<PAGE>
[GRAPHIC]
GE 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>
ELFUN INCOME FUND
Q
&
A
BOB MACDOUGALL LEADS THE TAXABLE FIXED INCOME TEAM AT GE INVESTMENTS. ASSETS
UNDER MANAGEMENT EXCEED $14 BILLION. HIS RESPONSIBILITIES INCLUDE MANAGING
THE ELFUN INCOME FUND, ELFUN MONEY MARKET FUND AND THE FIXED INCOME PORTION
OF THE ELFUN DIVERSIFIED FUND. BOB JOINED GE INVESTMENTS IN 1986 AS MUTUAL
FUND PORTFOLIO MANAGER AND WAS NAMED TO HIS PRESENT POSITION IN 1992.
PREVIOUSLY HE WAS WITH GE'S CORPORATE TREASURY OPERATION MANAGING THE
COMPANY'S $2 BILLION PORTFOLIO OF MARKETABLE SECURITIES AND SUPPORTING THE
TREASURER IN THE AREAS OF DEBT MANAGEMENT AND CAPITAL STRUCTURE PLANNING.
PRIOR TO THAT, BOB HELD VARIOUS FINANCIAL MANAGEMENT POSITIONS SINCE JOINING
GE IN 1973. HE HOLDS BACHELOR'S AND MASTER'S DEGREES IN BUSINESS
ADMINISTRATION FROM THE UNIVERSITY OF MASSACHUSETTS.
Q HOW DID THE ELFUN INCOME FUND PERFORM COMPARED WITH BENCHMARKS IN 1995?
A Elfun Income Fund achieved a total return of 18.2% in 1995. This compares
with a 16.6% average return for 157 mutual funds in Lipper peer group of
Intermediate Bond funds. The Lehman Brothers Aggregate Bond Index had a
return of 18.5%.
[GRAPHIC]
PHOTO OF BOB MAC DOUGALL
Q HOW DID MARKET EVENTS IN 1995 IMPACT THE FUND?
A The bond market has been on a roller coaster the last
couple of years. From February 1994 until February 1995, the Federal Reserve
was tightening monetary policy to slow economic growth. In July 1995 the Fed
moved to an accommodative posture and lowered short-term rates. The market,
anticipating this shift, rallied from early in the year with long rates
falling to 5.95% in December.
The defensive position which we established to preserve capital in 1994 kept
us from fully participating in the rally during the first quarter of 1995.
Favorable sector allocation and good individual security selection allowed us
to recoup the shortfall.
Q DESCRIBE YOUR SECTOR ALLOCATION PROCESS.
A The U.S. bond market is comprised of three primary sectors: governments,
corporate bonds and mortgage-backed securities (e.g. Ginnie Maes). While
similar in the sense they generate yield and have price sensitivity to
changes in interest rates, these sectors do not perform in lockstep. We
diversify our portfolio across all three sectors to reduce risk but also seek
to add performance by over/under weighting based on our outlook on relative
value. In 1995, demand for incremental yield caused the corporate sector to
perform the best. Mortgages, on the other hand, underperformed treasuries
due to investor concern over homeowner's ability to pay off their mortgages
and refinance in a falling interest rate environment.
Q HOW ARE YOU POSITIONED AT THE START OF 1996?
A The current economic expansion will soon be entering its fifth year. Both
fiscal and monetary policy seem restrictive. Inflation is well controlled.
We believe (hope) there will be less volatility in the market with return
consisting primarily of income with little or no price appreciation.
In that environment we will tend to be overweighted in
mortgage-backed securities and, to a lesser extent,
corporates to pick up incremental yield over Treasuries.
-28-
<PAGE>
ELFUN INCOME FUND
Comparison of Change in Value of a $10,000 Investment
[GRAPHIC]
LINE CHART
Data for line chart to follow:
<TABLE>
<CAPTION>
ELFUN INCOME
_______________________________
ELFUN LB
INCOME AGGREGATE
_______________________________
<S> <C> <C>
1985 10,000 10,000
1986 11,650 11,530
1987 11,743 11,853
1988 12,624 12,789
1989 14,429 14,644
1990 15,670 15,962
1991 18,193 18,515
1992 19,394 19,886
1993 21,275 21,814
1994 20,786 21,182
1995 24,569 25,100
</TABLE>
Average Annual Total Return
for the periods ended December 31, 1995
One Five Ten
Year Year Year
Elfun Income 18.21% 9.42% 9.41%
LB Aggregate 18.47% 9.48% 9.63%
INVESTMENT PROFILE
A Fund designed for investors who seek maximum current income consistent with
prudent management and preservation of capital through investments in a variety
of fixed income securities.
