<PAGE>
Filed pursuant to Rule 497(c)
File Nos: 33-31205
811-5904
Prospectus
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Elfun Funds
April 30, 1999
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Equity Funds
Elfun Trusts
Elfun Global Fund
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Income Funds
Elfun Income Fund
Elfun Tax-Exempt Income Fund
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Asset Allocation Fund
Elfun Diversified Fund
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Money Market Fund
Elfun Money Market Fund
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Like all mutual funds, these securities have not been approved or disapproved
by the Securities and Exchange Commission, nor has the Securities and Exchange
Commission passed upon the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
<PAGE>
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Contents
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Elfun Funds Prospectus
<TABLE>
<S> <C>
Equity Funds ................................................... 3
Elfun Trusts ................................................... 4
Elfun Global Fund .............................................. 6
Income Funds ................................................... 9
Elfun Income Fund .............................................. 10
Elfun Tax-Exempt Income Fund ................................... 12
Asset Allocation Fund .......................................... 15
Elfun Diversified Fund ......................................... 16
Money Market Fund .............................................. 19
Elfun Money Market Fund ........................................ 20
Fund Expenses .................................................. 22
More on Strategies and Risks ................................... 24
More on Risks .................................................. 24
Other Risk Considerations ...................................... 27
More on Investment Strategies .................................. 27
About the Investment Adviser, Distributor and Servicing Agent .. 33
Investment Adviser and Administrator ........................... 33
Distributor and Servicing Agent ................................ 33
About the Funds' Portfolio Managers ............................ 34
How to Invest .................................................. 35
How to Purchase Units .......................................... 35
How to Redeem Units ............................................ 37
How to Exchange Units .......................................... 39
Dividends, Capital Gains and Other Tax Information ............. 40
Calculating Net Asset Value .................................... 42
Appendix: Financial Highlights ................................ 43
</TABLE>
Additional information regarding the Elfun Funds ("Funds") is contained in the
Statement of Additional Information dated April 30, 1999 which is incorporated
by reference into (legally forms a part of) this Prospectus.
General Electric Company is not a party to the trust agreements which created
each Fund and does not sponsor the Funds.
<PAGE>
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Equity Funds Elfun Funds 3
Prospectus
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Who may want to invest in an Equity Fund?
Elfun Equity Funds may be appropriate for your investment portfolio if you:
o have a long-term investment goal
o are willing to accept higher short-term risk for potential long-term
returns
o want to diversify a portfolio composed mostly of fixed income investments
The Elfun Equity Funds may not be appropriate if you want:
o to avoid potentially significant changes in share price
o a short-term investment
o regular income
Equity funds generally invest in equity securities. Equity securities may
include common stocks, preferred stocks, depositary receipts, convertible
preferred stocks, convertible bonds, convertible debentures, convertible notes,
and rights and warrants of U.S. and foreign companies. Stocks represent an
ownership interest in a corporation. Equity funds have more potential for
capital growth than other funds, but they have greater risk.
[Sidebar]
An investment in an Elfun Fund is not a deposit of any bank and is not insured
by the Federal Deposit Insurance Corporation or any other government agency. An
investment in an Elfun Fund is subject to investment risks, including possible
loss of principal invested.
<PAGE>
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4 Elfun Funds
Prospectus
Equity Funds
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Elfun Trusts
Investment Objective:
Seeks long-term growth of capital and future income rather than current income.
The Strategy
Elfun Trusts invests primarily in equity securities. Stock selection is key to
the performance of the Fund. The portfolio manager seeks to identify securities
of issuers with characteristics such as:
o strong earnings growth
o attractive prices
o a presence in successful industries
o high quality management
The Fund also may invest in foreign securities and debt securities.
The portfolio manager may use various investment techniques to adjust the Fund's
investment exposure, but there is no guarantee that these techniques will work.
The Risks
The principal risk of investing in this Fund is stock market risk. To the extent
that the portfolio manager invests in foreign securities and debt securities,
the Fund would be subject to foreign exposure risk, interest rate risk and
credit risk.
If you would like additional information regarding the Fund's investment
strategies and risks, please refer to "More on Strategies and Risks" later in
this Prospectus.
<PAGE>
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5
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Fund Performance
The bar chart and table opposite illustrate the short-term variability in the
Fund's performance and the Fund's returns relative to a common measure of
performance. The bar chart illustrates how the Fund's performance varies from
year to year over the periods shown.
During the periods presented in the bar chart, the Fund's highest return for a
quarter was 18.67% for the quarter ended December 31, 1998. The Fund's lowest
return for a quarter was -15.03% for the quarter ended September 30, 1990. The
Fund's year-to-date return was 6.49% as of March 31, 1999.
The table opposite illustrates how the Fund's average annual returns for
different calendar periods compare to the returns of the Standard & Poor's 500
Composite Stock Index ("S&P 500 Index"). The table reflects the impact of the
Fund's expenses. It assumes you sold your Units at the end of each period.
Calendar Year Total Returns
[Bar Chart Appears Here]
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
35.81% -3.71% 28.17% 9.28% 8.98% 0.23% 39.19% 23.55% 30.86% 22.94%
</TABLE>
Average Annual Total Return
(as of December 31, 1998)
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
------ ------- --------
<S> <C> <C> <C>
Elfun Trusts 22.94% 22.63% 18.66%
S&P 500 Index 28.70% 24.08% 19.21%
</TABLE>
Both the bar chart and table assume reinvestment of dividends and distributions.
As with all mutual funds, past performance is not an indication of future
performance.
[Sidebar]
All mutual funds use a standard formula to calculate total return. Total return
measures the price change in a Unit assuming the reinvestment of all dividend
income and capital gain distributions.
<PAGE>
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6 Elfun Funds
Prospectus
Equity Funds
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Elfun Global Fund
Investment Objective: Seeks long-term growth of capital and future income by
investing principally in foreign securities consistent with prudent investment
management and the preservation of capital.
The Strategy
The Elfun Global Fund invests primarily in equity securities of companies
located in developed and developing countries, including the United States. The
portfolio managers focus on companies that they expect will grow faster than
relevant markets and whose security price does not fully reflect its potential
growth. Under normal circumstances, the Fund's assets are invested in no fewer
than three different countries. The portfolio managers consider the following
factors in determining where an issuer is located: country of organization,
primary securities trading market, location of assets, or country where the
issuer derives at least half of its revenues and profits. Stock selection is key
to the performance of the Fund.
The portfolio managers seek to identify securities of growth companies with
characteristics such as:
o low prices relative to their long-term cash earnings potential
o potential for significant improvement in the company's business
o financial strength
o sufficient liquidity
The Fund also may invest to a lesser extent in investment-grade securities. The
portfolio managers may use various investment techniques to adjust the Fund's
investment exposure, but there is no guarantee that these techniques will work.
The Risks
The principal risks of investing in this Fund are stock market risk, foreign
exposure risk, style risk and emerging markets risk. To the extent that the
portfolio managers invest in debt securities, the Fund would be subject to
interest rate risk and credit risk.
If you would like additional information regarding the Fund's investment
strategies and risks, please refer to "More on Strategies and Risks" later in
this Prospectus.
<PAGE>
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7
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Fund Performance
The bar chart and table opposite illustrate the short-term variability in the
Fund's performance and the Fund's returns relative to a common measure of
performance. The bar chart illustrates how the Fund's performance varies from
year to year over the periods shown.
During the periods presented in the bar chart, the Fund's highest return for a
quarter was 22.70% for the quarter ended December 31, 1998. The Fund's lowest
return for a quarter was -19.02% for the quarter ended September 30, 1998. The
Fund's year-to-date return was 6.58% as of March 31, 1999.
The table opposite illustrates how the Fund's average annual returns for
different calendar periods compare to the returns of the Morgan Stanley Capital
International World Index ("MSCIW Index"). The table reflects the impact of the
Fund's expenses. It assumes that you sold your Units at the end of each period.
Calendar Year Total Returns
[Bar Chart Appears Here]
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
24.74% -8.56% 14.81% 5.94% 31.88% -0.63% 16.03% 16.13% 8.47% 17.36%
</TABLE>
Average Annual Total Return
(as of December 31, 1998)
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
------ ------- --------
<S> <C> <C> <C>
Elfun Global Fund 17.36% 11.26% 12.05%
MSCIW Index 24.34% 15.68% 10.66%
</TABLE>
Both the bar chart and table assume reinvestment of dividends and distributions.
As with all mutual funds, past performance is not an indication of future
performance.
[Sidebar]
All mutual funds use a standard formula to calculate total return. Total return
measures the price change in a Unit assuming the reinvestment of all dividend
income and capital gain distributions.
<PAGE>
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8
[This page intentionally left blank.]
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Income Funds Elfun Funds 9
Prospectus
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Who may want to invest in an Income Fund?
Elfun Income Funds may be appropriate for your investment portfolio if you:
o seek regular income
o seek lower potential volatility than equity funds over the long term
o want to diversify a portfolio composed mostly of equity investments
Elfun Income Funds may not be appropriate if you want:
o high potential capital appreciation
The Elfun Tax-Exempt Income Fund may be appropriate for your investment
portfolio if you:
o are in a high tax bracket
o want income that is exempt from
federal income tax
Income funds generally invest in debt securities. Debt securities are bonds and
other securities that are used by issuers to borrow money from investors.
Holders of debt securities have a higher priority claim to assets than do equity
holders. Typically, the debt issuer pays the investor a fixed, variable or
floating rate of interest and must repay the borrowed amount at maturity. Some
debt securities, such as zero coupon bonds, are sold at a discount from their
face values instead of paying interest. Income funds provide regular income and
some provide federally tax-exempt income.
[Sidebar]
An investment in an Elfun Fund is not a deposit of any bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Investment in an Elfun Fund is subject to risk, including
possible loss of principal invested.
<PAGE>
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10 Elfun Funds
Prospectus
Income Funds
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Elfun Income Fund
Investment Objective:
Seeks a high level of income consistent with prudent investment management and
the preservation of capital.
The Strategy
The Elfun Income Fund invests primarily in investment grade securities,
including mortgage-backed securities, corporate bonds, U.S. Government
securities and money market instruments. The Fund normally has a weighted
average maturity of approximately five to ten years, but is subject to no
limitation with respect to the maturities of the instruments in which it may
invest.
