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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file
number 811-00483
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Elfun Trusts
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(Exact name of registrant as specified in charter)
3001, SUMMER STREET,STAMFORD, CONNECTICUT, 06905
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(Address of principal executive offices) (Zip code)
GE ASSET MANAGEMENT INC,3001, SUMMER STREET,STAMFORD,CONNECTICUT, 06905
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(Name and address of agent for service)
Registrant"s telephone number, including area code: 800-242-0134
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Date of fiscal year end: 12/31
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Date of reporting period: : 12/31/05
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<page>
ITEM 1. REPORTS TO STOCKHOLDERS.
Elfun Funds
Annual Report
December 31, 2005
[GRAPHIC OMITTED]
Contents
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MANAGER REVIEWS AND SCHEDULES OF INVESTMENTS
ELFUN INTERNATIONAL EQUITY FUND...................................... 1
ELFUN TRUSTS......................................................... 8
ELFUN DIVERSIFIED FUND............................................... 14
ELFUN TAX-EXEMPT INCOME FUND......................................... 33
ELFUN INCOME FUND.................................................... 47
ELFUN MONEY MARKET FUND.............................................. 62
NOTES TO PERFORMANCE...................................................... 67
NOTES TO SCHEDULES OF INVESTMENTS......................................... 68
FINANCIAL STATEMENTS
Financial Highlights................................................... 69
Statements of Assets and Liabilities................................... 72
Statements of Operations............................................... 74
Statements of Changes in Net Assets.................................... 76
Notes to Financial Statements.......................................... 78
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM................... 86
TAX INFORMATION........................................................... 87
ADVISORY AGREEMENT RENEWAL................................................ 88
ADDITIONAL INFORMATION.................................................... 90
INVESTMENT TEAM........................................................... 93
SHAREHOLDER SERVICES...................................................... 96
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This report has been prepared for shareholders and may be distributed to others
only if preceded or accompanied by a current prospectus.
Elfun International Equity Fund
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Q&A
THE ELFUN INTERNATIONAL EQUITY FUND IS MANAGED BY A TEAM OF PORTFOLIO MANAGERS
THAT INCLUDES BRIAN HOPKINSON, RALPH R. LAYMAN (PICTURED BELOW), JONATHAN L.
PASSMORE, MICHAEL J. SOLECKI AND JUDITH A. STUDER. AS LEAD PORTFOLIO MANAGER FOR
THE FUND, MR. LAYMAN OVERSEES THE ENTIRE TEAM AND ASSIGNS A PORTION OF THE FUND
TO EACH MANAGER, INCLUDING HIMSELF. EACH PORTFOLIO MANAGER IS LIMITED TO THE
MANAGEMENT OF HIS OR HER PORTION OF THE FUND, THE SIZE OF WHICH PORTIONS MR.
LAYMAN DETERMINES ON AN ANNUAL BASIS. THE PORTFOLIO MANAGERS DO NOT OPERATE
INDEPENDENTLY OF EACH OTHER, RATHER, THE TEAM OPERATES COLLABORATIVELY,
COMMUNICATING PURCHASES OR SALES OF SECURITIES ON BEHALF OF THE FUND. SEE
PORTFOLIO MANAGERS' BIOGRAPHICAL INFORMATION BEGINNING ON PAGE 93.
Q. HOW DID THE ELFUN INTERNATIONAL EQUITY FUND PERFORM COMPARED TO ITS
BENCHMARK AND LIPPER PEER GROUP FOR THE TWELVE-MONTH PERIOD ENDED DECEMBER
31, 2005?
A. For the twelve-month period ended December 31, 2005, the Elfun International
Equity Fund returned 19.69%. The MSCI EAFE Index, the Fund's benchmark,
returned 13.54% and the Fund's Lipper peer group of 204 International
Large-Cap Core funds returned an average of 13.46% for the same period.
Q. WHAT MARKET CONDITIONS IMPACTED FUND PERFORMANCE?
A. The international markets experienced strong absolute returns despite a
major recovery in the value of the U.S. Dollar. Reforms in Japan sparked a
powerful rally in the second half of the year, while emerging markets
continued to outperform, driven by sustained global growth. A strong U.S.
Dollar helped foreign exporters regain some competitive advantage after
three years of Dollar weakness.
Q. WHAT WORLD EVENTS HAD A MAJOR IMPACT ON FINANCIAL MARKETS?
A. The record-high energy prices and Asia's massive demand for raw materials
provided a field day for the owners of these assets but high prices put
pressure on consumers. Rising interest rates and weakness in overseas
currencies sparked a major turnaround in the U.S. Dollar, which supported
global companies over smaller, local operators. Inflation fears briefly
loomed late in the year but subsided in the face of cheap consumer products
flooding the major markets.
[PHOTO OF RALPH R. LAYMAN OMITTED]
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1
Elfun International Equity Fund
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Q&A
Q. WHICH STOCKS AND SECTORS SIGNIFICANTLY AFFECTED THE FUND'S PERFORMANCE?
A. Emerging energy plays, including Lukoil (Russia) and Petrobras (Brazil),
were major contributors, as were oil service stocks such as Stolt Offshore
(Norway). Japanese financials including Mitsubishi Estates (property) and
Nomura Holdings (brokerage) rallied strongly in the second half, and IT
holdings including Samsung Electronics (Korea) and Nidec (Japan - brushless
motors) also made major contributions. Weakness was seen in stocks where
competition was fierce such as in Smith & Nephew (UK - healthcare equipment)
and where the consumer is over-stretched as witnessed with UK food retailer
Tesco.
Q. DID THE WEIGHTINGS/COUNTRY ALLOCATION OF THE FUNDS CHANGE?
A. The overall weight to emerging markets was reduced during the period as
strong performances led to tactical trims of some stocks. The cash from
these sells was redeployed into new opportunities in Japan, raising the
weight in that country to the highest levels in many years, although the
Fund is still underweight versus the index. There was a modest increase in
the weight in the Pacific Rim, mainly in real estate opportunities, and
equally modest reductions in UK and European holdings.
Q. WHAT WERE THE MAJOR BUYS AND SELLS FOR THE PERIOD AND WHY?
A. Holdings were added in Japanese companies that met our criteria, including
brokerage and retail banking, on renewed vigor in those industries.
Positions were added in real estate on a major shift in valuations and
technology due to sheer competitive superiority. There was also a shift from
energy asset plays to oil service stocks. Embraer (Brazil aerospace), Daikin
(Japan - industrial) and Svenska Handelsbanken (Sweden) were eliminated for
valuation reasons. Other key sales, including Canon (Japan) and Alcan
(Canada), were due to competitive pressure or severe pricing issues.
2
Elfun International Equity Fund
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Understanding Your Fund's Expenses
As a shareholder of the Fund you incur transaction and ongoing expenses.
Transaction expenses including sales charges on purchase payments, reinvested
dividends (or other distributions), and redemption fees directly reduce the
investment return of the Fund. Ongoing costs include portfolio management fees,
distribution and service fees, professional fees, administrative fees and other
Fund expenses. The following example is intended to help you understand your
ongoing costs (in dollars) of investing in the Fund and to compare these costs
with the ongoing costs of investing in other mutual funds.
To illustrate these ongoing costs, we have provided an example and calculated
the expenses paid by investors in each share class of the Fund during the
period. The information in the following table is based on an investment of
$1,000, which is invested at the beginning of the period and held for the entire
six-month period ended December 31, 2005.
ACTUAL EXPENSES
The first section of the table provides information about actual account values
and actual expenses. You may use the information in this section, together with
the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JULY 1, 2005 - DECEMBER 31, 2005
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ACCOUNT VALUE AT ACCOUNT VALUE EXPENSES
THE BEGINNING OF AT THE END OF PAID DURING
THE PERIOD ($) THE PERIOD ($) THE PERIOD ($)*
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Actual Fund Return** 1,000.00 1,198.80 1.15
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Hypothetical 5% Return
(2.5% for the period) 1,000.00 1,023.89 1.05
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<FN>
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.21% (FROM
PERIOD JULY 1, 2005 - DECEMBER 31, 2005), MULTIPLIED BY THE AVERAGE ACCOUNT
VALUE OVER THE PERIOD, MULTIPLIED BY 184/365 (TO REFLECT THE SIX-MONTH
PERIOD).
** ACTUAL FUND RETURN FOR SIX-MONTH PERIOD ENDED DECEMBER 31, 2005 WAS: 19.88%.
</FN>
3
Elfun International Equity Fund
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CHANGE IN VALUE OF A $10,000 INVESTMENT
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[LINE GRAPH OMITTED]
Elfun International Equity MSCI EAFE Index
Fund (ending value $23,874) (ending value $17,594)
12/95 $10,000.00 $10,000.00
12/96 11,613.48 10,604.11
12/97 12,597.04 10,792.29
12/98 14,784.21 12,950.08
12/99 20,535.03 16,442.04
12/00 18,693.58 14,112.66
12/01 15,129.32 11,062.36
12/02 12,098.17 9,299.02
12/03 17,063.63 12,887.11
12/04 19,947.20 15,496.38
12/05 23,874.07 17,593.91
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED DECEMBER 31, 2005
- ------------------------------------------------
ONE FIVE TEN
YEAR YEAR YEAR
- ------------------------------------------------
Elfun International
Equity Fund 19.69% 5.01% 9.09%
MSCI EAFE Index 13.54% 4.51% 5.81%
INVESTMENT PROFILE
A fund designed for investors who seek long-term growth of capital and
future income consistent with prudent investment management and the preservation
of capital by investing at least 80% of its net assets in equity securities
under normal market conditions. The Fund invests primarily in equity
securities of companies located in developed and developing countries outside
the United States.
TOP TEN EQUITY HOLDINGS
AS OF DECEMBER 31, 2005
AS A % OF MARKET VALUE
- ----------------------------------------
BHP Billiton PLC 2.44%
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Nomura Holdings, Inc. 2.28%
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Total S.A. 2.04%
- ----------------------------------------
GlaxoSmithKline PLC 1.99%
- ----------------------------------------
Roche Holding AG 1.90%
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Koninklijke Philips
Electronics N.V. 1.82%
- ----------------------------------------
Toyota Motor Corp. 1.76%
- ----------------------------------------
Ente Nazionale
Idrocarburi S.p.A. 1.76%
- ----------------------------------------
Nestle S.A. (Regd.) 1.66%
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Nokia OYJ 1.64%
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LIPPER PERFORMANCE COMPARISON
INTERNATIONAL LARGE-CAP CORE PEER GROUP
BASED ON AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/05
ONE FIVE TEN
YEAR YEAR YEAR
Fund's rank in peer group: .............. 11 5 8
Number of Funds in peer group: .......... 204 140 58
Peer group average annual total return: . 13.46% 2.21% 6.11%
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SEE NOTES TO PERFORMANCE ON PAGE 67 FOR FURTHER INFORMATION, INCLUDING AN
EXPLANATION OF LIPPER PEER CATEGORIES. PAST PERFORMANCE DOES NOT PREDICT FUTURE
PERFORMANCE AND THE GRAPH AND TABLE DO NOT REFLECT THE DEDUCTION OF TAXES.
4
ELFUN INTERNATIONAL EQUITY FUND
Schedule of Investments
(dollars in thousands) -- December 31, 2005
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ELFUN INTERNATIONAL EQUITY FUND
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PORTFOLIO COMPOSITION AS A % OF THE MARKET VALUE OF $336,472 AS OF DECEMBER 31,
2005.
[PIE CHART OMITTED]
Continental Europe 37.0%
Japan 17.2%
United Kingdom 16.4%
Short-Term 16.1%
Emerging Asia 5.4%
Latin America 3.6%
Pacific Rim 2.7%
Canada 1.1%
Emerging Europe 0.5%
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NUMBER
OF SHARES VALUE
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COMMON STOCK -- 98.1%+
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BRAZIL -- 3.1%
Cia Vale do Rio Doce ADR .. 133,957 $ 5,511
Petroleo Brasileiro S.A. ADR 51,854 3,338
8,849
CANADA -- 1.3%
Canadian National
Railway Co. ............ 22,858 1,823
Nortel Networks Corp. ..... 177,454 539 (a)
Potash Corp of Saskatchewan 16,043 1,279
3,641
CHINA -- 0.4%
China Petroleum &
Chemical Corp. ......... 2,446,000 1,207
DENMARK -- 0.5%
Group 4 Securicor PLC ..... 481,370 1,355
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NUMBER
OF SHARES VALUE
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FINLAND -- 1.9%
Nokia OYJ ................. 303,365 $ 5,529
FRANCE -- 11.3%
Accor S.A. ................ 7,871 431 (j)
AXA S.A. .................. 110,561 3,555 (j)
BNP Paribas ............... 62,111 5,008 (j)
Carrefour S.A. ............ 42,834 2,000 (j)
Credit Agricole S.A. ...... 91,743 2,880 (j)
France Telecom S.A. ....... 66,609 1,649
Lagardere S.C.A. (Regd.) .. 10,745 824 (j)
LVMH Moet Hennessy
Louis Vuitton S.A. ..... 24,682 2,185 (j)
Renault S.A. .............. 5,576 453 (j)
Sanofi-Aventis ............ 32,102 2,802 (j)
Total S.A. ................ 27,428 6,865 (j)
Veolia Environnement ...... 86,608 3,907 (j)
32,559
GERMANY -- 5.6%
Allianz AG (Regd.) ........ 17,939 2,707 (j)
BASF AG ................... 34,237 2,613
Bayerische Motoren Werke AG 13,221 578 (j)
E.ON AG ................... 41,887 4,318 (j)
Linde AG .................. 19,116 1,483
Siemens AG (Regd.) ........ 52,631 4,495
16,194
HONG KONG -- 1.8%
Hongkong Land Holdings Ltd. 504,997 1,586
Jardine Matheson
Holdings Ltd. .......... 73,808 1,269
Sun Hung Kai Properties Ltd. 244,550 2,389 (j)
5,244
INDIA -- 1.7%
ICICI Bank Ltd. ADR ....... 65,387 1,883 (j)
Reliance Industries Ltd. GDR 74,277 2,936 (b)
4,819
- ---------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
5
ELFUN INTERNATIONAL EQUITY FUND
Schedule of Investments
(dollars in thousands) -- December 31, 2005
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- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
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ITALY -- 5.3%
Banca Intesa S.p.A. ....... 471,389 $ 2,488 (j)
Ente Nazionale Idrocarburi
S.p.A. ................. 214,335 5,924 (j)
Saipem S.p.A. ............. 78,365 1,281
Telecom Italia S.p.A ...... 69,315 171
UniCredito Italiano S.p.A. 792,549 5,441 (j)
15,305
JAPAN -- 20.1%
Acom Co. Ltd. ............. 35,799 2,299
Aiful Corp. ............... 3,300 275
Asahi Glass Co. Ltd. ...... 259,014 3,342 (j)
Bank of Yokohama Ltd. ..... 295,026 2,412
Chiyoda Corp. ............. 174,160 3,999 (j)
Hoya Corp. ................ 85,500 3,071
Komatsu Ltd. .............. 139,150 2,300
Kubota Corp. .............. 136,000 1,142
Mitsubishi Estate Co. Ltd. 247,946 5,147 (j)
Mitsubishi UFJ Financial
Group, Inc. ............ 398 5,395
Mitsui Sumitomo
Insurance Co. Ltd. ..... 384,000 4,695
Nidec Corp. ............... 52,452 4,457 (j)
Nomura Holdings, Inc. ..... 400,496 7,669
SMC Corp. ................. 16,059 2,293
Tokyu Corp. ............... 126,000 890 (j)
Toray Industries Inc. ..... 300,997 2,453 (j)
Toyota Motor Corp. ........ 114,287 5,926
57,765
MALAYSIA -- 0.4%
Malaysia International
Shipping Corp. BHD ..... 447,518 1,172
MEXICO -- 1.1%
America Movil S.A. de C.V.
ADR (Series L) ......... 110,649 3,238
NETHERLANDS -- 3.2%
ING Groep N.V. ............ 84,768 2,930
Koninklijke Philips
Electronics N.V. ....... 197,592 6,118
9,048
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NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
NORWAY -- 2.1%
Stolt Offshore S.A. ....... 356,774 $ 4,136 (a)
Telenor ASA ............... 184,951 1,810
5,946
RUSSIA -- 0.6%
LUKOIL ADR ................ 30,020 1,786 (b)
SINGAPORE -- 1.4%
CapitaLand Ltd. ........... 1,013,000 2,096
Singapore Telecommunications
Ltd. ................... 1,141,441 1,792
3,888
SOUTH KOREA -- 2.5%
Kookmin Bank .............. 51,253 3,879 (a)
Samsung Electronics Co. Ltd. 5,170 3,370
7,249
SPAIN -- 2.3%
Banco Santander Central
Hispano S.A. (Regd.) ... 312,895 4,115 (j)
Telefonica S.A. ........... 164,732 2,470
Telefonica S.A. ADR ....... 1,477 66
6,651
SWEDEN -- 2.0%
Sandvik AB ................ 72,100 3,352
Telefonaktiebolaget
LM Ericsson ............ 729,253 2,501
5,853
SWITZERLAND -- 9.1%
ABB Ltd. (Regd.) .......... 383,093 3,706 (a)
Adecco S.A. (Regd.) ....... 28,580 1,314
Credit Suisse Group (Regd.) 86,508 4,398 (h)
Holcim Ltd. (Regd.) ....... 26,608 1,807
Nestle S.A. (Regd.) ....... 18,752 5,592 (h)
Novartis AG (Regd.) ....... 20,762 1,088
Roche Holding AG .......... 42,752 6,400
Swiss Reinsurance ......... 23,778 1,736
26,041
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See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
6
ELFUN INTERNATIONAL EQUITY FUND
Schedule of Investments
(dollars in thousands) -- December 31, 2005
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
TAIWAN -- 1.2%
Taiwan Semiconductor
Manufacturing Co. Ltd. . 1,880,011 $ 3,578
UNITED KINGDOM -- 19.2%
BG Group PLC .............. 231,915 2,287
BHP Billiton PLC .......... 504,539 8,224 (h)
Brambles Industries PLC ... 389,697 2,790
Diageo PLC ................ 257,948 3,731
GlaxoSmithKline PLC ....... 265,905 6,706 (h)
Group 4 Securicor PLC ..... 468,653 1,295
Kingfisher PLC ............ 170,627 695
Lloyds TSB Group PLC ...... 303,584 2,546
National Grid PLC ......... 44,590 435
Prudential PLC ............ 287,591 2,715
Reed Elsevier PLC ......... 191,381 1,794
Rio Tinto PLC (Regd.) ..... 81,773 3,727
Royal Bank of Scotland
Group PLC .............. 131,153 3,951
Smith & Nephew PLC ........ 169,739 1,560
Smiths Group PLC .......... 235,552 4,230
Tesco PLC ................. 636,158 3,620
Vodafone Group PLC ........ 1,728,991 3,725 (h)
Wolseley PLC .............. 56,012 1,178
55,209
TOTAL INVESTMENTS IN SECURITIES
(COST $207,123) ........ 282,126
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SHORT-TERM INVESTMENTS -- 18.9%
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 1.4%
GEI Short Term Investment Fund
4.42% ..................... 3,938,114 3,938 (d,l)
SHORT-TERM SECURITIES PURCHASED WITH COLLATERAL
FROM SECURITIES ON LOAN -- 17.5%
State Street Navigator Securities
Lending Prime Portfolio
4.29% ..................... 50,407,767 50,408 (d,e)
TOTAL SHORT-TERM INVESTMENTS
(COST $54,346) ......... 54,346
VALUE
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS
(COST $261,469) ........ $336,472
LIABILITIES IN EXCESS OF OTHER ASSETS,
NET -- (17.0)% ......... (48,945)
--------
NET ASSETS-- 100.0% ....... $287,527
========
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OTHER INFORMATION
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The Elfun International Equity Fund had the following long futures contracts
open at December 31, 2005:
NUMBER CURRENT
EXPIRATION OF NOTIONAL UNREALIZED
DESCRIPTION DATE CONTRACTS VALUE APPRECIATION
- --------------------------------------------------------------------------------
DJ Euro Stoxx
Index FuturesMarch 2006 26 $1,100 $ 22
FTSE 100
Index FuturesMarch 2006 6 578 9
Topix Index
Futures March 2006 5 696 21
-------
$ 52
=======
The Elfun International Equity Fund was invested in the following sectors at
December 31, 2005:
SECTOR PERCENTAGE (BASED ON MARKET VALUE)
- --------------------------------------------------------------------------------
Financials 25.40%
Short-Term 16.15%
Industrials 12.09%
Energy 8.85%
Materials 8.05%
Information Technology 6.85%
Consumer Discretionary 5.65%
Healthcare 5.52%
Consumer Staples 4.44%
Telecommunication Services 4.43%
Utilities 2.57%
-------
100.00%
=======
- ---------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
7
Elfun Trusts
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THE ELFUN TRUSTS IS MANAGED BY DAVID B. CARLSON. SEE PORTFOLIO MANAGERS'
BIOGRAPHICAL INFORMATION BEGINNING ON PAGE 93.
