ELFUN DIVERSIFIED FUND, N-30D, 1996-03-07

ELFUN DIVERSIFIED FUND
N-30D, 1996-03-07

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<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 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 DIVERSIFIED FUND

Q
&
A

DAVID CARLSON AND BOB MAC DOUGALL SHARE PORTFOLIO MANAGEMENT RESPONSIBILITY
FOR THE ELFUN DIVERSIFIED FUND. DAVE CARLSON MANAGES THE U.S. EQUITY PORTION
AND BOB MAC DOUGALL MANAGES THE FIXED INCOME PORTION OF THE FUND. PLEASE REFER
TO PAGE 7 FOR DAVE'S BIOGRAPHICAL DETAILS AND PAGE 28FOR BOB'S BIOGRAPHICAL
DETAILS.

Q HOW DID ELFUN DIVERSIFIED PERFORM RELATIVE TO ITS BENCHMARK IN 1995?

A Elfun Diversified posted a total return of 27.1%. Its peer group of 220
mutual funds in the Balanced fund category, as tracked by Lipper Analytical
Services, posted an average return of 25.2%.

Q WHAT IS THE CURRENT BREAKDOWN IN THE ASSET MIX FOR ELFUN DIVERSIFIED AND HAS
IT CHANGED RECENTLY?

A The year-end weightings were as follows: domestic equities 48%,
international equities 14%, fixed income 32% and cash 6%. We lowered the
domestic equity weighting and raised the international equity weighting during
the year. The U.S. stock market had a significant increase in valuation and
looks somewhat less attractive than the international equity markets on a
risk/reward basis. The cash weighting was increased as well to protect against
a potential market correction.

[GRAPHIC]
PHOTO OF DAVID CARLSON AND BOB Mac DOUGALL

Q HOW DO YOU DECIDE THE WEIGHTS TO HAVE IN EACH ASSET CLASS?

A We have an asset allocation committee that meets monthly to assess the
outlook for the financial markets. They recommend an asset mix for the GE
Pension Trust and the mutual funds. They employ a number of quantitative
models and assess qualitative issues in coming up with their recommendations.
In a year like last year when both the bond and stock markets were moving in
the same direction, the shifts in weightings are few. If the markets move in
opposite directions or in disproportionate magnitudes, we may want to be much
more active in adjusting the weights.

Q WHAT IS THE OUTLOOK FOR THE ELFUN DIVERSIFIED FUND NEXT YEAR?

A It may help to think of Elfun Diversified in three pieces. The domestic
equity portion follows a growth strategy like Elfun Trusts. The
international equity portion follows a global growth strategy like Elfun
Global (minus the U.S. holdings). The fixed income portion is a smaller
version of the Elfun Income Fund. Please see the Q&A discussions on these
funds for a more complete description of the outlook for these asset classes.
Going forward, our efforts remain focused on the
asset allocation decision in order to properly position Elfun Diversified for
the continuously changing financial markets.

-12-

<PAGE>

ELFUN DIVERSIFIED FUND\

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

[GRAPHIC]
LINE CHART

Data for Line Chart to follow:

ELFUN DIVERSIFIED
_________________________________________________

ELFUN S&P LB
DIVERSIFIED 500 AGGREGATE
_________________________________________________
<S> <C> <C> <C>
1987 10,000 10,000 10,000
1988 10,660 11,670 10,790
1989 12,952 15,323 12,355
1990 13,574 14,832 13,466
1991 15,976 19,356 15,621
1992 17,478 20,847 16,777
1993 19,033 22,952 18,404
1994 18,984 23,274 17,871
1995 24,129 32,024 21,177
</TABLE>

Average Annual Total Return
for the periods ended December 31, 1995

ONE FIVE SINCE
YEAR YEAR INCEPTION
<S> <C> <C> <C>
Elfun Diversified 27.11% 12.18% 11.62%
S&P 500 37.61% 16.61% 15.67%
LB Aggregate 18.47% 9.48% 9.84%
</TABLE>

INVESTMENT PROFILE

A Fund designed for investors who seek to maximize total return consistent
with prudent management and preservation of capital by following an asset
allocation strategy contemplating shifts among a range of investments
principally including U.S. and foreign common stocks, bonds and other debt
instruments.