The portfolio managers seek to identify debt securities with characteristics
such as:
o attractive yields and prices
o the potential for capital appreciation
o reasonable credit quality
The Fund also may invest to a lesser extent in asset-backed securities, high
yield securities and foreign debt securities. The portfolio managers may use
various investment techniques to adjust the Fund's investment exposure, but
there is no guarantee that these techniques will work.
The Fund's investment strategy may result in a high portfolio turnover rate,
which may cause the Fund to experience increased transaction costs and
unitholders to incur increased taxes on their investment in the Fund.
The Risks
The principal risks of investing in this Fund are interest rate risk, credit
risk, prepayment risk and below investment-grade securities risk. To the extent
that the portfolio managers invest in foreign securities, the Fund would be
subject to foreign exposure risk. Certain portfolio securities are derivative
securities that carry derivative securities risk.
If you would like additional information regarding the risks associated with
this Fund, please refer to "More on Strategies and Risks" later in this
Prospectus.
<PAGE>
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11
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Fund Performance
The bar chart and table opposite illustrate the short-term variability in the
Fund's performance and the Fund's returns relative to a common measure of
performance. The bar chart illustrates how the Fund's performance varies from
year to year over the periods shown.
During the periods presented in the bar chart, the Fund's highest return for a
quarter was 6.25% for the quarter ended June 30, 1995. The Fund's lowest return
for a quarter was -2.37% for the quarter ended March 31, 1994. The Fund's
year-to-date return was -0.52% as of March 31, 1999.
The table opposite illustrates how the Fund's average annual returns for
different calendar periods compare to the returns of the Lehman Brothers
Aggregate Bond Index ("LB Aggregate Bond Index"). The table reflects the impact
of the Fund's expenses. It assumes that you sold your Units at the end of each
period.
Calendar Year Total Returns
[Bar Chart Appears Here]
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
14.34% 8.61% 16.13% 6.61% 9.72% -2.33% 18.21% 4.01% 9.58% 8.49%
</TABLE>
Average Annual Total Return
(as of December 31, 1998)
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
------ ------- --------
<S> <C> <C> <C>
Elfun Income Fund 8.49% 7.38% 9.19%
LB Aggregate Bond Index 8.67% 7.27% 9.26%
</TABLE>
Both the bar chart and table assume reinvestment of dividends and distributions.
As with all mutual funds, past performance is not an indication of future
performance.
[Sidebar]
All mutual funds use a standard formula to calculate total return. Total return
measures the price change in a Unit assuming the reinvestment of all dividend
income and capital gain distributions.
<PAGE>
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12 Elfun Funds
Prospectus
Income Funds
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Elfun Tax-Exempt Income Fund
Investment Objective:
Seeks as high a level of current interest income exempt from Federal income
taxation as is available from concentration of investment in municipal bonds
consistent with prudent investment management and the preservation of capital.
Elfun Tax-Exempt Income Fund
The Strategy
The Elfun Tax-Exempt Income Fund invests primarily in investment-grade municipal
securities. The portfolio manager manages the Fund so that, under normal
conditions, at least 80% of the Fund's net assets is invested in municipal
securities, the income from which is typically exempt from federal personal
income tax and the federal alternative minimum tax.
The portfolio manager seeks to identify debt securities with characteristics
such as:
o attractive yields and prices
o the potential for income generation
o the potential for capital appreciation
o reasonable credit quality
The Fund also may invest to a lesser extent in tax-free or taxable money market
instruments and may hold cash. The portfolio manager may use various investment
techniques to adjust the Fund's investment exposure, but there is no guarantee
that these techniques will work.
The Risks
The principal risks of investing in this Fund are municipal securities risk,
interest rate risk and credit risk. Certain portfolio securities are derivative
securities that carry derivative securities risk. The Fund's income may be
subject to state and local taxes.
If you would like additional information regarding the investment strategies and
risks associated with this Fund, please refer to "More on Strategies and Risks"
later in this Prospectus.
<PAGE>
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13
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Fund Performance
The bar chart and table opposite illustrate the short-term variability in the
Fund's performance and the Fund's returns relative to a common measure of
performance. The bar chart illustrates how the Fund's performance varies from
year to year over the periods shown.
During the periods presented in the bar chart, the Fund's highest return for a
quarter was 7.07% for the quarter ended March 31, 1995. The Fund's lowest return
for a quarter was -5.35% for the quarter ended March 31, 1994. The Fund's
year-to-date return was 0.77% as of March 31, 1999.
The table opposite illustrates how the Fund's average annual returns for
different calendar periods compare to the returns of the Lehman Brothers
Municipal Bond Index ("LB Muni Bond Index"). The table reflects the impact of
the Fund's expenses. It assumes that you sold your Units at the end of each
period.
Calendar Year Total Returns
[Bar Chart Appears Here]
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9.21% 5.98% 12.08% 8.50% 12.11% -5.77% 17.32% 3.60% 9.59% 6.21%
</TABLE>
Average Annual Total Return
(as of December 31, 1998)
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
------ ------- --------
<S> <C> <C> <C>
Elfun Tax-Exempt
Income Fund 6.21% 5.92% 7.72%
LB Muni Bond Index 6.48% 6.22% 8.22%
</TABLE>
Both the bar chart and table assume reinvestment of dividends and distributions.
As with all mutual funds, past performance is not an indication of future
performance.
Tax-Exempt Investing -- Tax-exempt investing usually benefits investors in
higher tax brackets.
All mutual funds use a standard formula to calculate total return. Total return
measures the price change in a Unit assuming the reinvestment of all dividend
income and capital gain distributions.
<PAGE>
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14
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Asset Allocation Elfun Funds 15
Fund Prospectus
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Who may want to invest in an Elfun Asset Allocation Fund?
An Asset Allocation Fund may be appropriate for your investment portfolio if
you:
o seek both capital appreciation and current income
o want a single diversified investment
Asset allocation funds are designed to meet the needs of investors who prefer to
have their asset allocation decisions made by professional money managers. They
provide an investor with a means to diversify by investing in a core portfolio
that typically holds both equity securities and debt securities. Although an
investor may achieve the same level of diversification by buying individual
Elfun Equity or Income Funds, the Elfun Diversified Fund presents a
diversification alternative within one fund. An investor should not expect
capital appreciation or current income levels comparable to funds for which
either capital appreciation or current income is their sole objective.
[Sidebar]
An investment in an Elfun Fund is not a deposit of any bank and is not insured
by the Federal Deposit Insurance Corporation or any other government agency. An
investment in an Elfun Fund is subject to investment risks, including possible
loss of principal invested.
<PAGE>
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16 Elfun Funds
Prospectus
Asset Allocation
Fund
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Elfun Diversified Fund
Investment Objective:
Seeks the highest total return consistent with prudent investment management and
the preservation of capital.
The Strategy
The Elfun Diversified Fund invests primarily in equity securities and debt
securities. The portfolio managers follow an asset allocation process
established by General Electric Investment Corporation's Asset Allocation
Committee to diversify holdings across asset classes. It is likely that the Fund
will maintain a weighting in U.S. equity securities, debt securities and foreign
securities based on the relative attractiveness of the asset classes. The Fund
invests in equity securities principally for their capital appreciation
potential and debt securities principally for their income potential. Within
each asset class, the portfolio managers use active security selection to choose
securities based on the merits of individual issuers.
The portfolio managers seek to identify equity securities of companies with
characteristics such as:
o strong earnings growth
o attractive prices
o a presence in successful industries
o high quality management
The portfolio managers seek to identify debt securities with characteristics
such as:
o attractive yields, coupons and prices
o favorable cash flow
o reasonable credit quality
The portfolio managers may use various investment techniques to adjust the
Fund's investment exposure, but there is no guarantee that these techniques will
work.
The Fund's asset allocation process may result in a high portfolio turnover
rate, which may cause the Fund to experience increased transaction costs and
unitholders to incur increased taxes on their investment in the Fund.
The Risks
The principal risks of investing in this Fund are stock market risk, foreign
exposure risk, interest rate risk, credit risk and prepayment risk. To the
extent the portfolio managers invest in high yield securities, the Fund would be
subject to below investment-grade securities risk. Certain portfolio securities
are derivative securities that carry derivative securities risk.
If you would like additional information regarding the Fund's investment
strategies and risks, please refer to "More on Strategies and Risks" later in
this Prospectus.
<PAGE>
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17
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Fund Performance
The bar chart and table opposite illustrate the short-term variability in the
Fund's performance. The bar chart illustrates how the Fund's performance varies
from year to year over the periods shown.
During the periods presented in the bar chart, the Fund's highest return for a
quarter was 11.94% for the quarter ended December 31, 1998. The Fund's lowest
return for a quarter was -5.78% for the quarter ended September 30, 1998. The
Fund's year-to-date return was 3.62% as of March 31, 1999.
The table opposite illustrates how the Fund's average annual returns for
different calendar periods compare to the return of the S&P 500 Index and the
return of the LB Aggregate Bond Index. The table reflects the impact of the
Fund's expenses. It assumes that you sold your Units at the end of each period.
Calendar Year Total Returns
[Bar Chart]
1989 21.51%
1990 4.75%
1991 17.70%
1992 9.35%
1993 8.90%
1994 -0.26%
1995 27.11%
1996 14.40%
1997 18.58%
1998 17.14%
Average Annual Total Return
(as of December 31, 1998)
1 Year 5 Years 10 Years
------ ------- --------
Elfun Diversified Fund 17.14% 15.03% 13.65%
S&P 500 Index 28.70% 24.08% 19.21%
LB Aggregate Bond Index 8.67% 7.27% 9.26%
Both the bar chart and table assume reinvestment of dividends and distributions.
As with all mutual funds, past performance is not an indication of future
performance.
All mutual funds must use the same formula to calculate total return. Total
return measures the price change in a Unit assuming the reinvestment of all
dividend income and capital gain distributions.
<PAGE>
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18
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Money Elfun Funds 19
Market Fund Prospectus
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Who may want to invest in an Elfun Money Market Fund?