Q. HOW DID THE ELFUN TRUSTS PERFORM COMPARED TO ITS BENCHMARK AND LIPPER PEER
GROUP FOR THE TWELVE-MONTH PERIOD ENDED DECEMBER 31, 2005?
A. For the twelve-month period ended December 31, 2005, the Elfun Trusts
returned 0.80%. The S&P 500 Index, the Fund's benchmark, returned 4.92% and
the Fund's Lipper peer group of 890 Large-Cap Core funds returned an average
of 4.85% for the same period.
Q. WHAT MARKET CONDITIONS IMPACTED THE FUND PERFORMANCE?
A. In the past twelve months, skyrocketing energy prices have weighed on the
stock market, and this concern intensified in the second half of the year,
as hurricanes Katrina and Rita disrupted U.S. petroleum production. With
crude oil prices above $60 a barrel, investors worried about the economy
slowing. Against this backdrop, the Federal Reserve endeavored to dampen the
inflationary effects of high energy costs, and tightened short rates at a
measured pace throughout the year. Within the stock market, energy stocks
remained strong (despite a 4th quarter pullback as commodity prices
moderated), many cyclical stocks declined, and less cyclical stocks such as
utilities and health care outperformed. Financials rallied late in the year,
as the market contemplated an end to the Federal Reserve's tightening cycle.
Large-cap stocks continued to lag the broad market, and value stocks once
again outperformed growth stocks - although the Russell 1000 Growth beat the
Russell 1000 Value in the last three quarters of the year.
Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE?
A. The energy and utility sectors led the market during the 12-month period,
rising 31% and 17%, respectively. As a growth oriented portfolio, the Fund
owned no utility stocks and remained underweight in energy, making it
difficult to perform in line with the major market averages. Within the
energy sector, strong performance from oil services company, Schlumberger
(+46%), was the largest contributor to the Fund's performance over the
period. In an environment of rising interest rates and high energy prices,
many of our consumer-oriented names were weak, including media companies
Liberty Media (-16%) and Comcast (-22%); specialty retailers Home Depot
(-4%) and Bed Bath & Beyond (-13%); and cruise company Carnival (-6%).
Within the benchmark, the financials sector returned over +6% during the
period and the Fund benefited from owning State Street (+15%) and AFLAC
(+18%), but this was not enough to offset the negative impact of
underweighting the sector and owning Fannie Mae (-30%).
[PHOTO OF DAVID B. CARLSON OMITTED]
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8
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Q&A
Vodafone, our only telecom services holding, declined (-19%), facing
increased European competition and challenges in Japan. Beverage company,
PepsiCo (+15%) added to the performance of our consumer staples holdings and
this coupled with our underweight position in this sector positively
affected the Fund during the period. Strong performance of our sole
materials holding benefited the Fund as Monsanto (+41%) significantly
outperformed the sector return of +5%. The company continued to report solid
results and provided positive guidance for the future of its genetically
modified seed operations. The Fund holdings of Intuit (+21%), UnitedHealth
(+41%) and Amgen (+23%) all contributed significantly to the performance of
the Fund.
Q. WERE THERE ANY SIGNIFICANT CHANGES TO THE FUND DURING THE PERIOD?
A. The Fund held 59 high quality companies at the end of the period. During the
year the Fund reduced its exposure to financials. In addition we trimmed our
position in Vodafone, our only holding in the telecom services sector.
Throughout the year we added to certain positions in the information
technology, materials, and consumer discretionary sectors. Early in the
year, we increased our position in Monsanto; this holding was one of the
largest contributors to performance during the period. We added to our
position in eBay and initiated a position in Qualcomm after sharp sell-offs
in the first half of 2005, both names contributed positively to performance
since purchase. Bed Bath & Beyond, a well-managed retailer with above
average long-term growth prospects, was a more recent addition. In the
energy sector we initiated a position in oil services company, Baker Hughes,
increasing our exposure to the oil services industry due to strong
fundamentals and demand from oil and gas producers. Portfolio turnover for
the period ran 10-15%, in-line with the historical range for the Fund.
Despite the challenging environment, our investment strategy, which has
provided the Fund's strong historical returns, remains unchanged. We
continue to focus our efforts on fundamental, bottom-up stock selection and
believe that the Fund remains well positioned for good relative performance
over the long-term.
9
Elfun Trusts
Understanding Your Fund's Expenses
- --------------------------------------------------------------------------------
As a shareholder of the Fund you incur transaction and ongoing expenses.
Transaction expenses including sales charges on purchase payments, reinvested
dividends (or other distributions), and redemption fees directly reduce the
investment return of the Fund. Ongoing costs include portfolio management fees,
distribution and service fees, professional fees, administrative fees and other
Fund expenses. The following example is intended to help you understand your
ongoing costs (in dollars) of investing in the Fund and to compare these costs
with the ongoing costs of investing in other mutual funds.
To illustrate these ongoing costs, we have provided an example and calculated
the expenses paid by investors in each share class of the Fund during the
period. The information in the following table is based on an investment of
$1,000, which is invested at the beginning of the period and held for the entire
six-month period ended December 31, 2005.
ACTUAL EXPENSES
The first section of the table provides information about actual account values
and actual expenses. You may use the information in this section, together with
the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JULY 1, 2005 - DECEMBER 31, 2005
- ---------------------------------------------------------------------------------------------------------------------------
ACCOUNT VALUE AT ACCOUNT VALUE EXPENSES
THE BEGINNING OF AT THE END OF PAID DURING
THE PERIOD ($) THE PERIOD ($) THE PERIOD ($)*
- ---------------------------------------------------------------------------------------------------------------------------
Actual Fund Return** 1,000.00 1,035.66 0.51
- ---------------------------------------------------------------------------------------------------------------------------
Hypothetical 5% Return
(2.5% for the period) 1,000.00 1,024.41 0.50
- ---------------------------------------------------------------------------------------------------------------------------
<FN>
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.10% (FROM
PERIOD JULY 1, 2005 - DECEMBER 31, 2005), MULTIPLIED BY THE AVERAGE ACCOUNT
VALUE OVER THE PERIOD, MULTIPLIED BY 184/365 (TO REFLECT THE SIX-MONTH
PERIOD).
** ACTUAL FUND RETURN FOR SIX-MONTH PERIOD ENDED DECEMBER 31, 2005 WAS: 3.57%.
</FN>
10
Elfun Trusts
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CHANGE IN VALUE OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
[LINE GRAPH OMITTED]
Elfun Trusts (ending value $25,385) S&P 500 (ending value $23,861)
12/95 $10,000.00 $10,000.00
12/96 12,354.67 12,311.39
12/97 16,166.93 16,409.82
12/98 19,875.79 21,119.11
12/99 23,799.55 25,568.45
12/00 25,201.90 23,220.38
12/01 23,693.63 20,454.37
12/02 18,976.31 15,933.57
12/03 23,330.92 20,510.99
12/04 25,182.77 22,742.86
12/05 25,385.33 23,861.46
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED DECEMBER 31, 2005
- -----------------------------------------------
ONE FIVE TEN
YEAR YEAR YEAR
- -----------------------------------------------
Elfun Trusts 0.80% 0.15% 9.76%
S&P 500 4.92% 0.55% 9.09%
INVESTMENT PROFILE
A fund designed for investors who seek long-term growth of capital and future
income rather than current income by investing primarily in equity
securities of U.S. companies.
TOP TEN HOLDINGS
AS OF DECEMBER 31, 2005
AS A % OF MARKET VALUE
- ----------------------------------------
Intuit Inc. 4.50%
- ----------------------------------------
First Data Corp. 4.39%
- ----------------------------------------
Schlumberger Ltd. 4.25%
- ----------------------------------------
State Street Corp. 4.02%
- ----------------------------------------
Carnival Corp. 3.54%
- ----------------------------------------
The Home Depot, Inc. 3.50%
- ----------------------------------------
Johnson & Johnson 3.36%
- ----------------------------------------
Dover Corp. 3.33%
- ----------------------------------------
Amgen, Inc. 3.24%
- ----------------------------------------
Microsoft Corp. 3.17%
- ----------------------------------------
- --------------------------------------------------------------------------------
LIPPER PERFORMANCE COMPARISON
LARGE CAP CORE PEER GROUP
BASED ON AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/05
ONE FIVE TEN
YEAR YEAR YEAR
Fund's rank in peer group: ........................ 808 209 18
Number of Funds in peer group: .................... 890 619 229
Peer group average annual total return: ........... 4.85% (0.95%) 7.59%
- --------------------------------------------------------------------------------
SEE NOTES TO PERFORMANCE ON PAGE 67 FOR FURTHER INFORMATION, INCLUDING AN
EXPLANATION OF LIPPER PEER CATEGORIES. PAST PERFORMANCE DOES NOT PREDICT FUTURE
PERFORMANCE AND THE GRAPH AND TABLE DO NOT REFLECT THE DEDUCTION OF TAXES.
11
ELFUN TRUSTS
Schedule of Investments
(dollars in thousands) -- December 31, 2005
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ELFUN TRUSTS
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION AS A % OF THE MARKET VALUE OF $2,310,250 AS OF
DECEMBER 31, 2005.
[PIE CHART OMITTED]
Consumer Staples 2.6%
Materials 1.7%
Information Technology 24.0%
Healthcare 20.1%
Consumer Discretionary 18.6%
Financials 16.0%
Energy 7.0%
Industrials 3.7%
Short-Term 3.3%
Telecommunication Services 3.0%
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK -- 98.2%+
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 18.9%
Bed Bath & Beyond, Inc. ... 550,000 $ 19,882 (a)
Carnival Corp. ............ 1,530,000 81,809 (j)
Comcast Corp. (Class A) ... 2,400,000 61,656 (a)
Discovery Holding Co.
(Series A) ............. 350,000 5,303 (a,j)
eBay, Inc. ................ 650,000 28,112 (a)
IAC/InterActiveCorp. ...... 169,999 4,813 (a,j)
Liberty Global Inc.
(Series C) ............. 1,185,000 25,122 (a,j)
Liberty Global, Inc.
(Series A) ............. 910,000 20,475 (a,j)
Liberty Media Corp.
(Series A) ............. 9,100,000 71,617 (a)
News Corp. (Class A) ...... 800,000 12,440 (j)
Omnicom Group, Inc. ....... 90,000 7,662
Target Corp. .............. 190,000 10,444 (j)
The Home Depot, Inc. ...... 2,000,000 80,960
430,295
CONSUMER STAPLES -- 2.7%
Colgate-Palmolive Co. ..... 286,670 15,724 (j)
PepsiCo, Inc. ............. 760,000 44,901
60,625
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
ENERGY -- 7.2%
Baker Hughes Incorporated . 360,000 $ 21,881 (j)
Exxon Mobil Corp. ......... 760,000 42,689
Schlumberger Ltd. ......... 1,010,000 98,121
162,691
FINANCIALS -- 16.2%
AFLAC Incorporated ........ 510,000 23,674 (j)
Alleghany Corp. ........... 37,142 10,548 (a)
American Express Co. ...... 200,000 10,292
American International
Group, Inc. ............ 330,000 22,516
Berkshire Hathaway, Inc.
(Class B) .............. 14,000 41,097 (a,j)
CB Richard Ellis Group, Inc.
(Class A) .............. 100,000 5,885 (a,j)
Citigroup, Inc. ........... 1,100,000 53,383
Federal National
Mortgage Assoc. ........ 1,100,000 53,691
JPMorgan Chase & Co. ...... 125,000 4,961
SLM Corp. ................. 920,000 50,683
State Street Corp. ........ 1,675,000 92,862 (e,j)
369,592
HEALTHCARE -- 20.4%
Abbott Laboratories ....... 980,000 38,641
Amgen, Inc. ............... 950,000 74,917 (a)
Cardinal Health, Inc. ..... 120,000 8,250 (j)
DENTSPLY International, Inc. 40,000 2,148 (j)
Johnson & Johnson ......... 1,290,000 77,529
Lincare Holdings Inc. ..... 1,310,000 54,902 (a)
Medtronic Inc. ............ 575,000 33,103
Pfizer Inc. ............... 2,780,000 64,830
UnitedHealth Group
Incorporated ........... 960,000 59,654
Wyeth ..................... 450,000 20,731
Zimmer Holdings, Inc. ..... 440,000 29,674 (a)
464,379
INDUSTRIALS -- 3.7%
Dover Corp. ............... 1,900,000 76,931 (j)
Iron Mountain Incorporated 125,000 5,278 (a,j)
Stericycle, Inc. .......... 35,000 2,061 (a,j)
84,270
- ---------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
12
ELFUN TRUSTS
Schedule of Investments
(dollars in thousands) -- December 31, 2005
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY -- 24.4%
Analog Devices, Inc. ...... 560,000 $ 20,087
Automatic Data
Processing, Inc. ....... 680,000 31,205 (j)
Checkfree Corp. ........... 150,000 6,885 (a)
Cisco Systems, Inc. ....... 1,830,000 31,330 (a)
Dell, Inc. ................ 1,050,000 31,489 (a)
EMC Corporation ........... 400,000 5,448 (a)
First Data Corp. .......... 2,360,000 101,504 (h)
Intel Corp. ............... 1,380,000 34,445
Intuit Inc. ............... 1,950,000 103,935 (a,j)
Linear Technology Corp. ... 115,000 4,148
Microsoft Corp. ........... 2,800,000 73,220
Molex Inc. (Class A) ...... 2,280,000 56,065 (j)
Paychex, Inc. ............. 530,000 20,204 (j)
QUALCOMM, Inc. ............ 400,000 17,232
Yahoo! Inc. ............... 430,000 16,847 (a)
554,044
MATERIALS -- 1.7%
Monsanto Co. .............. 500,000 38,765
TELECOMMUNICATION SERVICES -- 3.0%
Vodafone Group PLC ADR .... 3,225,000 69,241
TOTAL INVESTMENTS IN SECURITIES
(COST $1,443,380) ...... 2,233,902
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 3.4%
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 1.7%
GEI Short Term
Investment Fund
4.42% ..................... 39,171,351 $ 39,172 (d,l)
SHORT-TERM SECURITIES PURCHASED WITH COLLATERAL
FROM SECURITIES ON LOAN -- 1.7%
State Street Navigator Securities
Lending Prime Portfolio
4.29% ..................... 37,176,235 37,176 (d,e)
TOTAL SHORT-TERM INVESTMENTS
(COST $76,348) ......... 76,348
TOTAL INVESTMENTS
(COST $1,519,728) ...... 2,310,250
LIABILITIES IN EXCESS OF OTHER ASSETS,
NET -- (1.6)% .......... (36,541)
----------
NET ASSETS-- 100.0% ....... $2,273,709
==========
- ---------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
13
Elfun Diversified Fund
- --------------------------------------------------------------------------------
THE ELFUN DIVERSIFIED FUND IS MANAGED BY A TEAM OF PORTFOLIO MANAGERS LED BY
CHRISTOPHER D. BROWN, PAUL M. COLONNA AND RALPH R. LAYMAN. EACH OF THE FOREGOING
PORTFOLIO MANAGERS IS RESPONSIBLE FOR MANAGING ONE OF THREE SUB-PORTFOLIOS: U.S.
EQUITY, INTERNATIONAL EQUITY AND FIXED INCOME. MR. BROWN MANAGES THE U.S. EQUITY
PORTION, MR. LAYMAN MANAGES THE INTERNATIONAL EQUITY PORTION AND MR. COLONNA
MANAGES THE FIXED INCOME PORTION, EACH WITH A TEAM OF MANAGERS AND ANALYSTS. THE
SUB-PORTFOLIOS UNDERLYING THIS FUND ARE MANAGED INDEPENDENTLY OF EACH OTHER AND
THE PORTFOLIO MANAGERS HAVE FULL DISCRETION OVER THEIR PARTICULAR SUB-PORTFOLIO;
HOWEVER, THE PORTFOLIO MANAGEMENT TEAM IS COLLABORATIVE TO ENSURE STRICT
ADHERENCE TO THIS FUND'S OBJECTIVES. SEE PORTFOLIO MANAGERS' BIOGRAPHICAL
INFORMATION BEGINNING ON PAGE 93.
Q. HOW DID THE ELFUN DIVERSIFIED FUND PERFORM COMPARED TO ITS BENCHMARK AND
LIPPER PEER GROUP FOR THE TWELVE-MONTH PERIOD ENDED DECEMBER 31, 2005?
A. For the twelve-month period ended December 31, 2005, the Elfun Diversified
Fund returned 4.02%. The Fund's broad-based benchmarks, the S&P 500 Index
and The Lehman Brothers Aggregate Bond Index, returned 4.92% and 2.43%,
respectively. The Fund's Lipper peer group of 650 Balanced Funds returned an
average of 4.69% for the same period.
[PHOTO OF CHRISTOPHER D. BROWN, PAUL M. COLONNA AND RALPH R. LAYMAN OMITTED]
- --------------------------------------------------------------------------------
14
Q&A
- --------------------------------------------------------------------------------
Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE DURING THE TWELVE-MONTH
PERIOD ENDED DECEMBER 31, 2005?
A. In the past twelve months, skyrocketing energy prices have weighed on the
stock market, and this concern intensified in the second half of the year,
as hurricanes Katrina and Rita disrupted U.S. petroleum production. With
crude oil prices above $60 a barrel, investors worried about the economy
slowing. Against this backdrop, the Federal Reserve Board endeavored to
dampen the inflationary effects of high energy costs, and tightened short
rates at a measured pace throughout the year. Within the stock market,
energy stocks remained strong (despite a 4th quarter pullback as commodity
prices moderated), many cyclical stocks declined, and less cyclical stocks
such as utilities and health care outperformed. Financials rallied late in
the year, as the market contemplated an end to the Federal Reserve's
tightening cycle. Large-cap stocks continued to lag the broad market, and
value stocks once again outperformed growth stocks although the Russell 1000
Growth beat the Russell 1000 Value in the last three quarters of the year.
For the year ending December 31, 2005, the sectors that negatively impacted
performance included consumer discretionary, financials, health care, and
information technology. An overweight position in the lagging sector
consumer discretionary sector was the single largest detractor from
portfolio performance for the year. The underperformance was driven by
declines in: media, namely Liberty Media (-16%) and Comcast (-22%);
specialty retailer Home Depot (-4%); and leisure company Carnival (-6%). The
financials sector returned a strong +6.5% relative to the benchmark during
the period and the Fund benefited from owning State Street (+15%), HCC
Insurance (+36%) and AFLAC (+18%); but this was not enough to offset the
negative impact of underweighting the sector and owning Citigroup (+5%) and
Fannie Mae (-30%). Health care detracted from portfolio performance during
the year as our holdings underperformed those of the benchmark sector.
Strong performances from Amgen (+23%) and Wyeth (+11%) were overshadowed by
lagging performance from holdings of Abbott (-13%) and Pfizer (-11%).
Additionally, an overweight position in information technology and
underperformance from portfolio holdings such as Dell (-29%) and Molex (-7%)
hurt relative performance.
The primary positive contributors to performance for the year were the
materials and energy sectors. Materials benefited from the strong
performance of our sole holding, Monsanto (+41%), which significantly
outperformed the sector return of +5%. The company continued to report solid
earnings and to provide positive guidance for future results. Despite the
Fund's underweight position in energy, the S&P 500 Index's best performing
sector (+31%), strong security selection drove outperformance relative to
the benchmark sector. Burlington Resources (+99%), Schlumberger (+47%) and
Nabors (+48%) were the biggest contributors to the Fund's outperformance in
this sector.
Despite recent challenges, we remain highly committed to investing in high
quality large-cap stocks with predictable and steady above-average earnings
growth. In the last twelve months we initiated positions in companies such
as Monsanto, which was one of the portfolio's best performing stocks during
the period. In addition we eliminated names such as Burlington Resources and
Nabors during the year after they became fully valued and more attractive
investment options became
15
Elfun Diversified Fund
- --------------------------------------------------------------------------------
available. The Fund remains overweight in information technology, consumer
discretionary and healthcare. During the period, we added to positions in
the energy, healthcare, materials, consumer staples and information
technology sectors. Over the year, we reduced our position in telecom
services and were net sellers of financial stocks. We continue to believe
the portfolio comprised of high quality companies will be well positioned
for long-term results.
In the fixed income markets, despite major problems announced by both
General Motors and Ford in the spring, hurricanes hitting the gulf coast in
early fall, and continued high energy prices, the U.S. economy maintained a
robust pace of growth in 2005. Low interest rates and new affordability
mortgage-products (e.g. interest-only, negative amotization) have helped
home sales stay at lofty levels. Consumer health improved which supported
spending and business investment improved as well. Although still moderate
by historical standards, inflation figures picked up slightly during the
year, which kept the Federal Reserve Board steadfast in its goal of removing
accommodation by raising rates. In 2005, the Federal Reserve Board met and
raised its target Fed funds rate 8 times, in increments of 25 basis points
(bps) to 4.25%. As a result of the Federal Reserve's continued endorsement
of higher rates, the yield on the 2-year treasuries increased 133 bps to
4.4%. Due to moderate inflation expectations and strong foreign buying,
10-year treasury yields rose only 17 bps to 4.39%.