<TABLE>
<CAPTION>
TOP TEN LARGEST HOLDINGS
AS A PERCENTAGE OF NET ASSETS
AT DECEMBER 31, 1995
<S> <C>
U.S. Treasury Bond, 7.625%, 2/15/25 2.27%
U.S. Treasury Note, 6.75%, 4/30/00 2.10%
Federal National Mortgage Assoc. 1.69%
Federal Home Loan Mortgage Corp., 8% TBA 1.62%
Government National Mortgage Assoc., 9%, 12/15/09 1.57%
U.S. Treasury Note, 7.50%, 2/15/05 1.47%
Travelers Group Inc. 1.47%
Phillip Morris Cos. Inc. 1.29%
Rueters Holdings PLCADR (Class B) 1.28%
First Data Corp. 1.26%
</TABLE>

*Lipper Performance Comparison
BASED ON 12/31/95 TOTAL RETURNS
BALANCED PEER GROUP
<TABLE>
<CAPTION>
ONE FIVE
YEAR YEAR
<S> <C> <C>
Fund's rank in peer group: 58 40
Number of Funds in peer group: 220 61
Peer group average total return: 25.16% 13.11%
Lipper categories in peer group: BALANCED
</TABLE>

*SEE NOTES TO PERFORMANCE FOR EXPLANATION OF PEER CATEGORIES.

See Page 39 For Notes To Performance. Past Performance Is No Guarantee Of
Future Results.

-13-

<PAGE>

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

ELFUN DIVERSIFIED FUND

[GRAPHIC]
PIE CHART

Data for pie chart to follow:

Cash & Other 5.9%
Bonds & Notes 32.2%
Foreign Equity 14.0%
Domestic Equity 47.9%

NUMBER
OF SHARES VALUE
___________________________________________________________

<S> <C> <C>
COMMON STOCK--61.9%
___________________________________________________________

AUTOMOTIVE--0.6%
Nippondenso Co. 5,000 $93
Suzuki Motor Corp. 19,000 212
Valeo 3,567 165(a)
470
[GRPAHIC]
ICON BANKS & FINANCIAL SERVICES

BANKS & FINANCIAL SERVICES--7.5%
American Express Co. 10,000 414
AMMB Holdings Berhad 6,000 68
Banco Comercial Portugues 11,723 154
Banque Nationale Paris 3,098 140
Block H & R Inc. 1,600 65
Citicorp 7,000 471
Countrywide Credit Industries 13,500 294
Deutsche Bank AG 3,417 162
Federal National
Mortgage Assoc. ....... 10,500 1,303
Grupo Financiero Bancomer
ADR (Series C) ........ 3,907 22(a,b)
International Nederlanden 2,283 152
Morgan (J.P.) & Co. Inc. 5,000 401
Rollins Inc. .......... 2,600 58
State Street Boston Corp. 9,000 405
Thai Farmers Bank ..... 2,600 26
Travelers Group Inc. .. 18,000 1,132
Wells Fargo & Co. ..... 2,500 540
5,807