A Money Market Fund may be appropriate for your portfolio if you:
o want regular income
o are investing for a short period of time
o want an investment that seeks to maintain a stable share price
A Money Market Fund may not be appropriate if you:
o want a potentially higher rate of income
o want a long-term investment
o seek capital appreciation
Money Market Funds invest in short-term, high quality debt securities. They
seek to provide stability of principal and regular income. The income provided
by a money market fund varies with interest rate movements.
<PAGE>
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20 Elfun Funds
Prospectus
Money Market Fund
- ------------------------------------------------------------------------------
Elfun Money Market Fund
Investment Objective:
Seeks a high level of current income consistent with prudent investment
management and the preservation of capital.
The Strategy
The Elfun Money Market Fund invests primarily in short-term, U.S.
dollar-denominated money market instruments. The Fund's investments may
include U.S. Government securities, repurchase agreements, commercial paper,
variable rate securities, foreign debt securities and bank deposits of
domestic and foreign banks. The portfolio manager limits investments to high
quality securities with maturities of up to 13 months and limits the average
maturity to 90 days.
The Fund invests consistent with regulatory standards governing security
quality, maturity and portfolio diversification. The Fund may invest more than
25% of its total assets in the banking industry. Changes in banking
regulations or the economy can have a significant negative impact on the
banking industry.
All of the Fund's assets are rated in the two highest short-term rating
categories (or their unrated equivalents), and 95% of its assets are rated in
the highest rating category (or its unrated equivalent), by a nationally
recognized statistical rating organization. Additional information about the
money market securities in which the Fund may invest, including rating
categories, is contained in the statement of additional information.
The Risks
The principal risks of investing in this Fund are interest rate risk, credit
risk and foreign exposure risk.
An investment in the Fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation (FDIC) or any other government agency. Although the Fund
seeks to maintain a value of $1.00 per Unit, it is possible to lose money by
investing in the Fund. The Fund's yield will change due to movements in
current short-term interest rates and market conditions. A change in interest
rates or default on the Fund's investments could cause the Fund's Unit price
to decline below $1.00.
If you would like additional information regarding the investment strategies
and risks associated with this Fund, please refer to "More on Strategies and
Risks" later in this Prospectus.
<PAGE>
----------
21
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Fund Performance
The bar chart and table opposite illustrate the short-term variability in the
Fund's performance and the Fund's returns relative to a common measure of
performance. The bar chart illustrates how the Fund's performance varies from
year to year over the periods shown.
During the periods presented in the bar chart, the Fund's highest return for a
quarter was 1.82% for the quarter ended March 31, 1991. The Fund's lowest
return for a quarter was 0.26% for the quarter ended January 31, 1993. The
Fund's year-to-date return was 1.18% as of March 31, 1999.
The table opposite illustrates how the Fund's average annual returns for
different calendar periods compare to the returns of the 90 Day Treasury Bill
Rate ("90 Day T-Bill"). The table reflects the impact of the Fund's expenses. It
assumes that you sold your Units at the end of each period. The Fund's seven day
yield was 4.92% and the seven day effective yield was 5.04% as of December 31,
1998. "Effective yield" reflects the compounding effect of earnings on
reinvested dividends.
Calendar Year Total Returns
[BAR CHART APPEARS HERE]
1991 6.55%
1992 3.91%
1993 3.31%
1994 4.17%
1995 5.82%
1996 5.23%
1997 5.45%
1998 5.39%
Average Annual Total Return
(as of December 31, 1998)
Since
1 Year 5 Years Inception*
------ ------- ----------
Elfun Money Market Fund 5.39% 5.21% 5.19%
90 Day T-Bill 4.88% 5.05% 4.80%
Both the bar chart and table assume reinvestment of dividends and
distributions. If GEIC had not reduced certain expenses during certain of the
periods shown, the Fund's total return would have been lower. As with all
mutual funds, past performance is not an indication of future performance.
* Inception date (commencement of investment operations): June 14, 1990
[Sidebar]
All mutual funds use a standard formula to calculate total return. Total
return measures the price change in a Unit assuming the reinvestment of all
dividend income and capital gain distributions.
<PAGE>
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22 Elfun Funds Fund Expenses
Prospectus
- ------------------------------------------------------------------------------
This summary shows what it will cost you directly or indirectly to invest in a
Fund.
No sales charges, redemption fees or transfer fees are assessed by any Fund,
except if a unitholder elects to redeem units by telephone and have the proceeds
wired to a bank, in which case a Fund will charge a $10 fee.
Annual fund operating expenses come out of a Fund's assets and are reflected in
the Fund's Unit price and dividends.
The figures below reflect actual expenses for the year ended December 31, 1998.
Annual Fund Operating Expenses
(as a percentage of average net assets)
Elfun
Elfun Tax- Elfun
Elfun Diversi- Exempt Elfun Money
Elfun Global fied Income Income Market
Trusts Fund Fund Fund Fund Fund
------ ---- ---- ---- ---- ----
Management expenses:* 0.05% 0.10% 0.09% 0.04% 0.07% 0.03%
Other expenses:** 0.07% 0.21% 0.16% 0.06% 0.15% 0.22%
Total Operating Expenses: 0.12% 0.31% 0.25% 0.10% 0.22% 0.25%
* The nature of the services provided to, and the management expenses paid by,
each Fund are described under "About the Investment Adviser."
** "Other expenses" includes costs of unitholder services, custodial fees, legal
and accounting fees, printing costs and registration fees, the costs of
regulatory compliance, the costs associated with maintaining a Fund's legal
existence and the costs involved in communicating with unitholders of the Funds.
<PAGE>
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23
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The Impact of Fund Expenses
The following example is intended to help you compare the cost of investing in a
Fund with the cost of investing in other mutual funds. Although actual costs may
be higher or lower, you would pay the following expenses on a $10,000
investment, assuming a 5% annual return and that the Fund's operating expenses
remain the same. The example also assumes that you redeemed all of your Units at
the end of each period shown. The example should not be considered to be a
representation of past or future expenses of a Fund. Actual expenses may be
greater or less than those shown.
Example
You would pay the following expenses on a $10,000 investment:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Elfun Trusts: $ 12 $ 39 $ 68 $ 154
Elfun Global Fund: 32 100 174 393
Elfun Income Fund: 23 71 124 280
Elfun Tax-Exempt Income Fund: 10 32 56 128
Elfun Diversified Fund: 26 80 141 318
Elfun Money Market Fund: 26 80 141 318
<PAGE>
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24 Elfun Funds More on
Prospectus Strategies
and Risks
- --------------------------------------------------------------------------------
More on Risks
Like all mutual funds, investing in the Elfun Funds involves risk factors and
special considerations. A Fund's risk is defined primarily by its principal
investment strategies, which are described earlier in this Prospectus.
Investments in a Fund are not insured against loss of principal. As with any
mutual fund, there can be no assurance that a Fund will achieve its investment
objective. Investing in Units of a Fund should not be considered a complete
investment program. The Unit value of the Equity Funds, Income Funds and Elfun
Diversified Fund will rise and fall. Although the Elfun Money Market Fund seeks
to preserve the value of your investment at $1.00 per Unit, it is possible to
lose money by investing in the Fund.
One of your most important investment considerations should be balancing risk
and return. Different types of investments tend to respond differently to shifts
in the economic and financial environment. So, diversifying your investments
among different asset classes--such as stocks, bonds and cash--and within an
asset class--such as small-cap and large-cap stocks--can help you manage risk
and achieve the results you need to comfortably reach your financial goals.
For more information about the risks associated with the Funds, please see the
Statement of Additional Information (SAI), which is incorporated by reference
into this Prospectus.
Below investment-grade securities risk: Below investment-grade securities,
sometimes called "junk bonds," are considered speculative. These securities have
greater risk of default than higher rated securities. The market value of below
investment-grade securities is more sensitive to individual corporate
developments and economic changes than higher rated securities. The market for
below investment-grade securities may be less active than for higher rated
securities, which can adversely affect the price at which these securities may
be sold. Less active markets may diminish a Fund's ability to obtain accurate
market quotations when valuing the portfolio securities and calculating a Fund's
net asset value. In addition, a Fund may incur additional expenses if a holding
defaults and a Fund has to seek recovery of its principal investment. Below
investment-grade securities may also present risks based on payment
expectations. For example, these securities may contain redemption or call
provisions. If an issuer exercises these provisions in a declining interest rate
market, the Fund would have to replace the security with a lower yielding
security resulting in a decreased return for investors.
Credit Risk: The price of a bond is affected by the issuer's or counterparty's
credit quality. Changes in financial condition and general economic conditions
can affect credit quality and therefore the ability to honor financial
obligations. Lower quality bonds are generally more sensitive to these changes
than higher quality bonds. Even within securities considered investment grade,
differences exist in credit quality and some investment grade debt securities
may have speculative characteristics. A security's price may be adversely
affected by the market's opinion of the security's credit quality level even if
the issuer or counterparty has suffered no degradation in ability to honor the
obligation.
Derivative Securities Risk: Derivative securities (securities whose values are
based on other securities, currencies or indices) include options (on stocks,
indices, currencies, futures contracts or bonds), forward currency exchange
contracts, futures contracts, swaps and structured securities. Derivative
securities may be used as a direct investment or as a hedge for a Fund's
portfolio or a portion of a portfolio. Hedging involves using a security to
offset investment risk. Hedging may include reducing the risk of a position held
in a portfolio. Hedging and other investment techniques also may be used to
increase a Fund's exposure to a particular investment strategy. If the portfolio
manager's judgment of market conditions proves incorrect or the strategy does
not correlate well with a Fund's investments, the use of derivatives could
result in a loss regardless of whether the intent was to reduce risk or increase
return and may increase a Fund's volatility. In addition, in the event that
non-exchange traded
<PAGE>
----------
25
- --------------------------------------------------------------------------------
derivatives are used, these derivatives could result in a loss if the
counterparty to the transaction does not perform as promised.
Emerging Markets Risk: Emerging market securities bear most foreign exposure
risks discussed later in this section. In addition, there are greater risks
involved in investing in emerging markets than in developed foreign markets.