*Lipper Performance Comparison
BASED ON 12/31/95 TOTAL RETURNS
INTERMEDIATE BOND PEER GROUP
One Five Ten
Year Year Year
Fund's rank in peer group: 35 12 3
Number of Funds in peer group: 157 37 10
Peer group average total return: 16.62% 8.88% 8.87%
Lipper categories in peer group: INTERMEDIATE INVESTMENT GRADE CORP.
*SEE NOTES TO PERFORMANCE FOR EXPLANATION OF PEER CATEGORIES.
Quality Ratings as of December 31, 1995
Percent of
MOODY'S RATINGS + MARKET VALUE
AAA 79.80%
AA 1.17%
A 6.20%
Baa 7.76%
Ba 4.96%
NR 0.11%
+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.
-29-
<PAGE>
SCHEDULE OF INVESTMENTS (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1995
ELFUN INCOME FUND
[GRAPHIC]
PIE CHART
data for pie chart to follow:
Short Term 6.4%
Corporate Notes 23.8%
Asset Backed 11.5%
Mortgage-Backed 32.8%
U.S. Government 25.5%
DUE TO SECURITY LENDING ACTIVITY, THE ABOVE PORTFOLIO BREAKDOWNS ARE BASED
ON TOTAL MARKET VALUE OF INVESTMENTS.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
____________________________________________________________
<S> <C> <C>
BONDS AND NOTES--118.3%
U.S. TREASURIES--32.2%
U.S. Treasury Bonds
6.25% 08/15/23 $ 800 $ 823
6.875% 08/15/25 1,500 1,692(j)
7.50% 11/15/24 75 90
7.625% 02/15/25 3,501 4,281(j)
8.125% 08/15/19 1,855 2,333(j)
9.00% 11/15/18 1,000 1,362
12.00% 05/15/05 - 08/15/13 3,390 5,105
15,686
U.S. Treasury Notes
5.50% 11/15/98 2,400 2,418
5.625% 11/30/00 1,676 1,691
5.75% 09/30/97 - 10/31/97 2,850 2,876
5.875% 08/15/98 3,690 3,748(j)
6.125% 05/15/98 - 09/30/00 10,494 10,773(j)
6.25% 08/31/00 500 517
6.50% 05/15/05 - 08/15/05 7,160 7,624(j)
6.75% 04/30/00 5,395 5,678
7.50% 02/15/05 8,306 9,414(j)
7.875% 11/15/04 1,074 1,243
8.00% 05/15/01 7,900 8,843(j)
54,825
TOTAL U.S. TREASURIES
(COST $67,455) 70,511
ASSET BACKED--14.5%
Advanta Credit Card Master Trust Corp.
6.098% 09/01/00 $1,672 $1,673(e)
6.218% 10/01/01 1,000 1,002(e)
Advanta Mortgage Loan Trust Corp.
6.30% 07/25/25 373 367
6.31% 04/25/26 588 590(e)
AT & T Universal Card Master Trust
5.95% 10/17/02 400 404
Caterpillar Financial Asset Trust
6.10% 06/25/00 367 368
Conti Mortgage Home Equity
7.63% 05/15/09 445 450
Discover Card Master Trust
6.128% 04/16/02 1,000 1,001(e)
6.208% 10/16/04 1,700 1,707(e)
6.70% 02/16/00 400 407
First USA Credit Card Master Trust
6.108% 04/15/03 1,300 1,299(e)
6.288% 10/15/03 300 301(e)
6.308% 08/15/03 700 704(e)
Fleetwood Credit Grantor Trust
6.55% 05/16/11 474 481
General Motors Acceptance Corp.
5.55% 05/15/97 46 46
Household Affinity Credit Card Trust
6.088% 05/15/01 1,000 999(e)
Household Finance Corp.
