Fund 3
Elfun Trusts 8
Elfun Diversified Fund 13
Elfun Tax-Exempt Income Fund 24
Elfun Income Fund 33
Elfun Money Market Fund 41
Notes to Performance 45
Notes to Schedules of Investments 46
Financial Statements 47
Financial Highlights and Statements of Assets and
Liabilities, Operations, and Changes in
Net Assets
Notes to Financial Statements 56
Independent Auditors' Report 61
Elfun Funds Investment Team 64
Shareholder Services Inside back cover
How you can obtain more information
<PAGE>
Highly Rated Elfun Funds
BY MORNINGSTAR
Through December 31, 1997
- --------------------------------------------------------------------------------
NUMBER
FUND OF FUNDS STAR
(CATEGORY) IN CATEGORY RATING
- --------------------------------------------------------------------------------
Elfun Global -- (International Equity)
- --------------------------------------------------------------------------------
Overall and 3 year 684 ****
5 year 285 ****
10 year 96 ****
- --------------------------------------------------------------------------------
Elfun Trusts -- (Domestic Equity)
- --------------------------------------------------------------------------------
Overall and 3 year 2332 *****
5 year 1292 ****
10 year 676 *****
- --------------------------------------------------------------------------------
Elfun Tax-Exempt Income -- (Municipal Bonds)
- --------------------------------------------------------------------------------
Overall and 3 year 1491 ****
5 year 720 ****
10 year 337 ****
- --------------------------------------------------------------------------------
Elfun Income -- (Taxable Bonds)
- --------------------------------------------------------------------------------
Overall and 3 year 1371 ****
5 year 771 ****
10 year 323 ****
- --------------------------------------------------------------------------------
Morningstar is an independent fund ranking company that seeks to provide a
non-biased rating system used in making investment decisions. A fund is rated in
its investment class on a scale of one to five stars through the evaluation of
the historical balance of risk and return.
Morningstar proprietary ratings reflect historical risk-adjusted performance
through December 31, 1997. The ratings are subject to change every month.
Morningstar ratings are calculated from a fund's three-, five- and ten-year
returns (with fee and sales charge adjustments) in excess of 90-day Treasury
Bill returns. Ten percent of the funds in a rating category receive five stars,
the next 22.5% receive four stars and the next 35% receive three stars. Returns
assume changes in share price and reinvestment of dividends and capital gains.
Past performance is no guarantee of future results.
<PAGE>
A LETTER FROM THE CHAIRMAN
DEAR SHAREHOLDER,
The U.S. equity and fixed income markets were very strong during 1997. Despite
the volatility in the fourth quarter, the U.S. equity market as measured by the
S&P 500 was up 33.3% for 1997 marking the first time in history that the U.S.
equity market was up more than 20% for three consecutive years. The bond markets
were strong, primarily due to the positive news on the inflation front. The
international markets experienced periods of high volatility driven by
uncertainty in the Asian markets which started in Southeast Asia and then moved
on to Hong Kong and Korea. The international markets ended up 1.8% for the year
as measured by the EAFE Index (Europe, Australia, Far East).
PERFORMANCE HIGHLIGHTS
In an environment marked by periods of market volatility, the funds, as a group,
performed relatively well as four of our six funds placed in the top quarter
versus their peers for 1997 according to Lipper Analytical Services, an
independent mutual fund rating service. Elfun Trusts achieved its second best
year since 1989 with a return of 30.9% and finished in the top 25% of its Lipper
peer group. Both funds with U.S. equity exposure (Elfun Trusts and Elfun
Diversified) achieved double-digit returns for the year. The fixed income funds
did especially well compared to their peers, with Elfun Income performing in the
top 10% of its peer group for the 1, 5, and 10 year periods. Elfun Money Market
Fund's performance was in the top 3% of its peers for the 1 and 5 year periods,
and Elfun Tax-Exempt was in the top 30%. Elfun Global completed a challenging
year with a 8.5% total return, trailing the 15.8% return of the MSCI World
Index. Although the fund's 1997 performance was hurt by its underweighting in
the U.S. as well as the market challenge in Asia, the prior years solid
performance of Elfun Global enabled the fund to achieve favorable 3, 5 and 10
year star ratings as measured by Morningstar, an independent fund ranking
company which analyzes risk-adjusted performance. Our top rated Morningstar
Funds are presented on the inside front cover of this report. The average
returns for each
[GRAPHIC OMITTED]
[PHOTO OF John Myers]
1
<PAGE>
A LETTER FROM THE CHAIRMAN (CONTINUED)
applicable Lipper category and complete details on each fund's performance can
be found on the various performance review pages included in this annual report.
CURRENT MARKET OUTLOOK
The fundamentals for higher U.S. stock prices still appear to be in place.
Long-term interest rates are low, corporate earnings are for the most part
solid, and inflation which grew by its lowest margin in 11 years, remains under
control with few signs of picking up steam. Valuations, however, are at or near
historical highs. With the uncertainty of how the economic problems in Asia will
impact the global economy, stock selection will become increasingly important in
1998. Maintaining a long-term investment perspective is important in all market
environments but it's particularly important when markets are likely to be
volatile. The foreign markets are likely to continue to experience above average
volatility, however, strong companies with solid fundamentals can still be
found.
A WORD ABOUT SERVICE
Finally, in our ongoing effort to better serve you, our valued shareholder, you
may have noticed that we made changes to our voice response system this year. We
hope you have found these changes helpful. Send us a letter or give us a call at
(1-800) 242-0134. We would like to know what you think. Providing you with the
highest level of service every business day is important to all of us.
Sincerely,
/s/John Myers
John Myers
Chairman of the Board and President
General Electric Investment Corporation
John Myers is a seasoned veteran of GE's financial community and of GE
Investments. John, previously Executive Vice President of GE Investments, began
his GE career in 1970 after serving as an officer in the U.S. Navy. He
progressed through several global financial assignments in GE corporate staff
and GE Power Systems before joining GE Investments in 1986. John serves on the
Board of Directors of Doubletree Hotels Corporation. He holds a B.S. in
Mathematics from Wagner College, where he serves on the Board of Trustees.
2
<PAGE>
ELFUN GLOBAL FUND
QA&
Ralph Layman manages the international equity operation with total assets of
almost $10 billion. His responsibilities include co-management of the Elfun
Global Fund with Michael J. Solecki. Prior to joining GE Investments in 1991,
Ralph was Executive Vice President and Director of International Equity
Operations at Northern Capital Management. Previously, he was a Vice President
and Portfolio Manager at Templeton Investment Counsel, Inc. He was instrumental
in forming Templeton's Emerging Markets Fund, the first listed emerging markets
equity fund in the U.S. Ralph is a Trustee of the GE Pension Trust, and GE's
employee savings program, and serves on the GE Investments' Asset Allocation
Committee. He is a Chartered Financial Analyst (CFA), a charter member of the
International Society of Security Analysts and a member of the New York Society
of Security Analysts. Ralph is a graduate of the University of Wisconsin with a
B.S. in Economics and a M.S. in Finance.
Michael J. Solecki is Co-Portfolio Manager of the Elfun Global Fund and has
served the fund in that capacity since September 1997. Mike has more than eight
years of investment experience and has held positions with GE Investments since
1990. He is currently a Vice President of GE Investments. Mike is a Chartered
Financial Analyst (CFA) and a member of the New York Society of Security
Analysts. He holds a B.S. in Finance from Western New England College.
Q. HOW DID THE ELFUN GLOBAL FUND PERFORM VS. ITS BENCHMARKS AND LIPPER PEER
GROUP FOR THE ONE-YEAR ENDED DECEMBER 31, 1997?
A. The Elfun Global Fund produced a total return of 8.47% for the year ended
December 31, 1997. The MSCI World Index returned 15.76%. Over the same
period, the fund's Lipper peer group of 220 Global funds posted an average
return of 11.8%.
[GRAPHIC OMITTED]
[PHOTO OF Ralph Layman and Michael J. Solecki]
Q. WHAT DROVE THE FUND'S PERFORMANCE?
A. Asia's economic and currency problems were largely responsible for igniting
selling pressure in many key markets around the world. Monday, October 20
was the defining moment of the Asian crisis, as most global markets
retreated significantly. On that day, the Dow Jones industrial average fell
a record 554 points. U.S. stocks rebounded from that fallout and finished
the year with strong gains. Our underweighting in the U.S. was largely
responsible for the fund's under-performance. On a more positive note, even
though the Japanese market had a poor year, our Japanese stocks were
actually positive contributors to performance due to our strong stock
selection.
Q. WHICH STOCKS PERFORMED WELL?
A. In particular, we enjoyed good performance from several European companies.
Merita, a large Finnish bank, recorded solid investment results after it
merged with a large Swedish bank. AXA-UAP, the French-based financial
services company, was one of many companies benefiting from the wave of
corporate restructurings sweeping Europe. Credito Italiano recorded
impressive gains due to consolidation in the Italian banking sector as well
as a decline in interest rates. And NTT Data, a leading networking,
integration systems and consulting company in Japan, turned in solid
performance because of its strong fundamentals. In the U.S., Airtouch
Communications, a leading telecommunications company, contributed favorably
to the fund's investment results.
Q. WHAT IS YOUR OUTLOOK FOR THE FUND?
A. The crisis in Asia is likely to play a significant part in the direction of
stock prices in many global markets during the coming months. If Asia's
problems worsen, the global economy could experience deflation. That would
be good news for consumers but not for corporate profits and stock prices.
If Asia's problems start to wane, the outlook for global stocks is
generally favorable. Solid corporate earnings and low interest rates should
bolster European stocks. Moreover, the Continent is still on target to
achieve economic union by January 1, 1999. Economic problems in Japan are
likely to remain a concern for investors until the government adopts strong
measures to help stimulate sustainable economic growth.
Given the uncertainty of the global economy, stock selection is likely to
be critically important in achieving solid returns in 1998. As a result, we
intend to focus our efforts on identifying what we would consider high
quality, financially sound companies with good earnings prospects,
regardless of the economic environment within their respective country.
3
<PAGE>
ELFUN GLOBAL FUND
Comparison of Change in Value of a $10,000 Investment
ELFUN GLOBAL MSCI WORLD INDEX
1/5/88 10,000.00 10,000.00
12/88 10,994.28 12,329.78
12/89 13,713.84 14,376.85
12/90 12,539.50 11,930.14
12/91 14,397.34 14,111.90
12/92 15,253.14 13,373.30
12/93 20,116.06 16,383.96
12/94 19,989.73 17,215.81
12/95 23,193.93 20,781.53
12/96 26,936.22 23,583.48
12/97 29,217.49 27,291.98
AVERAGE ANNUAL TOTAL RETURN
for the periods ended December 31, 1997
- --------------------------------------------------------------------------------
Since
One Five Inception
Year Year (1/5/88)
- --------------------------------------------------------------------------------
Elfun Global Fund 8.47% 13.88% 11.31%
MSCI World 15.76% 15.33% 10.56%
INVESTMENT PROFILE
A Fund designed for investors who seek long-term growth of capital and future
income consistent with prudent management and preservation of capital. The Fund
invests principally in equity securities issued by companies located in both
developed and developing countries throughout the world.
*Lipper Performance Comparison
Based on Average Annual Total Returns
for the periods ended 12/31/97
Global Stock Peer Group
One Five
Year Year
Fund's rank in peer group: 144 28
Number of Funds in peer group: 220 57
Peer group average total return: 11.8% 14.0%
Lipper categories in peer group: Global, Global Small Cap
* See Notes to Performance for explanation of peer categories.
Top Ten Largest Holdings
as a percentage of net assets
at December 31, 1997
- --------------------------------------------------------------------------------
Airtouch Communications Inc. 3.1%
- --------------------------------------------------------------------------------
AlliedSignal Inc. 2.7%
- --------------------------------------------------------------------------------
Siebe PLC 2.6%
- --------------------------------------------------------------------------------
Sony Corp. 2.6%
- --------------------------------------------------------------------------------
Sampo Insurance Co. Ltd. 2.1%
- --------------------------------------------------------------------------------
AXA-UAP 2.0%
- --------------------------------------------------------------------------------
ING Groep N.V. 1.9%
- --------------------------------------------------------------------------------
Novartis AG (Regd.) 1.9%
- --------------------------------------------------------------------------------
Daimler-Benz AG 1.8%
- --------------------------------------------------------------------------------
Total S.A. (Class B) 1.7%
- --------------------------------------------------------------------------------
See page 45 for Notes to Performance. Past performance is no guarantee of future
results.
4
<PAGE>
SCHEDULE OF INVESTMENTS (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1997
Elfun Global Fund
U.S. 23.3%
Japan 7.1%
Europe 53.7%
Pacific Rim 3.0%
Other Regions 10.4%
Cash & Other 2.5%
Number
of Shares Value
- --------------------------------------------------------------------------------
Common Stock -- 97.5%
- --------------------------------------------------------------------------------
Australia -- 0.9%
Coca Cola Amatil Ltd. 225,774 $ 1,687
Austria -- 0.9%
OMV AG 3,466 480
VA Technologie AG 7,744 1,176
1,656
Brazil -- 3.1%
Telecomunicacoes Brasiliero
S.A. ADR 21,483 2,502
Telecomunicacoes de Sao
Paulo S.A. (Pfd receipts) 292,858 78(a)
Telecomunicacoes de Sao
Paulo S.A. (Pfd. shares) 6,985,684 1,859
Uniao de Banco Brasiliero
S.A. GDR 49,411 1,590(a)
6,029
Croatia -- 0.1%
Pliva D D GDR (Regd.) 14,282 248
Finland -- 3.5%
Merita Ltd. (Series A) 495,375 2,708
Sampo Insurance Co. Ltd. 124,586 4,046
6,754
Number
of Shares Value
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED] France -- 11.7%
AXA-UAP 50,086 $ 3,876
Banque Nationale de Paris 14,742 784
Cap Gemini S.A 27,763 2,276
Carrefour S.A 3,538 1,846
Coflexip S.A. ADR 54,908 3,047
Lyonnaise Des Eaux S.A 10,312 1,141
Michelin CGDE (Regd.)
(Class B) 31,726 1,597
Renault S.A 48,641 1,368(a)
Schneider S.A 46,752 2,539
Total S.A. (Class B) 30,288 3,296
Usinor Sacilor 64,947 938
22,708
[GRAPHIC OMITTED] Germany -- 6.4%
Bayerische Vereinsbank AG 29,054 1,901
Daimler-Benz AG 49,218 3,453
Fresenius Medical Care AG 24,765 1,645(a)
Fresenius Medical Care AG
(Pfd. shares) 13,177 710(a)
Mannesmann AG 5,941 3,002
SGL Carbon AG 12,290 1,585
12,296
Greece -- 0.0%
Alpha Credit Bank (Regd.) 1,134 66
Hong Kong -- 1.3%
Giordano International Ltd. 1,350,000 466
HSBC Holdings PLC (Regd.) 59,200 1,459
Johnson Electric Holdings 223,000 642
2,567
Indonesia -- 0.2%
PT Astra International Inc. 832,500 216
PT Steady Safe 1,168,190 79
295
Israel -- 2.6%
Comverse Technology Inc. 29,154 1,137(a)
ECI Telecommunications Ltd. 61,675 1,573
Tecnomatix Technologies Ltd. 22,841 771(a)
Teva Pharmaceutical Industries
Ltd. ADR 31,127 1,472
4,953
- ----------
See Notes to Schedules of Investments and Financial Statements
5
<PAGE>
ELFUN GLOBAL FUND (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1997
Number
of Shares Value
- --------------------------------------------------------------------------------
Italy -- 4.8%
Credito Italiano 722,283 $ 2,227
Industrie Natuzzi S.p.A. ADR 115,963 2,392
Istituto Bancario San Paolo di
Torino 146,863 1,403
Montedison S.p.A 1,516,696 1,362
Telecom Italia Mobile S.p.A 430,368 1,987
9,371
[GRAPHIC OMITTED] Japan -- 7.1%
Canon Inc. 101,000 2,352
Credit Saison Co. Ltd. 27,300 673
Honda Motor Co. 73,000 2,678
NTT Data Corp. 44 2,369
Sony Corp. 55,800 4,957
Sumitomo Sitix Corp. 58,000 618
13,647
Mexico -- 1.1%
Gruma S.A. de C.V. (Series B) 127,893 507(a)
Grupo Carso S.A. de C.V
(Series A) 105,585 705
Grupo Financiero Bancomer
S.A. ADR (Series C) 72,757 937(a,b)
2,149
Netherlands -- 3.4%
IHC Caland N.V 24,446 1,268
ING Groep N.V 87,172 3,672
Ispat International N.V.(Regd.)
(Class A) 75,721 1,637(a)
6,577
Norway -- 0.4%
Petroleum Geo Services 13,432 846
Panama -- 1.7%
Banco Latinoamericano de
Exportaciones S.A. (Class E) 24,721 1,023
Panamerican Beverages Inc.
(Class A) 71,724 2,340
3,363
Peru -- 1.2%
Telefonica del Peru S.A. ADR
(Class B) 100,129 2,334
Number
of Shares Value
- --------------------------------------------------------------------------------
Philippines -- 0.6%
Metropolitan Bank & Trust Co. 84,100 $ 566
Pilipino Telephone Corp. 999,000 111(a)
San Miguel Corp. 382,205 467
1,144
Portugal -- 0.9%
Banco Comercial Portugues
(Regd.) 52,938 1,083
Telecel-Comunicacoes
Pessoais S.A 5,330 568(a)
1,651
South Africa -- 0.7%
Dimension Data Holdings Ltd. 326,219 1,408
Spain -- 2.5%
Banco Santander S.A. (Regd.) 48,905 1,634
Repsol S.A 75,700 3,230
4,864
Sweden -- 1.4%
Autoliv Inc. SDR 82,838 2,697
Switzerland -- 4.4%
ABB AG 1,742 2,188
Novartis AG (Regd.) 2,229 3,615
Tag Heuer International S.A 6,795 591(a)
ZurichVersicherungsgesellschaft
(Regd.) 4,414 2,102
8,496
[GRAPHIC OMITTED]
United Kingdom -- 13.3%
Airtours PLC 131,276 2,674
Bank of Scotland PLC 62,156 564
Billiton PLC 329,662 845(a)
Bodycote International PLC 50,651 752
Commercial Union PLC 91,637 1,278
Granada Group PLC 201,449 3,077
Johnson Matthey PLC 255,214 2,285
LucasVarity PLC 694,451 2,452
Medeva PLC 26,754 71
Railtrack Group PLC 160,103 2,543
Reed International PLC 104,467 995
Royal Sun Alliance Insurance
Group PLC 189,512 1,908
- ----------
See Notes to Schedules of Investments and Financial Statements
6
<PAGE>
SCHEDULE OF INVESTMENTS (DOLLARS IN THOUSANDS)
Number
of Shares Value
- --------------------------------------------------------------------------------
Siebe PLC 257,439 $ 5,053
Stagecoach Holdings PLC 91,815 1,259
25,756
[GRAPHIC OMITTED] United States -- 23.3%
Airtouch Communications Inc. 145,057 6,029(a)
AlliedSignal Inc. 131,586 5,124
Avery Dennison Corp. 23,915 1,070
Citicorp 20,956 2,650
Ecolab Inc. 36,007 1,996
First Data Corp. 89,079 2,606
Harman International
Industries Inc. 62,221 2,640
Home Depot Inc. 34,572 2,035
Intel Corp. 21,310 1,497
Morgan Stanley, DeanWitter 33,771 1,997
Motorola Inc. 44,715 2,551
Scherer (R.P.) Corp. 49,775 3,036(a)
Sears Roebuck & Co. 54,829 2,481
Sensormatic Electronics Corp. 199,461 3,279
Thermo Electron Corp. 49,697 2,211(a)
Travelers Group Inc. 46,862 2,525
UCAR International Inc. 10,710 428(a)
Zebra Technologies Corp.
(Class A) 33,580 999(a)
45,154
Total Common Stock
(Cost $169,436) 188,716
Short-Term Investments -- 1.8%
- --------------------------------------------------------------------------------
GEI Short Term Investment Fund
(COST $3,437) 3,437 3,437
Other Assets and Liabilities,
net 0.7% 1,339
- --------------------------------------------------------------------------------
NET ASSETS -- 100% $193,492
================================================================================
ICONS REPRESENT THE TOP FIVE COUNTRY WEIGHTINGS IN THE
ELFUN GLOBAL FUND AS OF DECEMBER 31, 1997.
