ELFUN FUNDS
ANNUAL REPORT
DECEMBER 31, 1999
<PAGE>
UNDERSTANDING YOUR REPORT
A LETTER FROM THE PRESIDENT .......................... 1
John Myers on market events
REVIEW OF PERFORMANCE AND SCHEDULES OF INVESTMENTS
Portfolio managers discuss your Funds' results in 1999
ELFUN INTERNATIONAL EQUITY FUND ................. 3
ELFUN TRUSTS .................................... 8
ELFUN DIVERSIFIED FUND .......................... 12
ELFUN TAX-EXEMPT INCOME FUND .................... 24
ELFUN INCOME FUND ............................... 32
ELFUN MONEY MARKET FUND ......................... 40
NOTES TO PERFORMANCE ................................. 44
NOTES TO SCHEDULES OF INVESTMENTS .................... 44
FINANCIAL STATEMENTS
Financial Highlights .............................. 45
Notes to Financial Highlights ..................... 47
Statements of Assets and Liabilities,
Operations, and Changes in Net Assets ............. 48
NOTES TO FINANCIAL STATEMENTS ........................ 54
INDEPENDENT AUDITORS' REPORT ......................... 62
ELFUN FUNDS' INVESTMENT TEAM ......................... 64
SHAREHOLDER SERVICES ....................INSIDE BACK COVER
How you can obtain more information
HIGHLY RATED ELFUN FUNDS
MORNINGSTAR RATINGS(TM)
THROUGH DECEMBER 31, 1999
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NUMBER
FUND OF FUNDS STAR
(CATEGORY) IN CATEGORY RATING
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ELFUN INTERNATIONAL EQUITY -- (International Equity)
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Overall and 3 year 1104 [STAR] [STAR] [STAR] [STAR]
5 year 638 [STAR] [STAR] [STAR] [STAR]
10 year 124 [STAR] [STAR] [STAR] [STAR]
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ELFUN TRUSTS -- (Domestic Equity)
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Overall and 3 year 3469 [STAR] [STAR] [STAR] [STAR]
5 year 2180 [STAR] [STAR] [STAR] [STAR]
10 year 770 [STAR] [STAR] [STAR] [STAR]
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ELFUN TAX-EXEM[STAR]T INCOME -- (Municipal Bonds)
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Overall and 3 year 1623 [STAR] [STAR] [STAR] [STAR] [STAR]
5 year 1348 [STAR] [STAR] [STAR] [STAR] [STAR]
10 year 386 [STAR] [STAR] [STAR] [STAR]
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ELFUN INCOME -- (Taxable Bonds)
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Overall 1617 [STAR] [STAR] [STAR] [STAR]
3 year 1617 [STAR] [STAR] [STAR] [STAR]
5 year 1221 [STAR] [STAR] [STAR] [STAR]
10 year 387 [STAR] [STAR] [STAR] [STAR]
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ELFUN DIVERSIFIED -- (Domestic Equity)
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Overall 3469 [STAR] [STAR] [STAR] [STAR]
3 year 3469 [STAR] [STAR] [STAR]
5 year 2180 [STAR] [STAR] [STAR] [STAR]
10 year 770 [STAR] [STAR] [STAR] [STAR]
Morningstar is an independent fund rating company that seeks to provide a
non-biased rating system used in making investment decisions. A fund is rated in
its broad asset class on a scale of one to five stars through the evaluation of
the historical balance of risk and return after 3 years of performance.
Morningstar proprietary ratings reflect historical risk-adjusted performance
through December 31, 1999. The ratings are subject to change every month.
Morningstar ratings are calculated from a fund's three-, five- and ten-year
average annual returns (with fee and sales charge adjustments) and a risk factor
that reflects fund performance below 90-day T-bill returns. The top ten percent
of the funds in a broad asset class receive five stars, the next 22.5% receive
four stars and the next 35% receive three stars. Ratings are for the share
classes shown only; other classes may vary.
Investment return and principal value of an investment will fluctuate and you
may have a gain or loss when you sell your shares. The advisor has voluntarily
agreed to waive and/or bear certain fees and expenses. Without these provisions
which may be terminated in the future, the results may have been lower. Returns
assume changes in share price and reinvestment of dividends and capital gains.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
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This report has been prepared for shareholders and may be distributed to others
only if preceded or accompanied by a current prospectus.
<PAGE>
A LETTER FROM THE PRESIDENT
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DEAR SHAREHOLDER,
The approach of the new millennium was marked by very strong performance across
most global equity markets, while the U.S. bond market suffered its second worst
year since 1973. The S&P 500 again set a record in 1999, returning in excess of
20% for the fifth straight year. Investors' interest in U.S. equities however
was confined to a very narrow portion of the market, namely technology. The
technology sector returned over 80%, following a 76% gain in 1998, despite
anxiety surrounding Y2K. The dominance of technology is due in large part to the
increasingly pervasive use of the Internet in all aspects of business. The
unprecedented move in technology accounted for 90% of the S&P 500's 1999
performance. Interestingly, the S&P 500 excluding technology returned only 3%
for the year. Innovation and productivity gains are among the positive
by-products of the current technology cycle but, as disciplined, long-term
investors, we remain cautious about valuations. As a whole, U.S. equity markets
enjoyed a very favorable economic backdrop in 1999 including strong GDP growth,
modest wage pressure, low inflation, and high consumer confidence.
International equity markets also performed extremely well and outperformed the
S&P 500 for the first time since 1994. Most investors became convinced that the
economic troubles of Asia, Latin America, and Russia were behind us and that
sentiment provided the catalyst for positive performance across many individual
markets - European markets climbed 15.9%, Japan rose 61.5%, and emerging markets
soared 66.4%. We believe international markets will remain very attractive over
the next few years as consolidation, restructuring, and privatization trends
continue to exert economic pressures on companies to pursue shareholder value
and to find new ways to grow earnings.
The reversal of Federal Reserve policy in 1999, to tighten rates three times
after reducing rates three times in 1998, created difficulties for the bond
market. The yield on the long-bond started the year around 5% and ended 1999 at
6.5%. The steepening of the yield curve reflected a "wall of worry" by most bond
investors that the strong economy would eventually push up inflation thereby
forcing the Fed to increase rates even more. Despite challenges in the fixed
income markets, we believe that a diversified portfolio, including bonds, is a
responsible way to invest in times of uncertainty.
PERFORMANCE HIGHLIGHTS
Our Elfun family of equity funds posted strong performance relative to the
average returns of their Lipper peer groups and to their respective benchmarks.
Specifically, the ELFUN INTERNATIONAL EQUITY FUND (recently renamed to better
reflect its objectives), returned 38.9%, beating its benchmark by 14 percentage
points! ELFUN TRUSTS returned 19.7%, ranking the fund in the top one-third of
its peer group over five years. ELFUN DIVERSIFIED FUND returned 14.0%, beating
the average fund in its peer group by 5.3 percentage points and placing the fund
in the top quartile of its peer group over one-, five-, and ten-year periods.
Our Elfun family of fixed income funds also returned good relative performance
in a very challenging environment. The ELFUN TAX-EXEMPT INCOME FUND posted
better results than the average fund in its peer universe, ranking it in the top
15% of its peer group on a one- and five-year basis. The ELFUN INCOME FUND
returned better results than its peer group in 1999, ranking it in the top 15%
over one- and five-year periods and in the top 10% on a ten-year basis. The
ELFUN MONEY MARKET FUND also beat the average fund in its peer group in addition
to beating its benchmark, ranking it in the top 2% over one-year, and in the top
3% of its peer group over a five-year period.
Please take a moment to read our annual report for the calendar year 1999. In it
you will find financial information on all our Elfun Funds, including fund
performance, benchmark performance, peer group performances, and holdings. Your
Portfolio Managers have prepared a commentary to answer questions you might have
on each individual fund. Several of our funds again
[PHOTO OF JOHN MYERS OMITTED]
1
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A LETTER FROM THE PRESIDENT (CONTINUED)
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received favorable ratings from Morningstar, an independent fund-ranking company
that analyzes risk-adjusted performance and our top-rated funds are presented on
the inside front cover.
MARKET OVERVIEW
The last five years of the 20th century produced very favorable results for
financial markets. Double-digit returns now seem to be the norm in terms of
investor expectations, given the 20%-plus returns recorded by the S&P 500 in the
last half of the 1990's. The new millennium begins with a positive backdrop for
the global markets.
The U.S. market is characterized by a "New Era Economy" with low inflation;
modest interest rates; modest wage pressure offset by very strong productivity
gains; healthy consumer spending; a new technology cycle centered around the
Internet; and robust economic growth. We believe that these factors, combined
with a favorable demographic picture over the next ten years, bode well for U.S.
company earnings and for the U.S. equity market in general. The international
markets are now embracing consolidation and restructuring in the name of
shareholder value which should translate into better earnings and stock prices
for those who can execute their strategy. The emerging markets are still
recovering from the economic woes of the Asian crisis and investors remain
confident about their prospects. The fixed income markets will continue to be
challenged by the Federal Reserve's efforts to stave off inflation and keep
economic growth manageable. The fixed income markets are anticipating several
rate hikes in 2000 to accomplish this goal. Another issue for the bond market is
the lack of supply of 30-year paper given the U.S. budget surplus. We are in new
territory in terms of paying down our national debt, which is having a unique
impact on the yield curve, namely, an inversion of the curve in which short-term
rates exceed longer-term rates. The danger could be that the equity markets
ignore this phenomenon and continue to bid stocks higher.
While the backdrop remains constructive, there are reasons to take a cautiously
optimistic approach to investing over the next couple of years. As a
disciplined, long-term investor we continue to monitor the excesses in the U.S.
equity markets including valuations, technology concentration, and the IPO
market, where capital flows are at record highs. The robust growth of the U.S.
economy, the widening U.S. trade deficit, the budget surplus, inflationary
pressures, excess global capacity, and Federal Reserve's bias toward tightening
interest rates over the short term are all factors to watch carefully as they
could create volatility in world financial markets. We continue to believe that
our bottom-up approach to security selection will enable us to differentiate our
portfolios and lead us to the winners in this new century.
As an aside, let me comment on the name change of the Elfun Global Fund to the
Elfun International Equity Fund. Elfun investors have used the Elfun Global Fund
since its inception ten years ago in order to diversity their equity holdings
into foreign markets. Global funds as a category, however, typically invest in
the U.S. equity market as well, and this has created some confusion among
certain investors. In order to emphasize that this fund primarily invests in
international securities, we have renamed the fund "Elfun International Equity".
Although the change did not require any modifications in the portfolio, as the
fund can continue to hold a small percentage of non-international securities and
still maintain its status as an international equity fund, we will reduce the
U.S. weighting over time to align the fund with other international equity funds
we manage.
Lastly, a comment on the Year 2000 issue. To date, we have not experienced any
significant disruptions to our financial or operating activities caused by
failure of these computerized systems resulting from Year 2000 issues. Still,
the impact of failures by companies, markets, or governments of countries in
which the Funds invest to address effectively the Year 2000 issue may be felt
well after January 1, 2000 and could negatively impact the Funds' performance.
In addition, the Funds could be adversely affected if the computer systems used
by GE Asset Management, its sub-advisers or external service providers do not
correctly process such date-related information.
We remain committed to a long-term investment perspective and to you, our
shareholders.
Sincerely,
[SIGNATURE]
John Myers
President and Chief Executive Officer
GE ASSET MANAGEMENT
JOHN MYERS IS A SEASONED VETERAN OF GE'S FINANCIAL COMMUNITY AND OF GE ASSET
MANAGEMENT. JOHN BEGAN HIS GE CAREER IN 1970 AFTER SERVING AS AN OFFICER IN THE
U.S. NAVY. HE PROGRESSED THROUGH SEVERAL GLOBAL FINANCIAL ASSIGNMENTS BEFORE
JOINING GE ASSET MANAGEMENT IN 1986. HE HOLDS A B.S. IN MATHEMATICS FROM WAGNER
COLLEGE, WHERE HE SERVES ON THE BOARD OF TRUSTEES.
2
<PAGE>
ELFUN INTERNATIONAL EQUITY FUND
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Q&A
RALPH LAYMAN (PICTURED ON THE LEFT) MANAGES THE INTERNATIONAL EQUITY OPERATION
WITH TOTAL ASSETS EXCEEDING $16 BILLION. HIS RESPONSIBILITIES INCLUDE
CO-MANAGEMENT OF THE ELFUN INTERNATIONAL EQUITY FUND WITH MICHAEL SOLECKI. PRIOR
TO JOINING GE ASSET MANAGEMENT IN 1991, RALPH WAS EXECUTIVE VICE PRESIDENT,
PARTNER AND PORTFOLIO MANAGER 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 ASSET MANAGEMENT'S 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 SOLECKI IS CO-PORTFOLIO MANAGER OF THE ELFUN INTERNATIONAL EQUITY FUND
AND HAS SERVED THE FUND IN THAT CAPACITY SINCE 1997. MIKE HAS MORE THAN EIGHT
YEARS OF INVESTMENT EXPERIENCE AND HAS HELD POSITIONS WITH GE ASSET MANAGEMENT
SINCE 1990. HE IS CURRENTLY A VICE PRESIDENT OF GE ASSET MANAGEMENT. 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 INTERNATIONAL EQUITY FUND PERFORM COMPARED TO ITS BENCHMARK
AND LIPPER PEER GROUP FOR THE ONE-YEAR PERIOD ENDED DECEMBER 31, 1999?
A. The Elfun International Equity Fund posted a return of 38.90% for the
one-year period ended December 31, 1999. For the same period, the MSCI World
Index returned 24.94% and our Lipper peer group of 299 Global Stock funds
returned an average of 37.71%.
Q. WHY DID THE ELFUN GLOBAL FUND CHANGE ITS NAME TO THE ELFUN INTERNATIONAL
EQUITY FUND?
A. Elfun investors have used the Elfun Global Fund since its inception more than
ten years ago to diversify their equity holdings into foreign markets. Global
funds, however, typically invest in the U.S. equity market, and this created
confusion among many of our investors. In order to clarify the positioning of
this fund within the Elfun Funds, namely that this fund is the investment option
primarily invested in international securities; we have renamed it the Elfun
International Equity Fund. The change did not require a modification of the
portfolio because funds may hold a modest percentage of non-international
securities and still be named an international equity fund. Nevertheless, in
seeking to properly position the fund as a true international option, we will
reduce the U.S. weighting over time in a thoughtful manner, and align the
portfolio with other international equity funds we manage.
Q. WHAT DROVE THE FUND'S PERFORMANCE?
A. The largest performance drivers were telecom operators Mannesmann (Germany),
Sonera Group (Finland) and Airtouch Communications (U.S.), consumer electronics
leader Sony (Japan), and technology leaders EMC (U.S.) and Taiwan Semiconductor
Manufacturing (Taiwan). In addition, the emerging markets performed particularly
well, in most cases coming off a low base following the Asian Crisis of 1997/98.
Q. WHAT IS YOUR OUTLOOK FOR THE MARKET AND THE FUND?
A. As Europe continues to merge and integrate, it is likely that we will
continue to see cost savings coming out of merger and acquisition activity which
could drive earnings and hence share prices higher. In 1999, we started to see
corporate activity in many sectors that have traditionally been viewed as
locally dependent, such as telecommunication operators and utilities. The rate
of merger announcements is likely to increase, especially as company managements
focus more on shareholder value than has traditionally been the case and as
these industries become pan-Europe. We anticipate more consolidation in many
European industries.
Corporate restructuring continues in Japan although at far too slow a pace.
Those companies which have made major changes in their businesses and that have
taken shareholder-friendly policies have seen stronger earnings growth and
higher valuations in their share prices. However, there are many companies that
still do not understand the need for change and we believe that the difference
in share price performance between such companies will widen.
Two issues are paramount for the U.S. market in 2000. First, has the strong
performance of technology stocks been overdone? Second, will inflation and
continued Federal Reserve tightening become major negatives for the economy and
the stock market? A few dozen large-cap stocks, mostly technology companies, are
currently being accorded extremely high valuation factor levels, while the rest
of the S&P 500 is selling around long term valuation norms. The stock market
breadth was very narrow in 1999, with 54% of S&P 500 stocks declining. The
highest S&P non-technology sector (Capital Goods) was only up 26% compared with
a 81% gain by the Technology sector. Whether this valuation discrepancy is
warranted remains to be seen, but it certainly offers the potential for extreme
volatility, especially if the market activity or the first few days of the new
year becomes the norm.
[PHOTO OF RALPH LAYMAN AND MICHAEL SOLECKI OMITTED]
3
<PAGE>
ELFUN INTERNATIONAL EQUITY FUND
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COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
[LINE GRAPH OMITTED]
ELFUN INTERNATIONAL EQUITY FUND MSCI WORLD
'89 $10000.00 $10000.00
'90 9143.93 8298.10
'91 10498.59 9815.24
'92 11122.65 9302.37
'93 14668.50 11395.50
'94 14576.43 11973.94
'95 16912.90 14455.13
'96 19641.77 16403.86
'97 21305.47 18988.55
'98 25004.65 23609.75
'99 34731.06 29496.91
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED DECEMBER 31, 1999
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ONE FIVE TEN
YEAR YEAR YEAR
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Elfun International
Equity Fund 38.90% 18.96% 13.26%
MSCI World 24.94% 19.76% 11.42%
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 12/31/99
GLOBAL STOCK PEER GROUP
ONE FIVE TEN
YEAR YEAR YEAR
Fund's rank in peer group: .......... 123 52 9
Number of Funds in peer group: ...... 299 122 26
Peer group average total return: .... 37.71% 18.91% 12.15%
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, 1999
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Sonera Group Oyj 3.40%
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Mannesmann AG 3.02%
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EMC Corp. 2.50%
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Ericsson LM Telephone (Series B) 2.09%
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Taiwan Semiconductor Manufacturing Co. 2.06%
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Sony Corp. 1.98%
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Telefonica S.A. 1.89%
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Canon Inc. 1.88%
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Fujitsu Ltd. 1.87%
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Honeywell International Inc. 1.86%
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SEE NOTES TO PERFORMANCE. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
4
<PAGE>
SCHEDULE OF INVESTMENTS (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1999
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ELFUN INTERNATIONAL EQUITY FUND
[PIE CHART OMITTED]
EUROPE 57.9%
JAPAN 11.6%
OTHER REGIONS 8.7%
UNITED STATES 8.4%
PACIFIC RIM 7.9%
CASH & OTHER 5.5%
NUMBER
OF SHARES VALUE
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COMMON STOCK -- 94.3%
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AUSTRALIA -- 1.7%
Brambles Industries Ltd. ...... 118,168 $ 3,268
Cable & Wireless Optus Ltd. ... 517,585 1,729(a)
4,997
BRAZIL -- 0.5%
Telecomunicacoes Brasileiras
S.A. ADR ................... 1,312 169
Uniao de Bancos Brasilieros
S.A. GDR ................... 38,652 1,164
1,333
CANADA -- 2.7%
ATI Technologies Inc. ......... 67,300 891(a)
Celestica Inc. ................ 31,624 1,770(a)
CGI Group Inc. (Class A) ...... 45,304 1,938(a)
Nortel Networks Corp. ......... 33,519 3,385
7,984
DENMARK -- 0.7%
Novo-Nordisk AS (Series B) .... 14,827 1,967
FINLAND -- 5.8%
MeritaNordbanken Oyj (Series A) 274,711 1,616(a)
Nokia Oyj (Series A) .......... 12,067 2,188
Pohjola Group Insurance
Corp. (Series B) ........... 11,613 702
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Sampo Insurance Co. Ltd.
(Series A) ................. 68,706 $ 2,402
Sonera Group Oyj .............. 144,847 9,929
16,837
[ICON OMITTED] FRANCE -- 15.9%
Aerospatiale Matra (Regd.) .... 51,856 1,138(a)
Alstom ........................ 88,087 2,937(a)
Aventis S.A. (Class A) ........ 44,104 2,564
AXA-UAP ....................... 38,928 5,427
Banque Nationale de Paris ..... 14,742 1,360(a)
Cap Gemini S.A. ............... 19,518 4,955
Carrefour S.A. ................ 17,672 3,260
Coflexip S.A. ADR ............. 29,374 1,116
Lagardere S.C.A. .............. 94,087 5,118
Lyonnaise Des Eaux S.A. ....... 9,802 1,571
Michelin CGDE (Regd.) (Class B) 55,039 2,162
Rhodia S.A. ................... 25,855 584
Schneider S.A. ................ 44,874 3,524
Societe Generale .............. 4,528 1,054
STMicroelectronics N.V. ....... 20,555 3,164
Total S.A. (Class B) .......... 37,778 5,042
Vivendi ....................... 15,644 1,413
46,389
[ICON OMITTED] GERMANY -- 9.8%
Bayerische Vereinsbank AG ..... 22,291 1,523
DaimlerChrysler AG ............ 16,424 1,277
Deutsche Bank AG .............. 37,918 3,203(a)
Fresenius Medical Care AG ..... 35,078 3,000
Mannesmann AG ................. 36,556 8,820
Metallgesellschaft AG ......... 98,034 1,965
Muenchener Rueckverischerungs-
Gesellschaft AG (Regd.) .... 11,444 2,903
Preussag AG ................... 73,674 4,104
Veba AG ....................... 40,066 1,947
28,742
GREECE -- 0.5%
Hellenic Telecommunication
Organization S.A. ADR ...... 125,318 1,496
HONG KONG -- 2.0%
Giordano International Ltd. ... 1,072,000 1,103
Hutchison Whampoa Ltd. ........ 23,000 334
Johnson Electric Holdings Ltd. 681,500 4,375
5,812
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See Notes to Schedules of Investments and Notes to Financial Statements.