Specifically, the economic structures in emerging markets countries are less
diverse and mature than those in developed countries, and their political
systems are less stable. Investments in emerging market countries may be
affected by national policies that restrict foreign investment. Emerging market
countries may have less developed legal structures, and the small size of their
securities market and low trading volumes can make investments illiquid and more
volatile than investments in developed countries. As a result, a Fund investing
in emerging market countries may be required to establish special custody or
other arrangements before investing.
Foreign Exposure Risk: Investing in foreign securities, including depositary
receipts, or securities of U.S. entities with significant foreign operations,
involves additional risks which can affect a Fund's performance. Foreign
markets, particularly emerging markets, may be less liquid, more volatile and
subject to less government supervision than U.S. markets. There may be
difficulties enforcing contractual obligations, and it may take more time for
transactions to clear and settle in foreign countries than in the U.S. Less
information may be available about foreign issuers. The costs of buying and
selling foreign securities, including tax, brokerage and custody costs,
generally are higher than those involving domestic transactions. The specific
risks of investing in foreign securities include:
o Currency Risk: The values of foreign investments may be affected by changes
in currency rates or exchange control regulations. If the local currency
gains strength against the U.S. dollar, the value of the foreign security
increases in U.S. dollar terms. Conversely, if the local currency weakens
against the U.S. dollar, the value of the foreign security declines in U.S.
dollar terms. U.S. dollar-denominated securities of foreign issuers,
including Depositary Receipts, also are subject to currency risk based on
their related investments.
o Political/Economic Risk: Changes in economic, tax or foreign investment
policies, government stability, war or other political or economic actions
may have an adverse effect on a Fund's foreign investments.
o Regulatory Risk: Foreign companies often are not subject to uniform
accounting, auditing and financial reporting standards or to other
regulatory practices and requirements common to U.S. companies.
Illiquid Securities Risk: Illiquid securities may be difficult to resell at
approximately the price they are valued in the ordinary course of business in
seven days or less. When investments cannot be sold readily at the desired time
or price, a Fund may have to accept a lower price or may not be able to sell the
security at all, or forego other investment opportunities, all of which may have
an impact on the Fund.
Interest Rate Risk: Bond prices generally rise when interest rates decline and
decline when interest rates rise. The longer the duration of a bond, the more a
change in interest rates affects the bond's price. Short-term and long-term
interest rates may not move the same amount and may not move in the same
direction.
Municipal Securities Risk: Municipal securities are backed by the entities that
issue them and/or other revenue streams. Like other debt securities, prices of
municipal debt securities are affected inversely by changes in interest rates
and by changes in the credit rating or financial condition of the issuer. Income
derived from investments in municipal securities typically is exempt from
Federal income tax, however capital gains are subject to Federal tax. The
municipal securities market is volatile and may be significantly affected by
tax, legislative or political changes. Some municipal securities are insured and
guarantee the timely payment of interest and repayment of principal.
Prepayment Risk: Prices and yields of
<PAGE>
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26 Elfun Funds
Prospectus
More on Strategies
and Risks
- --------------------------------------------------------------------------------
mortgage-backed securities assume the securities will be redeemed at a given
time. When interest rates decline, mortgage-backed securities experience higher
prepayments because the underlying mortgages are repaid earlier than expected. A
Fund's portfolio manager may be forced to invest the proceeds from prepaid
mortgage-backed securities at lower rates, which results in a lower return for
the Fund. When interest rates increase, mortgage-backed securities experience
lower prepayments because the underlying mortgages may be repaid later than
expected. This typically reduces the value of the underlying securities.
Repurchase and Reverse Repurchase Agreements Risk:
A Fund entering into a repurchase agreement may suffer a loss if the other party
to the transaction defaults on its obligations and could be delayed or prevented
from exercising its rights to dispose of the underlying securities. The value of
the underlying securities might decline while the Fund seeks to assert its
rights. The Fund could incur additional expenses in asserting its rights or may
lose all or part of the income from the agreement. A reverse repurchase
agreement involves the risk that the market value of the securities retained by
a Fund may decline below the price of the securities the Fund has sold but is
obligated to repurchase at a higher price under the agreement.
Restricted Securities Risk: Restricted securities may be subject to legal
restraints and, therefore, are less liquid than other securities. The prices
received from reselling restricted securities in privately negotiated
transactions may be less than those originally paid by a Fund. Companies whose
securities are restricted are not subject to the same investor protection
requirements as publicly traded securities.
Stock Market Risk: A Fund's share price will move up and down in reaction to
stock market movements. Stock prices change daily in response to company
activity and general economic and market conditions. A Fund's investments in
common stocks and other equity securities are subject to stock market risk,
which is the risk that the value of equity securities may decline. Also, equity
securities are subject to the risk that a particular issuer's securities may
decline in value, even during periods when equity securities in general are
rising. Additional stock market risks may be introduced when a particular equity
security is traded on a foreign market. For more detail on the related risks
involved in foreign markets, see Foreign Exposure Risk.
Style Risk: Securities with different characteristics tend to shift in and out
of favor depending upon market and economic conditions as well as investor
sentiment. A fund may underperform other funds that employ a different style. A
fund may also employ a combination of styles that impact its risk
characteristics. Examples of different styles include growth and value
investing, as well as those focusing on large, medium, or small company
securities.
o Growth Investing Risk: Growth Stocks may be more volatile than other stocks
because they are more sensitive to investor perceptions of the issuing company's
growth potential. Growth oriented funds will typically underperform when value
investing is in favor.
o Value Investing Risk: Undervalued stocks may not realize their perceived value
for extended periods of time or may never realize their perceived value. Value
stocks may respond differently to market and other developments than other types
of stocks. Value oriented funds will typically underperform when growth
investing is in favor.
o Mid-Cap Company Risk: Investments in securities of mid-cap companies entail
greater risks than investments in larger, more established companies. Mid-cap
companies tend to have more narrow product lines, more limited financial
resources and a more limited trading market for their stocks, as compared with
larger companies. As a result, their stock prices may decline significantly as
market conditions change.
o Small-Cap Company Risk: Investing in securities of small-cap companies may
involve greater risks than investing in larger, more established issuers.
Smaller companies may have limited product lines, markets or financial
resources. Their securities may trade less frequently and in more limited volume
than securities of larger, more established compa-
<PAGE>
----------
27
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nies. In addition, smaller companies are typically subject to greater changes in
earnings and business prospects than are larger companies. Consequently, the
prices of small company stocks tend to rise and fall in value more than other
stocks. Although investing in small-cap companies offers potential for
above-average returns, the companies may not suceed and the value of stock
shares could decline significantly.
Other Risk Considerations:
EURO Conversion: On January 1, 1999, eleven of the fifteen member countries of
the European Economic and Monetary Union (Participating Countries) established
fixed conversion rates between their existing sovereign currencies and the EURO,
a new common currency in Europe. The introduction of the EURO may result in
uncertainties for securities of European companies, European markets and the
operation of the Funds. The redenomination of certain European debt and equity
securities over a period of time may result in differences in various
accounting, tax and/or legal treatments that would not otherwise occur. Market
disruptions may occur that could adversely affect the value of European
securities and currencies held by the Funds. Other risks relate to the ability
of financial institution systems to process EURO transactions.
General Electric Investment Corporation has addressed ongoing EURO conversion
issues in a broad range of areas, including internal business applications,
trading systems and accounting systems. In addition, GE Investment Corporation
has worked closely with the Funds' major service providers to address EURO
conversion issues. It is possible, however, that the markets for securities in
which certain Funds invest may be adversely affected by the conversion to the
EURO. Furthermore, individual issuers may suffer increased costs and decreased
earnings due to the long-term impact of EURO conversion.
Year 2000: Like other business organizations and individuals around the world,
each of the Funds could be adversely affected if the computer systems used by
its investment manager and external service providers do not properly process
and calculate date-related information from and after January 1, 2000. This is
commonly known as the "Year 2000 Problem." General Electric Investment
Corporation is engaged in a multi-year effort to address the Year 2000 Problem
in a broad range of areas, including internal business applications,
process-enabling systems and facilities. In addition, efforts are underway to
track each of the Funds' major service providers to see what they have
completed, or have undertaken to address the Year 2000 Problem. At this time,
however, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on the Funds.
Furthermore, it is possible that the markets for securities in which the Funds
invest may be detrimentally affected by computer failures throughout the
financial services industry beginning January 1, 2000. Corporate and
governmental data processing errors may result in production problems for
individual companies and overall economic uncertainties. Earnings of individual
issuers may be affected by remediation costs. In addition, it has been reported
that foreign institutions have made less progress in addressing the Year 2000
Problem than major U.S. entities, which could have a greater impact on certain
Elfun Funds' investments that are more sensitive to these risks.
More On Investment Strategies
A Fund is permitted to use other securities and investment strategies in pursuit
of its investment objective, subject to limits established by the Funds' Board
of Trustees. No Fund is under any obligation to use any of the techniques or
strategies at any given time or under any particular economic condition. Certain
instruments and investment strategies may expose the Funds to other risks and
considerations, which are discussed in the Funds' SAI.
Holding Cash and Temporary Defensive Positions: Under normal circumstances, each
Fund may hold cash and/or money market instruments (i) pending investment, (ii)
for
<PAGE>
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28 Elfun Funds
Prospectus
More on Strategies
and Risks
- --------------------------------------------------------------------------------
cash management purposes, and (iii) to meet operating expenses. A Fund may from
time to time take temporary defensive positions when the portfolio manager
believes that adverse market, economic, political or other conditions exist. In
these circumstances, the portfolio manager may (i) without limit hold cash
and/or invest in money market instruments, or (ii) restrict the securities
markets in which a Fund's assets are invested by investing those assets in
securities markets deemed to be conservative in light of the Fund's investment
objective and strategies. The Funds, other than the Money Market Fund, may
invest in money market instruments directly or indirectly through investment in
the GEI Short-Term Investment Fund ("Investment Fund"). The Investment Fund is
advised by GE Investment Management Incorporated, an affiliate of the Funds'
investment manager, which charges no advisory fee to the Investment Fund.
To the extent that a Fund, other than the Elfun Money Market Fund, holds cash or
invests in money market instruments, it may not achieve its investment
objective.