- ----------
See Notes to Schedules of Investments and Financial Statements
7
<PAGE>
ELFUN TRUSTS
Q&A
David Carlson manages pension and mutual fund portfolios with total assets of
over $5 billion. His responsibilities include managing Elfun Trusts and the U.S.
equity portion of the Elfun Diversified Fund. Dave joined GE in 1980 on the
Financial Management Program. In 1982, he joined GE Investments as a Security
Analyst responsible for several consumer industries. In 1988, Dave assumed
responsibility for managing Elfun Trusts. He is a Trustee of the GE Canada
Pension Trust, a Chartered Financial Analyst (CFA) and a member of the New York
Society of Security Analysts. Dave is a graduate of Indiana University with a
B.S. in Business.
Q. HOW DID ELFUN TRUSTS PERFORM COMPARED TO ITS BENCHMARK AND LIPPER PEER
GROUP FOR THE ONE-YEAR PERIOD ENDED DECEMBER 31, 1997?
A. Elfun Trusts posted a total return of 30.86%. This compares with a 33.29%
return for the Standard & Poor's 500 Index. Our Lipper peer group of 820
Growth funds had an average return of 25.3% for the same period.
Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE?
A. The fund's performance benefited from large weightings in financial and
healthcare stocks, which were two of the top performing industry groups in
1997. Financial stocks benefited from the sharp decline in interest rates
and the ongoing consolidation in the sector. Healthcare stocks performed
well due to strong industry fundamentals and investors' preference for
quality growth companies with less economic sensitivity. Pharmaceutical
stocks in particular performed well and continue to post strong earnings
growth. The fund's holdings in media stocks, and cable in particular,
performed well during the year, due to improving fundamental trends in the
industry.
Q. WAS THERE ANY STRATEGY THAT DETRACTED FROM PERFORMANCE?
A. The fact that we maintained a larger-than-normal cash position detracted
slightly from performance. Cash represented approximately 6% of the fund
during most of the year.
Q. WHICH STOCKS STOOD OUT?
A. In the financial services sector, American Express, American International
Group (AIG), Travelers Group, and Federal National Mortgage Association all
posted solid gains. Our top performing healthcare holdings included Eli
Lilly, Bristol-Myers and Pfizer, Inc. Comcast, Tele-Communications, and
Liberty Media Group were among our best-performing media stocks.
Q. WHAT IS YOUR OUTLOOK FOR THE FUND?
A. Given the level of valuations in the stock market, the nation's economic
growth rate and the uncertainty created by Asia's economic woes, we don't
expect equities to produce the historically high level of returns that we
have seen over the last three years. However, with interest rates low and
inflation still under control, the economic backdrop for equities remains
favorable. In this environment, we believe stock picking, rather than broad
sector-related investing, will be the key to registering solid investment
results in 1998.
[GRAPHIC OMITTED]
[PHOTO OF David Carlson]
8
<PAGE>
ELFUN TRUSTS
Comparison of Change in Value of a $10,000 Investment
ELFUN TRUSTS S&P 500
12/87 10,000.00 10,000.00
12/88 11,841.11 11,664.54
12/89 16,081.06 15,343.32
12/90 15,484.18 14,858.20
12/91 19,846.76 19,401.24
12/92 21,687.80 20,900.74
12/93 23,634.94 22,992.73
12/94 23,688.77 23,291.23
12/95 32,973.16 32,024.19
12/96 40,737.25 39,425.84
12/97 53,307.47 52,552.27
AVERAGE ANNUAL TOTAL RETURN
for the periods ended December 31, 1997
- --------------------------------------------------------------------------------
One Five Ten
Year Year Year
- --------------------------------------------------------------------------------
Elfun Trusts 30.86% 19.71% 18.22%
S&P 500 33.29% 20.25% 18.05%
INVESTMENT PROFILE
A Fund designed for investors who seek long-term growth of capital and future
income rather than current income through investment in domestic and foreign
securities. The Fund invests principally in common stocks or in securities
convertible into common stocks and may hold bonds, notes and other types of
securities.
*Lipper Performance Comparison
Based on Average Annual Total Returns
for the periods ended 12/31/97
Growth Peer Group
One Five Ten
Year Year Year
Fund's rank in peer group: 203 54 35
Number of Funds in peer group: 820 311 181
Peer group average total return: 25.3% 16.5% 15.9%
Lipper categories in peer group: Growth
* See Notes to Performance for explanation of peer categories.
Top Ten Largest Holdings
as a percentage of net assets
at December 31, 1997
- --------------------------------------------------------------------------------
Travelers Group Inc. 3.3%
- --------------------------------------------------------------------------------
Federal National Mortgage Assoc. 3.0%
- --------------------------------------------------------------------------------
Schlumberger Ltd. 2.8%
- --------------------------------------------------------------------------------
Airtouch Communications Inc. 2.6%
- --------------------------------------------------------------------------------
Dover Corp. 2.6%
- --------------------------------------------------------------------------------
First Data Corp. 2.6%
- --------------------------------------------------------------------------------
Johnson & Johnson 2.5%
- --------------------------------------------------------------------------------
Equifax Inc. 2.4%
- --------------------------------------------------------------------------------
Abbott Laboratories 2.2%
- --------------------------------------------------------------------------------
Pfizer Inc. 2.2%
- --------------------------------------------------------------------------------
See page 45 for Notes to Performance. Past performance is no guarantee of future
results.
9
<PAGE>
SCHEDULE OF INVESTMENTS (DOLLARS IN THOUSANDS)
Elfun Trusts
Energy & Basic Materials 12.3%
Consumer 17.9%
Capital Goods 10.1%
Healthcare 18.1%
Financial Services 18.4%
Retail Trade 2.2%
Technology 12.6%
Transportation 1.0%
Utilities 4.8%
Cash & Other 2.6%
Number
of Shares Value
- --------------------------------------------------------------------------------
Common Stock -- 96.9%
- --------------------------------------------------------------------------------
Basic Materials -- 2.2%
Air Products & Chemicals Inc. 130,000 $ 10,693
Airgas Inc. 620,000 8,680(a)
Du Pont de Nemours
(E.I.) & Co. 70,000 4,204
Morton International Inc. 570,000 19,594
43,171
[GRAPHIC OMITTED] Capital Goods -- 10.1%
Alleghany Corp. Delaware 35,373 10,072(a)
AlliedSignal Inc. 1,080,000 42,053
AMP Inc. 210,000 8,820
Browning-Ferris Industries Inc. 150,000 5,550
Dover Corp. 1,440,000 52,020
Emerson Electric Co. 200,000 11,288
Hubbell Inc. (Class A) 91,000 4,288
Hubbell Inc. (Class B) 535,000 26,382
Molex Inc. (Class A) 515,000 14,806
Sherwin-Williams Co. 210,000 5,828
Tyco International Ltd. 230,000 10,364
Waste Management Inc. 300,000 8,250
199,721
[GRAPHIC OMITTED]
Consumer - Cyclical -- 10.3%
Carnival Corp. (Class A) 265,000 14,674
Catalina Marketing Corp. 165,000 7,631(a)
Cendant Corp. 250,000 8,594(a)
Number
of Shares Value
- --------------------------------------------------------------------------------
Circus Circus Enterprises Inc. 285,000 $ 5,843(a)
Comcast Corp. (Class A) 585,000 18,464
Comcast UK Cable Partners Ltd.
(Class A) 300,000 2,831(a)
Disney (Walt) Co. 330,000 32,691
Gannett Inc. 310,000 19,162
Harman International
Industries Inc. 260,000 11,034
Interpublic Group Cos. Inc. 415,000 20,672
McDonald's Corp. 210,000 10,027
Metromedia International
Group Inc. 150,000 1,425(a)
Stanley Works 135,000 6,370
Tele-Communications Inc.
(Series A) 435,000 12,153(a)
Tele-Communications Inc.
Liberty Media Group
(Series A) 335,000 12,144(a)
Tele-Communications
TCI Ventures Group 235,000 6,653(a)
Time Warner Inc. 140,000 8,680
Xerox Corp. 60,000 4,429
203,477
Consumer - Stable -- 7.6%
Anheuser Busch Cos. Inc. 240,000 10,560
Avon Products Inc. 265,000 16,264
Coca Cola Co. 55,000 3,664
Colgate Palmolive Co. 120,000 8,820
Gillette Co. 100,000 10,044
Kimberly Clark Corp. 655,000 32,300
Pepsico Inc. 790,000 28,786
Philip Morris Cos. Inc. 725,000 32,852(i)
Procter & Gamble Co. 100,000 7,981
151,271
[GRAPHIC OMITTED] Energy -- 10.1%
Amoco Corp. 60,000 5,108
Anadarko Petroleum Co. 200,000 12,138
Atlantic Richfield Co. 180,000 14,423
Baker Hughes Inc. 340,000 14,832
Burlington Resources Inc. 105,000 4,705
Exxon Corp. 280,000 17,132
- ----------
See Notes to Schedules of Investments and Financial Statements
10
<PAGE>
SCHEDULE OF INVESTMENTS (DOLLARS IN THOUSANDS)
Number
of Shares Value
- --------------------------------------------------------------------------------
Nabors Industries Inc. 155,000 $ 4,873(a)
Royal Dutch Petroleum Co.
ADR 620,000 33,596
Schlumberger Ltd. 700,000 56,350
Texaco Inc. 200,000 10,875
Union Pacific Resources
Group Inc. 260,000 6,305
Unocal Corp. 500,000 19,406
199,743
[GRAPHIC OMITTED] Financial -- 12.3%
American Express Co. 195,000 17,404
Citicorp 260,000 32,874
Countrywide Credit Industries 200,000 8,575
Federal National Mortgage
Assoc 1,045,000 59,630
Green Tree Financial Corp. 30,000 786
Morgan Stanley, Dean Witter 100,000 5,913
State Street Corp. 380,000 22,111
Travelers Group Inc. 1,220,000 65,727
Wells Fargo & Co. 90,000 30,549
243,569
[GRAPHIC OMITTED] Healthcare -- 18.1%
Abbott Laboratories 665,000 43,599
American Home Products Corp. 130,000 9,945
Bristol-Myers Squibb Co. 390,000 36,904
Cardinal Health Inc. 440,000 33,055
Dentsply International Inc. 370,000 11,285
Eli Lilly & Co. 165,000 11,488
Johnson & Johnson 740,000 48,747
Lincare Holdings Inc. 250,000 14,250(a)
Merck & Co. Inc. 365,000 38,781
Pfizer Inc. 580,000 43,246
Scherer (R.P.) Corp. 210,000 12,810(a)
Smithkline Beecham PLC ADR 340,000 17,489
Sun Healthcare Group Inc. 270,000 5,231(a)
Sybron International Corp. 160,000 7,510(a)
Tenet Healthcare Corp. 180,000 5,963(a)
Watson Pharmaceuticals Inc. 560,000 18,165(a)
358,468
Number
of Shares Value
- --------------------------------------------------------------------------------
Insurance -- 6.1%
American International
Group Inc. 232,500 $ 25,284
Chubb Corp. 230,000 17,394
General Reinsurance Corp. 90,000 19,080
Loews Corp. 285,000 30,246
Marsh & McLennan Cos. Inc. 315,000 23,487
UNUM Corp. 120,000 6,525
122,016
Retail Trade -- 2.2%
Arbor Drugs Inc. 585,000 10,823
Home Depot Inc. 255,000 15,013
Toys 'R Us Inc. 560,000 17,605(a)
43,441
Technology - Electronics and Equipment -- 2.6%
Applied Materials Inc. 85,000 2,561(a)
Cisco Systems Inc. 210,000 11,707(a)
Hewlett Packard Co. 130,000 8,125
Intel Corp. 415,000 29,154
51,547
Technology - Software & Services -- 9.6%
Automatic Data Processing Inc. 620,000 38,053
Equifax Inc. 1,360,000 48,195
First Data Corp. 1,725,000 50,456(i)
Microsoft Corp. 115,000 14,864(a)
Reuters Holdings 240,000 2,621
Reuters Holdings PLC ADR
(Class B) 545,000 36,106
190,295
Transportation -- 1.0%
Pittston Brinks Group 215,000 8,654
Union Pacific Corp. N.V 200,000 12,487
21,141
Utilities -- 4.7%
Airtouch Communications Inc. 1,260,000 52,369(a)
Bell Atlantic Corp. 125,000 11,375
GTE Corp. 60,000 3,135
NTL Inc. 820,000 22,857(a)
WorldCom Inc. 100,000 3,025(a)
92,761
- ----------
See Notes to Schedules of Investments and Financial Statements
11
<PAGE>
ELFUN TRUSTS (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1997
Number
of Shares Value
- --------------------------------------------------------------------------------
Total Common Stock
(Cost $861,117) $1,920,621
- --------------------------------------------------------------------------------
Preferred Stock -- 0.5%
- --------------------------------------------------------------------------------
Airtouch Communications Inc.
(Class B), 6.00% 40,000 1,425
Microsoft Corp. (Series A),
$ 2.20 95,000 8,538
Total Preferred Stock
(Cost $9,232) 9,963
Total Investments in Securities
(Cost $870,349) 1,930,584
- --------------------------------------------------------------------------------
Short-Term Investments -- 2.4%
- --------------------------------------------------------------------------------
GEI Short Term Investment Fund
(COST $47,567) 47,567 47,567
Other Assets and Liabilities,
net 0.2% 3,244
- --------------------------------------------------------------------------------
NET ASSETS -- 100% $1,981,395
================================================================================
Other Information
- --------------------------------------------------------------------------------
Elfun Trusts had the following short futures contracts open at December 31,
1997:
Number
Expiration of Underlying Unrealized
Description Date Contracts Face Value Loss
- --------------------------------------------------------------------------------
S&P 500 March 1998 160 $39,164 $212
ICONS REPRESENT THE TOP FIVE INDUSTRY WEIGHTINGS IN
ELFUN TRUSTS AS OF DECEMBER 31, 1997.
- ----------
See Notes to Schedules of Investments and Financial Statements
12
<PAGE>
ELFUN DIVERSIFIED FUND
Q&A
The Elfun Diversified Fund is managed jointly by David Carlson, Ralph Layman and
Robert MacDougall. The fund follows an asset allocation strategy and each
portfolio manager is responsible for investments within his area of expertise:
Dave Carlson manages the domestic equity investments in the portfolio (please
refer to page 8 for Dave's biographical details), Ralph Layman manages the
international equity holdings within the portfolio (please refer to page 3 for
Ralph's biographical details) and Bob MacDougall manages the fixed income
related investments in the portfolio (please refer to page 33 for Bob's
biographical details).
Q. HOW DID THE ELFUN DIVERSIFIED FUND PERFORM COMPARED TO ITS BENCHMARKS AND
LIPPER PEER GROUP FOR THE ONE-YEAR PERIOD ENDED DECEMBER 31, 1997?
A. The Elfun Diversified Fund posted a total return of 18.58%. The Elfun
Diversified Fund allocates its investments among several asset classes and,
therefore, must be compared with multiple benchmarks. Specifically, U.S.
stocks as measured by the S&P 500 Index returned 33.29%, international
stocks, as measured by the EAFE Index returned 1.78%, and fixed income, as
measured by the Lehman Bros. Aggregate Bond Index returned 9.65% for the
year ended December 31, 1997. Our Lipper peer group of 350 Balanced funds
had an average return of 19.0% for the same period.
Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE?
A. Once again last year, U.S. stocks outperformed international stocks by a
wide margin. While our international holdings did well versus their
respective benchmark, they lagged the U.S. return. The Elfun Diversified
Fund is somewhat unique versus its Balanced fund peers in that it holds a
higher than average weighting in international stocks. This allocation
decision negatively impacted our peer ranking. Our exposure to U.S. stocks
participated in the strong U.S. stock market, and the U.S. fixed- income
securities benefited from low inflation and the resulting decline in
interest rates.
Q. WHAT SECTORS AND INDIVIDUAL SECURITIES CONTRIBUTED TO THE FUND'S
PERFORMANCE?
A. In the U.S., the fund enjoyed superior investment results from its exposure
to financial services and healthcare stocks, two of the market's top
performing industry groups. In the financial services sector, we realized
excellent performance from American Express, Travelers Group, and Federal
National Mortgage Association, among others. Some of our better performing
healthcare stocks were Eli Lilly, Bristol-Myers and Pfizer, Inc. NTT Data,
a leading networking, integration systems and consulting company in Japan,
was among our top international stock holdings.
Q. WHAT DETRACTED FROM THE FUND'S PERFORMANCE?
A. Our exposure to the Japanese market was a drag on performance. However,
while the Japanese market was down about 24% due to an anemic economy, our
holdings there advanced 9%. Our above-average cash position also hindered
our investment results.
Q. WHAT IS YOUR OUTLOOK FOR THE FUND?
A. Fundamentally, the economic backdrop for U.S. stocks continues to be in
good shape. Inflation remains subdued and interest rates remain low.
However, given the current level of valuations, we don't expect returns to
be as high in the U.S. as they were last year. The turmoil in Asia is
likely to keep the U.S. economy from growing too strongly, which should
keep interest rates from spiking. That should be good news for domestic
fixed- income securities. Asian markets are likely to be jittery until
economic stability returns to the region. The direction of the Japanese
market depends on how the government plans to revive the economy. Finally,
low interest rates and corporate restructuring should continue to help
bolster stock prices in Europe.
13
<PAGE>
ELFUN DIVERSIFIED FUND
Comparison of Change in Value of a $10,000 Investment
ELFUN DIVERSIFIED S&P 500 LB AGGREGATE
1/1/88 10,000.00 10,000.00 10,000.00
12/88 10,656.83 11,664.54 10,788.97
12/89 12,949.56 15,343.32 12,356.53
12/90 13,565.05 14,858.20 13,460.53
12/91 15,965.75 19,401.24 15,614.29
12/92 17,458.61 20,900.74 16,768.82
12/93 19,012.60 22,992.73 18,403.91
12/94 18,962.16 23,291.23 17,866.78
12/95 24,102.33 32,024.19 21,167.87
12/96 27,572.37 40,092.07 22,045.47
12/97 32,694.31 52,552.22 24,057.08
AVERAGE ANNUAL TOTAL RETURN
for the periods ended December 31, 1997
- --------------------------------------------------------------------------------
Since
One Five Inception
Year Year (1/5/88)
- --------------------------------------------------------------------------------
Elfun Diversified 18.58% 13.37% 12.56%
S&P 500 33.29% 20.25% 18.05%
LB Aggregate 9.65% 7.49% 9.18%
INVESTMENT PROFILE
A Fund designed for investors who seek to maximize total return consistent with
prudent management and preservation of capital by following an asset allocation
strategy contemplating shifts among a range of investments including U.S. and
foreign common stocks, bonds and other debt instruments.
*Lipper Performance Comparison
Based on Average Annual Total Returns
for the periods ended 12/31/97
Balanced Peer Group
One Five
Year Year
Fund's rank in peer group: 196 49
Number of Funds in peer group: 350 109
Peer group average total return: 19.0% 13.2%
Lipper categories in peer group: Balanced
*See Notes to Performance for explanation of peer categories.
Top Ten Largest Holdings
as a percentage of net assets
at December 31, 1997
- --------------------------------------------------------------------------------
Travelers Group Inc. 1.8%
- --------------------------------------------------------------------------------
Federal National Mortgage Assoc. 1.6%
- --------------------------------------------------------------------------------
Dover Corp. 1.5%
- --------------------------------------------------------------------------------
U.S. Treasury Bonds 10.625% 8/15/15 1.5%
- --------------------------------------------------------------------------------
Schlumberger Ltd. 1.4%
- --------------------------------------------------------------------------------
U.S. Treasury Bonds 6.125% 11/15/27 1.4%
- --------------------------------------------------------------------------------
U.S. Treasury Notes 5.75% 11/15/00 1.3%
- --------------------------------------------------------------------------------
Airtouch Communications Inc. 1.3%
- --------------------------------------------------------------------------------
First Data Corp. 1.3%
- --------------------------------------------------------------------------------
U.S. Treasury Notes 5.875% 7/31/99 1.3%
- --------------------------------------------------------------------------------
See page 45 for Notes to Performance. Past performance is no guarantee of future
results.