[GRAPHIC]
ICON BROADCASTING & MEDIA

BROADCASTING, ENTERTAINMENT & MEDIA--6.2%
Capital Cities/ABC Inc. 5,300 $654
Carmike Cinemas Inc. .. 1,000 23
Carnival Corp. (Class A) 5,000 122
Catalina Marketing Corp. 2,000 126
Circus Circus Enterprises Inc. 2,500 70
Comcast Corp. (Class A) 18,000 327(a)
Disney (Walt) Co. ..... 4,600 271
Donnelley (R.R.) & Sons Co. 10,000 394
Gannett Inc. .......... 5,000 307
Interpublic Group Cos. Inc. 5,300 230
Readers Digest Assoc. Inc.
(Class A) ............. 1,500 77
Reed International .... 12,476 190
Reuters Holdings PLC ADR
(Class B) ............. 18,000 992
Tele-Communications Inc. 5,000 134(a)
Tele-Communications Inc.
(Class A) ............. 21,000 417(a)
Television Broadcasts Ltd. ADR 24,000 86
Time Warner, Inc. ..... 5,000 189
Wolters Kluwer ........ 1,643 155
4,764

BUILDING MATERIALS & CONSTRUCTION--0.7%
Hutchison Whampoa Ltd. 37,000 226
Siam Cement ........... 1,700 94
VA Technologie AG ..... 1,771 225
545

CHEMICAL--1.3%
Air Products & Chemicals Inc. 4,500 237
Airgas Inc. ........... 4,500 150(a)
Morton International Inc. 16,000 574
SGL Carbon ............ 1,015 79
1,040
Consumer Related--5.0%
Anheuser Busch Cos. Inc. 3,500 234
Burns Philip & Co. .... 83,082 186
Canon Inc. ............ 10,000 181
Coca Cola Co. ......... 1,500 111
Colgate Palmolive Co. . 2,000 141

___________________
See Notes to Schedules of Investments and Financial Statements

-14-

<PAGE>

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

<CAPTION>
Number
of Shares Value
___________________________________________________________

<S> <C> <C>
Electrolux AB (Series B) 2,535 $104
General Mills Inc. .... 2,000 116
McDonalds Corp. ....... 8,000 361
Nestle S.A. .......... 115 127
Nutricia Verenigde Bedrijen 1,926 156
Pepsico Inc. .......... 16,000 894
Philip Morris Cos. Inc. 11,000 995
Procter & Gamble Co. .. 1,500 125
Scholastic Corp. ...... 1,200 93(a)
3,824

[GRAPHIC]
ICON DIVERSIFIED MANUFACTURING

DIVERSIFIED MANUFACTURING--4.8%
Alleghany Corp. Delaware 1,400 277
Allied Signal Inc. .... 15,000 713
BBC Brown Boveri ...... 322 374
Dover Corp. ........... 22,000 811
Grupo Carso S.A. de C.V. ADR 10,678 113(a,b)
Hanson PLC ADR ........ 25,000 381
Istituto Mobilaire Italiano 16,164 102
Loews Corp. ........... 9,400 737
Sasib ................. 29,319 72
Tokyo Steel Manufacturing 6,000 110
3,690

[GRAPHIC]
ICON FOR DRUGS, HEALTHCARE & COSMETICS

DRUGS, HEALTHCARE & COSMETICS--10.0%
Abbott Laboratories ... 19,000 793
American Home Products Corp. 5,000 485
American Medical Response 4,500 146(a)
Arbor Drugs Inc. ...... 7,500 158
Arrow International Inc. 2,000 80
Astra AB .............. 8,514 337
Avon Products Inc. .... 4,500 339
Bristol-Myers Squibb Co. 5,500 472
Cardinal Health Inc. .. 2,500 137
Dentsply International Inc. 3,000 120
Eli Lilly & Co. ....... 6,600 371
FHP International Corp. 3,500 100(a)
Gehe AG ............... 213 108
Gehe AG (new) ......... 52 26(a)
Gillette Co. .......... 3,400 177
International Flavours 2,000 96
Johnson & Johnson ..... 10,500 899
Lincare Holdings Inc. . 2,500 63(a)
Living Centers of America Inc. 3,000 105
Medeva ................ 52,005 218
Merck & Co. Inc. ...... 10,500 690
Pfizer Inc. ........... 14,500 915
Roche Holdings AG ..... 54 427
Smithkline Beecham PLC ADR 7,000 389
Takare ................ 29,310 82
7,733