5
<PAGE>
ELFUN INTERNATIONAL EQUITY FUND (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1999
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NUMBER
OF SHARES VALUE
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IRELAND -- 1.1%
Bank of Ireland ................. 187,505 $ 1,492
CRH PLC ......................... 84,085 1,817
3,309
ISRAEL -- 3.2%
Comverse Technology Inc. ........ 26,706 3,866(a)
ECI Telecommunications Ltd. ..... 94,565 2,990
Teva Pharmaceutical
Industries Ltd. ADR .......... 34,568 2,478
9,334
ITALY -- 2.0%
Banca Intesa S.p.A. ............. 358,677 1,456
Saipem S.p.A. ................... 382,543 1,383
Telecom Italia Mobile S.p.A. .... 132,004 1,475
Telecom Italia S.p.A ............ 111,781 1,577
5,891
[ICON OMITTED] JAPAN -- 11.6%
Asahi Bank Ltd. ................. 82,592 509
Asahi Chemical Industry Co. Ltd. 106,000 545
Canon Inc. ...................... 138,000 5,484
Fujitsu Ltd. .................... 120,000 5,473
Kao Corp. ....................... 53,621 1,530
Mazda Motor Corp. ............... 369,000 1,643
Minebea Co. Ltd. ................ 210,000 3,603
Mitsukoshi Ltd. ................. 42,643 150(a)
NAMCO Ltd. ...................... 10,900 706
Promise Co. Ltd. ................ 13,300 677
Shin-Etsu Chemical Co. .......... 64,000 2,756
Sony Corp. ...................... 19,500 5,783
Sumitomo Electric Industries .... 82,000 948
The Fuji Bank Ltd. .............. 55,000 535
The Tokyo Electric Power Co. Inc. 14,900 400
Toshiba Corp. ................... 422,000 3,222
33,964
MEXICO -- 2.2%
Desc S.A. de C.V. (Series B) .... 235,902 194
Desc S.A. de C.V. ADR (Class C) . 33,384 559
Grupo Carso S.A. de C.V. ADR .... 105,492 1,042(a)
NUMBER
OF SHARES VALUE
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Grupo Financiero Banamex
Accival S.A. de C.V. (Class B) 663,058 $ 2,659(a)
Grupo Televisa S.A. GDR ......... 31,005 2,116(a)
6,570
NETHERLANDS -- 4.6%
IHC Caland N.V. ................. 41,365 1,510
ING Groep N.V. .................. 86,182 5,204
Ispat International N.V. ........ 42,415 684
Koninklijke Ahold N.V. .......... 25,403 752
Philips Electronics N.V. ........ 31,712 4,312
Vendex KBB N.V. ................. 36,877 981
13,443
PANAMA -- 0.1%
Panamerican Beverages
Inc. (Class A) ............... 10,686 220
POLAND -- 0.4%
Telekomunikacja Polska
S.A. GDR (Series A) .......... 201,242 1,258(b)
PORTUGAL -- 0.2%
Banco Comercial Portugues (Regd.) 90,330 502
Jeronimo Martins, SGPS, S.A. .... 7,862 201
703
SINGAPORE -- 0.1%
Chartered Semiconductor
Manufacturing Ltd. ADR ....... 5,223 381(a)
SOUTH KOREA -- 1.9%
Kookmin Bank .................... 47,094 738
Korea Telecom Corp. ADR ......... 16,303 1,219
Korea Telecom Corp. ............. 10,562 1,665
Pohang Iron & Steel Co. Ltd. .... 12,240 1,468
Pohang Iron & Steel Co. Ltd. ADR 14,883 521
5,611
SPAIN -- 2.3%
Repsol S.A. ..................... 48,030 1,114
Telefonica S.A. ................. 221,299 5,528(a)
6,642
SWEDEN -- 3.7%
Autoliv Inc. SDR ................ 79,638 2,331
- ---------------
See Notes to Schedules of Investments and Notes to Financial Statements.
6
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SCHEDULE OF INVESTMENTS (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1999
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Ericsson LM Telephone (Series B) . 95,143 $ 6,116
Investor AB (Series B) ........... 28,031 395(a)
Kinnevik AB (Series B) ........... 10,146 315
NetCom Systems AB (Series B) ..... 21,966 1,544(a)
10,701
SWITZERLAND -- 1.7%
ABB AG ........................... 18,526 2,266
Credit Suisse Group .............. 8,566 1,703
Novartis AG (Regd.) .............. 620 910
4,879
TAIWAN -- 2.2%
Synnex Technology International
Corp. GDR ..................... 20,443 524(b)
Taiwan Semiconductor
Manufacturing Co. ...........1,131,937 6,023
6,547
[ICON OMITTED] UNITED KINGDOM-- 9.0%
Airtours PLC ................... 268,443 1,635
British Aerospace PLC .......... 291,981 1,920
Cable & Wireless
Communication PLC ........... 236,088 3,375(a)
Cable & Wireless PLC ........... 58,641 1,006
Commercial Union PLC ........... 146,902 2,370
Corus Group PLC ................ 931,013 2,421(a)
FKI PLC ........................ 174,281 683
Granada Group PLC .............. 321,981 3,251
Invensys PLC ................... 704,734 3,726
Nycomed Amersham PLC ........... 244,054 1,537
Railtrack Group PLC ............ 46,921 788
Reed International PLC ......... 167,484 1,258
Royal & Sun Alliance
Insurance Group PLC ......... 139,225 1,043
Saatchi & Saatchi PLC .......... 72,021 432
Somerfield PLC ................. 541,791 790
26,235
[ICON OMITTED] UNITED STATES-- 8.4%
Citigroup Inc. ................. 73,300 4,073
EMC Corp. ...................... 66,929 7,312(a)
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Honeywell International Inc. ... 94,089 $ 5,428
Intel Corp. .................... 32,358 2,663
Morgan Stanley Dean Witter & Co. 16,050 2,291
Zebra Technologies Corp. (Class A) 45,245 2,647(a)
24,414
TOTAL COMMON STOCK
(COST $179,096) ............. 275,659
- --------------------------------------------------------------------------------
PREFERRED STOCK -- 0.2%
- --------------------------------------------------------------------------------
Henkel KGaA
(COST $734) ................. 10,000 660
- --------------------------------------------------------------------------------
WARRANTS -- 0.0%
- --------------------------------------------------------------------------------
Muenchener Rueckverischerungs-
Gesellschaft AG (Regd.)
(COST $0) ................... 183 10(a)
TOTAL INVESTMENTS IN SECURITIES
(COST $179,830) ............. 276,329
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 4.9%
- --------------------------------------------------------------------------------
GEI Short Term Investment Fund
(COST $14,155) .............. 14,155 14,155
OTHER ASSETS AND LIABILITIES,
NET 0.6% .................... 1,850
---------
NET ASSETS-- 100% .............. $292,334
=========
OTHER INFORMATION
- --------------------------------------------------------------------------------
The Elfun International Equity Fund invested in the following sectors at
December 31, 1999:
SECTOR AMOUNT (BASED ON TOTAL NET ASSETS)
- --------------------------------------------------------------------------------
Capital Equipment 33.12%
Services 23.76%
Finances 15.95%
Consumer Goods 10.11%
Multi Industry 4.80%
Materials 3.92%
Energy 2.91%
Cash & Other 5.43%
-------
100.00%
=======
[ICON OMITTED] ICONS REPRESENT THE TOP FIVE COUNTRY WEIGHTINGS IN THE ELFUN
INTERNATIONAL EQUITY FUND AS OF DECEMBER 31, 1999.
- -----------------
See Notes to Schedules of Investments and Notes to Financial Statements.
7
<PAGE>
ELFUN TRUSTS
Q&A
DAVID CARLSON MANAGES PENSION AND MUTUAL FUND PORTFOLIOS WITH TOTAL ASSETS OF
NEARLY $6 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 ASSET MANAGEMENT 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, 1999?
A. Elfun Trusts posted a total return of 19.74% for the one-year period ended
December 31, 1999. This compares with a return of 21.07% for the S&P 500 Index.
Our new Lipper peer group of 374 Large Cap Core funds returned an average of
22.35% for the same period.
Q. WHY DID THE FUND UNDERPERFORM ITS BENCHMARK FOR THE YEAR?
A. Elfun Trusts underperformed the S&P 500 Index due primarily to the difference
in the technology weighting. Tech stocks make up about 29% of the S&P 500 and
about 19% of Elfun Trusts. We own the bell-weather names such as Microsoft,
Intel, Cisco, and EMC, but we own them in smaller percentage than the S&P 500
Index. One interesting fact about technology stock performance last year; the
S&P 500 return excluding technology stocks was only 3%. Clearly, technology was
the place to be.
The weakness in healthcare stocks, principally the large drug stocks, also
affected performance. Drug stocks make up about 17% of Elfun Trusts and about 9%
of the S&P 500 Index. Many of the drugs stocks declined in price last year,
which hurt fund performance. As far as peer group comparisons go, the same
drivers would apply. Our peer funds own more technology and less healthcare than
we do.
Q. WOULD YOU REVIEW THE STRATEGY OF THE FUND AND COMMENT ON THE TECHNOLOGY
WEIGHTING?
A. The strategy for Elfun Trusts has not changed. The fund continues to focus on
high quality, financially strong, growth oriented companies that have a dominant
position in their respective industries. We are investors, not traders. We have
a long time horizon and low turnover to minimize capital gain recognition. While
we perceive ourselves to be growth oriented, Lipper does not classify us as a
growth fund. To be classified as a growth fund these days you need to have a
large commitment to technology stocks. We view our 19% weight in tech stocks to
be significant, but many mutual funds have a much greater technology weighting.
Our underweighting is solely due to valuation concerns. We would not hesitate to
take the weighting higher if valuations seemed more reasonable to us. We are
finding other companies with comparable growth rates to be more attractively
priced in today's market.
Q. WHAT IS YOUR OUTLOOK FOR THE MARKET AND THE FUND IN THE NEW YEAR?
A. We do not really have a strong opinion on the market. In past annual reports
we have commented on historically high valuation levels for the market, yet we
continue to see the market make new highs. We believe the Fund has a lower risk
profile than the S&P 500, specifically, a lower price/earnings ratio and an
underweighting in the more volatile groups. We believe that the 77 stocks in the
Elfun Trusts portfolio, when compared to the S&P 500, have a higher growth rate,
stronger balance sheets, and a generally higher quality profile in terms of
business mix and management. We continue to believe that these characteristics
will lead to strong performance over the long term.
[PHOTO OF DAVID CARLSON OMITTED]
8
<PAGE>
ELFUN TRUSTS
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
[LINE GRAPH OMITTED]
ELFUN TRUSTS S&P 500
'89 $10000.00 $10000.00
'90 9628.82 9683.83
'91 12341.63 12644.75
'92 13486.72 13622.05
'93 14697.46 14985.50
'94 14730.88 15180.05
'95 20504.33 20871.75
'96 25332.42 25695.77
'97 33149.20 34250.92
'98 40754.01 44080.25
'99 48799.38 53362.50
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
ONE FIVE TEN
YEAR YEAR YEAR
- --------------------------------------------------------------------------------
Elfun Trusts 19.74% 27.07% 17.18%
S&P 500 21.07% 28.59% 18.23%
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 12/31/99
GROWTH PEER GROUP
ONE FIVE TEN
YEAR YEAR YEAR
Fund's rank in peer group: ........... 234 37 18
Number of Funds in peer group: ....... 374 116 48
Peer group average total return: ..... 22.35% 25.53% 16.66%
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, 1999
- --------------------------------------------------------------------------------
Citigroup Inc. 5.29%
- --------------------------------------------------------------------------------
NTL Inc. 4.52%
- --------------------------------------------------------------------------------
AT&T Corp.- Liberty Media Group (Class A) 4.48%
- --------------------------------------------------------------------------------
First Data Corp. 3.91%
- --------------------------------------------------------------------------------
Cardinal Health Inc. 2.87%
- --------------------------------------------------------------------------------
Dover Corp. 2.81%
- --------------------------------------------------------------------------------
Comcast Corp. (Class A) 2.75%
- --------------------------------------------------------------------------------
Johnson & Johnson 2.50%
- --------------------------------------------------------------------------------
Automatic Data Processing Inc. 2.42%
- --------------------------------------------------------------------------------
Intel Corp. 2.42%
- --------------------------------------------------------------------------------
SEE NOTES TO PERFORMANCE. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
9
<PAGE>
SCHEDULE OF INVESTMENTS (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1999
- --------------------------------------------------------------------------------
ELFUN TRUSTS
[PIE CHART OMITTED]
CONSUMER 23.6%
TECHNOLOGY 18.9%
HEALTHCARE 17.3%
FINANCIAL SERVICES 15.9%
CAPITAL GOODS 8.9%
ENERGY 6.4%
UTILITIES 4.6%
RETAIL TRADE 2.5%
CASH & OTHER 1.7%+
BASIC MATERIALS 0.2%
+INCLUDES CASH EQUITIZED BY FUTURES OF 1.3%
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK -- 98.3%
- --------------------------------------------------------------------------------
BASIC MATERIALS -- 0.2%
Airgas Inc. ................... 470,000 $ 4,465(a)
[ICON OMITTED] CAPITAL GOODS-- 8.9%
Alleghany Corp. ............... 36,080 6,693
Dover Corp. ................... 1,710,000 77,591
Honeywell International Inc. .. 820,000 47,304
Hubbell Inc. (Class A) ........ 91,000 2,559
Hubbell Inc. (Class B) ........ 610,000 16,623
Molex Inc. (Class A) .......... 1,430,000 64,707
Waste Management Inc. ......... 1,675,000 28,789
244,266
[ICON OMITTED] CONSUMER - CYCLICAL -- 19.8%
AT&T Corp. - Liberty Media
Group (Class A) ............ 2,180,000 123,715(a)
Carnival Corp. ................ 590,000 28,209
Catalina Marketing Corp. ...... 540,000 62,505(a)
Comcast Corp. (Class A) ....... 1,500,000 75,844
Gannett Inc. .................. 315,000 25,692
Harman International
Industries Inc. ............ 155,000 8,699
Interpublic Group Cos. Inc. ... 880,000 50,765
Metromedia International
Group Inc. ................. 356,654 1,694(a)
NTL Inc. ...................... 1,000,000 124,750(a)
Time Warner Inc. .............. 330,000 23,904
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Walt Disney Co. ............... 655,000 $ 19,159
Xerox Corp. ................... 120,000 2,723
547,659
CONSUMER - STABLE -- 3.8%
Anheuser Busch Cos. Inc. ...... 200,000 14,175
Avon Products Inc. ............ 580,000 19,140
Colgate-Palmolive Co. ......... 240,000 15,600
Gillette Co. .................. 255,000 10,503
Pepsico Inc. .................. 790,000 27,847
Philip Morris Cos. Inc. ....... 725,000 16,811(h)
104,076
ENERGY -- 6.4%
Anadarko Petroleum Corp. ...... 485,000 16,551
Baker Hughes Inc. ............. 845,000 17,798
Exxon Mobil Corp. ............. 300,000 24,169
Nabors Industries Inc. ........ 420,000 12,994(a)
Royal Dutch Petroleum Co. ADR . 710,000 42,910
Schlumberger Ltd. ............. 830,000 46,687
Transocean Sedco Forex Inc. ... 160,688 5,413
Unocal Corp. .................. 300,000 10,069
176,591
[ICON OMITTED] FINANCIAL -- 11.0%
American Express Co. .......... 167,000 27,764
Chicago Title Corp. ........... 125,000 5,781
Citigroup Inc. ................ 2,625,000 145,851
Countrywide Credit
Industries Inc. ............ 285,000 7,196
Federal National Mortgage Assoc. 955,000 59,628
State Street Corp. ............ 415,000 30,321(e)
Wells Fargo & Co. ............. 655,000 26,487
303,028
[ICON OMITTED] HEALTHCARE -- 17.3%
Abbott Laboratories ........... 1,370,000 49,748
American Home Products Corp. .. 580,000 22,874
Bristol-Myers Squibb Co. ...... 780,000 50,066
Cardinal Health Inc. .......... 1,655,000 79,233
Dentsply International Inc. ... 465,000 10,986
Henry Schein Inc. ............. 860,000 11,449(a)
Johnson & Johnson ............. 740,000 68,913
- -----------
See Notes to Schedules of Investments and Notes to Financial Statements.
10
<PAGE>
SCHEDULE OF INVESTMENTS (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1999
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Lincare Holdings Inc. ......... 895,000 $ 31,045(a)
Merck & Co. Inc. .............. 910,000 61,027
Omnicare Inc. ................. 350,000 4,200
Pfizer Inc. ................... 950,000 30,816
Shire Pharmaceuticals
Group PLC ADR .............. 210,000 6,116(a)
Sybron International Corp. .... 1,225,000 30,242(a)
Watson Pharmaceuticals Inc. ... 575,000 20,592(a)
477,307
INSURANCE -- 4.9%
American International Group Inc. 435,937 47,136
Berkshire Hathaway Inc. (Class B) 13,650 24,979(a)
Loews Corp. ................... 285,000 17,296
Marsh & McLennan Cos. Inc. .... 480,000 45,930
135,341
RETAIL TRADE -- 2.5%
CVS Corp. ..................... 270,000 10,783
Home Depot Inc. ............... 870,000 59,650
70,433
TECHNOLOGY - ELECTRONICS & EQUIPMENT-- 8.4%
Analog Devices Inc. ........... 60,000 5,580(a)
Applied Materials Inc. ........ 280,000 35,473(a)
Cisco Systems Inc. ............ 610,000 65,346(a)
Dell Computer Corp. ........... 170,000 8,670(a)
EMC Corp. ..................... 370,000 40,422(a)
Intel Corp. ................... 810,000 66,673
Pitney Bowes Inc. ............. 220,000 10,629
232,793
[ICON OMITTED] TECHNOLOGY - SOFTWARE & SERVICES -- 10.5%
Automatic Data Processing Inc. 1,240,000 66,805
Equifax Inc. .................. 2,090,000 49,246
First Data Corp. .............. 2,185,000 107,748(h)
Microsoft Corp. ............... 485,000 56,624(a)
Reuters Group PLC ADR ......... 110,000 8,889
289,312
UTILITIES -- 4.6%
MCI WorldCom Inc. ............. 750,000 39,797(a)
SBC Communications Inc. ....... 380,000 18,525
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Sprint Corp. .................. 130,000 $ 8,751
Vodafone AirTouch PLC ADR ..... 1,185,000 58,657
125,730
TOTAL INVESTMENTS IN SECURITIES
(COST $1,132,782) .......... 2,711,001
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 1.6%
- --------------------------------------------------------------------------------
GEI Short Term Investment Fund
(COST $45,587) ............. 45,587 45,587
OTHER ASSETS AND LIABILITIES, NET 0.1% 1,947
----------
NET ASSETS-- 100% ............ $2,758,535
==========
- --------------------------------------------------------------------------------
OTHER INFORMATION (IN THOUSANDS)
- --------------------------------------------------------------------------------
Elfun Trusts had the following short Futures Contract open at December 31, 1999:
NUMBER UNDERLYING
EXPIRATION OF FACE UNREALIZED
DESCRIPTION DATE CONTRACTS VALUE LOSS
- --------------------------------------------------------------------------------
S&P 500 March 2000 100 $37,105 $(1,229)
[ICON OMITTED] ICONS REPRESENT THE TOP FIVE INDUSTRY WEIGHTINGS IN ELFUN TRUSTS
AS OF DECEMBER 31, 1999.
- --------------
See Notes to Schedules of Investments and Notes to Financial Statements.
11
<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 U.S. 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 32 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, 1999?
A. The Elfun Diversified Fund posted a total return of 14.04% for the year. The
fund allocates its investments among several asset classes and should be
compared to several benchmarks. U.S. stocks as measured by the S&P 500 Index
returned 21.07%, international stocks, as measured by the MSCI EAFE Index,
returned 26.96% and fixed income investments, as measured by the Lehman Brothers
Aggregate Bond Index returned -0.83%. Our Lipper peer group of 448 Balanced
funds had an average return of 8.72% for the same period.
Q. WHAT FACTORS LED TO THE OUTPERFORMANCE OF THE FUND?
A. Asset allocation played a key role. The international equities market as a
whole significantly outperformed the S&P 500, and international equities
amounted to 17% of the fund. This portion had a return in excess of 30% compared
with approximately 20% for the U.S. portion. Fixed income was the laggard as
interest rates rose throughout the year. Our weighting in international stocks
sets us apart from many other balanced funds, which concentrate on the U.S.
financial markets. Please read the commentary of the Elfun International Equity
Fund and the Elfun Income Fund for a more detailed analysis of those individual
asset classes.
Q. WHAT ARE THE CURRENT WEIGHTINGS OF THE VARIOUS ASSET CLASSES AND HOW HAVE
THEY CHANGED THROUGHOUT THE YEAR?
A. The weightings remain at 45% U.S. equities, 17% international equities, 34%
fixed income and 4% cash. The target weightings, as set by GE Asset Management's
Asset Allocation Committee, have been unchanged all year. However, with stocks
significantly outperforming bonds, the valuation models show bonds becoming
increasingly more attractive. It is possible we may increase the fixed income
weighting in the coming months, but at this time the same targets remain in
place.
Q. WHAT IS YOUR OUTLOOK FOR THE FUND IN THE COMING YEAR?
A. The returns for this fund will continue to reflect a blend of the returns of
the individual asset classes. The U.S. stock market looks expensive to us when
compared to historical valuation levels. We believe that international stocks
look attractive relative to the valuation levels of the U.S. market. We do not
see a significant increase in inflation, so bonds at present levels look
increasingly attractive. In sum, we believe that stocks may take a breather
after their extraordinary run the last few years, and bonds should do better
this year than last year.
12
<PAGE>
ELFUN DIVERSIFIED FUND
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
[LINE GRAPH OMITTED]
ELFUN DIVERSIFIED FUND S&P 500 LB AGGREGATE
'89 $10000.00 $10000.00 $10000.00
'90 10475.27 9683.83 10894.53
'91 12329.26 12411.33 12637.71
'92 13481.93 13622.05 13573.23
'93 14682.03 14985.50 14896.42
'94 14643.09 15180.05 14461.83
'95 18612.33 20871.75 17133.15
'96 21291.12 25695.77 17752.45
'97 25247.43 34250.92 19471.64
'98 29574.75 44080.25 21160.57
'99 33726.98 53362.50 20984.85
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
ONE FIVE TEN
YEAR YEAR YEAR
- --------------------------------------------------------------------------------
Elfun Diversified 14.04% 18.16% 12.93%
S&P 500 21.07% 28.59% 18.23%
LB Aggregate (0.83)% 7.73% 7.69%
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 12/31/99
BALANCED PEER GROUP
ONE FIVE TEN
YEAR YEAR YEAR
Fund's rank in peer group: ........... 80 57 17
Number of Funds in peer group: ....... 448 223 61
Peer group average total return: ..... 8.72% 16.24% 11.82%
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, 1999
- --------------------------------------------------------------------------------
Citigroup Inc. 2.53%
- --------------------------------------------------------------------------------
NTL Inc. 2.11%
- --------------------------------------------------------------------------------
AT&T Corp. - Liberty Media Group (Class A) 2.04%
- --------------------------------------------------------------------------------
First Data Corp. 1.82%
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. 7.00%, TBA 1.79%
- --------------------------------------------------------------------------------
U.S. Treasury Bonds 8.125%, 08/15/19 1.67%
- --------------------------------------------------------------------------------
Dover Corp. 1.41%
- --------------------------------------------------------------------------------
Cardinal Health Inc. 1.34%
- --------------------------------------------------------------------------------
Comcast Corp. (Class A) 1.26%
- --------------------------------------------------------------------------------
U.S. Treasury Notes 5.25%, 05/31/01 1.25%
- --------------------------------------------------------------------------------
SEE NOTES TO PERFORMANCE. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
13
<PAGE>
SCHEDULE OF INVESTMENTS (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1999
- --------------------------------------------------------------------------------
ELFUN DIVERSIFIED FUND
[PIE CHART OMITTED]
DOMESTIC EQUITY 44.9%+
BONDS AND NOTES 34.1%
FOREIGN EQUITY 16.7%
CASH & OTHER 4.3%
+INCLUDES PREFERRED STOCK
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
DOMESTIC EQUITY -- 44.7%
- --------------------------------------------------------------------------------
BASIC MATERIALS -- 0.1%
Airgas Inc. ..................... 15,840 $ 151(a)
[ICON OMITTED] CAPITAL GOODS-- 4.9%
Alleghany Corp. ................. 881 163
Dover Corp. ..................... 64,880 2,944
Emerson Electric Co. ............ 5,989 344
Honeywell International Inc. .... 36,984 2,134
Hubbell Inc. (Class B) .......... 21,888 596
Molex Inc. (Class A) ............ 49,536 2,241
Textron Inc. .................... 4,943 379
United Technologies Corp. ....... 5,933 386
Waste Management Inc. ........... 57,600 990
10,177
[ICON OMITTED] CONSUMER - CYCLICAL -- 9.1%
AT&T Corp. - Liberty Media
Group (Class A) .............. 74,880 4,249(a)
Carnival Corp. .................. 20,160 964
Catalina Marketing Corp. ........ 18,720 2,167(a)
Comcast Corp. (Class A) ......... 51,838 2,621
Gannett Inc. .................... 10,310 841
Harman International
Industries Inc. .............. 5,184 291
Interpublic Group Cos. Inc. ..... 29,952 1,728
NTL Inc. ........................ 35,133 4,383(a)
Time Warner Inc. ................ 10,829 784
Walt Disney Co. ................. 27,802 813
18,841
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
CONSUMER - STABLE -- 1.6%
Anheuser Busch Cos. Inc. ........ 6,566 $ 465
Avon Products Inc. .............. 18,835 622
Colgate-Palmolive Co. ........... 7,373 479
Gillette Co. .................... 8,640 356
Pepsico Inc. .................... 25,402 895
Philip Morris Cos. Inc. ......... 23,155 537
3,354
ENERGY -- 2.8%
Anadarko Petroleum Corp. ........ 16,992 580
Baker Hughes Inc. ............... 29,376 619(h)
Exxon Mobil Corp. ............... 9,619 775
Nabors Industries Inc. .......... 14,400 445(a)
Royal Dutch Petroleum Co. ADR ... 23,501 1,420
Schlumberger Ltd. ............... 27,302 1,536
Transocean Sedco Forex Inc. ..... 5,286 178
Unocal Corp. .................... 10,080 338
5,891
[ICON OMITTED] FINANCIAL -- 5.2%
American Express Co. ............ 5,760 958(h)
Citigroup Inc. .................. 94,752 5,265
Countrywide Credit Industries Inc. 10,080 254
Federal National Mortgage Assoc. 37,555 2,345
State Street Corp. .............. 15,967 1,167(e)
Wells Fargo & Co. ............... 22,464 908
10,897
[ICON OMITTED] HEALTHCARE -- 7.7%
Abbott Laboratories ............. 47,520 1,726
American Home Products Corp. .... 19,066 752
Bristol-Myers Squibb Co. ........ 25,920 1,664
Cardinal Health Inc. ............ 58,177 2,785
Dentsply International Inc. ..... 16,128 381
Henry Schein Inc. ............... 29,664 395(a)
Johnson & Johnson ............... 23,674 2,205
Lincare Holdings Inc. ........... 31,392 1,089(a)
Merck & Co. Inc. ................ 31,680 2,124
Omnicare Inc. ................... 12,096 145
Pfizer Inc. ..................... 32,256 1,046
Pharmacia & Upjohn Inc. ......... 74 3
Sybron International Corp. ...... 43,202 1,067(a)
Watson Pharmaceuticals Inc. ..... 19,872 712(a)
16,094
- -------------
See Notes to Schedules of Investments and Notes to Financial Statements.