Primary drivers of Fund performance during the year were sector allocation
and curve positioning. The Fund made non-index allocations to high yield and
emerging market sectors and away from high-grade benchmark sectors, as these
markets (especially emerging market debt) outperformed The Lehman Aggregate
benchmark. The Fund's yield curve exposure was positioned to take advantage
of a flattening yield curve, which proved correct as the yield spread
between the 2-year and 10-year notes narrowed by 116 bps. Security selection
in BBB-rated corporate securities also added value. Duration positioning
throughout the year was detrimental to Fund performance.
The international markets experienced strong absolute returns despite a
major recovery in the value of the U.S. Dollar. Reforms in Japan sparked a
powerful rally in the second half of the year, while emerging markets
continued to outperform, driven by sustained global growth. A strong U.S.
Dollar helped foreign exporters regain some competitive advantage after
three years of Dollar weakness.
The record-high energy prices and Asia's massive demand for raw materials
provided a field day for the owners of these assets but high prices put
pressure on consumers. Rising interest rates and weakness in overseas
currencies sparked a major turnaround in the U.S. Dollar, which supported
global companies over smaller, local operators. Inflation fears briefly
loomed late in the year but subsided in the face of cheap consumer products
flooding the major markets.
Emerging energy plays, including Lukoil (Russia) and Petrobras (Brazil),
were major contributors, as were oil service stocks such as Stolt Offshore
(Norway). Japanese financials including Mitsubishi Estates (property) and
Nomura Holdings (brokerage) rallied strongly in the second half, and IT
holdings including Samsung Electronics (Korea) and Nidec (Japan - brushless
motors) also made major contributions. Weakness was seen in stocks where
competition was fierce such as in Smith & Nephew
16
Q&A
- --------------------------------------------------------------------------------
(UK - healthcare equipment) and where the consumer is over-stretched as
witnessed with UK food retailer Tesco.
The overall weight to emerging markets was reduced during the period as
strong performances led to tactical trims of some stocks. The cash from
these sells was redeployed into new opportunities in Japan, raising the
weight in that country to the highest levels in many years, although the
Fund is still underweight versus the index. There was a modest increase in
the weight in the Pacific Rim, mainly in real estate opportunities, and
equally modest reductions in UK and European holdings.
Holdings were added in Japanese companies that met our criteria, including
brokerage and retail banking, on renewed vigor in those industries.
Positions were added in the real estate sector because of a major shift in
valuations and technology sectors due to sheer competitive superiority.
There was also a shift from energy asset plays to oil service stocks.
Embraer (Brazil - aerospace), Daikin (Japan - industrial) and Svenska
Handelsbanken (Sweden) were eliminated for valuation reasons. Other key
sales, including Canon (Japan) and Alcan (Canada), were made due to
competitive pressure or severe pricing issues.
17
Elfun Diversified Fund
Understanding Your Fund's Expenses
- --------------------------------------------------------------------------------
As a shareholder of the Fund you incur transaction and ongoing expenses.
Transaction expenses including sales charges on purchase payments, reinvested
dividends (or other distributions), and redemption fees directly reduce the
investment return of the Fund. Ongoing costs include portfolio management fees,
distribution and service fees, professional fees, administrative fees and other
Fund expenses. The following example is intended to help you understand your
ongoing costs (in dollars) of investing in the Fund and to compare these costs
with the ongoing costs of investing in other mutual funds.
To illustrate these ongoing costs, we have provided an example and calculated
the expenses paid by investors in each share class of the Fund during the
period. The information in the following table is based on an investment of
$1,000, which is invested at the beginning of the period and held for the entire
six-month period ended December 31, 2005.
ACTUAL EXPENSES
The first section of the table provides information about actual account values
and actual expenses. You may use the information in this section, together with
the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JULY 1, 2005 - DECEMBER 31, 2005
- ---------------------------------------------------------------------------------------------------------------
ACCOUNT VALUE AT ACCOUNT VALUE EXPENSES
THE BEGINNING OF AT THE END OF PAID DURING
THE PERIOD ($) THE PERIOD ($) THE PERIOD ($)*
- ---------------------------------------------------------------------------------------------------------------
Actual Fund Return** 1,000.00 1,053.17 1.13
- ---------------------------------------------------------------------------------------------------------------
Hypothetical 5% Return
(2.5% for the period) 1,000.00 1,023.83 1.11
- ---------------------------------------------------------------------------------------------------------------
<FN>
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.22% (FROM
PERIOD JULY 1, 2005 - DECEMBER 31, 2005), MULTIPLIED BY THE AVERAGE ACCOUNT
VALUE OVER THE PERIOD, MULTIPLIED BY 184/365 (TO REFLECT THE SIX-MONTH
PERIOD).
** ACTUAL FUND RETURN FOR SIX-MONTH PERIOD ENDED DECEMBER 31, 2005 WAS: 5.32%.
</FN>
18
Elfun Diversified Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CHANGE IN VALUE OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
[LINE GRAPH OMITTED]
Elfun Diversified Fund S&P 500 (ending LB Aggregate Bond
(ending value $23,151) value $23,861) (ending value $18,189)
12/95 $10,000.00 $10,000.00 $10,000.00
12/96 11,439.71 12,311.39 10,363.06
12/97 13,564.79 16,409.82 11,363.50
12/98 15,889.75 21,119.11 12,350.60
12/99 18,120.64 25,568.45 12,249.16
12/00 19,110.54 23,220.38 13,673.26
12/01 18,588.62 20,454.37 14,827.75
12/02 16,888.16 15,933.57 16,348.34
12/03 20,476.55 20,510.99 17,019.36
12/04 22,257.35 22,742.86 17,757.79
12/05 23,151.29 23,861.46 18,189.04
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED DECEMBER 31, 2005
- -----------------------------------------------------
ONE FIVE TEN
YEAR YEAR YEAR
- -----------------------------------------------------
Elfun Diversified Fund 4.02% 3.91% 8.76%
S&P 500 4.92% 0.55% 9.09%
LB Aggregate Bond 2.43% 5.87% 6.16%
INVESTMENT PROFILE
A fund designed for investors who seek the highest total return
consistent with prudent investment management and the preservation of
capital by investing primarily in a combination of U.S. and foreign
equity securities, and investment-grade debt securities.
TOP TEN LONG-TERM HOLDINGS
AS OF DECEMBER 31, 2005
AS A % OF MARKET VALUE
- -------------------------------------------
Microsoft Corp. 2.27%
- -------------------------------------------
Exxon Mobil Corp. 2.16%
- -------------------------------------------
First Data Corp. 2.09%
- -------------------------------------------
American International Group, Inc. 1.84%
- -------------------------------------------
Pfizer Inc. 1.58%
- -------------------------------------------
U.S. Treasury Notes
4.25%, 11/30/07 1.53%
- -------------------------------------------
Wyeth 1.51%
- -------------------------------------------
The Home Depot, Inc. 1.50%
- -------------------------------------------
Johnson & Johnson 1.49%
- -------------------------------------------
Industrial Select Sector
- -------------------------------------------
SPDR Fund 1.44%
- -------------------------------------------
- --------------------------------------------------------------------------------
LIPPER PERFORMANCE COMPARISON
BALANCED PEER GROUP
BASED ON AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED 12/31/05
ONE FIVE TEN
YEAR YEAR YEAR
Fund's rank in peer group: ............... 431 100 34
Number of Funds in peer group: ........... 650 382 177
Peer group average annual total return: .. 4.69% 2.67% 7.17%
- --------------------------------------------------------------------------------
SEE NOTES TO PERFORMANCE ON PAGE 67 FOR FURTHER INFORMATION, INCLUDING AN
EXPLANATION OF LIPPER PEER CATEGORIES. PAST PERFORMANCE DOES NOT PREDICT FUTURE
PERFORMANCE AND THE GRAPH AND TABLE DO NOT REFLECT THE DEDUCTION OF TAXES.
19
ELFUN DIVERSIFIED FUND
Schedule of Investments
(dollars in thousands) -- December 31, 2005
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ELFUN DIVERSIFIED FUND
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION AS A % OF THE MARKET VALUE OF $281,467 AS OF DECEMBER 31,
2005.
[PIE CHART OMITTED]
Domestic Equity 52.3%
Bonds and Notes 23.0%
Foreign Equity 17.8%
Short-Term & Others 6.9%
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
DOMESTIC EQUITY -- 54.6%+
- --------------------------------------------------------------------------------
COMMON STOCK -- 54.6%
CONSUMER DISCRETIONARY -- 9.3%
Bed Bath & Beyond, Inc. ...... 20,455 $ 739 (a)
Carnival Corp. ............... 68,236 3,649
Comcast Corp. (Class A) ...... 145,175 3,730 (a)
Discovery Holding Co.
(Series A) ................ 20,617 312 (a,j)
eBay, Inc. ................... 16,786 726 (a)
Liberty Global Inc.
(Series C) ................ 39,426 836 (a,j)
Liberty Global, Inc.
(Series A) ................ 29,554 665 (a)
Liberty Media Corp.
(Series A) ................ 458,700 3,610 (a)
Omnicom Group, Inc. .......... 21,513 1,831
Target Corp. ................. 26,662 1,466
The Home Depot, Inc. ......... 104,530 4,231
Viacom Inc. (Class B) ........ 75,818 2,472
24,267
CONSUMER STAPLES -- 4.7%
Clorox Co. ................... 20,473 1,165 (j)
Colgate-Palmolive Co. ........ 69,490 3,811
PepsiCo, Inc. ................ 55,346 3,270
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Sara Lee Corp. ............... 34,118 $ 645
The Coca-Cola Co. ............ 85,171 3,433
12,324
ENERGY -- 4.9%
EOG Resources, Inc. .......... 13,612 999
Exxon Mobil Corp. ............ 108,187 6,077
Halliburton Co. .............. 27,294 1,691
Schlumberger Ltd. ............ 40,593 3,944
12,711
FINANCIALS -- 9.0%
AFLAC Incorporated ........... 31,843 1,478 (h)
Alleghany Corp. .............. 933 265 (a)
American International
Group, Inc. ............... 75,735 5,167 (h)
Bank of America Corp. ........ 64,067 2,957
Berkshire Hathaway, Inc.
(Class B) ................. 494 1,450 (a)
Citigroup, Inc. .............. 37,992 1,844
Federal National
Mortgage Assoc. ........... 64,446 3,146
HCC Insurance Holdings, Inc. . 19,144 568 (j)
MBNA Corp. ................... 56,105 1,523
Mellon Financial Corp. ....... 29,362 1,006
State Street Corp. ........... 53,177 2,948 (e)
SunTrust Banks, Inc. ......... 15,017 1,093
23,445
HEALTHCARE -- 8.7%
Abbott Laboratories .......... 84,916 3,348 (h)
Aetna, Inc. .................. 12,889 1,216
Amgen, Inc. .................. 40,562 3,199 (a)
Johnson & Johnson ............ 69,753 4,192
Lincare Holdings Inc. ........ 44,354 1,859 (a)
Pfizer Inc. .................. 190,493 4,442
Wyeth ........................ 92,226 4,249
22,505
INDUSTRIALS -- 3.3%
Corinthian Colleges, Inc. 33,695 397 (a,j)
Dover Corp. .................. 83,400 3,377
Southwest Airlines Co. ....... 94,856 1,558
Tyco International Ltd. ...... 75,060 2,166
- ---------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
20
ELFUN DIVERSIFIED FUND
Schedule of Investments
(dollars in thousands) -- December 31, 2005
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
United Technologies Corp. .... 8,168 $ 457
Waste Management, Inc. ....... 21,348 648
8,603
INFORMATION TECHNOLOGY -- 13.8%
Activision, Inc. ............. 23,821 327 (a,j)
Automatic Data
Processing, Inc. .......... 47,007 2,157
Certegy, Inc. ................ 19,199 779 (j)
Checkfree Corp. .............. 10,264 471 (a)
Cisco Systems, Inc. .......... 137,278 2,350 (a)
Dell, Inc. ................... 53,065 1,591 (a)
EMC Corporation .............. 104,250 1,420 (a)
First Data Corp. ............. 136,720 5,880 (h)
Intel Corp. .................. 111,017 2,771
Intuit Inc. .................. 70,512 3,758 (a)
Microsoft Corp. .............. 244,288 6,388
Molex Inc. (Class A) ......... 121,309 2,983 (j)
Novellus Systems, Inc. ....... 53,831 1,298 (a,j)
Oracle Corp. ................. 211,242 2,579 (a)
Yahoo! Inc. .................. 24,884 975 (a)
35,727
MATERIALS -- 0.9%
Monsanto Co. ................. 31,466 2,440
TOTAL COMMON STOCK
(COST $129,058) ........... 142,022
PREFERRED STOCK -- 0.0*
Zurich Regcaps
Funding Trust I
(COST $108) ............... 105 106 (b)
TOTAL DOMESTIC EQUITY
(COST $129,166) ........... 142,128
- --------------------------------------------------------------------------------
FOREIGN EQUITY -- 19.3%
- --------------------------------------------------------------------------------
COMMON STOCK -- 19.2%
CONSUMER DISCRETIONARY -- 1.2%
Accor S.A. ................... 1,317 72 (j)
Bayerische Motoren Werke AG .. 2,211 97
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Kingfisher PLC ............... 28,540 $ 116
Koninklijke Philips
Electronics N.V. .......... 33,052 1,023
Lagardere S.C.A. (Regd.) ..... 1,797 138 (j)
LVMH Moet Hennessy
Louis Vuitton S.A. ........ 4,129 366 (j)
Reed Elsevier PLC ............ 32,010 300
Renault S.A. ................. 932 76 (j)
Toyota Motor Corp. ........... 19,098 990
3,178
CONSUMER STAPLES -- 1.0%
Carrefour S.A. ............... 7,166 335 (j)
Diageo PLC ................... 43,149 624
Nestle S.A. (Regd.) .......... 3,137 935
Tesco PLC .................... 106,502 606
2,500
ENERGY -- 1.7%
BG Group PLC ................. 38,787 383
China Petroleum &
Chemical Corp. ............ 410,000 202
Ente Nazionale
Idrocarburi S.p.A. ........ 35,871 991 (j)
LUKOIL ADR ................... 4,988 297 (b)
Petroleo Brasileiro S.A. ADR . 8,794 566 (j)
Saipem S.p.A. ................ 13,115 214
Stolt Offshore S.A. .......... 59,711 692 (a)
Total S.A. ................... 4,588 1,148 (j)
4,493
FINANCIALS -- 5.6%
Acom Co. Ltd. ................ 5,991 385
Aiful Corp. .................. 550 46
Allianz AG (Regd.) ........... 3,001 453
AXA S.A. ..................... 18,494 595 (j)
Banca Intesa S.p.A. .......... 75,248 397 (j)
Banco Santander Central
Hispano S.A. (Regd.) ...... 56,673 745 (j)
Bank of Yokohama Ltd. ........ 51,605 422 (j)
BNP Paribas .................. 11,083 894 (j)
CapitaLand Ltd. .............. 170,000 352
Credit Agricole S.A. ......... 14,640 460
Credit Suisse Group (Regd.) .. 14,471 736
Hongkong Land Holdings Ltd. .. 83,999 264
- ---------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
21
ELFUN DIVERSIFIED FUND
Schedule of Investments
(dollars in thousands) -- December 31, 2005
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
ICICI Bank Ltd. ADR .......... 10,446 $ 301 (j)
ING Groep N.V. ............... 14,180 490
Jardine Matheson
Holdings Ltd. ............. 13,707 236
Kookmin Bank ................. 8,257 625 (a)
Lloyds TSB Group PLC ......... 48,396 406
Mitsubishi Estate Co. Ltd. ... 46,982 975 (j)
Mitsubishi UFJ Financial
Group, Inc. ............... 71 962
Mitsui Sumitomo
Insurance Co. Ltd. 64,000 782
Nomura Holdings, Inc. ........ 67,099 1,285
Prudential PLC ............... 48,151 455
Royal Bank of Scotland
Group PLC ................. 21,001 633
Sun Hung Kai Properties Ltd. . 41,177 402 (j)
Swiss Reinsurance ............ 3,979 290
UniCredito Italiano S.p.A. ... 142,366 977 (j)
14,568
HEALTHCARE -- 1.2%
GlaxoSmithKline PLC .......... 44,480 1,122
Novartis AG (Regd.) .......... 3,883 203
Roche Holding AG ............. 7,152 1,071
Sanofi-Aventis ............... 5,370 469
Smith & Nephew PLC ........... 28,390 261
3,126
INDUSTRIALS -- 2.8%
ABB Ltd. (Regd.) ............. 64,083 620 (a)
Adecco S.A. (Regd.) .......... 4,781 220
Asahi Glass Co. Ltd. ......... 43,003 555 (j)
Brambles Industries PLC ...... 65,184 467
Canadian National
Railway Co. ............... 4,277 341
Chiyoda Corp. ................ 29,369 674 (j)
Group 4 Securicor PLC ........ 78,394 217
Group 4 Securicor PLC ........ 80,521 227
Komatsu Ltd. ................. 23,358 386
Kubota Corp. ................. 23,000 193 (j)
Malaysia International
Shipping Corp. BHD ........ 73,426 192
Reliance Industries Ltd. GDR . 12,210 483 (b)
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Sandvik AB ................... 12,005 $ 558
Siemens AG (Regd.) ........... 9,825 839
SMC Corp. .................... 2,697 385
Smiths Group PLC ............. 39,402 708
Tokyu Corp. .................. 21,000 148 (j)
Wolseley PLC ................. 9,369 197
7,410
INFORMATION TECHNOLOGY -- 1.5%
Hoya Corp. ................... 15,600 560
Nidec Corp. .................. 9,858 838 (j)
Nokia OYJ .................... 50,744 925
Nortel Networks Corp. ........ 29,684 90 (a,j)
Samsung Electronics Co. Ltd. . 860 561
Taiwan Semiconductor
Manufacturing Co. Ltd. .... 314,273 598
Telefonaktiebolaget
LM Ericsson ............... 121,974 418
3,990
MATERIALS -- 1.7%
BASF AG ...................... 5,727 437
BHP Billiton PLC ............. 84,398 1,376
Cia Vale do Rio Doce ADR ..... 16,849 693
Holcim Ltd. (Regd.) .......... 4,451 302
Linde AG ..................... 3,198 248
Potash Corp of Saskatchewan .. 2,682 214
Rio Tinto PLC (Regd.) ........ 13,679 623
Toray Industries Inc. ........ 50,999 416
4,309
TELECOMMUNICATION SERVICES -- 1.9%
America Movil S.A. de C.V.
ADR (Series L) ............ 18,563 543
France Telecom S.A. .......... 11,142 276
Singapore Telecommunications
Ltd. ...................... 189,672 298
Telecom Italia S.p.A ......... 11,583 29
Telefonica S.A. .............. 27,547 413 (j)
Telefonica S.A. ADR .......... 248 11
Telenor ASA .................. 31,015 303
Vodafone Group PLC ........... 289,230 623
Vodafone Group PLC ADR ....... 110,695 2,377 (j)
4,873
- ---------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
22
ELFUN DIVERSIFIED FUND
Schedule of Investments
(dollars in thousands) -- December 31, 2005
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
UTILITIES -- 0.6%
E.ON AG ...................... 7,007 $ 722
National Grid PLC ............ 7,459 73
Veolia Environnement ......... 14,487 653 (j)
1,448
TOTAL COMMON STOCK
(COST $37,570) ............ 49,895
PREFERRED STOCK -- 0.1%
Cia Vale do Rio Doce ADR
(COST $84) ................ 6,205 225
TOTAL FOREIGN EQUITY
(COST $37,654) ............ 50,120
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
BONDS AND NOTES -- 25.0%
- --------------------------------------------------------------------------------
U.S. TREASURIES -- 5.7%
U.S. Treasury Bonds
5.38% 02/15/31 .......... $1,337 1,503(h)
8.13% 08/15/19 - 08/15/21 740 1,021(h)
U.S. Treasury Inflation-Protected
Securities
2.00% 01/15/14 .......... 307 306(h)
3.88% 04/15/29 .......... 64 87(h)
U.S. Treasury Notes
4.25% 11/30/07 .......... 4,305 4,293
4.38% 11/15/08 - 12/15/10 4,035 4,039(h)
4.50% 11/15/15 .......... 3,500 3,531
14,780
FEDERAL AGENCIES -- 1.0%
Federal Farm Credit Bank
3.75% 01/15/09 .......... 315 307(h)
Federal Home Loan Bank
2.38% 02/15/06 .......... 435 434(h)
Federal Home Loan
Mortgage Corp.
3.63% 09/15/08 .......... 257 250(h)
4.13% 07/12/10 .......... 860 838(h)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
4.75% 12/08/10 .......... $ 515 $ 512(h)
6.75% 03/15/31 .......... 175 220(h)
2,561
AGENCY MORTGAGE BACKED -- 6.0%
Federal Home Loan
Mortgage Corp.