Various investment techniques are utilized by a Fund to increase or decrease its
exposure to changing security prices, interest rates, currency exchange rates,
commodity prices or other factors that affect security values. These techniques
may involve derivative transactions such as buying and selling options and
futures contracts, entering into currency exchange contracts or swap agreements,
purchasing indexed securities and selling securities short. These techniques are
designed to adjust the risk and return characteristics of a Fund's portfolio of
investments and are not used for leverage. To the extent that a Fund employs
these techniques, the Fund would be subject to derivative securities risk.
Borrowing: Each Fund may borrow for temporary or emergency purposes. The Elfun
Tax-Exempt Income Fund may borrow from banks for long-term or leveraging
purposes in an amount not to exceed 10% of total assets. Borrowing for long-term
or leveraging purposes may increase the impact on the Fund of fluctuations in
the value of securities purchased with borrowed money. There can be no assurance
that the Fund would realize a higher return on its investment than the interest
rate on borrowed money.
The following are important definitions that may be unfamiliar to an investor
reading about the Elfun Funds:
Asset-backed securities represent a participation in, or are secured by and
payable from, a stream of payments generated by particular assets, such as
credit card receivables or auto loans.
Bank Deposits are cash, checks or drafts deposited in a financial institution
for credit to a customer's account. Banks differentiate between demand deposits
(checking accounts on which the customer may draw) and time deposits, which pay
interest and have a specified maturity or require 30 days' notice before
withdrawal.
Cash and cash equivalents are highly liquid and highly rated instruments such as
commercial paper and bank deposits.
Certificates of Deposit include short-term debt securities issued by banks.
Commercial paper includes short-term debt securities issued by banks,
corporations and other borrowers.
Convertible securities may be debt or equity securities that pay interest or
dividends and that may be converted on specified terms into the stock of the
issuer.
Corporate bonds are debt securities issued by companies.
Debt securities are bonds and other securities that are used by issuers to
borrow money from investors. Holders of debt securities have a higher priority
claim to assets than do equity holders. Typically, the debt issuer pays the
investor a fixed, variable or floating rate of interest and must repay the
borrowed amount at maturity. Some debt securities, such as zero coupon bonds,
are sold at a discount from their face values instead of paying interest.
Depositary receipts represent interests in an account at a bank or trust company
which holds equity securities. These inter-
<PAGE>
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29
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ests may include American Depositary Receipts (held at U.S. banks and traded in
the United States), European Depositary Receipts, Global Depositary Receipts or
other similar instruments.
Derivative Securities (securities whose values are based on other securities,
currencies or indices) include options (on stocks, indices, currencies, futures
contracts or bonds), forward currency exchange contracts, futures contracts,
swaps, interest-only and principal-only debt securities, certain mortgage-backed
securities like CMOs, and structured securities.
Duration -- a mathematical calculation of the average life of a bond (or
portfolio of bonds) based on cash flows that serves as a useful measure of its
price risk. Each year of duration approximates an expected one percent change in
the bond's price for every one percent change in the interest rate.
Eurodollar Deposits are deposits issued in U.S. dollars by foreign banks and
foreign branches of U.S. banks.
Foreign debt securities are issued by foreign corporations or governments. They
may include the following:
o Eurodollar Bonds, which are dollar-denominated securities issued outside the
U.S. by foreign corporations and financial institutions or by foreign branches
of U.S. corporations and financial institutions
o Yankee Bonds, which are dollar-denominated securities issued by foreign
issuers in the U.S.
o Securities denominated in currencies other than U.S. dollars
Foreign securities include interests in or obligations of entities located
outside of the United States. The determination of where an issuer of a security
is located will be made by reference to the country in which the issuer (a) is
organized, (b) derives at least 50% of its revenues or profits from goods
produced or sold, investments made or services performed, (c) has at least 50%
of its assets situated, or (d) has the principal trading market for its
securities. Foreign securities may be denominated in non-U.S. currencies and
traded outside the United States or may be in the form of depositary receipts.
High yield securities are debt securities of corporations, preferred stock and
convertible preferred stock that are rated Ba through C by Moody's or BB through
D by S&P (or comparably rated by another nationally recognized statistical
rating organization) or, if not rated by Moody's or S&P, are considered by
portfolio management to be of speculative quality. High yield securities include
bonds rated below investment grade, sometimes called "junk bonds," and are
considered speculative by the major credit rating agencies.
Illiquid Securities are securities that cannot be disposed of by a Fund within
seven days in the ordinary course of business at approximately the amount at
which the Fund has valued the securities.
Investment-grade securities are debt securities rated Baa or better by Moody's
and BBB or better by S&P or are comparably rated by another nationally
recognized statistical rating organization, or, if not rated, are of similar
quality to such securities. Securities rated in the fourth highest grade have
some speculative elements.
Maturity -- the date on which a debt security matures or when the issuer must
pay back the principal amount of the security.
Money market instruments are short-term debt securities of the U.S. government,
banks and corporations. The Funds may invest in money market instruments through
investments in the GEI Short-Term Investment Fund (Investment Fund). The
Investment Fund is advised by GE Investment Management Incorporated, an
affiliate of the Funds' investment manager, which charges no advisory fee for
such services.
Mortgage-backed securities include securities issued by the Government National
Mortgage Association (Ginnie Mae), the Federal National Mortgage Association
(Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac) and other
government agencies and private issuers. They may also include collateralized
mortgage
<PAGE>
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30 Elfun Funds
Prospectus
More on Strategies
and Risks
- --------------------------------------------------------------------------------
obligations ("CMOs") which are derivative securities that are fully
collateralized by a portfolio of mortgages.
Municipal securities are debt obligations of local, state or regional
governments. Municipal securities include both municipal bonds (securities with
maturities of more than one year) and municipal notes (securities with
maturities of less than one year). They may be a general obligation of the
municipality that issued them or they may be secured by the revenues of a
special project or facility. Income derived from investments in municipal
securities is typically exempt from Federal income tax, however, capital gains
are subject to Federal tax.
Non-publicly traded securities are securities that are subject to contractual or
legal restrictions on transfer, excluding, for purposes of this restriction,
Rule 144A Securities that have been determined to be liquid by a Fund's Board of
Trustees.
Preferred securities are classes of stock that pay dividends at a specified
rate. Dividends are paid on preferred stocks before they are paid on common
stocks. In addition, preferred stockholders have priority over common
stockholders as to the proceeds from the liquidation of a company's assets.
Repurchase Agreements (repos) are transactions in which a security (usually
a government security) is purchased with a simultaneous commitment to sell it
back to the seller (a commercial bank or recognized securities dealer) at an
agreed upon price on an agreed upon date -- usually the next day.
U.S. Government Securities are issued or guaranteed by the U.S. Government or
one of its agencies or instrumentalities. Some U.S. Government Securities are
backed by the full faith and credit of the federal government. Other U.S.
Government Securities are backed by the issuer's right to borrow from the U.S.
Treasury and some are backed only by the credit of the issuing organization. All
U.S. Government Securities are considered highly creditworthy.
Variable Rate Securities carry interest rates that may be adjusted periodically
to market rates. Interest rate adjustments could increase or decrease the income
generated by the securities.
Weighted average maturity -- the length of time in days or years until the
average security in a money market or bond fund will mature or be redeemed by
its issuer. The average maturity is weighted according to the dollar amounts
invested in the various securities in the fund. This measure indicates an income
fund's sensitivity to changes in interest rates. In general, the longer a fund's
average weighted maturity, the more its share price will fluctuate in
response to changing interest rates.
The following tables summarize each Fund's current investment policies and
limitations. Certain policies and limitations may be changed at the discretion
of GE Investment Managment. Percentage figures refer to the percentage of a
Fund's assets that may be invested in accordance with the indicated policy.
<PAGE>
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31
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<TABLE>
<CAPTION>
Structured Purchasing Purchasing
Reverse Non-Publicly and and Writing and Writing
Repurchase Repurchase Traded Indexed Securities Securities
Agreements Agreements Securities Securities Options Index Options
---------- ---------- ---------- ---------- ------- -------------
<S> <C> <C> <C> <C> <C> <C>
Elfun Trusts Yes No Yes No Yes Yes
Elfun Global Fund Yes No Yes No Yes Yes
Elfun Income Fund Yes No Yes Yes Yes Yes
Elfun Tax-Exempt Income Fund Yes No Yes No Yes Yes
Elfun Diversified Fund Yes No Yes Yes Yes Yes
Elfun Money Market Fund Yes Yes Yes No No No
</TABLE>
<TABLE>
<CAPTION>
Maximum Maximum When-Issued
Futures Investment in Investment and
and Forward Options on Maximum Below-Investment in Delayed
Options on Currency Foreign Investment in Grade Debt Foreign Delivery
Futures Transactions Currencies Debt Securities Securities Securities Securities
--------- ------------ ---------- --------------- ---------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Elfun Trusts Yes No No 35% 5% 35%* Yes
Elfun Global Fund Yes Yes Yes 35% None 100% Yes
Elfun Income Fund Yes Yes Yes 100% (maximum 10% BB or B by 35%* Yes
of 25% BBB by S&P or Ba or B
S&P or Baa by by Moody's or
Moody's or equivalent
equivalent)
Elfun Tax-Exempt Yes No No 100% (maximum 10% BB or B None Yes
Income Fund of 25% BBB by S&P or Ba
by S&P or Baa by Moody's or
by Moody's or equivalent
equivalent)
Elfun Diversified Yes Yes Yes 100% (maximum 10% BB or B by 20%* Yes
Fund of 25% BBB by S&P or Ba or
S&P or Baa by by Moody's or
Moody's or equivalent
equivalent)
Elfun Money Market No No No 100% None 10%* Yes
Fund
</TABLE>
* This limitation excludes ADRs and securities of a foreign issuer with a class
of securities registered with the Securities and Exchange Commission and listed
on a U.S. national securities exchange or traded on the Nasdaq National Market
or Nasdaq Small Cap Market.