8.15% 03/19/96 332 334
ITT Floorplan Receivables
9.75% 02/15/01 4,307 4,308(e)
MBNA Master Credit Card Trust
5.86% 03/15/00 1,500 1,502(e)
6.088% 03/15/01 1,000 999(e)
6.108% 01/15/02 1,540 1,540(e)
Merrill Lynch Credit Corp.
6.338% 10/15/20 586 586(e)
Morgan Stanley Capital Inc.
6.388% 10/15/04 598 603(e)
Option One
6.306% 11/20/26 1,889 1,889(e)
Peoples Bank Credit Card Master Trust
6.088% 03/15/01 1,000 1,000(e)
________________
SEE NOTES TO SCHEDULES OF INVESTMENTS AND FINANCIAL STATEMENTS
-30-
<PAGE>
SCHEDULE OF INVESTMENTS (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1995
<CAPTION>
PRINCIPAL
AMOUNT VALUE
_______________________________________________________________
<S> <C> <C>
Premier Auto Trust
5.95% 12/06/98 $ 400 $ 402
Southern Pacific Secured Assets Corp.
6.125% 12/26/96 480 480(e)
Standard Credit Card Master Trust
5.82% 05/08/00 3,000 3,001(e)
6.55% 10/07/07 600 617
6.75% 06/07/00 500 514
TMS Trust
6.458% 06/15/25 1,642 1,644(e)
Wachovia Credit Card Master Trust
6.108% 03/15/03 600 600(e)
TOTAL ASSET BACKED
(COST $31,760) 31,818
CORPORATE NOTES--30.1%
Advanta Corp.
6.01% 11/29/96 1,000 1,001 (e)
American Airlines
9.71% 01/02/07 786 913
American Home Products
7.70% 02/15/00 500 535
Arkla Inc.
9.20% 12/18/97 1,000 1,057
Banco Nacional De Comercio Corp.
7.25% 02/02/04 400 309
Bank of China
8.25% 03/15/14 250 250
Banque Paribas
8.35% 06/15/07 300 338
BBV International Finance Ltd.
7.00% 12/01/25 280 280
BCH Cayman Islands
8.25% 06/15/04 800 879
Bell Telephone Co.
8.35% 12/15/30 600 754
Capital One Bank
6.212% 03/20/96 1,100 1,101 (e)
6.43% 06/29/98 1,500 1,519
6.48% 08/15/97 415 419
Central Maine Power Co.
7.40% 06/02/98 150 153
China International Trust & Investment Corp.
9.00% 10/15/06 190 216
Cleveland Electric Illuminating Co.
8.29% 11/15/99 1,000 1,023
CoAmerica Bank
7.50% 01/17/96 310 310
Columbia/Healthcare Corp.
8.36% 04/15/24 550 645
Dean Witter Discover & Co.
5.93% 12/29/97 1,000 1,000 (e)
Delta Air Lines Inc.
7.79% 12/01/98 915 958
9.875% 01/01/98 500 537
Dresdner Bank A G
7.25% 09/15/15 280 299
Duty Free International Inc.
7.00% 01/15/04 450 435
Equitable Life Assured Society
7.70% 12/01/15 350 355
Finova Capital Corp.
6.375% 10/15/00 400 406
6.75% 11/15/04 600 615
First USA Bank
5.93% 11/13/96 620 620 (e)
Ford Motor Credit Co.
7.25% 05/15/99 500 522
Ford Motor Credit Medium Term Note
5.98% 04/19/99 5,000 5,005 (e)
Foster Technology Inc.
6.75% 11/15/05 275 283
General Motors Acceptance Corp.
5.93% 11/15/96 2,500 2,503 (e)
8.375% 01/19/99 1,500 1,609
General Motors Corp.
8.89% 08/18/03 300 346
Great Atlantic & Pacific Tea Inc.
9.125% 01/15/98 400 422
Hanson Overseas B V
6.75% 09/15/05 155 160
________________
SEE NOTES TO SCHEDULES OF INVESTMENTS AND FINANCIAL STATEMENTS
-31-
<PAGE>
SCHEDULE OF INVESTMENTS (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1995
<CAPTION>
PRINCIPAL
AMOUNT VALUE
________________________________________________________________
<S> <C> <C>
Harnischfeger Industries
7.25% 12/15/25 $ 345 $ 348
HSBC Finance Nederland B.V.