14
<PAGE>
SCHEDULE OF INVESTMENTS (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1997
Elfun Diversified Fund
Domestic Equity 46.3%
Foreign Equity 16.9%
Bonds & Notes 32.7%
Cash & Other 4.1%
Number
of Shares Value
- --------------------------------------------------------------------------------
Domestic Equity -- 45.9%
- --------------------------------------------------------------------------------
Basic Materials -- 1.1%
Air Products & Chemicals Inc. 4,436 $ 365
Airgas Inc. 22,316 312(a)
Du Pont de Nemours
(E.I.) & Co. 2,523 152
Morton International Inc. 20,569 707
1,536
[GRAPHIC OMITTED] Capital Goods -- 5.8%
Alleghany Corp. Delaware 1,456 415
AlliedSignal Inc. 46,090 1,795
AMP Inc. 7,531 316
Browning-Ferris Industries Inc. 3,721 138
Dover Corp. 60,490 2,185
Emerson Electric Co. 11,810 666
Hubbell Inc. (Class B) 21,734 1,072
Molex Inc. (Class A) 18,711 538
Sherwin-Williams Co. 7,175 199
Textron Inc. 3,602 225
Tyco International Ltd. 8,376 377
United Technologies Corp. 2,514 183
Waste Management Inc. 10,868 299
8,408
[GRAPHIC OMITTED] Consumer - Cyclical -- 5.1%
Carnival Corp. (Class A) 9,586 531
Catalina Marketing Corp. 6,015 278(a)
Number
of Shares Value
- --------------------------------------------------------------------------------
Cendant Corp. 9,120 $ 314(a)
Circus Circus Enterprises Inc. 10,285 211(a)
Comcast Corp. (Class A) 20,744 655
Disney (Walt) Co. 14,457 1,432
Gannett Inc. 10,983 679
Harman International
Industries Inc. 9,508 404
Interpublic Group Cos. Inc. 14,942 744
McDonald's Corp. 7,436 355
Metromedia International
Group Inc. 5,232 50(a)
Stanley Works 5,045 238
Tele-Communications Inc.
(Series A) 15,718 439(a)
Tele-Communications Inc.
Liberty Media Group
(Series A) 12,225 443(a)
Tele-Communications
TCI Ventures Group 8,422 238(a)
Time Warner Inc. 4,956 307
7,318
Consumer - Stable -- 3.8%
Anheuser Busch Cos. Inc. 8,538 376
Avon Products Inc. 9,357 574
Coca Cola Co. 1,925 128
Colgate-Palmolive Co. 4,184 308
Gillette Co. 3,687 370
Kimberly Clark Corp. 23,480 1,158
Pepsico Inc. 28,720 1,047
Philip Morris Cos. Inc. 26,197 1,187
Procter & Gamble Co. 3,524 281
5,429
[GRAPHIC OMITTED] Energy -- 2.8%
Amoco Corp. 2,752 234
Anadarko Petroleum Co. 7,302 443
Atlantic Richfield Co. 6,388 512
Baker Hughes Inc. 12,225 533
Burlington Resources Inc. 3,881 174
Exxon Corp. 9,780 598
Nabors Industries Inc. 5,706 179(a)
Texaco Inc. 7,040 383
- ----------
See Notes to Schedules of Investments and Financial Statements
15
<PAGE>
ELFUN DIVERSIFIED FUND (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1997
Number
of Shares Value
- --------------------------------------------------------------------------------
Union Pacific Resources
Group Inc. 9,314 $ 226
Unocal Corp. 17,616 684
3,966
[GRAPHIC OMITTED] Financial -- 6.6%
American Express Co. 6,986 623
Citicorp 11,315 1,431
Countrywide Credit Industries 7,302 313
Federal National Mortgage
Assoc 40,961 2,337
Green Tree Financial Corp. 1,141 30
Morgan Stanley, Dean Witter 3,493 206
State Street Corp. 13,778 802
Travelers Group Inc. 49,064 2,643
Wells Fargo & Co. 3,260 1,107
9,492
[GRAPHIC OMITTED] Healthcare -- 8.5%
Abbott Laboratories 24,062 1,578
American Home Products Corp. 4,658 356
Bristol-Myers Squibb Co. 13,762 1,302
Cardinal Health Inc. 15,912 1,195
Dentsply International Inc. 13,196 402
Eli Lilly & Co. 6,016 419
Johnson & Johnson 26,779 1,764
Lincare Holdings Inc. 9,120 520(a)
Merck & Co. Inc. 13,195 1,402
Pfizer Inc. 20,958 1,563
Scherer (R.P.) Corp. 7,568 462(a)
Sun Healthcare Group Inc. 9,120 177(a)
Sybron International Corp. 5,821 273(a)
Tenet Healthcare Corp. 6,598 218(a)
Watson Pharmaceuticals Inc. 20,182 655(a)
12,286
Insurance -- 3.1%
American International
Group Inc. 9,758 1,061
Chubb Corp. 8,344 631
General Reinsurance Corp. 3,299 700
Loews Corp. 10,091 1,071
Marsh & McLennan Cos. Inc. 11,255 839
UNUM Corp. 4,269 232
4,534
Number
of Shares Value
- --------------------------------------------------------------------------------
Retail Trade -- 1.1%
Arbor Drugs Inc. 21,249 $ 393
Home Depot Inc. 9,087 535
Toys 'R Us Inc. 19,987 628(a)
1,556
Technology - Electronics and Equipment -- 1.4%
Applied Materials Inc. 3,105 94(a)
Cisco Systems Inc. 7,568 422(a)
Comverse Technology Inc. 2,678 104(a)
Hewlett Packard Co. 4,657 291
Intel Corp. 15,058 1,058
1,969
Technology - Software & Services -- 3.8%
Automatic Data Processing Inc. 22,510 1,382
Equifax Inc. 48,512 1,719
First Data Corp. 62,296 1,822
Microsoft Corp. 4,107 531(a)
5,454
Transportation -- 0.5%
Pittston Brinks Group 7,762 313
Union Pacific Corp. N.V 7,180 448
761
Utilities -- 2.3%
Airtouch Communications Inc. 45,020 1,871(a)
Bell Atlantic Corp. 4,269 389
GTE Corp. 1,940 101
NTL Inc. 29,496 822(a)
WorldCom Inc. 3,493 106(a)
3,289
Total Domestic Equity
(Cost $38,064) 65,998
Foreign Equity -- 16.7%
- --------------------------------------------------------------------------------
Basic Materials -- 0.7%
BASF AG 1,471 52
Billiton PLC 43,861 112(a)
Fresenius Medical Care AG 1,920 127(a)
Iscor Ltd. 26,258 8
Johnson Matthey PLC 1,756 16
- ----------
See Notes to Schedules of Investments and Financial Statements
16
<PAGE>
SCHEDULE OF INVESTMENTS (DOLLARS IN THOUSANDS)
Number
of Shares Value
- --------------------------------------------------------------------------------
Montedison S.p.A 236,243 $ 212
SGL Carbon AG 2,265 292
Usinor Sacilor 9,257 134
953
[GRAPHIC OMITTED] Capital Goods -- 1.5%
ABB AG 277 348
Alcatel Alsthom 623 79
Barlow Ltd. 8,828 75
Grupo Carso S.A. de C.V. ADR 8,524 102
Holderbank Financiere
Glarus AG 135 110
Lyonnaise Des Eaux S.A 2,664 295
Mannesmann AG 653 330
PT Mulia Industrindo 110,000 13
Siebe PLC 28,970 569
Siemens AG 734 43
VA Technologie AG 1,496 227
2,191
[GRAPHIC OMITTED] Consumer - Cyclical -- 2.8%
Airtours PLC 21,749 443
Autoliv Inc. SDR 9,810 319
Canon Inc. 18,000 419
Comcast UK Cable Partners Ltd.
(Class A) 11,061 104(a)
Cordiant PLC 18,696 34(a)
Daimler-Benz AG 3,423 240
Electrolux AB (Series B) 1,065 74
Granada Group PLC 25,356 387
Honda Motor Co. 10,000 367
Industrie Natuzzi S.p.A. ADR 1,732 36
Johnson Electric Holdings 24,500 71
Kinnevik AB (Series B) 1,091 18
LucasVarity PLC 82,076 290
Michelin CGDE (Regd.)
(Class B) 3,489 176
Reed International PLC 26,186 249
Renault S.A 6,389 180(a)
Saatchi & Saatchi PLC 18,696 33(a)
Sony Corp. 5,600 498
3,938
Consumer - Stable -- 0.4%
Coca Cola Amatil Ltd. 22,433 168
Gruma S.A. de C.V. (Series B) 14,176 56(a)
Number
of Shares Value
- --------------------------------------------------------------------------------
Nestle S.A. (Regd.) 44 $ 66
Panamerican Beverages Inc.
(Class A) 5,133 167
San Miguel Corp. 32,820 40
497
[GRAPHIC OMITTED] Energy -- 3.2%
Coflexip S.A. ADR 4,792 266
ENI S.p.A. (Regd.) 4,801 27
OMV AG 768 106
Repsol S.A 10,148 433
Royal Dutch Petroleum Co. ADR 21,842 1,184
Schlumberger Ltd. 25,227 2,031
Total S.A. (Class B) 4,962 540
Veba AG 442 30
4,617
[GRAPHIC OMITTED] Financial -- 2.2%
Alpha Credit Bank (Regd.) 1,081 63
Banco Comercial Portugues
(Regd.) 9,746 199
Banco Comercial Portugues
ADR 3,521 71
Banco Santander S.A. (Regd.) 6,252 209
Bank of Scotland 13,060 119
Bayerische Vereinsbank AG 4,161 272
Cheung Kong (Holdings) Ltd. 6,000 39
Credito Italiano 72,413 223
Den Danske Bank 2,594 346
Grupo Financiero Bancomer
S.A. ADR (Series C) 7,938 102(a,b)
HSBC Holdings PLC (Regd.) 7,975 197
ING Groep N.V 9,384 395
Investor AB (Series B) 708 35
Istituto Bancario San Paolo
di Torino 14,752 141
Merita Ltd. (Series A) 45,855 251
Metro Bank & Trust Co. 11,120 75
National Westminster Bank PLC 7,320 122
Sumitomo Realty & Development 12,000 69
Sumitomo Sitix Corp. 5,000 53
Uniao de Banco Brasiliero
S.A. GDR 5,691 183(a)
3,164
- ----------
See Notes to Schedules of Investments and Financial Statements
17
<PAGE>
ELFUN DIVERSIFIED FUND (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1997
Number
of Shares Value
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED] Healthcare -- 1.1%
Medeva PLC 21,884 $ 58
Novartis AG (Regd.) 364 590
PT Astra International Inc. 62,500 16
Roche Holdings AG 16 159
Smithkline Beecham PLC ADR 12,225 629
Teva Pharmaceutical Industries
Ltd. ADR 3,499 166
1,618
Insurance -- 1.1%
AXA-UAP 7,794 603
Commercial Union PLC 9,001 126
Pohjola Insurance Group
(Series B) 931 34
Royal & Sun Alliance Insurance
Group PLC 20,720 209
Sampo Insurance Co. Ltd. 2,108 68
Schw Rueckversicher (Regd.) 108 202
Zurich Versicherungsgesellschaft
(Regd.) 686 327
1,569
Retail Trade -- 0.4%
Carrefour S.A 545 284
Credit Saison Co. Ltd. 10,355 256
Giordano International Ltd. 90,000 31
Tag Heuer International S.A 598 52(a)
623
Technology - Electronics and Equipment -- 0.7%
Brambles Industries Ltd. 16,772 333
ECI Telecommunications Ltd. 10,393 265
NetCom Systems AB (Series B) 4,182 90
Schneider S.A 5,806 315
1,003
Technology - Software & Services -- 1.5%
Cap Gemini S.A 3,416 280
Dimension Data Holdings Ltd. 37,482 162
NTT Data Corp. 6 323
Reuters Holdings PLC ADR
(Class B) 20,957 1,388
SEMA Group PLC 1,971 48
2,201
Number
of Shares Value
- --------------------------------------------------------------------------------
Transportation-- 0.5%
IHC Caland N.V 4,608 $ 239
Railtrack Group PLC 29,287 465
704
Utilities -- 0.6%
BSES Ltd. GDR 1,296 22
Telecom Italia Mobile S.p.A 82,392 380
Telecomunicacoes Brasileiras
S.A. ADR 1,816 212
Telefonica del Peru S.A
ADR (Class B) 11,295 263
877
Total Foreign Equity
(Cost $19,120) 23,955
Principal
Amount Value
- --------------------------------------------------------------------------------
Bonds and Notes -- 32.7%
- --------------------------------------------------------------------------------
Federal Agency -- 0.1%
Small Business Administration
6.55% 10/01/17 - 12/01/17
(COST $148) $ 148 148
U.S. Treasuries -- 13.9%
U.S. Treasury Bonds
13.75% 08/15/04 1,252 1,793(i)
12.00% 05/15/05 321 439(i)
12.50% 08/15/14 1,127 1,742(i)
10.625% 08/15/15 1,418 2,131(i)
6.625% 02/15/27 359 390(i)
6.375% 08/15/27 10 11(i)
6.125% 11/15/27 1,900 1,953(i)
8,459
U.S. Treasury Notes
5.875% 01/31/99 - 8/31/99 3,933 3,944
6.00% 06/30/99 1,173 1,179
5.625% 11/30/99 210 210(i)
7.75% 12/31/99 934 970(i)
5.75% 11/15/00 1,873 1,877(i)
6.625% 07/31/01 860 884
6.375% 09/30/01 170 174
- ----------
See Notes to Schedules of Investments and Financial Statements
18
<PAGE>
SCHEDULE OF INVESTMENTS (DOLLARS IN THOUSANDS)
Principal
Amount Value
- --------------------------------------------------------------------------------
5.625% 12/31/02 $ 1,071 $ 1,067
6.50% 05/15/05 - 05/15/05 70 73
6.625% 05/15/07 8 8
6.125% 08/15/07 993 1,020
11,406
U.S. Treasury STRIP
6.02% 08/15/11 245 109(d,i)
Total U.S. Treasuries
(Cost $19,547) 19,974
Asset Backed -- 0.8%
Advanta Mortgage Loan Trust Corp.
6.30% 07/25/25 31 30
California Infrastructure
6.42% 12/26/09 41 41
Carco Auto Loan Master Trust
6.689% 08/15/04 163 164
First Plus Home Improvement
Loan Trust
7.80% 03/20/16 44 46
First Security Capital
8.41% 12/15/26 43 47
First USA Credit Card Trust
5.798% 02/17/05 58 58
Fleetwood Credit Grantor Trust
6.40% 05/15/13 79 80
Green Tree Recreational, Equipment
& Consumer Trust
6.49% 02/25/18 75 75
IMC Home Equity Loan Trust
7.23% 05/20/27 82 84
Iroquois Trust
6.68% 11/10/03 130 130(b)
6.752% 06/25/07 155 156(b)
Provident Bank Home Equity
Loan Trust
6.72% 01/25/13 202 203
Tiers Trust
6.688% 11/15/03 104 104
TOTAL ASSET BACKED
(Cost $1,206) 1,218
Principal
Amount Value
- --------------------------------------------------------------------------------
Corporate Notes -- 6.6%
Abbey National PLC
7.35% 10/29/49 $ 88 $ 92
AFC Capital Trust
8.207% 02/03/27 100 110
Bancomer S.A.
9.00% 06/01/00 70 70(b)
Bank Austria AG
7.25% 02/15/17 250 263
Bell Telephone Co. - Canada
9.50% 10/15/10 30 37
Bell Telephone Co. - Pennsylvania
8.35% 12/15/30 75 93
BT Preferred Capital Trust
7.875% 02/25/27 130 135
China International Trust &
Investment Corp.
9.00% 10/15/06 75 78
Circus Circus Enterprises Inc.
6.70% 11/15/96 70 70
Cleveland Electric Illuminating Co.
7.19% 07/01/00 35 36
Columbia University
6.83% 12/15/20 70 73
Conseco Inc.
8.70% 11/15/26 100 112
Continental Cablevision Inc.
8.50% 09/15/01 70 74
8.30% 05/15/06 50 55
CSX Corp.
7.05% 05/01/02 95 97
DDR Pass-Through Asset Trust
7.125% 03/15/02 230 234(b)
Deutsche Bank Financial Inc.
6.70% 12/13/06 65 66
Empresa Nacional De Electricid
8.125% 02/01/2097 70 73
Energy Group Overseas
7.375% 10/15/17 85 88(b)
Farmers Insurance Exchange
8.625% 05/01/24 55 64(b)
FBOP Capital Trust
10.20% 02/06/27 55 64(b)
- ----------
See Notes to Schedules of Investments and Financial Statements
19
<PAGE>
ELFUN DIVERSIFIED FUND (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1997
Principal
Amount Value
- --------------------------------------------------------------------------------
Federated Department Stores Inc.
10.00% 02/15/01 $ 30 $ 33
Felcor Suites Ltd.
7.375% 10/01/04 90 90(b)
Ford Motor Credit Corp.
7.32% 05/23/02 205 207
Freeport Term Malta Ltd.
7.50% 03/29/09 100 105(b)
Fujian International Trust &
Investment Corp.
7.375% 08/25/07 65 62(b)
Guangdong International Trust &
Investment Corp.
8.875% 05/22/07 100 89(b)
8.75% 10/24/16 150 155(b)
Hydro-Quebec
8.05% 07/07/24 115 132
8.25% 04/15/26 175 204
Ikon Capital Resource Inc.
6.27% 07/19/99 400 401
Ikon Office Solutions Inc.
6.75% 12/01/25 200 193
Industrial Finance Corp.
7.75% 08/04/07 155 147(b)
Israel Electric Corp. Ltd.
8.10% 12/15/96 25 26(b)
Korea Development Bank
7.125% 09/17/01 45 38
6.625% 11/21/03 80 62
7.375% 09/17/04 25 20
Korea Electric Power Corp.
7.75% 04/01/13 83 60
Landeskreditbank Baden
7.875% 04/15/04 65 71
LCI International Inc.
7.25% 06/15/07 53 55
Lehman Brothers Holdings Inc.
6.90% 03/30/01 100 102
Loewen Group International Inc.
7.50% 04/15/01 240 243(b)
Loewen Pass Through Asset Trust
6.70% 10/01/99 350 348(b)
Long Island Lighting
7.30% 07/15/99 85 86
Principal
Amount Value
- --------------------------------------------------------------------------------
Meditrust
7.114% 08/15/04 $ 100 $ 101
MIC Financing Trust
8.375% 02/01/27 150 158(b)
Morgan Stanley Finance PLC
8.03% 02/28/17 45 48
National Westminster Bank PLC
7.75% 04/29/49 85 92
New Jersey Economic
Development Authority
7.425% 02/15/29 70 77
New York State Dormitory
Authority Revenue
6.32% 04/01/99 90 90
News America Holdings Inc.
8.15% 10/17/36 220 238
Niagara Mohawk Power Corp.
9.50% 06/01/00 85 90
Norfolk Southern Corp.
7.90% 05/15/2097 158 179
North Atlantic Energy Corp.
9.05% 06/01/02 93 96
NRG Energy Inc.
7.50% 06/15/07 160 165(b)
NWCG Holding Corp.
6.33% 06/15/99 150 137(d)
Oryx Energy Co.
10.00% 06/15/99 250 261
Paramount Communications Inc.
5.875% 07/15/00 200 196
Petroleos Mexicanos
7.75% 10/29/99 50 50(b)
Philip Morris Cos. Inc.
7.20% 02/01/07 40 41
Raytheon Co.
7.20% 08/15/27 260 271
Reliance Industries Ltd.
10.50% 08/06/46 45 46(b)
Republic New York Corp.
7.20% 07/15/2097 80 83
Republic of Argentina
9.50% 11/30/02 32 32
Republic of Columbia
7.25% 02/15/03 35 34
- ----------
See Notes to Schedules of Investments and Financial Statements
20
<PAGE>
SCHEDULE OF INVESTMENTS (DOLLARS IN THOUSANDS)
Principal
Amount Value
- --------------------------------------------------------------------------------
Republic of Panama
7.875% 02/13/02 $ 50 $ 48(b)
Riggs Capital Trust
8.625% 12/31/26 40 42(b)
RJR Nabisco Inc.
8.00% 07/15/01 200 207
St. George Funding Co.
8.485% 12/31/49 230 251(b)
Sun Life Canada Capital Trust
8.526% 05/29/49 105 116(b)
Taubman Realty Group L.P.
8.00% 06/15/99 50 51
TCI Communications Inc.
8.65% 09/15/04 100 110
Tele-Communications Inc.
6.469% 12/20/00 78 79
Tenet Healthcare Corp.
8.00% 01/15/05 70 71
Time Warner Inc.
