ELFUN TAX EXEMPT INCOME FUND, N-30D, 1996-03-07

ELFUN TAX EXEMPT INCOME FUND
N-30D, 1996-03-07

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<PAGE>

[GRAPHIC]

ELFUN LOGO

ELFUN FUNDS
ANNUAL REPORT
December 31, 1995

<PAGE>

UNDERSTANDING YOUR REPORT

Page
____

ELFUN FUNDS' SPECTRUM INSIDE FRONT COVER
HOW YOUR FUNDS MATCH UP WITH THE RISK/RETURN SPECTRUM

CHAIRMAN'S LETTER 1
DALE FREY ON MARKET EVENTS

REVIEW OF PERFORMANCE
AND SCHEDULES OF INVESTMENTS

ELFUN GLOBAL FUND 2
ELFUN TRUSTS 7
ELFUN DIVERSIFIED FUND 12
ELFUN TAX-EXEMPT INCOME FUND 20
ELFUN INCOME FUND . . 28
ELFUN MONEY MARKET FUND 35
PORTFOLIO MANAGERS DISCUSS YOUR FUNDS' RESULTS IN 1995

FINANCIAL STATEMENTS 41
FINANCIAL HIGHLIGHTS AND STATEMENTS OF ASSETS AND
LIABILITIES, OPERATIONS, AND CHANGES IN NET ASSETS

NOTES 50
NOTES TO THE FINANCIAL STATEMENTS

INDEPENDENT AUDITORS' REPORT 55
THE ACCOUNTANT'S OPINION

ELFUN FUNDS INVESTMENT TEAM . . 56

SHAREHOLDER INQUIRIES INSIDE BACK COVER
HOW YOU CAN OBTAIN MORE INFORMATION

_______________________________________________________________________________

ON THE COVER: GE Investments' portfolio managers are pictured making a trade
in one of our newly upgraded trading rooms. During 1995,
GE Investments made technological improvements in an effort
to create state-of-the-art trading facilities.

<PAGE>

INVESTMENT STRATEGY
_______________________________________________________________________________

CONSERVATIVE MODERATE AGGRESSIVE

FINDING THE RIGHT MIX OF RISK AND RETURN
_______________________________________________________________________________

MUTUAL FUND CATEGORIES POTENTIAL
RISK/RETURN
SPECTRUM
_______________________________________________________________________________

GLOBAL GROWTH This category includes international stock funds that invest in
common stocks and other equity securities of companies located primarily
outside the United States. Compared with domestic stocks, these funds offer
potentially higher returns, but carry additional risks.

Growth This category includes stock funds designed to pursue long-term
growth. Balanced and asset allocation funds investing in diversified
portfolios of bonds, other fixed income securities and money market
instruments, as well as stocks may also be included. Although stocks
historically have offered the greatest growth potential, they have fluctuated
more in price from day to day.

Income This category includes taxable or tax-exempt bond funds. Depending on
the types of bonds or other fixed income securities in which the funds
invest, these funds seek to provide a moderate to high level of current
income, while aiming to preserve an investor's original investment value.
Stability This category seeks to provide strong safety and stability of
principal while providing current income. Funds in this category are built
around high-quality, short-term securities with remaining maturities of 13
months or less.

<PAGE>

Finding the right mix of risk and return

ELFUN FUNDS
_______________________________________________________________________________

ELFUN GLOBAL FUND

ELFUN TRUSTS
ELFUN DIVERSIFIED FUND

Each investor has a unique notion of what the "right" mix of risk and return
should be. You may, for example, be an investor who seeks to maintain the
highest possible degree of stability in your portfolio, and therefore favors
money market securities. Or, you may be at the opposite end of the spectrum --
someone who is willing to accept and tolerate higher degrees of risk in
exchange for the potential of higher returns offered by stocks. Because
higher returns generally mean greater price fluctuations and potential loss,
investment decisions will always revolve around this tradeoff.

ELFUN TAX-EXEMPT INCOME FUND

ELFUN INCOME FUND

To help you align your portfolio's particular blend of risk and return
with your investment preferences, Elfun Funds strives to offer an
evenly balanced array of investment options.

ELFUN MONEY MARKET FUND

As illustrated at left, each fund in the Elfun family of funds falls into
a distinct category that is designed to match up with the various stages of
the risk/return spectrum. Using this guide, you can fashion a diversified
portfolio to help you achieve your individual investment goals while
maintaining a level of risk acceptable to you. Through this type of
approach, Elfun Funds can truly be your core investment program.

<PAGE>

A LETTER FROM THE CHAIRMAN

DEAR SHAREHOLDER:

This past year marks some exciting changes at GE Investments. We have
devoted significant efforts and resources to improving our customer service
capabilities. Our GE Inquiry Center has been expanded to accommodate major
technology improvements. Each of our inquiry specialists has undergone
extensive training in order to provide you with more valuable information.
In addition, we continue to upgrade our trading areas with the latest
equipment for trading, news and information to assure that our analysts stay
on top of the markets. In the same spirit of change, you'll note some
improvements to this year's annual report. We have organized the report to
be more interesting and informative for you. For example, we added helpful
fund information on the inside front cover to guide you through the report.
Also, we have expanded our reviews of performance to include more fund
highlights.

PERFORMANCE HIGHLIGHTS

[GRAPHIC]
PHOTO OF DALE F. FREY

After weak financial performance in 1994, financial markets rebounded
tremendously in 1995, especially in the U.S. The Elfun Funds followed this
trend with Elfun Trusts leading the way in performance with an annual return
of 39.2%, the 3rd best year for the Fund since 1954. Elfun Diversified had
its best year ever, with a 27.1% return, benefiting from the Fund's
allocation in the U.S. stock market. The fixed income funds were boosted by
lower interest rates in 1995, with both Elfun Income (18.2% return) and Elfun
Tax-Exempt (17.3% return) achieving double digit performance.

All of the Elfun Funds, except Elfun Global, outperformed the
average of their peers' returns for the year, based on calculations by Lipper
Analytical Services, an independent mutual fund rating service.
Additionally, the 1995 annual returns of Elfun Trusts and Elfun Money Market
were in the top 10% of their Lipper peers.

The average total returns for each applicable Lipper category, and
complete details of each fund's performance can be found on various
performance review pages contained in this annual report.

MARKET OVERVIEW

Strong corporate earnings were reported throughout 1995, along with low
inflation and decreasing interest rates. Merger and acquisition activity
topped $450 billion for the year and cash flows into equity mutual funds
exceeded $100 billion, setting records for both measures. These factors drove
the S&P 500 up 37.6% for the year.

Bonds recovered after the worst market in history in 1994, reacting
well to indications of an economy under control. The 1995 returns were 18.5%,
as measured by the Lehman Brothers Aggregate Bond Index. The Lehman Brothers
Municipal Bond Index, returned 17.5% for the year, a strong performance
considering that tax reform concerns hovered over the tax-exempt market
throughout the year.

International equity market performance, as measured by the MSCI
EAFE Index, lagged the U.S. equity markets with a return of 11.2% for the
year. This underperformance was primarily driven by Japan, where weak
economic prospects and impending "bad debt" problems at financial
institutions held Japanese equities to only a 0.7% gain in 1995. European
markets posted a respectable return of 21.8% for the year. We believe
European companies continue to represent excellent global values as
cost-cutting efforts begin to pay off.

MARKET OUTLOOK

All in all, 1995 was a terrific year for the financial markets. Looking
forward, the potential certainly exists for a short-term market correction
given current high market valuation levels. Over the long term however,
lower interest rates, controlled inflation, and stable economic growth should
result in a continuation of long-term growth in the financial markets.

It was a pleasure to serve your investment needs in 1995 and we
look forward to helping you meet your financial objectives in 1996.