4.50% 06/01/33 - 10/01/35 300 283
5.00% 07/01/35 - 10/01/35 1,028 995
5.50% 05/01/20 .......... 23 23
6.00% 04/01/17 - 05/01/35 527 532
6.50% 01/01/27 - 12/01/34 311 315
7.00% 10/01/16 - 02/01/35 111 116
7.50% 11/01/09 - 09/01/33 81 85
8.00% 07/01/26 - 11/01/30 12 13
8.50% 04/01/30 - 05/01/30 40 43
Federal National
Mortgage Assoc.
4.00% 05/01/19 - 06/01/19 147 140
4.50% 05/01/18 - 02/01/35 1,372 1,319
5.00% 06/01/20 - 08/01/35 783 763
5.50% 04/01/14 - 08/01/35 1,004 1,008
6.00% 02/01/14 - 08/01/35 1,161 1,174
6.50% 12/01/14 - 02/01/35 1,535 1,575
7.00% 01/01/16 - 05/01/35 388 405
7.50% 12/01/09 - 03/01/34 158 164
8.00% 12/01/11 - 11/01/33 141 151
8.50% 05/01/30 - 05/01/31 8 8
9.00% 06/01/09 - 12/01/22 105 111
4.50% TBA ............... 375 365(c)
5.00% TBA ............... 2,585 2,536(c)
5.50% TBA ............... 1,865 1,846(c)
6.00% TBA ............... 500 505(c)
Government National
Mortgage Assoc.
4.50% 08/12/33 - 09/15/34 273 263
5.00% 08/15/33 .......... 72 71
6.00% 04/15/30 - 06/15/35 96 99
6.50% 06/15/24 - 08/15/34 139 146
7.00% 03/15/12 - 06/15/34 73 77
7.50% 07/15/23 - 04/15/28 44 46
8.00% 05/15/30 .......... 2 2
8.50% 10/15/17 .......... 65 71
- ---------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
23
ELFUN DIVERSIFIED FUND
Schedule of Investments
(dollars in thousands) -- December 31, 2005
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
9.00% 11/15/16 - 12/15/21 $ 57 $ 62
5.50% TBA ............... 175 176(c)
15,488
AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 1.5%
Collateralized Mortgage Obligation
Trust (Class B)
5.78% 11/01/18 .......... 5 4(d,f,h)
Federal Home Loan
Mortgage Corp.
2.28% 10/15/18 .......... 226 14(g,i)
2.78% 12/15/30 .......... 501 29(g,i)
4.08% 10/15/33 .......... 80 57(i)
4.50% 04/15/13 - 03/15/19 492 52(g)
4.50% 05/15/17 - 11/15/19 175 168
5.00% 12/15/13 - 12/01/34 2,437 420(g)
5.00% 05/15/20 - 02/15/35 1,155 1,095
5.03% 12/15/33 .......... 50 39(i)
5.50% 04/15/17 - 06/15/33 328 53(g)
5.50% 10/15/34 .......... 72 73
6.84% 06/15/33 .......... 320 311(i)
7.50% 01/15/16 .......... 27 28
7.50% 07/15/27 .......... 57 12(g)
8.00% 04/15/20 .......... 3 3
8.00% 02/01/23 - 07/01/24 12 2(g)
14.77% 09/25/43 .......... 782 9(d,g,i)
Federal Home Loan
Mortgage STRIPS
4.72% 08/01/27 .......... 2 2(d,f)
Federal National
Mortgage Assoc.
1.16% 12/25/42 .......... 224 5(g,i)
2.23% 06/25/43 .......... 684 35(g,i)
3.12% 05/25/18 .......... 1,147 83(g,i)
3.22% 09/25/42 .......... 609 50(g,i)
3.27% 04/25/17 - 10/25/17 257 19(g,i)
3.32% 08/25/16 .......... 59 3(g,i)
3.72% 06/25/42 .......... 143 12(g,i)
4.00% 02/25/28 .......... 15 15
4.50% 05/25/18 .......... 82 8(g)
4.50% 12/25/19 .......... 50 47
4.75% 11/25/14 .......... 59 5(g)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
5.00% 02/25/11 - 02/25/32 $ 85 $ 5(g)
5.00% 03/25/35 .......... 75 71
5.44% 09/25/31 .......... 109 102(i)
5.50% 01/25/27 .......... 103 12(g)
5.50% 07/25/34 - 02/25/35 240 242(h)
5.75% 02/25/35 .......... 125 127
6.00% 12/25/34 .......... 100 102
6.50% 12/25/34 .......... 59 61
8.00% 07/25/14 .......... 34 35
Federal National Mortgage
Assoc. (Class 1)
4.21% 11/01/34 .......... 304 232(d,f)
Federal National Mortgage
Assoc. (Class S)
2.72% 02/25/31 .......... 158 8(g,i)
Federal National Mortgage
Assoc. REMIC
4.50% 11/25/13 .......... 226 11(g)
5.00% 10/25/22 .......... 77 12(g)
5.50% 08/25/33 .......... 290 67(g)
6.98% 03/25/31 .......... 153 151(i)
Federal National Mortgage
Assoc. REMIC (Class B)
4.43% 12/25/22 .......... 5 4(d,f)
Federal National Mortgage
Assoc. STRIPS (Class 2)
7.50% 11/01/23 .......... 116 29(g)
8.00% 08/01/23 - 07/01/24 25 5(g)
8.50% 03/01/17 - 07/25/22 10 2(g)
9.00% 05/25/22 .......... 5 1(g)
Government National
Mortgage Assoc.
5.00% 02/16/34 .......... 65 62(h)
Vendee Mortgage Trust
16.77% 05/15/33 .......... 521 16(d,g,i)
4,010
ASSET BACKED -- 1.2%
American Express Credit Account
Master Trust (Class A)
4.51% 09/15/08 .......... 387 387(i)
Bank One Issuance Trust
3.59% 05/17/10 .......... 25 25
- ---------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
24
ELFUN DIVERSIFIED FUND
Schedule of Investments
(dollars in thousands) -- December 31, 2005
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Bear Stearns Asset Backed
Securities Inc. (Class A)
4.75% 01/25/34 .......... $ 37 $ 37(h,i)
BMW Vehicle Owner
Trust (Class B)
2.93% 03/25/09 .......... 47 46
Capital One Auto Finance Trust
4.48% 01/15/08 .......... 179 179(i)
Capital One Master Trust
(Class C)
6.70% 06/15/11 .......... 100 104(b,h)
Capital One Prime Auto
Receivables Trust (Class A)
4.45% 09/17/07 .......... 72 72(i)
Carmax Auto Owner Trust
4.35% 03/15/10 .......... 64 63
Chase Credit Card Master
Trust (Class A)
4.48% 07/15/10 .......... 120 120(i)
Chase Funding Mortgage Loan
Asset-Backed Certificates
4.63% 03/25/32 .......... 48 48(h,i)
Citibank Credit Card
Issuance Trust
4.45% 04/07/10 .......... 59 58
4.75% 03/07/08 .......... 240 240(i)
Countrywide Asset-Backed
Certificates
4.81% 05/25/33 .......... 11 11(h,i)
Countrywide Asset-Backed
Certificates (Class A)
4.71% 04/25/32 .......... 43 43(h,i)
Fleet Credit Card Master
Trust II (Class A)
4.51% 04/15/10 .......... 180 180(i)
Fleet Home Equity Loan
Trust (Class A)
4.62% 01/20/33 .......... 37 37(h,i)
Honda Auto Receivables
Owner Trust (Class A)
4.15% 10/15/10 .......... 69 68
Household Automotive
Trust (Class A)
4.67% 07/17/09 .......... 334 334(i)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
MBNA Master Credit Card Trust
USA (Class A)
4.63% 08/15/08 .......... $700 $ 700(i)
Mid-State Trust
7.54% 07/01/35 .......... 16 16(h)
Peco Energy Transition Trust
6.52% 12/31/10 .......... 45 48(h)
Residential Asset Mortgage
Products, Inc.
4.62% 03/25/34 .......... 63 63(h,i)
Residential Asset Mortgage
Products, Inc. (Class A)
4.66% 06/25/32 .......... 57 57(h,i)
Residential Asset Securities Corp.
4.63% 07/25/32 .......... 28 28(h,i)
Residential Asset Securities
Corp. (Class A)
4.16% 07/25/30 .......... 60 59(h,i)
Volkswagen Auto Lease
Trust (Class A)
3.94% 10/20/10 .......... 43 42
Wells Fargo Home Equity Trust
3.97% 09/25/24 .......... 35 34(h,i)
3,099
CORPORATE NOTES -- 7.5%
Abbey National PLC
7.95% 10/26/29 .......... 80 103
Adaro Finance B.V.
8.50% 12/08/10 .......... 100 101(b)
AES Corp.
8.75% 06/15/08 .......... 145 152
AIG SunAmerica Global
Financing VII
5.85% 08/01/08 .......... 100 102(b)
Air Jamaica Ltd.
9.38% 07/08/15 .......... 75 74(b)
Albertson's, Inc.
7.50% 02/15/11 .......... 45 46
Allegiance Corp.
7.00% 10/15/26 .......... 35 39
Allied Waste North America
7.25% 03/15/15 .......... 180 182
Allstate Life Global Funding Trusts
3.85% 01/25/08 .......... 115 113
- ---------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
25
ELFUN DIVERSIFIED FUND
Schedule of Investments
(dollars in thousands) -- December 31, 2005
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
ALROSA Finance S.A.
8.88% 11/17/14 .......... $100 $ 115(b)
Altria Group, Inc.
7.20% 02/01/07 .......... 50 51
America Movil S.A. de C.V.
6.38% 03/01/35 .......... 10 10
American Electric Power
Company, Inc. (Series D)
5.25% 06/01/15 .......... 35 35
American General Corp.
7.50% 08/11/10 .......... 80 87
American General Finance Corp.
4.88% 07/15/12 .......... 105 103
ANZ Capital Trust
4.48% 12/31/49 .......... 85 82(b)
Appalachian Power Co. (Series G)
3.60% 05/15/08 .......... 30 29
Appalachian Power Co. (Series K)
5.00% 06/01/17 .......... 55 53
Archer-Daniels-Midland Co.
5.38% 09/15/35 .......... 55 53
Assurant, Inc.
6.75% 02/15/34 .......... 75 82
AT&T Corp.
9.05% 11/15/11 .......... 135 149
AT&T, Inc.
4.13% 09/15/09 .......... 110 106
5.88% 08/15/12 .......... 55 57
6.15% 09/15/34 .......... 70 70
BAC CAP TRUST V
5.63% 03/08/35 .......... 80 78
Banco BMG S.A.
9.15% 01/15/16 .......... 70 69(b)
Banco Mercantil del Norte S.A.
5.88% 02/17/14 .......... 95 94(b,i)
Banco Santander Chile
5.38% 12/09/14 .......... 90 90(b)
Bank One Corp.
6.50% 02/01/06 .......... 55 55
Barclays Bank PLC
7.38% 06/29/49 .......... 110 122(b,i)
Bavaria S.A.
8.88% 11/01/10 .......... 60 65(b)
8.88% 11/01/10 .......... 45 49
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
BBVA Bancomer Capital Trust I
10.50% 02/16/11 .......... $100 $ 100(b)
BellSouth Corp.
6.55% 06/15/34 .......... 75 80
BNP US Funding LLC (Series A)
7.74% 12/31/49 .......... 45 47(b,i)
BNSF Funding Trust I
6.61% 12/15/55 .......... 65 68(i)
Boeing Co.
8.75% 09/15/31 .......... 30 43
British Aerospace Finance, Inc.
7.50% 07/01/27 .......... 50 59(b)
Burlington Northern
Santa Fe Corp.
8.13% 04/15/20 .......... 135 170
Campbell Soup Co.
5.50% 03/15/07 .......... 85 86
Capital One Bank
6.50% 06/13/13 .......... 40 42
Capital One Financial Corp.
8.75% 02/01/07 .......... 80 83
Carolina Power & Light Co.
5.15% 04/01/15 .......... 40 40
5.70% 04/01/35 .......... 20 20
6.13% 09/15/33 .......... 70 74
Case New Holland Inc.
6.00% 06/01/09 .......... 240 233
Centex Corp.
7.88% 02/01/11 .......... 55 60
Chesapeake Energy Corp.
7.75% 01/15/15 .......... 160 170
Citigroup, Inc.
6.63% 06/15/32 .......... 165 186
Clear Channel
Communications, Inc.
4.63% 01/15/08 .......... 75 74
CNA Financial Corp.
5.85% 12/15/14 .......... 105 105
CNF Inc.
6.70% 05/01/34 .......... 15 16
Comcast Cable Communications
Holdings, Inc.
9.46% 11/15/22 .......... 70 92
Consolidated Natural Gas Co.
5.38% 11/01/06 .......... 145 145
- ---------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
26
ELFUN DIVERSIFIED FUND
Schedule of Investments
(dollars in thousands) -- December 31, 2005
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Consumers Energy Co.
5.15% 02/15/17 .......... $ 50 $ 48
5.80% 09/15/35 .......... 55 53
Corp Interamericana de
Entretenimiento S.A.
8.88% 06/14/15 .......... 70 68(b)
Countrywide Home Loans, Inc.
5.63% 05/15/07 .......... 75 76
COX Communications, Inc.
5.45% 12/15/14 .......... 80 78
Credit Suisse First Boston
International
8.00% 11/06/15 .......... 100 103(b)
Crown Americas LLC and Crown
Americas Capital Corp.
7.75% 11/15/15 .......... 215 223(b)
CSX Transportation, Inc.
9.75% 06/15/20 .......... 8 11
DaimlerChrysler NA Holding Corp.
4.05% 06/04/08 .......... 50 49
4.75% 01/15/08 .......... 50 50
8.50% 01/18/31 .......... 55 67
DBS Bank Ltd.
5.00% 11/15/19 .......... 90 88(b,i)
Desarrolladora Homex S.A.
de C.V. (REIT)
7.50% 09/28/15 .......... 125 123(b)
Detroit Edison Co. (Series B)
5.45% 02/15/35 .......... 85 80
Deutsche Telekom International
Finance BV
3.88% 07/22/08 .......... 225 220
Dex Media, Inc.
8.50% 08/15/10 .......... 215 225
DirecTV Holdings LLC
6.38% 06/15/15 .......... 160 156
Dominion Resources Inc. (Series B)
4.13% 02/15/08 .......... 145 142
Dominion Resources Inc. (Series G)
3.66% 11/15/06 .......... 25 25(k)
Duke Capital LLC
4.30% 05/18/06 .......... 85 85
4.33% 11/16/06 .......... 65 65
5.67% 08/15/14 .......... 45 45
8.00% 10/01/19 .......... 60 72
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Echostar DBS Corp.
5.75% 10/01/08 .......... $230 $ 225
El Paso Electric Co.
6.00% 05/15/35 .......... 85 85
Emmis Communications Corp.
10.37% 06/15/12 .......... 70 70(i)
Enterprise Products Operating LP
4.00% 10/15/07 .......... 145 142
EOP Operating LP (REIT)
7.75% 11/15/07 .......... 130 136
Evraz Group S.A.
8.25% 11/10/15 .......... 100 99(b)
FirstEnergy Corp. (Series B)
6.45% 11/15/11 .......... 15 16
Flextronics International Ltd.
6.25% 11/15/14 .......... 240 237
Ford Motor Credit Co.
6.63% 06/16/08 .......... 135 122
FPL Group Capital, Inc. (Series B)
5.55% 02/16/08 .......... 110 111
Gaz Capital S.A.
8.63% 04/28/34 .......... 140 177(b)
Genentech, Inc.
5.25% 07/15/35 .......... 40 38
General Mills, Inc.
3.88% 11/30/07 .......... 75 74
Georgia Power Co.
4.88% 07/15/07 .......... 105 105
Gerdau S.A.
8.88% 12/31/49 .......... 100 103(b)
Goldman Sachs Group, Inc.
5.13% 01/15/15 .......... 160 158
Goodrich Corp.
7.10% 11/15/27 .......... 55 63
Greater Bay Bancorp
5.25% 03/31/08 .......... 85 85
GS Caltex Corp.
5.50% 10/15/15 .......... 80 80(b)
GTE Corp.
6.94% 04/15/28 .......... 100 107
7.51% 04/01/09 .......... 55 58
Halliburton Co.
8.75% 02/15/21 .......... 40 53
Hertz Corp.
8.88% 01/01/14 .......... 70 71(b)
- ---------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
27
ELFUN DIVERSIFIED FUND
Schedule of Investments
(dollars in thousands) -- December 31, 2005
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Hopson Development
Holdings Ltd.
8.13% 11/09/12 .......... $100 $ 103(b)
HSBC Bank USA NA
3.88% 09/15/09 .......... 155 149
HSBC Capital Funding LP
4.61% 12/29/49 .......... 100 94(b,i)
HSBC Capital Funding LP
(Series 1)
9.55% 12/31/49 .......... 85 99(b,i)
HSBC Finance Corp.
6.50% 11/15/08 .......... 120 125
6.75% 05/15/11 .......... 170 182
IBM Canada Credit
Services Company
3.75% 11/30/07 .......... 45 44(b)
ILFC E-Capital Trust I
5.90% 12/21/65 .......... 100 100(b,i)
ING Groep N.V.
5.78% 12/29/49 .......... 55 56(i)
International Business
Machines Corp.
3.80% 02/01/08 .......... 55 54
International Lease
Finance Corp.
5.00% 04/15/10 .......... 80 80
iStar Financial, Inc.
4.88% 01/15/09 .......... 30 30
7.00% 03/15/08 .......... 50 52
Jefferson Smurfit Corp. US
7.50% 06/01/13 .......... 60 55
Kansas Gas & Electric
5.65% 03/29/21 .......... 45 44
Kimco Realty Corp. (REIT)
4.82% 06/01/14 .......... 55 53
Kinder Morgan Energy
Partners LP
5.13% 11/15/14 .......... 65 64
Kinder Morgan, Inc.
6.50% 09/01/12 .......... 85 90
L-3 Communications Corp.
6.38% 10/15/15 .......... 85 85(b)
Laboratory Corp of
America Holdings
5.63% 12/15/15 .......... 55 56
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Lyondell Chemical Co. (Series A)
9.63% 05/01/07 .......... $140 $ 146
MacDermid, Inc.
9.13% 07/15/11 .......... 215 228
Marsh & McLennan
Companies, Inc.
5.15% 09/15/10 .......... 70 69
Meritage Homes Corp.
6.25% 03/15/15 .......... 245 223
MGM Mirage
5.88% 02/27/14 .......... 250 239
Midamerican Energy
Holdings Co.
3.50% 05/15/08 .......... 60 58
Mohegan Tribal Gaming
Authority
8.00% 04/01/12 .......... 140 147
Morgan Stanley
4.75% 04/01/14 .......... 80 77
Motorola, Inc.
4.61% 11/16/07 .......... 20 20
National Power Corp.
8.63% 08/23/11 .......... 55 59(b,i)
Navistar International
Corp. (Series B)
6.25% 03/01/12 .......... 250 224
NB Capital Trust IV
8.25% 04/15/27 .......... 140 150
Nell AF SARL
8.38% 08/15/15 .......... 100 99(b)
Nelnet, Inc.
5.13% 06/01/10 .......... 65 64
New Cingular Wireless
Services Inc.
8.75% 03/01/31 .......... 90 119
News America, Inc.
7.25% 05/18/18 .......... 50 56
Nexstar Broadcasting
Group, Inc.
7.00% 01/15/14 .......... 160 147
Nextel Communications, Inc.
(Series D)
7.38% 08/01/15 .......... 140 148
Nordea Bank AB
5.42% 12/29/49 .......... 45 45(b,i)
- ---------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
28
ELFUN DIVERSIFIED FUND
Schedule of Investments
(dollars in thousands) -- December 31, 2005
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Norfolk Southern Corp.
6.00% 04/30/08 .......... $ 50 $ 51
Norfolk Southern
Railway Co.
9.75% 06/15/20 .......... 22 31
Northeast Utilities (Series B)
3.30% 06/01/08 .......... 35 34
Northrop Grumman Corp.
4.08% 11/16/06 .......... 140 139
NorthWestern Corp.
5.88% 11/01/14 .......... 55 55
Novelis Inc.
7.50% 02/15/15 .......... 160 149(b)
Ocean Energy, Inc.
4.38% 10/01/07 .......... 50 49
Odyssey Re Holdings Corp.
7.65% 11/01/13 .......... 90 94
Ohio Power Co. (Series E)
6.60% 02/15/33 .......... 35 39
Owens Brockway Glass
Container Inc.
6.75% 12/01/14 .......... 120 116
Pacific Gas & Electric Co.
6.05% 03/01/34 .......... 40 41
PanAmSat Corp.
9.00% 08/15/14 .......... 160 168
Pemex Finance Ltd.
9.03% 02/15/11 .......... 50 55
9.69% 08/15/09 .......... 139 149(h)
Pemex Project Funding
Master Trust
6.13% 08/15/08 .......... 160 163
7.38% 12/15/14 .......... 15 17
Pepco Holdings, Inc.