14
<PAGE>
SCHEDULE OF INVESTMENTS (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1999
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
INSURANCE -- 2.4%
American International Group Inc. 17,169 $ 1,856
Berkshire Hathaway Inc. (Class B) 454 831(a)
Chicago Title Corp. .............. 4,320 200
Loews Corp. ...................... 8,928 542
Marsh & McLennan Cos. Inc. ....... 15,437 1,477
4,906
RETAIL TRADE -- 1.2%
CVS Corp. ........................ 9,792 391
Home Depot Inc. .................. 30,240 2,073
2,464
TECHNOLOGY - ELECTRONICS & EQUIPMENT-- 3.2%
Analog Devices Inc. .............. 2,310 215(a)
Applied Materials Inc. ........... 9,792 1,241(a)
Cisco Systems Inc. ............... 20,736 2,221(a)
Dell Computer Corp. .............. 6,048 308(a)
Intel Corp. ...................... 28,224 2,323
Pitney Bowes Inc. ................ 7,776 376
6,684
[ICON OMITTED] TECHNOLOGY - SOFTWARE & SERVICES -- 5.4%
Automatic Data Processing Inc. ... 39,859 2,147
EMC Corp. ........................ 12,096 1,321(a)
Equifax Inc. ..................... 72,000 1,697
First Data Corp. ................. 76,608 3,778
Microsoft Corp. .................. 16,992 1,984(a)
Reuters Group PLC ADR ............ 4,032 326
11,253
UTILITIES -- 1.1%
MCI WorldCom Inc. ................ 25,920 1,375(a)
SBC Communications Inc. .......... 12,442 607
Sprint Corp. ..................... 4,608 310
2,292
TOTAL DOMESTIC EQUITY
(COST $51,328) ................ 93,004
- --------------------------------------------------------------------------------
FOREIGN EQUITY -- 16.7%
- --------------------------------------------------------------------------------
BASIC MATERIALS -- 0.5%
Ispat International N.V. (Regd.)
(Class A) ..................... 6,370 103
Metallgesellschaft AG ............ 14,071 282
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Pohang Iron & Steel Co. Ltd. ..... 1,563 $ 187
Pohang Iron & Steel Co. Ltd. ADR . 2,110 74
Shin-Etsu Chemical Co. ........... 8,000 345
991
[ICON OMITTED] CAPITAL GOODS -- 2.8%
ABB AG ........................... 2,471 302(a)
Aerospatiale Matra (Regd.) ....... 7,684 169(a)
Alstom ........................... 11,703 390(a)
Asahi Chemical Industry Co. Ltd. . 17,000 87
ATI Technologies Inc. ............ 9,945 132(a)
British Aerospace PLC ............ 38,671 254
Celestica Inc. ................... 5,272 295(a)
Corus Group PLC ..................123,520 321
CRH PLC .......................... 11,172 241
Desc S.A. de C.V. (Series B) ..... 32,672 27
Desc S.A. de C.V. ADR (Class C) .. 4,884 82
FKI PLC .......................... 45,171 177
Grupo Carso S.A. de C.V. ADR
(Class C) ..................... 15,522 153(a)
Invensys PLC ..................... 93,633 495
Kao Corp. ........................ 6,643 190
Lyonnaise Des Eaux S.A. .......... 1,375 220
Mannesmann AG .................... 4,857 1,172
Minebea Co. Ltd. ................. 28,000 481
Preussag AG ...................... 9,791 546
Rhodia S.A. ...................... 3,820 86
VA Technologie AG ................ 1,383 91
5,911
[ICON OMITTED] CONSUMER - CYCLICAL-- 2.3%
Airtours PLC ..................... 34,479 210
Autoliv Inc. SDR ................. 10,607 310
Canon Inc. ....................... 18,000 715
DaimlerChrysler AG ............... 2,502 195
Granada Group PLC ................ 42,785 432
Grupo Televisa S.A. GDR .......... 4,100 280(a)
Johnson Electric Holdings ........ 53,400 343
Kinnevik AB (Series B) ........... 1,504 47
Mazda Motor Corp. ................ 49,000 218
Michelin CGDE (Regd.) (Class B) .. 7,260 285
NAMCO Ltd. ....................... 1,600 104
Philips Electronics N.V. ......... 4,213 573
- ---------------
See Notes to Schedules of Investments and Notes to Financial Statements.
15
<PAGE>
ELFUN DIVERSIFIED FUND (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1999
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Reed International PLC ........... 24,387 $ 183
Saatchi & Saatchi PLC ............ 10,675 64
Sony Corp. ....................... 2,600 771
Synnex Technology International
Corp. GDR ..................... 3,502 90(b)
4,820
CONSUMER - STABLE -- 0.0%
Panamerican Beverages
Inc. (Class A) ................ 1,933 40
DIVERSIFIED -- 0.4%
Hutchison Whampoa Ltd. ........... 3,000 44
Lagardere S.C.A. ................. 12,490 679
723
ENERGY -- 0.8%
Coflexip S.A. ADR ................ 4,444 169
Repsol S.A. ...................... 6,439 149
Saipem ........................... 50,457 183
Total S.A. (Class B) ............. 4,983 665
Veba AG .......................... 5,326 259
Vivendi .......................... 2,040 184
1,609
[ICON OMITTED] FINANCIAL -- 1.7%
Asahi Bank Ltd. .................. 12,512 77
Banca Intesa S.p.A. .............. 47,655 193
Banco Comercial Portugues (Regd.) 15,222 84
Bank of Ireland .................. 24,732 197
Banque Nationale de Paris ........ 1,307 121
Bayerische Vereinsbank AG ........ 2,960 202
Credit Suisse AG ................. 1,138 226
Deutsche Bank AG ................. 5,038 426
Grupo Financiero Banamex Accival
S.A. de C.V. (Class B) ....... 87,256 350(a)
ING Groep N.V. ................... 11,450 691
Investor AB (Series B) ........... 3,592 51
Invik & Co. AB ................... 773 92
Kookmin Bank ..................... 7,240 113
MeritaNordbanken Oyj ............. 40,713 240(a)
Promise Co. Ltd. ................. 2,000 102
Societe Generale ................. 464 108
The Fuji Bank Ltd. ............... 7,000 68
Uniao de Bancos Brasilieros
S.A. GDR ...................... 6,172 186
3,527
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
HEALTHCARE -- 0.9%
Aventis S.A. (Class A) ........... 5,872 $ 341
Fresenius Medical Care AG ........ 3,808 326
Novartis AG (Regd.) .............. 91 134
Novo-Nordisk AS (Series B) ....... 1,972 262
Nycomed Amersham PLC ............. 31,165 196
Shire Pharmaceuticals Group
PLC ADR ....................... 7,488 218(a)
Teva Pharmaceutical Industries
Ltd. ADR ...................... 4,593 329
1,806
INSURANCE -- 0.9%
AXA-UAP .......................... 5,172 721
Commercial Union PLC ............. 19,491 314
Muenchener Rueckversicherungs-
Gesellschaft AG (Regd.) ....... 1,520 386
Pohjola Group Insurance Corp.
(Series B) .................... 1,722 104
Royal & Sun Alliance Insurance
Group PLC ..................... 20,485 153
Sampo Insurance Co. Ltd. (Series A) 7,827 274
1,952
RETAIL TRADE -- 0.5%
Carrefour S.A. ................... 2,348 433
Giordano International Ltd. ......138,000 142
Jeronimo Martins, SGPS, S.A. ..... 1,157 30
Koninklijke Ahold N.V. ........... 3,836 113
Mitsukoshi Ltd. .................. 7,746 27(a)
Somerfield PLC ................... 79,693 116
Vendex KBB N.V. .................. 5,594 149
1,010
[ICON OMITTED] TECHNOLOGY - ELECTRONICS & EQUIPMENT-- 3.2%
Brambles Industries Ltd. ......... 15,698 434
Cable & Wireless Communication PLC 31,361 448(a)
Cable & Wireless Optus Ltd. ...... 59,423 199(a)
Chartered Semiconductor
Manufacturing Ltd. ADR ........ 733 54(a)
Comverse Technology Inc. ......... 2,867 415(a)
ECI Telecommunications Ltd. ...... 12,564 397
Ericsson LM Telephone (Series B) . 12,634 812
Fujitsu Ltd. ..................... 16,000 730
NetCom Systems AB (Series B) ..... 2,918 205(a)
- ----------
See Notes to Schedules of Investments and Notes to Financial Statements.
16
<PAGE>
SCHEDULE OF INVESTMENTS (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1999
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Nokia Oyj (Series A) ........... 1,607 $ 291
Nortel Networks Corp. .......... 4,453 450
Schneider S.A. ................. 5,962 468
STMicroelectronics N.V. ........ 2,732 421
Sumitomo Electric Industries ... 11,000 127
Taiwan Semiconductor
Manufacturing Co. ........... 150,051 798
Toshiba Corp. .................. 56,000 428
6,677
TECHNOLOGY - SOFTWARE & SERVICES-- 0.4%
Cap Gemini S.A. ................ 2,593 658
CGI Group Inc. (Class A) ....... 6,029 258
916
TELECOMMUNICATIONS -- 0.3%
Cable & Wireless PLC ........... 8,288 142
Sonera Oyj ..................... 5,649 387
529
TRANSPORTATION -- 0.1%
IHC Caland N.V. ................ 5,496 201
Railtrack Group PLC ............ 6,006 101
302
[ICON OMITTED] UTILITIES -- 1.9%
Hellenic Telecommunication
Organization S.A. ADR ....... 6,522 78
Hellenic Telecommunication
Organization S.A. ........... 5,020 119
Korea Telecom Corp. ADR ........ 2,870 215
Korea Telecom Corp. ............ 1,050 165
Telecom Italia Mobile S.p.A. ... 7,879 88
Telecom Italia S.p.A ........... 13,530 191
Telecomunicacoes Brasileiras
S.A. ADR .................... 174 22
Telefonica S.A. ................ 29,398 734(a)
Telekomunikacja Polska S.A.
GDR (Series A) .............. 27,904 174(b)
The Tokyo Electric Power Co. Inc. 2,200 59
Vodafone AirTouch PLC ADR ...... 41,184 2,039
3,884
TOTAL FOREIGN EQUITY
(COST $24,215) .............. 34,697
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
BONDS AND NOTES -- 34.1%
- --------------------------------------------------------------------------------
U.S. TREASURIES -- 6.9%
U.S. Treasury Bonds
8.125% 08/15/19 ............ $3,057 $ 3,484(h)
5.25% 02/15/29 ............ 160 132(h)
6.125% 08/15/29 ............ 1,745 1,663(h)
5,279
U.S. Treasury Notes
5.25% 05/31/01 ............ 2,639 2,605(h)
5.875% 11/30/01 ............ 2,210 2,196(h)
6.625% 03/31/02 ............ 110 111(h)
5.875% 11/15/04 ............ 975 956(h)
6.00% 08/15/09 ............ 2,585 2,504(h)
8,372
U.S. Treasury STRIPS
6.83% 08/15/11 ............ 490 223(d,h)
6.84% 02/15/12 ............ 995 438(d,h)
661
TOTAL U.S. TREASURIES
(COST $14,789) .............. 14,312
FEDERAL AGENCIES -- 3.1%
Federal Home Loan Bank
5.625% 03/19/01 ............ 415 410
5.875% 08/15/01 ............ 1,480 1,467
5.25% 04/25/02 ............ 480 465
5.75% 04/15/08 ............ 695 640
2,982
Federal Home Loan Mortgage Corp.
6.22% 03/18/08 ............ 500 462
5.125% 10/15/08 ............ 215 188
6.625% 09/15/09 ............ 915 889
1,539
Federal National Mortgage Assoc.
5.75% 04/15/03 ............ 630 612
5.78% 05/05/04 ............ 400 382
6.99% 07/09/07 ............ 785 759
5.64% 12/10/08 ............ 245 219
1,972
Small Business Administration
6.55% 10/01/17 - 12/01/17 . 134 128
TOTAL FEDERAL AGENCIES
(COST $6,849) ............... 6,621
- ------------
See Notes to Schedules of Investments and Notes to Financial Statements.
17
<PAGE>
ELFUN DIVERSIFIED FUND (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1999
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
AGENCY MORTGAGE BACKED -- 10.6%
Federal Home Loan Mortgage Corp.
7.50% 06/01/10 ..............$ 236 $ 238
7.50% 09/01/12 .............. 53 53
8.00% 08/01/24 .............. 17 17
8.00% 10/01/25 .............. 16 16
8.00% 11/01/26 .............. 21 22
8.00% 05/01/27 .............. 1,817 1,835
6.50% 04/01/29 - 07/01/29 ... 3,855 3,634
6.00% TBA ................... 700 641(c)
6.50% TBA ................... 300 283(c)
7.00% TBA ................... 3,850 3,726(c)
10,465
Federal National Mortgage Assoc.
6.50% 01/01/04 .............. 7 7
9.00% 06/01/09 .............. 367 385
7.50% 12/01/09 .............. 915 920
7.00% 08/01/13 .............. 68 68
7.50% 02/01/14 .............. 387 389
9.00% 04/01/16 .............. 199 209
9.00% 12/01/17 .............. 133 139
7.50% 12/01/18 .............. 92 92
9.00% 12/01/22 .............. 158 165
7.50% 12/01/23 .............. 366 364
7.00% 08/01/27 - 11/01/27 ... 845 817
6.16% 08/07/28 .............. 680 595
6.50% 01/01/29 - 03/01/29 ... 1,025 966
6.00% 10/01/29 .............. 549 502
6.50% TBA ................... 745 720(c)
7.50% TBA ................... 1,900 1,879(c)
8,217
Government National Mortgage Assoc.
7.00% 03/15/12 .............. 465 460
9.00% 11/15/16 .............. 227 240
9.00% 01/15/17 - 11/15/17 ... 238 250
8.50% 10/15/17 .............. 502 520
9.00% 12/15/21 .............. 28 30
7.50% 06/15/23 - 08/15/23 ... 217 215
6.50% 03/15/24 .............. 283 269
7.50% 01/15/28 - 04/15/28 ... 268 264
6.50% 04/15/28 .............. 900 845
7.00% 04/15/28 .............. 519 501
3,594
TOTAL AGENCY MORTGAGE BACKED
(COST $22,920) ................ 22,276
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 2.5%
Collateralized Mortgage Obligation Trust
5.72% 09/01/15 .............. $ 8 $ 7(d,f)
5.73% 11/01/18 .............. 29 21(d,f)
28
Federal Home Loan Mortgage Corp.
7.50% 11/01/09 .............. 287 289
8.00% 04/15/20 .............. 24 24
5.75% 06/15/23 .............. 145 137
8.00% 02/01/28 .............. 24 24
6.50% 11/01/28 .............. 922 870
6.50% 02/01/29 .............. 611 576
1,920
Federal National Mortgage Assoc.
5.125% 02/13/04 .............. 805 757
6.04% 02/25/09 .............. 970 888
8.50% 04/01/17 .............. 23 6(g,d)
8.00% 12/01/17 .............. 161 164
8.50% 01/01/18 .............. 4 1(g)
6.00% 03/25/19 .............. 355 320
7.00% 06/18/20 .............. 18 18(b)
8.00% 10/25/20 .............. 67 67
9.00% 05/25/22 .............. 41 11(g)
8.50% 07/25/22 .............. 55 15(g)
7.00% 07/01/28 .............. 896 866
3,113
Federal National Mortgage Assoc. REMIC
7.623% 12/17/04 .............. 83 84(d)
6.171% 05/25/14 .............. 33 32
8.50% 03/01/17 .............. 11 3(g)
6.24% 12/25/22 .............. 40 29(d,f)
148
TOTAL AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS
(COST $5,515) ................. 5,209
ASSET BACKED -- 0.7%
Advanta Mortgage Loan Trust Corp.
6.30% 07/25/25 .............. 17 17
Chase Credit Card Master Trust
6.00% 08/15/05 .............. 39 38
- ---------------
See Notes to Schedules of Investments and Notes to Financial Statements.
18
<PAGE>
SCHEDULE OF INVESTMENTS (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1999
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Citibank Credit Card Master Trust I
5.75% 01/15/03 .............. $ 20 $ 20
5.50% 02/15/06 .............. 128 121
Discover Card Master Trust I
5.75% 10/16/03 .............. 95 94
5.30% 08/15/04 .............. 77 74
5.60% 05/16/06 .............. 332 315
First USA Credit Card Master Trust
5.28% 09/18/06 .............. 67 63
Ford Credit Auto Loan Master Trust
5.50% 02/15/03 .............. 50 49
Ford Credit Auto Owner Trust
5.90% 06/15/02 .............. 113 112
Green Tree Financial Corp.
6.90% 04/15/18 .............. 63 63
6.97% 04/01/31 .............. 89 88
MBNA Master Credit Card Trust
6.60% 04/16/07 .............. 94 92
Peco Energy Transport Trust
5.80% 03/01/07 .............. 63 60
6.05% 03/01/09 .............. 63 59
Provident Bank Home Equity Loan Trust
6.72% 01/25/13 .............. 76 75
West Penn Funding LLC
6.81% 09/25/08 .............. 64 64
TOTAL ASSET BACKED
(COST $1,452) ................. 1,404
CORPORATE NOTES -- 7.8%
Abbey National PLC
7.95% 10/26/29 .............. 100 99
6.70% 06/29/49 .............. 55 50
7.35% 10/29/49 .............. 88 84
Aetna Services Inc.
6.97% 08/15/36 .............. 130 127
Allstate Corp.
7.20% 12/01/09 .............. 85 83
Amerada Hess Corp.
7.875% 10/01/29 .............. 125 122
American Airlines Inc.
6.855% 04/15/09 .............. 85 84
Arizona Public Service Co.
6.25% 01/15/05 .............. 75 70
Armstrong World Industries Inc.
7.45% 05/15/29 .............. 80 71
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Associates Corp. of North America
6.375% 10/15/02 .............. $200 $197
5.75% 11/01/03 .............. 55 52
AT&T Capital Corp.
6.60% 05/15/05 .............. 75 72
AT&T Corp.
6.50% 03/15/29 .............. 130 111
Atlantic City Electric Co.
6.19% 01/17/06 .............. 185 174
B.F. Goodrich Co.
6.45% 04/15/08 .............. 75 69
Bank One Corp.
6.40% 08/01/02 .............. 200 197
BCI US Funding Trust I
9.39% 12/29/49 .............. 100 92(b)
Beckman Instruments Inc.
7.10% 03/04/03 .............. 55 53
Bell Telephone Co. - Pennsylvania
8.35% 12/15/30 .............. 75 81
Bellsouth Telecomm Inc.
6.375% 06/01/28 .............. 65 55
Boston University
7.625% 07/15/97 .............. 230 215
Brascan Ltd.
7.375% 10/01/02 .............. 35 34
Bristol-Myers Squibb Co.
6.875% 08/01/97 .............. 50 45
CIT Group Inc.
7.125% 10/15/04 .............. 130 129
Cleveland Electric Co. Toledo Edison
7.19% 07/01/00 .............. 35 35
Coastal Corp.
6.375% 02/01/09 .............. 160 146
Columbia University Trustees New York
6.83% 12/15/20 .............. 70 66
Conseco Inc.
6.40% 06/15/01 .............. 145 141
8.70% 11/15/26 .............. 60 53
Continental Cablevision Inc.
8.50% 09/15/01 .............. 70 71
Corporacion Andina De Fomento
6.75% 03/15/05 .............. 130 123
Crown Cork & Seal Co. Inc.
8.00% 04/15/23 .............. 85 78
CSX Corp.
6.25% 10/15/08 .............. 240 217
- -----------
See Notes to Schedules of Investments and Notes to Financial Statements.
19
<PAGE>
ELFUN DIVERSIFIED FUND (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1999
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
DaimlerChrysler AG
7.20% 09/01/09 ............... $130 $128
Delphi Automotive Systems Corp.
6.125% 05/01/04 ............... 90 85
Dresdner Funding Trust I
8.151% 06/30/31 ............... 100 94(b)
Du Pont de Nemours (E.I) & Co.
6.75% 10/15/04 ............... 60 59
6.875% 10/15/09 ............... 60 58
Duke Capital Corp.
7.25% 10/01/04 ............... 195 191
Duke Energy Corp.
5.375% 01/01/09 ............... 90 78
Electronic Data Systems Corp.
6.85% 10/15/04 ............... 50 49
7.45% 10/15/29 ............... 20 20
Empresa Nacional De Electricidad
8.125% 02/01/97 ............... 70 57
EOP Operating LP
6.50% 01/15/04 ............... 100 95
FDX Corp.