7.40% 04/15/03 150 157 (b)
Hydro Quebec
8.05% 07/07/24 500 571
8.25% 04/15/26 1,000 1,135
11.75% 02/01/12 510 750
Istituto Banca San Paolo
6.275% 08/25/00 900 898 (e)
ITT Corp. (new)
6.25% 11/15/00 440 445
Joy Technologies Inc.
10.25% 09/01/03 800 906
KFW International Finance Inc.
8.20% 06/01/06 725 846
Landeskreditbank Baden
7.875% 04/15/04 570 639
Lehman Brothers Inc.
7.125% 07/15/02 1,200 1,241
Liberty Mutual Insurance Co.
8.20% 05/04/07 500 554 (b)
8.50% 05/15/25 200 223 (b)
Markel Corp.
7.25% 11/01/03 250 257
McDonnell Douglas Finance Corp.
6.135% 05/28/96 500 501 (e)
Merrill Lynch & Co. Inc.
6.032% 05/19/98 3,000 3,000 (e)
6.64% 09/19/02 750 770
Methanex Corp.
7.40% 08/15/02 270 283
Metropolitan Life Insurance Co.
7.80% 11/01/25 400 417 (b)
Morgan Stanley Group Inc.
6.082% 05/18/98 1,800 1,803 (e)
Multiva Mexico Trust Corp.
9.75% 06/09/97 300 264 (b)
Nationsbank Corp.
5.775% 03/27/98 1,360 1,358 (e)
5.963% 05/26/98 1,000 1,000 (e)
5.973% 06/02/98 1,000 1,000 (e)
7.55% 01/09/96 310 310 (e)
New American Capital Inc.
7.688% 04/12/00 500 501 (b,e)
Newfoundland Province Canada
9.875% 06/01/20 500 667
News America Holdings Inc.
9.125% 10/15/99 750 829
10.125% 10/15/12 815 986
North Atlantic Energy Corp.
9.05% 06/01/02 905 935
Ontario Province Canada
7.00% 08/04/05 275 293
Oryx Energy Co.
10.00% 06/15/99 750 814
Petroleos Mexicanos
6.813% 03/08/99 510 454 (b)
Prudential Insurance Co. America
8.30% 07/01/25 100 107 (b)
Public Service Co.
8.875% 05/15/96 250 253
Quaker Oats Co.
6.71% 07/13/05 250 258
7.28% 08/29/05 275 294
Republic of Italy
6.875% 09/27/23 295 288 (d)
RHG Finance Corp.
8.875% 10/01/05 1,000 1,047
RJR Nabisco Inc.
8.75% 04/15/04 1,000 1,034
Royal Caribbean
11.375% 05/15/02 125 137
Smurfit Capital
7.50% 11/20/25 850 887
Societe Nationale Des Chemins
8.875% 12/01/24 300 378 (b)
St. George Bank Ltd.
7.15% 10/01/05 350 362 (b)
Swiss Bank Corp.
7.50% 07/15/25 250 274
Taubman Realty Group L.P.
8.00% 06/15/99 660 692
_______________
SEE NOTES TO SCHEDULES OF INVESTMENTS AND FINANCIAL STATEMENTS
-32-
<PAGE>
SCHEDULE OF INVESTMENTS (DOLLARS IN THOUSANDS) -- DECEMBER 31, 1995
<CAPTION>
PRINCIPAL
AMOUNT VALUE
_____________________________________________________________
<S> <C> <C>
Tele-Communications Inc.
6.43% 03/09/98 $ 750 $757
7.13% 02/02/98 1,000 1,022
8.75% 08/01/15 350 388
9.25% 04/15/02 200 227
Time Warner Entertainment Co. L.P.
10.15% 05/01/12 500 620
Time Warner Inc.
7.75% 06/15/05 275 286
Tosco Corp.
7.00% 07/15/00 250 255
Unisys Corp.
10.625% 10/01/99 500 442
United Air Lines Inc.
9.75% 08/15/21 110 132
10.67% 05/01/04 480 579
11.21% 05/01/14 325 430
United Co. Financial Corp.