[GRAPHIC]
ICON ELECTRICAL & ELECTRONICS

ELECTRICAL & ELECTRONICS--4.9%
Alcatel Alsthom 702 61
AMP Inc. 10,500 403
First Data Corp. 14,500 970
Hewlett Packard Co. 1,700 142
Hubbell Inc. (Class B) 8,925 587
Intel Corp. 7,300 414
Molex Inc. (Class A) .. 6,400 196
Murata Manufacturing Co. 4,000 147
Rohm Co. 7,000 395
Secom Co. 2,000 139
Sensormatic Electronics Corp. 4,000 70
Siemens AG 465 254(a)
VLSI Technology Inc. 2,500 45(a)
3,823
ENERGY & ENERGY RELATED--4.8%
Amoco Corp. 2,000 144
Anadarko Petroleum Co. 6,000 325
Atlantic Richfield Co. 2,500 277
Coflexip ADR 7,101 134(a)
Exxon Corp. 5,300 425
Omv AG ................ 1,231 107
Petroleum Geo Services ADR 2,606 65(a)
Royal Dutch Petroleum Co. 5,000 705
Schlumberger Ltd. 9,000 623
Texaco Inc. 3,500 275
Total 3,560 240
Unocal Corp. 12,000 349
3,669
ENTERTAINMENT--0.2%
Polygram . 2,176 116

__________________
See Notes to Schedules of Investments and Financial Statements

-15-

<PAGE>

ELFUN DIVERSIFIED FUND (DOLLARS IN THOUSANDS)

<CAPTION>
NUMBER
OF SHARES VALUE
__________________________________________________________________
<S> <C> <C>
FOREST PRODUCTS, PAPER & PACKAGING--1.1%
Kimberly Clark Corp. 9,900 $819

INDUSTRIAL PRODUCTS & SERVICES--2.4%
Browning-Ferris Industries Inc. 9,000 265
Dun & Bradstreet Corp. 1,500 97
Flightsafety International Inc. 3,000 151
ISS (Series B) 3,672 83
Minnesota Mining &
Manufacturing 5,700 378
Technip 3,512 242
Waste Management
International PLC ADR 4,100 44(a)
WMX Technologies Inc. 19,000 567
1,827

INSURANCE--3.1%
American International
Group Inc. 4,500 416
Chubb Corp. 3,000 290
General Reinsurance Corp. 3,200 496
Marsh & McLennan Cos. 4,200 373
Schw Ruckversicher 237 276
TIG Holdings Inc. 7,000 200
UNUM Corp. 5,000 275
USF & G Corp. 3,110 52
2,378

MERCHANDISING--1.6%
Carrefour 405 246
CUC International Inc. 1,100 37(a)
Duracell International Inc. 2,000 103
Giordano International 30,000 26
Home Depot Inc. 6,500 311
Ito Yokado Co. 3,000 185
Toys 'R Us 16,000 348(a)
1,256

OFFICE EQUIPMENT & SUPPLIES--2.2%
Automatic Data Processing Inc. 7,500 557
Equifax Inc. 35,000 748
Microsoft Corp. 2,300 202(a)
Sap AG 1,427 216
1,723

REAL ESTATE--0.1%
Debartolo Realty Corp. 4,000 52
Glimcher Realty Trust . 2,000 35
87

RETAIL--0.1%
Izumi Co. 3,000 66

TELEPHONE & UTILITIES--4.1%
Airtouch Communications 14,000 395(a)
American Telephone
& Telegraph 7,300 473
Cellular Communications Inc. 5,000 249
DDI Corp. 41 318(a)
GTE Corp. 5,000 220
International Cabletel Inc. 16,000 392(a)
MCI Communications Corp. 13,000 340
NYNEX Corp. 4,000 216
Stet (Savings) 48,767 99
Telefonos De Mexico S.A. ADR 1,880 60
Telekom Malaysia 18,000 140
Veba AG 6,833 290
3,192