<PAGE>
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32 Elfun Funds Propectus
More on Strategies
and Risks
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<TABLE>
<CAPTION>
Debt Floating Participation
Obligations Securities and Interests
Lending Rule of of Other Variable in
Portfolio 144A Supranational Depositary Investment Municipal Rate Municipal
Securities Securities Agencies Receipts Funds Leases Instruments Obligations
---------- ---------- -------- -------- ----- ------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Elfun Trusts Yes Yes No Yes Yes No No No
Elfun Global Fund Yes Yes No Yes Yes No No* No
Elfun Income Fund Yes Yes Yes No Yes No Yes Yes
Elfun Tax-Exempt Yes Yes No No No Yes Yes Yes
Income Fund
Elfun Diversified Yes Yes Yes Yes Yes Yes Yes Yes
Fund
Elfun Money Market Yes Yes Yes No No No Yes No
Fund
</TABLE>
* Excludes commercial paper and notes with variable and floating rates of
interest.
<TABLE>
<CAPTION>
Asset
Custodial Mortgage Government Backed
Receipts Related Stripped Securities Short
Zero Municipal on Securities, Mortgage and Mortgage Sales
Coupon Obligation Municipal including Related Receivable-Backed Dollar Against
Obligations Components Obligations CMOs Securities Securities Rolls the Box
----------- ---------- ----------- ---- ---------- ---------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Elfun Trusts No No No No No No No No
Elfun Global Fund No No No No No No No No*
Elfun Income Fund Yes No No Yes Yes Yes Yes No
Elfun Tax-Exempt Yes Yes Yes No No No No No
Income Fund
Elfun Diversified Yes Yes Yes Yes Yes Yes Yes No*
Fund
Elfun Money Market No No No No No No No Yes
Fund
</TABLE>
* The Fund may join with other investment companies or client accounts in the
purchase or sale of securities.
<PAGE>
-----------------------------------------
About the Investment Elfun Funds 33
Adviser, Distributor Prospectus
and Servicing Agent
- --------------------------------------------------------------------------------
Investment Adviser and Administrator
General Electric Investment Corporation (GEIC), located at 3003 Summer Street,
Stamford, Connecticut 06904, is the investment adviser of each Fund. GEIC is a
wholly-owned subsidiary of GE and a registered investment adviser. GEIC's
principal officers, directors and portfolio managers hold similar positions
with GE Investment Management Incorporated (GEIM), a wholly-owned subsidiary
of GE. As of March 1, 1999, GEIC and GEIM managed roughly $80 billion in
assets, including $16 billion in mutual funds.
The management and administration fee charged to the Funds by GEIC is the
reasonable cost, both direct and indirect, incurred by GEIC in providing
advisory and administration services. Direct and indirect costs incurred by GEIC
for a Fund are paid out of, or reimbursed to GEIC from, gross income. The costs
to be charged to a Fund include: SEC fees, state Blue Sky notification fees,
fees of custodians, transfer and dividend disbursing agents (including fees and
expenses incurred by GEIC as the Funds' unitholder servicing agent (the
"Servicing Agent")), industry association fees, external accounting, audit and
legal expenses, costs of independent pricing services, costs of maintaining the
Fund's existence, costs attributable to unitholder services (including, without
limitation, telephone and personnel expenses), costs of preparing and pricing
unitholders' reports, prospectuses and statements of additional information and
holding meetings, the direct and indirect cost of GEIC personnel providing
investment advisory and other services to the Fund. Some of these costs may be
incurred directly by the Funds. While Trustees who are employees of GE serve as
trustees without compensation, each Fund is required to reimburse GEIC for the
portion of the remuneration such persons receive from GE which is allocable to
the time they spend on Fund matters in their capacity as GEIC employees. In
addition, the following cost and expenses will be incurred directly by a Fund;
taxes, brokerage fees and expenses, interest on borrowings and extraordinary
expenses.
For the year ended December 31, 1998, the Funds paid GEIC the following
amounts as a percentage of average net assets for investment management and
administration services:
Elfun Trusts 0.05%
Elfun Global Fund 0.10%
Elfun Income Fund 0.07%
Elfun Tax-Exempt Income Fund 0.04%
Elfun Diversified Fund 0.09%
Elfun Money Market Fund 0.03%
Distributor and Servicing Agent
During the year ended December 31, 1998, GEIC also served as the Funds'
Servicing Agent. As Servicing Agent, GEIC was responsible for processing
redemption requests, providing services which assist the Funds' transfer
agent, and responding to unitholder inquiries. GEIC was reimbursed for the
reasonable costs of providing such services. For the year ended December 31,
1998, the Funds paid GEIC the following amounts as a percentage of average net
assets for services as Servicing Agent: Elfun Trusts -- 0.03%; Elfun Global
Fund -- 0.08%; Elfun Income Fund -- 0.06%; Elfun Tax-Exempt Income Fund --
0.02%; Elfun Diversified Fund -- 0.06%; and Elfun Money Market Fund -- 0.05%
Effective January 1, 1999, GE Investment Distributors, Inc. ("GEID"), the
Funds' distributor, assumed GEIC's responsibilities as Servicing Agent. GEID
does not receive a fee for acting as the Fund's Distributor and is reimbursed
for the reasonable costs incurred in providing its services as Servicing
Agent. GEID is a wholly-owned subsidiary of GE Financial Assurance Holdings,
Inc., an indirect, wholly-owned subsidiary of GE.
<PAGE>
- -----------------------------------------
34 Elfun Funds
Prospectus
About the
Investment Adviser
- --------------------------------------------------------------------------------
About the Funds' Portfolio Managers
David B. Carlson is a Senior Vice President of GEIC. He is portfolio manager
of Elfun Trusts and is also responsible for the management of the equity
investments for the Elfun Diversified Fund. He has served Elfun Trusts as a
portfolio manager since 1988 and has served the Elfun Diversified Fund as a
portfolio manager since 1992. He has more than 16 years of investment
experience and has held positions with GEIC, or its affiliates since 1982.
Robert R. Kaelin is a Senior Vice President of GE Investments and is the
portfolio manager of the Elfun Tax-Exempt Income Fund. He has served as a
portfolio manager for the Fund since 1984 and has over 29 years of investment
experience. Mr. Kaelin has held positions with GEIC since 1984.
Ralph R. Layman is a Director and Executive Vice President of GEIC. Mr. Layman
is a co-portfolio manager of the Elfun Global Fund and has served the Fund in
a portfolio management capacity since 1991. He has also managed foreign
investments of the Elfun Diversified Fund since March 1997. He has more than
20 years of investment experience and has held positions with GEIC since 1991.
Robert A. MacDougall is a Director and Executive Vice President of GEIC. He
leads a team of portfolio managers for the Elfun Income Fund and also manages
fixed income investments for the Elfun Diversified Fund. Mr. MacDougall has
served in those capaciites for the Elfun Income Fund since 1986 and the Elfun
Diversified Fund since its inception in 1987. He has more than 15 years of
investment experience and has held positions with GEIC since 1986.
Michael J. Solecki is a Vice President of GEIC and co-portfolio manager of the
Elfun Global Fund and has served in that capacity since March 1997. He has
more than eight years of investment experience and has held positions with
GEIC since 1990.
<PAGE>
-----------------------------------------
How to Invest Elfun Funds 35
Prospectus
- --------------------------------------------------------------------------------
How to Purchase Units
Who may Purchase Units
Units of any of the six Elfun Funds to which this prospectus pertains may be
purchased by:
1. Regular and senior members of the Elfun Society,
2. The immediate family of those members,
3. Trusts whose sole beneficiaries are such members,
4. The surviving unremarried spouse of a deceased member,
5. Members of the Board of Directors of General Electric Company ("GE"),
6. GE and its subsidiaries, and
7. Such others as the trustees of the Funds may permit provided that their
participation does not affect the Funds' status as "employees' securities
companies" within the meaning of section 2(a)(13) of the Investment Company Act
of 1940, as amended (the "1940 Act").
Regular members of the Elfun Society are selected from active employees of GE
and/or its majority owned subsidiaries. Senior members are former members who
have retired from those companies. Immediate family is defined as spouse,
children or step-children.
Fund may, in its discretion, reject any order for the purchase of Units. The
Funds no longer issue physical certificates representing Units in any Fund.
Ownership of Units is evidenced by Statements of Account representing Units
issued in book-entry form.
The Elfun Funds offer several ways to purchase Units. You may open an account
and make an investment by mail and make subsequent investments by bank wire,
payroll deduction or electronic funds transfer, as described later in this
section. The Funds no longer issue physical certificates representing Units in
any Fund. Ownership of Units is evidenced by Statements of Account representing
Units issued in book-entry form.
Investing By Mail
o Read this prospectus.
o If opening a new account, complete and sign the application. You may obtain
an application by calling the Funds' Distributor at the number listed on the
back cover.
o Send a check drawn on a U.S. bank in U.S. dollars payable to the applicable
Fund. Third-party checks or endorsed checks are not accepted by the Funds.
o If adding to an existing account, include your account number on the check.
o If a check used to open or add to an account does not clear, you may be
assessed an additional change.
Mail to:
Elfun Mutual Funds
P.O. Box 419631
Kansas City, MO 64141-6631
Overnight delivery:
Elfun Mutual Funds
c/o National Financial Data Services Inc.
330 West 9th Street
Kansas City, MO 64105
Minimum Investments
Initial Investment $500
Subsequent Investments $100
Subsequent minimums are reduced to $25 for Automatic Investment and Payroll
Savings Plans. Accounts that fall below the $500 account minimum may be
automatically redeemed by a Fund on 30 days' notice.
<PAGE>
- ---------------------------------------
36 Elfun Funds
Prospectus
How to Invest
- --------------------------------------------------------------------------------
Once You Have Opened an Account--You Have Additional Options
By Wire
o Wire to the address below. Include your name, the name of the Fund and your
account number. The unitholder's bank may charge a fee for this service.
o Wire orders received by the close of regular trading on the New York Stock
Exchange (NYSE) are executed at that day's net asset value per unit. Wire orders
received after the close of regular trading on the NYSE receive the next
business days' price.