7.00% 07/15/98 250 255
Viacom Inc.
7.75% 06/01/05 950 1,009
Woolworth Corp.
7.00% 06/01/00 500 509
TOTAL CORPORATE NOTES
(COST $64,180 65,854
MORTGAGE-BACKED--41.5%
Federal Home Loan Mortgage Corp.
6.50% 06/01/08 - 06/01/24 8,260 8,277
6.50% TBA 2,520 2,533 (c)
6.75% 07/01/03 - 12/01/06 451 456
7.00% 11/01/09 - 08/01/25 2,441 2,478
7.00% TBA 12,680 12,791 (c)
7.50% 06/01/23 - 04/01/25 6,714 6,890
7.75% 09/01/07 - 03/01/09 1,102 1,147
8.00% 08/01/16 426 447
8.00% TBA 4,700 4,871 (c)
8.25% 06/01/08 256 267
8.50% 04/01/09 623 652
8.75% 03/01/08 183 191
41,000
Federal National Mortgage Assoc.
6.00% 09/01/08 - 08/01/09 $ 864 $ 855
7.00% 07/01/17 528 539
7.50% 06/01/09 - 02/01/14 1,210 1,253
7.75% 01/01/09 426 445
9.00% 07/01/07 - 12/01/24 1,398 1,472
4,564
Government National Mortgage Assoc.
7.50% 04/15/23 - 03/15/24 1,993 2,053
7.50% 03/20/25 1,486 1,513 (i)
8.00% 04/15/17 - 10/15/25 11,348 11,827
9.00% 07/15/09 - 07/15/17 8,420 9,118
9.50% 12/15/09 1,215 1,333
25,844
Collateralized Mortgage Obligations
Aetna Commercial Mortgage Trust
6.422% 12/26/30 600 602
American Southwest Financial Securities Corp.
0.70% 01/18/09 2,605 83 (g)
1.078% 01/18/09 3,585 198 (g)
7.30% 10/17/01 413 429
Asset Securitization Corp.
7.10% 08/13/29 711 745
Community Program Loan Trust
4.50% 10/01/18 2,000 1,766
DLJ Mortgage Acceptance Corp.
6.65% 12/17/27 456 465 (b)
6.85% 12/17/27 427 435 (b)
FDIC REMIC Trust
7.85% 09/25/25 900 928
Federal Home Loan Mortgage Corp.
3.50% 11/15/07 1,453 1,218
8.00% 04/15/20 480 502
1089.16%09/15/22 8 162 (g)
Federal National Mortgage Assoc.
2.21% 07/25/10 3,000 409 (g)
2.335% 07/25/10 780 89 (g)
2.525% 07/25/10 1,894 181 (g)
8.00% 07/01/24 1,831 412 (g)
8.921% 10/01/24 1,812 1,518 (d,f)
9.967% 08/25/23 821 693 (d,f)
_________________
SEE NOTES TO SCHEDULES OF INVESTMENTS AND FINANCIAL STATEMENTS
-33-
<PAGE>
ELFUN INCOME FUND (DOLLARS IN THOUSANDS)
<CAPTION>
PRINCIPAL
AMOUNT VALUE
_______________________________________________________________
<S> <C> <C>
Federal National Mortgage Assoc. REMIC
6.965% 07/25/10 $680 $703
LB Commercial Conduit Mortgage Trust
2.37% 05/25/05 5,989 686 (g)
7.144% 08/25/04 594 611
Merrill Lynch Mortgage Investor's Inc.
7.115% 05/25/15 298 306
7.523% 06/15/21 696 714
Mid-State Trust
8.33% 04/01/30 2,133 2,306
Residential Resources Inc.
8.00% 10/01/18 290 300
Salomon Brothers Mortgage Securities Inc.
8.125% 11/01/12 356 370
Sawgrass Finance REMIC Trust
6.45% 01/20/06 700 711
Vornado Finance Corp.