/s/ Dale F. Frey
Dale F. Frey
Chairman of the Board and President
GENERAL ELECTRIC INVESTMENTS CORPORATION

-1-

<PAGE>

Q
&
A

ELFUN TAX-EXEMPT INCOME FUND

BOB KAELIN MANAGES THE TAX-EXEMPT OPERATION WITH TOTAL ASSETS OVER $5
BILLION. HIS RESPONSIBILITIES INCLUDE MANAGING THE ELFUN TAX-EXEMPT INCOME
FUND. PRIOR TO JOINING GE INVESTMENTS IN 1984, BOB WAS SENIOR VICE PRESIDENT
AND MANAGER OF TAX-EXEMPTS FOR CIGNA/INA INSURANCE COMPANY. FROM 1969 TO
1976, BOB WAS VICE PRESIDENT AT GIRARD BANK IN PHILADELPHIA AND A.G. BECKER
IN NEW YORK, WHERE HE WAS A MUNICIPAL BOND SALESMAN. BOB IS A GRADUATE OF ST.
JOSEPH UNIVERSITY IN PHILADELPHIA WITH A B.S. IN BUSINESS ADMINISTRATION.

Q HOW DID THE ELFUN TAX-EXEMPT INCOME FUND PERFORM COMPARED TO ITS BENCHMARKS
IN 1995?

A The Elfun Tax-Exempt Income Fund had a return of 17.3% in 1995. Our Lipper
peer group of 225 General Municipal Bond funds had an average return of 16.8%
for the same period. The Lehman Brothers Municipal Bond Index returned 17.5%.

Q HOW WOULD YOU CHARACTERIZE THE MARKET IN 1995?

A While the decline in interest rates was very favorable to municipals, the
year saw three major factors that impacted the performance of municipal
bonds. First, the significant reduction in the supply of bonds; second the
announcement of the Orange County, California default; and finally the
ongoing debate in Washington over tax reform. During the year $50 billion in
outstanding supply moved out of the market. Expectations were high that the
reduction in supply would make municipal bonds a top performing asset class.
In reality, the dearth of municipal bonds helped support the market when it
was negatively impacted initially by Orange County
and more recently by tax reform.

[GRAPHIC]
PHOTO OF BOB KAELIN

Q WHY DID THE FUND OVER OR UNDER PERFORM ITS BENCHMARK AND PEERS?

A The Fund was able to outperform its peers average as we kept a low cash
position and took advantage of the rally in the bond market by moving into
discount bonds and selling premium bonds. During periods when interest rates
are declining discount bonds will experience greater price appreciation than
premium bonds.

The Fund also benefited from its limited exposure to the California market
which was hurt by Orange County. At no point during the year did holdings in
California go above 2% of the Fund. We are happy to note that the Fund held
no investments involved in the Orange County collapse.

Q WHAT HAS BEEN THE INVESTMENT STRATEGY OVER THE PAST YEAR?

A Over the year the investment strategy of the Fund did not change. Our
consistent approach of identifying value while maintaining a high average
quality rating has enabled the Fund to ride through a very volatile market
environment. Through this strategy we strive to maximize tax-exempt income
for our shareholders while minimizing capital gains.

Q WHAT IS THE OUTLOOK FOR THE FUNDS IN THE UPCOMING YEAR/HOW HAVE YOU
POSITIONED THE FUND GOING FORWARD?

A Looking ahead into this election year we expect market volatility to
increase. The budget negotiations that have received so much coverage lately
have set the stage for an ideological battle over how the Federal government
will operate after the elections. The prospect of fundamental change always
creates uncertainty. During this period we expect tax reform to be a major
campaign issue that will continue to influence the demand for munis. On the
positive side we continue to be optimistic about the economy. Low inflation
and moderate growth should indicate further declines in interest rates.
Within this environment we will maintain our strategy to seek value.

-20-

<PAGE>

ELFUN TAX-EXEMPT INCOME FUND

COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT

[GRAPHIC]
LINE CHART
Data for line to follow:

ELFUN TAX-EXEMPT
_________________________________

ELFUN LB MUNI
TAX-EXEMPT BOND
_________________________________
<S> <C> <C>
1985 10,000 10,000
1986 12,060 11,930
1987 12,096 12,109
1988 13,681 13,344
1989 14,939 14,785
1990 15,836 15,865
1991 17,752 17,784
1992 19,261 19,349
1993 21,591 21,729
1994 20,346 20,606
1996 23,865 24,191
</TABLE>

<TABLE>
<CAPTION>
Average Annual Total Return
for the periods ended December 31, 1995

One Five Ten
Year Year Year
<S> <C> <C> <C>
Elfun Tax-Exempt 17.32% 8.55% 9.08%
LBMI 17.45% 8.82% 9.24%
</TABLE>

INVESTMENT PROFILE

A Fund designed for investors who seek as high a level of current interest
income exempt from federal income taxes as is consistent with prudent
investment management and preservation of capital by investing principally in
municipal obligations.

*Lipper Performance Comparison
Based On 12/31/95 Total Returns
General Municipal Peer Group
<TABLE>
<CAPTION>
ONE FIVE TEN
YEAR YEAR YEAR
<S> <C> <C> <C>
Fund's rank in peer group: 88 46 13
Number of Funds in peer group: 225 98 56
Peer group average total return: 16.84% 8.48% 8.6%
Lipper categories in peer group: GENERAL MUNICIPAL DEBT

</TABLE>
*SEE NOTES TO PERFORMANCE FOR EXPLANATION OF PEER CATEGORIES.

Quality Ratings as of December 31, 1995
<TABLE>
<CAPTION>
PERCENT OF
MOODY'S RATINGS + MARKET VALUE
<S> <C>
AAA 40.80%
AA 32.10%
A 21.90%
Baa 3.40%
NR 1.80%
</TABLE>

+Moody's Investors Service, Inc. is a nationally recognized
statistical rating organization.

See page 39 for Notes to Performance. Past performance is no guarantee of
future results.

-21-

<PAGE>

SCHEDULE OF INVESTMENTS (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1995

ELFUN TAX-EXEMPT INCOME FUND

[GRAPHIC]
PIE CHART
Data for chart to follow:

Cash & Other 0.3%
Other Revenue 6.0%
General Obligations 22.5%
Municipal Buildings 6.3%
Education 11.6%
Power 19.3%
Transportation 12.9%
Water & Sewer 11.5%
Hospital 7.6%
Pollution 2.0%

Principal
Amount Value
_____________________________________________________________
<S> <C> <C>
MUNICIPAL BONDS--98.0%
_____________________________________________________________

Alabama--0.3%
Birmingham Alabama G.O.
5.125% 07/01/17 $4,000 $3,832

ARIZONA--3.9%
Arizona Industrial Devel. Auth.
Rev. - Power
7.05% 08/01/20 12,000 13,190
Arizona Transportation Board
Rev. - Trans.
6.00% 07/01/08 5,000 5,500
Arizona Transportation Board
Rev. - Trans., MBIA Insured
7.00% 07/01/00 7,150 7,925
Salt River Project Arizona
Improvement Rev. - Power
5.50% 01/01/25 4,750 4,757
5.75% 01/01/19 10,250 10,421
6.25% 01/01/19 8,500 9,093
50,886

CALIFORNIA--1.0%
California State G.O.
8.00% 05/01/03 10,725 12,992

[GRAPHIC]
COLORADO STATE

COLORADO--5.9%
Colorado Springs Colorado Utility
Rev. - Power
6.50% 11/15/15 $30,370 $33,227

Northern Colorado Water
Rev. - Water & Sewer
6.00% 12/01/15 4,500 4,554

Platte River Power. Auth.
Rev. - Power
6.875% 06/01/16 37,850 39,751
77,532

CONNECTICUT--1.0%
Connecticut State G.O.
5.50% 03/15/07 9,560 9,973
5.625% 03/15/09 1,990 2,064

Connecticut State Health & Educational Fac. Auth.
Rev. - Education, MBIA Insured
5.125% 11/01/12 1,495 1,471
13,508