TRANSPORTATION--1.2%
Brambles Industries Ltd. 13,964 156
Danzas Holding ........ 139 154
Pittston Services Group 3,000 94
Union Pacific Corp. ... 8,500 561
965

TOTAL COMMON STOCK
(COST $34,155) 47,794

Principal
Amount Value
<S> <C> <C>
___________________________________________________________

BONDS AND NOTES--32.2%
___________________________________________________________

U.S. TREASURIES--11.9%
U.S. Treasury Bonds

6.25% 08/15/23 $145 149
6.875% 08/15/25 345 389
7.625% 02/15/25 1,437 1,757
8.125% 08/15/19 135 170
12.00% 08/15/13 260 401
2,866

___________________
See Notes to Schedules of Investments and Financial Statements

-16-

<PAGE>

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

<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
___________________________________________________________

U.S. Treasury Notes
5.50% 11/15/98 $100 $101
5.75% 09/30/97 700 706
5.875% 08/15/98 440 447
6.00% 08/31/97 457 463
6.125% 05/15/98 - 09/30/00 872 895
6.25% 08/31/00 100 103
6.50% 05/15/05 - 08/15/05 625 666
6.75% 04/30/00 1,545 1,626
7.50% 02/15/05 1,001 1,134
8.00% 05/15/01 150 168

6,309

TOTAL U.S. TREASURIES
(COST $8,715) 9,175

ASSET BACKED--0.5%
Advanta Mortgage Loan Trust Corp.
6.30% 07/25/25 48 47
AT & T Universal Card Master Trust
5.95% 12/17/02 40 40
Conti Mortgage Home Equity
7.63% 05/15/09. 49 50
Discover Card Master Trust
6.70% 02/16/00 50 51
Fleetwood Credit Grantor Trust
6.55% 05/16/11 56 57
Household Finance Corp.
8.15% 03/19/96 41 42
Premier Auto Trust
5.95% 12/06/98 40 40
Standard Credit Card Master Trust
6.55% 10/07/07 60 62
6.75% 06/07/00 50 51

TOTAL ASSET BACKED
(COST $434) 440

CORPORATE NOTES--6.7%
Arkla Inc.
8.74% 05/14/98 250 262
BCH Cayman Islands
8.25% 06/15/04 25 28
Bell Telephone Co.
8.35% 12/15/30 75 94

Capital One Bank
6.43% 06/29/98 400 405
Central Maine Power Co.
7.40% 06/02/98 200 204
Finova Capital Corp.
6.75% 11/15/04 250 256
Foster Technology Inc.
6.75% 11/15/05 150 155
General Motors Acceptance Corp.
6.10% 09/11/97 625 630
General Motors Corp.
8.89% 08/18/03 50 58
Great Atlantic & Pacific Tea Inc.
9.125% 01/15/98 200 211
Hanson Overseas B V
6.75% 09/15/05 115 119
Harnischfeger Industries
7.25% 12/15/25 30 30
HSBC Finance Nederland B.V.
7.40% 04/15/03 100 105(b)
Hydro Quebec
8.25% 04/15/26 125 142
ITT Corp. (new)
6.25% 11/15/00 50 51
Joy Technologies Inc.
10.25% 09/01/03 150 170
KFW International Finance Inc.
8.20% 06/01/06 80 93
Landeskreditbank Baden
7.875% 04/15/04 65 73
Liberty Mutual Insurance Co.
8.50% 05/15/25 100 111(b)
Long Island Lighting Co.
9.75% 05/01/21 500 514
News America Holdings Inc.
9.125% 10/15/99 100 111
North Atlantic Energy Corp.
9.05% 06/01/02 200 206
Paramount Communications Inc.
5.875% 07/15/00. 200 197
Quaker Oats Co.
7.28% 08/29/05 25 27