7.85% 01/30/15 ............... 66 65
Federated Department Stores Inc.
6.125% 09/01/01 ............... 85 84
Ford Motor Co.
7.45% 07/16/31 ............... 115 111
Ford Motor Credit Co.
6.70% 07/16/04 ............... 120 118
5.80% 01/12/09 ............... 130 115
7.375% 10/28/09 ............... 210 207
Fortune Brands Inc.
7.125% 11/01/04 ............... 100 99(b)
FPL Group Capital Inc.
7.375% 06/01/09 ............... 290 285
General Motors Acceptance Corp.
5.75% 11/10/03 ............... 55 52
6.15% 04/05/07 ............... 90 84
Georgia-Pacific Group.
9.95% 06/15/02 ............... 50 53
Goldman Sachs Group L.P.
6.65% 05/15/09 ............... 100 93
Guangdong International Trust
& Investment Corp.
8.75% 10/24/16 ............... 75 4(a,b,m)
HCR Manor Care
7.50% 06/15/06 ............... 50 44
Heritage Media Corp.
8.75% 02/15/06 ............... 150 154
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Household Finance Corp.
6.125% 07/15/02 ............... $ 40 $ 39
Hydro-Quebec
8.05% 07/07/24 ............... 115 122
8.25% 04/15/26 ............... 175 182
Israel Electric Corp. Ltd.
7.125% 07/15/05 ............... 50 48(b)
8.10% 12/15/96 ............... 25 21(b)
J.P. Morgan & Co.
6.00% 01/15/09 ............... 200 179
Korea Development Bank
6.625% 11/21/03 ............... 80 77
Kroger Co.
6.34% 06/01/01 ............... 171 169
7.375% 03/01/05 ............... 150 148
LCI International Inc.
7.25% 06/15/07 ............... 53 51
Lehman Brothers Holdings Inc.
8.50% 08/01/15 ............... 70 72
7.50% 08/01/26 ............... 130 130
LG&E Capital Corp.
5.75% 11/01/01 ............... 100 98(b)
Liberty Property Ltd. Partnership
7.50% 01/15/18 ............... 80 68
Lockheed Martin Corp.
7.95% 12/01/05 ............... 140 138
8.20% 12/01/09 ............... 90 90
8.50% 12/01/29 ............... 60 61
Lumbermens Mutual Casualty
8.30% 12/01/37 ............... 40 34(b)
MBNA Corp.
6.306% 04/22/03 ............... 150 145
MCI Communications Corp.
6.125% 04/15/02 ............... 300 295
MCI WorldCom Inc.
6.40% 08/15/05 ............... 95 91
8.875% 01/15/06 ............... 125 131
Meditrust
7.114% 08/15/04 ............... 100 75
Merita Bank Ltd.
7.15% 12/29/49 ............... 250 242(b)
Merrill Lynch & Co. Inc.
5.71% 01/15/02 ............... 170 166
Monsanto Co.
5.75% 12/01/05 ............... 70 64
Morgan Stanley, Dean Witter & Co.
7.125% 01/15/03 ............... 185 185
5.625% 01/20/04 ............... 170 160
- --------------
See Notes to Schedules of Investments and Notes to Financial Statements.
20
<PAGE>
SCHEDULE OF INVESTMENTS (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1999
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Nabisco Inc.
6.125% 02/01/33 .............. $ 85 $ 81
Natexis AMBS Co. LLC
8.44% 12/29/49 .............. 105 99(b)
National Rural Utilities Cooperative
6.046% 04/15/03 .............. 100 97
5.50% 01/15/05 .............. 75 70
National Westminster Bank PLC
7.75% 04/29/49 .............. 85 82
New Jersey Economic Development Authority
7.425% 02/15/29 .............. 70 68
Newell Co.
6.35% 07/15/08 .............. 135 125
News America Holdings Inc.
8.15% 10/17/36 .............. 220 210
News America Inc.
7.625% 11/30/28 .............. 110 102
Noram Energy Corp.
6.375% 11/01/03 .............. 70 67
Norfolk Southern Corp.
7.90% 05/15/97 .............. 88 83
North Atlantic Energy Corp.
9.05% 06/01/02 .............. 65 66
Northrop-Grumman Corp.
8.625% 10/15/04 .............. 65 67
Occidental Petroleum Corp.
7.375% 11/15/08 .............. 75 73
Ontario Province of Canada
7.375% 01/27/03 .............. 150 152
Pepsi Bottling Holdings Inc.
5.375% 02/17/04 .............. 150 140(b)
5.625% 02/17/09 .............. 70 62(b)
Philip Morris Cos. Inc.
7.25% 09/15/01 .............. 70 70
7.20% 02/01/07 .............. 40 37
7.65% 07/01/08 .............. 100 95
Phillips Petroleum Co.
9.375% 02/15/11 .............. 200 226
Pitney Bowes Credit Corp.
9.25% 06/15/08 .............. 100 111
Principal Financial Group
8.20% 08/15/09 .............. 80 81(b)
Procter & Gamble Co.
6.875% 09/15/09 .............. 70 68
9.36% 01/01/21 .............. 110 127
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Quebec Province of Canada
7.50% 09/15/29 .............. $ 90 $ 87
Raytheon Co.
6.75% 08/15/07 .............. 125 117
Rohm & Haas Co.
6.95% 07/15/04 .............. 65 64
7.85% 07/15/29 .............. 100 100
Royal & Sun Alliance Insurance Group PLC
8.95% 10/15/29 .............. 120 123(b)
Safeway Inc.
7.50% 09/15/09 .............. 85 83
Sprint Capital Corp.
5.70% 11/15/03 .............. 60 57
6.875% 11/15/28 .............. 235 209
St. George Funding Co.
8.485% 12/29/49 .............. 190 156(b)
Stop & Shop Cos. Inc.
9.75% 02/01/02 .............. 50 53
SunAmerica Inc.
5.60% 07/31/97 .............. 160 110
Suntrust Banks Inc.
6.00% 01/15/28 .............. 70 64
Tele-Communications Inc.
9.80% 02/01/12 .............. 130 152
7.875% 08/01/13 .............. 80 81
Teleglobe Inc.
7.20% 07/20/09 .............. 75 70
Tenet Healthcare Corp.
7.875% 01/15/03 .............. 60 58
Texas Utilities Co.
5.94% 10/15/01 .............. 100 98
Textron Inc.
6.375% 07/15/04 .............. 140 135
Time Warner Pass-Through Asset Trust
6.10% 12/30/01 .............. 230 225(b)
Tosco Corp.
7.625% 05/15/06 .............. 50 49
Transamerica Capital
7.625% 11/15/37 .............. 105 96
TRW Inc.
6.625% 06/01/04 .............. 110 106
Turner Broadcasting Systems Inc.
8.38% 07/01/13 .............. 100 104
TXU Eastern Funding Co.
6.45% 05/15/05 .............. 170 161
6.75% 05/15/09 .............. 100 91
- --------------
See Notes to Schedules of Investments and Notes to Financial Statements.
21
<PAGE>
ELFUN DIVERSIFIED FUND (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1999
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Tyco International Group S.A.
6.25% 06/15/03 ............... $ 40 $ 38
7.00% 06/15/28 ............... 345 299
Union Carbide Corp.
6.79% 06/01/25 ............... 100 96
Union Oil Co. of California
7.35% 06/15/09 ............... 100 97
United Illuminating Co.
6.25% 12/15/02 ............... 30 29
United Parcel Service Inc.
8.375% 04/01/30 ............... 130 139
US Airways
8.36% 07/20/20 ............... 85 83
US West Capital Funding Inc.
6.875% 08/15/01 ............... 135 134(b)
6.125% 07/15/02 ............... 35 34
6.875% 07/15/28 ............... 55 48
US West Communications Inc.
5.625% 11/15/08 ............... 100 87
USA Networks Inc.
6.75% 11/15/05 ............... 80 75
USA Waste Services Inc.
6.125% 07/15/01 ............... 300 286
USX Marathon Group
9.80% 07/01/01 ............... 75 78
Wal-Mart Stores Inc.
6.875% 08/10/09 ............... 150 146
Walt Disney Co.
5.62% 12/01/08 ............... 80 71
Westinghouse Electric Corp.
8.875% 06/01/01 ............... 45 46
Williams Cos. Inc.
6.125% 02/15/02 ............... 145 142
Yale University
7.375% 04/15/96 ............... 50 47
TOTAL CORPORATE NOTES
(COST $17,032) ................. 16,142
NON-AGENCY MORTGAGE BACKED SECURITIES -- 2.2%
Amresco Commercial Mortgage Funding Corp.
6.73% 06/17/29 ............... 82 81
Asset Securitization Corp.
6.50% 02/14/41 ............... 65 64
Chase Commercial Mortgage Securities Corp.
6.39% 11/18/08 ............... 102 95
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Commercial Mortgage Acceptance Corp.
6.49% 05/15/08 ..............$ 113 $ 106
Credit Suisse First Boston
Mortgage Securities Corp.
6.30% 11/15/08 .............. 92 85
DLJ Commercial Mortgage Corp.
6.41% 02/15/08 .............. 292 271
DLJ Mortgage Acceptance Corp.
6.65% 12/17/27 .............. 29 29(b)
6.24% 11/12/31 .............. 242 222
First Union Commercial Mortgage Trust
6.07% 10/15/08 .............. 173 158
First Union Lehman Brothers-Bank of America
6.28% 06/18/07 .............. 333 321
6.56% 11/18/08 .............. 827 778
First Union-Chase Commercial Bank
6.65% 04/15/09 .............. 187 177
GMAC Commercial Mortgage Securities Inc.
6.42% 08/15/08 .............. 73 68
10.07% 08/15/23 .............. 2,111 82
GS Mortgage Securities Corp.
6.86% 07/13/30 .............. 129 128(d)
Lehman Large Loan
6.79% 06/12/04 .............. 77 76
Merrill Lynch Mortgage Investors Inc.
6.39% 02/15/30 .............. 357 335
Mid-State Trust
7.54% 07/01/35 .............. 31 29(d)
Morgan Stanley Capital I
6.86% 05/15/06 .............. 128 127(b)
6.52% 01/15/08 .............. 24 23
6.54% 05/15/08 .............. 200 189
6.21% 09/15/08 .............. 64 59
9.74% 04/15/23 .............. 1,032 41(d)
6.01% 11/15/30 .............. 124 118
6.48% 11/15/30 .............. 101 95
9.82% 11/15/31 .............. 1,610 77(b,d)
Nationslink Funding Corp.
6.00% 11/20/07 .............. 72 68
Sawgrass Finance REMIC Trust
6.45% 01/20/06 .............. 90 90
- -------------
See Notes to Schedules of Investments and Notes to Financial Statements.
22
<PAGE>
SCHEDULE OF INVESTMENTS (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1999
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Structured Asset Securities Corp.
8.389% 04/25/27 ............ $ 65 $ 66
7.21% 02/25/28 ............ 499 26(d)
Vornado Finance Corp.
6.36% 12/01/00 ............ 460 458(b)
TOTAL NON-AGENCY MORTGAGE BACKED SECURITIES
(COST $4,770) ............... 4,542
NON-AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.3%
BlackRock Capital Finance
7.22% 11/25/28 ............ 269 257(b)
7.25% 11/25/28 ............ 159 91(b)
Salomon Brothers Mortgage Securities Inc.
7.00% 07/25/24 ............ 238 206
TOTAL NON-AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS
(COST $657) ................. 554
TOTAL BONDS AND NOTES
(COST $73,984) .............. 71,060
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
PREFERRED STOCKS -- 0.2%
- --------------------------------------------------------------------------------
DOMESTIC PREFERRED -- 0.2%
Centaur Funding Corp. (Series B),
9.08% ....................... 265 268(b)
TCI Communications Inc., 10.00% 3,200 82
350
FOREIGN PREFERRED -- 0.0%
Henkel KGaA .................... 1,482 98
TOTAL PREFERRED STOCKS
(COST $487) ................. 448
- --------------------------------------------------------------------------------
WARRANTS -- 0.0%
- --------------------------------------------------------------------------------
Muenchener Rueckversicherungs-
Gescellschaft AG (Regd.),
06/03/02
(COST $0) ................... 33 2(a)
TOTAL INVESTMENTS IN SECURITIES
(COST $150,014) ............. 199,211
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 7.2%
- --------------------------------------------------------------------------------
GEI Short Term Investment Fund . 9,451 $ 9,451
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 2.7%
State Street Bank and Trust Co.
2.80% 01/03/00 ............ $5,602 5,602
(dated 12/31/99, proceeds
$5,602, collateralized
by $5,716, U.S. Treasury
Bonds, 8.125%, 08/15/19)
TOTAL SHORT-TERM INVESTMENTS
(COST $15,053) .............. 15,053
OTHER ASSETS AND LIABILITIES, NET (2.9%) (6,136)
--------
NET ASSETS-- 100% .............. $208,128
========
[ICON OMITTED] ICONS REPRESENT THE TOP FIVE COMBINED INDUSTRY WEIGHTINGS FOR THE
DOMESTIC AND FOREIGN EQUITIES IN THE ELFUN DIVERSIFIED FUND AS OF DECEMBER 31,
1999.
- --------------
See Notes to Schedules of Investments and Notes to Financial Statements.
23
<PAGE>
ELFUN TAX-EXEMPT INCOME FUND
Q&A
BOB KAELIN MANAGES THE TAX-EXEMPT OPERATION WITH TOTAL ASSETS EXCEEDING $7
BILLION. HIS RESPONSIBILITIES INCLUDE MANAGING THE ELFUN TAX-EXEMPT INCOME FUND.
PRIOR TO JOINING GE ASSET MANAGEMENT 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, 1999?
A. The Elfun Tax-Exempt Income Fund posted a return of -3.01% for the one-year
period ended December 31, 1999. For the same period, the Lehman Brothers
Municipal Bond Index returned -2.07% and our Lipper peer group of 265 General
Municipal Bond funds had an average return of -4.63%.
Q. WHAT DOMESTIC/WORLD EVENTS HAD A MAJOR IMPACT ON THE FINANCIAL MARKETS IN THE
PAST YEAR AND HOW DID THIS IMPACT YOUR FUND?
A. The sharp rise in interest rates during the second half of the year caused
many investors to stay on the sidelines. While the rise in rates lagged other
fixed income markets, nominal municipal yields are at highs not seen since 1994.
Throughout the year the market was impacted by surprisingly strong domestic and
international economies; efforts by the Federal Reserve ("Fed") to temper growth
by raising interest rates; roaring equity markets; and very inconsistent demand
from traditional buyers of municipal securities. Through all of this we did not
make a bet on the direction of interest rates as many of our peers did.
Q. WHAT INFLUENCED FUND PERFORMANCE?
A. The fund underperformed its benchmark as we maintained a slightly longer
duration (sensitivity to interest rates) in the second half of the year. During
this period, the municipal market suffered, as all fixed income classes did, due
to a rising interest rate environment. Municipals were further impacted by a
surge in new bonds entering the market as issuers positioned themselves for
year-end. The glut of bonds with few buyers willing to position bonds over
year-end, put undue pressure on prices. The fund was able to outperform its
Lipper peers because, although duration exceeds benchmark, we did not assume as
much interest rate risk as other funds.
Q. HOW DID INDIVIDUAL SECTORS PERFORM?
A. The fund was overweighted in water & sewer bonds, which was the second best
performing sector in the market. The best sector was housing bonds, where
unfortunately, we were underweighted. If we combine the performance of the
sectors the fund matched the performance of the benchmark's water & sewer and
housing bonds. The fund also maintained a higher average cash balance, which
became a defensive position as interest rates rose.
Q. WHAT HAS BEEN THE INVESTMENT STRATEGY OF THE FUND OVER THE PAST YEAR?
A. We maintain a consistent investment strategy that does not deviate from our
goal of identifying value and yield without compromising the high average
quality rating of the fund. Through this approach to the market, we are able to
maximize tax-exempt income for our unit holders while minimizing capital gains.
Q. WHAT IS YOUR OUTLOOK FOR THE FUND IN THE UPCOMING YEAR AND HOW HAVE YOU
POSITIONED THE FUND GOING FORWARD?
A. Besides entering a new millennium, we are also entering an election year. If
the past is any indication, we can expect additional market volatility in the
municipal market as candidates opine their views on taxes and the economy.
Unless the Fed puts the brakes on growth, we expect economic activity to
continue to be robust and thus be the driving force in the market. The
economy/Fed scenario will be similar to last year. Until the economy moderates,
we expect market participants to speculate over the Fed's course of action,
which will add to market volatility. Closer to home, we expect the municipal
market to moderate. The year end supply bulge has begun to diminish, helping to
support price levels. If interest rates stay at their current levels, the supply
of new bonds entering the market will be well below last year. Current interest
rates should also make municipals attractive to investors. The dynamic of lower
supply and higher demand should provide a boost to the municipal market. Within
this environment we will maintain our strategy of seeking value while
maintaining a cautious view towards the market.
[PHOTO OF BOB KAELIN OMITTED]
24
<PAGE>
ELFUN TAX-EXEMPT INCOME FUND
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
[LINE GRAPH OMITTED]
ELFUN TAX-EXEMPT FUND LBMI
'89 $10000.00 $10000.00
'90 10597.56 10729.01
'91 11877.82 12031.54
'92 12887.96 13092.02
'93 14448.63 14699.25
'94 13615.15 13939.16
'95 15973.71 16373.30
'96 16549.15 17099.13
'97 18135.75 18670.89
'98 19261.22 19880.37
'99 18680.51 19469.24
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
ONE FIVE TEN
YEAR YEAR YEAR
- --------------------------------------------------------------------------------
Elfun Tax-Exempt (3.01)% 6.53% 6.45%
LBMI (2.07)% 6.91% 6.89%
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 12/31/99
GENERAL MUNICIPAL BOND PEER GROUP
ONE FIVE TEN
YEAR YEAR YEAR
Fund's rank in peer group: ........... 30 22 22
Number of Funds in peer group: ....... 265 174 79
Peer group average total return: ..... (4.63)% 5.76% 6.18%
Lipper categories in peer group: ..... GENERAL MUNICIPAL DEBT
* SEE NOTES TO PERFORMANCE FOR EXPLANATION OF PEER CATEGORIES.
QUALITY RATINGS AS OF DECEMBER 31, 1999
- --------------------------------------------------------------------------------
PERCENT OF
MOODY'S RATINGS + NET ASSETS
- --------------------------------------------------------------------------------
Aaa 55.58%
- --------------------------------------------------------------------------------
Aa 31.16%
- --------------------------------------------------------------------------------
A 9.06%
- --------------------------------------------------------------------------------
Baa 0.82%
- --------------------------------------------------------------------------------
Other 3.38%
- --------------------------------------------------------------------------------
+MOODY'S INVESTORS SERVICE, INC. IS A NATIONALLY RECOGNIZED STATISTICAL RATING
ORGANIZATION.
SEE NOTES TO PERFORMANCE. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
25
<PAGE>
SCHEDULE OF INVESTMENTS (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1999
- --------------------------------------------------------------------------------
ELFUN TAX-EXEMPT INCOME FUND
[PIE CHART OMITTED]
GENERAL OBLIGATIONS 27.6%
WATER & SEWER 13.4%
HOSPITAL 10.9%
TRANSPORTATION 9.6%
UTILITIES 8.4%
LEASE 7.3%
SALES TAX 7.0%
EDUCATION 6.2%
RESERVES & OTHER 5.7%
CASH 3.4%
HOUSING 0.5%
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
MUNICIPAL BONDS -- 96.6%
- --------------------------------------------------------------------------------
ALABAMA -- 1.8%
Alabama Public School & College
Auth. - Education
5.75% 08/01/13 ............ $ 5,000 $ 5,089
Alabama Water Pollution Control
Auth. Rev. - Water & Sewer
4.75% 08/15/21 ............ 7,155 5,921(k)
Jefferson County Alabama Sewer
Rev. - Water & Sewer
5.75% 02/01/27 ............ 6,750 6,404(k)
Mobile County Alabama G.O.
5.35% 02/01/10 ............ 6,530 6,525
23,939
ARIZONA -- 1.3%
Arizona Transportation Board
Rev. - Sales Tax
6.00% 07/01/08 ............ 5,000 5,310
Mohave County Arizona Industrial
Dev. Auth. - Industrial Dev. Rev.
7.05% 08/01/20 ............ 12,000 12,261
17,571
CALIFORNIA -- 4.5%
California State Dept. Water
Resource Ctr. Rev. -
Water & Sewer
4.75% 12/01/25 ............ 4,000 3,248
California State G.O.
8.00% 05/01/03 ............ 10,725 11,808(h)
5.00% 02/01/21 ............ 4,350 3,815
4.50% 10/01/28 ............ 10,000 7,698(k)
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Los Angeles California Waste
Water Systems Rev. -
Water & Sewer
5.70% 06/01/20 ............ $15,000 $14,628(k)
San Diego County California
Certificates Participation
Rev. - Lease Rev.
5.25% 11/15/19 ............ 6,000 5,475(k)
San Francisco California City
County Airports - Int'l
Airport Rev.
4.50% 05/01/23 ............ 5,000 3,959(k)
Southern California Public
Power Auth. Rev. -
Electric Utility
5.00% 07/01/22 ............ 12,500 10,898(k)
61,529
COLORADO -- 2.3%
Colorado Springs Colorado
Utility Rev. -
Electric Utility
6.50% 11/15/15 ............ 30,370 31,727
[ICON OMITTED] CONNECTICUT -- 11.5%
Connecticut State Clean
Water Fund Rev.
4.875% 09/01/19 ............ 5,585 4,836
4.875% 09/01/22 ............ 6,000 5,104
Connecticut State G.O.
4.00% 11/01/00 ............ 3,425 3,429
5.00% 11/01/02 ............ 6,060 6,142
5.00% 11/01/03 ............ 2,670 2,711
6.15% 11/15/03 ............ 2,000 2,092(j)
6.00% 10/01/04 - 11/01/04 . 4,455 4,700(j)
5.30% 03/15/05 ............ 5,000 5,118
5.50% 08/01/05 ............ 2,855 2,954
5.25% 11/01/05 ............ 3,545 3,629
5.25% 11/01/06 ............ 6,060 6,188
5.50% 03/15/07 ............ 9,560 9,824
5.25% 11/01/07 ............ 6,285 6,410
5.50% 12/01/07 ............ 8,850 9,171(j)
5.50% 03/15/08 ............ 4,000 4,101
5.00% 11/01/08 ............ 1,185 1,182
5.50% 12/01/08 ............ 11,090 11,492(j)
5.63% 03/15/09 ............ 1,990 2,046
5.25% 03/15/14 ............ 3,175 3,064
4.50% 10/15/16 ............ 2,510 2,099
Connecticut State Health &
Educational Fac. Auth.
Rev. - Health
5.13% 11/01/12 ............ 1,495 1,450(k)
- -----------------
See Notes to Schedules of Investments and Notes to Financial Statements.
26
<PAGE>
SCHEDULE OF INVESTMENTS (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1999
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Connecticut State Resources
Recovery Auth.
5.50% 11/15/12 ............. $3,865 $ 3,873(k)
Connecticut State Special
Tax Obligation Rev. - Sales Tax
4.00% 10/01/00 ............. 7,550 7,544
5.125% 09/01/05 ............. 2,250 2,277
6.00% 10/01/09 ............. 5,250 5,580(k)
Mashantucket Western Pequot
Tribe Connecticut Rev. -
Lease Rev.