DELAWARE--1.5%
Delaware Trans. Auth.
Rev. - Trans., Prerefunded
6.50% 07/01/11 15,505 17,403
New Castle County Delaware G.O.
6.40% 10/15/03 2,390 2,667
20,070

DISTRICT OF COLUMBIA--3.9%
District of Columbia Rev. - Education
7.15% 04/01/21 17,950 19,673
7.25% 04/01/20 28,955 31,182
50,855

[GRAPHIC]
FLORIDA STATE

FLORIDA--8.5%
Brevard County Utility
Rev. - Pwr., AMBAC Insured
5.25% 03/01/07 - 03/01/08 6,050 6,295
Dade County School District G.O.,
MBIA Insured
5.20% 08/01/07 5,000 5,168
5.50% 08/01/15 17,805 17,945

__________________
See Notes to Schedules of Investments and Financial Statements

-22-

<PAGE>

SCHEDULE OF INVESTMENTS (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1995

Principal
Amount Value
_____________________________________________________________

<S> <C> <C>
Florida State Board Education
Capital Outlay G.O.
5.125% 06/01/22 $ 2,000 $ 1,937
5.25% 06/01/17 23,700 23,428
6.00% 06/01/19 5,250 5,464
Florida State Div. Bd. Fin. Dept.
Rev. - Other, MBIA Insured
6.50% 07/01/09 - 07/01/10 8,855 9,763
Hillsborough County School Board
Rev. - Certificate Participation,
MBIA Insured
6.00% 07/01/12 - 07/01/14 7,155 7,575
Hillsborough County Util. Ref.
Rev. - Water & Sewer, FSA Insured
6.50% 08/01/16 3,260 3,545
Hillsborough County Util. Ref.
Rev. - Water & Sewer, MBIA Insured
6.50% 08/01/16 5,240 5,711
6.625% 08/01/11 10,000 11,068
Orange County Rev. - Water &
Sewer, AMBAC Insured
6.25% 10/01/17 6,500 6,948
Orlando Florida Utilities
Commission Water & Electric
Rev. - Power
5.125% 10/01/19 5,000 4,849
Vero Beach Florida Electric
Rev. - Power, MBIA Insured
5.25% 12/01/07 1,240 1,278
110,974

GEORGIA--2.2%
Atlanta Georgia Water & Sewer
Rev. - Water & Sewer
4.75% 01/01/23 5,000 4,628
De Kalb County Georgia Water
& Sewer Rev. - Water & Sewer
5.125% 10/01/14 2,900 2,857
5.25% 10/01/23 2,750 2,710
Fulton County Georgia School District
5.625% 01/01/21 8,205 8,340
Georgia State G.O.
6.50% 08/01/04 1,750 2,010
Metropolitan Atlanta Rev. - Trans.
6.55% 07/01/20 3,725 4,011

Private Colleges & University
Rev. - Education, MBIA Insured
6.50% 11/01/15 $ 4,010 $ 4,633
29,189

HAWAII--0.8%
Hawaii State G.O.
4.50% 06/01/01 6,500 6,556
Honolulu Hawaii City & County G.O.
6.00% 01/01/12 2,000 2,170
6.10% 06/01/11 1,500 1,605
10,331
[GRAPHIC]
ILLINOIS STATE

ILLINOIS--7.4%
Chicago Illinois School Finance
Auth. G.O., MBIA Insured
5.00% 06/01/09 9,000 8,759
Chicago Public Bldg. Comm.
Rev. - Education, MBIA Insured
7.125% 01/01/15 9,115 10,150
7.70% 01/01/08 6,500 7,083
Cook County Illinois G.O.,
MBIA Insured
5.375% 11/15/18 14,500 14,283
Illinois Education Fac. Auth.
Rev. - Education
7.125% 07/01/21 14,940 16,876
Illinois State Sales Tax Rev. - Sales Tax
5.50% 06/15/20 4,415 4,424
Metropolitan Pier Rev. - Bldg.
6.50% 06/15/27 14,575 15,439
Regional Transport Auth. Illinois
Rev. - Trans.
6.25% 06/01/15 19,055 20,191
97,205

INDIANA--2.2%
Indiana Health Facility Hospital
Rev. - Health
5.25% 11/01/15 1,500 1,443
Indiana University Rev. - Education
6.00% 11/15/14 7,500 7,988
Indianapolis Airport Rev. - Trans.
9.00% 07/01/15 2,500 2,609
Indianapolis Local Rev. - Trans.
6.00% 07/01/10 6,000 6,273

________________
See Notes to Schedules of Investments and Financial Statements

-23-

<PAGE>

ELFUN TAX-EXEMPT INCOME FUND (DOLLARS IN THOUSANDS)

<CAPTION>
Principal
Amount Value
_____________________________________________________________
<S> <C> <C>
Petersburg Pollution Control
Rev. - Pollution Control
5.40% 08/01/17 $2,750 $ 2,760
6.625% 12/01/24 7,250 7,989
29,062

IOWA--0.3%
Muscatine Elec.
Rev. - Power, AMBAC Insured
7.625% 01/01/04 3,840 3,918

MARYLAND--0.3%
Montgomery County G.O.
8.60% 05/01/01 2,910 3,495

MASSACHUSETTS--5.2%
Massachusetts State Health &
Educational Fac. Auth.
Rev. - Hosp., MBIA Insured
6.30% 08/15/24 4,000 4,308
Massachusetts State Indus. Fin.
Agcy. Resources G.O.
6.30% 07/01/05 8,750 9,281
Massachusetts State Port. Authority
Rev. - Trans.
6.00% 07/01/13 1,675 1,761
Massachusetts State Water Resources
Auth. Rev. - Water
5.10% 03/01/03 8,000 8,261
6.50% 07/15/08 - 07/15/19 23,370 26,974
Massachusetts State Water Resources
Auth. Rev. - Water, MBIA Insured
4.75% 12/01/23 7,500 6,902
5.00% 03/01/22 7,500 7,183
5.50% 03/01/17 3,500 3,537
68,207

MICHIGAN--3.9%
Detroit Michigan Sewage Disposal
Rev. - Sewer, MBIA Insured
5.25% 07/01/21 9,250 9,160
Detroit Sewer System
Rev. - Water & Sewer
7.00% 07/01/11 5,000 5,317

Michigan Trunk Line Rev.-Trans.
5.50% 10/01/21 $35,815 $35,230
Warren Michigan Consolidated
School District G.O., MBIA Insured
5.50% 05/01/21 750 751
50,458

MINNESOTA--3.0%
Southern Muni. Power Agcy.
Rev. - Power
5.75% 01/01/11 8,780 9,533
Southern Muni. Power Agcy.
Rev. - Power, MBIA Insured
4.75% 01/01/16 7,000 6,496
5.00% 01/01/12 - 01/01/17 23,710 22,899
38,928

NEBRASKA--0.3%
Nebraska Public Power District
Rev. - Power
5.00% 01/01/17 4,100 3,900

NEW HAMPSHIRE--2.1%
New Hampshire Higher Education
& Health Facilities Rev. - Education,
MBIA Insured
6.25% 07/01/20 5,000 5,300
New Hampshire Higher Educational
& Health Facilities Rev. - Education
5.375% 06/01/23 5,000 4,960
New Hampshire State Education &
Health Facilities Rev. - Education,
MBIA Insured
6.25% 07/01/12 3,500 3,735
New Hampshire State Tpke. Systems
Rev. - Trans., MBIA Insured
5.25% 02/01/19 4,500 4,429
New Hampshire Tpke. Auth. Rev. - Trans.
5.75% 04/01/20 8,745 8,876
27,300

[GRAPHIC]
NEW JERSEY STATE

NEW JERSEY--7.6%
Atlantic County N.J. Utilities
Auth. G.O., AMBAC Insured
5.00% 01/15/13 6,400 6,270