Wire Address:
State Street Bank and Trust Company
ABA 0110-0002-8
DDA 9905-101-3
Payroll Deduction
o You must furnish a completed Elfun Mutual Funds Payroll Deduction
Authorization Form to the Distributor. Contact the Distributor for a copy of the
Payroll Deduction Form at (800) 242-0134.
o Statements of Account are sent on a quarterly basis to those investing
through payroll deductions.
Automatic Investment Plan
o You may have funds transferred directly from your bank account each month.
Call (800) 242-0134 to make arrangements.
o If an automatic investment transaction fails due to insufficient funds in
your account, you may be assessed an additional charge.
Retirement Accounts
Units of the Funds, other than the Elfun Tax-Exempt Fund, are available for
purchase by an Elfun Traditional or Roth Individual Retirement Account ("Elfun
IRAs"). An Elfun IRA application and further details about Elfun IRAs plans are
available from the Distributor.
<PAGE>
-----------
37
- --------------------------------------------------------------------------------
How to Redeem Units
Redemption of Units in General
Bookunits may be redeemed either by telephonic request or by mail. Units
represented by Certificates should be mailed to the addresses listed below for
deposit into Bookunits.
A redemption request received in proper form will be effected at the net asset
value per Unit next determined less any redemption fee as the Trustees may
prescribe. At the present time, the Trustees do not contemplate instituting any
redemption fee for redemption by mail.
By Mail
Send a signed written request, stating the number of Units or specific dollar
amount you want to sell. The written request must also identify the Fund from
which Units are to be redeemed and the account number. Your signature must
appear exactly as it does on the account registration.
Signatures must be guaranteed for any redemption:
o exceeding $25,000
o mailed to a different address from that on record
o paid to someone else
o wired to a financial institution (other than the bank of record)
o mailed to an address that has been changed within the last 30 days
Mail to:
Elfun Mutual Funds
P.O. Box 419631
Kansas City, MO 64141-6631
Overnight Delivery:
Elfun Mutual Funds
c/o National Financial Data Services Inc.
330 West 9th Street
Kansas City, MO 64105
By Telephone
Units may be redeemed by telephone utilizing the Funds' automated system or by
an agent during business hours. The telephone option must have been selected
during initial account setup or subsequently by written request signed by all
registered Unitholders. A single $10 charge will be assessed with each
telephonic redemption wire request. Call toll-free (800) 242-0134.
<PAGE>
- ---------------------------------------
38 Elfun Funds
Prospectus
How to Invest
- --------------------------------------------------------------------------------
By Systematic Withdrawal Plan
You may select a specific amount to be redeemed from your account on a regular
basis.
o Your account balance must be at least $10,000
o Minimum of $50 per withdrawal
o You may sell Units monthly
o If an automatic monthly investment transaction fails due to insufficient
funds in your account, you may be assessed an additional charge.
o You will receive written confirmation of transactions on a quarterly basis
(except the Elfun Money Market Fund which provides a written confirmation
monthly)
o Further information about the Withdrawal Plan may be obtained from the
Servicing Agent.
Checkwriting
Checkwriting privileges may be elected at no cost by shareholders of the Money
Market Fund. Checks may be made payable to any person in amounts of $100 or
more. The Transfer Agent will redeem Units in an amount sufficient to cover the
amount of a check. If the amount of the check is greater than the value of the
Units in a unitholder's account, the check will be returned marked "insufficient
funds" and you may be assessed an additional charge. Please contact the
Distributor at the number listed on the back cover for additional details.
Special Considerations for Selling Units
o When using a check to sell Units of the Money Market Fund, the minimum
check amount is $100.
o If you have purchased Units of a Fund by personal check, redemption of
these Units can only be processed after your check is cleared by your bank. This
could take up to 15 days or more.
o If your account balance falls below $500, the transfer agent may request
that you bring your balance up to the $500 minimum or request that you close
your account. If you take no action within 30 days, the transfer agent may sell
your Units and mail the proceeds to you.
Redemptions in Kind
Large redemptions that exceed $250,000 or 1% of a Fund's assets may be
considered detrimental to the Fund's existing Unitholders. Therefore, the Fund
may require that you take a "distribution in kind" upon redemption and may give
you portfolio securities instead of cash proceeds. Such Fund portfolio
securities will have to be sold through a broker and you may incur transaction
costs when you sell them.
When We Receive Your Transaction Request
Purchase and redemption requests received in good order will be executed at the
net asset value next calculated after receipt of transaction instructions.
Purchase and redemption orders are executed only on days when the NYSE is open
for trading. If the NYSE closes early, the deadlines for purchase and redemption
orders will be accelerated to the earlier closing time. Redemption may be
suspended when trading on the NYSE is restricted or as permitted by the SEC. For
Funds declaring daily income dividends, you will begin to earn income as of the
first business day after payment for your order has been received by the Fund.
You may initiate certain transactions by telephone if you have completed and
returned a telephone transaction form. The Distributor will not be responsible
for losses resulting from unauthorized telephone transaction instructions if it
follows reasonable procedures to verify the identity of the investor.
<PAGE>
-----------
39
- --------------------------------------------------------------------------------
How to Exchange Units
You can exchange Units of one Elfun Fund for Units of another Elfun Fund. An
exchange is a sale and purchase of Units for tax purposes. You may have a
taxable gain or loss when you exchange your Units. To exchange Units:
o by telephone, call (800) 242-0134.
o by mail, send your written request to Elfun Mutual Funds at the address
below.
Mail to:
Elfun Mutual Funds
P.O. Box 419631
Kansas City, MO 64141-6631
Overnight Delivery:
Elfun Mutual Fund
c/o National Financial Data Services Inc.
330 West 9th Street
Kansas City, MO 64105
You should review the description of the Fund that you wish to purchase.
<PAGE>
- ------------------------------------------
40 Elfun Funds Dividends, Capital Gains
Prospectus and Other Tax Information
- --------------------------------------------------------------------------------
Unless you instruct a Fund to mail dividends from net investment income and net
capital gains to you, they will be reinvested in your account. There are no fees
or charges to reinvest dividends.
Each Fund may be subject to a 4% excise tax on undistributed net investment
income and net capital gains. To avoid this tax, the Funds may pay dividends
from net investment income and net capital gains more frequently.
<TABLE>
<CAPTION>
Fund Distribution Schedule
- ---------------------------------------- -----------------------------------------------------------
<S> <C>
Elfun Trusts o Dividends are declared and paid annually.
Elfun Global Fund o Short-term and long-term capital gains, if any, are declared and paid
Elfun Diversified Fund annually
</TABLE>
<TABLE>
<CAPTION>
Fund Distribution Schedule
- ---------------------------------------- -----------------------------------------------------------
<S> <C>
Elfun Tax-Exempt Income Fund o Dividends are declared daily and paid monthly.
Elfun Income Fund o Short-term and long-term capital gains, if any, are declared and paid
Elfun Money Market Fund* annually.
</TABLE>
* All expenses of the Elfun Money Market Fund are accrued daily and deducted
before declaration of dividends to unitholders.
<PAGE>
----------
41
- --------------------------------------------------------------------------------
Taxes
Tax issues can be complicated. We suggest you see your investment professional
or tax advisor for any questions you may have.
Dividends and distributions from net investment income and short-term capital
gains are taxed as ordinary income. Long-term capital gains distributions are
taxed at the long-term capital gains rate, whether you reinvest your
distributions or have them paid to you.
Distributions from Elfun Tax-Exempt Income Fund
In general, income from the Elfun Tax-Exempt Income Fund is exempt from Federal
income tax but may be subject to state and local taxes. Because the Fund may
invest in taxable securities, some dividends from net investment income may be
subject to Federal and state income taxes. Short-term and long-term capital
gains distributed by the Fund are taxable.
Foreign Taxes
Foreign governments may impose taxes on a fund and its investments, and these
taxes generally will reduce the fund's distributions. However, if you meet
certain holding period requirements with respect to your fund Units, an
offsetting tax credit may be available to you. If you do not meet such holding
period requirements, you may still be entitled to a deduction for certain
foreign taxes. In either case, your tax statement will show more taxable income
or capital gains that were actually distributed by the fund, but will also show
the amount of the available offsetting credit or deduction.
Tax Statement
You will receive an annual statement summarizing your dividend and capital gains
distributions. Please consult a tax advisor if you have questions about your
specific tax situation.
Backup Withholding
If you do not provide complete and certified taxpayer identification
information, each Fund is obligated by law to withhold 31% of most Fund
distributions.
<PAGE>
- ----------------------------------------
42 Elfun Funds Calculating Net Asset Value
Prospectus
- --------------------------------------------------------------------------------
Fund Units are sold at net asset value ("NAV"). The NAV of each Fund is
calculated at the close of regular trading on the New York Stock Exchange
(NYSE), normally 4:00 p.m. Eastern time, each day the NYSE is open for trading.
The NAV per Unit for Funds (other than the Elfun Money Market Fund) is
determined by adding the value of the Fund's investments, cash, and other assets
attributable to that class, subtracting its liabilities, and then dividing the
result by the number of that class' outstanding Units.
A Fund's portfolio securities are valued most often on the basis of market
quotations. Foreign securities are valued on the basis of quotations from the
primary market in which they are traded. Some debt securities are valued using
dealers and pricing services. Municipal bond valuations are based on prices
supplied by a qualified municipal pricing service. The prices are composed of
the mean average of the bid and ask prices on the secondary market. All
portfolio securities of the Money Market Fund and any short-term securities held
by any other Fund with remaining maturities of sixty days or less are valued on
the basis of amortized cost or original cost plus accrued interest. A Fund's
written or purchased options are generally valued at the last sales price, or if
no sales occurred on that day, at the less quoted bid price. The value of a
futures contract is generally equal to the unrealized gain or loss on the
contract that is determined by marking the contract to the current settlement
price for a like contract on the valuation date of the futures contract. A
Fund's NAV may change on days when Unitholders will not be able to purchase or
redeem the Fund's Units.
If quotations are not readily available for any security, or if the value of a
security has been materially affected by events occurring after the closing of a
market, the security may be valued by using procedures approved by a Fund's
Board of Trustees that they believe accurately reflects "fair value."