5.04% 06/01/10 .......... 60 60(i)
5.50% 08/15/07 .......... 80 81
Potomac Edison Company
5.35% 11/15/14 .......... 40 40
Procter & Gamble - Esop
(Series A)
9.36% 01/01/21 .......... 125 161
Puget Energy, Inc.
3.36% 06/01/08 .......... 35 34
5.48% 06/01/35 .......... 55 53
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Quest Diagnostics Inc.
6.75% 07/12/06 .......... $ 65 $ 66
Qwest Corp.
7.63% 06/15/15 .......... 200 214(b)
Rabobank Capital Funding II
5.26% 12/31/49 .......... 115 114(b,i)
Rabobank Capital Funding Trust
5.25% 12/29/49 .......... 50 49(b,i)
RBS Capital Trust I
5.51% 09/29/49 .......... 80 80(i)
Residential Capital Corp.
6.13% 11/21/08 .......... 105 105
Road King Infrastructure
Finance 2004 Ltd.
6.25% 07/15/11 .......... 100 100
Rogers Cable Inc.
5.50% 03/15/14 .......... 125 117
Royal Bank of Scotland
Group PLC
7.65% 08/31/49 .......... 60 72(i)
Royal Bank of Scotland
Group PLC ADR
9.12% 03/31/49 .......... 85 97
SBC Communications, Inc.
5.10% 09/15/14 .......... 70 68
Simon Property Group LP (REIT)
4.60% 06/15/10 .......... 55 54
4.88% 08/15/10 .......... 80 79
Sinclair Broadcast Group, Inc.
8.00% 03/15/12 .......... 160 165
Smithfield Foods Inc.
7.63% 02/15/08 .......... 140 145
Sprint Capital Corp.
6.00% 01/15/07 .......... 130 131
8.38% 03/15/12 .......... 95 110
8.75% 03/15/32 .......... 170 225
St. Paul Travelers Companies, Inc.
5.50% 12/01/15 .......... 55 55
Standard Chartered Bank
Hong Kong Ltd.
4.38% 12/03/14 .......... 50 50(i)
State of Illinois
4.95% 06/01/23 .......... 25 24(h)
5.10% 06/01/33 .......... 50 49(h)
- ---------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
29
ELFUN DIVERSIFIED FUND
Schedule of Investments
(dollars in thousands) -- December 31, 2005
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Stewart Enterprises, Inc.
7.75% 02/15/13 .......... $175 $ 168(b)
Sumitomo Mitsui Banking Corp.
5.63% 07/29/49 .......... 40 40(b,i)
Telefonos de Mexico S.A. de C.V.
4.50% 11/19/08 .......... 325 319
TELUS Corp.
7.50% 06/01/07 .......... 100 103
8.00% 06/01/11 .......... 55 62
Tesoro Corp.
6.25% 11/01/12 .......... 40 40(b)
6.63% 11/01/15 .......... 70 71(b)
The Kroger Company
6.80% 12/15/18 .......... 55 59
Thomson Corp.
5.50% 08/15/35 .......... 55 53
Time Warner
Entertainment Co. LP
8.38% 07/15/33 .......... 75 89
TXU Electric Delivery Co.
5.00% 09/01/07 .......... 55 55
6.38% 05/01/12 .......... 45 47
Tyson Foods, Inc.
7.25% 10/01/06 .......... 2 2
UBS Preferred Funding Trust I
8.62% 10/29/49 .......... 50 57(i)
Union Pacific Corp.
6.65% 01/15/11 .......... 5 5
United Rentals
North America, Inc.
7.75% 11/15/13 .......... 170 166
United Utilities PLC
6.45% 04/01/08 .......... 55 57
Valero Energy Corp.
3.50% 04/01/09 .......... 30 29
Verizon
6.50% 09/15/11 .......... 60 62
Verizon Global Funding Corp.
7.75% 06/15/32 .......... 75 89
Verizon Pennsylvania Inc.
8.75% 08/15/31 .......... 55 68
Viacom, Inc.
5.63% 05/01/07 .......... 15 15
VTB Capital SA for Vneshtorgbank
5.25% 09/21/07 .......... 210 210(b,i)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Wells Fargo & Co.
5.25% 12/01/07 .......... $ 65 $ 65
Westar Energy, Inc.
5.15% 01/01/17 .......... 35 34
Westfield Capital
Corporation Limited
4.38% 11/15/10 .......... 80 77(b)
Westlake Chemical Corp.
8.75% 07/15/11 .......... 130 139
Weyerhaeuser Co.
6.13% 03/15/07 .......... 24 24
Wisconsin Electric Power
3.50% 12/01/07 .......... 65 63
XTO Energy, Inc.
7.50% 04/15/12 .......... 70 78
19,403
NON-AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 1.7%
Bank of America Alternative
Loan Trust
6.50% 07/25/35 .......... 94 96(h)
Bear Stearns Commercial
Mortgage Securities
6.02% 02/14/31 .......... 100 103(h)
CalSTRS Trust
4.13% 11/20/12 .......... 149 147(b,h)
CS First Boston Mortgage
Securities Corp.
5.00% 07/15/37 .......... 1,312 41(b,d,g,h,i)
CS First Boston Mortgage
Securities Corp. (Class A)
4.51% 07/15/37 .......... 79 77(h)
DLJ Commercial Mortgage Corp.
6.24% 11/12/31 .......... 350 360(h)
GMAC Commercial Mortgage
Securities, Inc.
6.42% 05/15/35 .......... 339 349(h)
GMAC Commercial Mortgage
Securities, Inc. (Class X)
5.00% 12/10/41 .......... 2,083 57(d,g,h,i)
Greenwich Capital Commercial
Funding Corp.
5.12% 04/10/37 .......... 90 90(h)
Impac CMB Trust (Class A)
4.76% 12/25/33 .......... 208 208(h,i)
- ---------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
30
ELFUN DIVERSIFIED FUND
Schedule of Investments
(dollars in thousands) -- December 31, 2005
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
JPMorgan Chase Commercial
Mortgage Securities Corp.
1.16% 01/12/39 .......... $1,163 $ 48(b,g,h,i)
6.47% 11/15/35 .......... 64 68(h)
LB-UBS Commercial
Mortgage Trust
4.06% 09/15/27 .......... 144 140(h,i)
4.51% 12/15/29 .......... 74 72(h)
4.53% 01/15/36 .......... 514 36(b,d,g,h)
4.74% 03/15/34 .......... 457 7(b,d,g,h,i)
4.92% 01/18/12 .......... 1,632 54(d,g,h,i)
6.23% 03/15/26 .......... 87 90(h)
7.01% 02/15/40 .......... 1,266 27(b,d,g,h,i)
7.33% 03/15/36 .......... 1,299 38(b,d,g,h,i)
LB-UBS Commercial Mortgage
Trust (Class A)
6.65% 11/15/27 .......... 116 124(h)
LB-UBS Commercial Mortgage
Trust (Class B)
6.65% 07/14/16 .......... 26 28(b,h)
LB-UBS Commercial Mortgage
Trust (Class X)
7.20% 12/15/39 .......... 1,109 20(b,d,g,h,i)
Master Alternative Loans Trust
5.00% 08/25/18 .......... 71 10(g,h)
6.50% 08/25/34 - 05/25/35 310 314(h)
Master Alternative Loans
Trust (Class 3)
6.50% 01/25/35 .......... 81 82(h)
Morgan Stanley Capital I
6.53% 03/15/31 .......... 221 229(h)
Morgan Stanley Dean
Witter Capital I
4.57% 04/15/34 .......... 334 8(b,d,g,h,i)
4.81% 10/15/35 .......... 511 12(b,d,g,h,i)
7.20% 10/15/33 .......... 209 225(h)
Morgan Stanley Dean Witter
Capital I (Class X)
1.46% 02/01/31 .......... 221 10(b,h,i)
Nomura Asset Securities
Corp. (Class A)
6.59% 03/15/30 .......... 221 228(h)
Opteum Mortgage
Acceptance Corp.
4.68% 02/25/35 .......... 744 744(h,i)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Residential Asset Securitization
Trust (Class A)
4.78% 05/25/35 .......... $223 $ 223(h,i)
Structured Asset Securities
Corp. (Class X)
2.05% 02/25/28 .......... 113 6(g,i)
4,371
SOVEREIGN BONDS -- 0.4%
Government of Bahamas
6.63% 05/15/33 .......... 55 64(b,h)
Government of Brazil
8.75% 02/04/25 .......... 70 77
11.00% 08/17/40 .......... 140 180(h)
Government of Indonesia
7.50% 01/15/16 .......... 100 104(b,h)
8.50% 10/12/35 .......... 100 109(b)
Government of Peru
7.35% 07/21/25 .......... 200 197(h)
Government of Turkey
7.38% 02/05/25 .......... 100 103
11.88% 01/15/30 .......... 100 154
Government of Vietnam
6.88% 01/15/16 .......... 100 104(b,h)
Province of Saskatchewan
Canada
8.50% 07/15/22 .......... 30 41(h)
1,133
TOTAL BONDS AND NOTES
(COST $66,015) ............ 64,845
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
EXCHANGE TRADED FUNDS -- 2.0%
- --------------------------------------------------------------------------------
Financial Select Sector
SPDR Fund ................. 32,874 1,041 (p)
Industrial Select Sector
SPDR Fund ................. 128,942 4,051 (p)
TOTAL EXCHANGE TRADED FUNDS
(COST $4,322) ............. 5,092
TOTAL INVESTMENTS IN SECURITIES
(COST $237,157) ........... 262,185
- ---------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
31
ELFUN DIVERSIFIED FUND
Schedule of Investments
- --------------------------------------------------------------------------------
(dollars in thousands) -- December 31, 2005
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 7.4%
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 1.0%
GEI Short Term
Investment Fund
4.42% ..................... 2,570,680 $ 2,571 (d,l)
SHORT-TERM SECURITIES PURCHASED WITH COLLATERAL
FROM SECURITIES ON LOAN -- 6.4%
State Street Navigator Securities
Lending Prime Portfolio
4.29% ..................... 16,711,281 16,711 (d,e)
TOTAL SHORT-TERM INVESTMENTS
(COST $19,282) ......... 19,282
TOTAL INVESTMENTS
(COST $256,439) ........ 281,467
LIABILITIES IN EXCESS OF OTHER ASSETS,
NET -- (8.3)% .......... (21,537)
--------
NET ASSETS-- 100.0% ....... $259,930
========
OTHER INFORMATION
- --------------------------------------------------------------------------------
The Elfun Diversified Fund had the following long futures contracts open at
December 31, 2005:
NUMBER CURRENT UNREALIZED
EXPIRATION OF NOTIONAL APPRECIATION/
DESCRIPTION DATE CONTRACTS VALUE DEPRECIATION
- --------------------------------------------------------------------------------
U.S.Treasury
Notes 5 Yr.
Futures March 2006 25 $ 2,659 $ (2)
------
The Elfun Diversified Fund had the following short futures contracts open at
December 31, 2005:
NUMBER CURRENT UNREALIZED
EXPIRATION OF NOTIONAL APPRECIATION/
DESCRIPTION DATE CONTRACTS VALUE DEPRECIATION
- --------------------------------------------------------------------------------
S&P 500 Index
Futures March 2006 14 $(4,392) 59
------
$ 57
======
- ---------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
32
Elfun Tax-Exempt Income Fund
- --------------------------------------------------------------------------------
Q&A
THE ELFUN TAX-EXEMPT INCOME FUND IS MANAGED BY MICHAEL J. CAUFIELD. SEE
PORTFOLIO MANAGERS' BIOGRAPHICAL INFORMATION BEGINNING ON PAGE 93.
Q. HOW DID THE ELFUN TAX-EXEMPT FUND PERFORM COMPARED TO ITS BENCHMARK AND
LIPPER PEER GROUP FOR THE TWELVE-MONTH PERIOD ENDED DECEMBER 31, 2005?
A. For the twelve-month period ended December 31, 2005, the Elfun Tax-Exempt
Fund returned 3.64%. The Lehman Brothers Municipal Bond Index, the Fund's
benchmark, returned 3.51% and the Fund's Lipper peer group of 260 General
Municipal Bond funds returned an average of 3.00% for the same period.
Q. WHAT WERE THE PRIMARY DRIVERS BEHIND FUND PERFORMANCE?
A. Against a backdrop of continued tightening of Federal Reserve monetary
policy, economic expansion without core inflation and accelerating energy
price increases, the yield curve flattened over the last twelve months as
maturities longer than ten years fared much better than those inside of that
range. In 2005 investors were rewarded for taking on added curve and credit
risk. Over the course of the year, the Fund maintained a neutral duration
(compared to The Lehman Municipal Bond Index). Despite our guarded outlook
for higher interest rates, we positioned the Fund for a flattening yield
curve, extending our long bond exposure to over 38%, without affecting
overall duration. As thirty-year municipal bond yields rallied through 4.5%,
investors turned to lower rated credits for additional yield as the curve
continued to flatten. As a result, lower rated credits outperformed for the
third consecutive year. Baa and lower rated bonds outperformed all other
rating categories, driven by the highly volatile Tobacco and unsecured
Airline sectors, which returned over 10%, as several legal issues were
resolved. While the Fund does not hold any airline or tobacco debt, we did
however, increase our allocation to the education and health care sectors,
which were among the best performing categories in The Lehman Index. Our
overweight in health care, which returned in excess of 6%, allowed the Fund
to add incremental yield, and yet avoid potential event risk associated with
the asset backed tobacco sector. While we utilized our research expertise to
expand our lower rated credit exposure to 5%, which allowed the Fund to
participate as credit spreads narrowed to historic lows, the average credit
quality of the Fund's portfolio remained at the Aa1 level.
[PHOTO OF MICHAEL J. CAUFIELD OMITTED]
- --------------------------------------------------------------------------------
33
Elfun Tax-Exempt Income Fund
- --------------------------------------------------------------------------------
Q&A
Q. WHAT HAPPENED IN THE U.S. ECONOMY DURING THE TWELVE-MONTH PERIOD ENDED
DECEMBER 31, 2005 AND HOW WAS THE PORTFOLIO POSITIONED WITH RESPECT TO
ECONOMIC CONDITIONS?
A. The Federal Reserve's decision to continue raising its short term interest
rate target led to continued trend of flattening of the municipal yield
curve in 2005. Yields on shorter maturities finished the year higher by
70-115 bps while longer maturities were clearly the beneficiary of Fed
actions, finishing the year lower by as much as 22 bps. In an effort to
obtain additional yield, buyers were forced to move out the curve, creating
significant demand for longer maturities, benefiting bonds with maturities
of 25 years and longer. In addition, credit spreads tightened to historic
limits as investors also moved down the credit curve in search of higher
absolute yields. Flows into mutual funds were directed to high yield funds,
which led to increased demand with few new issues to choose from ultimately
contributing to strong price appreciation across the sector. Municipalities
took advantage of the flatter curve, issuing a record $408B in debt, driven
by refunding activity, which accounted for approximately 25% of new issue
activity, an increase of over 30% compared to the previous year. The Fund
was well positioned throughout the curve with a strong income component on
the intermediate segment of the curve and a market weighted position on the
long-end of the curve. The Fund extended its exposure on the long-end of the
curve early in the year, increasing its allocation of maturities of 25 years
and greater, from approximately 25% to 38%, thereby positioning the Fund to
perform in a flattening yield curve environment.
Q. WHAT HAS BEEN THE INVESTMENT STRATEGY OF THE FUND OVER THE LAST YEAR?
A. Our strategy remained consistent with our long-term philosophy, reliant upon
a strong income component, high credit quality and the maximization of
income exempt from federal taxes. During 2005, the Fund provided above
average tax-exempt income characterized by investments in bonds from issuers
with strong credit fundamentals as we maintained a neutral exposure to
interest rates. The Fund continued to be challenged by the loss of income
attributable to early bond calls and a laddered portfolio strategy. We
employed a reinvestment strategy positioning bonds in the twenty to thirty
year range, expecting a flattening yield curve scenario, which rewarded
investors willing to assume additional risk, while emphasizing structure and
quality. Throughout our extension strategy, the overall duration of the
Fund's portfolio was managed to remain neutral to the duration of The Lehman
Index. In addition, we also utilized our internal research capabilities to
take advantage of tightening credit spreads, which allowed the Fund to add
incremental performance returns. Our long-term strategy continues to rank it
strongly among its peer group in terms of income, as well as overall
performance. The Fund's adherence to a disciplined investment process,
emphasizing credit quality, maximization of tax-exempt income and capital
preservation, while managing capital gains, has allowed the Fund, as of
December 31, 2005, to rank in the top 73 percent of all funds for the past
three-year period, the top 17 percent for the past five-year period and the
top 11 percent for the past ten-year period.
34
Elfun Tax-Exempt Income Fund
Understanding Your Fund's Expenses
- --------------------------------------------------------------------------------
As a shareholder of the Fund you incur transaction and ongoing expenses.
Transaction expenses including sales charges on purchase payments, reinvested
dividends (or other distributions), and redemption fees directly reduce the
investment return of the Fund. Ongoing costs include portfolio management fees,
distribution and service fees, professional fees, administrative fees and other
Fund expenses. The following example is intended to help you understand your
ongoing costs (in dollars) of investing in the Fund and to compare these costs
with the ongoing costs of investing in other mutual funds.
To illustrate these ongoing costs, we have provided an example and calculated
the expenses paid by investors in each share class of the Fund during the
period. The information in the following table is based on an investment of
$1,000, which is invested at the beginning of the period and held for the entire
six-month period ended December 31, 2005.
ACTUAL EXPENSES
The first section of the table provides information about actual account values
and actual expenses. You may use the information in this section, together with
the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JULY 1, 2005 - DECEMBER 31, 2005
- ---------------------------------------------------------------------------------------------------------------
ACCOUNT VALUE AT ACCOUNT VALUE EXPENSES
THE BEGINNING OF AT THE END OF PAID DURING
THE PERIOD ($) THE PERIOD ($) THE PERIOD ($)*
- ---------------------------------------------------------------------------------------------------------------
Actual Fund Return** 1,000.00 1,006.46 0.64
- ---------------------------------------------------------------------------------------------------------------
Hypothetical 5% Return
(2.5% for the period) 1,000.00 1,024.27 0.65
- ---------------------------------------------------------------------------------------------------------------
<FN>
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.13% (FROM
PERIOD JULY 1, 2005 - DECEMBER 31, 2005), MULTIPLIED BY THE AVERAGE ACCOUNT
VALUE OVER THE PERIOD, MULTIPLIED BY 184/365 (TO REFLECT THE SIX-MONTH
PERIOD).
** ACTUAL FUND RETURN FOR SIX-MONTH PERIOD ENDED DECEMBER 31, 2005 WAS: 0.65%.
</FN>
35
Elfun Tax-Exempt Income Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CHANGE IN VALUE OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
[LINE GRAPH OMITTED]
Elfun Tax-Exempt Income Fund LBMI (ending
(ending value $17,155) value $17,431)
12/95 $10,000.00 $10,000.00
12/96 10,360.22 10,443.26
12/97 11,353.49 11,403.21
12/98 12,058.06 12,142.14
12/99 11,694.50 11,892.46
12/00 13,141.11 13,281.90
12/01 13,759.14 13,962.58
12/02 15,095.18 15,303.71
12/03 15,841.66 16,117.01
12/04 16,552.79 16,839.20
12/05 17,154.87 17,430.70
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED DECEMBER 31, 2005
- -----------------------------------------------
ONE FIVE TEN
YEAR YEAR YEAR
- -----------------------------------------------
Elfun Tax-Exempt
Income Fund 3.64% 5.47% 5.54%
LBMI 3.51% 5.59% 5.71%
INVESTMENT PROFILE
A fund designed for investors who seek as high a level of current interest
income exempt from federal income taxation as is available from concentration of
investment in municipal bonds consistent with prudent investment management and
the preservation of capital by investing primarily in investment-grade municipal
securities. Under normal conditions, the portfolio manager manages the Fund so
that at least 80% of the Fund's income is exempt from both regular federal
income taxes and the federal alternative minimum tax.
QUALITY RATINGS
AS OF DECEMBER 31, 2005
AS A % OF MARKET VALUE
- -----------------------------------------
MOODY'S/S&P/ PERCENTAGE OF
FITCH RATING+ MARKET VALUE
- -----------------------------------------
Aaa/AAA 65.11%
- -----------------------------------------
Aa/AA 23.50%
- -----------------------------------------
A/A 7.86%
- -----------------------------------------
Below A 3.53%
- -----------------------------------------
+ MOODY'S INVESTORS SERVICES, INC., STANDARD & POOR'S AND FITCH ARE NATIONALLY
RECOGNIZED STATISTICAL RATING ORGANIZATIONS.
- --------------------------------------------------------------------------------
LIPPER PERFORMANCE COMPARISON
GENERAL MUNICIPAL DEBT PEER GROUP
BASED ON AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/05
ONE FIVE TEN
YEAR YEAR YEAR
Fund's rank in peer group: ................... 65 38 16
Number of Funds in peer group: ............... 260 216 141
Peer group average annual total return: ...... 3.00% 4.78% 4.74%
- --------------------------------------------------------------------------------
SEE NOTES TO PERFORMANCE ON PAGE 67 FOR FURTHER INFORMATION, INCLUDING AN
EXPLANATION OF LIPPER PEER CATEGORIES. PAST PERFORMANCE DOES NOT PREDICT FUTURE
PERFORMANCE AND THE GRAPH AND TABLE DO NOT REFLECT THE DEDUCTION OF TAXES.