________________
See Notes to Schedules of Investments and Financial Statements

-24-

<PAGE>

SCHEDULE OF INVESTMENTS (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1995

Principal
Amount Value
<S> <C> <C>
New Jersey Building Auth.
Rev. - Muni. Bldg.
5.00% 06/15/12 $ 9,440 $ 9,222
7.20% 06/15/13 6,000 6,535
New Jersey Building Auth.
Rev. - State Bldg.
5.00% 06/15/11 10,650 10,459
7.00% 06/15/07 3,100 3,353
New Jersey Sports and Exposition
Convention Ctr. Rev. - Building
6.50% 03/01/19 12,590 13,522
New Jersey Tpke. Auth.
. Rev. - Trans., AMBAC Insured
6.50% 01/01/16 43,460 50,670
100,031

NEW MEXICO--0.6%
Albuquerque Airport Rev. - Trans.
6.50% 07/01/19 7,980 8,196

NEW YORK--3.0%
Battery Park City Auth. Rev. -
Economic Development & Lease
4.75% 11/01/19 16,130 14,183
New York Dormitory CUNY
Rev. - Education
7.00% 07/01/09 7,000 8,063
New York State Housing Fin. Agcy.
Rev. - Housing
6.375% 09/15/14 5,000 5,222
New York State Thruway Auth.
Rev. - Trans.
6.00% 04/01/14 8,000 8,316
Port Authority New York And New
Jersey Rev. - Port, Airport & Marina
5.00% 07/15/09 - 07/15/10 4,190 4,139
39,923

NORTH CAROLINA--0.2%
North Carolina Medical Care
Commission Hospital Rev. - Health
5.50% 02/15/19 2,000 1,969

NORTH DAKOTA--0.8%
Bismarck Hospital Rev. - Hosp., BIG Insured
7.30% 05/01/97 $ 1,795 $ 1,876
Mercer County North Dakota
Pollution Control Revenue - Power,
AMBAC Insured
6.05% 01/01/19 8,500 8,896
10,772

OHIO--4.9%
Clermont County Ohio Hospital
Facilities Rev. - Health, AMBAC Insured
7.50% 09/01/19 2,000 2,273
Cleveland Water Works
Rev. - Water & Sewer, AMBAC Insured
6.25% 01/01/16 9,490 10,097
Columbus G.O.
5.30% 07/01/09 1,850 1,896
Northeast Ohio Reg. Sewer District
Rev. - Water & Sewer, AMBAC Insured
6.50% 11/15/16 13,500 15,166
Ohio State Building Auth. Rev. - Lease
4.75% 04/01/14 5,000 4,609
Ohio State Building Auth.
Rev. - Muni. Bldg., MBIA Insured
7.00% 09/01/07 3,230 3,617
Ohio State Higher Education
Rev. - Education, MBIA Insured
6.70% 05/01/05 10,100 11,059
Ohio State Water Development
Auth. Pollution Control Fac.
Rev. - Water, MBIA Insured
5.00% 06/01/07 2,160 2,152
5.30% 06/01/11 - 12/01/11 12,675 12,739
Ohio State Water Development Auth.
Rev. - Water & Sewer, AMBAC Insured
5.50% 12/01/18 1,250 1,260
64,868

OKLAHOMA--1.1%
Oklahoma Tpke. Auth.
Rev. - Trans., MBIA Insured
6.25% 01/01/22 4,640 4,980

__________________
See Notes to Schedules of Investments and Financial Statements

-25-

<PAGE>

ELFUN TAX-EXEMPT INCOME FUND (DOLLARS IN THOUSANDS)

<CAPTION>
Principal
Amount Value
_____________________________________________________________
<S> <C> <C>
Tulsa Oklahoma Industrial Auth.
Hospital Rev. - Health
5.60% 02/15/03 $ 1,155 $ 1,206
5.70% 02/15/04 1,220 1,279
5.75% 02/15/05 645 679
6.10% 02/15/09 2,485 2,615
6.25% 02/15/14 - 02/15/17 3,225 3,369
14,128

OREGON--0.6%
Oregon State G.O.
5.875% 10/01/18 2,500 2,600
6.875% 12/01/13 5,000 5,434
8,034

[GRAPHIC]
ICON PENNSYLAVANIA STATE

PENNSYLVANIA--7.5%
Allegheny County Hospital Development
Auth. Rev. - Health, MBIA Insured
5.375% 12/01/25 25,000 24,399
6.20% 09/01/15 3,500 3,743
Montgomery County Higher Education &
Health Auth. (Holy Redeemer Hosp.)
Rev. - Hosp.
8.25% 03/01/14 3,160 3,550
Northampton County Higher Education
Fac. Auth. Lehigh Univ.
Rev. - Education, MBIA Insured
6.90% 10/15/06 2,155 2,413
7.00% 10/15/11 7,800 8,800
Pennsylvania Higher Education Fac.
Auth. Rev. - Education
8.125% 03/01/19 3,735 4,222
8.50% 10/01/08 2,095 2,355
Pennsylvania Intergovernmental Co-op.
Rev. - Muni., MBIA Insured
5.60% 06/15/15 8,535 8,596
Pennsylvania State G.O.
6.75% 01/01/09 9,505 10,343
Philadelphia Gas Wks Other
Rev. - Natural Gas, FSA Insured
6.375% 07/01/14 1,845 1,983
Philadelphia Hospitals & Higher
Education Facilities Rev. - Health
5.00% 02/15/21 11,250 10,345

Philadelphia Pennsylvania School
District Rev. - Education, MBIA Insured
5.55% 07/01/05 $10,150 $10,693
5.65% 07/01/06 2,070 2,184
5.75% 07/01/07 1,200 1,268
5.80% 07/01/08 1,500 1,581
5.85% 07/01/09 1,440 1,515
97,990

PUERTO RICO--1.6%
Puerto Rico Commonwealth G.O.
7.125% 07/01/97 - 07/01/02 20,170 21,445
South Carolina--2.5%
Charleston County SC G.O.
5.90% 06/01/10 2,170 2,308
6.00% 06/01/11 - 06/01/12 4,765 5,074
South Carolina State Public Service
Auth. Rev. - Power, MBIA Insured
5.50% 07/01/21 24,620 24,881
32,263

TENNESSEE--0.6%
Nashville Health & Education
Rev. - Education
7.625% 05/01/08 2,300 2,504
Shelby County Improvements G.O.
6.50% 08/01/07 - 08/01/08 5,100 5,401
7,905

TEXAS--3.0%
Harris County Texas G.O.
6.125% 08/15/20 15,000 15,994
San Antonio Electric & Gas
Rev. - Power & Gas
5.00% 02/01/16 6,650 6,397
Texas State G.O.
9.00% 10/01/99 - 10/01/00 12,800 15,242
University Texas University
Rev. - Education
5.20% 08/15/09 1,295 1,309
38,942

_________________
See Notes to Schedules of Investments and Financial Statements

-26-

<PAGE>

SCHEDULE OF INVESTMENTS (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1995

<CAPTION>
Principal
Amount Value
_____________________________________________________________
<S> <C> <C>
UTAH--3.8%
Intermountain Power Agcy.
Rev. - Power
5.00% 07/01/23 $15,145 $14,139
5.50% 07/01/20 28,875 28,721
6.00% 07/01/21 7,390 7,402
50,262

VIRGINIA--3.9%
Chesapeake Virginia G.O.
6.00% 05/01/10 - 05/01/12 6,695 7,137
Fairfax County Virginia Water Auth.
Rev. - Water & Sewer
5.00% 04/01/16 2,500 2,389
Norfolk Virginia Industrial
Development Auth. Rev. - Health
5.00% 11/01/20 4,250 3,969
Norfolk Virginia Water Rev. -
Water & Sewer, AMBAC Insured
5.375% 11/01/23 2,500 2,498
Prince William County Virginia
Industrial Development Auth. Rev. - Health
6.75% 10/01/15 2,600 2,810
6.85% 10/01/25 2,500 2,723
Roanoke Virginia Industrial Development
Authority Hospital Revenue -
Health, MBIA Insured
5.00% 07/01/24 21,220 20,110
University Virginia Rev. - Education
5.375% 06/01/20 5,000 5,046
Virginia State Trans. Board
Rev. - Trans., Prerefunded
6.90% 05/15/12 4,250 4,598
51,280