4.90% 07/29/99 100 98(b)
6.10% 12/30/01 150 147(b)
Total Access Communication PLC
7.625% 11/04/01 195 103(b)
Transamerica Capital
7.625% 11/15/37 105 109(b)
Triton Energy Ltd.
8.75% 04/15/02 76 78
Universal Outdoor Inc.
9.75% 10/15/06 45 51
Videotron Holdings PLC
11.00% 08/15/05 70 62
Washington Mutual Capital
8.375% 06/01/27 75 83
Waterford Funding Corp.
8.09% 01/02/17 240 251
Yale University Notes
7.375% 04/15/96 70 78
Total Corporate Notes
(Cost $9,264) 9,433
Mortgage Backed -- 11.3%
Federal Home Loan Bank
6.15% 10/23/00 110 110
6.172% 11/24/00 175 175
285
Principal
Amount Value
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.
7.50% 06/01/10 $ 487 $ 501
9.00% 12/01/24 221 236
9.00% 04/01/25 764 815
8.00% 12/01/25 39 41
8.00% 01/01/26 177 183
1,776
Federal National Mortgage Assoc.
5.96% 07/23/99 385 386
5.82% 08/25/99 270 270
6.41% 07/08/02 200 204
6.50% 01/01/04 15 15
6.99% 07/09/07 230 236
8.50% 04/01/17 41 43(i)
9.00% 10/01/24 104 110
5.22% 07/01/26 65 49(d)
7.00% 08/01/27 500 505
7.50% 08/01/27 - 10/01/27 1,341 1,373
6.103% 03/01/33 257 257(l)
6.139% 05/01/36 359 359(l)
6.142% 05/01/36 806 806(l)
6.50% TBA 480 480(c)
7.00% TBA 1,353 1,363(c)
6,456
Government National Mortgage Assoc.
8.50% 10/15/17 1,016 1,086
9.00% 12/15/17 100 108
8.00% 01/15/23 - 12/15/23 479 499
6.50% 03/15/24 375 372
2,065
Collateralized Mortgage Obligations
Amresco Commercial Mortgage
Funding Corp.
6.73% 06/17/29 101 102
Asset Securitization Corp.
7.41% 01/13/30 100 106
6.50% 02/14/41 88 89
BCF
7.22% 11/25/28 273 277
7.25% 11/25/28 165 158
5.476% 11/25/38 114 113
BHN Mortgage Trust
7.916% 07/25/09 46 45(b)
7.54% 05/31/17 79 75(b)
- ----------
See Notes to Schedules of Investments and Financial Statements
21
<PAGE>
ELFUN DIVERSIFIED FUND (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1997
Principal
Amount Value
- --------------------------------------------------------------------------------
Collateralized Mortgage Obligation Trust
5.46% 09/01/15 $ 36 $ 32(d,f)
5.75% 11/01/18 43 32(d,f)
Community Program Loan Trust
4.50% 10/01/18 94 84
CS First Boston Mortgage Securities Corp.
6.425% 08/20/30 20 20
DLJ Mortgage Acceptance Corp.
6.55% 11/15/06 180 182(b)
6.65% 12/17/27 45 45(b)
Federal Home Loan Mortgage Corp.
8.00% 04/15/20 48 50
4.95% 04/01/27 1,003 724(d,f)
Federal National Mortgage Assoc.
7.148% 10/17/09 86 89
8.50% 03/01/17 72 18(g)
8.50% 01/01/18 8 2(g)
7.00% 06/18/20 194 195
7.41% 03/25/21 109 116
9.00% 05/25/22 86 23(g)
8.50% 07/25/22 112 31(g)
7.50% 05/01/23 189 50(g)
6.00% 08/25/23 317 93(g)
5.15% 12/15/24 317 214(d,f)
5.05% 04/01/27 74 58(d,f)
Federal National Mortgage Assoc. REMIC
7.623% 12/17/04 109 114
6.856% 06/17/11 64 65
6.909% 06/25/16 163 167
6.82% 07/25/20 104 96(d,f)
5.67% 12/25/22 85 69(d,f)
8.02% 09/25/23 98 72(d,f)
GS Mortgage Securities Corp.
6.46% 07/13/30 129 132(d)
Mid State Trust
7.54% 07/01/35 39 41
Morgan Stanley Capital Inc.
6.504% 10/15/10 130 131(b)
6.86% 07/15/29 150 153(b)
6.59% 10/03/30 54 54
Residential Assets Securitization Trust
7.75% 04/25/27 - 7/25/27 431 447
Principal
Amount Value
- --------------------------------------------------------------------------------
Salomon Brothers Mortgage
Securities Inc.
7.00% 07/25/24 $ 246 $ 245
Sawgrass Finance REMIC Trust
6.45% 01/20/06 90 91
Structured Asset Securities Corp.
6.169% 01/25/00 69 69(b)
6.79% 06/12/04 81 83
8.457% 04/25/27 138 143
10.25% 02/25/28 921 48(d)
Vornado Finance Corp.
6.36% 11/23/00 460 460(b)
5,703
Total Mortgage Backed
(Cost $16,070) 16,285
Total Bonds and Notes
(Cost $46,235) 47,058
Number
of Shares Value
- --------------------------------------------------------------------------------
Preferred Stock -- 0.6%
- --------------------------------------------------------------------------------
Domestic Preferred -- 0.4%
Airtouch Communications Inc.
(Class B), 6.00% 1,369 49
Microsoft Corp. (Series A),
$2.20 3,513 316
New Plan Realty Trust,
7.80% 2,009 104
News Corp. Exchange Trust,
5.00% 720 50(b)
Simon DeBartolo Group Inc.
(Series C), 7.89% 1,895 98
617
Foreign Preferred -- 0.2%
Banco Comercial Portugues 314 23
Fresenius Medical Care AG 1,013 55(a)
Telecomunicacoes de Sao Paulo
(Receipts) 35,047 9(a)
- ----------
See Notes to Schedules of Investments and Financial Statements
22
<PAGE>
SCHEDULE OF INVESTMENTS (DOLLARS IN THOUSANDS)
Number
of Shares Value
- --------------------------------------------------------------------------------
Telecomunicacoes de Sao
Paulo S.A.-Telesp 836,013 $ 223
310
Total Preferred Stock
(Cost $932) 927
Total Investments in Securities
(Cost $104,351) 137,938
- --------------------------------------------------------------------------------
Short-Term Investments -- 5.0%
- --------------------------------------------------------------------------------
GEI Short Term Investment
Fund 6,770 6,770
Principal
Amount Value
- --------------------------------------------------------------------------------
Repurchase Agreement
State Street Bank and Trust Co.
6.00% 01/02/98 $450 450
(dated 12/31/97, proceeds
$450, collateralized by $463,
United States Treasury Note,
6.375%, 1/15/00)
Total Short-Term Investments
(Cost $7,220) 7,220
Expiration Date/ Number of
Strike Price Contracts Value
- --------------------------------------------------------------------------------
Call Options Written -- 0.0%
- --------------------------------------------------------------------------------
U.S. Treasury Bond Jan. 98/106.19 360,000 $ (1)
U.S. Treasury Bond Jan. 98/105.50 380,000 (1)
Total Call Options Written
(Premium $(2)) (2)
- --------------------------------------------------------------------------------
Put Options Written -- 0.0%
- --------------------------------------------------------------------------------
U.S. Treasury Bond Jan. 98/100.19 360,000 (1)
U.S. Treasury Bond Jan. 98/99.50 380,000 (2)
Total Put Options Written
(Premium $(3)) (3)
Other Assets and Liabilities,
net (0.9%) (1,345)
- --------------------------------------------------------------------------------
NET ASSETS -- 100% $143,808
================================================================================
ICONS REPRESENT THE TOP FIVE COMBINED INDUSTRY WEIGHTINGS FOR THE DOMESTIC AND
FOREIGN EQUITIES IN THE ELFUN DIVERSIFIED FUND AS OF DECEMBER 31, 1997.
- ----------
See Notes to Schedules of Investments and Financial Statements
23
<PAGE>
ELFUN TAX-EXEMPT INCOME FUND
Q&A
Bob Kaelin manages the tax-exempt operation with total assets over $6 billion.
His responsibilities include managing the Elfun Tax-Exempt Income Fund. Prior to
joining GE Investments in 1984, Bob was Senior Vice President and Manager of
Tax-Exempts for CIGNA/INA Insurance Company. From 1969 to 1976, Bob was Vice
President at Girard Bank in Philadelphia and A.G. Becker in New York, where he
was a municipal bond salesman. Bob is a graduate of St. Joseph University in
Philadelphia with a B.S. in Business Administration.
Q. HOW DID THE ELFUN TAX-EXEMPT INCOME FUND PERFORM COMPARED TO ITS BENCHMARK
AND LIPPER PEER GROUP FOR THE ONE-YEAR PERIOD ENDED DECEMBER 31, 1997?
A. The Elfun Tax-Exempt Income Fund posted a total return of 9.59%. This
compares with a 9.19% return for the Lehman Municipal Bond Index. Our
Lipper peer group of 235 General Municipal Bond funds had an average return
of 9.1% for the same period.
Q. WHAT DROVE THE FUND'S PERFORMANCE?
A. The fund maintained a slightly longer duration compared to the index. By
doing so, the fund had a higher average coupon compared to the benchmark,
which increased the fund's income-producing stream. This strategy also
enabled the fund to enjoy greater appreciation when interest rates
declined. For much of the year, interest rates trended lower due to signs
inflation was under control. Late in the year, the economic and currency
problems in Asia also contributed to the decline in interest rates. Another
key to the fund's good performance was our decision to sell certain
callable bonds before they got close enough to their call dates for the
market to discount their values.
[GRAPHIC OMITTED]
[PHOTO OF Bob Kaelin]
Q. WHAT ECONOMIC EVENTS HAD AN IMPACT ON THE TAX-EXEMPT MARKET IN 1997?
A. The first major event was the Federal Reserve's (the "Fed") decision to
raise short-term interest rates in March to stem concerns over rising
inflation. This was the first rate hike by the Fed in approximately two
years and the Fed's only move in monetary policy in 1997. For the rest of
the year, inflation was under control and interest rates, for the most
part, trended lower. Another significant event was the sharp decline in
interest rates ignited by the economic and currency crisis in Asia late in
the year.
Q. WHAT IS YOUR OUTLOOK FOR THE FUND?
A. The outlook for the tax-exempt market and the fund is good. While new
issuance will be high because of the favorable interest-rate environment,
we expect demand will be strong. Good economic conditions have left
individuals and institutions, such as insurance companies and bond funds,
flush with cash that we believe will find its way into tax-exempt
securities. Given the sharp increase in stock prices over the last three
years, these investors are also likely to increase their exposure to bonds
to put more balance into their portfolios.
The interest-rate outlook also appears good for bonds. Uncertain economic
conditions in Asia are likely to keep U.S. economic growth from surging and
long-term interest rates from rising significantly. Moreover, since the
United States has some of the highest real interest rates in the world
today, it behooves the Fed to consider pushing short-term interest rates
lower to help the global economy.
24
<PAGE>
ELFUN TAX-EXEMPT INCOME FUND
Comparison of Change in Value of a $10,000 Investment
ELFUN TAX EXEMPT LBMI
12/87 10,000.00 10,000.00
12/88 11,307.30 11,020.00
12/89 12,348.61 12,210.16
12/90 13,086.71 13,101.50
12/91 14,667.57 14,686.78
12/92 15,915.33 15,979.22
12/93 17,842.69 17,944.66
12/94 16,813.37 17,016.93
12/95 19,726.18 19,988.08
12/96 20,436.75 20,875.55
12/97 22,396.09 22,796.10
AVERAGE ANNUAL TOTAL RETURN
for the periods ended December 31, 1997
- --------------------------------------------------------------------------------
One Five Ten
Year Year Year
- --------------------------------------------------------------------------------
Elfun Tax-Exempt 9.59% 7.07% 8.40%
LBMI 9.19% 7.36% 8.58%
INVESTMENT PROFILE
A Fund designed for investors who seek as high a level of current interest
income exempt from federal income taxes as is consistent with prudent investment
management and preservation of capital by investing principally in municipal
obligations.
*Lipper Performance Comparison
Based on Average Annual Total Returns
for the periods ended 12/31/97
General Municipal Bond Peer Group
One Five Ten
Year Year Year
Fund's rank in peer group: 62 33 31
Number of Funds in peer group: 235 111 72
Peer group average total return: 9.1% 6.8% 8.2%
Lipper categories in peer group: General Municipal Debt
* See Notes to Performance for explanation of peer categories.
Quality Ratings as of December 31, 1997
- --------------------------------------------------------------------------------
Percent of
Moody's Ratings + Market Value
- --------------------------------------------------------------------------------
Aaa 54.9%
- --------------------------------------------------------------------------------
Aa 21.3%
- --------------------------------------------------------------------------------
A 16.4%
- --------------------------------------------------------------------------------
Baa 6.1%
- --------------------------------------------------------------------------------
NR 1.3%
- --------------------------------------------------------------------------------
+ Moody's Investors Service, Inc. is a nationally recognized statistical
rating organization.
See page 45 for Notes to Performance. Past performance is no guarantee of future
results.
25
<PAGE>
SCHEDULE OF INVESTMENTS (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1997
Elfun Tax-Exempt Income Fund
Water and Sewer 15.0%
Health 9.1%
General Obligations 25.6%
Transportation 10.6%
Other Long Term Bonds 4.8%
Education 8.2%
Cash and Other 2.6%
Electric Utility 8.5%
Sales Tax 7.2%
Lease Revenue 8.4%
Principal
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds -- 97.4%
- --------------------------------------------------------------------------------
Alabama -- 0.5%
Mobile County Alabama G.O.
5.35% 02/01/10 $ 6,530 $ 6,810
Arizona -- 2.4%
Arizona Industrial Devel. Auth.
Rev. - Industrial Dev.
7.05% 08/01/20 12,000 12,886
Arizona Transportation Board
Rev. - Sales Tax
6.00% 07/01/08 5,000 5,684
7.00% 07/01/00 7,150 7,590(k)
Phoenix Arizona G.O.
5.55% 07/01/09 3,975 4,350
Phoenix Arizona Street & Highway
User Rev. - Trans.
6.10% 07/01/01 1,500 1,606
Pima County Arizona Unified
School District Number 1
Tucson G.O.
8.00% 07/01/01 1,400 1,573(k)
33,689
California -- 3.7%
California State G.O.
8.00% 05/01/03 10,725 12,632(i)
Principal
Amount Value
- --------------------------------------------------------------------------------
Los Angeles California Waste Water
Systems Rev. - Water & Sewer
5.70% 06/01/20 $15,000 $ 15,604(k)
San Diego County California
Certificates Participation
Rev. - Lease Rev.
5.25% 11/15/19 6,000 6,049(k)
Southern California Public Power
Auth. Rev. - Electric Utility
5.00% 07/01/15 5,725 5,743(m)
5.00% 07/01/22 12,500 12,139(k)
52,167
Colorado -- 2.4%
Colorado Springs Colorado Utility
Rev. - Electric Utility
6.50% 11/15/15 30,370 33,201
Connecticut -- 5.8%
Connecticut State G.O.
5.50% 08/01/05 2,855 3,068
5.50% 03/15/07 9,560 10,186
5.50% 12/01/08 11,090 12,027
5.625% 03/15/09 1,990 2,106
5.95% 11/15/00 2,700 2,848
6.00% 11/01/04 - 11/1/04 4,455 4,915
6.15% 11/15/03 2,000 2,178
Connecticut State Health &
Educational Fac. Auth.
Rev. - Health
5.125% 11/01/12 1,495 1,523(k)
Connecticut State Special Tax Obligation
Rev. - Sales Tax
4.00% 10/01/00 7,550 7,563
5.125% 09/01/05 2,250 2,358
6.00% 10/01/08 2,470 2,787(k)
Mashantucket Western Pequot Tribe Connecticut
Rev. - Lease Rev.
5.70% 09/01/12 2,500 2,629(b)
5.75% 09/01/18 9,500 9,854(b)
Stamford Connecticut G.O.
4.90% 02/15/06 1,025 1,062
5.00% 02/15/07 1,550 1,611
5.00% 02/15/08 1,475 1,526
5.00% 02/15/09 1,500 1,542
- ----------
See Notes to Schedules of Investments and Financial Statements
26
<PAGE>
SCHEDULE OF INVESTMENTS (DOLLARS IN THOUSANDS)
Principal
Amount Value
- --------------------------------------------------------------------------------
5.00% 02/15/10 $ 1,875 $ 1,917
5.00% 02/15/11 1,875 1,911
5.00% 02/15/12 1,875 1,905
5.00% 02/15/13 1,875 1,899
5.00% 02/15/14 1,875 1,894
5.05% 02/15/15 1,875 1,890
81,199
Delaware -- 1.0%
Delaware Trans. Auth. Rev. - Trans.
6.50% 07/01/11 10,000 10,946(j)
New Castle County Delaware G.O.
6.40% 10/15/03 2,390 2,611
13,557
District of Columbia -- 1.3%
District of Columbia Rev. - Education
7.15% 04/01/21 17,950 18,918
[GRAPHIC OMITTED] Florida -- 8.4%
Brevard County Utility Rev. -
Water & Sewer
5.25% 03/01/07 2,800 2,946(k)
5.25% 03/01/08 3,250 3,412(k)
Dade County School District G.O.
5.20% 08/01/07 5,000 5,255(k)
5.50% 08/01/11 14,250 15,001(k)
5.50% 08/01/15 17,805 18,558(k)
Florida State Board Education
Capital Outlay G.O.
5.00% 06/01/13 8,000 8,054
6.00% 06/01/19 5,250 5,629
Florida State Div. Bd. Fin. Dept.
Rev. - Lease Rev.
6.50% 07/01/09 6,915 7,549(k)
6.50% 07/01/10 1,940 2,118(k)
Hillsborough County School Board
Rev. - Lease Rev.
6.00% 07/01/12 5,000 5,454(k)
6.00% 07/01/14 2,155 2,352(k)
Hillsborough County Util. Ref.
Rev. - Water & Sewer
6.50% 08/01/16 8,500 9,294(k)
6.625% 08/01/11 10,000 11,063(k)
Principal
Amount Value
- --------------------------------------------------------------------------------
Orange County Rev. -
Water & Sewer
6.25% 10/01/17 $ 6,500 $ 7,068(k)
Orlando & Orange County
Expressway Auth. Rev. - Trans.
5.25% 07/01/14 13,695 13,941(k)
117,694
Georgia -- 1.6%
Fulton County Georgia School
District G.O.
5.625% 01/01/21 8,205 8,528
Georgia State G.O.
6.50% 08/01/04 1,750 1,991
6.50% 04/01/08 - 08/01/08 5,320 6,229
Gwinnett County Georgia Water &
Sewer Auth. Rev. - Water & Sewer
8.60% 08/01/03 1,250 1,526
Private Colleges & University
Rev. - Education
6.50% 11/01/15 4,010 4,798(k)
23,072
Hawaii -- 0.3%
Honolulu Hawaii City &
County G.O.
6.00% 01/01/12 2,000 2,236
6.10% 06/01/11 1,500 1,661
3,897
Illinois -- 5.2%
Chicago Illinois School Finance
Auth. G.O.
5.00% 06/01/09 9,000 9,280(k)
Chicago Public Bldg. Comm.
Rev. - Lease Rev.
7.125% 01/01/15 9,115 9,789(k,m)
Cook County Illinois G.O.
5.375% 11/15/18 14,500 14,783(k)
Illinois Education Fac. Auth.
Rev. - Education
7.125% 07/01/21 14,940 16,643
Metropolitan Pier & Exposition
Authority Illinois Rev. - Sales Tax
6.50% 06/15/27 10,305 11,576
- ----------
See Notes to Schedules of Investments and Financial Statements
27
<PAGE>
ELFUN TAX-EXEMPT INCOME FUND (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1997
Principal
Amount Value
- --------------------------------------------------------------------------------
Regional Transport Auth. Illinois
Rev. - Trans.
6.25% 06/01/15 $ 9,980 $ 10,916
72,987
Indiana -- 2.8%
Indiana Transportation Finance
Auth. Airport Fac. Lease
Rev. - Trans.
5.00% 11/01/12 13,305 13,538(k)
5.00% 11/01/16 3,250 3,252(k)
Indiana University Rev. -
Education
6.00% 11/15/14 7,500 8,103
Indianapolis Local Rev. -
Bank Bond
6.00% 07/01/10 6,000 6,427
Petersburg Pollution Control
Rev. - Industrial Dev.