36
ELFUN TAX-EXEMPT INCOME FUND
Schedule of Investments
(dollars in thousands) -- December 31, 2005
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ELFUN TAX-EXEMPT INCOME FUND
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION AS A % OF THE MARKET VALUE OF $1,735,008 AS OF DECEMBER
31, 2005.
[PIE CHART OMITTED]
General Obligation 22.8%
Education 15.4%
Water & Sewer 14.8%
Transportation 14.0%
Hospital 13.1%
Utilities 8.6%
Resource & Other 5.6%
Lease 4.1%
Short-Term 0.8%
Housing 0.8%
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
MUNICIPAL BONDS -- 98.8%+
- --------------------------------------------------------------------------------
ALABAMA -- 1.4%
Alabama Public School & College
Authority (Series D)
5.75% 08/01/13 ....... $5,000 $ 5,444 (h)
Alabama Water Pollution
Control Authority (Series A)
(AMBAC Insured)
4.75% 08/15/21 ....... 5,000 5,056(h,o)
City of Birmingham AL
5.25% 05/01/17 ....... 3,395 3,690
City of Birmingham AL (Series B)
5.25% 06/01/24 ....... 2,035 2,177(n)
5.25% 06/01/24 ....... 205 217
Montgomery BMC Special Care
Facilities Financing Authority
(Series A) (MBIA Insured)
4.58% 11/15/20 ....... 8,375 7,975(o)
24,559
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
ALASKA -- 0.2%
City of Anchorage AK
(MBIA Insured)
6.50% 12/01/10 ....... $ 2,825 $ 3,200(h,o)
ARIZONA -- 3.0%
Arizona State Transportation
Board (Series A)
6.00% 07/01/08 ....... 5,000 5,321(h)
Arizona State University
(FSA Insured)
5.25% 07/01/15 ....... 5,000 5,468(h,o)
City of Scottsdale AZ
5.00% 07/01/24 ....... 5,000 5,269(n)
Maricopa County Industrial
Development Authority
5.50% 07/01/26 ....... 7,500 7,927
Maricopa County Stadium
District (AMBAC Insured)
5.38% 06/01/16 ....... 2,145 2,347(o)
Northern Arizona University
(FGIC Insured)
5.50% 06/01/34 ....... 2,000 2,177(o)
Phoenix Civic Improvement Corp.
(FGIC Insured)
5.50% 07/01/23 - 07/01/24 7,260 8,462(o)
Salt River Project Agricultural
Improvement & Power
District (Series A)
5.00% 01/01/35 ....... 5,000 5,253
University Medical Center Corp.
5.00% 07/01/35 ....... 9,750 9,764
51,988
CALIFORNIA -- 6.0%
Acalanes Union High School
District (FGIC Insured)
4.18% 08/01/21 ....... 5,815 2,748(d,h,o)
California Statewide Communities
Development Authority
5.00% 07/01/27 ....... 11,500 11,877
5.25% 07/01/35 ....... 5,000 5,093
- ---------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
37
ELFUN TAX-EXEMPT INCOME FUND
Schedule of Investments
(dollars in thousands) -- December 31, 2005
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Desert Community College
District (Series A)
(MBIA Insured)
5.00% 08/01/29 ....... $11,300 $ 12,405(n,o)
Marin Community College District
(Series A) (MBIA Insured)
5.00% 08/01/27 - 08/01/28 11,340 11,962(o)
Port of Oakland (Series M)
(FGIC Insured)
5.25% 11/01/16 - 11/01/17 14,300 15,589(o)
Sacramento City Financing
Authority (AMBAC Insured)
5.38% 11/01/14 ....... 12,725 13,973(o)
San Diego Unified School District
(Series E) (FSA Insured)
5.25% 07/01/17 - 07/01/19 8,795 9,692(o)
State of California
5.00% 03/01/32 ....... 15,000 15,608
University of California (Series A)
(AMBAC Insured)
5.00% 05/15/34 ....... 6,000 6,266(o)
105,213
COLORADO -- 1.7%
City of Colorado Springs
(Series A) (MBIA Insured)
5.38% 11/15/26 ....... 10,000 10,340(o)
Colorado Health Facilities
Authority
5.00% 03/01/25 ....... 5,000 5,055
Colorado Water Resources &
Power Development
Authority (Series A)
5.25% 09/01/17 - 09/01/18 5,880 6,355
E-470 Public Highway Authority
(Series A) (MBIA Insured)
5.00% 09/01/26 ....... 4,280 4,402(o)
5.75% 09/01/35 ....... 4,000 4,408(o)
30,560
CONNECTICUT -- 5.1%
City of Stamford CT
5.25% 07/15/11 ....... 3,450 3,609
5.25% 07/15/11 ....... 2,670 2,797(n)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
City of Stamford CT (Series A)
4.60% 08/01/14 ....... $ 2,235 $ 2,307(n)
4.70% 08/01/15 ....... 1,635 1,692(n)
Connecticut Resources Recovery
Authority (Series A)
(MBIA Insured)
5.50% 11/15/12 ....... 3,865 4,012(o)
Connecticut State Clean Water Fund
4.88% 09/01/19 ....... 5,335 5,660(n)
Connecticut State Health &
Educational Facility
Authority (Series Y)
5.00% 07/01/35 ....... 5,000 5,282
Mashantucket Western Pequot
Tribe CT (Series B)
5.70% 09/01/12 ....... 2,500 2,625(b)
5.75% 09/01/18 ....... 9,500 9,924(b)
South Central Regional Water
Authority Water System
Revenue (MBIA Insured)
5.00% 08/01/27 ....... 6,755 7,135(o)
State of Connecticut
(MBIA Insured)
6.00% 10/01/09 ....... 5,250 5,731(o)
State of Connecticut (Series A)
5.25% 03/15/14 ....... 3,175 3,327
State of Connecticut (Series B)
5.25% 11/01/06 - 11/01/07 12,345 12,661
State of Connecticut (Series C)
5.25% 10/15/13 ....... 1,250 1,323(n)
State of Connecticut (Series D)
5.50% 12/01/07 - 12/01/08 19,665 20,563
5.50% 12/01/07 ....... 75 78(m)
5.50% 12/01/08 ....... 200 210(n)
88,936
DELAWARE -- 0.3%
State of Delaware
5.25% 04/01/13 - 04/01/14 4,545 4,876(n)
DISTRICT OF COLUMBIA -- 1.3%
District of Columbia
(MBIA Insured)
5.75% 09/15/20 ....... 5,000 5,427(o)
- ---------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
38
ELFUN TAX-EXEMPT INCOME FUND
Schedule of Investments
(dollars in thousands) -- December 31, 2005
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
District of Columbia (Series A)
(MBIA Insured)
5.25% 06/01/27 ....... $ 1,335 $ 1,408(n,o)
5.25% 06/01/27 ....... 8,665 9,059(o)
District of Columbia (Series B)
(FSA Insured)
5.25% 06/01/26 ....... 6,900 7,220(o)
23,114
FLORIDA -- 3.4%
Brevard County Health
Facilities Authority
5.00% 04/01/34 ....... 16,000 16,114
Florida State Board Education
(Series B)
5.38% 06/01/16 ....... 10,000 10,990
Florida State Board of
Education (Series D)
4.50% 06/01/21 ....... 5,000 5,052
Hillsborough County Industrial
Development Authority
(Series A)
5.00% 10/01/18 ....... 5,000 5,168
5.25% 10/01/24 ....... 5,500 5,734
Hillsborough County Industrial
Development Authority
(Series B)
5.25% 10/01/15 ....... 5,130 5,448
Indian River County School Board
(MBIA Insured)
5.00% 07/01/24 ....... 2,000 2,092(o)
North Broward Hospital District
5.70% 01/15/16 ....... 1,915 2,056
South Miami Health
Facilities Authority
5.25% 11/15/33 ....... 6,380 6,620
59,274
GEORGIA -- 4.4%
City of Atlanta GA (FSA Insured)
5.75% 11/01/26 - 11/01/27 10,460 12,719(h,o)
City of Atlanta GA (Series B)
(FSA Insured)
5.25% 01/01/33 ....... 4,000 4,259(h,o)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
City of Augusta GA (FSA Insured)
5.25% 10/01/34 ....... $ 9,000 $ 9,657(h,o)
County of Fulton GA
(FGIC Insured)
5.00% 01/01/30 ....... 5,000 5,234(o)
5.25% 01/01/35 ....... 10,500 11,183(o)
De Kalb County GA
5.00% 10/01/28 ....... 6,500 6,763
Fayette County School District
(FSA Insured)
4.63% 03/01/22 ....... 2,520 2,045(d,o)
4.67% 03/01/23 ....... 2,290 1,856(d,o)
Henry County Hospital Authority
(MBIA Insured)
5.00% 07/01/24 ....... 1,865 1,973(o)
Marietta Development Authority
5.00% 09/15/29 ....... 2,365 2,458
Private Colleges &
Universities Authority
5.25% 06/01/18 - 06/01/20 5,250 5,656
Private Colleges & Universities
Authority (Series A)
6.00% 06/01/21 ....... 2,410 2,579
Private Colleges & Universities
Facilities Authority
(MBIA Insured)
6.50% 11/01/15 ....... 4,010 4,757(m,o)
State of Georgia (Series C)
6.50% 04/01/08 ....... 2,805 3,001
6.50% 04/01/08 ....... 15 16(m)
State of Georgia (Series D)
6.50% 08/01/08 ....... 2,500 2,699
76,855
HAWAII -- 1.2%
City & County of Honolulu HI (Series A)
6.00% 01/01/12 ....... 1,265 1,424
6.00% 01/01/12 ....... 735 831(m)
State of Hawaii (FSA Insured)
5.25% 07/01/16 ....... 8,670 9,377(o)
5.25% 07/01/16 ....... 1,330 1,456(n,o)
5.75% 02/01/14 ....... 6,500 7,379(o)
20,467
- ---------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
39
ELFUN TAX-EXEMPT INCOME FUND
Schedule of Investments
(dollars in thousands) -- December 31, 2005
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
ILLINOIS -- 4.2%
Chicago O'Hare International
Airport (Series A) (MBIA Insured)
5.00% 01/01/29 ....... $15,000 $ 15,586(o)
County of Cook IL (Series C)
(AMBAC Insured)
5.50% 11/15/26 ....... 10,000 10,873(o)
Illinois Educational Facilities
Authority (Series A)
(AMBAC Insured)
5.70% 07/01/24 ....... 10,000 10,503(o)
Illinois Finance Authority
(Series A)
5.50% 08/15/43 ....... 5,000 5,331
Illinois Health Facilities Authority
6.13% 11/15/22 ....... 3,500 3,912(n)
Metropolitan Pier &
Exposition Authority
6.50% 06/15/27 ....... 305 305
Metropolitan Pier & Exposition
Authority (AMBAC Insured)
5.38% 06/01/14 ....... 15,000 15,542(o)
Metropolitan Pier & Exposition
Authority (MBIA Insured)
4.48% 06/15/19 ....... 4,000 3,140(d,o)
University of Illinois (Series B)
(FGIC Insured)
5.25% 04/01/32 ....... 8,500 8,875(o)
74,067
INDIANA -- 1.8%
Indiana Health Facility Financing
Authority (Series A)
(AMBAC Insured)
5.38% 03/01/34 ....... 5,500 5,872(o)
Indiana Transportation
Finance Authority
5.50% 12/01/20 ....... 5,000 5,442(n)
Indiana Transportation Finance
Authority (Series A)
(AMBAC Insured)
5.00% 11/01/12 - 11/01/16 16,555 17,114(n,o)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Indianapolis Local Public
Improvement Bond Bank
(Series A)
6.00% 01/01/15 ....... $ 2,425 $ 2,680
31,108
IOWA -- 0.3%
Iowa Finance Authority (Series V)
5.25% 08/15/12 - 08/15/14 2,105 2,166(m)
5.38% 08/15/17 ....... 2,460 2,521(m)
4,687
KANSAS -- 0.2%
University of Kansas
Hospital Authority
5.63% 09/01/32 ....... 4,150 4,433
KENTUCKY -- 0.3%
University Of Kentucky
(Series Q) (FGIC Insured)
5.25% 05/01/20 ....... 4,545 4,882(n,o)
LOUISIANA -- 1.1%
Louisiana Public Facilities
Authority (MBIA Insured)
5.25% 07/01/33 ....... 10,925 11,513(o)
Louisiana Public Facilities
Authority (Series A)
(MBIA Insured)
5.38% 05/15/16 ....... 7,870 8,524(o)
20,037
MAINE -- 0.9%
Maine Health & Higher
Educational Facilities
Authority (Series C)
5.13% 07/01/31 ....... 5,000 5,235
Maine Health & Higher
Educational Facilities
Authority (Series D)
(FSA Insured)
5.50% 07/01/23 ....... 470 476(o)
- ---------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
40
ELFUN TAX-EXEMPT INCOME FUND
Schedule of Investments
(dollars in thousands) -- December 31, 2005
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Maine Municipal Bond Bank
(Series B)
5.50% 11/01/21 ....... $ 3,325 $ 3,596
Maine Municipal Bond Bank
(Series C) (FSA Insured)
5.35% 11/01/18 ....... 5,310 5,649(n,o)
14,956
MARYLAND -- 3.1%
County of Prince Georges MD
(Series A)
5.00% 10/01/22 ....... 6,820 7,284
Maryland State Health & Higher
Educational Facilities Authority
5.13% 11/15/34 ....... 7,200 7,538
State of Maryland
5.00% 10/15/11 ....... 3,500 3,616(n)
5.50% 08/01/17 ....... 21,000 24,232
University System of Maryland
(Series A)
5.25% 04/01/17 ....... 10,035 10,859
53,529
MASSACHUSETTS -- 4.6%
Commonwealth of
Massachusetts (Series B)
5.50% 11/01/08 ....... 18,035 19,045
Massachusetts Bay
Transportation Authority
(Series A) (MBIA Insured)
4.75% 03/01/16 ....... 4,500 4,625(o)
Massachusetts State Turnpike
Authority (Series B)
(MBIA Insured)
5.13% 01/01/23 - 01/01/37 20,500 21,074(o)
Massachusetts State Water
Pollution Abatement (Series 6)
5.63% 08/01/18 ....... 115 125
5.63% 08/01/18 ....... 6,885 7,581(n)
Massachusetts State Water
Resources Authority (Series A)
6.50% 07/15/08 - 07/15/19 23,370 26,962
79,412
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
MICHIGAN -- 2.6%
Detroit MI (Series A) (FSA Insured)
5.25% 07/01/21 - 07/01/22 $4,545 $ 5,133(o)
Detroit MI (Series A)
(MBIA Insured)
5.00% 01/01/27 ....... 7,145 7,329(o)
5.00% 07/01/27 ....... 1,230 1,272(n,o)
Grand Rapids MI (FGIC Insured)
5.25% 01/01/17 ....... 3,000 3,199(o)
Hartland Consolidated
School District (FGIC Insured)
5.13% 05/01/22 ....... 5,000 5,030(n,o)
Kent Hospital Finance
Authority (Series A)
5.25% 07/01/30 ....... 6,845 6,911
Michigan Municipal
Bond Authority
5.25% 10/01/17 ....... 6,465 7,013
Michigan State Hospital
Finance Authority
5.38% 12/01/30 ....... 2,000 2,104
Michigan State Trunk Line
(Series A) (MBIA Insured)
5.00% 11/01/26 ....... 4,000 4,149(o)
Muskegon Heights Public
Schools (MBIA Insured)
5.00% 05/01/24 ....... 2,650 2,746(o)
44,886
MINNESOTA -- 1.2%
City of Maple Grove MN
5.00% 09/01/35 ....... 5,500 5,597
Minneapolis & St. Paul
Metropolitan Airports
Commission (Series A)
(AMBAC Insured)
5.00% 01/01/30 ....... 8,500 8,712(o)
St. Paul Housing &
Redevelopment Authority
6.00% 11/15/30 ....... 6,000 6,380
20,689
- ---------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
41
ELFUN TAX-EXEMPT INCOME FUND
Schedule of Investments
(dollars in thousands) -- December 31, 2005
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
MISSISSIPPI -- 0.5%
State of Mississippi
5.50% 09/01/14 ....... $ 7,500 $ 8,380
MISSOURI -- 0.5%
Hazelwood School District
(Series A) (FGIC Insured)
5.00% 03/01/24 ....... 3,000 3,174(o)
Missouri State Health &
Educational Facilities Authority
5.25% 05/15/23 ....... 2,300 2,423
6.00% 05/15/07 ....... 2,340 2,422
8,019
NEVADA -- 1.0%
County of Clark NV
5.50% 07/01/20 ....... 7,565 8,069
County of Clark NV
(MBIA Insured)
5.50% 07/01/30 ....... 6,500 6,913(o)
Las Vegas Special Improvement
District No 707 (Series A)
(FSA Insured)
5.55% 06/01/16 ....... 1,870 1,994(o)
16,976
NEW JERSEY -- 9.2%
Cape May County Municipal
Utilities Authority (Series A)
(FSA Insured)
5.75% 01/01/15 - 01/01/16 8,500 9,744(o)
Essex County Improvement
Authority (FSA Insured)
5.25% 12/15/17 ....... 10,000 10,914(o)
New Jersey Economic
Development Authority
5.13% 03/01/30 ....... 6,180 6,472
5.75% 06/15/29 ....... 3,000 3,179
New Jersey State Educational
Facilities Authority
5.25% 07/01/32 ....... 2,625 2,720
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
New Jersey State Educational
Facilities Authority (Series A)
5.00% 07/01/30 ....... $ 1,750 $ 1,853
New Jersey State Educational
Facilities Authority (Series B)
(MBIA Insured)
5.00% 07/01/30 ....... 8,500 8,969(o)
New Jersey State Educational
Facilities Authority (Series D)
5.25% 07/01/19 ....... 4,000 4,544
New Jersey State Turnpike
Authority (AMBAC Insured)
6.50% 01/01/16 ....... 7,910 9,301(o)
6.50% 01/01/16 ....... 42,050 49,599(m,o)
New Jersey Transportation Trust
Fund Authority (Series C)
5.50% 06/15/19 - 06/15/24 31,280 34,958(n)
New Jersey Transportation Trust
Fund Authority (Series C)
(FSA Insured)
5.75% 12/15/14 ....... 6,000 6,817(o)
New Jersey Wastewater
Treatment Trust (Series C)
5.88% 06/15/06 ....... 5,160 5,219
6.88% 06/15/08 ....... 5,905 6,394
160,683
NEW MEXICO -- 0.7%
New Mexico Hospital Equipment
Loan Council (Series A)
5.50% 08/01/25 - 08/01/30 10,750 11,849(n)
NEW YORK -- 7.3%
City of New York (Series B)
5.25% 08/01/13 ....... 1,475 1,525
5.25% 08/01/13 ....... 25 26(n)
5.60% 08/15/06 ....... 13,000 13,180
Municipal Assistance Corporation
for the City of New York
(Series E)
5.20% 07/01/08 ....... 10,000 10,194(n)
New York City Municipal Water
Finance Authority
5.50% 06/15/33 ....... 5,000 5,382
- ---------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
42
ELFUN TAX-EXEMPT INCOME FUND
Schedule of Investments
(dollars in thousands) -- December 31, 2005
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
New York City Transitional
Finance Authority
5.50% 11/01/19 - 05/01/25 $19,070 $ 20,745(n)
6.00% 11/15/19 ....... 3,750 4,184(n)
New York City Transitional
Finance Authority (Series A)
5.30% 11/15/09 ....... 1,000 1,071(m)
New York City Transitional
Finance Authority (Series B)
5.50% 11/15/11 ....... 1,250 1,356
6.00% 11/15/10 - 11/15/11 2,545 2,839(n)
New York City Transitional
Finance Authority (Series C)
5.50% 05/01/25 ....... 30 32(n)
New York State
Dormitory Authority
5.40% 07/01/10 ....... 8,185 8,437
New York State Dormitory
Authority (Series A)
5.00% 07/01/25 - 07/01/31 15,610 16,481
New York State Dormitory
Authority (Series B)
5.25% 11/15/23 ....... 10,400 11,214
5.38% 07/01/20 ....... 3,695 4,045
6.50% 08/15/10 ....... 3,490 3,882
6.50% 08/15/10 ....... 5 6(m)
New York State Dormitory
Authority (Series D)
7.00% 07/01/09 ....... 3,815 4,068(m)
New York State Environmental
Facilities Corp.
5.50% 06/15/13 ....... 10,000 11,224
New York State Urban
Development Corp.