5.70% 09/01/12 ............. 2,500 2,400(b)
5.75% 09/01/18 ............. 9,500 8,832(b)
Stamford Connecticut G.O.
4.90% 02/15/06 ............. 885 887
5.00% 02/15/10 ............. 1,875 1,854
5.00% 02/15/11 ............. 1,000 978
5.25% 07/15/11 ............. 6,120 6,124
5.00% 02/15/12 ............. 1,875 1,811
5.00% 02/15/13 ............. 1,875 1,783
5.00% 02/15/14 ............. 1,875 1,759
4.60% 08/01/14 ............. 2,635 2,343
5.00% 02/15/15 ............. 1,875 1,734
4.70% 08/01/15 ............. 2,635 2,318
4.75% 08/01/16 ............. 2,635 2,307
4.75% 08/01/17 ............. 2,635 2,280
4.75% 08/01/18 ............. 2,635 2,256
156,682
[ICON OMITTED] FLORIDA -- 6.7%
Brevard County Utility
Rev. - Water & Sewer
5.25% 03/01/07 ............. 2,800 2,826(k)
5.25% 03/01/08 ............. 3,250 3,276(k)
Dade County School District G.O.
5.50% 08/01/11 ............. 14,250 14,805(j,k)
5.50% 08/01/15 ............. 17,805 18,499(j,k)
Florida State Board Education
Capital Outlay G.O.
5.50% 06/01/08 ............. 4,400 4,551(j)
4.50% 06/01/23 ............. 2,500 1,976(k)
Florida State Div. Bd. Fin.
Dept. Rev. - Lease Rev.
6.50% 07/01/10 ............. 1,940 2,016(j,k)
Hillsborough County Utility
Ref. Rev. - Water & Sewer
6.625% 08/01/11 ............. 10,000 10,479(k)
6.50% 08/01/16 ............. 8,500 8,867(k)
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Jacksonville Florida Capital
Improvement Rev. -
Refunding Stadium Project
4.75% 10/01/25 ............$ 4,750 $ 3,869(k)
Miami-Dade County Florida
Parks Program
4.75% 11/01/23 ............ 4,920 4,053(k)
Orange County Water & Wastewater
Rev. - Treatment
6.25% 10/01/17 ............ 3,485 3,581(k)
Orlando & Orange County Expressway
Auth. Rev. - Trans.
5.25% 07/01/14 ............ 13,695 13,171(k)
91,969
GEORGIA -- 1.4%
Fulton County Georgia School
District G.O.
5.625% 01/01/21 ............ 8,205 8,556(j)
Georgia State G.O.
6.50% 04/01/08 - 08/01/08 ...... 5,320 5,854
Private Colleges & University Rev. -
Education
6.50% 11/01/15 ............ 4,010 4,315(j,k,l)
18,725
HAWAII -- 0.1%
Honolulu Hawaii City & County G.O.
6.00% 01/01/12 ............ 1,265 1,316
6.00% 01/01/12 ............ 735 773(j,l)
2,089
ILLINOIS -- 5.7%
Chicago Illinois School
Finance Auth. G.O.
5.00% 06/01/09 ............ 9,000 8,828(k)
Chicago Public Bldg. Comm.
Rev. - Lease Rev.
7.125% 01/01/15 ............ 9,115 9,352(j,k,l)
Cook County Illinois G.O.
5.375% 11/15/18 ............ 14,500 13,484(k)
Illinois Education Fac. Auth.
Rev. - Education
7.125% 07/01/21 ............ 14,940 15,767(j)
Illinois Health Fac. Auth.
Rev. - Health
5.00% 08/15/21 ............ 8,600 7,334(k)
Metropolitan Pier & Exposition
Auth. Illinois Rev. - Sales Tax
6.50% 06/15/27 ............ 305 319
6.50% 06/15/27 ............ 10,000 10,720(j)
- ------------
See Notes to Schedules of Investments and Notes to Financial Statements.
27
<PAGE>
ELFUN TAX-EXEMPT INCOME FUND (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1999
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Regional Transport Auth.
Illinois Rev. - Trans.
6.25% 06/01/15 ............. $10,980 $ 11,774(j,k)
77,578
INDIANA -- 2.7%
Indiana Transportation Finance
Auth. Airport Fac. Lease
Rev. - Trans.
5.00% 11/01/12 ............. 13,305 12,581(k)
5.00% 11/01/16 ............. 3,250 2,918(k)
Indiana University Rev. - Education
6.00% 11/15/14 ............. 7,500 7,763
Indianapolis Local Rev. - Bank Bond
6.00% 07/01/10 ............. 6,000 6,253
Petersburg Pollution Control
Rev. - Industrial Dev.
6.63% 12/01/24 ............. 7,250 7,615
37,130
IOWA -- 0.7%
Iowa Finance Auth. Rev. - Health
5.25% 08/15/12 ............. 1,755 1,659
5.25% 08/15/14 ............. 3,790 3,474
5.375% 08/15/17 ............. 4,215 3,837
8,970
MAINE -- 0.5%
Maine Health & Higher Educational
Facilities Auth. Rev. - Health
5.50% 07/01/23 ............. 7,690 7,145(k)
MARYLAND -- 0.2%
Maryland State G.O.
5.00% 10/15/11 ............. 3,500 3,412
MASSACHUSETTS -- 4.3%
Massachusetts Bay Transportation
Auth. - Trans.
4.75% 03/01/16 ............. 5,000 4,326(k)
Massachusetts State G.O.
5.50% 11/01/08 ............. 18,135 18,644
Massachusetts State Health &
Educational Fac. Auth.
Rev. - Health
6.30% 08/15/24 ............. 4,000 4,034(k)
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Massachusetts State Water
Resources Auth. Rev. -
Water & Sewer
6.50% 07/15/08 ............$ 9,245 $ 10,044(k)
6.50% 07/15/19 ............ 14,125 14,993(k)
4.75% 12/01/23 ............ 7,500 6,065(k)
58,106
MICHIGAN -- 3.2%
Hartland Michigan Consolidated
School District Rev. - Education
5.125% 05/01/22 ............ 5,000 4,338(k)
Michigan Municipal Bond Auth.
Rev. - Water & Sewer
5.50% 10/01/19 ............ 4,000 3,801
Michigan Trunk Line Rev. - Sales Tax
5.50% 10/01/21 ............ 35,815 35,561(j)
43,700
MINNESOTA -- 0.7%
Southern Muni. Power Agency Rev. -
Electric Utility
5.00% 01/01/12 ............ 10,000 9,591(k)
MISSOURI -- 1.3%
Jackson County Missouri
Consolidated School
District Number 002 G.O.
5.25% 03/15/09 ............ 8,000 8,032(k)
Missouri Health & Educational
Facilities Rev. - Health
6.00% 05/15/07 ............ 2,340 2,443
University Missouri Health
Facilities Rev. - Health
5.60% 11/01/26 ............ 8,000 7,474(k)
17,949
NEW HAMPSHIRE -- 1.0%
New Hampshire Higher Educational
& Health Facilities
Rev. - Education
6.25% 07/01/20 ............ 5,000 5,139(k)
New Hampshire Tpke. Auth.
Rev. - Trans.
5.75% 04/01/20 ............ 8,745 8,352
13,491
- --------------
See Notes to Schedules of Investments and Notes to Financial Statements.
28
<PAGE>
SCHEDULE OF INVESTMENTS (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1999
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
[ICON OMITTED] NEW JERSEY -- 6.7%
New Jersey Building Auth.
Rev. - Lease Rev.
5.00% 06/15/11 ............. $10,350 $10,000
5.00% 06/15/12 ............. 9,440 9,026
New Jersey Health Care Fac.
Fin. Auth. Rev. - Health
5.50% 07/01/08 ............. 2,715 2,780(k)
New Jersey Sports & Exposition
Convention Ctr. Rev. -
Lease Rev.
6.50% 03/01/19 ............. 10,540 11,008
New Jersey Tpke. Auth.
Rev. - Trans.
6.50% 01/01/16 ............. 49,960 53,871(k)
New Jersey Wastewater Treatment
Trust Rev. - Water & Sewer
5.875% 06/15/06 ............. 5,160 5,423
92,108
NEW MEXICO -- 0.8%
New Mexico State G.O.
4.00% 09/01/07 ............. 4,810 4,452
4.00% 09/01/08 ............. 7,050 6,434
10,886
[ICON OMITTED] NEW YORK -- 9.6%
Battery Park City Auth.
Rev. - Lease Rev.
5.00% 11/01/13 ............. 10,000 9,309(k)
5.25% 11/01/17 ............. 6,500 5,977(k)
4.75% 11/01/19 ............. 16,130 13,497(k)
Municipal Assistance Corp.
Rev. - Sales Tax
5.20% 07/01/08 ............. 10,000 10,061
New York City Municipal Water
Finance Auth. Rev. -
Water & Sewer
5.125% 06/15/21 ............. 2,400 2,114(k)
New York G.O.
7.00% 02/01/05 ............. 3,470 3,679(j)
6.375% 08/01/06 ............. 4,030 4,253(j,k)
5.60% 08/15/06 ............. 13,000 13,309
5.25% 08/01/11 ............. 3,950 3,856
5.25% 08/01/13 ............. 1,500 1,429
New York State Dormitory CUNY
Rev. - Education
7.00% 07/01/09 ............. 7,000 7,585
5.40% 07/01/10 ............. 8,185 8,302
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
New York State Housing Finance
Agency Service Contract
Rev. - Housing
6.375% 09/15/14 .............$ 65 $ 67
New York State Local Government
Assistance Corp. Rev. -
Sales Tax
5.50% 04/01/21 ............. 12,255 11,128(k)
New York State Urban Development
Auth. Rev. - Housing
5.50% 07/01/16 ............. 7,000 6,714(k)
New York State Urban Development
Corp.Rev. - Lease Rev.
5.50% 01/01/16 ............. 25,310 23,847
Suffolk County New York Water
Auth. Waterworks Rev. -
Water & Sewer
5.00% 06/01/17 ............. 6,000 5,333(k)
130,460
NORTH CAROLINA -- 1.9%
Mecklenburg County North
Carolina G.O.
4.50% 02/01/15 ............. 14,000 12,086
North Carolina Medical Care
Commission Health Care
Facilities Rev. - Health
4.75% 06/01/28 ............. 11,000 8,697
North Carolina Medical Care
Commission Hospital
Rev. - Health
4.75% 10/01/26 ............. 7,000 5,567
26,350
NORTH DAKOTA -- 1.2%
Oliver County North Dakota
Pollution Control Rev. -
Electric Utility
5.30% 01/01/27 ............. 18,000 15,997(k)
OHIO -- 4.9%
Clermont County Ohio Hospital
Facilities Rev. - Health
7.50% 09/01/19 ............. 455 477(j,k)
Cleveland Ohio Parking
Facilities Rev.
5.50% 09/15/16 ............. 5,200 5,034(k)
- -------------
See Notes to Schedules of Investments and Notes to Financial Statements.
29
<PAGE>
ELFUN TAX-EXEMPT INCOME FUND (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1999
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Cleveland Ohio Public Power
Systems Rev. -
Electric Utility
7.00% 11/15/24 ........... $ 8,300 $ 9,218(j,k)
Cleveland Water Works Rev. -
Water & Sewer
6.25% 01/01/16 ........... 9,490 9,824(k)
Northeast Ohio Reg. Sewer
District Rev. - Water & Sewer
6.50% 11/15/16 ........... 15,500 16,198(j,k)
Ohio State Building Auth.
Rev. - Lease Rev.
4.75% 04/01/14 ........... 5,000 4,473
Ohio State Higher Education
Rev. - Education
6.70% 05/01/05 ........... 10,100 10,386(j,k)
Ohio State Public Facilities
Commission G.O.
4.50% 11/01/09 ........... 1,500 1,420(k)
Ohio State Water Development Auth.
Pollution Control Fac.
Rev. - Water & Sewer
5.30% 12/01/11 ........... 9,265 9,224(k)
66,254
OKLAHOMA -- 0.3%
Oklahoma Tpke. Auth. Rev. - Trans.
6.25% 01/01/22 ........... 4,640 4,773(k)
OREGON -- 0.4%
Oregon State G.O.
5.875% 10/01/18 ........... 2,100 2,139
Portland Sewer Systems Rev. -
Sewer Rev.
4.50% 06/01/16 ........... 3,750 3,178(k)
5,317
[ICON OMITTED] PENNSYLVANIA -- 6.9%
Allegheny County Hospital
Development Auth. Rev. -
Health
5.375% 12/01/25 ........... 27,000 24,240(k)
Erie Pennsylvania Sewer
Auth. - Sewer Rev.
4.90% 06/01/16 ........... 2,130 1,869(k)
4.95% 06/01/17 ........... 1,150 1,011(k)
Montgomery County Pennsylvania
Higher Education & Health
Rev. - Health
5.00% 10/01/09 ........... 2,405 2,340(k)
5.10% 10/01/10 ........... 2,670 2,601(k)
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Northampton County Higher
Education Fac. Auth.
Lehigh Univ. Rev. - Education
7.00% 10/15/11 ........... $ 7,800 $ 8,277(j,k)
Pennsylvania Intergovernmental
Co-op. Rev. - Sales Tax
5.60% 06/15/15 ........... 8,000 8,221(j,k)
Pennsylvania State Higher
Educational Facility Auth.
UPMC Health Systems - Health
4.65% 08/01/12 ........... 3,920 3,534(k)
4.625% 08/01/16 ........... 3,250 2,742(k)
5.00% 08/01/29 ........... 7,735 6,385(k)
Philadelphia Gas Works Rev. -
Natural Gas
6.375% 07/01/14 ........... 1,845 1,951(j,k)
Philadelphia Hospitals & Higher
Education Facilities
Rev. - Health
5.00% 02/15/21 ........... 11,250 9,428
Philadelphia Pennsylvania
Airport Rev. - Trans.
6.00% 06/15/06 ........... 5,000 5,272(k)
Philadelphia Pennsylvania
School District G.O.
5.55% 07/01/05 ........... 9,645 9,957(j,k)
5.65% 07/01/06 ........... 2,070 2,149(j,k)
5.75% 07/01/07 ........... 1,200 1,253(j,k)
5.80% 07/01/08 ........... 1,500 1,573(j,k)
5.85% 07/01/09 ........... 1,440 1,516(j,k)
94,319
RHODE ISLAND -- 0.3%
Rhode Island G.O.
5.00% 08/01/11 ........... 5,000 4,809
SOUTH CAROLINA -- 2.4%
Charleston County SC G.O.
5.90% 06/01/10 ........... 2,170 2,279(j,k)
6.00% 06/01/11 ........... 2,310 2,439(j,k)
6.00% 06/01/12 ........... 2,455 2,592(j,k)
South Carolina State Public
Service Auth. Rev. -
Electric Utility
5.50% 07/01/21 ........... 26,635 25,069(k)
32,379
TENNESSEE -- 0.9%
Knox County Tennessee Health
Educational & Housing
Facilities Board Rev. - Health
7.25% 01/01/09 ........... 4,500 5,090(k)
- ----------------
See Notes to Schedules of Investments and Notes to Financial Statements.
30
<PAGE>
SCHEDULE OF INVESTMENTS (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1999
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Metropolitan Government
Nashville & Davidson County
Tennessee Health & Educational
Board Rev. - Education
6.875% 12/01/24 ............$ 6,000 $ 6,636(j,k)
11,726
TEXAS -- 5.7%
Austin Texas G.O.
5.375% 09/01/16 ............ 5,030 4,772
5.375% 09/01/17 ............ 5,320 4,999
Harris County Texas G.O.
6.125% 08/15/20 ............ 15,000 16,060(j)
Houston Texas Water & Sewer
Systems Rev. - Water & Sewer
5.25% 12/01/21 ............ 20,000 17,871(k)
Lower Colorado River Auth.
Texas Rev. - Water & Sewer
5.875% 05/15/16 ............ 20,000 19,926(k)
Texas State Pubic Fin. Auth.
Bldg. Rev. - Lease Rev.
5.00% 08/01/17 ............ 6,440 5,727(k)
University Texas Permanent
University Fund Rev. -
Education
4.75% 07/01/17 ............ 8,840 7,610(k)
University Texas University
Rev. - Education
5.20% 08/15/09 ............ 1,295 1,296
78,261
UTAH -- 0.6%
Intermountain Power Agency Utah
Power Supply Rev. -
Electric Utility
5.00% 07/01/21 ............ 10,000 8,522
VIRGINIA -- 3.0%
Chesapeake Virginia G.O.
6.00% 05/01/12 ............ 2,150 2,237(k)
Fairfax County Virginia Sewer
Rev. - Water & Sewer
5.875% 07/15/28 ............ 13,785 13,441(k)
Fairfax County Virginia Water
Auth. Rev. - Water & Sewer
5.00% 04/01/16 ............ 2,500 2,289
Roanoke Virginia Industrial
Development Auth. Hospital
Rev. - Health
5.00% 07/01/24 ............ 21,220 18,081(k)
University Virginia Rev. -
Education
5.375% 06/01/20 ............ 5,000 4,696
40,744
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
WEST VIRGINIA -- 0.2%
West Virginia State University
Rev. - Education
6.00% 04/01/12 ............$ 3,000 $ 3,118(k)
WISCONSIN -- 0.9%
Wisconsin State Health &
Educational Fac. Auth.
Rev. - Health
5.25% 08/15/23 ............ 13,455 11,850(k)
TOTAL INVESTMENTS IN SECURITIES
(COST $1,323,582) ........... 1,319,176
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 1.8%
- --------------------------------------------------------------------------------
GEI Short Term Investment Fund
(COST $23,921) ............... 23,921 23,921
OTHER ASSETS AND LIABILITIES,
NET 1.6% ..................... 22,084
----------
NET ASSETS-- 100% ............... $1,365,181
==========
[ICON OMITTED] ICONS REPRESENT THE TOP FIVE STATE WEIGHTINGS IN THE ELFUN
TAX-EXEMPT INCOME FUND AS OF DECEMBER 31, 1999.
- -------------
See Notes to Schedules of Investments and Notes to Financial Statements.
31
<PAGE>
ELFUN INCOME FUND
Q&A
ROBERT MACDOUGALL LEADS THE FIXED INCOME TEAM AT GE ASSET MANAGEMENT. ASSETS
UNDER MANAGEMENT EXCEED $29 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 ASSET MANAGEMENT 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. DESCRIBE WHAT HAPPENED IN THE FIXED INCOME MARKETS DURING 1999.
A. The U.S. bond market suffered its second worst year since 1973. Yields on
30-year Treasuries rose from 5.1% to 6.5%. Intermediate maturity bonds fared
even worse as yields rose 1.8%. The end result was price depreciation that more
than offset interest income producing a -0.83% total return for the Lehman
Brothers Aggregate Bond Index.
The global economic crisis, which prompted the Federal Reserve to ease monetary
policy 75 basis points in 1998, subsided in 1999. The pace of economic activity
remained robust and rekindled fears of inflation. Low unemployment and rising
real estate and stock market wealth buoyed consumer confidence and, in turn,
consumer spending. Concerned that tight labor markets would lead to inflationary
increases in wages, the Federal Reserve took back all of the 1998 easing in
three 25 basis point steps between June and November. Many observers believe
further tightening would have occurred had it not been for the uncertainty over
how the century date change might affect financial markets.
In terms of sectors, mortgage backed securities performed the best, returning
1.86%, due primarily to their shorter average duration and higher yield.
Corporates lost 1.96%, while U.S. Treasuries and agencies declined 2.23%.
Q. HOW DID THE ELFUN INCOME FUND PERFORM COMPARED TO ITS BENCHMARK AND LIPPER
PEER GROUP FOR THE ONE-YEAR PERIOD ENDED DECEMBER 31, 1999?
A. The Elfun Income Fund had a return of -0.62% while the Lehman Brothers
Aggregate Bond Index returned -0.83%. Our Lipper peer group of 137 Intermediate
U.S. Government Bond funds posted an average return of -1.73% for the same
period.
Q. WHAT WERE THE KEY DRIVERS OF FUND PERFORMANCE?
A. The back-up in interest rates in the early part of the year cost us some
relative performance until we adjusted downward our interest rate sensitivity
(duration). On the plus side, our overweight in mortgage backed securities and
good security selection in the corporate sector impacted returns favorably.
Q. WHAT IS YOUR OUTLOOK FOR THE BOND MARKET?
A. Until as we see a slowdown in the pace of economic activity, the market is at
risk to more Federal Reserve tightenings. Meanwhile global competition and
increasing productivity should keep a lid on inflation. Once fears of an
overheating economy subside, bond yields will look very attractive.
[PHOTO OF ROBERT MACDOUGALL OMITTED]
32
<PAGE>
ELFUN INCOME FUND
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
[LINE GRAPH OMITTED]
ELFUN INCOME FUND LB AGGREGATE
'89 $10000.00 $10000.00
'90 10861.46 10894.53
'91 12613.33 12637.71
'92 13448.78 13573.23
'93 14755.83 14896.42
'94 14411.94 14461.83
'95 17036.24 17133.15
'96 17719.59 17752.45
'97 19416.62 19471.64
'98 21064.18 21160.57
'99 20933.74 20984.85
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
ONE FIVE TEN
YEAR YEAR YEAR
- --------------------------------------------------------------------------------
Elfun Income (0.62)% 7.75% 7.67%
LB Aggregate (0.83)% 7.73% 7.69%
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 12/31/99
INTERMEDIATE U.S. TAXABLE BOND PEER GROUP
ONE FIVE TEN
YEAR YEAR YEAR
Fund's rank in peer group: .......... 21 3 2
Number of Funds in peer group: ..... 137 92 25
Peer group average total return: ... (1.73)% 6.37% 6.47%
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, 1999
- --------------------------------------------------------------------------------
PERCENT OF
MOODY'S/S&P RATING+ NET ASSETS
- --------------------------------------------------------------------------------
Aaa 73.01%
- --------------------------------------------------------------------------------
Aa 4.13%
- --------------------------------------------------------------------------------
A 9.18%
- --------------------------------------------------------------------------------
Baa 6.74%
- --------------------------------------------------------------------------------
Ba 0.91%
- --------------------------------------------------------------------------------
Other 6.03%
- --------------------------------------------------------------------------------
+MOODY'S INVESTORS SERVICE, INC. AND STANDARD & POOR'S ARE A NATIONALLY\
RECOGNIZED STATISTICAL RATING ORGANIZATIONS.