WASHINGTON--0.5%
Seattle Municipal Light & Power Rev. - Power
5.375% 11/01/18 1,500 1,480
Seattle Water Systems Rev. - Water
5.50% 06/01/18 5,425 5,484
6,964

WEST VIRGINIA--0.2%
West Virginia State University Rev. -
Education, AMBAC Insured
6.00% 04/01/12 3,000 3,161

WISCONSIN--1.9%
Wisconsin Public Power Incorporated Systems Power
Supply Systems - Power,
AMBAC Insured
5.25% 07/01/21 $ 6,190 $ 6,045
Wisconsin State G.O.
5.20% 05/01/10 4,150 4,156
5.25% 05/01/11 2,385 2,393
Wisconsin State Health & Educational
Fac. Auth. Rev. - Health, MBIA Insured
5.25% 08/15/23 13,455 12,851
25,445

TOTAL INVESTMENTS IN SECURITIES
(COST $1,180,703) 1,286,220

SHORT TERM INVESTMENTS--0.3%
_____________________________________________________________
REPURCHASE AGREEMENT--0.3%
State Street Bank and Trust Co.
5.75% 01/02/96
(Cost $3,970) 3,970 3,970

(dated 12/29/95, proceeds
$3,973, collateralized by
$4,055 United States Treasury
Note, 9.25%, 02/01/16)

OTHER ASSETS AND LIABILITIES,
NET 1.7% 22,152
__________
NET ASSETS -- 100% $1,312,342
__________
__________
</TABLE>

[GRAPHIC]
Sample Icon

ICONS REPRESENT THE TOP FIVE STATES IN THE ELFUN
TAX-EXEMPT INCOME FUND AT DECEMBER 31, 1995.

________________
See Notes to Schedule of Investments and Financial Statements

-27-

<PAGE>

NOTES TO PERFORMANCE (UNAUDITED)

Total returns assume changes in share price and reinvestment of dividends
and capital gains. Investment returns and principal value on an investment
will fluctuate and you may have a loss or gain when you sell your shares.

A portion of the Elfun Tax-Exempt Fund's income may be subject to state,
federal and/or alternative minimum tax. Capital gains, if any, are subject to
capital gains tax.

The Standard & Poor's Composite Index of 500 Stocks (S&P 500), MSCI World
Index, Lehman Brothers Aggregate Bond Index (LBKL), and the 90 Day U.S.
Treasury Index (90 day T-bill) are unmanaged indices and do not reflect the
actual cost of investing in the instruments that comprise each index. The S&P
500 Index is a composite of the prices of 500 widely held U.S. stocks
recognized by investors to be representative of the stock market in general.
The MSCI World Index is a composite of 1,579 stocks of companies in 22
countries representing the European, Pacific Basin and American regions. The
MSCI World Index is widely used by global investors. The Lehman Brothers
Aggregate Bond Index is a composite index of short, medium, and long-term
bond performance and is widely recognized as a barometer of the bond market
in general. The Lehman Brothers Municipal Bond Index is a composite of
investment-grade (Baa or greater), fixed-rate municipal bonds with maturities
greater than two years and is considered to be representative of the
municipal bond market. The 90 Day U.S. Treasury Index is the average return
on three month U.S. Treasury Bills. The results shown for the foregoing
indices assume reinvestment of net dividends or interest.

Broad market index returns are calculated from the nearest month end to the
Funds' inception date for funds with less than ten years of performance. The
Donoghue yields represent the average yields of 772 taxable money market
funds.

The peer universe of funds used in our peer ranking calculation is based on
the blend of Lipper peer categories, as shown. This blend is the same as the
category blend used by the Wall Street Journal (except for the Elfun
Diversified Fund for which we use the specific Lipper peer group and Elfun
Money Market which is not in the Wall Street Journal). The actual number of
funds and numerical rankings in these universes could differ since the Wall
Street Journal excludes certain funds which do not meet their net asset or
shareholder publication thresholds. Lipper is an independent mutual fund
rating service located in Summit, Jersey.

General Electric Investment Corporation agreed to limit certain fees and
expenses of the Elfun Global, Elfun Diversified and Elfun Money Market Fund
in prior years, as described in detail in the Funds' prospectus. In the
absence of these limitations, the total returns for the Elfun Global and
Elfun Diversified Funds would have been lower for the 5 year and since
inception periods and for the Elfun Money Market Fund, the 5 year and since
inception period would have been 4.48% and 4.80% respectively.

The Funds' portfolios are actively managed and their composition will vary
over time. The specific holdings cited throughout the report are for
illustrative purposes only and may not represent current or future
investments of the Funds. They are not intended to constitute a
recommendation to purchase or sell any particular security. See the
prospectus for complete descriptions of investment objectives, policies and
permissible investments.

-39-

<PAGE>

NOTES TO SCHEDULE OF INVESTMENTS (DOLLARS IN THOUSANDS)

(a) Non-income producing security.

(b) Pursuant to Rule 144A of Securities Act of 1933, these securities may
be resold in transactions exempt from registration, normally to
qualified institutional buyers. At December 31, 1995, these securities
amounted to $1,253, $665 and $6,192 or 0.9%, 0.9% and 2.8% of net
assets for the Elfun Global Fund, Elfun Diversified Fund and Elfun
Income Fund, respectively.

(d) Coupon amount represents effective yield.

(e) Floating rate coupon. The stated rate represents the rate at
December 31, 1995.

(f) Principal only securities represent the right to receive the
monthly principal payments on an underlying pool of mortgages.
No payments of interest on the pool are passed through to the
principal only holder.

(g) Interest only securities represent the right to receive the
monthly interest payments on an underlying pool of mortgages.
Payments of principal on the pool reduce the value of the interest
only holding.

(h) Restricted securities. Securities are not registered under the
Securities Act of 1933, or have contractual or legal restrictions
to resale. Dates of acquisition and costs are shown in parentheses
after the titles of the restricted securities. The Fund does not
intend to register these securities and therefore should not bear
any costs of registration. These restricted securities are fair
valued by officers of the Funds under procedures authorized by the
Trustees. At December 31, 1995, the fair value of these restricted
securities represented $4,000 or 0.3% of net assets of Elfun Trusts.

(i) Adjustable rate mortgage coupon. The stated rate represents the rate
at December 31, 1995.

(j) All or a portion of security out on loan.