6.625% 12/01/24 7,250 8,133
39,453
Iowa -- 0.8%
Iowa Finance Authority
Rev. - Health
5.00% 08/15/11 1,670 1,679
5.25% 08/15/12 1,755 1,804
5.25% 08/15/14 3,790 3,879
5.375% 08/15/17 4,215 4,304
11,666
Kentucky -- 0.9%
Louisville & Jefferson County
Kentucky Rev. - Water & Sewer
5.30% 05/15/19 11,900 12,022(k)
Maine -- 0.6%
Maine Health & Higher
Educational Facilities Auth.
Rev. - Health
5.50% 07/01/23 7,690 7,873(k)
Maryland -- 0.5% Maryland State G.O.
5.00% 10/15/11 3,500 3,600
Principal
Amount Value
- --------------------------------------------------------------------------------
Montgomery County G.O.
8.60% 05/01/01 $ 2,910 $ 3,311
6,911
[GRAPHIC OMITTED] Massachusetts -- 6.3%
Massachusetts State G.O.
5.50% 11/01/08 18,135 19,625
Massachusetts State Health &
Educational Fac. Auth.
Rev. - Health
6.30% 08/15/24 4,000 4,368(k)
Massachusetts State Indus. Fin. Agcy.
Rev. - Resource Rec.
6.30% 07/01/05 8,750 9,401
Massachusetts State Water Resources Auth.
Rev. - Water & Sewer
4.75% 12/01/23 7,500 7,063(k)
5.00% 03/01/22 7,500 7,295(k)
5.10% 03/01/03 8,000 8,315
5.50% 03/01/17 3,000 3,089(k)
6.50% 07/15/08 9,245 10,918
6.50% 07/15/19 14,125 17,195
87,269
Michigan -- 3.0%
Hartland Michigan Consolidated
School District Rev. - Education
5.125% 05/01/22 5,000 5,001(k)
Michigan Trunk Line Rev. -
Sales Tax
5.50% 10/01/21 35,815 36,408
41,409
Minnesota -- 1.4%
Southern Muni. Power Agcy.
Rev. - Electric Utility
5.00% 01/01/12 10,000 10,135(k)
5.75% 01/01/11 8,780 9,233(m)
19,368
Missouri -- 1.3%
Jackson County Missouri
Consolidated School District
Number 002 G.O.
5.25% 03/15/09 8,000 8,354(k)
- ----------
See Notes to Schedules of Investments and Financial Statements
28
<PAGE>
SCHEDULE OF INVESTMENTS (DOLLARS IN THOUSANDS)
Principal
Amount Value
- --------------------------------------------------------------------------------
University Missouri Health
Facilities Rev. - Health
5.60% 11/01/26 $10,000 $ 10,496(k)
18,850
New Hampshire -- 1.4%
New Hampshire Higher
Educational & Health Facilities
Rev. - Education
6.25% 07/01/20 5,000 5,406(k)
New Hampshire State Tpke.
Systems Rev. - Trans.
5.25% 02/01/19 4,500 4,520(k)
New Hampshire Tpke. Auth.
Rev. - Trans.
5.75% 04/01/20 8,745 9,116
19,042
[GRAPHIC OMITTED] New Jersey -- 7.4%
Atlantic County N.J. Utilities
Auth. G.O.
5.00% 01/15/13 6,400 6,400(i,k)
Essex County New Jersey G.O.
5.375% 09/01/10 2,125 2,230(k)
New Jersey Building Auth.
Rev. - Lease Rev.
5.00% 06/15/11 10,650 10,835
5.00% 06/15/12 9,440 9,574
New Jersey Sports and Exposition
Convention Ctr. Rev. - Lease Rev.
6.50% 03/01/19 12,590 13,733
New Jersey State G.O.
5.125% 07/15/08 5,180 5,451
New Jersey Tpke. Auth.
Rev. - Trans.
6.50% 01/01/16 45,960 54,623(k)
102,846
[GRAPHIC OMITTED] New York -- 11.9%
Battery Park City Auth. Rev. - Lease Rev.
4.75% 11/01/19 16,130 15,473(k)
5.00% 11/01/13 10,000 10,005(k)
5.25% 11/01/17 6,500 6,566(k)
Principal
Amount Value
- --------------------------------------------------------------------------------
Municipal Assistance Corp. Rev. -
Sales Tax
5.20% 07/01/08 $10,000 $ 10,528
Nassau County New York G.O.
4.75% 09/01/11 5,750 5,721(k)
New York New York G.O.
4.60% 08/01/06 1,400 1,423(k)
4.70% 08/01/07 1,725 1,761(k)
4.80% 08/01/05 1,190 1,191
5.25% 08/01/03 2,175 2,246
5.25% 08/01/05 3,200 3,294
5.25% 08/01/11 3,950 3,946
5.25% 08/01/13 1,500 1,504
5.25% 08/01/15 2,400 2,378
5.60% 08/15/06 13,000 13,716
New York State Dormitory CUNY
Rev. - Education
5.30% 07/01/08 3,000 3,238
5.40% 07/01/10 8,185 8,760
7.00% 07/01/09 7,000 8,300
New York State Housing Finance
Agency Service Contract
Rev. - Housing
6.375% 09/15/14 5,000 5,670(j)
New York State Local Government
Assistance Corp. Rev. - Sales Tax
5.50% 04/01/21 12,255 12,503
New York State Thruway Auth.
Rev. - Trans.
6.00% 04/01/14 8,000 8,523
New York State Urban Development Auth.
Rev. - Housing
5.50% 07/01/16 7,000 7,277
New York State Urban Development
Corporation Rev. - Lease Rev.
5.50% 01/01/16 25,310 25,677
Suffolk County New York Water
Auth. Waterworks
Rev. - Water & Sewer
5.00% 06/01/17 6,000 5,919(k)
165,619
- ----------
See Notes to Schedules of Investments and Financial Statements
29
<PAGE>
ELFUN TAX-EXEMPT INCOME FUND (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1997
Principal
Amount Value
- --------------------------------------------------------------------------------
Ohio -- 4.4%
Clermont County Ohio Hospital Facilities
Rev. - Health
7.50% 09/01/19 $ 2,000 $ 2,168(j,k)
Cleveland Water Works
Rev. - Water & Sewer
6.25% 01/01/16 9,490 10,245(k)
Columbus G.O.
5.30% 07/01/09 1,850 1,925
Northeast Ohio Reg. Sewer District
Rev. - Water & Sewer
6.50% 11/15/16 15,500 16,975(j,k)
Ohio State Building Auth.
Rev. - Lease Rev.
4.75% 04/01/14 5,000 4,808
7.00% 09/01/07 3,230 3,520(k)
Ohio State Higher Education
Rev. - Education
6.70% 05/01/05 10,100 10,868(k)
Ohio State Public Facilities
Commission G.O.
4.50% 11/01/09 1,500 1,485(k)
Ohio State Water Development
Auth. Pollution Control Fac.
Rev. - Water & Sewer
5.30% 12/01/11 9,265 9,605(k)
61,599
Oklahoma -- 0.4%
Oklahoma Tpke. Auth. Rev. - Trans.
6.25% 01/01/22 4,640 5,045(k)
Oregon -- 0.6% Oregon State G.O.
5.875% 10/01/18 2,435 2,605
6.875% 12/01/13 5,000 5,221
7,826
[GRAPHIC OMITTED] Pennsylvania -- 6.8%
Allegheny County Hospital Development Auth.
Rev. - Health
5.375% 12/01/25 20,000 20,329(k)
6.20% 09/01/15 3,500 3,857(k)
Principal
Amount Value
- --------------------------------------------------------------------------------
Delaware Valley Pennsylvania
School District G.O.
6.50% 04/01/01 $ 1,000 $ 1,075(k)
Montgomery County Higher
Education & Health Auth.
(Holy Redeemer Hosp.)
Rev. - Lease Rev.
8.25% 03/01/14 3,160 3,360
Montgomery County Pennsylvania
Higher Education & Health Auth.
Rev. - Health
5.00% 10/01/09 2,405 2,467(k)
Montgomery County Pennsylvania
Higher Education & Health
Rev. - Health
5.10% 10/01/10 2,670 2,739(k)
5.125% 10/01/11 2,810 2,863(k)
Northampton County Higher
Education Fac. Auth. Lehigh
Univ. Rev. - Education
7.00% 10/15/11 7,800 8,714(k)
Pennsylvania Higher Education
Fac. Auth. Rev. - Education
8.50% 10/01/08 2,095 2,206
Pennsylvania Intergovernmental
Co-op. Rev. - Sales Tax
5.60% 06/15/15 8,000 8,203(k)
Philadelphia Gas Works
Rev. - Natural Gas
6.375% 07/01/14 1,845 2,044(k)
Philadelphia Hospitals & Higher
Education Facilities
Rev. - Health
5.00% 02/15/21 11,250 10,949
Philadelphia Pennsylvania School
District G.O.
5.00% 04/01/04 4,460 4,631(k)
5.55% 07/01/05 10,150 10,827(k)
5.65% 07/01/06 2,070 2,220(k)
5.75% 07/01/07 1,200 1,292(k)
5.80% 07/01/08 1,500 1,618(k)
5.85% 07/01/09 1,440 1,556(k)
- ----------
See Notes to Schedules of Investments and Financial Statements
30
<PAGE>
SCHEDULE OF INVESTMENTS (DOLLARS IN THOUSANDS)
Principal
Amount Value
- --------------------------------------------------------------------------------
University Pittsburgh Pennsylvania
Higher Education
Rev. - Education
4.95% 06/01/11 $ 3,775 $ 3,804(k)
94,754
Rhode Island -- 0.4%
Rhode Island G.O.
5.00% 08/01/11 5,000 5,019
South Carolina -- 2.5%
Charleston County SC G.O.
5.90% 06/01/10 2,170 2,359
6.00% 06/01/11 2,310 2,517
6.00% 06/01/12 2,455 2,673
South Carolina State Public Service
Auth. Rev. - Electric Utility
5.50% 07/01/21 26,635 27,160(k)
34,709
Tennessee -- 0.6%
Knox County Tennessee Health
Educational & Housing
Facilities Board Rev. - Health
7.25% 01/01/09 4,500 5,511(k)
Nashville Health & Education
Rev. - Education
7.625% 05/01/08 2,300 2,374
7,885
Texas -- 4.4%
Harris County Texas G.O.
6.125% 08/15/20 15,000 16,740
Houston Texas Water & Sewer
Systems Rev. - Water & Sewer
5.25% 12/01/21 20,000 20,246(k)
Tarrant County Texas Water
Control & Improvement
Rev. - Water & Sewer
5.75% 03/01/13 3,500 3,669(j,k)
Texas Municipal Power Agency
Rev. - Electric Utiity
5.25% 09/01/08 5,000 5,358(k)
Texas State G.O.
9.00% 10/01/99 6,200 6,730(i)
9.00% 10/01/00 6,600 7,470(i)
Principal
Amount Value
- --------------------------------------------------------------------------------
University Texas University
Rev. - Education
5.20% 08/15/09 $ 1,295 $ 1,362
61,575
Utah -- 0.7%
Intermountain Power Agency
Utah Power Supply
Rev. - Electric Utility
5.00% 07/01/21 10,000 9,757
Vermont -- 0.2%
Burlington Vermont Electric
Rev. - Electric Utility
5.30% 07/01/08 3,155 3,400(k)
Virginia -- 3.9%
Chesapeake Virginia G.O.
6.00% 05/01/12 2,150 2,330
Fairfax County Virginia Sewer
Rev. - Water & Sewer
5.875% 07/15/28 13,785 14,774(k)
Fairfax County Virginia Water
Auth. Rev. - Water & Sewer
5.00% 04/01/16 2,500 2,494
Norfolk Virginia Industrial
Development Auth.
Rev. - Health
5.00% 11/01/20 4,250 4,154
Roanoke Virginia Industrial
Development Auth. Hospital
Rev. - Health
5.00% 07/01/24 21,220 20,913(k)
University Virginia Rev. - Educ.
5.375% 06/01/20 5,000 5,077
Virginia State Trans. Board
Rev. - Trans.
6.90% 05/15/12 4,250 4,382(j)
54,124
West Virginia -- 0.2%
West Virginia State University
Rev. - Education
6.00% 04/01/12 3,000 3,251(k)
- ----------
See Notes to Schedules of Investments and Financial Statements
31
<PAGE>
ELFUN TAX-EXEMPT INCOME FUND (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1997
Principal
Amount Value
- --------------------------------------------------------------------------------
Wisconsin -- 1.4% Wisconsin State G.O.
5.20% 05/01/10 $ 4,150 $ 4,280
5.25% 05/01/11 2,385 2,451
Wisconsin State Health &
Educational Fac. Auth.
Rev. - Health
5.25% 08/15/23 13,455 13,471(k)
20,202
Total Investments in Securities
(Cost $1,247,114) 1,358,665
Number
of Shares Value
- --------------------------------------------------------------------------------
Short-Term Investments -- 1.0%
- --------------------------------------------------------------------------------
GEI Short Term Investment Fund
(COST $13,962) 13,962 13,962
Other Assets and Liabilities,
net 1.6% 22,107
- --------------------------------------------------------------------------------
NET ASSETS -- 100% $1,394,734
================================================================================
ICONS REPRESENT THE TOP FIVE STATE WEIGHTINGS IN THE ELFUN
TAX-EXEMPT INCOME FUND AS OF DECEMBER 31, 1997.
- ----------
See Notes to Schedules of Investments and Financial Statements
32
<PAGE>
ELFUN INCOME FUND
Q&A
Robert MacDougall leads the fixed income team at GE Investments. Assets under
management exceed $24 billion. His responsibilities include managing the Elfun
Income Fund, Elfun Money Market Fund and the fixed income portion of the Elfun
Diversified Fund. Bob joined GE Investments in 1986 as Mutual Fund Portfolio
Manager, became Senior Vice President - Fixed Income in 1992 and was named to
his present position in 1997. Previously he was with GE's Corporate Treasury
Operation, managing the Company's $2 billion portfolio of marketable securities
and supporting the Treasurer in debt management and capital structure planning.
Prior to that, Bob held various financial management positions since joining GE
in 1973. He holds Bachelor's and Master's degrees in Business Administration
from the University of Massachusetts.
Q. HOW DID THE ELFUN INCOME FUND PERFORM COMPARED TO ITS BENCHMARK AND LIPPER
PEER GROUP FOR THE ONE-YEAR PERIOD ENDED DECEMBER 31, 1997?
A. The Elfun Income Fund posted a total return of 9.58%. This compares with a
9.65% return for the Lehman Brothers Aggregate Bond Index. Our Lipper peer
group of 137 Intermediate U.S. Taxable Bond funds had an average return of
8.1% for the same period.
[GRAPHIC OMITTED]
[PHOTO OF Robert MacDougall]
Q. WHAT HAPPENED IN THE BOND MARKET DURING THE PAST TWELVE MONTHS?
A. Throughout much of 1997, interest rates trended lower and bond prices moved
higher. The year began with the economy showing signs of strength, raising
concerns about higher inflation. In turn, the Federal Reserve (the "Fed")
raised short-term interest rates by one-quarter of one percent in March. It
was the Fed's first rate hike in approximately two years and the only
change in monetary policy by the Fed in 1997. The economy showed signs of
slowing in April through July. In late July, the bond market received a big
boost when Fed chairman Mr. Greenspan gave a generally positive forecast
for both the financial markets and the economy during his Humphrey-Hawkins
testimony before the Senate. In August, inflationary concerns re-ignited on
a slightly stronger than expected employment report for July and a robust
increase in orders of goods reported by the National Association of
Purchasing Managers. In September, however, those concerns abated on news
that the economy was growing moderately and inflation was under control.
Concerns about the future growth potential of countries along the Pacific
Rim and its impact on the global economy sent interest rates tumbling in
October and throughout most of November and December.
Q. WHAT DROVE THE FUND'S PERFORMANCE?
A. The fund's sector allocation was largely responsible for its performance.
Early in the year, the fund's overweighted positions in corporate bonds and
mortgage backed securities contributed significantly to performance. In
1997, corporate bonds produced the best investment results compared with
Treasuries and mortgage backed securities. The fund's decision to increase
its exposure to Treasuries in July and September also contributed favorably
to its investment results, as Treasuries outperformed mortgage securities
during that period.
Q. WHAT IS YOUR OUTLOOK?
A. Our forecast for bonds remains favorable. Real rates of return on U.S.
bonds remain attractive compared to other markets. The federal budget
deficit is declining, which means the government is likely to issue fewer
bonds in the future, and when the supply of available bonds decreases,
prices generally rise. Although the U.S. economy is still growing at a
healthy pace, the problems in Asia are likely to keep inflation under
control, which should translate to good news for bonds.
33
<PAGE>
ELFUN INCOME FUND
Comparison of Change in Value of a $10,000 Investment
ELFUN INCOME LB AGGREGATE
12/87 10,000.00 10,000.00
12/88 10,752.21 10,788.97
12/89 12,294.41 12,356.53
12/90 13,353.60 13,460.53
12/91 15,507.64 15,614.29
12/92 16,534.49 16,768.82
12/93 18,141.43 18,403.91
12/94 17,718.63 17,866.78
12/95 20,945.05 21,167.87
12/96 21,785.19 21,933.01
12/97 23,871.59 24,057.05
AVERAGE ANNUAL TOTAL RETURN
for the periods ended December 31, 1997
- --------------------------------------------------------------------------------
One Five Ten
Year Year Year
- --------------------------------------------------------------------------------
Elfun Income 9.58% 7.62% 9.09%
LB Aggregate 9.65% 7.49% 9.18%
INVESTMENT PROFILE
A Fund designed for investors who seek a high level of current income consistent
with prudent management and preservation of capital through investments in a
variety of fixed income securities.
*Lipper Performance Comparison
Based on Average Annual Total Returns
for the periods ended 12/31/97
Intermediate U.S. Taxable Bond Peer Group
One Five Ten
Year Year Year
Fund's rank in peer group: 10 4 2
Number of Funds in peer group: 137 56 17
Peer group average total return: 8.1% 6.1% 7.9%
Lipper categories in peer group: Intermediate U.S. Government,
Intermediate U.S. Treasury
*See Notes to Performance for explanation of peer categories.
Quality Ratings as of December 31, 1997
- --------------------------------------------------------------------------------
Percent of
Moody's Ratings + Market Value
- --------------------------------------------------------------------------------
Aaa 78.6%
- --------------------------------------------------------------------------------
Aa 2.3%
- --------------------------------------------------------------------------------
A 5.0%
- --------------------------------------------------------------------------------
Baa 6.2%
- --------------------------------------------------------------------------------
Ba 6.9%
- --------------------------------------------------------------------------------
B 1.0%
- --------------------------------------------------------------------------------
+ Moody's Investors Service, Inc. is a nationally recognized statistical
rating organization.
See page 45 for Notes to Performance. Past performance is no guarantee of future
results.
34
<PAGE>
SCHEDULE OF INVESTMENTS (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1997
Elfun Income Fund
U.S. Treasuries 34.9%
Corporate Notes 21.9%
Mortgage Backed 36.2%
Cash & Other 7.0%
Principal
Amount Value
- --------------------------------------------------------------------------------
Bonds and Notes -- 100.9%
- --------------------------------------------------------------------------------
Federal Agency -- 0.3%
Small Business Administration
6.55% 10/01/17 - 12/01/17
(COST $711) $ 711 $ 712
U.S. Treasuries -- 34.9%
U.S. Treasury Bonds
13.75% 08/15/04 3,792 5,432(i)
12.00% 05/15/05 465 636(i)
12.50% 08/15/14 1,208 1,867(i)
10.625% 08/15/15 6,684 10,046(i)
6.625% 02/15/27 4,826 5,239(i)
6.375% 08/15/27 70 74(i)
6.125% 11/15/27 7,705 7,918(h)
31,212
U.S. Treasury Notes
5.875% 01/31/99 - 8/31/99 17,579 17,627
6.00% 06/30/99 4,577 4,600
5.625% 11/30/99 6,090 6,084(h)
7.75% 12/31/99 5,443 5,655(i)
5.75% 11/15/00 2,634 2,639(h)
6.25% 04/30/01 4,459 4,529(i)
6.625% 07/31/01 3,054 3,140
6.375% 09/30/01 750 765
5.625% 12/31/02 1,421 1,416
6.50% 08/15/05 200 209(h,i)
6.625% 05/15/07 355 376
6.125% 08/15/07 884 908
47,948
Principal
Amount Value
- --------------------------------------------------------------------------------
U.S. Treasury STRIP
6.02% 08/15/11 $ 3,288 $ 1,467(d)
Total U.S. Treasuries
(Cost $78,891) 80,627
Asset Backed -- 5.5%
Advanta Mortgage Loan Trust Corp.