SEE NOTES TO PERFORMANCE. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
33
<PAGE>
SCHEDULE OF INVESTMENTS (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1999
- --------------------------------------------------------------------------------
ELFUN INCOME FUND
[PIE CHART OMITTED]
MORTGAGE BACKED 41.0%
CORPORATE NOTES 22.0%
U.S. TREASURIES 16.4%
FEDERAL AGENCIES 12.4%
CASH & OTHER 8.2%
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
BONDS AND NOTES -- 95.6%
- --------------------------------------------------------------------------------
U.S. TREASURIES -- 16.4%
U.S. Treasury Bonds
8.125% 08/15/19 ............ $10,561 $12,035(h)
5.25% 02/15/29 ............ 1,300 1,075(h)
6.125% 08/15/29 ............ 3,650 3,479(h,i)
16,589
U.S. Treasury Notes
5.25% 05/31/01 ............ 1,924 1,899(h)
5.875% 11/30/01 ............ 8,640 8,585(i)
6.625% 03/31/02 ............ 660 664(h)
5.875% 11/15/04 ............ 3,985 3,907
7.00% 07/15/06 ............ 1,762 1,805(h)
6.00% 08/15/09 ............ 6,308 6,111(i)
22,971
U.S. Treasury STRIPS
6.83% 08/15/11 ............ 6,568 2,992(d,h)
6.84% 02/15/12 ............ 2,930 1,289(d,h)
4,281
TOTAL U.S. TREASURIES
(COST $45,674) .............. 43,841
FEDERAL AGENCIES -- 12.4%
Federal Home Loan Bank
5.625% 03/19/01 ............ 1,650 1,632
5.875% 08/15/01 ............ 5,760 5,708
5.25% 04/25/02 ............ 1,855 1,799
5.75% 04/15/08 ............ 2,470 2,274
11,413
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.
6.22% 03/18/08 ............$ 1,855 $ 1,713
5.125% 10/15/08 ............ 1,045 916
6.625% 09/15/09 ............ 1,650 1,603
4,232
Federal National Mortgage Assoc.
5.75% 04/15/03 ............ 890 865
5.125% 02/13/04 ............ 4,610 4,334
5.78% 05/05/04 ............ 1,480 1,413
6.99% 07/09/07 ............ 2,010 1,943
5.64% 12/10/08 ............ 1,225 1,097
6.04% 02/25/09 ............ 4,420 4,047
6.16% 08/07/28 ............ 2,735 2,395
16,094
Small Business Administration
6.55% 10/01/17 - 12/01/17 . 647 616
6.125% 01/01/18 ............ 986 916
1,532
TOTAL FEDERAL AGENCIES
(COST $35,048) .............. 33,271
AGENCY MORTGAGE BACKED -- 32.1%
Federal Home Loan Mortgage Corp.
7.50% 11/01/09 ............ 265 267
7.50% 06/01/10 ............ 1,413 1,426
7.50% 09/01/12 ............ 883 890
8.00% 08/01/24 ............ 131 133
8.00% 10/01/25 ............ 67 68
8.00% 11/01/26 ............ 89 90
8.00% 05/01/27 ............ 5,668 5,723
6.50% 06/01/29 - 08/01/29 . 7,928 7,473
6.00% TBA ................. 2,000 1,830(c)
6.50% TBA ................. 3,026 2,853(c)
7.00% TBA ................. 17,129 16,578(c)
7.50% TBA ................. 400 396(c)
37,727
Federal National Mortgage Assoc.
6.50% 01/01/04 ............ 62 61
9.00% 06/01/09 ............ 763 800
7.50% 12/01/09 ............ 2,840 2,858
7.00% 08/01/13 ............ 313 310
7.50% 02/01/14 ............ 1,767 1,778
9.00% 04/01/16 ............ 427 450
8.00% 12/01/17 ............ 758 771
9.00% 12/01/17 ............ 554 577
7.50% 12/01/18 ............ 377 375
9.00% 12/01/22 ............ 632 659
7.50% 12/01/23 ............ 2,035 2,022
7.00% 08/01/27 - 11/01/27 . 5,523 5,344
6.50% 01/01/28 - 06/01/28 . 301 284
- -------------
See Notes to Schedules of Investments and Notes to Financial Statements.
34
<PAGE>
SCHEDULE OF INVESTMENTS (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1999
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
7.00% 07/01/28 ............. $ 896 $ 866
6.50% 01/01/29 -03/01/29 ... 4,159 3,919
6.00% 08/01/29 ............. 2,046 1,872
6.50% TBA .................. 5,824 5,567(c)
7.50% TBA .................. 600 593(c)
29,106
Government National Mortgage Assoc.
7.00% 03/15/12 ............. 2,139 2,117
9.00% 11/15/16 ............. 964 1,017
9.00% 01/15/17 - 11/15/17 .. 991 1,043
8.50% 10/15/17 ............. 1,004 1,041
9.00% 12/15/21 ............. 118 124
7.50% 03/15/23 - 12/15/23 .. 2,081 2,067
6.50% 01/15/24 - 04/15/24 .. 2,075 1,967
6.50% 11/15/27 ............. 187 177
7.00% 11/15/27 - 12/15/27 .. 759 734
7.50% 12/15/27 ............. 263 261
6.50% 03/15/28 - 04/15/28 .. 3,290 3,086
7.00% 03/15/28 - 04/15/28 .. 857 828
7.50% 01/15/28 - 10/15/28 .. 2,536 2,508
8.00% TBA .................. 2,183 2,205(c)
19,175
TOTAL AGENCY MORTGAGE BACKED
(COST $87,723) ............... 86,008
AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 2.1%
Collateralized Mortgage Obligation Trust
5.72% 09/01/15 ............. 70 62(f,d)
5.73% 11/01/18 ............. 246 178(f,d)
240
Federal Home Loan Mortgage Corp.
8.00% 04/15/20 ............. 225 227
5.75% 06/15/23 ............. 595 562
8.00% 02/01/28 ............. 100 101
890
Federal National Mortgage Assoc.
14.34% 04/01/17 ............. 190 52(g,d)
8.50% 01/01/18 ............. 34 9(g)
6.00% 03/25/19 ............. 1,733 1,561
7.00% 06/18/20 ............. 108 107(b)
8.00% 10/25/20 ............. 267 269
9.00% 05/25/22 ............. 236 67(g)
8.50% 07/25/22 ............. 421 116(g)
2,181
Federal National Mortgage Assoc. REMIC
6.13% 12/17/04 ............. 461 463
6.171% 05/25/14 ............. 250 242
8.50% 03/01/17 ............. 94 25(g)
6.24% 12/25/22 ............. 234 169(d, f)
899
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
First Union Commercial Mortgage Trust
6.07% 10/15/08 ............. $ 672 $ 612
First Union National Bank Chase
6.65% 04/15/09 ............. 728 688
TOTAL AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS
(COST $6,513) ................ 5,510
ASSET BACKED -- 3.8%
Advanta Mortgage Loan Trust Corp.
6.30% 07/25/25 ............. 133 130
Chase Credit Card Master Trust
6.00% 08/15/05 ............. 219 213
Citibank Credit Card Master Trust I
5.75% 01/15/03 ............. 84 83
5.50% 02/15/06 ............. 527 498
Discover Card Master Trust I
6.55% 08/18/03 ............. 660 660
5.75% 10/16/03 ............. 390 384
5.30% 08/15/04 ............. 317 306
5.60% 05/16/06 ............. 1,445 1,373
First USA Credit Card Master Trust
5.28% 09/18/06 ............. 554 521
Ford Credit Auto Loan Master Trust
5.50% 02/15/03 ............. 140 138
6.20% 02/15/03 ............. 100 100
Ford Credit Auto Owner Trust
5.90% 06/15/02 ............. 521 517
Green Tree Financial Corp.
6.97% 04/01/31 ............. 345 342
MBNA Master Credit Card Trust
6.625% 03/15/03 ............. 2,417 2,419
6.72% 10/15/03 ............. 500 501
6.687% 03/15/04 ............. 660 662
6.60% 04/16/07 ............. 533 524
Peco Energy Transport Trust
5.80% 03/01/07 ............. 255 242
6.05% 03/01/09 ............. 255 239
West Penn Funding LLC
6.81% 09/25/08 ............. 242 240
TOTAL ASSET BACKED
(COST $10,294) ............... 10,092
CORPORATE NOTES -- 22.0%
Abbey National PLC
7.95% 10/26/29 ............. 400 399
6.70% 06/29/49 ............. 570 514
7.35% 10/29/49 ............. 242 230
Aetna Services Inc.
6.97% 08/15/36 ............. 365 358
- ----------
See Notes to Schedules of Investments and Notes to Financial Statements.
35
<PAGE>
ELFUN INCOME FUND (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1999
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Allstate Corp.
7.20% 12/01/09 .............. $325 $316
Amerada Hess Corp.
7.875% 10/01/29 .............. 520 507
American Airlines Inc.
6.855% 04/15/09 .............. 335 329
Armstrong World Industries Inc.
7.45% 05/15/29 .............. 320 284
Associates Corp. of North America
6.375% 10/15/02 .............. 1,000 984
5.75% 11/01/03 .............. 255 243
AT&T Capital Corp.
6.60% 05/15/05 .............. 265 255
AT&T Corp.
6.50% 03/15/29 .............. 500 428
Bank One Corp.
6.40% 08/01/02 .............. 580 570
BCI US Funding Trust 1
9.39% 12/29/49 .............. 300 276(b)
Beckman Instruments Inc.
7.10% 03/04/03 .............. 215 206
Bell Telephone Co. - Pennsylvania
8.35% 12/15/30 .............. 600 650
Bellsouth Telecomm Inc.
6.375% 06/01/28 .............. 375 316
Boston University
7.625% 07/15/97 .............. 520 487
Brascan Ltd.
7.375% 10/01/02 .............. 155 152
Bristol-Myers Squibb Co.
6.875% 08/01/97 .............. 265 237
CIT Group Inc.
7.125% 10/15/04 .............. 530 525
Cleveland Electric Co. Toledo Edison
7.19% 07/01/00 .............. 200 200
Coastal Corp.
6.375% 02/01/09 .............. 400 364
Columbia University Trustees New York
6.83% 12/15/20 .............. 350 329
Conseco Inc.
6.40% 06/15/01 .............. 515 499
8.70% 11/15/26 .............. 330 295
Continental Cablevision Inc.
8.50% 09/15/01 .............. 450 459
Corporacion Andina De Fomento
6.75% 03/15/05 .............. 240 228
Crown Cork & Seal Co. Inc.
8.00% 04/15/23 .............. 330 304
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
CSX Corp.
6.25% 10/15/08 .............. $905 $819
DaimlerChrysler AG
7.20% 09/01/09 .............. 475 467
Delphi Automotive Systems Corp.
6.125% 05/01/04 .............. 335 317
Dresdner Funding Trust I
8.151% 06/30/31 .............. 500 469(b)
Du Pont de Nemours (E.I) & Co.
6.75% 10/15/04 .............. 220 217
6.875% 10/15/09 .............. 220 213
Duke Capital Corp.
7.25% 10/01/04 .............. 585 572
Duke Energy Corp.
5.375% 01/01/09 .............. 400 346
Electronic Data Systems Corp.
6.85% 10/15/04 .............. 200 197
7.45% 10/15/29 .............. 85 83
Empresa Nacional De Electricidad
8.125% 02/01/97 .............. 415 336
EOP Operating LP
6.50% 01/15/04 .............. 320 305
FDX Corp.
7.85% 01/30/15 .............. 292 286
Federated Department Stores Inc.
6.125% 09/01/01 .............. 380 373
Ford Motor Co.
7.45% 07/16/31 .............. 440 423
Ford Motor Credit Co.
6.70% 07/16/04 .............. 450 440
5.80% 01/12/09 .............. 470 417
7.375% 10/28/09 .............. 805 795
Fortune Brands Inc.
7.125% 11/01/04 .............. 320 318(b)
FPL Group Capital Inc.
7.375% 06/01/09 .............. 315 309
General Motors Acceptance Corp.
5.75% 11/10/03 .............. 250 238
6.15% 04/05/07 .............. 355 331
Georgia-Pacific Group
9.95% 06/15/02 .............. 235 248
Goldman Sachs Group L.P.
6.65% 05/15/09 .............. 250 233
Greenpoint Bank Brooklyn
6.70% 07/15/02 .............. 365 356(a)
Guangdong International Trust
& Investment Corp.
8.75% 10/24/16 .............. 205 10(a,b,m)
HCR Manor Care
7.50% 06/15/06 .............. 220 193
- --------------
See Notes to Schedules of Investments and Notes to Financial Statements.
36
<PAGE>
SCHEDULE OF INVESTMENTS (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1999
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Heritage Media Corp.
8.75% 02/15/06 ............. $ 645 $ 663
Household Finance Corp.
6.125% 07/15/12 ............. 170 165
Hydro-Quebec
8.05% 07/07/24 ............. 685 724
8.25% 04/15/26 ............. 1,365 1,422
Israel Electric Corp. Ltd.
8.10% 12/15/96 ............. 425 357(b)
7.125% 07/15/05 ............. 200 192(b)
J.P. Morgan & Co.
6.00% 01/15/09 ............. 480 430
Korea Development Bank
6.625% 11/21/03 ............. 415 398
Kroger Co.
6.34% 06/01/01 ............. 215 213
7.375% 03/01/05 ............. 260 255
LCI International Inc.
7.25% 06/15/07 ............. 314 302
Lehman Brothers Holdings Inc.
8.50% 08/01/15 ............. 410 419
7.50% 08/01/26 ............. 520 521
LG&E Capital Corp.
5.75% 11/01/01 ............. 445 435(b)
Liberty Property Ltd. Partnership
7.50% 01/15/18 ............. 160 136
Lockheed Martin Corp.
7.95% 12/01/05 ............. 525 517
8.20% 12/01/09 ............. 325 323
8.50% 12/01/29 ............. 220 224
Lumbermens Mutual Casualty
8.30% 12/01/37 ............. 220 188(b)
MBNA Corp.
6.306% 04/22/03 ............. 200 193
MCI Communications Corp.
6.125% 04/15/02 ............. 880 866
MCI WorldCom Inc.
6.40% 08/15/05 ............. 385 369
8.875% 01/15/06 ............. 350 367
Meditrust
7.114% 08/15/04 ............. 415 311
Merita Bank Ltd.
7.15% 12/29/49 ............. 485 469(b)
Merrill Lynch & Co. Inc.
5.71% 01/15/02 ............. 645 630
Monsanto Co.
5.75% 12/01/05 ............. 310 285
6.60% 12/01/28 ............. 125 108(b)
Morgan Stanley Dean Witter & Co.
7.125% 01/15/03 ............. 670 669
5.625% 01/20/04 ............. 675 636
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Nabisco Inc.
6.125% 02/01/33 ............. $ 370 $353
Natexis AMBS Co. LLC
8.44% 12/29/49 ............. 555 523(b)
National Rural Utilities Cooperative
6.046% 04/15/03 ............. 200 194
5.50% 01/15/05 ............. 315 293
National Westminster Bank PLC
7.75% 04/29/49 ............. 520 500
New Jersey Economic Development Authority
7.425% 02/15/29 ............. 350 341
Newell Co.
6.35% 07/15/08 ............. 595 551
News America Holdings Inc.
8.15% 10/17/36 ............. 250 239
News America Inc.
7.625% 11/30/28 ............. 405 375
Noram Energy Corp.
6.375% 11/01/03 ............. 310 298
Norfolk Southern Corp.
7.90% 05/15/97 ............. 487 461
North Atlantic Energy Corp.
9.05% 06/01/02 ............. 373 378
Northrop-Grumman Corp.
8.625% 10/15/04 ............. 290 300
Occidental Petroleum Corp.
7.375% 11/15/08 ............. 285 278
Ontario Province of Canada
7.375% 01/27/03 ............. 540 546
Pepsi Bottling Holdings Inc.
5.375% 02/17/04 ............. 500 469(b)
5.625% 02/17/09 ............. 275 242(b)
Philip Morris Cos. Inc.
7.25% 09/15/01 ............. 305 303
7.20% 02/01/07 ............. 280 262
Phillips Petroleum Co.
9.375% 02/15/11 ............. 395 447
Pitney Bowes Credit Corp.
9.25% 06/15/08 ............. 385 428
Principal Financial Group
8.20% 08/15/09 ............. 310 315(b)
Procter & Gamble Co.
6.875% 09/15/09 ............. 250 244
9.36% 01/01/21 ............. 415 479
Quebec Province of Canada
5.67% 02/27/26 ............. 1,000 993
7.50% 09/15/29 ............. 345 335
- -----------
See Notes to Schedules of Investments and Notes to Financial Statements.
37
<PAGE>
ELFUN INCOME FUND (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1999
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Raytheon Co.
6.75% 08/15/07 ............... $395 $368
Rohm & Haas Co.
6.95% 07/15/04 ............... 220 217
7.85% 07/15/29 ............... 215 216
Royal & Sun Alliance
Insurance Group PLC
8.95% 10/15/29 ............... 430 439(b)
Safeway Inc.
7.50% 09/15/09 ............... 335 328
Sprint Capital Corp.
5.70% 11/15/03 ............... 270 256
6.875% 11/15/28 ............... 350 311
St. George Funding Co.
8.485% 12/29/49 ............... 505 415(b)
Stop & Shop Cos. Inc.
9.75% 02/01/02 ............... 205 215
SunAmerica Inc.
5.60% 07/31/97 ............... 815 560
Suntrust Bank Inc.
6.00% 01/15/28 ............... 310 283
Tele-Communications Inc.
9.80% 02/01/12 ............... 465 543
7.875% 08/01/13 ............... 320 325
Teleglobe Canada Inc.
7.20% 07/20/09 ............... 260 244
Tenet Healthcare Corp.
7.875% 01/15/03 ............... 395 383
Texas Utilities Co.
5.94% 10/15/01 ............... 600 590
Textron Inc.
6.375% 07/15/04 ............... 330 318
The B.F Goodrich Co.
6.45% 04/15/08 ............... 215 197
Time Warner Inc
10.15% 05/01/12 ............... 500 586
Time Warner Pass-Through Asset Trust
6.10% 12/30/01 ............... 320 314(b)
Tosco Corp.
7.625% 05/15/06 ............... 215 212
Transamerica Capital
7.625% 11/15/37 ............... 420 383
TRW Inc.
6.625% 06/01/04 ............... 410 395
Turner Broadcasting Systems Inc.
8.375% 07/01/13 ............... 400 414
TXU Eastern Funding Co.
6.45% 05/15/05 ............... 675 639
6.75% 05/15/09 ............... 300 275
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Tyco International Group S.A.
6.25% 06/15/03 ...............$ 80 $ 77
7.00% 06/15/28 ............... 340 294
Union Carbide Corp.
6.79% 06/01/25 ............... 375 361
Union Oil Co.
7.35% 06/15/09 ............... 260 253
United Illuminating Co.
6.25% 12/15/02 ............... 115 111
United Parcel Service Inc.
8.375% 04/01/30 ............... 285 304
US Airways Pass-Through Trust
8.36% 07/20/20 ............... 340 332
US West Capital Funding Inc.
6.875% 08/15/01 ............... 525 520(b)
6.125% 07/15/02 ............... 140 137
6.875% 07/15/28 ............... 215 188
US West Communications Inc.
5.625% 11/15/08 ............... 365 319
USA Networks Inc.
6.75% 11/15/05 ............... 335 314
USA Waste Services Inc.
6.125% 07/15/01 ............... 150 143
USX Marathon Group
9.80% 07/01/01 ............... 310 321
Viacom Inc.
7.75% 06/01/05 ............... 675 679
Wal-Mart Stores Inc.
6.875% 08/10/09 ............... 585 570
Walt Disney Co.
5.62% 12/01/08 ............... 305 270
Westinghouse Electric Corp.
8.875% 06/01/01 ............... 175 179
Williams Cos. Inc.
6.125% 02/15/12 ............... 615 601
Yale University
7.375% 04/15/96 ............... 275 260
TOTAL CORPORATE NOTES
(COST $61,851) ................. 58,848
NON-AGENCY MORTGAGE BACKED SECURITIES -- 5.8%
Amresco Commercial Mortgage Funding Corp.
6.73% 06/17/29 ............... 440 435
Asset Securitization Corp.
6.50% 02/14/41 ............... 298 294
Chase Commercial Mortgage
Securities Corp.
6.39% 11/18/08 ............... 513 478
- -------------
See Notes to Schedules of Investments and Notes to Financial Statements.
38
<PAGE>
SCHEDULE OF INVESTMENTS (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1999
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Commercial Mortgage Acceptance Corp.
6.49% 05/15/08 ............. $ 519 $ 486
Credit Suisse First Boston
Mortgage Securities Corp.
6.30% 11/15/08 ............. 496 458
DLJ Mortgage Acceptance Corp.
6.65% 12/17/27 ............. 250 246(b)
6.24% 11/12/31 ............. 961 884
First Union Lehman Brothers-
Bank of America
6.56% 11/18/08 ............. 2,259 2,126
GMAC Commercial Mortgage
Securities Inc.
6.42% 08/15/08 ............. 371 346
10.07% 08/15/23 ............. 8,662 335(d)
GS Mortgage Security Corp.
7.75% 05/19/27 ............. 209 196(b)
6.86% 07/13/30 ............. 687 679
Lehman Large Loan
6.79% 06/12/04 ............. 391 387
Merrill Lynch Mortgage Investors Inc.
6.39% 02/15/30 ............. 456 427
Mid-State Trust
7.54% 07/01/35 ............. 166 156
Morgan Stanley Capital Inc.
6.86% 05/15/06 ............. 690 681(b)
6.52% 01/15/08 ............. 123 116
6.21% 09/15/08 ............. 202 187
9.82% 10/15/18 ............. 6,628 316(b,d)
9.74% 04/15/23 ............. 4,249 170(d)
6.01% 11/15/30 ............. 579 550
6.48% 11/15/30 ............. 439 413
Nationslink Funding Corp.
6.001% 11/20/07 ............. 329 313
6.476% 07/20/08 ............. 489 460
Sawgrass Finance REMIC Trust
6.45% 01/20/06 ............. 700 699
Structured Asset Securities Corp.
8.389% 04/25/27 ............. 628 647
8.45% 02/25/28 ............. 3,440 176
Vornado Finance Corp.
6.36% 12/01/00 ............. 3,032 3,022(b)
TOTAL NON-AGENCY MORTGAGE BACKED SECURITIES
(COST $16,329) ............... 15,683
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
NON-AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 1.0%
Blackrock Capital Finance L.P.
7.22% 11/25/28 ............. $1,365 $ 1,302(b)
7.25% 11/25/28 ............. 808 461(b)
Salomon Brothers Mortgage
Securities Inc.
7.00% 07/25/24 ............. 1,205 1,043
TOTAL NON-AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS
(COST $3,331) ................ 2,806
TOTAL BONDS AND NOTES
(COST $266,763) .............. 256,059
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
PREFERRED STOCK -- 0.8%
- --------------------------------------------------------------------------------
CORPORATE PREFERRED -- 0.8%
Centaur Funding Corp.
(Series B), 9.08% ............ 480 485(b)
Home Ownership Funding, 13.331% . 1,840 1,462(b)
TCI Communications Inc., 10.00% . 8,000 206
TOTAL PREFERRED STOCK
(COST $2,229) ................ 2,153
TOTAL INVESTMENTS IN SECURITIES
(COST $268,992) .............. 258,212
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 20.8%
- --------------------------------------------------------------------------------
GEI Short Term Investment Fund .. 37,834 37,834
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
FEDERAL AGENCIES -- 6.7%
Federal Home Loan Mortgage Corp.
5.79% 01/11/00 ............. $14,000 13,978(d)
International Bank For
Reconstruction & Development
5.76% 01/12/00 ............. 4,000 3,993
TOTAL SHORT-TERM INVESTMENTS
(COST $55,805) ............... 55,805
OTHER ASSETS AND LIABILITIES,
NET (17.2)% .................. (46,036)
--------
NET ASSETS-- 100% ............... $267,981
========
- -------------
See Notes to Schedules of Investments and Notes to Financial Statements.