ABBREVIATIONS:

ITL -- Italian Lira

ADR --- American Depository Receipt

AMBAC --- AMBAC Indemnity Corporation

BIG --- Bond Investment Guarantee

FSA --- Financial Security Assurance

MBIA --- Municipal Bond Insurance Association

REMIC --- Real Estate Mortgage Investment Conduit

-40-

<PAGE>

FINANCIAL HIGHLIGHTS
SELECTED DATA BASED ON A SHARE OUTSTANDING DURING THE YEAR ENDED DECEMBER 31:

ELFUN TAX-EXEMPT INCOME FUND 1995 1994 1993 1992 1991
_____________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $10.83 $12.29 $11.76 $11.59 $11.03

INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.68 0.67 0.71 0.73 0.73
Net realized and unrealized
gains (losses) on investments 1.15 (1.37) 0.68 0.22 0.56
_____________________________________________________________________________________________

TOTAL INCOME (LOSS) FROM
INVESTMENT OPERATIONS 1.83 (0.70) 1.39 0.95 1.29
_____________________________________________________________________________________________

LESS DISTRIBUTIONS FROM:
Net investment income 0.68 0.67 0.71 0.73 0.73
Net realized gains 0.07 0.09 0.15 0.05 0.00
_____________________________________________________________________________________________

TOTAL DISTRIBUTIONS 0.75 0.76 0.86 0.78 0.73
_____________________________________________________________________________________________

NET ASSET VALUE, END OF YEAR $11.91 $10.83 $12.29 $11.76 $11.59
_____________________________________________________________________________________________

TOTAL RETURN 17.32% (5.77%) 12.11% 8.50% 12.08%

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(in thousands) $1,312,342 $1,145,873 $1,297,256 $1,115,254 $962,751
Ratio of net investment income
to average net assets 5.91% 5.90% 5.79% 6.25% 6.49%
Ratio of expenses to average
net assets 0.13% 0.13% 0.10% 0.11% 0.14%
Portfolio turnover rate 59% 24% 29% 29% 36%
</TABLE>

________________

SEE NOTES TO FINANCIAL STATEMENTS

-42-

<PAGE>

STATEMENT OF ASSETS
AND LIABILITIES
DECEMBER 31, 1995 (AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
ELFUN
TAX-EXEMPT
INCOME FUND

<S> <C>
ASSETS
Investments in securities, at market
(Cost $119,844, $652,502, $58,326,
$1,180,703, $252,350, and
$0, respectively) $1,286,220
Short term investments (at amortized cost) 3,970
Cash 66
Foreign currency (cost $924, $14, $123,
$0, $0, and $0, respectively) 0
Receivable for investments sold 0
Dividends receivable 0
Interest receivable 24,198
Tax reclaim receivable 0
Receivable for fund shares sold 873
Variation margin receivable 0
___________________________________________________________

TOTAL ASSETS 1,315,327
___________________________________________________________

LIABILITIES
Options written, at market
(Premium received $0, $46, $0,
$0, $0, and $0, respectively) 0
Distributions payable to shareholders 1,945
Payable upon return of securities loaned 0
Payable for investments purchased 0
Payable for fund shares repurchased 393
Payable to GEIC 647
Variation margin payable 0
___________________________________________________________

TOTAL LIABILITIES 2,985
___________________________________________________________

NET ASSETS $1,312,342
___________________________________________________________

NET ASSETS CONSIST OF:

Capital paid in $1,204,417
Undistributed net investment income 31
Accumulated net realized gain (loss) 2,377
Net unrealized appreciation
(depreciation) on:
Investments 105,517
Futures 0
Written options 0
Foreign currency transactions 0
___________________________________________________________

NET ASSETS $1,312,342
___________________________________________________________

Shares outstanding (Par value
$10, $10, $10, $10,
$10, and $1, respectively) 110,193

Net asset value, offering
and redemption
price per share $11.91
</TABLE>

_________________
SEE NOTES TO FINANCIAL STATEMENTS

-45-

<PAGE>

STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(AMOUNTS IN THOUSANDS)

ELFUN
TAX-EXEMPT
INCOME FUND
<S> <C>
INVESTMENT INCOME
INCOME:
Dividends $0
Interest 75,283
Less: Foreign taxes withheld 0
_______________________________________________

TOTAL INCOME 75,283
_______________________________________________

EXPENSES:
Administrative expenses 665
Shareholder servicing
agent expenses 245
Transfer agent expenses 372
Custody and accounting 179
Professional fees 42
Registration, filing,
printing and
miscellaneous expenses 86
_______________________________________________

TOTAL EXPENSES 1,589
_______________________________________________

NET INVESTMENT INCOME 73,694
_______________________________________________

NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS

REALIZED GAIN (LOSS) ON:
Investments 11,159
Futures 0
Written options 0
Foreign currency transactions 0

INCREASE (DECREASE) IN
UNREALIZED APPRECIATION/
DEPRECIATION ON:
Investments 112,201
Futures 0
Written options 0
Foreign currency transactions 0
_______________________________________________

Net realized and unrealized gain
(loss) on investments 123,360
_______________________________________________

NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $197,054
_______________________________________________
</TABLE>

__________________

SEE NOTES TO FINANCIAL STATEMENTS

-47-

<PAGE>

STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
(AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
ELFUND
TAX-EXEMPT
INCOME FUND
1995 1994
_______________________________________________________________

<S> <C> <C>
INCREASE IN NET ASSETS

OPERATIONS:
Net investment income $73,694 $72,024
Net realized gain (loss)
on investments,
futures, written options,
and foreign
currency transactions 11,159 (1,246)
Net increase (decrease) in
unrealized appreciation
/depreciation 112,201 (145,728)
_______________________________________________________________

Net increase (decrease)
from operations 197,054 (74,950)
_______________________________________________________________

DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (73,694) (72,233)
Net realized gains (7,518) (9,290)
_______________________________________________________________

TOTAL DISTRIBUTIONS (81,212) (81,523)
_______________________________________________________________

Increase (decrease)
in net assets from
operations and
distributions 115,842 (156,473)
_______________________________________________________________

SHARE TRANSACTIONS:
Proceeds from sale
of shares 78,293 97,179
Value of distributions
reinvested 57,694 58,839
Cost of shares redeemed (85,360) (150,928)
_______________________________________________________________

Net increase (decrease) from
share transactions 50,627 5,090
_______________________________________________________________

TOTAL INCREASE
(DECREASE) IN NET ASSETS 166,469 (151,383)

NET ASSETS
Beginning of year 1,145,873 1,297,256
_______________________________________________________________

End of year $1,312,342 $1,145,873
_______________________________________________________________

UNDISTRIBUTED (OVERDISTRIBUTED)
NET INVESTMENT
INCOME, END OF YEAR $31 $0

CHANGES IN FUND SHARES

FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
(AMOUNTS IN THOUSANDS)

<S> <C> <C>
Shares sold 6,834 8,430
Issued for distributions
reinvested 4,982 5,193
Shares redeemed (7,431) (13,407)
NET INCREASE IN FUND SHARES 4,385 216
_______________________________________________________________

</TABLE>

______________
SEE NOTES TO FINANCIAL STATEMENTS

-49-

<PAGE>

NOTES TO FINANCIAL STATEMENTS (DECEMBER 31, 1995)

1. ORGANIZATION OF THE FUNDS

The Elfun Funds (the "Funds") are registered under the Investment Company Act
of 1940 (as amended) ("the 1940 Act") as diversified, open-end management
investment companies and are authorized to issue an unlimited number of
shares. The Funds operate as Employees' Securities Companies (as defined
in the 1940 Act) and as such are exempt from certain provisions of the
1940 Act.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The following summarizes the significant accounting policies of the Funds:

SECURITY VALUATION AND TRANSACTIONS

Securities for which exchange quotations are readily available are valued at
the last sale price, or if no sales occurred on that day, at the last quoted
bid price. Certain fixed income securities are valued by a dealer or by a
pricing service based upon a computerized matrix system, which considers
market transactions and dealer supplied valuations. Valuations for municipal
bonds are based on prices obtained from a qualified municipal bond pricing
service; prices represent the mean of the secondary market.

Futures contracts are valued at the settlement price established each day by
the board of trade or exchange on which they are principally traded. Options
traded on an exchange are valued using the last sale price or, in the absence
of a sale, the last offering price. Options traded over-the-counter are
valued using dealer-supplied valuations. Forward foreign currency contracts
are valued at the mean between the bid and the offered forward rates as last
quoted by a recognized dealer.

Short term investments maturing within 60 days are valued at amortized cost
or original cost plus accrued interest, each of which approximates market
value.

Portfolio positions which cannot be valued as set forth above are valued at
fair value determined under procedures approved by the Trustees.

Elfun Money Market Fund values its securities using the amortized cost
method, which values securities initially at cost and thereafter assumes a
constant amortization to maturity of any discount or premium. Amortized cost
approximates market value.