5.50% 07/01/16 ....... 7,000 7,214
127,105
NORTH CAROLINA -- 1.2%
Cary NC
5.00% 03/01/21 ....... 2,400 2,580
City of Charlotte NC
5.60% 06/01/20 ....... 2,800 3,096(n)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
City of Charlotte NC
(Series C)
5.00% 07/01/24 ....... $ 1,460 $ 1,548
Mecklenburg County NC
(Series B)
4.50% 02/01/15 ....... 14,000 14,601(n)
21,825
OHIO -- 4.0%
City of Cleveland OH
(MBIA Insured)
5.50% 09/15/16 ....... 5,200 5,380(o)
Cleveland-Cuyahoga County
Port Authority
(AMBAC Insured)
5.40% 12/01/15 ....... 3,500 3,631(n,o)
Columbus OH (Series 1)
5.63% 11/15/15 ....... 7,310 8,071(n)
County of Cuyahoga OH
6.00% 01/01/32 ....... 10,000 11,025
County of Hamilton OH
(Series A)
(MBIA Insured)
5.00% 12/01/19 ....... 4,250 4,538(o)
County of Hamilton OH
(Series B)
(AMBAC Insured)
5.25% 12/01/32 ....... 7,500 7,924(o)
Franklin County OH (Series C)
5.00% 05/15/21 ....... 2,685 2,832
5.25% 05/15/24 ....... 1,400 1,486
Ohio State Higher Educational
Facility Commission
5.20% 11/01/26 ....... 9,450 10,118
Ohio State University (Series A)
5.25% 12/01/11 ....... 3,150 3,433
Ohio State Water
Development Authority
5.50% 12/01/20 ....... 5,000 5,563(n)
State of Ohio (Series A)
4.75% 06/15/18 ....... 3,690 3,891(n)
Steubenville OH
6.38% 10/01/20 ....... 1,660 1,835
69,727
- ---------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
43
ELFUN TAX-EXEMPT INCOME FUND
Schedule of Investments
(dollars in thousands) -- December 31, 2005
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
OKLAHOMA -- 1.1%
Claremore Public Works Authority
(Series A) (FSA Insured)
5.25% 06/01/34 ....... $ 6,315 $ 6,760 (o)
Oklahoma Transportation
Authority (Series A)
(AMBAC Insured)
5.25% 01/01/15 ....... 9,125 9,904(o)
Tulsa Industrial Authority
(MBIA Insured)
5.00% 10/01/22 ....... 2,000 2,054(o)
18,718
OREGON -- 0.0%*
State of Oregon
5.88% 10/01/18 ....... 660 675
PENNSYLVANIA -- 4.1%
Montgomery County Higher
Education & Health Authority
(AMBAC Insured)
5.00% 10/01/09 ....... 2,405 2,490(o)
5.10% 10/01/10 ....... 2,670 2,767(o)
Pennsylvania Industrial
Development Authority
(AMBAC Insured)
5.50% 07/01/17 ....... 3,100 3,421(o)
Pennsylvania State Higher
Educational Facilities Authority
5.50% 07/15/38 ....... 10,750 11,324(n)
6.00% 05/01/30 ....... 5,000 5,463
Pennsylvania State University
(Series A)
5.00% 09/01/34 ....... 5,000 5,217
Pennsylvania Turnpike
Commission (Series A)
(AMBAC Insured)
5.00% 12/01/23 ....... 2,125 2,224(o)
5.00% 12/01/23 ....... 2,875 2,949(m,o)
5.25% 12/01/32 ....... 12,695 13,667(o)
Pittsburgh Public Parking
Authority (AMBAC Insured)
5.35% 12/01/10 ....... 520 561(n,o)
5.45% 12/01/11 ....... 440 476(n,o)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
5.55% 12/01/12 ....... $ 1,015 $ 1,103(n,o)
5.60% 12/01/13 ....... 1,125 1,224(n,o)
5.70% 12/01/14 ....... 1,245 1,360(n,o)
5.75% 12/01/15 - 12/01/16 2,330 2,550(n,o)
Southcentral General Authority
5.38% 05/15/28 ....... 4,100 4,498(n)
5.38% 05/15/28 ....... 900 970(m)
State Public School Building
Authority (FSA Insured)
5.25% 06/01/27 ....... 8,000 8,524(o)
70,788
PUERTO RICO -- 1.2%
Children's Trust Fund
5.75% 07/01/20 ....... 4,520 4,766(n)
Commonwealth of Puerto Rico
(Series A)
5.50% 07/01/13 ....... 6,500 7,073
Puerto Rico Public Buildings
Authority (Series H)
(FGIC Insured)
5.25% 07/01/15 ....... 8,000 8,897(o)
20,736
SOUTH CAROLINA -- 8.5%
Beaufort County SC
(MBIA Insured)
5.50% 06/01/17 - 06/01/18 4,150 4,584(o)
Berkeley County School District
5.25% 12/01/24 ....... 15,000 15,781
Charleston Educational
Excellence Finance Corp.
5.25% 12/01/27 - 12/01/30 24,000 25,367
City of Greenville SC
5.13% 02/01/22 ....... 5,195 5,513
County of Charleston SC
5.90% 06/01/10 ....... 2,170 2,193(n)
6.00% 06/01/11 - 06/01/12 4,765 4,818(n)
Dorchester County
School District No 2
5.25% 12/01/22 ....... 8,075 8,533
Greenville County School District
5.25% 12/01/21 ....... 2,000 2,127
5.50% 12/01/28 ....... 16,725 18,016
- ---------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
44
ELFUN TAX-EXEMPT INCOME FUND
Schedule of Investments
(dollars in thousands) -- December 31, 2005
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Lexington County SC
5.50% 11/01/13 ....... $ 5,000 $ 5,489
Scago Educational Facilities
Corp. (FSA Insured)
5.00% 04/01/17 - 04/01/20 4,000 4,269(o)
South Carolina State Public
Service Authority (Series B)
(FSA Insured)
5.13% 01/01/32 ....... 17,000 17,770(o)
5.50% 01/01/36 ....... 5,000 5,377(o)
South Carolina Transportation
Infrastructure Bank (Series A)
(AMBAC Insured)
5.25% 10/01/19 ....... 9,780 10,742(o)
South Carolina Transportation
Infrastructure Bank (Series A)
(MBIA Insured)
5.50% 10/01/30 ....... 11,000 11,901(n,o)
South Carolina Transportation
Infrastructure Bank (Series B)
(AMBAC Insured)
5.20% 10/01/22 ....... 5,000 5,331(o)
147,811
TENNESSEE -- 0.7%
Knox County Health Educational &
Housing Facilities Board
(FSA Insured)
4.21% 01/01/16 ....... 12,000 7,499(d,o)
Knox County Health
Educational & Housing
Facilities Board (Series B)
(MBIA Insured)
7.25% 01/01/09 ....... 4,500 4,976(o)
12,475
TEXAS -- 5.0%
City of Austin TX
5.38% 09/01/16 - 09/01/17 10,350 11,047(n)
City of Austin TX (Series A)
(AMBAC Insured)
5.50% 11/15/16 ....... 5,450 6,174(o)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
City of Dallas TX (Series A)
(AMBAC Insured)
5.00% 08/15/20 ....... $ 4,675 $ 4,844(o)
City of Fort Worth TX
5.00% 02/15/18 ....... 2,800 2,892(n)
City of Houston TX
(FGIC Insured)
5.25% 12/01/21 ....... 20,000 20,902(n,o)
City of Houston TX (Series B)
(AMBAC Insured)
5.75% 12/01/14 ....... 5,000 5,590(n,o)
City of Plano TX
4.88% 09/01/19 ....... 1,500 1,575(n)
McKinney Independent
School District
5.25% 02/15/20 ....... 2,000 2,175
North Central Texas Health
Facility Development Corp.
5.13% 05/15/22 ....... 4,500 4,619
San Antonio Independent
School District (Series A)
5.38% 08/15/19 - 08/15/20 6,250 6,818(n)
Texas State Public Finance
Authority (AMBAC Insured)
5.00% 08/01/17 ....... 5,740 5,888(n,o)
University of Houston
(MBIA Insured)
5.50% 02/15/30 ....... 8,000 8,557(o)
University of Texas
5.25% 08/15/14 ....... 5,705 6,285
87,366
UTAH -- 0.7%
City of Salt Lake City UT
5.13% 06/15/19 ....... 3,715 3,983
Metropolitan Water District of
Salt Lake & Sandy (Series A)
(AMBAC Insured)
5.00% 07/01/22 - 07/01/24 6,100 6,460(o)
Murray UT (MBIA Insured)
4.75% 05/15/20 ....... 2,285 2,289(o)
12,732
- ---------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
45
ELFUN TAX-EXEMPT INCOME FUND
Schedule of Investments
(dollars in thousands) -- December 31, 2005
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
VERMONT -- 0.5%
University of Vermont &
State Agricultural College
(AMBAC Insured)
5.13% 10/01/27 ....... $ 1,000 $ 1,054 (o)
University of Vermont &
State Agricultural College
(MBIA Insured)
5.00% 10/01/35 ....... 6,950 7,283(o)
8,337
VIRGINIA -- 1.0%
Chesterfield County Industrial
Development Authority
5.88% 06/01/17 ....... 3,000 3,277
City of Norfolk VA (MBIA Insured)
5.88% 11/01/20 ....... 1,920 1,973(o)
Fairfax County Water Authority
5.00% 04/01/30 ....... 5,275 5,562
Virginia Commonwealth
Transportation Board (Series A)
5.75% 05/15/21 ....... 1,945 2,111(n)
Virginia Resources Authority
(Series A)
5.13% 11/01/34 ....... 5,000 5,319
18,242
WASHINGTON -- 1.9%
King County WA
5.50% 12/01/13 ....... 970 1,088(m)
5.50% 12/01/13 ....... 9,030 10,056
5.80% 12/01/12 ....... 10,000 10,655(n)
Seattle Museum
Development Authority
5.13% 04/01/31 ....... 10,000 10,615
32,414
WEST VIRGINIA -- 0.4%
West Virginia Housing
Development Fund (Series B)
5.30% 05/01/24 ....... 4,000 4,127
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
West Virginia Housing
Development Fund (Series C)
5.35% 11/01/27 ....... $2,740 $ 2,831
6,958
WISCONSIN -- 1.0%
State of Wisconsin (Series 1)
(AMBAC Insured)
5.75% 07/01/14 ....... 2,990 3,332(o)
5.75% 07/01/14 ....... 2,010 2,258(n,o)
State of Wisconsin (Series A)
5.30% 07/01/18 ....... 5,800 6,250(n)
Wisconsin State Health &
Educational Facilities
Authority (MBIA Insured)
5.25% 08/15/27 ....... 5,000 5,139(o)
16,979
TOTAL INVESTMENT IN SECURITIES
(COST $1,634,629) ...... 1,720,523
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 0.8%
GEI Short Term Investment Fund
4.42%
(COST $14,485) ......... 14,484,607 14,485 (d,l)
TOTAL INVESTMENTS
(COST $1,649,114) ...... 1,735,008
OTHER ASSETS AND LIABILITIES,
NET-- 0.4% ............. 6,527
----------
NET ASSETS-- 100.0% ....... $1,741,535
==========
- ---------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
46
Elfun Income Fund
- --------------------------------------------------------------------------------
Q&A
THE ELFUN INCOME FUND IS MANAGED BY A TEAM OF PORTFOLIO MANAGERS THAT INCLUDES
ALFREDO CHANG, PAUL M. COLONNA (PICTURED BELOW), MARK DELANEY, ERIC H. GOULD,
WILLIAM M. HEALEY AND VITA MARIE PIKE. THE TEAM IS LEAD BY MR. COLONNA WHO IS
VESTED WITH OVERSIGHT AUTHORITY BUT DOES NOT POSSESS THE POWER TO VETO THE
INVESTMENT DECISIONS OF HIS CO-MANAGERS. EACH PORTFOLIO MANAGER IS ASSIGNED A
CLASS OF ASSETS, THE SIZE OF WHICH ARE DETERMINED BY TEAM CONSENSUS AND ADJUSTED
ON A MONTHLY BASIS, IF NECESSARY. ALTHOUGH EACH PORTFOLIO MANAGER MANAGES HIS OR
HER ASSET CLASS INDEPENDENT OF THE OTHER TEAM MEMBERS, THE TEAM IS HIGHLY
COLLABORATIVE AND COMMUNICATIVE. SEE PORTFOLIO MANAGERS' BIOGRAPHICAL
INFORMATION BEGINNING ON PAGE 93.
Q. HOW DID THE ELFUN INCOME FUND PERFORM COMPARED TO ITS BENCHMARK AND LIPPER
PEER GROUP FOR THE TWELVE-MONTH PERIOD ENDED DECEMBER 31, 2005?
A. For the twelve-month period ended December 31, 2005, the Elfun Income Fund
returned 2.58%. The Lehman Brothers Aggregate Bond Index, the Fund's
benchmark, returned 2.43% and the Fund's Lipper peer group of 469
Intermediate Investment Grade Debt funds returned an average of 1.77% for
the same period.
Q. DESCRIBE WHAT HAPPENED IN THE U.S. ECONOMY DURING THE TWELVE-MONTH PERIOD
ENDED DECEMBER 31, 2005.
A. Despite major problems announced by both General Motors and Ford in the
spring, hurricanes hitting the gulf coast in early fall, and continued high
energy prices, the U.S. economy maintained a robust pace of growth in 2005.
Low interest rates and new affordability mortgage-products (e.g.
interest-only, negative amortization) have helped home sales stay at lofty
levels. Consumer health improved which supported spending and business
investment improved as well. Although still moderate by historical
standards, inflation figures picked up slightly during the year, which kept
the Federal Reserve Board steadfast in its goal of removing accommodation by
raising rates. In 2005, the Federal Reserve Board met and raised its target
Fed funds rate 8 times, in increments of 25 bps to
[PHOTO OF PAUL M. COLONNA OMITTED]
- --------------------------------------------------------------------------------
47
Elfun Income Fund
- --------------------------------------------------------------------------------
Q&A
4.25%. As a result of the Federal Reserve's continued endorsement of higher
rates, the yield on the 2-year treasuries increased 133 bps to 4.4%. Due to
moderate inflation expectations and strong foreign buying, 10-year treasury
yields rose only 17 bps to 4.39%.
Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE?
A. Primary drivers of Fund performance during the year were sector allocation
and curve positioning. Non-index allocations to high yield and emerging
market sectors, away from high grade benchmark sectors as these markets,
especially emerging market debt, outperformed The Lehman Aggregate
benchmark. The Fund's yield curve exposure was positioned to take advantage
of a flattening yield curve, which proved correct as the yield spread
between the 2-year and 10-year notes narrowed by 116 bps. Security selection
in BBB-rated corporate securities also added value. Duration positioning
throughout the year was detrimental to Fund performance.
48
Elfun Income Fund
Understanding Your Fund's Expenses
- --------------------------------------------------------------------------------
As a shareholder of the Fund you incur transaction and ongoing expenses.
Transaction expenses including sales charges on purchase payments, reinvested
dividends (or other distributions), and redemption fees directly reduce the
investment return of the Fund. Ongoing costs include portfolio management fees,
distribution and service fees, professional fees, administrative fees and other
Fund expenses. The following example is intended to help you understand your
ongoing costs (in dollars) of investing in the Fund and to compare these costs
with the ongoing costs of investing in other mutual funds.
To illustrate these ongoing costs, we have provided an example and calculated
the expenses paid by investors in each share class of the Fund during the
period. The information in the following table is based on an investment of
$1,000, which is invested at the beginning of the period and held for the entire
six-month period ended December 31, 2005.
ACTUAL EXPENSES
The first section of the table provides information about actual account values
and actual expenses. You may use the information in this section, together with
the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JULY 1, 2005 - DECEMBER 31, 2005
- ---------------------------------------------------------------------------------------------------------------
ACCOUNT VALUE AT ACCOUNT VALUE EXPENSES
THE BEGINNING OF AT THE END OF PAID DURING
THE PERIOD ($) THE PERIOD ($) THE PERIOD ($)*
- ---------------------------------------------------------------------------------------------------------------
Actual Fund Return** 1,000.00 1,001.63 1.29
- ---------------------------------------------------------------------------------------------------------------
Hypothetical 5% Return
(2.5% for the period) 1,000.00 1,023.64 1.31
- ---------------------------------------------------------------------------------------------------------------
<FN>
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.26% (FROM
PERIOD JULY 1, 2005 - DECEMBER 31, 2005), MULTIPLIED BY THE AVERAGE ACCOUNT
VALUE OVER THE PERIOD, MULTIPLIED BY 184/365 (TO REFLECT THE SIX MONTH
PERIOD).
** ACTUAL FUND RETURN FOR SIX-MONTH PERIOD ENDED DECEMBER 31, 2005 WAS: 0.16%.
</FN>
49
Elfun Income Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CHANGE IN VALUE OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
[LINE GRAPH OMITTED]
Elfun Income Fund LB Aggregate Bond
(ending value $18,050) (ending value $18,189)
12/95 $10,000.00 $10,000.00
12/96 10,401.12 10,363.06
12/97 11,397.25 11,363.50
12/98 12,364.34 12,350.60
12/99 12,287.77 12,249.16
12/00 13,652.61 13,673.26
12/01 14,740.36 14,827.75
12/02 16,250.38 16,348.34
12/03 16,907.59 17,019.36
12/04 17,595.65 17,757.79
12/05 18,050.49 18,189.04
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED DECEMBER 31, 2005
- ------------------------------------------------
ONE FIVE TEN
YEAR YEAR YEAR
- ------------------------------------------------
Elfun Income Fund 2.58% 5.74% 6.08%
LB Aggregate Bond 2.43% 5.87% 6.16%
INVESTMENT PROFILE
A fund designed for investors who seek a high level of income
consistent with prudent investment management and the preservation of capital
by investing at least 80% of its net assets in debt securities under normal
market conditions. The Fund invests primarily in a variety of investment-grade
debt securities, such as mortgage-backed securities, corporate bonds,
U.S. Government securities and money market instruments.
QUALITY RATINGS
AS OF DECEMBER 31, 2005
AS A % OF MARKET VALUE
- ---------------------------------------
MOODY'S/S&P/ PERCENTAGE OF
FITCH RATING+ MARKET VALUE
- ---------------------------------------
Aaa/AAA 73.27%
- ---------------------------------------
Aa/AA 2.58%
- ---------------------------------------
A/A 7.61%
- ---------------------------------------
Baa/BBB 7.86%
- ---------------------------------------
Ba/BB and lower 8.68%
- ---------------------------------------
+ MOODY'S INVESTORS SERVICES, INC., STANDARD & POOR'S AND FITCH ARE NATIONALLY
RECOGNIZED STATISTICAL RATING ORGANIZATIONS.
- --------------------------------------------------------------------------------
LIPPER PERFORMANCE COMPARISON
INTERMEDIATE INVESTMENT GRADE DEBT PEER GROUP
BASED ON AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/05
ONE FIVE TEN
YEAR YEAR YEAR
Fund's rank in peer group: .............. 44 76 23
Number of Funds in peer group: .......... 469 303 137
Peer group average annual total return: . 1.77% 5.27% 5.35%
- --------------------------------------------------------------------------------
SEE NOTES TO PERFORMANCE ON PAGE 67 FOR FURTHER INFORMATION, INCLUDING AN
EXPLANATION OF LIPPER PEER CATEGORIES. PAST PERFORMANCE DOES NOT PREDICT FUTURE
PERFORMANCE AND THE GRAPH AND TABLE DO NOT REFLECT THE DEDUCTION OF TAXES.
50
ELFUN INCOME FUND
Schedule of Investments
(dollars in thousands) -- December 31, 2005
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ELFUN INCOME FUND
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION AS A % OF THE MARKET VALUE OF $498,634 AS OF
DECEMBER 31, 2005.
[PIE CHART OMITTED]
Federal Agencies 3.2%
Mortgage Backed 33.7%
Corporate Notes 26.7%
Asset Backed & Other 19.6%
U.S. Treasuries 16.8%
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
BONDS AND NOTES -- 102.3%+
- --------------------------------------------------------------------------------
U.S. TREASURIES -- 21.8%
U.S. Treasury Bonds
5.38% 02/15/31 ....... $ 5,461 $ 6,138(j)
7.13% 02/15/23 ....... 1,005 1,300(j)
8.13% 08/15/19 - 08/15/21 2,730 3,757(j,h)
U.S. Treasury Inflation-Protected Securities
2.00% 01/15/14 ....... 1,795 1,786(h)
3.88% 04/15/29 ....... 362 490(h)
U.S. Treasury Notes
4.13% 08/15/08 ....... 460 458(j)
4.25% 11/30/07 ....... 26,495 26,421(j)
4.38% 11/15/08 - 12/15/10 26,025 26,051(j)
4.50% 11/15/15 ....... 17,500 17,653(j)
84,054
FEDERAL AGENCIES -- 4.1%
Federal Farm Credit Bank
3.75% 01/15/09 ....... 1,940 1,889(h)
Federal Home Loan Bank
2.38% 02/15/06 ....... 3,565 3,556(h)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Federal Home Loan
Mortgage Corp.