39
<PAGE>
ELFUN MONEY MARKET FUND
Q&A
ROBERT MACDOUGALL MANAGES THE ELFUN MONEY MARKET FUND (PLEASE REFER TO PAGE
32 FOR BOB'S BIOGRAPHICAL DETAILS AND AN ANALYSIS ON THE FIXED INCOME MARKETS.)
Q. HOW DID THE ELFUN MONEY MARKET FUND PERFORM COMPARED TO ITS BENCHMARK AND
LIPPER PEER GROUP FOR THE ONE-YEAR PERIOD ENDED DECEMBER 31, 1999?
A. The Elfun Money Market Fund posted a return of 5.11% for the one-year period
ended December 31, 1999. For the same period, the 90-day U.S. Treasury Bill
returned 4.83% and our Lipper peer group of 337 Money Market funds posted an
average return of 4.49%.
Q. WHAT WAS THE KEY DRIVER OF FUND PERFORMANCE?
A. By actively managing our maturity structure, we were able to capitalize on
the higher rates caused by the Federal Reserve tightenings.
[PHOTO OF DOLLARS OMITTED]
40
<PAGE>
ELFUN MONEY MARKET FUND
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
[LINE GRAPH OMITTED]
ELFUN MONEY MARKET 90-DAY U.S. T-BILL
6/14/90 $10000.00 $10000.00
'90 10453.53 10433.21
'91 11138.58 11010.86
'92 11574.51 11397.90
'93 11957.56 11747.24
'94 12456.76 12259.75
'95 13182.15 12953.62
'96 13872.07 13620.62
'97 14627.67 14328.89
'98 15416.33 15028.66
'99 16204.69 15754.74
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
SINCE
ONE FIVE INCEPTION
YEAR YEAR (6/14/90)
- --------------------------------------------------------------------------------
Elfun Money Market 5.11% 5.40% 5.18%
90 Day U.S. T-Bill 4.83% 5.14% 4.85%
*LIPPER PERFORMANCE COMPARISON
BASED ON AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/99
MONEY MARKET PEER GROUP
ONE FIVE
YEAR YEAR
Fund's rank in peer group: ............... 5 7
Number of Funds in peer group: .......... 337 218
Peer group average total return: ........ 4.49% 4.95%
Lipper categories in peer group: ......... MONEY MARKET
* SEE NOTES TO PERFORMANCE FOR EXPLANATION OF PEER CATEGORIES.
FUND YIELD AT DECEMBER 31, 1999
- --------------------------------------------------------------------------------
IBC
FUND MONEY FUND
- --------------------------------------------------------------------------------
7 Day Current 5.74%+ 5.13%
- --------------------------------------------------------------------------------
7 Day Effective 5.91% 5.26%
- --------------------------------------------------------------------------------
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 NOT INSURED OR GUARANTEED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR BY ANY OTHER GOVERNMENT AGENCY.
ALTHOUGH THE FUND SEEKS TO PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER
SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUND.
+ THE SEVEN DAY CURRENT YIELD, RATHER THAN THE TOTAL RETURN, MORE CLOSELY
REFLECTS THE CURRENT EARNINGS OF THE ELFUN MONEY MARKET FUND AT DECEMBER 31,
1999.
SEE NOTES TO PERFORMANCE. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
41
<PAGE>
SCHEDULE OF INVESTMENTS (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1999
- --------------------------------------------------------------------------------
ELFUN MONEY MARKET FUND
[PIE CHART OMITTED]
COMMERICAL PAPER 49.9%
CERTIFICATES OF DEPOSITS 24.9%
U.S. GOVERNMENTS 20.6%
CASH & OTHER 4.6%
PRINCIPAL AMORTIZED
AMOUNT COST
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 100.3%
- --------------------------------------------------------------------------------
U.S. GOVERNMENTS -- 20.6%
U.S. AGENCIES
Federal Home Loan Bank
5.61% 02/09/00 ............. $9,735 $ 9,678(d)
5.54% 02/16/00 ............. 5,185 5,149(d)
5.64% 02/23/00 ............. 12,160 12,060(d)
5.75% 04/12/00 ............. 6,120 6,023(d)
5.64% 05/05/00 ............. 9,200 9,025(d)
41,935
Federal Home Loan Mortgage
5.37% 04/13/00 ............. 2,400 2,364(d)
Federal National Mortgage Assoc.
5.55% 02/03/00 ............. 3,000 2,985(d)
5.62% 04/17/00 ............. 2,270 2,233(d)
5,218
U.S. TREASURIES
U.S. Treasury Notes
5.50% 03/31/00 ............. 4,490 4,492
6.25% 05/31/00 ............. 4,220 4,231
5.88% 06/30/00 ............. 1,000 1,001
9,724
TOTAL U.S. GOVERNMENTS
(COST $59,241) ............... 59,241
PRINCIPAL AMORTIZED
AMOUNT COST
- --------------------------------------------------------------------------------
COMMERCIAL PAPER -- 49.9%
Abbey National PLC
5.80% 02/29/00 ............. $10,000 $ 9,905
Associates Corp. of North America
6.42% 01/21/00 ............. 10,100 10,064
Bank of America
6.04% 01/07/00 ............. 9,630 9,620
Credit Suisse
5.93% 01/10/00 ............. 9,500 9,486
First Union Corp.
6.00% 01/31/00 ............. 9,630 9,582
Goldman Sachs Group L.P.
6.55% 01/28/00 ............. 10,100 10,050
Halifax Building Society
5.78% 02/22/00 ............. 9,850 9,768
Merrill Lynch & Co. Inc.
5.85% 02/04/00 ............. 9,810 9,756
Morgan (J.P.) & Co. Inc.
5.97% 01/14/00 ............. 8,240 8,222
Morgan Stanley Dean Witter
5.92% 01/12/00 ............. 10,000 9,982
Rabobank Nederland N.V.
4.50% 01/03/00 ............. 12,800 12,800
Royal Bank of Canada
4.75% 01/03/00 ............. 13,900 13,900
Toronto-Dominion Holdings
6.36% 01/18/00 ............. 10,160 10,130
UBS Finance Delaware Inc.
5.93% 03/30/00 ............. 10,100 9,952
TOTAL COMMERCIAL PAPER
(COST $143,217) .............. 143,217
YANKEE CERTIFICATES OF DEPOSIT -- 24.9%
Algemene Bank Nederland N.V.
4.50% 01/03/00 ............. 12,310 12,310
Bank of Montreal
6.31% 01/13/00 ............. 10,000 10,000
Bank of Nova Scotia
5.91% 03/15/00 ............. 10,000 9,879
Bayerische Hypotheken Bank
6.09% 01/28/00 ............. 10,000 10,000
Deutsche Bank AG
6.08% 01/14/00 ............. 9,500 9,500
Dresdner Bank AG
5.81% 02/28/00 ............. 10,000 9,906
- ------------
See Notes to Schedules of Investments and Notes to Financial Statements.
42
<PAGE>
ELFUN MONEY MARKET FUND (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1999
- --------------------------------------------------------------------------------
PRINCIPAL AMORTIZED
AMOUNT COST
- --------------------------------------------------------------------------------
Societe Generale North America Inc.
5.81% 02/25/00 ............$ 9,900 $ 9,812
TOTAL YANKEE CERTIFICATES OF DEPOSIT
(COST $71,407) .............. 71,407
TIME DEPOSITS -- 4.9%
Republic National Bank
New York New York
5.25% 01/03/00 ............ 13,900 13,900
State Street Cayman Islands
4.50% 01/03/00 ............ 159 159
TOTAL TIME DEPOSITS
(COST $14,059) .............. 14,059
TOTAL SHORT-TERM INVESTMENTS
(COST $287,924) ............. 287,924
OTHER ASSETS AND LIABILITIES, NET (0.3)% (932)
--------
NET ASSETS-- 100% .............. $286,992
========
- ---------
See Notes to Schedules of Investments and Notes to Financial Statements.
43
<PAGE>
NOTES TO PERFORMANCE (UNAUDITED)
- --------------------------------------------------------------------------------
Information on the preceding pages is unaudited.
Total returns take into account changes in share price and assume reinvestment
of dividends and capital gains, if any. Investment returns and net asset value
on an investment will fluctuate and you may have a gain or loss when you sell
your shares.
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 ("S&P") 500 Composite Price Index of stocks (S&P 500
Index), Morgan Stanley Capital International World Index (MSCI World), the
Morgan Stanley Capital International Europe, Australasia, Far East Index (MSCI
EAFE), 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 stocks recognized by investors to be representative of
the stock market in general. MSCI World is a composite of 1,364 securities
traded in 22 developed markets of the world. MSCI EAFE is a composite of 967
foreign securities traded in 20 developed markets representing Europe,
Australasia and Far East. LB Aggregate 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. In the
instance of the Elfun Money Market Fund, where the inception date was not at the
beginning of the month, the index return is calculated from the month end
nearest to the fund's inception date. The 90 Day T-Bill is the average return on
three month U.S. Treasury Bills. The IBC Money Fund Report yields represent the
average yields of 951 taxable money market funds. The results shown for the
foregoing indices assume reinvestment of net dividends or interest.
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.
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
descriptions of investment objectives, policies, risks and permissible
investments.
NOTES TO SCHEDULES OF INVESTMENTS (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1999
- --------------------------------------------------------------------------------
(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, 1999, these securities amounted to
$1,782; $3,341; $11,232; and $14,337 or 0.6%, 1.6%, 0.8% and 5.4% of net
assets for the Elfun International Equity 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) Coupon amount represents effective yield.
(e) State Street Corp. is the parent company of State Street Bank & Trust Co.,
the fund's custodian.
(f) Principal only securities represent the right to receive the monthly
principal payments on an underlying U.S. Treasury or pool of mortgages. No
payments of interest are passed through to the "principal only" holder.
(g) Interest only securities represent the right to receive the monthly interest
payments on an underlying pool of mortgages. Payments of principal on the
pool reduce the value of the interest only holding.
(h) At December 31, 1999, all or a portion of this security was pledged to cover
collateral requirements for futures, options or TBAs.
(i) All or a portion of security out on loan.
(j) Prerefunded. Bonds which 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 FGIC, MBIA, AMBAC, or FSA. The Elfun Tax-Exempt
Income Fund had insurance concentrations of 5% or greater as of December 31,
1999 (as a percentage of net assets) as follows:
MBIA 27.12% AMBAC 15.14%
(l) 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.
(m) At December 31, 1999, the security is in default. GE Asset Management has
determined that the security is illiquid as it may be difficult to resell
within seven days in the ordinary course of business at approximately the
price it is valued. The cost of the securities are $78 and $213 and
represents 0.04% and 0.37% of net assets of the Elfun Diversified Fund and
Elfun Income Fund, respectively.
ABBREVIATIONS:
ADR -- American Depositary Receipt
AMBAC -- AMBAC Indemnity Corporation
GDR -- Global Depository Receipt
G.O. -- General Obligation
MBIA -- Municipal Bond Insurance Association Corporation
Regd. -- Registered
REMIC -- Real Estate Mortgage Investment Conduit
SDR -- Special Drawing Rights
STRIPS -- Separate Trading of Registered Interest and Principal of
Securities
44
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SELECTED DATA BASED ON A SHARE OUTSTANDING DURING THE YEAR ENDED DECEMBER 31:
<TABLE>
<CAPTION>
ELFUN INTERNATIONAL EQUITY FUND 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year .............. $19.60 $17.00 $17.67 $16.65 $15.58
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income ........................ 0.26 0.26 0.22 0.24 0.23
Net realized and unrealized
gains (losses) on investments ............. 7.30 2.69 1.26 2.45 2.27
- --------------------------------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM INVESTMENT OPERATIONS .. 7.56 2.95 1.48 2.69 2.50
- --------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ........................ 0.23 0.22 0.17 0.23 0.19
Net realized gains ........................... 2.61 0.13 1.98 1.44 1.24
- --------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ............................. 2.84 0.35 2.15 1.67 1.43
- --------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR .................... $24.32 $19.60 $17.00 $17.67 $16.65
- --------------------------------------------------------------------------------------------------------------------
TOTAL RETURN(A) ................................. 38.90% 17.36% 8.47% 16.13% 16.03%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in thousands) ....... $292,334 $207,466 $193,492 $176,303 $142,262
Ratios to average net assets:
Net investment income ..................... 1.22% 1.32% 1.17% 1.37% 1.36%
Expenses .................................. 0.20% 0.31% 0.24% 0.25% 0.34%
Portfolio turnover rate ...................... 67% 54% 83% 45% 55%
- --------------------------------------------------------------------------------------------------------------------
ELFUN TRUSTS 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year .............. $62.58 $55.81 $46.46 $39.88 $30.91
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ........................ 0.63 0.83 0.75 0.75 0.77
Net realized and unrealized
gains (losses) on investments ............. 11.64 11.93 13.48 8.68 11.33
- --------------------------------------------------------------------------------------------------------------------
TOTAL INCOME FROM INVESTMENT OPERATIONS ......... 12.27 12.76 14.23 9.43 12.10
- --------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ........................ 0.62 0.83 0.74 0.75 0.77
Net realized gains ........................... 4.42 5.16 4.14 2.10 2.36
- --------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ............................. 5.04 5.99 4.88 2.85 3.13
- --------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR .................... $69.81 $62.58 $55.81 $46.46 $39.88
- --------------------------------------------------------------------------------------------------------------------
TOTAL RETURN(A) ................................. 19.74% 22.94% 30.86% 23.55% 39.19%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in thousands) ....... $2,758,535 $2,368,878 $1,981,395 $1,525,979 $1,228,366
Ratios to average net assets:
Net investment income ..................... 0.91% 1.35% 1.39% 1.71% 2.08%
Expenses .................................. 0.12% 0.12% 0.09% 0.13% 0.13%
Portfolio turnover rate ...................... 11% 15% 16% 12% 15%
</TABLE>
- ------------
See Notes to Schedules of Investments and Notes to Financial Statements.
45
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SELECTED DATA BASED ON A SHARE OUTSTANDING DURING THE YEAR ENDED DECEMBER 31:
<TABLE>
<CAPTION>
ELFUN DIVERSIFIED FUND 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ............... $20.18 $19.16 $17.27 $15.86 $13.24
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income ......................... 0.60 0.61 0.56 0.54 0.53
Net realized and unrealized
gains (losses) on investments .............. 2.22 2.66 2.64 1.75 3.06
- --------------------------------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM INVESTMENT OPERATIONS ... 2.82 3.27 3.20 2.29 3.59
- --------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ......................... 0.59 0.60 0.56 0.54 0.53
Net realized gains ............................ 1.29 1.65 0.75 0.34 0.44
- --------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS .............................. 1.88 2.25 1.31 0.88 0.97
- --------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR ..................... $21.12 $20.18 $19.16 $17.27 $15.86
- --------------------------------------------------------------------------------------------------------------------
TOTAL RETURN(A) .................................. 14.04% 17.14% 18.58% 14.40% 27.11%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in thousands) ........ $208,128 $177,582 $143,808 $102,157 $77,255
Ratios to average net assets:
Net investment income ...................... 2.83% 3.00% 3.11% 3.41% 3.62%
Expenses ................................... 0.20% 0.25% 0.22% 0.28% 0.34%
Portfolio turnover rate ....................... 98% 126% 100% 89% 93%
- --------------------------------------------------------------------------------------------------------------------
ELFUN TAX-EXEMPT INCOME FUND 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ............... $11.98 $11.93 $11.61 $11.91 $10.83
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income ......................... 0.61 0.62 0.65 0.66 0.68
Net realized and unrealized
gains (losses) on investments .............. (0.96) 0.10 0.43 (0.25) 1.15
- --------------------------------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM INVESTMENT OPERATIONS ... (0.35) 0.72 1.08 0.41 1.83
- --------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ......................... 0.61 0.62 0.65 0.66 0.68
Net realized gains ............................ 0.04 0.05 0.11 0.05 0.07
- --------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS .............................. 0.65 0.67 0.76 0.71 0.75
- --------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR ..................... $10.98 $11.98 $11.93 $11.61 $11.91
- --------------------------------------------------------------------------------------------------------------------
TOTAL RETURN(A) .................................. (3.01)% 6.21% 9.59% 3.60% 17.32%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in thousands) ........ $1,365,181 $1,486,373 $1,394,734 $1,301,737 $1,312,342
Ratios to average net assets:
Net investment income ...................... 5.31% 5.18% 5.52% 5.67% 5.91%
Expenses ................................... 0.14% 0.10% 0.10% 0.13% 0.13%
Portfolio turnover rate ....................... 24% 18% 28% 22% 59%
</TABLE>
- ----------
See Notes to Schedules of Investments and Notes to Financial Statements.
46
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SELECTED DATA BASED ON A SHARE OUTSTANDING DURING THE YEAR ENDED DECEMBER 31:
<TABLE>
<CAPTION>
ELFUN INCOME FUND 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year .................. $11.56 $11.61 $11.32 $11.64 $10.55
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income ............................ 0.73 0.72 0.75 0.76 0.77
Net realized and unrealized
gains (losses) on investments ................. (0.80) 0.24 0.29 (0.32) 1.09
- --------------------------------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM INVESTMENT OPERATIONS ...... (0.07) 0.96 1.04 0.44 1.86
- --------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ............................ 0.73 0.75 0.75 0.76 0.77
Net realized gains ............................... 0.04 0.26 0.00 0.00 0.00
- --------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ................................. 0.77 1.01 0.75 0.76 0.77
- --------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR ........................ $10.72 $11.56 $11.61 $11.32 $11.64
- --------------------------------------------------------------------------------------------------------------------
TOTAL RETURN(A) ..................................... (0.62)% 8.49% 9.58% 4.01% 18.21%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in thousands) ........... $267,981 $274,082 $230,963 $219,451 $218,880
Ratios to average net assets:
Net investment income ......................... 6.55% 6.12% 6.56% 6.68% 6.90%
Expenses ...................................... 0.18% 0.22% 0.20% 0.24% 0.25%
Portfolio turnover rate .......................... 211% 216% 222% 201% 367%
- --------------------------------------------------------------------------------------------------------------------
ELFUN MONEY MARKET FUND 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year .................. $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ............................ 0.05 0.05 0.05 0.05 0.06
- --------------------------------------------------------------------------------------------------------------------
TOTAL INCOME FROM INVESTMENT OPERATIONS ............. 0.05 0.05 0.05 0.05 0.06
- --------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ............................ 0.05 0.05 0.05 0.05 0.06
- --------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ................................. 0.05 0.05 0.05 0.05 0.06
- --------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR ........................ $1.00 $1.00 $1.00 $1.00 $1.00
- --------------------------------------------------------------------------------------------------------------------
TOTAL RETURN(A) ..................................... 5.11% 5.39% 5.45% 5.23% 5.82%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in thousands) ........... $286,992 $203,920 $167,385 $139,474 $117,506
Ratios to average net assets:
Net investment income ......................... 4.91% 5.21% 5.27% 5.08% 5.68%
Expenses ...................................... 0.19% 0.25% 0.24% 0.31% 0.30%
<FN>
- -------------
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.
</FN>
</TABLE>
- --------------
See Notes to Schedules of Investments and Notes to Financial Statements.
47
<PAGE>
STATEMENTS OF ASSETS
AND LIABILITIES DECEMBER 31, 1999
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
ELFUN ELFUN ELFUN ELFUN
INTERNATIONAL ELFUN DIVERSIFIED TAX-EXEMPT ELFUN MONEY MARKET
EQUITY FUND TRUSTS FUND INCOME FUND INCOME FUND FUND
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in securities, at market
(cost $179,830; $1,132,782;
$150,014; $1,323,582; $268,992
and $0, respectively) ............. $276,329 $2,711,001 $199,211 $1,319,176 $258,212 $ --
Short-term investments
(at amortized cost) ............... 14,155 45,587 15,053 23,921 55,805 287,924
Cash .................................. 1 -- -- -- -- --
Foreign currency (cost $1,261; $0;
$171; $0; $0 and $0, respectively) 1,266 -- 172 -- -- --
Receivable for investments sold ....... -- -- 2,175 -- 8,193 --
Income receivables .................... 375 2,066 1,071 23,558 3,472 397
Receivable for fund shares sold ....... 163 1,053 67 139 362 411
Receivable from advisor ............... 74 -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS ...................... 292,363 2,759,707 217,749 1,366,794 326,044 288,732
- ---------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Distributions payable to shareholders . -- -- 44 1,035 277 209
Payable upon return of securities loaned -- -- -- -- 18,764 --
Payable for investments purchased ..... -- -- 9,537 -- 38,744 --
Payable for fund shares redeemed ...... 29 513 11 233 196 1,393
Payable to GE Asset Management ........ -- 574 29 345 82 138
Variation margin payable .............. -- 85 -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES ................. 29 1,172 9,621 1,613 58,063 1,740
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS ............................... $292,334 $2,758,535 $208,128 $1,365,181 $267,981 $286,992
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Capital paid in ....................... $195,930 $1,177,834 $158,963 $1,373,871 $284,415 $286,980
Undistributed (distributions in excess)
net investment income .............. (35) 314 4 -- 248 12
Accumulated net realized gain (loss) .. (55) 3,400 (36) (4,284) (5,902) --
Net unrealized appreciation/(depreciation) on:
Investments ....................... 96,499 1,578,219 49,197 (4,406) (10,780) --
Futures ........................... -- (1,229) -- -- -- --
Foreign currency related transactions (5) (3) -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS ............................... $292,334 $2,758,535 $208,128 $1,365,181 $267,981 $286,992
- ---------------------------------------------------------------------------------------------------------------------------
Shares outstanding (Par value $10; $10;
$10; $10; $10; and $1, respectively) . 12,020 39,516 9,854 124,286 24,998 286,994
Net asset value, offering and
redemption price per share ........... $ 24.32 $ 69.81 $ 21.12 $ 10.98 $ 10.72 $ 1.00
</TABLE>
- -----------
See Notes to Financial Statements.
48 & 49
<PAGE>
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
ELFUN ELFUN ELFUN ELFUN
INTERNATIONAL ELFUN DIVERSIFIED TAX-EXEMPT ELFUN MONEY MARKET
EQUITY FUND TRUSTS FUND INCOME FUND INCOME FUND FUND
- ----------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
<S> <C> <C> <C> <C> <C> <C>
Dividends ........................... $ 3,214 $ 22,192 $ 1,298 $ -- $ 438 $ --
Interest ............................ 490 4,527 4,574 79,131 18,041* 11,897
Less: Foreign taxes withheld ........ (390) (251) (76) -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME ........................... 3,314 26,468 5,796 79,131 18,479 11,897
- ----------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Administration expenses ............. 146 1,472 123 1,133 142 74
Shareholder servicing agent expenses 97 370 65 167 94 67
Transfer agent expenses ............. 149 617 115 304 170 225
Custody and accounting expenses ..... 23 264 20 166 30 23
Professional fees ................... 20 143 18 93 24 20
Registration, filing, printing and
miscellaneous expenses ........... 23 99 39 107 40 28
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES ......................... 458 2,965 380 1,970 500 437
- ----------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME .................. 2,856 23,503 5,416 77,161 17,979 11,460
- ----------------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments ......................... 28,593 168,192 11,299 (47) (6,058) --
Futures ............................. -- (4,915) (4) -- -- --
Written options ..................... -- -- 63 -- 255 --
Foreign currency related transactions (422) -- (92) -- -- --
INCREASE (DECREASE) IN UNREALIZED
APPRECIATION/DEPRECIATION ON:
Investments ...................... 49,815 276,943 8,797 (121,113) (13,801) --
Futures .......................... -- 440 -- -- -- --
Written options .................. -- -- (1) -- (3) --
Foreign currency related transactions (24) (2) (3) -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
on investments ...................... 77,962 440,658 20,059 (121,160) (19,607) --
- ----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ........... $80,818 $464,161 $25,475 $(43,999) $ (1,628) $11,460
- ----------------------------------------------------------------------------------------------------------------------------------
<FN>
* Income attributable to security lending activity, net of rebate expenses, for
the Elfun Income Fund was $259.