Transactions are accounted for as of the trade date. Cost is determined and
gains and losses are based upon the specific identification method for both
financial statement and federal tax purposes.

The Funds may purchase or sell securities on a when-issued or forward
commitment basis. Payment and delivery may take place a month or more after
the date of the transaction. The price of the underlying securities and the
date when the securities will be delivered and paid for are fixed at the time
the transaction is negotiated. This may increase the risk if the other party
involved in the transaction fails to deliver and causes the Fund to
subsequently invest at less advantageous yields. In connection with such
purchases the Funds are required to hold collateral (cash, U.S. Government
securities or other liquid, high grade debt obligations) with the Funds'
custodian sufficient to cover the purchase price, unless they enter into an
offsetting contract for the sale of equal securities and value.

FOREIGN CURRENCY

Accounting records of the Funds are maintained in U.S. dollars. Investment
securities and other assets and liabilities and purchases and sales of
investment securities are denominated in foreign currency and translated to
U.S. dollars at the prevailing exchange rate on the respective dates of such
transactions.

The Funds do not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations
are included with the

-50-

<PAGE>

NOTES TO FINANCIAL STATEMENTS (DECEMBER 31, 1995)

net realized and unrealized gain or loss from investments. Reported net
realized exchange gains or losses from foreign currency transactions
represent sale of foreign currencies, currency gains or losses between the
trade date and the settlement date on securities transactions, realized gains
and losses on forward foreign currency contracts, and the difference between
the amounts of dividends, interest, and foreign withholding taxes recorded on
the Fund's books, and the U.S. dollar equivalent of the amounts actually
received or paid. Net unrealized foreign exchange gains and losses arise
from changes in the value of assets and liabilities other than investments in
securities at fiscal year end, as a result of changes in the exchange rate.

INCOME TAXES

It is each Fund's policy to comply with all sections of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of
its taxable income, tax-exempt income, and gains to its shareholders and
therefore no provision for federal income tax has been made. Each Fund is
treated as a separate taxpayer for federal income tax purposes.

Capital loss carryovers are available to offset future realized capital
gains. To the extent that these carryover losses are used to offset future
capital gains, it is probable that the gains so offset will not be
distributed to shareholders because they would be taxable as ordinary income.
At December 31, 1995, the Elfun Income Fund had a capital loss carryover of
$614,528. The carryforward expires December 31, 2002.

INVESTMENT INCOME

Corporate actions (including cash dividends) are recorded net of
non-reclaimable tax withholdings on the ex-dividend date, except for certain
foreign securities for which corporate actions are recorded as soon as such
information is available. Interest income is recorded on the accrual basis.
All discounts and premiums on taxable bonds and premi
ums on tax exempt bonds are amortized to call or maturity date, whichever is
shorter using the effective yield method. On tax exempt bonds purchased
before May 1, 1993, only original issue discount is amortized. For tax exempt
bonds purchased after April 30, 1993, both market discount and original issue
discount are amortized.

EXPENSES

Expenses of the Funds which are directly identifiable to a specific Fund are
allocated to that Fund. Expenses which are not readily identifiable to a
specific Fund are allocated in such a manner as deemed equitable, taking into
consideration the nature and type of expense and the relative sizes of the
Funds. All expenses of the Funds are paid by the Investment Advisor and
reimbursed by the Funds.

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.

DISTRIBUTIONS TO SHAREHOLDERS

Elfun Tax-Exempt Income Fund, Elfun Income Fund and Elfun Money Market Fund
declare investment income dividends daily (paid monthly). Elfun Global Fund,
Elfun Trusts, and Elfun Diversified Fund declare and pay dividends of net
investment income annually. All Funds declare and pay net realized capital
gain distributions annually. The character of income and gains to be
distributed are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles. Reclassifications
are made to the Portfolios' capital accounts to reflect income and gains
available for distribution (or available capital loss carryovers) under
income tax regulations. The calculation of net investment

-51-

<PAGE>

NOTES TO FINANCIAL STATEMENTS (DECEMBER 31, 1995)

income per share in the Financial Highlights table excludes these
adjustments.

FORWARD FOREIGN CURRENCY CONTRACTS

A forward foreign currency contract ("Forward".) is an agreement between two
parties to buy and sell a currency at a set price on a future date. The
market value of the Forward fluctuates with changes in currency exchange
rates. The Forward is marked-to-market daily and the change in the market
value is recorded by the Fund as an unrealized gain or loss. When the
Forward is closed, the Fund records a realized gain or loss equal to the
difference between the value at the time it was opened and the value at the
time it was closed. The Fund could be exposed to risk if a counterparty is
unable to meet the terms of the contract or if the value of the currency
changes unfavorably. The Fund may enter into Forwards in connection with
planned purchases and sales of securities, to hedge specific receivables or
payables against changes in future exchange rates or to hedge the U.S. dollar
value of portfolio securities denominated in a foreign currency.

REPURCHASE AGREEMENTS

The Funds' custodian takes possession of the collateral pledged for
investments in repurchase agreements on behalf of the Funds. It is the policy
of the Funds to value the underlying collateral daily on a mark-to-market
basis to determine that the value, including accrued interest, is at least
equal to the repurchase price. In the event of default of the obligation to
repurchase, the Funds have the right to liquidate the collateral and apply
the proceeds in satisfaction of the obligation.

FUTURES AND OPTIONS

The Funds, other than the Elfun Money Market Fund, may invest in futures
contracts and may purchase and write options. These investments involve, to
varying degrees, elements of market risk and risks in excess of the amount
recognized in the Statement of Assets and Liabilities. The face or contract
amounts reflect the extent of the involvement the Funds have in the
particular classes of instruments. Risks may be caused by an
imperfect correlation between movements in the price of the instruments
and the price of the underlying securities and interest rates.
Risks also may arise if there is an illiquid secondary market for the
instruments, or due to the inability of counterparties to perform. The Funds
will invest in these instruments to hedge against the effects of changes in
value of portfolio securities due to anticipated changes in interest rates
and/or market conditions, to equitize a cash position, for duration
management, or when the transactions are economically appropriate to the
reduction of risk inherent in the management of the Fund involved.

Upon entering into a futures contract, the Fund is required to deposit either
cash or securities in an amount (initial margin) equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Fund each day. The variation margin payments are
equal to the daily changes in the contract value and are recorded as
unrealized gains and losses. The Fund recognizes a realized gain or loss
when the futures contract is closed. The Fund will realize a gain or loss
upon the expiration or closing of the option transaction. When an option is
exercised, the proceeds on sales for a written call option, the purchase cost
for a written put option, or the proceeds on the sale of the security for a
purchased put or cost of the security for a call option is adjusted by the
amount of premium received or paid.

SECURITY LENDING

The Funds may loan securities to well known and recognized U.S. and foreign
brokers and banks and receive a lenders fee. These fees are included in
interest income. The loans of securities will be collateralized by cash,
letters of credit or U.S. Government Securities. The collateral will be
segregated and maintained at all times with the custodian and must be equal
to the current value of the securities loaned. In the event the counterparty

-52-

<PAGE>

NOTES TO FINANCIAL STATEMENTS (DECEMBER 31, 1995)

(borrower) does not meet its contracted obligation to return the securities,
the Fund may be exposed to the risk of loss of reacquiring the loaned
securities at prevailing market prices.

OTHER

There are certain additional risks involved when investing in foreign
securities that are not inherent in domestic securities. These risks may
involve foreign currency exchange rate fluctuations, adverse political and
economic developments and the imposition of unfavorable foreign governmental
laws and restrictions.

3. FEES AND COMPENSATION PAID TO AFFILIATES

ADVISORY AND ADMINISTRATION FEES

During 1995 the Funds incurred expenses for the cost of services directed by
General Electric Company's wholly owned subsidiary, General Electric
Investment Corporation ("GEIC"), as Investment Advisor and for services GEIC
rendered as shareholder servicing agent. These expenses are included as
administrative expenses and shareholder servicing agent fees in the Statement
of Operations. The Trustees received no compensation as Trustees for the
Elfun Funds.

4. AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION
(DOLLARS IN THOUSANDS)

Aggregate gross unrealized appreciation/depreciation of investments for each
Fund at December 31, 1995, were as follows:

<TABLE>
<CAPTION>
GROSS GROSS NET
UNREALIZED UNREALIZED UNREALIZED
APPRECIATION DEPRECIATION APPRECIATION
__________________________________________________________________________
<S> <C> <C> <C>
Elfun Global Fund $ 23,483 $ 6,711 $ 16,772
Elfun Trusts 557,006 7,414 549,592
Elfun Diversified
Fund 15,269 861 14,408
Elfun Tax-Exempt
Income Fund 105,517 0 105,517
Elfun Income Fund 7,073 403 6,670
</TABLE>

The aggregate cost of each Fund's investments was substantially the same for
book and federal income tax purposes at December 31, 1995.

5. OPTIONS
(DOLLARS IN THOUSANDS)

During the year ended December 31, 1995 the following option contracts were
written:

<TABLE>
<CAPTION>
ELFUN TRUSTS ELFUN DIVERSIFIED FUND
________________________ ___________________________

NUMBER NUMBER
OF CONTRACTS PREMIUM OF CONTRACTS PREMIUM
_______________________________________________________________________________
<S> <C> <C> <C> <C>
Balance as of
December 31, 1994 100 $18 0 $0
Written 250 62 694 157
Closed and Expired (200) (34) (300) (155)
Exercised 0 0 (394) (2)
_____ ____ ____ ____
Balance as of
December 31, 1995 150 $46 0 $0
_____ ____ ____ ____
_____ ____ ____ ____

<CAPTION>
ELFUN INCOME FUND
________________________
NUMBER
OF CONTRACTS PREMIUM
____________________________________________________________
<S> <C> <C>
Balance as of
December 31, 1994 0 $ 0
Written 9,600 48
Closed and Expired (8,680) (44)
Exercised (920) (4)
______ _____
Balance as of
December 31, 1995 0 $ 0
______ _____
______ _____
</TABLE>

-53-

<PAGE>

NOTES TO FINANCIAL STATEMENTS (DECEMBER 31, 1995)

6. INVESTMENT TRANSACTIONS
(DOLLARS IN THOUSANDS)

The cost of purchases and the proceeds from sales of investments, other
than U.S. Government obligations, short-term investments and options,
for the year ended December 31, 1995, were:

PURCHASES SALES
___________________________________________________________

<S> <C> <C>
Elfun Global Fund $73,633 $71,036

Elfun Trusts 152,278 160,471

Elfun Diversified Fund 19,008 16,175

Elfun Tax-Exempt
Income Fund 739,434 701,038

Elfun Income Fund 402,790 427,114
</TABLE>

The cost of purchases and the proceeds from sales of
long-term U.S. Government obligations for the year ended
December 31, 1995, were:

PURCHASES SALES
____________________________________________________________

<S> <C> <C>
Elfun Trusts $ 0 $5,448

Elfun Diversified Fund 42,112 41,083

Elfun Income Fund 463,603 420,805
</TABLE>

7. SECURITY LENDING

At December 31, 1995, the Elfun Income Fund loaned securities having
a value, including accrued interest, of approximately $39,694,174
and received $40,478,335 in cash and letters of credit as collateral
for the loans. Cash collateral received is invested in high grade
liquid debt obligations and short term investments at December 31, 1995.

-54-

<PAGE>

INDEPENDENT AUDITORS' REPORT

[GRAPHIC]

Logo for KPMG Peat Marwick LLP

TO THE BOARD OF TRUSTEES AND
SHAREHOLDERS OF THE ELFUN MUTUAL FUNDS:

We have audited the accompanying statements of assets and liabilities of the
Elfun Global Fund, Elfun Trusts, Elfun Diversified Fund, Elfun Tax-Exempt
Income Fund, Elfun Income Fund and Elfun Money Market Fund, (the "Elfun
Funds"), including the schedules of investments as of December 31, 1995, and
the related statements of operations for the year then ended, the statements
of changes in net assets for each of the years in the two-year period then
ended, and the financial highlights for each of the years in the five-year
period then ended. These financial statements and financial highlights are
the responsibility of the Funds' management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 1995, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Elfun Funds, the results of their operations, the changes in their net assets
and their financial highlights for the aforementioned periods, in conformity
with generally accepted accounting principles.

/s/KPMG Peat Marwick
KPMG Peat Marwick

New York, New York
February 8, 1996

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<PAGE>

ELFUN FUNDS INVESTMENT TEAM

PORTFOLIO MANAGERS

ELFUN GLOBAL FUND
Ralph R. Layman

ELFUN TRUSTS
David B. Carlson

ELFUN DIVERSIFIED FUND
David B. Carlson
Robert A. MacDougall

ELFUN TAX-EXEMPT INCOME FUND
Robert R. Kaelin

ELFUN INCOME FUND
Robert A. MacDougall

ELFUN MONEY MARKET FUND
Robert A. MacDougall

TRUSTEES

Dale F. Frey
CHAIRMAN OF THE BOARD AND PRESIDENT,
GENERAL ELECTRIC INVESTMENT CORPORATION

Eugene K. Bolton
Michael J. Cosgrove
Ralph R. Layman
Alan M. Lewis
John H. Myers
Donald W. Torey

OFFICERS OF GENERAL ELECTRIC INVESTMENT CORPORATION

SECRETARY
Alan M. Lewis

INVESTMENT ADVISOR
General Electric Investment Corporation

INDEPENDENT AUDITORS
KPMG Peat Marwick LLP

CUSTODIAN
State Street Bank & Trust Company

SHAREHOLDER SERVICING AGENT
Address all inquiries to:
GE Investments
P.O. Box 8309
Boston, MA 02266-8309

-56-

<PAGE>
ELFUN FUNDS SERVICES

SERVICES FOR OUR SHAREHOLDERS:

Elfun Inquiry Center 1-800-242-0134
Dial Comm 8*225-4040
Toll 1-203-326-4040

AUDIO RESPONSE SYSTEM:

To obtain information and process account
transactions on your Elfun Funds:

* Call 1-800-242-0134

* Press 1 on your touch-tone phone to gain access

* Press 2 to obtain information on the Elfun Funds

* Then select an option below.

PERSONALIZED SERVICES:
Please press zero (0) on your touch-tone phone or please hold on your
rotary dial phone to speak directly to an Inquiry Specialist in order to
obtain:

* General Information

* Fund Exchanges

* Telephone Wire Redemption

* Change of Registration Instructions

* IRA Rollovers

* Check Reordering

DAILY VALUE, YIELDS/PERFORMANCE 1-800-843-3359

_______________________________________________________________

1 2 3
INFORMATION SPECIFIC ACCOUNT TRANSACTION
ONLY INFORMATION PROCESSING
_______________________________________________________________

1 1 1
TRANSFER ACCOUNT FUND
BY MAIL BALANCE EXCHANGES
_______________________________________________________________

2 2 2
REDEEM LAST REDEMPTIONS
BY MAIL TRANSACTION
_______________________________________________________________

3 3 3
CHANGE DUPLICATE DUPLICATE
ADDRESS STATEMENT TAX FORMS
_______________________________________________________________

4
PRICE QUOTES
LAST BUSINESS
DAY & PERSONAL
PRICE PORTFOLIO
_______________________________________________________________

<PAGE>

BULK RATE
U.S. POSTAGE
PAID
BOSTON, MA
PERMIT NO. 54201

ELFUN FUNDS
3003 SUMMER STREET
STAMFORD, CT 06904-7900

[GRAPHIC]
ELFUN LOGO

_____________________________________________________________________________
Distributed by GE Investment Services Inc., member NASD and SIPC