<PAGE>
----------------------------------------
Financial Elfun Funds 43
Highlights Prospectus
- --------------------------------------------------------------------------------
The financial highlights tables that follow are intended to help you understand
a Fund's financial performance for the fiscal years ended December 31. Certain
information reflects financial results for a single Fund Unit. The total returns
in the table represent the rate that an investor would have earned or
lost on an investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by KPMG LLP, whose report,
along with the Funds' financial statements, are included in the Funds' Annual
Report, which is available upon request.
<PAGE>
- ----------------------------------------
44 Elfun Funds
Prospectus
Financial
Highlights
- --------------------------------------------------------------------------------
Elfun Trusts
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $55.81 $46.46 $39.88 $30.91 $33.76
- ------------------------------------------------------------------------------------------------------------------------------------
Income from Investment Operations:
- ------------------------------------------------------------------------------------------------------------------------------------
Net Investment Income 0.83 0.75 0.75 0.77 0.77
- ------------------------------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gains (Losses) on Investments 11.93 13.48 8.68 11.33 (0.68)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income from Investment Operations 12.76 14.23 9.43 12.10 0.09
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions from:
- ------------------------------------------------------------------------------------------------------------------------------------
Net Investment Income 0.83 0.74 0.75 0.77 0.77
- ------------------------------------------------------------------------------------------------------------------------------------
Net Realized Gains 5.16 4.14 2.10 2.36 2.17
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions 5.99 4.88 2.85 3.13 2.94
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $62.58 $55.81 $46.46 $39.88 $30.91
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return (a) 22.94% 30.86% 23.55% 39.19% 0.23%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data:
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (in thousands) $2,368,878 $1,981,395 $1,525,979 $1,228,366 $900,349
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ------------------------------------------------------------------------------------------------------------------------------------
Net Investment Income 1.35% 1.39% 1.71% 2.08% 2.28%
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses 0.12% 0.09% 0.13% 0.13% 0.17%
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 15% 16% 12% 15% 19%
</TABLE>
- --------------------------------------------------------------------------------
Elfun Global Fund
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $17.00 $17.67 $16.65 $15.58 $16.48
- ------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) from Investment Operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net Investment Income 0.26 0.22 0.24 0.23 0.21
- ------------------------------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gains (Losses) on Investments 2.69 1.26 2.45 2.27 (0.32)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) from Investment Operations 2.95 1.48 2.69 2.50 (0.11)
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions from:
- ------------------------------------------------------------------------------------------------------------------------------------
Net Investment Income 0.22 0.17 0.23 0.19 0.19
- ------------------------------------------------------------------------------------------------------------------------------------
Net Realized Gains 0.13 1.98 1.44 1.24 0.60
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions 0.35 2.15 1.67 1.43 0.79
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $19.60 $17.00 $17.67 $16.65 $15.58
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return (a) 17.36% 8.47% 16.13% 16.03% (0.63)%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (in thousands) $207,466 $193,492 $176,303 $142,262 $126,196
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income 1.32% 1.17% 1.37% 1.36% 1.44%
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses 0.31% 0.24% 0.25% 0.34% 0.38%
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 54% 83% 45% 55% 30%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Highlights
<PAGE>
----------
45
- --------------------------------------------------------------------------------
Elfun Income Fund
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $11.61 $11.32 $11.64 $10.55 $11.68
- ------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) from Investment Operations:
- ------------------------------------------------------------------------------------------------------------------------------------
Net Investment Income 0.72 0.75 0.76 0.77 0.70
- ------------------------------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gains (Losses) on Investments 0.24 0.29 (0.32) 1.09 (0.97)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) from Investment Operations 0.96 1.04 0.44 1.86 (0.27)
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions from:
- ------------------------------------------------------------------------------------------------------------------------------------
Net Investment Income 0.75 0.75 0.76 0.77 0.70
- ------------------------------------------------------------------------------------------------------------------------------------
Net Realized Gains 0.26 0.00 0.00 0.00 0.16
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions 1.01 0.75 0.76 0.77 0.86
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $11.56 $11.61 $11.32 $11.64 $10.55
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return (a) 8.49% 9.58% 4.01% 18.21% (2.33)%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (in thousands) $274,082 $230,963 $219,451 $218,880 $185,665
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ------------------------------------------------------------------------------------------------------------------------------------
Net Investment Income 6.12% 6.56% 6.68% 6.90% 6.34%
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses 0.22% 0.20% 0.24% 0.25% 0.30%
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 216% 222% 201% 367% 215%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Elfun Tax-Exempt
Income Fund
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $11.93 $11.61 $11.91 $10.83 $12.29
- ------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Investment Operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net Investment Income 0.62 0.65 0.66 0.68 0.67
- ------------------------------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gains (Losses) on Investments 0.10 0.43 (0.25) 1.15 (1.37)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Investment Operations 0.72 1.08 0.41 1.83 (0.70)
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions from:
- ------------------------------------------------------------------------------------------------------------------------------------
Net Investment Income 0.62 0.65 0.66 0.68 0.67
- ------------------------------------------------------------------------------------------------------------------------------------
Net Realized Gains 0.05 0.11 0.05 0.07 0.09
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions 0.67 0.76 0.71 0.75 0.76
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $11.98 $11.93 $11.61 $11.91 $10.83
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return (a) 6.21% 9.59% 3.60% 17.32% (5.77)%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data:
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (in thousands) $1,486,373 $1,394,734 $1,301,737 $1,312,342 $1,145,873
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ------------------------------------------------------------------------------------------------------------------------------------
Net Investment Income 5.18% 5.52% 5.67% 5.91% 5.90%
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses 0.10% 0.10% 0.13% 0.13% 0.13%
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 18% 28% 22% 59% 24%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Highlights
<PAGE>
- ----------------------------------------
46 Elfun Funds
Prospectus
Financial
Highlights
- --------------------------------------------------------------------------------
Elfun Diversified Fund
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $19.16 $17.27 $15.86 $13.24 $14.05
- ------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) from Investment Operations:
- ------------------------------------------------------------------------------------------------------------------------------------
Net Investment Income 0.61 0.56 0.54 0.53 0.47
- ------------------------------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gains (Losses) on Investments 2.66 2.64 1.75 3.06 (0.51)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) from Investment Operations 3.27 3.20 2.29 3.59 (0.04)
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions from:
- ------------------------------------------------------------------------------------------------------------------------------------
Net Investment Income 0.60 0.56 0.54 0.53 0.46
- ------------------------------------------------------------------------------------------------------------------------------------
Net Realized Gains 1.65 0.75 0.34 0.44 0.31
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions 2.25 1.31 0.88 0.97 0.77
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $20.18 $19.16 $17.27 $15.86 $13.24
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return (a) 17.14% 18.58% 14.40% 27.11% (0.26)%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (in thousands) $177,582 $143,808 $102,157 $77,255 $57,774
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ------------------------------------------------------------------------------------------------------------------------------------
Net Investment Income 3.00% 3.11% 3.41% 3.62% 3.42%
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses 0.25% 0.22% 0.28% 0.34% 0.39%
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 126% 100% 89% 93% 82%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Elfun Money Market Fund
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994(b)
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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 0.06 0.04
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income from Investment Operations 0.05 0.05 0.05 0.06 0.04
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions from:
- ------------------------------------------------------------------------------------------------------------------------------------
Net Investment Income 0.05 0.05 0.05 0.06 0.04
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions 0.05 0.05 0.05 0.06 0.04
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $1.00 $1.00 $1.00 $1.00 $1.00
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return (a) 5.39% 5.45% 5.23% 5.82% 4.17%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data:
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (in thousands) $203,920 $167,385 $139,474 $117,506 $107,406
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ------------------------------------------------------------------------------------------------------------------------------------
Net Investment Income 5.21% 5.27% 5.08% 5.68% 4.20%
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses 0.25% 0.24% 0.31% 0.30% 0.16%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Notes to Financial Highlights
(a) Total returns are historical and assume changes in share price, reinvestment
of dividends and capital gains, and assume no sales charge.
(b) Had the Adviser not absorbed a portion of the expenses the net investment
income per share would have been the same, the total return would have been
lower, and the ratio of expenses to average net assets would have been
.34% for the year ended December 31, 1994.
<PAGE>
[This page intentionally left blank.]
<PAGE>
- ----------------------------------------
Elfun Funds
Prospectus
- ----------------------------------------
Investment Adviser
General Electric Investment Corporation
3003 Summer Street
P.O. Box 7900
Stamford, CT 06904
- ----------------------------------------
Transfer Agent and Custodian
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02101
- ----------------------------------------
Distributor and Servicing Agent
GE Investment Distributors, Inc.
777 Long Ridge Road, Building B
Stamford, CT 06927
- ------------------------------------------------------------
If you wish to know more
You will find additional information about the Elfun Funds in the following
documents:
Annual Report to Unitholders: This report details the Funds' actual investments
as of the report date. The report usually includes performance numbers, a
discussion of market conditions and investment strategies that affected Fund
performance during the Funds' last fiscal year.
Statement of Additional Information (SAI): The SAI contains additional
information about the Funds and their investment strategies and policies and is
incorporated by reference (legally considered part of the prospectus). The SAI
is on file with the Securities and Exchange Commission (SEC).
You may visit the SEC's Internet Website (http://www.sec.gov) to view the SAI
and other information. Also, you can obtain copies of this information by
sending your request and duplicating fee to the SEC's Public Reference Section,
Washington, D.C. 20549-6009. You may review and copy information about the
Funds, including the SAI, at the SEC's Public Reference Room in Washington, D.C.
To find out more about the public reference room, call the SEC at
1-800-SEC-0330.
You may obtain a free copy of the SAI or the Funds' annual report and make
inquiries by contacting:
Elfun Mutual Funds
3003 Summer Street
P.O. Box 120065
Stamford, CT 06912-0074
Telephone: 1-800-242-0134
Website: http://www.elfun.org
Investment Company Act file numbers:
Elfun Trusts: 811-00483
Elfun Global Fund: 811-05216
Elfun Income Fund: 811-03866
Elfun Tax-Exempt Income Fund: 811-02735
Elfun Diversified Fund: 811-05324
Elfun Money Market Fund: 811-05904
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EF-PRO-1