</FN>
</TABLE>
- -----------
See Notes to Financial Statements.
50 & 51
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
ELFUN ELFUN
INTERNATIONAL ELFUN DIVERSIFIED
EQUITY FUND TRUSTS FUND
1999 1998 1999 1998 1999 1998
- ---------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
<S> <C> <C> <C> <C> <C> <C>
Net investment income .................$ 2,856 $ 2,696 $ 23,503 $ 29,250 $ 5,416 $ 4,853
Net realized gain (loss) on
investments, futures, written
options, and foreign currency
related transactions ................. 28,171 757 163,277 183,039 11,266 13,396
Net increase (decrease) in
unrealized appreciation/
depreciation ......................... 49,791 27,532 277,381 239,584 8,793 6,835
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease)from operations . 80,818 30,985 464,161 451,873 25,475 25,084
- ---------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income .................. (2,516) (2,336) (23,331) (29,478) (5,330) (4,813)
Net realized gains ..................... (28,107) (1,325) (165,864) (182,358) (11,669) (13,144)
- ---------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ....................... (30,623) (3,661) (189,195) (211,836) (16,999) (17,957)
- ---------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from
operations and distributions ........... 50,195 27,324 274,966 240,037 8,476 7,127
- ---------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares ........... 27,191 20,099 139,897 165,883 24,267 26,484
Value of distributions reinvested ...... 28,144 3,356 138,628 154,891 15,965 16,810
Cost of shares redeemed ................ (20,662) (36,805) (163,834) (173,328) (18,162) (16,647)
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) from
share transactions ..................... 34,673 (13,350) 114,691 147,446 22,070 26,647
- ---------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ... 84,868 13,974 389,657 387,483 30,546 33,774
NET ASSETS
Beginning of year ......................... 207,466 193,492 2,368,878 1,981,395 177,582 143,808
- ---------------------------------------------------------------------------------------------------------------
End of year ...............................$292,334 $207,466 $2,758,535 $2,368,878 $208,128 $177,582
- ---------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED (DISTRIBUTIONS IN EXCESS) NET
INVESTMENT INCOME, END OF YEAR ............$ (35) $ 1 $ 314 $ 142 $ 4 $ (3)
CHANGES IN FUND SHARES
- ---------------------------------------------------------------------------------------------------------------
Shares sold .................................. 1,207 1,075 2,064 2,716 1,142 1,276
Issued for distributions reinvested .......... 1,182 171 2,016 2,490 764 836
Shares redeemed .............................. (952) (2,044) (2,418) (2,851) (854) (815)
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares ....... 1,437 (798) 1,662 2,355 1,052 1,297
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ELFUN ELFUN
TAX-EXEMPT ELFUN MONEY MARKET
INCOME FUND INCOME FUND FUND
1999 1998 1999 1998 1999 1998
- -----------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
<S> <C> <C> <C> <C> <C> <C>
Net investment income ................. $ 77,161 $ 74,864 $ 17,979 $ 15,462 $ 11,460 $ 9,475
Net realized gain (loss) on
investments, futures, written
options, and foreign currency
related transactions ................ (47) 6,694 (5,803) 6,190 -- 1
Net increase (decrease) in
unrealized appreciation/
depreciation ........................ (121,113) 5,155 (13,804) (1,268) -- --
- -----------------------------------------------------------------------------------------------------------------
Net increase (decrease)from operations (43,999) 86,713 (1,628) 20,384 11,460 9,476
- -----------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ................. (77,161) (74,864) (17,937) (15,968) (11,460) (9,477)
Net realized gains .................... (4,877) (6,048) (1,002) (6,022) -- --
- -----------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ...................... (82,038) (80,912) (18,939) (21,990) (11,460) (9,477)
- -----------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from
operations and distributions .......... (126,037) 5,801 (20,567) (1,606) -- (1)
- -----------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Proceeds from sale of shares .......... 134,206 134,467 42,791 63,001 299,285 211,013
Value of distributions reinvested ..... 56,852 56,497 16,113 18,047 10,858 9,117
Cost of shares redeemed ............... (186,213) (105,126) (44,438) (36,263) (227,071) (183,594)
- -----------------------------------------------------------------------------------------------------------------
Net increase (decrease) from
share transactions .................... 4,845 85,838 14,466 44,785 83,072 36,536
- -----------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS .. (121,192) 91,639 (6,101) 43,179 83,072 36,535
NET ASSETS
Beginning of year ........................ 1,486,373 1,394,734 274,082 230,903 203,920 167,385
- -----------------------------------------------------------------------------------------------------------------
End of year .............................. $1,365,181 $1,486,373 $267,981 $274,082 $286,992 $203,920
- -----------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED (DISTRIBUTIONS IN EXCESS) NET
INVESTMENT INCOME, END OF YEAR ........... $ -- $ -- $ 249 $ 206 $ 12 $ 11
CHANGES IN FUND SHARES
- -----------------------------------------------------------------------------------------------------------------
Shares sold ................................. 11,531 11,240 3,824 5,369 299,285 211,013
Issued for distributions reinvested ......... 4,946 4,725 1,455 1,548 10,858 9,117
Shares redeemed ............................. (16,261) (8,796) (4,000) (3,091) (227,071) (183,594)
- -----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund shares ...... 216 7,169 1,279 3,826 83,072 36,536
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
- ------------
See Notes to Financial Statements.
52 & 53
<PAGE>
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1999
- --------------------------------------------------------------------------------
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 preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions at
the date of the financial statements. Actual results may differ from those
estimates.
The following summarizes the significant accounting policies of the Funds:
SECURITY VALUATION AND TRANSACTIONS
Securities for which exchange (or NASDAQ) 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 as well as dealer supplied valuations. Valuations for municipal
bonds are based on prices obtained from a qualified municipal bond pricing
service; such prices represent the mean of the bid and ask of the secondary
market. Short-term investments maturing within 60 days are valued at amortized
cost or original cost plus accrued interest, both of which approximate current
value. Fund positions that cannot be valued as set forth above are valued at
fair value determined in good faith under procedures approved by the Board of
Trustees of the Funds.
In accordance with Rule 2a-7 under the 1940 Act, Elfun Money Market Fund values
its securities initially at cost and thereafter securities are assumed to have a
constant amortization to maturity of any discount or premium. Amortized cost
approximates fair value.
Security transactions are accounted for as of the trade date. Realized gains and
losses on investments sold are recorded on the basis of identified cost for both
financial statement and federal tax purposes.
REPURCHASE AGREEMENTS
Each of the Funds may enter into repurchase agreements. The Funds' custodian
54
<PAGE>
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1999
- --------------------------------------------------------------------------------
takes possession of the collateral pledged for investments in repurchase
agreements on behalf of the Funds. The Funds value the underlying collateral
daily on a mark-to-market basis to determine that the value, including accrued
interest, is at least equal to 102% of the repurchase price. In the event the
seller defaults and the value of the security declines, or if the seller enters
an insolvency proceeding, realization of the collateral by the Funds may be
delayed or limited.
SECURITY LENDING
The Funds may loan securities to brokers, dealers, and financial institutions
determined by GE Asset Management to be creditworthy, subject to certain
limitations. The Funds receive compensation in the form of fees in addition to
the interest and dividends on the loaned securities during the term of the loan.
The loans of securities are secured by collateral in the form of cash or other
liquid assets, which are segregated and maintained with the custodian in an
amount at least equal to 102% of the current market value of the loaned
securities. During the term of the loan, the Funds will receive any gain or loss
in the market value of its loaned securities and of securities in which cash
collateral is invested net of any rebate. In the event the counterparty
(borrower) does not meet its contracted obligation to return the securities, the
Fund may be exposed to the risk of loss of reacquiring the loaned securities at
prevailing market prices using the proceeds of the sale of the collateral.
FOREIGN CURRENCY
Accounting records of the Funds are maintained in U.S. dollars. Investment
securities and other assets and liabilities denominated in foreign currency are
translated daily to U.S. dollars at the prevailing rates of exchange at period
end. Purchases and sales of securities, income receipts and expense payments
denominated in foreign currencies are translated into U.S. dollars at the
prevailing exchange rate on the respective dates of the 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 or unrealized gain or loss from investments.
Net realized gains or losses on foreign currency transactions represent net
gains or losses on sales and maturities of foreign currency contracts,
disposition of
55
<PAGE>
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1999
- --------------------------------------------------------------------------------
foreign currencies, the difference between the amount of net investment income
and withholding taxes accrued and the U.S. dollar amount actually received and
paid, and gains or losses between the trade and settlement date on purchases and
sales of securities. Net unrealized foreign exchange gains and losses arising
from changes in the value of assets and liabilities as a result of changes in
foreign exchange rates are included as increases or decreases in unrealized
appreciation/depreciation on foreign currency related transactions.
FINANCIAL FUTURES CONTRACTS AND OPTIONS
Each of the Funds may invest in financial futures contracts and each of the
Funds may purchase and write options, subject to certain limitations. The Funds
may invest in futures and options contracts to manage their exposure to the
stock and bond markets and fluctuations in currency values. Buying futures,
writing puts and buying calls tend to increase a fund's exposure to the
underlying instrument. Selling futures, buying puts and writing calls tend to
decrease a fund's exposure to the underlying instrument, or hedge other fund
investments. The Funds will not enter into a transaction involving futures and
options on futures for speculative purposes. The Funds' risks in using these
contracts include changes in the value of the underlying instruments,
non-performance of the counterparties under the contracts' terms, and changes in
the liquidity of secondary markets for the contracts. Futures contracts are
valued at the settlement price established each day by the board of trade or
exchange on which they principally trade. Options are valued at the last sale
price, or if no sales occurred on that day, at the last quoted bid price.
Upon entering into a financial futures contract, the Funds are required to
pledge to the broker an amount of cash and/or other assets equal to a certain
percentage of the contract amount, known as initial margin deposit. Subsequent
payments, known as variation margins, are made or received by the Funds each
day, depending on the daily fluctuation in the fair value of the underlying
security. The Funds record an unrealized gain or loss equal to the daily
variation margin. Should market conditions move unexpectedly, the Fund may not
achieve the anticipated benefits of the financial futures contracts and may
incur a loss. The Funds recognize a realized gain or loss on the expiration or
closing of a futures contract.
When a fund writes an option, the amount of the premium received is recorded as
a liability and is subsequently
56
<PAGE>
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1999
- --------------------------------------------------------------------------------
adjusted to the current fair value of the option written. Premiums received from
writing options that expire unexercised are treated by the Funds on the
expiration date as realized gains from investments. The difference between the
premium and the amount paid on effecting a closing purchase transaction,
including brokerage commissions, is also treated as a realized gain, or if the
premium is less than the amount paid for the closing purchase, as a realized
loss. When an option is exercised, the proceeds from the sale of the underlying
securities purchased is adjusted by the original premium received or paid.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS
The Funds may purchase or sell securities on a when-issued and forward
commitment basis. These transactions are arrangements in which the Funds
purchase and sell securities with payment and delivery scheduled a month or more
after entering into the transaction. The price of the underlying securities and
the date when these securities will be delivered and paid for are fixed at the
time the transaction is negotiated. Losses may arise due to changes in the
market value of the underlying securities or if the counterparty does not
perform under the contract. In connection with such purchases, the Funds
maintain cash or liquid assets in an amount equal to purchase commitments for
such underlying securities until settlement date and for sales commitments the
Funds maintain equivalent deliverable securities as "cover" for the transaction.
Unsettled commitments are valued at current market value of the underlying
security. Daily fluctuations in the value of such contracts are recorded as
unrealized gains or losses. The Funds will not enter into such agreements for
the purpose of investment leverage.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
Certain Funds may enter into forward foreign currency exchange contracts to
facilitate transactions in foreign denominated securities and to manage a Fund's
currency exposure. Forward foreign currency exchange contracts are valued at the
mean between the bid and the offered forward rates as last quoted by a
recognized dealer. The aggregate principal amounts of the contracts are not
recorded in the Fund's financial statements. Such amounts, if any, appear under
the caption forward foreign currency contracts in the Schedule of Investments.
Fluctuations in the value of the contracts are recorded in the Statement of
Assets and Liabilities as
57
<PAGE>
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1999
- --------------------------------------------------------------------------------
an asset (or liability) and in the Statement of Operations as unrealized
appreciation (depreciation) until the contracts are closed, when they are
recorded as realized foreign currency related transactions gains or losses. The
Fund's risks in using these contracts include changes in the value of foreign
currency or the possibility that the counterparties do not perform under the
contract's terms. When a Fund enters into a forward foreign currency exchange
contract, it is required to segregate cash or liquid securities with its
custodian in an amount equal to the value of the Fund's total assets committed
to the consummation of the forward contract. If the value of the segregated
securities declines, additional cash or securities is segregated so that the
value of the account will equal the amount of the Fund's commitment with respect
to the contract.
INVESTMENTS IN FOREIGN MARKETS
Investments in foreign markets may involve special risks and considerations not
typically associated with investing in the United States. These risks include
revaluation of currencies, high rates of inflation, repatriation of income and
capital, and adverse political and economic developments. Moreover, securities
issued in these markets may be less liquid, subject to government ownership
controls, tariffs and taxes, subject to delays in settlements, and their prices
may be more volatile.
INCOME TAXES
(DOLLARS IN THOUSANDS)
The Funds intend to comply with all sections of the Internal Revenue Code
applicable to regulated investment companies, including the distribution of
substantially all of their taxable net investment income, tax-exempt income, and
net realized capital gains to their shareholders. Therefore, no provision for
federal income tax has been made. Each Fund is treated as a separate taxpayer
for federal income tax purposes.
As of December 31, 1999, the following Fund has a capital loss carryover as
indicated below. The capital loss carryover is available to offset future
realized capital gains to the extent provided in the Internal Revenue Code and
regulations thereunder. To the extent that this carryover loss is used to offset
future capital gains, it is probable that the gains so offset will not be
distributed to shareholders because they would be taxable as ordinary income.
FUND AMOUNT EXPIRES
- --------------------------------------------------------
Income Fund $4,168 2007
58
<PAGE>
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1999
- --------------------------------------------------------------------------------
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 Funds incurred and elected
to defer losses at October 31, 1999 as follows:
FUND CURRENCY CAPITAL
- -------------------------------------------------------
Elfun Income Fund $-- $1,644
Elfun Tax-Exempt Income Fund -- 4,284
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 gains distributions annually. The character
of income and gains to be distributed is determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These differences include treatment of realized and unrealized gains and losses
on forward foreign currency contracts, paydown gains and losses on mortgage
backed securities, and losses deferred due to wash sale transactions.
Reclassifications are made to the Funds' capital accounts to reflect income and
gains available for distribution (or available capital loss carryovers) under
income tax regulations. These reclassifications have no impact on net investment
income, net realized gains or losses, or net asset value of the Funds. The
calculation of net investment income per share in the Financial Highlights table
excludes these adjustments. During any particular year, net realized gains from
investment transactions in excess of any applicable capital loss carryforwards
would be taxable to the Funds if not distributed and, therefore, will be
declared and paid to their shareholders annually.
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 becomes available. Interest income is recorded on the accrual basis.
All discounts and premiums on taxable bonds and discounts and premiums on
tax-exempt bonds are amortized to call or maturity date, whichever is shorter,
using the effective yield method. For tax-exempt bonds purchased before May 1,
1993, only original issue discount is amortized. For tax-
59
<PAGE>
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1999
- --------------------------------------------------------------------------------
exempt bonds purchased on or after May 1, 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 directly 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 the Funds' investment adviser and
reimbursed by the Funds.
3. LINE OF CREDIT
Effective December 1999, the Funds share a revolving credit facility of up to
$188,000,000, with a number of its affiliated mutual funds. The credit facility
is with its custodial bank, State Street Bank and Trust Company. The revolving
credit facility requires the payment of a commitment fee equal to 0.08% per
annum based on the daily unused portion of the credit facility, payable
quarterly. The portion borne by the Funds generally is borne proportionately
based upon net assets. Generally, borrowings under the credit facility would
accrue interest at the Federal Funds Rate plus 50 basis points and is borne by
the borrowing Fund. The maximum amount allowed to be borrowed by any one Fund is
the lesser of its prospectus limitation, 20% of its net assets or $75 million.
The credit facility was not utilized by the Funds during the period ended
December 31, 1999.
4. SECURITY LENDING
(DOLLARS IN THOUSANDS)
At December 31, 1999, the Elfun Income Fund, which is the only fund that
participated in securities lending, had loaned securities having a value,
including accrued interest, of approximately $18,440 and received $18,764 and
$223 in cash and letter of credit, respectively, as collateral for loans.
5. FEES AND COMPENSATION PAID TO AFFILIATES
ADVISORY AND ADMINISTRATION FEES
During 1999, the Funds incurred expenses for the cost of services rendered by
General Electric Company's wholly-owned subsidiary, General Electric Investment
Corporation, as investment adviser and for services it 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.
60
<PAGE>
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1999
- --------------------------------------------------------------------------------
6. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION
(DOLLARS IN THOUSANDS)
Aggregate gross unrealized appreciation/ (depreciation) of investments for each
Fund at December 31, 1999, were as follows:
NET
GROSS GROSS UNREALIZED
UNREALIZED UNREALIZED APPRECIATION/
APPRECIATION DEPRECIATION (DEPRECIATION)
- -----------------------------------------------------------
Elfun International
Equity Fund $ 100,039 $ 3,540 $ 96,499
Elfun Trusts 1,659,139 80,920 1,578,219
Elfun Diversified
Fund 56,650 7,453 49,197
Elfun Tax-Exempt
Income Fund 33,217 37,623 (4,406)
Elfun Income Fund 215 10,995 (10,780)
The aggregate cost of each Fund's investments was substantially the same for
book and federal income tax purposes at December 31, 1999.
7. OPTIONS
(CONTRACTS AND DOLLARS IN THOUSANDS)
During the year ended December 31, 1999, 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, 1998 1,870 $ 8 7,980 $ 33
Written 27,164 80 109,216 322
Closed and Expired (23,474) (70) (94,696) (281)
Exercised (5,560) (18) (22,500) (74)
- --------------------------------------------------------------
Balance as of
December 31, 1999 -- $ -- -- $ --
- --------------------------------------------------------------
8. INVESTMENT TRANSACTIONS
(DOLLARS IN THOUSANDS)
The cost of purchases and the proceeds from sales of investments, other than
short-term securities and options, for the year ended December 31, 1999, were as
follows:
PURCHASES SALES
- --------------------------------------------------------
Elfun International
Equity Fund $150,052 $156,620
Elfun Trusts 269,532 327,152
Elfun Diversified Fund 189,133 179,022
Elfun Tax-Exempt
Income Fund 332,332 335,637
Elfun Income Fund 587,950 568,828
61
<PAGE>
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
[KPMG LLP LOGO OMITTED]
THE BOARD OF TRUSTEES AND
SHAREHOLDERS OF THE ELFUN MUTUAL FUNDS:
We have audited the accompanying statements of assets and liabilities of the
Elfun International Equity 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, 1999,
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, 1999, by correspondence with the custodian. As to securities
purchased or sold but not yet received or delivered, we performed other
appropriate auditing procedures. 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, 1999, 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.
[KPMG LLP SIGNATURE OMITTED]
New York, New York
February 4, 2000
62
<PAGE>
TAX INFORMATION, UNAUDITED
- --------------------------------------------------------------------------------
The Elfun International Equity Fund has elected to pass through foreign taxes
paid in 1999 to its shareholders of record on December 27, 1999. The total
amounts of foreign source income and foreign taxes paid are $2,946,251 and
$389,404, respectively. Additional information needed by shareholders to prepare
their 1999 Federal income tax returns has been provided with Forms 1099-DIV.
Of the dividends paid from net investment income by the Elfun Tax-Exempt Income
Fund for the tax period ended December 31, 1999, 95.72% represents exempt
interest dividends for Federal income tax purposes.
During the year ended December 31, 1999, the following Elfun Funds paid to
shareholders of record on December 27, 1999 the following long-term capital gain
dividends:
FUND PER SHARE AMOUNT
- --------------------------------------------------------
Elfun Trusts $4.41722
Elfun Diversified Fund $1.28211
Elfun International Equity Fund $2.61070
Elfun Tax-Exempt Income Fund $0.03855
Elfun Income Fund $0.02746
63
<PAGE>
ELFUN FUNDS' INVESTMENT TEAM
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS
ELFUN INTERNATIONAL EQUITY 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 LLP
CUSTODIAN
State Street Bank & Trust Company
SHAREHOLDER SERVICING AGENT
Address all inquiries to:
GE Asset Management
P.O. Box 419631
Kansas City, MO 64141-6631
OFFICERS OF THE INVESTMENT ADVISER
John H. Myers, TRUSTEE, PRESIDENT,
AND CHIEF EXECUTIVE OFFICER
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, MARKETING
Donald W. Torey, TRUSTEE, EVP, PRIVATE EQUITIES AND REAL ESTATE
John J. Walker, TRUSTEE, EVP, CHIEF FINANCIAL OFFICER
64
<PAGE>
SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
NEW ONLINE SERVICE
Your Elfun Mutual Fund accounts can now be accessed on the Internet at
WWW.ELFUN.ORG.
Here are some of the benefits of our online service:
[BULLET] View account balance and transaction history
[BULLET] Make exchanges
[BULLET] Redeem shares (minimum, $500; maximum, $50,000)
Many more features will be added to the web site in the future for your
convenience.
NEW EXTENDED TELEPHONE SERVICE
Our Customer Reps at the Inquiry Center are available Monday to Friday from 8:30
AM to 6:00 PM Eastern Standard Time. Call toll-free, 1-800-242-0134, for
assistance.
AUTOMATED VOICE RESPONSE SYSTEM
You can also access your account anytime during the day, 7 days a week by
dialing 1-800-242-0134. Simply follow the menu to obtain information or make
certain transactions.
CONTACT US BY MAIL
If you'd like to write to us, address your inquiries regarding your account(s)
to:
Elfun Mutual Funds
P. O. Box 419631
Kansas City, MO 64141-6631.
We are continuing to upgrade a variety of services in order to give you the
tools you need to manage your financial objectives. In the meantime, we welcome
all your comments and suggestions.
<PAGE>
- ----------------
BULK RATE
U.S. POSTAGE
PAID
CANTON, MA
PERMIT NO. 313
- -----------------
ELFUN FUNDS
3003 SUMMER STREET
STAMFORD, CT 06904-7900
DISTRIBUTOR
GE INVESTMENT DISTRIBUTORS INC.
MEMBER NASD AND SIPC
777 LONG RIDGE ROAD, BUILDING B
STAMFORD, CT 06927
[GE LOGO OMITTED]
ELF-2 (2/00)