6.30% 07/25/25 239 235
California Infrastructure
6.42% 12/26/09 208 210
Carco Auto Loan Master Trust
6.689% 08/15/04 867 870
First USA Credit Card Trust
6.12% 04/15/01 2,127 2,128
Fleetwood Credit Grantor Trust
6.40% 05/15/13 424 426
Ford Credit Auto Loan Master
Trust Series (Class A)
5.927% 07/15/01 1,136 1,138(e)
6.005% 02/15/03 100 100(e)
Green Tree Recreational,
Equipment & Consumer Trust
6.49% 02/25/18 411 412
IMC Home Equity Loan Trust
7.23% 05/20/27 442 454
Iroquois Trust
6.68% 11/10/03 693 694(b)
6.752% 06/25/07 825 828(b)
MBNA Master Credit Card Trust
6.295% 01/15/02 766 767(e)
6.15% 03/15/03 2,417 2,421(e)
Signet Master Trust
6.18% 09/16/02 983 984(e)
Standard Credit Card Master Trust
6.36% 05/08/00 326 326(e)
Tiers Trust
6.688% 11/15/03 553 555
Total Asset Backed
(Cost $12,519) 12,548
Corporate Notes -- 21.9%
Abbey National PLC
7.35% 10/29/49 517 541
AFC Capital Trust
8.207% 02/03/27 600 661
- ----------
See Notes to Schedules of Investments and Financial Statements
35
<PAGE>
ELFUN INCOME FUND (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1997
Principal
Amount Value
- --------------------------------------------------------------------------------
Associated Estates Realty Corp.
6.18% 09/27/99 $ 500 $ 501
Banco Hipotecario Nacional
8.00% 06/04/99 525 513(b)
Bancomer S.A.
9.00% 06/01/00 505 503(b)
Bank Austria AG
7.25% 02/15/17 500 527
Bell Telephone Co. - Canada
9.50% 10/15/10 340 424
Bell Telephone Co. - Pennsylvania
8.35% 12/15/30 600 747
BT Preferred Capital Trust
7.875% 02/25/27 825 859
China International Trust &
Investment Corp.
9.00% 10/15/06 340 356
Circus Circus Enterprises Inc.
6.70% 11/15/96 395 395
Cleveland Electric Co. -
Toledo Edison
8.29% 11/15/99 1,000 1,031
Cleveland Electric Illuminating Co.
7.19% 07/01/00 200 203
Columbia University
6.83% 12/15/20 350 363
Conseco Inc.
8.70% 11/15/26 550 615
Continental Cablevision Inc.
8.50% 09/15/01 450 478
8.30% 05/15/06 630 688
CSX Corp.
7.05% 05/01/02 190 195
DDR Pass-Through Asset Trust
7.125% 03/15/02 715 726(b)
Delta Air Lines Inc.
7.79% 12/01/98 420 426
Deutsche Bank Financial Inc.
6.70% 12/13/06 235 238
Empresa Nacional de Electricid
8.125% 02/01/97 415 431
Energy Group Overseas
7.375% 10/15/17 495 512(b)
Principal
Amount Value
- --------------------------------------------------------------------------------
Farmers Insurance Exchange
8.625% 05/01/24 $ 365 $ 422(b)
FBOP Capital Trust
10.20% 02/06/27 150 173(b)
Federated Department Stores Inc.
10.00% 02/15/01 720 791
Felcor Suites Ltd.
7.375% 10/01/04 315 314(b)
First Security Capital
8.41% 12/15/26 298 326
Ford Motor Credit Co.
7.32% 05/23/02 1,095 1,108
Freeport Term Malta Ltd.
7.50% 03/29/09 450 474(b)
Fujian International Trust &
Investment Corp.
7.375% 08/25/07 200 190(b)
Greenpoint Bank Brooklyn
6.70% 07/15/02 365 368
Gruma SA de CV
7.625% 10/15/07 135 133(b)
Guangdong International Trust &
Investment Corp.
8.875% 05/22/07 355 317(b)
8.75% 10/24/16 410 423(b)
Heritage Media Corp.
8.75% 02/15/06 500 532
Hydro-Quebec
8.05% 07/07/24 685 789
8.25% 04/15/26 1,365 1,591
Ikon Capital Inc.
6.27% 07/19/99 800 802
Ikon Office Solutions Inc.
6.75% 12/01/25 375 362
Industrial Finance Corp.
7.00% 08/04/07 585 556(b)
Israel Electric Corp. Ltd.
8.10% 12/15/96 850 879(b)
Korea Development Bank
7.125% 09/17/01 155 130
6.625% 11/21/03 415 323
7.375% 09/17/04 140 112
Korea Electric Power Corp.
7.75% 04/01/13 470 339
- ----------
See Notes to Schedules of Investments and Financial Statements
36
<PAGE>
SCHEDULE OF INVESTMENTS (DOLLARS IN THOUSANDS)
Principal
Amount Value
- --------------------------------------------------------------------------------
Landeskreditbank Baden
7.875% 04/15/04 $ 570 $ 622
LCI International Inc.
7.25% 06/15/07 314 325
Lehman Brothers Holdings Inc.
6.90% 03/30/01 615 625
Liberty Mutual Insurance Co.
8.20% 05/04/07 375 416(b)
Loewen Group International Inc.
6.70% 10/01/99 775 771(b)
7.50% 04/15/01 1,030 1,044(b)
Long Island Lighting
7.30% 07/15/99 440 446
Meditrust
7.114% 08/15/04 415 419
Merita Bank Ltd.
7.15% 12/29/49 485 493(b)
Merrill Lynch & Co. Inc.
5.939% 05/19/98 762 763
6.009% 01/22/99 265 266
MIC Financing Trust
8.375% 02/01/27 550 578(b)
Morgan Stanley Finance PLC
8.03% 02/28/17 300 318
National Westminster Bank PLC
7.75% 04/29/49 520 560
New Jersey Economic
Development Authority
7.425% 02/15/29 350 386
New York State Dormitory
Authority Revenue
6.32% 04/01/99 655 657
News America Holdings Inc.
8.15% 10/17/36 500 542
Niagara Mohawk Power Corp.
9.50% 06/01/00 400 423
Norfolk Southern Corp.
7.90% 05/15/2097 872 990
North Atlantic Energy Corp.
9.05% 06/01/02 538 553
NRG Energy Inc.
7.50% 06/15/07 460 475(b)
NWCG Holding Corp.
6.33% 06/15/99 750 686(d)
Principal
Amount Value
- --------------------------------------------------------------------------------
Oryx Energy Co.
10.00% 06/15/99 $ 1,150 $ 1,201
Petroleos Mexicanos
8.00% 07/01/98 265 266(b)
7.75% 10/29/99 525 528(b)
Philip Morris Cos. Inc.
7.20% 02/01/07 280 289
PSI Energy Inc.
6.25% 12/15/98 325 325
Reliance Industries Ltd.
10.50% 08/06/46 285 293(b)
Republic New York Corp.
7.20% 07/15/2097 415 433
Republic of Argentina
9.50% 11/30/02 460 457
Republic of Columbia
7.25% 02/15/03 280 274
Republic of Panama
7.875% 02/13/02 300 290(b)
Riggs Capital Trust
8.625% 12/31/26 300 318(b)
RJR Nabisco Inc.
8.75% 04/15/04 500 535
St. George Funding Co.
8.485% 12/31/49 605 660(b)
Sun Life Canada Capital Trust
8.526% 05/29/49 600 662(b)
Taubman Realty Group L.P.
8.00% 06/15/99 660 675
TCI Communications Inc.
8.65% 09/15/04 620 679
Tele-Communications Inc.
6.469% 12/20/00 414 417
9.25% 04/15/02 200 220
Tenet Healthcare Corp.
8.00% 01/15/05 450 458
Time Warner Entertainment Co. L.P.
10.15% 05/01/12 500 640
Time Warner Inc.
4.90% 07/29/99 1,115 1,093(b)
6.10% 12/30/01 300 294(b)
Total Access Communication PLC
7.625% 11/04/01 340 180(b)
- ----------
See Notes to Schedules of Investments and Financial Statements
37
<PAGE>
ELFUN INCOME FUND (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1997
Principal
Amount Value
- --------------------------------------------------------------------------------
Transamerica Capital
7.625% 11/15/37 $ 420 $ 437(b)
Triton Energy Ltd.
8.75% 04/15/02 595 611
Universal Outdoor Inc.
9.75% 10/15/06 230 258
Viacom Inc.
7.75% 06/01/05 950 966
Videotron Holdings PLC
11.00% 08/15/05 350 310
Washington Mutual Capital
8.375% 06/01/27 453 499
Waterford Funding Corp.
8.09% 01/02/17 40 42
Yale University Notes
7.375% 04/15/96 395 437
Total Corporate Notes
(Cost $49,224) 50,492
Mortgage Backed -- 36.2%
Federal Home Loan Bank
6.15% 10/23/00 565 565
6.172% 11/24/00 810 810
1,375
Federal Home Loan Mortgage Corp.
7.50% 06/01/10 2,922 3,007
9.00% 12/01/24 1,767 1,888
9.00% 04/01/25 3,369 3,597
8,492
Federal National Mortgage Assoc.
5.96% 07/23/99 1,860 1,864
5.82% 08/25/99 1,300 1,301
6.41% 07/08/02 1,095 1,115
6.50% 01/01/04 125 126
6.99% 07/09/07 1,210 1,240
9.00% 10/01/24 918 979
6.50% 04/01/26 231 229
7.00% 08/01/27 - 10/01/27 3,900 3,940
6.154% 03/01/33 1,263 1,263(l)
6.193% 05/01/36 1,766 1,765(l)
6.196% 05/01/36 3,960 3,959(l)
6.50% TBA 3,150 3,149(c)
7.00% TBA 9,132 9,201(c)
30,131
Principal
Amount Value
- --------------------------------------------------------------------------------
Government National Mortgage Assoc.
8.50% 10/15/17 $ 2,032 $ 2,171
9.00% 11/15/17 - 12/15/17 1,789 1,949
8.00% 01/15/23 - 12/15/23 4,767 4,963
6.50% 01/15/24 - 5/15/24 2,696 2,672
7.50% 01/15/24 - 3/15/24 48 50
11,805
Collateralized Mortgage Obligations
Amresco Commercial Mortgage
Funding Corp.
6.73% 06/17/29 540 545
Asset Securitization Corp.
6.50% 02/14/41 406 409
BCF
7.22% 11/25/28 1,383 1,400
7.25% 11/25/28 838 805
5.476% 01/25/38 576 575
BHN Mortgage Trust
7.916% 07/25/09 246 241(b)
7.54% 05/31/17 383 367(b)
Collateralized Mortgage
Obligation Trust
5.46% 09/01/15 305 269(d,f)
5.75% 11/01/18 364 265(d,f)
CS First Boston Mortgage
Securities Corp.
6.425% 08/20/30 102 102
DLJ Mortgage Acceptance Corp.
6.65% 12/17/27 389 392(b)
Federal Home Loan Mortgage
Corp.
8.00% 04/15/20 464 483
7.50% 04/15/21 815 835
4.95% 04/01/27 4,572 3,299(d,f)
Federal National Mortgage Assoc.
7.148% 10/17/09 587 609
8.50% 03/01/17 - 4/01/17 606 156(g)
8.50% 01/01/18 70 18(g)
7.00% 06/18/20 1,140 1,149
7.41% 03/25/21 865 915
9.00% 05/25/22 502 134(g)
8.50% 07/25/22 865 237(g)
5.22% 07/01/26 145 111(d)
5.05% 04/01/27 391 303(d,f)
- ----------
See Notes to Schedules of Investments and Financial Statements
38
<PAGE>
SCHEDULE OF INVESTMENTS (DOLLARS IN THOUSANDS)
Principal
Amount Value
- --------------------------------------------------------------------------------
Federal National Mortgage
Assoc. REMIC
7.623% 12/17/04 $ 604 $ 631
6.856% 06/17/11 440 447
6.909% 06/25/16 1,230 1,259
6.82% 07/25/20 796 740(d,f)
5.67% 12/25/22 497 400(d,f)
Federal National Mortgage
Assoc. STRIP
6.00% 08/25/23 1,618 473(g)
5.15% 12/15/24 1,618 1,094(d,f)
GS Mortgage Securities Corp.
6.86% 07/13/30 687 700
Mid State Trust
7.54% 07/01/35 209 219
Morgan Stanley Capital Inc.
6.504% 10/15/10 768 771(b)
6.86% 07/15/29 808 824(b)
6.59% 10/03/30 274 277
Residential Assets Securitization
Trust
7.75% 04/25/27 - 6/25/27 1,466 1,519
7.50% 08/25/27 821 854
Residential Resources Inc.
8.00% 10/01/18 241 242
Salomon Brothers Mortgage
Securities Inc.
8.125% 11/01/12 223 229
7.00% 07/15/24 1,244 1,240
Sawgrass Finance REMIC Trust
6.45% 01/20/06 700 707
Structured Asset Securities Corp.
6.90% 01/25/00 365 365(b)
6.79% 06/12/04 411 419
5.70% 04/25/27 1,342 1,390
10.25% 02/25/28 6,236 326(d)
Vornado Finance Corp.
6.36% 12/01/00 3,082 3,083(b)
31,828
Total Mortgage Backed
(Cost $82,742) 83,631
Principal
Amount Value
- --------------------------------------------------------------------------------
Foreign Denominated Notes -- 2.1%
Dutch Government
5.75% 02/15/07 NLG 1,793 $ 911
Federal Republic of Germany
6.00% 07/04/07 DEM 1,517 885
Government of Canada
7.00% 12/01/06 CAD 1,568 1,203
Kingdom of Belgium
6.25% 03/28/07 BEL 32,367 927
Kingdom of Denmark
7.00% 11/15/07 DKK 5,829 934
Total Foreign Denominated Notes
(Cost $4,698) 4,860
Total Bonds and Notes
(Cost $228,785) 232,870
Number
of Shares Value
- --------------------------------------------------------------------------------
Preferred Stock -- 1.9%
- --------------------------------------------------------------------------------
Home Ownership, 13.331% 2,705 2,630(b)
New Plan Realty Trust, 7.80% 10,290 534
News Corp. Exchange
Trust, 5.00% 3,800 263(b)
Pinto Totta International
Finance Ltd. 520 541(a,b)
Simon DeBartolo Group Inc.
(Series C), 7.89% 9,990 519
Total Preferred Stock
(Cost $4,379) 4,487
Total Investments in Securities
(Cost $233,164) 237,357
- ----------
See Notes to Schedules of Investments and Financial Statements
30
<PAGE>
ELFUN INCOME FUND (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1997
Principal
Amount Value
- --------------------------------------------------------------------------------
Short-Term Investments -- 8.8%
- --------------------------------------------------------------------------------
U.S. Government Agencies
Federal Home Loan Bank
5.10% 01/02/98 $ 1,500 $ 1,500(d)
Federal Home Loan Mortgage Corp.
6.00% 01/02/98 4,550 4,549(d)
5.60% 01/26/98 11,800 11,753(d)
Total U.S. Government Agencies 17,802
Number
of Shares Value
- --------------------------------------------------------------------------------
GEI Short Term Investment Fund 2,620 2,620
Total Short-Term Investments 20,422
(Cost $20,422)
Number
Expiration Date/ of
Strike Price Contracts Value
- --------------------------------------------------------------------------------
Call Options Written -- 0.0%
- --------------------------------------------------------------------------------
U.S. Treasury Bond Jan. 98/106.19 1,850,000 (3)
U.S. Treasury Bond Jan. 98/105.50 1,825,000 (7)
Total Call Options Written
(Premium received $(12)) (10)
Number
Expiration Date/ of
Strike Price Contracts Value
- --------------------------------------------------------------------------------
Put Options Written -- 0.0%
- --------------------------------------------------------------------------------
U.S. Treasury Bond Jan. 98/100.19 1,850,000 (5)
U.S. Treasury Bond Jan. 98/99.50 1,825,000 (7)
Total Put Options Written
(Premium received $(13)) (12)
Other Assets and Liabilities,
net (11.6%) (26,854)
- --------------------------------------------------------------------------------
NET ASSETS -- 100% $230,903
================================================================================
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS
- --------------------------------------------------------------------------------
At December 31, 1997, the outstanding forward foreign currency contracts, which
obligate the Elfun Income Fund to deliver currencies at a specified date, were
as follows:
U.S. $ Cost U.S. $
Foreign Currency Foreign on Origination Current Unrealized
Sale Contracts Currency Date Value Appreciation
- --------------------------------------------------------------------------------
BEL, expiring
01/12/98 35,407 $ 970 $ 956 $14
CAD, expiring
01/12/98 1,731 1,223 1,212 11
DEM, expiring
01/12/98 1,622 917 902 15
DKK, expiring
01/12/98 6,344 944 926 18
NLG, expiring
01/12/98 1,925 966 949 17
------ ------ ----
$5,020 $4,945 $75
====== ====== ====
- ----------
See Notes to Schedules of Investments and Financial Statements
40
<PAGE>
ELFUN MONEY MARKET FUND
- --------------------------------------------------------------------------------
Q&A
Robert MacDougall manages the Elfun Money Market Fund. Bob's biographical
details can be found on page 33.
Q. HOW DID ELFUN MONEY MARKET FUND PERFORM COMPARED TO ITS BENCHMARK AND
LIPPER PEER GROUP FOR THE ONE-YEAR PERIOD ENDED DECEMBER 31, 1997?
A. The Elfun Money Market Fund posted a total return of 5.45%. This compares
with a 5.20% return for the 90-day Treasury Bill for the same period. Our
Lipper peer group of 303 Money Market funds posted an average return of
4.9% for the same period.
Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE?
A. As always, we invested in high-quality, liquid securities with relatively
attractive yields and kept cost under control. Our decision to maintain a
shorter-than-average duration early in the year bolstered performance when
interest rates rose in March. In general, we adjust our fund's average
maturity to the index according to our interest-rate beliefs.
Q. WHAT MAJOR ECONOMIC EVENTS TOOK PLACE DURING THE YEAR?
A. The first major event was the Federal Reserve's (the "Fed") decision to
raise short-term interest rates in March to stem concerns over rising
inflation. This was the first rate hike by the Fed in approximately two
years and the Fed's only move in monetary policy in 1997. For the rest of
the year, except for August, inflation was under control and for the most
part, interest rates trended lower. Another significant event that caused a
sharp decline in rates was the economic and currency crisis in Asia late in
the year.
Q. WHAT IS YOUR OUTLOOK?
A. In general, the foundation of the U.S. economy remains solid. Inflation,
which grew at its lowest annual rate (1.7%) in more than a decade, is still
under control. Interest rates remain low, and corporate earnings are
trending down, which we believe will drive rates even lower. We would not
be surprised to see one or two Federal Reserve rate cuts during the first
half of this year to stimulate economic activity. The turmoil in Asia is
likely to keep the U.S. economy from growing, which should be good news for
domestic fixed income securities.
41
<PAGE>
ELFUN MONEY MARKET FUND
- --------------------------------------------------------------------------------
Comparison of Change in Value of a $10,000 Investment
- --------------------------------------------------------------------------------
ELFUN MONEY MARKET 90 DAY T-BILL
6/14/90 10,000.00 10,000.00
12/90 10,453.53 10,433.21
12/91 11,138.58 11,010.86
12/92 11,574.51 11,397.90
12/93 11,957.55 11,747.24
12/94 12,456.76 12,259.79
12/95 13,182.16 12,953.62
12/96 13,872.07 13,620.62
12/97 14,627.67 14,328.89
*Lipper Performance Comparison
Based on Average Annual Total Returns
for the periods ended 12/31/97
Money Market Peer Group
One Five
Year Year
Fund's rank in peer group: 10 4
Number of Funds in peer group: 303 183
Peer group average total return: 4.9% 4.3%
Lipper categories in peer group: Money Market
* See Notes to Performance for explanation of peer categories.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
for the periods ended December 31, 1997
- --------------------------------------------------------------------------------
Since
One Five Inception
Year Year (6/14/90)
- --------------------------------------------------------------------------------
Elfun Money Market 5.45% 4.79% 5.16%
90 Day U.S. T-Bill 5.20% 4.68% 4.85%
Fund Yield at December 31, 1997
- --------------------------------------------------------------------------------
IBC
FUND MONEY FUND
- --------------------------------------------------------------------------------
7 Day Current 5.52% 5.12%
- --------------------------------------------------------------------------------
7 Day Effective 5.67% 5.25%
- --------------------------------------------------------------------------------
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 is slightly higher because it
reflects the compounding effect of earnings on reinvested dividends.