_________________
See Notes to Schedules of Investments and Financial Statements

-17-

<PAGE>

ELFUN DIVERSIFIED FUND (DOLLARS IN THOUSANDS)

<CAPTION>
PRINCIPAL
AMOUNT VALUE
___________________________________________________________

<S> <C> <C>
Republic of Italy
6.875% 09/27/23. $180 $176
RJR Nabisco Inc.
8.00% 07/15/01 200 204
Smurfit Capital
7.50% 11/20/25 100 104
Taubman Realty Group L.P.
8.00% 06/15/99 50 52
Time Warner Inc.
8.75% 01/10/15 77 80
United Air Lines Inc.
11.21% 05/01/14 65 86
United Co. Financial Corp.
7.00% 07/15/98 200 204
TOTAL CORPORATE NOTES
(COST $5,017) 5,158

MORTGAGE-BACKED--13.1%
Federal Home Loan Mortgage Corp.
6.50% 03/01/09 - 08/01/25 870 872
6.50% TBA 306 308(c)
7.00% 11/01/09 - 08/01/25 399 404
7.00% TBA 805 812(c)
7.50% 09/01/24 88 90
8.00% TBA 1,210 1,254(c)
3,740

Federal National Mortgage Assoc.
8.50% 04/01/17 60 63
9.00% 08/01/07 43 45
108
Government National Mortgage Assoc.
7.50% 04/15/23 - 08/15/23 213 220
7.50% 03/20/25 253 258(i)
8.00% 12/15/22 - 07/15/25 1,267 1,320
9.00% 07/15/09 - 07/15/17 1,612 1,744
9.50% 12/15/09 187 205
3,747

Collateralized Mortgage Obligations
Aetna Commercial Mortgage Trust
6.422% 09/25/21 60 60

American Southwest Financial
Securities Corp.
0.70% 01/18/09 277 9(g)

1.078% 01/18/09 382 21(g)
7.30% 06/17/07 49 51
Asset Securitization Corp.
7.10% 08/13/29 77 81
Collateralized Mortgage
Obligation Trust
8.00% 01/01/17 200 207
Community Program Loan Trust
4.50% 10/01/18 100 88
DLJ Mortgage Acceptance Corp.
6.65% 12/25/25 53 54(b)
6.85% 11/17/05 50 51(b)
FDIC REMIC Trust
7.85% 09/25/25 100 103
Federal Home Loan Mortgage Corp.
3.50% 11/15/07 190 159
8.00% 04/15/20 50 53
Federal National Mortgage Assoc.
2.21% 07/25/10 300 41(g)
2.335% 07/25/10 78 9(g)
2.525% 07/25/10 189 18(g)
8.00% 07/01/24 201 45(g)

Federal National Mortgage
Assoc. REMIC
6.25% 07/25/07 500 502
6.965% 04/01/05 70 72
8.921% 10/01/24 199 167(d,f)
LB Commercial Conduit Mortgage Trust
7.144% 08/25/04....... 65 67
Merrill Lynch Mortgage Investor's Inc.
7.115% 05/25/15 79 82
7.523% 06/15/21 70 71
Mid-State Trust
8.33% 04/01/30 204 220
Sawgrass Finance REMIC Trust
6.45% 01/20/06 90 91
Vornado Finance Corp.
6.36% 12/01/00 210 209(b)
2,531

TOTAL MORTGAGE-BACKED
(COST $9,954) 10,126
TOTAL BONDS AND NOTES
(COST $24,120) 24,899

_________________
See Notes to Schedules of Investments and Financial Statements

-18-

<PAGE>

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

<CAPTION>
Principal
Amount Value
<S> <C> <C>
___________________________________________________________

CONVERTIBLE BONDS--0.0%
___________________________________________________________

Sasib
9.25% 2/31/97
(COST $51) ITL 80,000 $40

<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 3,900 1
(PREMIUM $506)