6.36% 12/01/00 1,880 1,875 (b)
19,417
TOTAL MORTGAGE-BACKED
(COST $88,950) 90,825
TOTAL BONDS AND NOTES
(COST $252,345) 259,008
<CAPTION>
NUMBER
EXPIRATION DATE/ OF
STRIKE PRICE CONTRACTS VALUE
_______________________________________________________________________________
<S> <C> <C> <C>
CALL OPTIONS PURCHASED--0.0%
U.S. Treasury Notes Jan. 96/103.25 355 12
(cost $5)
TOTAL INVESTMENTS IN SECURITIES
(COST $252,350) 259,020
<CAPTION>
Principal
Amount Value
_____________________________________________________________
<S> <C> <C>
SHORT TERM INVESTMENTS--8.1%
U.S. Government Agencies, Certificates of
Deposits and Time Deposits--7.6%
Algemene Bank Nederland N.V.
7.39% 01/12/96 $ 310 $ 310
Deutsche Bank AG
5.82% 01/05/96 5,000 5,000
Federal Home Loan Mortgage Corp.
5.60% 01/03/96 2,000 2,000
5.75% 01/02/96 4,500 4,499
Goldman Sachs Group LP
6.05% 01/03/96 4,000 3,998
San Paolo
6.40% 01/02/96 430 430
State Street Cayman Islands
5.875% 01/02/96 390 390
16,627
REPURCHASE AGREEMENT--0.5%
State Street Bank and Trust Co.
5.75% 01/02/96 1,000 1,000
(dated 12/29/95, proceeds
$1,001, collateralized by $1,026
United States Treasury Note,
9.25%, 2/01/16)
TOTAL SHORT TERM INVESTMENTS
(COST $17,627) 17,627
OTHER ASSETS AND LIABILITIES,
NET (26.4) (57,767)
NET ASSETS -- 100% $218,880
OTHER INFORMATION
The Elfun Income Fund had the following long Futures Contracts open at
December 31, 1995:
<CAPTION>
Number
EXPIRATION OF UNDERLYING UNREALIZED
DESCRIPTION DATE CONTRACTS FACE VALUE GAIN
________________________________________________________________________
<S> <C> <C> <C> <>C
U.S. Treasury March 1996 52 $6,316 $152
</TABLE>
______________
SEE NOTES TO SCHEDULES OF INVESTMENTS AND FINANCIAL STATEMENTS
-34-
<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.
(c) Settlement is on a delayed delivery or when issued basis with
final maturity to be announced (TBA) in the future.
(d) Coupon amount represents effective yield.
(e) 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:
<TABLE>
<CAPTION>
ELFUN INCOME FUND 1995 1994 1993 1992 1991
___________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $10.55 $11.68 $11.58 $11.92 $11.10
INCOME (LOSS) FROM
INVESTMENT OPERATIONS:
Net investment income 0.77 0.70 0.73 0.86 0.89
Net realized and unrealized
gains (losses) on investments 1.09 (0.97) 0.38 (0.10) 0.82
___________________________________________________________________________________________
TOTAL INCOME (LOSS) FROM
INVESTMENT OPERATIONS 1.86 (0.27) 1.11 0.76 1.71
___________________________________________________________________________________________
LESS DISTRIBUTIONS FROM:
Net investment income 0.77 0.70 0.73 0.87 0.89
Net realized gains 0.00 0.16 0.28 0.23 0.00
___________________________________________________________________________________________
TOTAL DISTRIBUTIONS 0.77 0.86 1.01 1.10 0.89
___________________________________________________________________________________________
NET ASSET VALUE, END OF YEAR $11.64 $10.55 $11.68 $11.58 $11.92
TOTAL RETURN 18.21% (2.33%) 9.72% 6.61% 16.13%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(in thousands) $218,880 $185,665 $199,478 $175,210 $137,873
Ratio of net investment income
to average net assets 6.90% 6.34% 6.10% 7.24% 7.75%
Ratio of expenses to
average net assets 0.25% 0.30% 0.17% 0.22% 0.36%
Portfolio turnover rate 367% 215% 131% 62% 133%
</TABLE>
____________
SEE NOTES TO FINANCIAL STATEMENTS
-43-
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995 (AMOUNTS IN THOUSANDS)
ELFUN
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) $259,020
Short term investments
(at amortized cost) 17,627
Cash 82
Foreign currency
(cost $924, $14, $123,
$0, $0, and $0,
respectively) 0
Receivable for
investments sold 0
Dividends receivable 0
Interest receivable 2,884
Tax reclaim receivable 9
Receivable for
fund shares sold 136
Variation margin receivable 18
_______________________________________________
TOTAL ASSETS 279,776
_______________________________________________
LIABILITIES
Options written, at market
(Premium received $0, $46,
$0, $0, $0, and
$0, respectively) 0
Distributions payable
to shareholders 188
Payable upon return of
securities loaned 40,164
Payable for investments purchased 20,140
Payable for fund shares repurchased 226
Payable to GEIC 178
Variation margin payable 0
_______________________________________________
Total liabilities 60,896