- --------------------------------------------------------------------------------
INVESTMENT PROFILE
A Fund designed for investors who seek to achieve a high level of current income
consistent with the preservation of capital and maintenance of liquidity through
investments in short-term high grade money market instruments.
- --------------------------------------------------------------------------------
An investment in the Elfun Money Market Fund is neither insured nor guaranteed
by the U.S. Government, and no assurance can be given that the Elfun Money
Market Fund will be able to maintain a stable net asset value of $1.00 per
share.
See page 45 for Notes to Performance. Past performance is no guarantee of future
results.
42
<PAGE>
SCHEDULE OF INVESTMENTS (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1997
Elfun Money Market Fund
Elfun Money Market Fund
Time Deposit, Certificates of Deposit & Other 17.8%
U.S. Government 36.2%
Commercial Paper 46.0%
- --------------------------------------------------------------------------------
Principal Amortized
Amount Cost
- --------------------------------------------------------------------------------
Short Term Investments -- 100.4%
- --------------------------------------------------------------------------------
U.S. Governments(d) -- 36.2%
Federal Farm Credit Bank
5.59% 04/07/98 $ 5,100 $ 5,026
Federal Home Loan Bank
5.69% 01/14/98 5,210 5,199
5.72% 06/10/98 5,450 5,317
10,516
Federal Home Loan Mortgage
Corp.
6.00% 01/02/98 2,620 2,619
6.18% 01/14/98 3,000 2,994
5.57% 02/11/98 5,000 4,969
5.69% 03/10/98 6,640 6,570
17,152
Federal National Mortgage Assoc.
5.62% 01/12/98 4,000 3,994
5.67% 02/06/98 6,230 6,196
5.73% 06/19/98 2,000 1,948
12,138
International Bank for
Reconstruction & Development
6.42% 01/06/98 6,000 5,995
6.00% 01/26/98 6,600 6,574
5.57% 03/13/98 3,230 3,195
15,764
Total U.S. Governments
(Cost $60,596) 60,596
Principal Amortized
Amount Cost
- --------------------------------------------------------------------------------
Commercial Paper(d) -- 46.0%
Abbey National PLC
5.61% 01/09/98 $ 6,400 $ 6,392
Associates Corp. of North America
5.80% 03/16/98 6,600 6,522
Chase Manhattan Corp.
5.74% 02/24/98 5,700 5,652
Credit Suisse
5.69% 02/12/98 6,640 6,597
First Union Corp.
5.63% 02/02/98 6,000 5,970
Halifax Building Society
5.75% 03/20/98 6,600 6,519
Merrill Lynch & Co. Inc.
5.83% 01/30/98 6,500 6,470
Morgan (J.P.) & Co. Inc.
5.81% 02/03/98 6,600 6,565
Morgan Stanley Group Inc.
5.81% 03/11/98 6,650 6,577
NationsBank Corp.
5.69% 02/12/98 6,610 6,567
Norwest Corp.
5.75% 01/23/98 5,370 5,351
5.83% 01/23/98 1,280 1,276
Toronto Dominion Bank
5.74% 02/18/98 6,600 6,550
Total Commercial Paper
(Cost $77,008) 77,008
Certificates of Deposit -- 15.8%
Bank of Montreal
5.61% 01/08/98 6,400 6,400
5.87% 01/08/98 250 250
Deutsche Bank AG
5.60% 01/02/98 5,920 5,920
5.84% 01/02/98 700 700
Dresdner Bank AG
5.62% 01/22/98 6,300 6,300
5.72% 01/22/98 300 300
Swiss Bank Corp.
5.77% 03/17/98 6,560 6,559
Total Certificates of Deposit
(Cost $26,429) 26,429
- ----------
See Notes to Schedules of Investments and Financial Statements
43
<PAGE>
ELFUN MONEY MARKET FUND (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1997
- --------------------------------------------------------------------------------
Principal Amortized
Amount Cost
- --------------------------------------------------------------------------------
Time Deposit -- 2.4%
State Street Cayman Islands
6.50% 01/02/98
(Cost $4,040) $ 4,040 $ 4,040
Total Short Term Investments
(Cost $168,073) 168,073
Other Assets and Liabilities,
net (0.4%) (688)
- --------------------------------------------------------------------------------
NET ASSETS -- 100% $167,385
================================================================================
See Notes to Schedules of Investments and Financial Statements
44
<PAGE>
NOTES TO PERFORMANCE (UNAUDITED)
Total returns assume changes in share price and reinvestment of dividends and
capital gains. Investment returns and net asset value on an investment will
fluctuate and you may have a loss or gain when you sell your shares.
A portion of the Elfun Tax-Exempt Income Fund's income may be subject to state,
federal and/or alternative minimum tax. Capital gains, if any, are subject to
capital gains tax.
The Standard & Poor's Composite Index of 500 Stocks (S&P 500), Morgan Stanley
Capital International Index (MSCI), Lehman Brothers Aggregate Bond Index (LB
Aggregate), Lehman Brothers Municipal Bond Index (LBMI), and the 90 Day U.S.
Treasury Index (90 Day T-Bill) 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 a composite of the prices of 500 widely held U.S. stocks recognized
by investors to be representative of the stock market in general. The MSCI World
Index is a composite of 1,560 stocks of companies in 23 countries representing
the European, Pacific Basin and American regions. The MSCI World Index is widely
used by global investors. The LB Aggregate Bond Index is a composite index of
short-, medium-, and long-term bond performance and is widely recognized as a
barometer of the bond market in general. The LBMI Index is a composite of
investment-grade (Baa or greater), fixed-rate municipal bonds with maturities
greater than two years and is considered to be representative of the municipal
bond market. The 90 Day T-Bill is the average return on three month U.S.
Treasury Bills. The results shown for the foregoing indices assume reinvestment
of net dividends or interest and are unaudited. Broad market index returns are
calculated from the nearest month end to the funds' inception date. The majority
of the broad market returns are not available from the funds' commencement of
investment operations through December 31, 1997. The IBC Money Fund yields
represent the average yields of 876 taxable money market funds.
The peer universe of funds used in our peer ranking calculation is based on the
blend of Lipper peer categories, as shown. This blend is the same as the
category blend used by the Wall Street Journal (except for the Elfun Diversified
Fund for which we use the specific Lipper peer group and the Elfun Money Market
Fund which is not in the Wall Street Journal). The actual number of funds and
numerical rankings in the Lipper and Wall Street Journal universes could differ
since the Wall Street Journal excludes certain funds which do not meet their net
asset or shareholder publication thresholds. Lipper is an independent mutual
fund rating service located in Summit, New Jersey.
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 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.
45
<PAGE>
NOTES TO SCHEDULES OF INVESTMENTS (DOLLARS IN THOUSANDS)
(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 December 31, 1997, these securities amounted to
$937, $4,716, $12,483 and $25,932 or 0.5%, 3.3%, 0.9% and 11.2% of net
assets for the Elfun Global Fund, Elfun Diversified Fund, Elfun Tax-Exempt
Income Fund and Elfun Income Fund, respectively. These securities have been
determined to be liquid using guidelines established by the Trustees.
(c) Settlement is on a delayed delivery or when-issued basis with final
maturity to be announced (TBA) in the future.
(d) Rate represents effective yield.
(e) Floating rate coupon. The stated rate represents the rate at December 31,
1997.
(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) All or a portion of security out on loan.
(i) At December 31, 1997, all or a portion of this security was pledged to
cover collateral requirements for futures, options and TBA's.
(j) Prerefunded. Bonds that are collateralized by U.S. Treasury securities
which are held in escrow and are used to pay principal and interest on the
tax-exempt issue and to retire the bonds at the earliest refunding date.
(k) The security is insured by either FGIC, MBIA, AMBAC, or FSA. The Elfun
Tax-Exempt Income Fund had insurance concentrations of 5% or greater as of
December 31, 1997 (as a percentage of net assets) as follows:
MBIA 30.1%
AMBAC 13.9%
(l) Adjustable rate mortgage coupon. The stated rate represents the rate at
December 31, 1997.
(m) Escrowed to maturity. Bonds which are collateralized by U.S. Treasury
securities which are held in escrow by a trustee and used to pay principal
and interest on such bonds.
ABBREVIATIONS:
ADR -- American Depositary Receipt
AMBAC -- AMBAC Indemnity Corporation
FGIC -- Financial Guarantee Insurance Corporation
FSA -- Financial Security Assurance
GDR -- Global Depository Receipt
G.O. -- General Obligation
MBIA -- Municipal Bond Insurance Association
REMIC -- Real Estate Mortgage Investment Conduit
STRIPS -- Separate Trading of Registered Interest and
Principal of Securities
CURRENCY TERMS
BEL -- Belgian Franc
CAD -- Canadian Dollar
DEM -- Deutsche Mark
DKK -- Danish Krone
NLG -- Netherland Guilder
46
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data based on a share outstanding during the year ended December 31:
<TABLE>
<CAPTION>
Elfun Global Fund 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $17.67 $16.65 $15.58 $16.48 $12.80
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.22 0.24 0.23 0.21 0.18
Net realized and unrealized
gains (losses) on investments 1.26 2.45 2.27 (0.32) 3.90
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM INVESTMENT OPERATIONS 1.48 2.69 2.50 (0.11) 4.08
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income 0.17 0.23 0.19 0.19 0.12
Net realized gains 1.98 1.44 1.24 0.60 0.28
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS 2.15 1.67 1.43 0.79 0.40
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $17.00 $17.67 $16.65 $15.58 $16.48
====================================================================================================================================
TOTAL RETURN(a) 8.47% 16.13% 16.03% (0.63%) 31.88%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(in thousands) $193,492 $176,303 $142,262 $126,196 $83,196
Ratios to average net assets:
Net investment income 1.17% 1.37% 1.36% 1.44% 1.42%
Expenses 0.24% 0.25% 0.34% 0.38% 0.31%
Portfolio turnover rate 83% 45% 55% 30% 43%
Average brokerage commission(b) $0.007 $0.012 N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Elfun Trusts 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year $46.46 $39.88 $30.91 $33.76 $33.93
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.75 0.75 0.77 0.77 0.81
Net realized and unrealized
gains (losses) on investments 13.48 8.68 11.33 (0.68) 2.25
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME FROM INVESTMENT OPERATIONS 14.23 9.43 12.10 0.09 3.06
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income 0.74 0.75 0.77 0.77 0.80
Net realized gains 4.14 2.10 2.36 2.17 2.43
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS 4.88 2.85 3.13 2.94 3.23
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $55.81 $46.46 $39.88 $30.91 $33.76
====================================================================================================================================
TOTAL RETURN(a) 30.86% 23.55% 39.19% 0.23% 8.98%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(in thousands) $1,981,395 $1,525,979 $1,228,366 $900,349 $937,676
Ratios to average net assets:
Net investment income 1.39% 1.71% 2.08% 2.28% 2.29%
Expenses 0.09% 0.13% 0.13% 0.17% 0.11%
Portfolio turnover rate 16% 12% 15% 19% 18%
Average brokerage commission(b) $0.050 $0.047 N/A N/A N/A
</TABLE>
- ----------
See Notes to Financial Highlights and Financial Statements
47
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data based on a share outstanding during the year ended December 31:
<TABLE>
<CAPTION>
Elfun Diversified Fund 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $17.27 $15.86 $13.24 $14.05 $13.54
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.56 0.54 0.53 0.47 0.48
Net realized and unrealized
gains (losses) on investments 2.64 1.75 3.06 (0.51) 0.73
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM INVESTMENT OPERATIONS 3.20 2.29 3.59 (0.04) 1.21
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income 0.56 0.54 0.53 0.46 0.47
Net realized gains 0.75 0.34 0.44 0.31 0.23
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS 1.31 0.88 0.97 0.77 0.70
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $19.16 $17.27 $15.86 $13.24 $14.05
====================================================================================================================================
TOTAL RETURN(a) 18.58% 14.40% 27.11% (0.26%) 8.90%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(in thousands) $143,808 $102,157 $77,255 $57,774 $54,911
Ratios to average net assets:
Net investment income 3.11% 3.41% 3.62% 3.42% 3.65%
Expenses 0.22% 0.28% 0.34% 0.39% 0.39%
Portfolio turnover rate 100% 89% 93% 82% 25%
Average brokerage commission(b) $0.028 $0.041 N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Elfun Tax-Exempt Income Fund 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year $11.61 $11.91 $10.83 $12.29 $11.76
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.65 0.66 0.68 0.67 0.71
Net realized and unrealized
gains (losses) on investments 0.43 (0.25) 1.15 (1.37) 0.68
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM INVESTMENT OPERATIONS 1.08 0.41 1.83 (0.70) 1.39
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income 0.65 0.66 0.68 0.67 0.71
Net realized gains 0.11 0.05 0.07 0.09 0.15
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS 0.76 0.71 0.75 0.76 0.86
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $11.93 $11.61 $11.91 $10.83 $12.29
====================================================================================================================================
TOTAL RETURN(a) 9.59% 3.60% 17.32% (5.77%) 12.11%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(in thousands) $1,394,734 $1,301,737 $1,312,342 $1,145,873 $1,297,256
Ratios to average net assets:
Net investment income 5.52% 5.67% 5.91% 5.90% 5.79%
Expenses 0.10% 0.13% 0.13% 0.13% 0.10%
Portfolio turnover rate 28% 22% 59% 24% 29%
</TABLE>
- ----------
See Notes to Financial Highlights and Financial Statements
48
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data based on a share outstanding during the year ended December 31:
<TABLE>
<CAPTION>
Elfun Income Fund 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $11.32 $11.64 $10.55 $11.68 $11.58
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.75 0.76 0.77 0.70 0.73
Net realized and unrealized
gains (losses) on investments 0.29 (0.32) 1.09 (0.97) 0.38
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM INVESTMENT OPERATIONS 1.04 0.44 1.86 (0.27) 1.11
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income 0.75 0.76 0.77 0.70 0.73
Net realized gains 0.00 0.00 0.00 0.16 0.28
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS 0.75 0.76 0.77 0.86 1.01
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $11.61 $11.32 $11.64 $10.55 $11.68
====================================================================================================================================
TOTAL RETURN(a) 9.58% 4.01% 18.21% (2.33%) 9.72%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(in thousands) $230,963 $219,451 $218,880 $185,665 $199,478
Ratios to average net assets:
Net investment income 6.56% 6.68% 6.90% 6.34% 6.10%
Expenses 0.20% 0.24% 0.25% 0.30% 0.17%
Portfolio turnover rate 222% 201% 367% 215% 131%
- ------------------------------------------------------------------------------------------------------------------------------------
Elfun Money Market Fund 1997 1996 1995 1994(c) 1993(c)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year $1.00 $1.00 $1.00 $1.00 $1.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.05 0.05 0.06 0.04 0.03
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM INVESTMENT OPERATIONS 0.05 0.05 0.06 0.04 0.03
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income 0.05 0.05 0.06 0.04 0.03
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS 0.05 0.05 0.06 0.04 0.03
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00
====================================================================================================================================
TOTAL RETURN(a) 5.45% 5.23% 5.82% 4.17% 3.31%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(in thousands) $167,385 $139,474 $117,506 $107,406 $59,959
Ratios to average net assets:
Net investment income 5.27% 5.08% 5.68% 4.20% 3.27%
Expenses 0.24% 0.31% 0.30% 0.16% 0.00%
</TABLE>
- ----------
NOTES TO FINANCIAL HIGHLIGHTS
(a) Total returns are historical and assume changes in share price,
reinvestment of dividends and capital gains, and assume no sales charge.
(b) For the fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on
which commissions are charged. Mark-ups, mark-downs, and spreads on shares
traded on a principal basis are not included unless they are disclosed on
confirmations prepared in accordance with rule 10b-10 under the Securities
Act of 1934.
(c) Had the Advisor not absorbed a portion of the expenses the net investment
income per share would have been the same, the total return would have been
lower, and the ratio of expenses to average net assets would have been
.34%, and .39%, for the years ended December 31, 1994 and 1993,
respectively.
- ----------
See Notes to Financial Highlights and Financial Statements
49
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS
AND LIABILITIES December 31, 1997
(Amounts in thousands)
ELFUN ELFUN ELFUN ELFUN
GLOBAL ELFUN DIVERSIFIED TAX-EXEMPT ELFUN MONEY MARKET
FUND TRUSTS FUND INCOME FUND INCOME FUND FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in securities, at market
(cost $169,436; $870,349; $104,351;
$1,247,114; $233,164; and $0,
respectively) $188,716 $1,930,584 $137,938 $1,358,665 $237,357 $ 0
Short-term investments (at amortized cost) 3,437 47,567 7,220 13,962 20,422 168,073
Cash 10 22 62 34 162 20
Receivable on forward foreign
currency contracts 0 0 0 0 75 0
Foreign currency (cost $1,199;
$170; $210; $0; $1 and
$0, respectively) 1,094 170 193 0 1 0
Receivable for investments sold 98 808 2,455 0 4,197 0
Income receivables 267 2,393 787 23,779 3,101 273
Receivable for fund shares sold 158 872 87 595 122 228
Variation margin receivable 0 8 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 193,780 1,982,424 148,742 1,397,035 265,437 168,594
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Options written, at market* 0 0 5 0 22 0
Distributions payable to shareholders 0 0 0 1,205 233 151
Payable upon return of securities loaned 0 0 0 0 11,342 0
Payable for investments purchased 15 0 4,796 0 22,480 0
Payable for fund shares redeemed 132 181 45 180 254 932
Payable to GEIC 141 848 88 916 203 126
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 288 1,029 4,934 2,301 34,534 1,209
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS 193,492 1,981,395 143,808 1,394,734 230,903 167,385
====================================================================================================================================
NET ASSETS CONSIST OF:
Capital paid in $174,606 $915,697 $110,295 $1,283,188 $225,164 $167,372
Undistributed net investment income 0 364 0 0 536 13
Accumulated net realized gain (loss) (285) 5,312 (56) (5) 911 0
Net unrealized appreciation /
(depreciation) on:
Investments 19,280 1,060,235 33,587 111,551 4,193 0
Futures 0 (212) 0 0 0 0
Written options 0 0 0 0 3 0
Foreign currency related transactions (109) (1) (18) 0 96 0
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $193,492 $1,981,395 $143,808 $1,394,734 $230,903 $167,385
====================================================================================================================================
Shares outstanding (Par value $10; $10;
$10; $10; $10; and $1, respectively) 11,381 35,499 7,505 116,901 19,893 167,386
Net asset value, offering and
demption price per share $17.00 $55.81 $19.16 $11.93 $11.61 $1.00
</TABLE>
* Premiums received for the Elfun Diversified Fund and Elfun Income Fund were
$5 and $25, respectively.