TOTAL INVESTMENTS IN SECURITIES
(COST $58,326) 72,734

<CAPTION>
Principal
Amount Value
___________________________________________________________
<S> <C> <C>
SHORT TERM INVESTMENTS--8.4%
___________________________________________________________

U.S. GOVERNMENT AGENCIES AND CERTIFICATES
OF DEPOSITS--6.1%
Algemene Bank Nederland N.V.
7.39% 01/12/96 $180 180
Federal Home Loan Bank
5.75% 01/02/96 3,000 3,000(d)
Federal National Mortgage Assoc.
5.67% 01/19/96 1,500 1,495(d)
4,675

REPURCHASE AGREEMENT--2.3%
State Street Bank and Trust Co.
5.75% 01/02/96 1,800 1,800
(dated 12/29/95, proceeds
$1,801, collateralized by
$1,841 United States Treasury
Note, 9.25%, 2/01/16)

TOTAL SHORT TERM INVESTMENTS
(COST $6,475) 6,475
OTHER ASSETS AND LIABILITIES,
NET (2.5%) (1,954)
________
NET ASSETS -- 100% $77,255
________
________

OTHER INFORMATION
____________________

The Elfun Diversified Fund had the following short Futures Contracts open at
December 31, 1995:

Number
Expiration of Underlying Unrealized
Description Date Contracts Face Value Gain
______________________________________________________________________________
<S> <C> <C> <C> <C>
S&P 500 March 1996 7 $2,165 $36
</TABLE>

[GRAPHIC]
ICONS REPRESENT THE TOP FIVE INDUSTRY WEIGHTINGS IN THE
ELFUN DIVERSIFIED FUND AT DECEMBER 31, 1995.

__________
See Notes to Schedules of Investments and Financial Statements

-19-

<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:
<TABLE>
<CAPTION>

Elfun Diversified Fund 1995 1994 1993 1992 1991
__________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $13.24 $14.05 $13.54 $12.84 $11.74

INCOME (LOSS) FROM
INVESTMENT OPERATIONS:
Net investment income 0.53 0.47 0.48 0.46 0.68
Net realized and unrealized
gains (losses) on investments 3.06 (0.51) 0.73 0.74 1.38
__________________________________________________________________________________________

TOTAL INCOME (LOSS) FROM
INVESTMENT OPERATIONS 3.59 (0.04) 1.21 1.20 2.06
__________________________________________________________________________________________

LESS DISTRIBUTIONS FROM:

Net investment income 0.53 0.46 0.47 0.46 0.70
Net realized gains 0.44 0.31 0.23 0.04 0.26
__________________________________________________________________________________________

TOTAL DISTRIBUTIONS 0.97 0.77 0.70 0.50 0.96
__________________________________________________________________________________________

NET ASSET VALUE, END OF YEAR $15.86 $13.24 $14.05 $13.54 $12.84
__________________________________________________________________________________________

TOTAL RETURN 27.11% (0.26%) 8.90% 9.35% 17.70%

RATIOS/SUPPLEMENTAL DATA:

Net assets, end of year
(in thousands) $77,255 $57,774 $54,911 $36,780 $23,959
Ratio of net investment income
to average net assets 3.62% 3.42% 3.65% 3.93% 4.96%
Ratio of expenses to average
net assets 0.34% 0.39% 0.39% 0.49% 0.90%
Portfolio turnover rate 93% 82% 25% 31% 67%
</TABLE>

________________
See Notes To Financial Statements

-42-

<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995 (AMOUNTS IN THOUSANDS)

ELFUN
DIVERSIFIED
FUND

<S> <C>
ASSETS
Investments in securities, at market
(Cost $119,844, $652,502, $58,326,
$1,180,703, $252,350, and
$0, respectively) $72,734
Short term investments (at amortized cost) 6,475
Cash 55
Foreign currency (cost $924, $14, $123,
$0, $0, and $0, respectively) 123
Receivable for investments sold 0
Dividends receivable 70
Interest receivable 361
Tax reclaim receivable 15
Receivable for fund shares sold 31
Variation margin receivable 0
TOTAL ASSETS 79,864