_______________________________________________
NET ASSETS $218,880
_______________________________________________
NET ASSETS CONSIST OF:
Capital paid in $212,711
Undistributed net
investment income 199
Accumulated net realized
gain (loss) (854)
Net unrealized appreciation
(depreciation) on:
Investments 6,670
Futures 152
Written options 0
Foreign currency transactions 2
_______________________________________________
NET ASSETS $218,880
_______________________________________________
Shares outstanding (Par value
$10, $10, $10, $10,
$10, and $1,
respectively) 18,807
Net asset value, offering
and redemption
price per share $11.64
</TABLE>
____________
SEE NOTES TO FINANCIAL STATEMENTS
-45-
<PAGE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
ELFUN
INCOME FUND
<S> <C>
INVESTMENT INCOME
INCOME:
Dividends $0
Interest 14,532
Less: Foreign taxes withheld 0
______________________________________________
TOTAL INCOME 14,532
______________________________________________
EXPENSES:
Administrative expenses 105
Shareholder servicing agent expenses 90
Transfer agent expenses 185
Custody and accounting 41
Professional fees 28
Registration, filing, printing and
miscellaneous expenses 65
______________________________________________
TOTAL EXPENSES 514
______________________________________________
NET INVESTMENT INCOME 14,018
______________________________________________
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Realized gain (loss) on:
Investments 4,970
Futures 1,389
Written options 17
Foreign currency transactions (103)
Increase (decrease) in
unrealized appreciation/
depreciation on:
Investments 13,299
Futures 152
Written options 0
Foreign currency transactions (6)
______________________________________________
Net realized and unrealized gain
(loss) on investments 19,718
______________________________________________
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $33,736
______________________________________________
</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>
ELFUN
INCOME
FUND
1995 1994
_______________________________________________________________
<S> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS:
Net investment income $14,018 $12,091
Net realized gain (loss)
on investments,
futures, written options,
and foreign
currency transactions 6,273 (7,125)
Net increase (decrease) in
unrealized appreciation
/depreciation 13,445 (9,677)
_______________________________________________________________
Net increase (decrease)
from operations 33,736 (4,711)
_______________________________________________________________
DISTRIBUTIONS TO UNITHOLDERS FROM:
Net investment income (14,022) (12,091)
Net realized gains 0 (2,744)
_______________________________________________________________
TOTAL DISTRIBUTIONS (14,022) (14,835)
_______________________________________________________________
Increase (decrease)
in net assets from
operations and distributions 19,714 (19,546)
_______________________________________________________________
SHARE TRANSACTIONS:
Proceeds from sale of shares 25,816 24,712
Value of distributions
reinvested 11,863 12,841
Cost of shares redeemed (24,178) (31,820)
_______________________________________________________________
Net increase (decrease) from
share transactions 13,501 5,733
_______________________________________________________________
TOTAL INCREASE (DECREASE)
IN NET ASSETS 33,215 (13,813)
NET ASSETS
Beginning of year 185,665 199,478
_______________________________________________________________
End of year $218,880 $185,665
_______________________________________________________________
UNDISTRIBUTED (OVERDISTRIBUTED)
NET INVESTMENT
INCOME, END OF YEAR $199 ($64)
<CAPTION>
CHANGES IN FUND SHARES
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
Shares sold 2,326 2,236
Issued for distributions
reinvested 1,061 1,174
Shares redeemed (2,179) (2,883)
_______________________________________________________________
Net increase in Fund shares 1,208 527
_______________________________________________________________
</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:
<TABLE>
<CAPTION>
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:
<TABLE>
<CAPTION>
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
-55-
<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]
GE LOGO
Distributed by GE Investment Services Inc., member NASD and SIPC