- ----------
See Notes to Financial Statements
50&51
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
For the year ended December 31, 1997 (Amounts in thousands)
ELFUN ELFUN ELFUN ELFUN
GLOBAL ELFUN DIVERSIFIED TAX-EXEMPT ELFUN MONEY MARKET
FUND TRUSTS FUND INCOME FUND INCOME FUND FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
INCOME:
Dividends $ 2,884 $ 22,949 $ 1,072 $ 0 $ 496 $ 0
Interest 130 3,812 3,182 75,293 14,606 8,649
Less: Foreign taxes withheld (271) (288) (44) 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME 2,743 26,473 4,210 75,293 15,102 8,649
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Administration expenses 182 626 93 730 151 78
Shareholder servicing agent expenses 53 175 32 85 47 32
Transfer agent expenses 134 390 76 248 159 190
Custody and accounting expenses 45 245 34 199 50 38
Professional fees 38 110 31 108 38 33
Registration, filing, printing and
miscellaneous expenses 10 47 16 5 0 7
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 462 1,593 282 1,375 445 378
- ------------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 2,281 24,880 3,928 73,918 14,657 8,271
====================================================================================================================================
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS REALIZED GAIN (LOSS) ON:
Investments 19,868 149,723 5,137 12,568 2,127 0
Futures 0 (9,570) 0 0 (19) 0
Written options 0 0 13 0 71 0
Foreign currency related transactions (614) 56 (60) 0 750 0
INCREASE (DECREASE) IN UNREALIZED
APPRECIATION/DEPRECIATION ON:
Investments (6,460) 308,646 12,098 35,899 2,708 0
Futures 0 718 0 0 (17) 0
Written options 0 0 0 0 3 0
Foreign currency related transactions (105) (3) (16) 0 19 0
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
on investments 12,689 449,570 17,172 48,467 5,642 0
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $14,970 $474,450 $21,100 $122,385 $20,299 $8,271
====================================================================================================================================
</TABLE>
- ----------
See Notes to Financial Statements
52&53
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1997 and 1996 (Amounts in thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
ELFUN
GLOBAL ELFUN
FUND TRUSTS
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income $ 2,281 $ 2,252 $ 24,880 $ 23,752
Net realized gain (loss) on investments, futures,
written options, and foreign currency
related transactions 19,254 13,068 140,209 69,213
Net increase (decrease) in unrealized
appreciation/depreciation (6,565) 8,966 309,361 200,771
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase from operations 14,970 24,286 474,450 293,736
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (1,686) (2,094) (24,572) (23,765)
Net realized gains (20,126) (13,195) (137,817) (66,151)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (21,812) (15,289) (162,389) (89,916)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from
operations and distributions (6,842) 8,997 312,061 203,820
- ------------------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares 30,328 30,141 146,134 114,193
Value of distributions reinvested 20,353 14,450 119,192 65,350
Cost of shares redeemed (26,650) (19,547) (121,971) (85,750)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase from share transactions 24,031 25,044 143,355 93,793
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 17,189 34,041 455,416 297,613
NET ASSETS
Beginning of year 176,303 142,262 1,525,979 1,228,366
- ------------------------------------------------------------------------------------------------------------------------------------
End of year $193,492 $176,303 $1,981,395 $1,525,979
====================================================================================================================================
UNDISTRIBUTED NET INVESTMENT INCOME,
END OF YEAR $0 $24 $364 $1
- ------------------------------------------------------------------------------------------------------------------------------------
CHANGES IN FUND SHARES
- ------------------------------------------------------------------------------------------------------------------------------------
Shares sold 1,608 1,702 2,766 2,609
Issued for distributions reinvested 1,210 820 2,181 1,382
Shares redeemed (1,413) (1,092) (2,293) (1,946)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in fund shares 1,405 1,430 2,654 2,045
====================================================================================================================================
</TABLE>
- ----------
See Notes to Financial Statements
54
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
ELFUN ELFUN ELFUN
DIVERSIFIED TAX-EXEMPT ELFUN MONEY MARKET
FUND INCOME FUND INCOME FUND FUND
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1997 1996 1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 3,928 $ 3,038 $ 73,918 $ 72,786 $ 14,657 $ 14,393 $ 8,271 $ 6,349
5,090 1,958 12,568 2,540 2,929 (809) 0 0
12,082 7,043 35,899 (29,865) 2,713 (5,245) 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
21,100 12,039 122,385 45,461 20,299 8,339 8,271 6,349
- ------------------------------------------------------------------------------------------------------------------------------------
(3,910) (3,013) (73,918) (72,817) (14,676) (14,391) (8,271) (6,349)
(5,216) (1,930) (12,571) (5,353) 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
(9,126) (4,943) (86,489) (78,170) (14,676) (14,391) (8,271) (6,349)
- ------------------------------------------------------------------------------------------------------------------------------------
11,974 7,096 35,896 (32,709) 5,623 (6,052) 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
33,170 21,433 106,866 67,712 28,332 25,974 183,354 157,968
8,588 4,659 59,947 53,431 12,221 11,811 7,843 5,936
(12,081) (8,286) (109,712) (99,039) (34,724) (31,162) (163,286) (141,936)
- ------------------------------------------------------------------------------------------------------------------------------------
29,677 17,806 57,101 22,104 5,829 6,623 27,911 21,968
- ------------------------------------------------------------------------------------------------------------------------------------
41,651 24,902 92,997 (10,605) 11,452 571 27,911 21,968
102,157 77,255 1,301,737 1,312,342 219,451 218,880 139,474 117,506
- ------------------------------------------------------------------------------------------------------------------------------------
$143,808 $102,157 $1,394,734 $1,301,737 $230,903 $219,451 $167,385 $139,474
====================================================================================================================================
$0 $39 $0 $0 $536 $353 $13 $13
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
1,773 1,270 9,112 5,845 2,488 2,300 183,354 157,969
453 268 5,105 4,622 1,075 1,050 7,843 5,936
(636) (495) (9,399) (8,577) (3,056) (2,771) (163,286) (141,936)
- ------------------------------------------------------------------------------------------------------------------------------------
1,590 1,043 4,818 1,890 507 579 27,911 21,969
====================================================================================================================================
</TABLE>
55
<PAGE>
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997
1. Organization of the Funds
The Elfun Funds (each a "Fund" and 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 operate as Employees'
Securities Companies (as defined in the 1940 Act) and as such are exempt from
certain provisions of the 1940 Act.
2. Summary of Significant Accounting Policies
The following summarizes the significant accounting policies of the Funds:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results may differ from those estimates, but are
expected to be immaterial.
SECURITY VALUATION AND TRANSACTIONS
Securities for which exchange quotations are readily available are valued at the
last sale price, or if no sales occurred on that day, at the last quoted bid
price. Certain fixed income securities are valued by a dealer or by a pricing
service based upon a computerized matrix system, which considers market
transactions and dealer supplied valuations. Valuations for municipal bonds are
based on prices obtained from a qualified municipal bond pricing service; prices
represent the mean of the bid and ask of the secondary market. Futures contracts
are valued at the settlement price established each day by the board of trade or
exchange on which they are principally traded. Options are valued at the last
sale price, or if no sales occurred on that day, at the last quoted bid price.
Forward foreign currency contracts are valued at the mean between the bid and
the offered forward rates as last quoted by a recognized dealer. Short-term
investments maturing within 60 days are valued at amortized cost. Fund positions
which cannot be valued as set forth above are valued at fair value determined
under procedures approved by the Board of Trustees of the Funds.
Elfun Money Market Fund values its securities using the amortized cost method,
in accordance with Rule 2a-7 of the 1940 Act, which values securities initially
at cost and thereafter assumes a constant amortization to maturity of any
discount or premium. Amortized cost approximates fair value.
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 and purchases and sales of
investment securities denominated in foreign currency are translated to U.S.
dollars at the prevailing exchange rate on the respective dates of such
transactions.
The Funds do not isolate the portion of the results of operations resulting from
changes in foreign exchange rates on investments from the fluctuations arising
from changes in their market prices. Such fluctuations are included in net
realized and unrealized gain or loss from investments. Reported net realized
exchange gains or losses from foreign currency transactions represent sale of
foreign currencies, currency gains or losses between the trade date and the
settlement date on securities transactions, realized gains and losses on forward
foreign currency contracts, and the difference between the amounts of dividends,
interest, and foreign withholding taxes recorded on the Fund's books, and the
U.S. dollar equivalent of the amounts actually received or paid. Net unrealized
foreign exchange gains and losses arise from changes in the value of assets and
liabilities, other than investments in securities as a result of changes in
exchange rates.
56
<PAGE>
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997
INCOME TAXES
It is each Fund's policy to comply with all sections of the Internal Revenue
Code applicable to regulated investment companies and to distribute
substantially all of its taxable income, tax-exempt income, and gains to its
shareholders and, therefore, no provision for federal income tax has been made.
Each Fund is treated as a separate taxpayer for federal income tax purposes.
Any net capital and currency losses incurred after October 31, within each
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 Elfun Tax-Exempt Income
Fund incurred and elected to defer net capital losses of $116,468.
INVESTMENT INCOME
Corporate actions (including cash dividends) are recorded net of nonreclaimable
tax withholdings on the ex-dividend date, except for certain foreign securities
for which corporate actions are recorded as soon after ex-dividend date as such
information is available. Interest income is recorded on the accrual basis. All
discounts and premiums on taxable bonds and premiums on tax-exempt bonds are
accreted or amortized to call or maturity date, whichever is shorter, using the
effective yield method. On tax-exempt bonds purchased before May 1, 1993, only
original issue discount is amortized. For tax-exempt bonds purchased after April
30, 1993, both market discount and original issue discount are amortized.
EXPENSES
Expenses of the Funds which are directly identifiable to a specific fund are
allocated to that fund. Expenses which are not readily identifiable to a
specific fund are allocated in such a manner as deemed equitable, taking into
consideration the nature and type of expense and the relative sizes of the
Funds. All expenses of the Funds are paid by General Electric Investment
Corporation ("GEIC"), investment adviser to the Funds, and reimbursed by the
Funds.
DISTRIBUTIONS TO SHAREHOLDERS
Elfun Tax-Exempt Income Fund, Elfun Income Fund and Elfun Money Market Fund
declare net investment income dividends daily and pay them monthly. All other
Funds declare and pay dividends from net investment income annually. All Funds
declare and pay net realized capital gain distributions annually. The character
of income and gains to be distributed are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These differences include treatment of realized and unrealized gains and losses
on forward foreign currency contracts, paydown gains and losses on
mortgage-backed securities, and losses on 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. The calculation of net investment income per share in
the Financial Highlights table excludes these adjustments. During any particular
year, net realized gains from investment transactions in excess of any
applicable cap loss carryforwards would be taxable to the Funds if not
distributed and, therefore, will be declared and paid to their shareholders
annually.
57
<PAGE>
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997
WHEN-ISSUED SECURITIES
The Funds may purchase or sell securities on a when-issued or forward commitment
basis. Payment and delivery may take place a month or more after the date of the
transaction. The price of the underlying securities and the date when the
securities will be delivered and paid for are fixed at the time the transaction
is negotiated. This may increase the risk if the other party involved in the
transaction fails to deliver and causes the Fund to subsequently invest at less
advantageous yields. In connection with such purchases, the Funds are required
to hold liquid assets as collateral with the Funds' custodian sufficient to
cover the purchase price, unless they enter into an offsetting contract for the
sale of equal securities and value.
FORWARD FOREIGN CURRENCY CONTRACTS
A forward foreign currency contract ("Forward") is an agreement between two
parties to buy and sell a currency at a set price on a future date. The market
value of the Forward fluctuates with changes in currency exchange rates. The
Forward is marked-to-market daily and the change in the market value is recorded
by the Funds as an unrealized gain or loss. When the Forward is closed, the
Funds record a realized gain or loss equal to the difference between the value
at the time it was opened and the value at the time it was closed. The Fund
could be exposed to risk if a counterparty is unable to meet the terms of the
contract or if the value of the currency changes unfavorably. The Fund may enter
into Forwards in connection with planned purchases and sales of securities, to
hedge specific receivables or payables against changes in future exchange rates
or to hedge the U.S. dollar value of portfolio securities denominated in a
foreign currency.
REPURCHASE AGREEMENTS
The Funds' custodian takes possession of the collateral pledged for investments
in repurchase agreements on behalf of the Funds. It is the policy of the Funds
to value the underlying collateral daily on a mark-to-market basis to determine
that the value, including accrued interest, is at least equal to the repurchase
price. In the event of default of the obligation to repurchase, the Funds have
the right to liquidate the collateral and apply the proceeds in satisfaction of
the obligation.
FUTURES AND OPTIONS
The Funds, other than the Elfun Money Market Fund, may invest in futures
contracts and purchase and write options. These investments involve, to varying
degrees, elements of market risk and risks in excess of the amount recognized in
the Statements of Assets and Liabilities. The face or contract amounts reflect
the extent of the involvement the Funds have in the particular classes of these
instruments. Risks may be caused by an imperfect correlation between movements
in the price of the instruments and the price of the underlying securities and
interest rates. Risks also may arise if there is an illiquid secondary market
for the instruments, or an inability of counterparties to perform. The Funds may
invest in futures contracts for the following reasons: (1) for the purpose of
hedging against the effects of changes in the value of portfolio securities or
other investments due to anticipated changes in interest rates, stock market
conditions and currency market conditions, (2) to gain stock, bond, or currency
market exposure for accumulating and residual cash positions, (3) for duration
management, (4) when such transactions are an economically appropriate way to
reduce risks inherent in the management of a Fund, and (5) for non-hedging
purposes such as seeking additional income or otherwise seeking to increase
total return.
58
<PAGE>
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997
Upon entering into a futures contract, the Funds are required to segregate with
the Funds' custodian either cash or securities in an amount (initial margin)
equal to a certain percentage of the contract value. Subsequent payments
(variation margin) are made or received by the Funds each day. The variation
margin payments are equal to the daily change in the contract value and are
recorded as unrealized gains and losses. The Funds recognize a realized gain or
loss when the futures contract is closed. The Funds will realize a gain or loss
upon the expiration or closing of an option transaction. When an option is
exercised, the proceeds on sales for a written call option, the purchase cost
for a written put option, or the proceeds on the sale of the security for a
purchased put or cost of the security for a call option is adjusted by the
amount of premium received or paid.
SECURITY LENDING
The Funds may loan securities to well known and recognized U.S. and foreign
brokers and banks and receive lender fees. These fees are included in interest
income. The loans of securities will be collateralized by cash, letters of
credit or U.S. Government securities. The collateral will be segregated and
maintained at all times with the custodian and must be equal to the current
value of the securities loaned. 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.
OTHER
There are certain additional risks involved when investing in foreign securities
that are not inherent in domestic securities. These risks may involve foreign
currency exchange rate fluctuations, adverse political and economic developments
and the imposition of unfavorable foreign governmental laws and restrictions.
3. FEES AND COMPENSATION PAID TO AFFILIATES
ADVISORY AND ADMINISTRATION FEES
During 1997, the Funds incurred expenses for the cost of services rendered by
General Electric Company's wholly-owned subsidiary, GEIC, as investment adviser
and for services GEIC rendered as shareholder servicing agent. These expenses
are included as administrative expenses and shareholder servicing agent fees in
the Statements of Operations. The Trustees received no compensation as Trustees
for the Elfun Funds.
4. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION
(Dollars in Thousands)
Aggregate gross unrealized appreciation/(depreciation) of investments for each
Fund at December 31, 1997, were as follows:
GROSS GROSS NET
UNREALIZED UNREALIZED UNREALIZED
APPRECIATION DEPRECIATION APPRECIATION
- --------------------------------------------------------------------------------
Elfun Global Fund $ 30,794 $11,514 $ 19,280
Elfun Trusts 1,067,813 7,578 1,060,235
Elfun Diversified
Fund 35,150 1,563 33,587
Elfun Tax-Exempt
Income Fund 111,551 0 111,551
Elfun Income Fund 4,925 732 4,193
The aggregate cost of each Fund's investments was substantially the same for
book and federal income tax purposes at December 31, 1997.
59
<PAGE>
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997
5. OPTIONS
(CONTRACTS AND DOLLARS IN THOUSANDS)
During the year ended December 31, 1997, the following option contracts were
written:
ELFUN DIVERSIFIED FUND ELFUN INCOME FUND
------------------------- --------------------------
NUMBER NUMBER
OF CONTRACTS PREMIUM OF CONTRACTS PREMIUM
- --------------------------------------------------------------------------------
Balance as of
December 31, 1996 0 $ 0 0 $ 0
Written 5,173 17 28,339 97
Closed and
Expired (3,693) (12) (20,989) (71)
----- ----- ------- ------
Exercised 0 0 0 0
Balance as of
December 31, 1997 1,480 $ 5 7,350 $ 26
===== ===== ===== ======
6. INVESTMENT TRANSACTIONS
(DOLLARS IN THOUSANDS)
The cost of purchases and the proceeds from sales of investments, other than
U.S. Government securities, short-term securities and options, for the year
ended December 31, 1997, were as follows:
PURCHASES SALES
- --------------------------------------------------------------------------------
Elfun Global Fund $ 162,307 $ 156,898
Elfun Trusts 263,603 270,238
Elfun Diversified Fund 59,222 39,504
Elfun Tax-Exempt
Income Fund 394,985 361,986
Elfun Income Fund 99,889 83,819
The cost of purchases and the proceeds from sales of long-term U.S. Government
securities for the year ended December 31, 1997, were as follows:
PURCHASES SALES
- --------------------------------------------------------------------------------
Elfun Trusts $ 2,546 $ 4,771
Elfun Diversified Fund 85,151 73,656
Elfun Income Fund 422,411 416,496
7. SECURITY LENDING
At December 31, 1997, the Elfun Income Fund loaned securities having a value,
including accrued interest, of approximately $11,196,937 and received
$11,430,639 in cash and letters of credit as collateral for the loans. Cash
collateral received is invested in high grade liquid debt obligations and
short-term investments at December 31, 1997.
60
<PAGE>
INDEPENDENT AUDITORS' REPORT
KPMG Peat Marwick LLP
To the Board of Trustees and
Shareholders of the Elfun Mutual Funds:
We have audited the accompanying statements of assets and liabilities of the
Elfun Global Fund, Elfun Trusts, Elfun Diversified Fund, Elfun Tax-Exempt Income
Fund, Elfun Income Fund and Elfun Money Market Fund, (the "Elfun Funds"),
including the schedules of investments, as of December 31, 1997, and the related
statements of operations for the year then ended, the 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 Elfun Funds' 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 generally accepted auditing
standards. 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, 1997, by correspondence with the custodian and brokers. 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
Elfun Funds as of December 31, 1997, the results of their operations for the
year then ended, the changes in their net assets for each of the years in the
two-year period then ended, and their financial highlights for each of the years
in the five-year period then ended, in conformity with generally accepted
accounting principles.
/s/ KPMG Peat Marwick LLP
New York, New York
February 13, 1998
61
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63
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Elfun Funds Investment Team
Portfolio Managers
ELFUN GLOBAL FUND
Ralph R. Layman
Michael J. Solecki
ELFUN TRUSTS
David B. Carlson
ELFUN DIVERSIFIED FUND
David B. Carlson
Ralph R. Layman
Robert A. MacDougall
ELFUN TAX-EXEMPT INCOME FUND
Robert R. Kaelin
ELFUN INCOME FUND
ELFUN MONEY MARKET FUND
Team led by
Robert A. MacDougall
Investment Adviser
General Electric Investment Corporation
Independent Auditors
KPMG Peat Marwick LLP
Custodian
State Street Bank & Trust Company
Shareholder Servicing Agent
Address all inquiries to:
GE Investments
P.O. Box 419631
Kansas City, MO 64141-6631
Officers of the Investment Adviser
John H. Myers, Trustee,
Chairman of the Board and President,
General Electric Investment Corporation
Eugene K. Bolton, Trustee, EVP, Domestic Equities
Michael J. Cosgrove, Trustee, EVP, Mutual Funds
Ralph R. Layman, Trustee, EVP, International Equities
Alan M. Lewis, Trustee, EVP, General Counsel and Secretary
Robert A. MacDougall, Trustee, EVP, Fixed Income
Geoffrey R. Norman, EVP, Institutional Marketing
Thomas J. Szkutak, Trustee, EVP, Chief Financial Officer
Donald W. Torey, Trustee, EVP, Alternative Investments and Real Estate
64
<PAGE>
SHAREHOLDER SERVICES
Shareholder Services has embarked on an ambitious program of service upgrades
which will be apparent to all our shareholders in the coming months. Among the
areas of improvement are our telephone technology, account transactional
processing and universal availability of our daily fund prices in the media. Our
first order of business was to redesign and improve the Automated Voice Response
System, which is accessed nearly one million times a year (over 3,500 calls per
day). These numbers show us that our share-holders find this service critical in
making investment decisions.
The new user-friendly Automated Voice Response System, is available 24 hours a
day, 7 days a week. Here is a brief list of the various functions including a
simplified and expanded menu selection:
o Obtain information on prices, yields and returns - current as well as
historical
o Create a personal portfolio to hear prices, yields and returns only of
funds you own or funds you may wish to track
o Obtain account balance information - individual investments and total
portfolio
o Hear seasonal information with details of upcoming activities,
mailings and other items of interest to shareholders.
We hope you will be pleased with this service upgrade and we welcome your
comments and suggestions.
INFORMATION AND ASSISTANCE
Inquiry Center hours: Monday to Friday 8:30 AM -- 5:00 PM
Shareholder Services: 1-800-242-0134
- --------------------------------------------------------------------------------
This report has been prepared for shareholders and may be distributed to others
only if preceded or accompanied by a current prospectus.
<PAGE>
Elfun Funds
3003 Summer Street
Stamford, CT 06904-7900
Bulk Rate
U.S. Postage
PAID
Canton, MA
Permit No. 313
Distributed by GE Investment Distributors, Inc.,
member NASD and SIPC ELF-2 (2/98)