LIABILITIES
Options written, at market
(Premium received $0, $46,
$0, $0, $0,
and $0, respectively) 0
Distributions payable to shareholders 0
Payable upon return of securities loaned 0
Payable for investments purchased 2,529
Payable for fund shares repurchased 12
Payable to GEIC 66
Variation margin payable 2
Total liabilities 2,609
NET ASSETS $77,255
NET ASSETS CONSIST OF:
Capital paid in $62,819
Undistributed net investment income 22
Accumulated net realized gain (loss) (30)
Net unrealized appreciation (depreciation) on:
Investments 14,408
Futures 36
Written options 0
Foreign currency transactions 0
NET ASSETS $77,255
Shares outstanding (Par value
$10, $10, $10, $10,
$10, and $1, respectively) 4,872
Net asset value, offering
and redemption
price per share $15.86
</TABLE>

____________
See Notes to Financial Statements

-45-

<PAGE>

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

ELFUN
DIVERSIFIED
FUND
<S> <C>
INVESTMENT INCOME
INCOME:
Dividends $827
Interest 1,894
Less: Foreign taxes withheld (25)
_________________________________________

TOTAL INCOME 2,696
_________________________________________

EXPENSES:
Administrative expenses 37
Shareholder servicing
agent expenses 35
Transfer agent expenses 66
Custody and accounting 16
Professional fees 26
Registration, filing,
printing and
miscellaneous expenses 54
_________________________________________

TOTAL EXPENSES 234
_________________________________________

NET INVESTMENT INCOME 2,462
_________________________________________

NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS

REALIZED GAIN (LOSS) ON:
Investments 2,274
Futures 11
Written options (341)
Foreign currency transactions (13)

INCREASE (DECREASE) IN
UNREALIZED APPRECIATION/
DEPRECIATION ON:

Investments 11,447
Futures 36
Written options 0
Foreign currency transactions 0
_________________________________________

Net realized and unrealized gain
(loss) on investments 13,414
_________________________________________

NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $15,876
_________________________________________

</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)

ELFUN
DIVERSIFIED
FUND
1995 1994
<S> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS:
Net investment income $2,462 $1,944
Net realized gain (loss)
on investments,
futures, written options,
and foreign
currency transactions 1,931 1,306
Net increase (decrease) in
unrealized appreciation
/depreciation 11,483 (3,415)
_______________________________________________________________

Net increase (decrease)
from operations 15,876 (165)
_______________________________________________________________

DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (2,437) (1,919)
Net realized gains (2,010) (1,284)
_______________________________________________________________

TOTAL DISTRIBUTIONS (4,447) (3,203)
_______________________________________________________________

Increase (decrease) in
net assets from
operations and
distributions 11,429 (3,368)
_______________________________________________________________

SHARE TRANSACTIONS:
Proceeds from sale
of shares 11,488 10,053
Value of distributions
reinvested 4,188 3,017
Cost of shares redeemed (7,624) (6,839)
_______________________________________________________________

Net increase (decrease) from
share transactions 8,052 6,231
_______________________________________________________________

TOTAL INCREASE (DECREASE)
IN NET ASSETS 19,481 2,863

NET ASSETS
Beginning of year $57,774 $54,911
_______________________________________________________________

End of year 77,255 57,774
_______________________________________________________________

UNDISTRIBUTED (OVERDISTRIBUTED)
NET INVESTMENT
INCOME, END OF YEAR $22 $23

CHANGES IN FUND SHARES

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

<S> <C> <C>
Shares sold 746 718
Issued for distributions
reinvested 265 227
Shares redeemed (501) (491)
_______________________________________________________________

Net increase in Fund shares 510 454
_______________________________________________________________
</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

-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