3.63% 09/15/08 ....... $ 840 $ 818(j)
4.13% 07/12/10 ....... 4,430 4,318
4.75% 12/08/10 ....... 2,765 2,751(h)
6.75% 03/15/31 ....... 1,920 2,411(h)
15,743
AGENCY MORTGAGE BACKED -- 23.0%
Federal Home Loan
Mortgage Corp.
4.50% 06/01/33 - 10/01/35 1,795 1,689
5.00% 07/01/35 - 10/01/35 1,427 1,381
5.50% 05/01/20 ....... 255 256
6.00% 04/01/17 - 05/01/35 3,336 3,381
6.50% 01/01/27 - 12/01/34 1,967 2,018(h)
7.00% 10/01/16 - 02/01/35 573 596
7.50% 01/01/08 - 09/01/33 275 286
8.00% 11/01/30 ....... 18 20
Federal National
Mortgage Assoc.
4.00% 05/01/19 - 06/01/19 966 921
4.50% 05/01/18 - 02/01/35 7,722 7,421
5.00% 06/01/20 - 08/01/35 3,100 3,024
5.50% 03/01/14 - 08/01/35 5,459 5,453
6.00% 02/01/14 - 08/01/35 7,906 7,996
6.50% 02/01/14 - 02/01/35 8,344 8,556
7.00% 08/01/13 - 05/01/35 2,803 2,922
7.50% 08/01/13 - 03/01/34 1,288 1,350
8.00% 12/01/11 - 11/01/33 630 668
8.50% 04/01/30 - 05/01/31 56 60
9.00% 06/01/09 - 12/01/22 285 303
5.00% TBA ............ 31,940 31,348(c)
5.50% TBA ............ 1,635 1,619(c)
Government National
Mortgage Assoc.
4.50% 08/15/33 - 09/15/34 1,895 1,818
5.00% 08/15/33 ....... 449 443
6.00% 04/15/27 - 06/15/35 1,748 1,789
6.50% 04/15/19 - 08/15/34 1,054 1,096
7.00% 03/15/12 - 06/15/34 387 404
7.50% 03/15/23 - 10/15/33 170 183
8.00% 06/15/27 - 11/15/29 79 85
8.50% 10/15/17 ....... 131 142
- ---------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
51
ELFUN INCOME FUND
Schedule of Investments
(dollars in thousands) -- December 31, 2005
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
9.00% 11/15/16 - 12/15/21 $ 242 $ 265
5.50% TBA ............ 1,100 1,107(c)
88,600
AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 6.7%
Collateralized Mortgage
Obligation Trust (Class B)
5.78% 11/01/18 ....... 40 34(d,f,h)
Federal Home Loan
Mortgage Corp.
2.28% 10/15/18 ....... 1,410 84(g,h,i)
2.78% 12/15/30 ....... 3,224 185(g,h,i)
4.08% 10/15/33 ....... 515 370(i)
4.50% 04/15/13 - 03/15/19 2,916 285(g)
4.50% 05/15/17 - 11/15/19 1,025 984
5.00% 01/15/11 - 12/01/34 14,354 2,316(g,h)
5.00% 05/15/20 - 02/15/35 7,290 6,915(h)
5.03% 12/15/33 ....... 315 248(i)
5.50% 04/15/17 - 06/15/33 1,507 290(g)
5.50% 10/15/34 ....... 752 758
6.84% 06/15/33 ....... 1,281 1,243(i)
7.50% 01/15/16 ....... 152 159
8.00% 04/15/20 ....... 26 26
8.00% 02/01/23 - 07/01/24 38 9(g)
14.77% 09/25/43 ....... 5,339 59(d,g,i)
Federal Home Loan
Mortgage STRIPS
4.72% 08/01/27 ....... 9 7(d,f)
Federal National Mortgage Assoc.
1.16% 12/25/42 ....... 1,567 37(g,h,i)
2.23% 06/25/43 ....... 4,932 250(g,h,i)
2.62% 10/25/29 ....... 1,183 71(g,i)
2.72% 12/25/30 ....... 1,629 81(g,h,i)
3.22% 09/25/42 ....... 3,502 289(g,i)
3.27% 04/25/17 - 10/25/17 2,615 191(g,h,i)
3.32% 08/25/16 ....... 834 47(g,i)
3.72% 06/25/42 ....... 1,130 92(g,i)
4.00% 02/25/28 ....... 75 73
4.50% 05/25/18 ....... 527 53(g,h)
4.50% 12/25/19 ....... 375 354(h)
4.75% 11/25/14 ....... 301 25(g)
5.00% 02/25/11 - 02/25/32 848 74(g,h)
5.00% 03/25/35 ....... 500 473(h)
5.44% 09/25/31 ....... 750 707(h,i)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
5.50% 01/25/27 ....... $ 712 $ 86(g,h)
5.50% 07/25/34 - 02/25/35 1,540 1,551(h)
5.75% 02/25/35 ....... 775 788(h)
6.00% 12/25/34 ....... 500 510(h)
6.50% 12/25/34 ....... 370 385(h)
8.00% 07/25/14 ....... 479 492
Federal National Mortgage
Assoc. (Class 1)
4.21% 11/01/34 ....... 3,387 2,578(d,f)
Federal National Mortgage
Assoc. (Class S)
2.72% 02/25/31 ....... 1,152 56(g,i)
Federal National Mortgage
Assoc. REMIC
4.50% 11/25/13 ....... 1,395 65(g,h)
5.00% 10/25/22 ....... 476 72(g,h)
5.50% 08/25/33 ....... 1,776 411(g,h)
6.98% 03/25/31 ....... 1,158 1,142(h,i)
Federal National Mortgage
Assoc. REMIC (Class B)
4.43% 12/25/22 ....... 28 24(d,f)
Federal National Mortgage
Assoc. REMIC (Class J)
1080.91% 03/25/22 ...... --** 1(g)
Federal National Mortgage
Assoc. REMIC (Class K)
1008.00% 05/25/22 ...... --** 2(g)
Federal National Mortgage Assoc.
STRIPS (Class 2)
7.50% 11/01/23 ....... 119 30(g)
8.00% 08/01/23 - 07/01/24 80 16(g)
8.50% 03/01/17 - 07/25/22 89 20(g)
9.00% 05/25/22 ....... 29 8(g)
Government National
Mortgage Assoc.
5.00% 02/16/34 ....... 670 636(h)
Vendee Mortgage Trust
16.77% 05/15/33 ....... 3,493 107(d,g,h,i)
25,769
ASSET BACKED -- 6.4%
AESOP Funding II LLC (Class A)
4.49% 04/20/10 ....... 1,000 1,002(b,h,i)
- ---------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
52
ELFUN INCOME FUND
Schedule of Investments
(dollars in thousands) -- December 31, 2005
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Bank One Issuance Trust
3.59% 05/17/10 ....... $ 175 $ 172
BMW Vehicle Owner Trust (Class B)
2.93% 03/25/09 ....... 389 384
Capital One Master Trust (Class C)
6.70% 06/15/11 ....... 149 155(b,h)
Centex Home Equity Co. LLC
4.55% 01/25/25 ....... 236 236(h,i)
Chase Funding Mortgage Loan
Asset-Backed Certificates
5.75% 05/25/32 ....... 69 65(h)
Citibank Credit Card
Issuance Trust
4.45% 04/07/10 ....... 496 489
Citifinancial Mortgage
Securities, Inc.
4.58% 04/25/34 ....... 18 18(h,i)
CNH Equipment Trust
4.44% 10/15/08 ....... 2,000 2,001(h,i)
Countrywide Asset-Backed
Certificates (Class A)
4.65% 05/25/36 ....... 494 494(h,i)
4.66% 08/25/32 ....... 84 84(h,i)
First Franklin Mtg Loan
Asset Backed Certificates
4.56% 12/31/49 ....... 2,000 2,000(h,i)
First USA Credit Card Master
Trust (Class A)
4.51% 11/19/08 ....... 2,400 2,401(i)
Fleet Home Equity Loan
Trust (Class A)
4.62% 01/20/33 ....... 778 779(h,i)
GMAC Mortgage Corp. Loan
Trust (Class A)
4.48% 06/25/34 ....... 1,000 1,000(h,i)
GSAA Trust
4.78% 05/25/34 ....... 232 232(h,i)
Honda Auto Receivables Owner
Trust (Class A)
4.15% 10/15/10 ....... 427 421
Household Automotive
Trust (Class A)
4.67% 07/17/09 ....... 2,335 2,337(i)
Long Beach Mortgage
Loan Trust
4.84% 11/26/32 ....... 356 357(h,i)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Metris Master Trust (Class A)
4.52% 10/20/10 ....... $3,000 $ 3,001(i)
Mid-State Trust
7.54% 07/01/35 ....... 85 88(h)
Peco Energy Transition Trust
6.52% 12/31/10 ....... 400 426(h)
Residential Asset Mortgage
Products, Inc.
4.62% 03/25/34 ....... 230 230(h,i)
4.71% 12/25/33 ....... 77 77(h,i)
Residential Asset Securities Corp.
4.63% 07/25/32 ....... 151 151(h,i)
Residential Asset Securities
Corp. (Class A)
4.16% 07/25/30 ....... 329 324(h,i)
4.67% 06/25/33 ....... 297 297(h,i)
Saxon Asset Securities Trust
4.61% 05/25/35 ....... 1,268 1,268(h,i)
Structured Asset Investment
Loan Trust
4.61% 02/25/35 ....... 3,000 3,000(b,h,i)
Volkswagen Auto Lease
Trust (Class A)
3.94% 10/20/10 ....... 265 261
Wachovia Asset Securitization
Inc. (Class A)
4.60% 06/25/34 ....... 591 592(h,i)
Wells Fargo Home Equity Trust
3.97% 09/25/24 ....... 209 205(h,i)
24,547
CORPORATE NOTES -- 31.0%
Abbey National PLC
7.95% 10/26/29 ....... 510 659(h)
Adaro Finance B.V.
8.50% 12/08/10 ....... 415 418(b)
AES Corp.
8.75% 06/15/08 ....... 860 903(h)
AIG SunAmerica Global
Financing VII
5.85% 08/01/08 ....... 510 521(b)
Air Jamaica Ltd.
9.38% 07/08/15 ....... 435 432(b)
Albertson's, Inc.
7.50% 02/15/11 ....... 260 267(h)
- ---------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
53
ELFUN INCOME FUND
Schedule of Investments
(dollars in thousands) -- December 31, 2005
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Allegiance Corp.
7.00% 10/15/26 ....... $ 300 $ 332(h)
Allied Waste North America
7.25% 03/15/15 ....... 1,050 1,060
Allstate Life Global
Funding Trusts
3.85% 01/25/08 ....... 560 549(h)
Alltel Corp.
4.66% 05/17/07 ....... 670 667(h)
ALROSA Finance S.A.
8.88% 11/17/14 ....... 455 521(b)
Altria Group, Inc.
7.20% 02/01/07 ....... 255 261
America Movil S.A. de C.V.
6.38% 03/01/35 ....... 70 69
American Electric Power
Company, Inc.
4.71% 08/16/07 ....... 425 422(k)
American Electric Power
Company, Inc. (Series D)
5.25% 06/01/15 ....... 335 334
American General Corp.
7.50% 08/11/10 ....... 280 306
American General Finance Corp.
4.88% 07/15/12 ....... 470 460
ANZ Capital Trust
4.48% 12/31/49 ....... 505 489(b)
Appalachian Power Co. (Series G)
3.60% 05/15/08 ....... 260 252(h)
Appalachian Power Co. (Series K)
5.00% 06/01/17 ....... 330 316(h)
Archer-Daniels-Midland Co.
5.38% 09/15/35 ....... 330 317(h)
Assurant, Inc.
6.75% 02/15/34 ....... 475 520
AT&T Corp.
9.05% 11/15/11 ....... 815 902(h)
AT&T, Inc.
4.13% 09/15/09 ....... 650 628
5.88% 08/15/12 ....... 325 335
6.15% 09/15/34 ....... 435 437
BAC CAP TRUST V
5.63% 03/08/35 ....... 495 485(h)
Banco BMG S.A.
9.15% 01/15/16 ....... 425 420(b)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Banco Mercantil del Norte S.A.
5.88% 02/17/14 ....... $ 650 $ 645(b,i)
Banco Santander Chile
5.38% 12/09/14 ....... 545 544(b)
Bank One Corp.
6.50% 02/01/06 ....... 80 80
Barclays Bank PLC
7.38% 06/29/49 ....... 665 736(b,i)
Bavaria S.A.
8.88% 11/01/10 ....... 260 284
8.88% 11/01/10 ....... 345 375(b)
BBVA Bancomer Capital Trust I
10.50% 02/16/11 ....... 580 583(b)
BellSouth Corp.
6.55% 06/15/34 ....... 480 512(h)
BNP US Funding LLC (Series A)
7.74% 12/31/49 ....... 255 267(b,i)
BNSF Funding Trust I
6.61% 12/15/55 ....... 390 409(i)
Boeing Co.
8.75% 09/15/31 ....... 210 304(h)
BRE Properties Inc. (REIT)
5.95% 03/15/07 ....... 590 595(h)
British Aerospace Finance, Inc.
7.50% 07/01/27 ....... 340 403(b)
Burlington Northern
Santa Fe Corp.
8.13% 04/15/20 ....... 765 962(h)
Campbell Soup Co.
5.50% 03/15/07 ....... 405 407
Capital One Bank
6.50% 06/13/13 ....... 195 207
Capital One Financial Corp.
8.75% 02/01/07 ....... 490 508(h)
Carolina Power & Light Co.
5.15% 04/01/15 ....... 230 228
5.70% 04/01/35 ....... 130 130
6.13% 09/15/33 ....... 490 519
Case New Holland Inc.
6.00% 06/01/09 ....... 1,455 1,411(h)
Centex Corp.
7.88% 02/01/11 ....... 345 378
Chesapeake Energy Corp.
7.75% 01/15/15 ....... 950 1,007(h)
Citigroup, Inc.
6.63% 06/15/32 ....... 915 1,032(h)
- ---------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
54
ELFUN INCOME FUND
Schedule of Investments
(dollars in thousands) -- December 31, 2005
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Clear Channel
Communications, Inc.
4.63% 01/15/08 ....... $ 535 $ 527(h)
CNA Financial Corp.
5.85% 12/15/14 ....... 680 683(h)
CNF Inc.
6.70% 05/01/34 ....... 80 84
Comcast Cable Communications
Holdings, Inc.
9.46% 11/15/22 ....... 1,565 2,057(h)
ConAgra Foods, Inc.
7.88% 09/15/10 ....... 200 221
Consolidated Edison Company
of New York
5.63% 07/01/12 ....... 585 605(h)
Consolidated Natural Gas Co.
5.38% 11/01/06 ....... 425 426
Consumers Energy Co.
5.15% 02/15/17 ....... 330 315
5.80% 09/15/35 ....... 330 321
Corp Interamericana de
Entretenimiento S.A.
8.88% 06/14/15 ....... 430 420(b)
Countrywide Home Loans, Inc.
5.63% 05/15/07 ....... 255 257
COX Communications, Inc.
5.45% 12/15/14 ....... 515 502(h)
Credit Suisse First Boston
International
8.00% 11/06/15 ....... 430 444(b)
Crown Americas LLC and Crown
Americas Capital Corp.
7.75% 11/15/15 ....... 1,290 1,335(b)
CSX Transportation, Inc.
9.75% 06/15/20 ....... 202 276
DaimlerChrysler NA
Holding Corp.
4.05% 06/04/08 ....... 330 322
4.75% 01/15/08 ....... 330 327
8.50% 01/18/31 ....... 330 400
DBS Bank Ltd.
5.00% 11/15/19 ....... 605 589(b,i)
Desarrolladora Homex S.A.
de C.V. (REIT)
7.50% 09/28/15 ....... 775 761(b)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Detroit Edison Co. (Series B)
5.45% 02/15/35 ....... $ 535 $ 505(h)
Dex Media, Inc.
8.50% 08/15/10 ....... 1,290 1,351(h)
DirecTV Holdings LLC
6.38% 06/15/15 ....... 965 943
Dominion Resources Inc.
(Series B)
4.13% 02/15/08 ....... 580 570(h)
Dominion Resources Inc.
(Series G)
3.66% 11/15/06 ....... 515 509(h,k)
Duke Capital LLC
4.30% 05/18/06 ....... 350 349
4.33% 11/16/06 ....... 445 442(h)
5.67% 08/15/14 ....... 95 96
8.00% 10/01/19 ....... 350 419
Echostar DBS Corp.
5.75% 10/01/08 ....... 1,395 1,367(h)
El Paso Electric Co.
6.00% 05/15/35 ....... 495 495(h)
Emmis Communications Corp.
10.37% 06/15/12 ....... 430 432(i)
Enterprise Products
Operating LP
4.00% 10/15/07 ....... 1,135 1,111(h)
EOP Operating LP (REIT)
7.75% 11/15/07 ....... 595 622
Evraz Group S.A.
8.25% 11/10/15 ....... 510 504(b)
FirstEnergy Corp. (Series B)
6.45% 11/15/11 ....... 485 514
Flextronics International Ltd.
6.25% 11/15/14 ....... 1,455 1,435(h)
Ford Motor Credit Co.
6.63% 06/16/08 ....... 830 753(h)
FPL Group Capital, Inc. (Series B)
5.55% 02/16/08 ....... 660 666
Gaz Capital S.A.
8.63% 04/28/34 ....... 865 1,094(b)
Genentech, Inc.
5.25% 07/15/35 ....... 235 224
Georgia Power Co.
4.88% 07/15/07 ....... 530 530
Gerdau S.A.
8.88% 12/31/49 ....... 340 351(b)
- ---------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
55
ELFUN INCOME FUND
Schedule of Investments
(dollars in thousands) -- December 31, 2005
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Goldman Sachs Group, Inc.
5.13% 01/15/15 ....... $1,005 $ 993
Goodrich Corp.
7.10% 11/15/27 ....... 385 439
Greater Bay Bancorp
5.25% 03/31/08 ....... 405 405
Grupo Televisa S.A.
6.63% 03/18/25 ....... 490 499
Grupo Transportacion Ferroviaria
Mexicana S.A. de C.V.
9.38% 05/01/12 ....... 270 296(b)
GS Caltex Corp.
5.50% 10/15/15 ....... 495 494(b)
GTE Corp.
6.94% 04/15/28 ....... 400 428
7.51% 04/01/09 ....... 330 350
Halliburton Co.
8.75% 02/15/21 ....... 250 329
Hertz Corp.
8.88% 01/01/14 ....... 430 438(b)
Hopson Development
Holdings Ltd.
8.13% 11/09/12 ....... 420 432(b)
HSBC Bank USA NA
3.88% 09/15/09 ....... 1,040 1,003(h)
HSBC Capital Funding LP
4.61% 12/29/49 ....... 405 382(b,i)
HSBC Capital Funding LP
(Series 1)
9.55% 12/31/49 ....... 585 685(b,i)
HSBC Finance Corp.
6.50% 11/15/08 ....... 715 743
6.75% 05/15/11 ....... 1,210 1,296(h)
IBM Canada Credit
Services Company
3.75% 11/30/07 ....... 275 269(b)
ILFC E-Capital Trust I
5.90% 12/21/65 ....... 500 502(b,i)
ING Groep N.V.
5.78% 12/29/49 ....... 325 330(i)
International Business
Machines Corp.
3.80% 02/01/08 ....... 330 324
International Lease
Finance Corp.
5.00% 04/15/10 ....... 495 492
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
iStar Financial, Inc.
4.88% 01/15/09 ....... $ 165 $ 163
7.00% 03/15/08 ....... 330 341
Jefferson Smurfit Corp. US
7.50% 06/01/13 ....... 365 336
Kansas Gas & Electric
5.65% 03/29/21 ....... 270 265
Kimco Realty Corp. (REIT)
4.82% 06/01/14 ....... 325 313
Kinder Morgan Energy
Partners LP
5.13% 11/15/14 ....... 405 396
Kinder Morgan, Inc.
6.50% 09/01/12 ....... 415 440(h)
Kraft Foods, Inc.
5.25% 06/01/07 ....... 305 306
L-3 Communications Corp.
6.38% 10/15/15 ....... 520 519(b)
Laboratory Corp of
America Holdings
5.63% 12/15/15 ....... 330 334
Lyondell Chemical Co. (Series A)
9.63% 05/01/07 ....... 860 898(h)
MacDermid, Inc.
9.13% 07/15/11 ....... 1,290 1,366(h)
Marsh & McLennan
Companies, Inc.
5.15% 09/15/10 ....... 500 496
Meritage Homes Corp.
6.25% 03/15/15 ....... 1,450 1,320(h)
MGM Mirage
5.88% 02/27/14 ....... 1,495 1,428(h)
Midamerican Energy Holdings Co.
3.50% 05/15/08 ....... 500 483(h)
Mohegan Tribal Gaming
Authority
8.00% 04/01/12 ....... 865 910
Morgan Stanley
4.75% 04/01/14 ....... 490 470
Morgan Stanley (Series F)
4.28% 01/18/08 ....... 2,000 2,002(i)
Morgan Stanley Bank AG for
OAO Gazprom
9.63% 03/01/13 ....... 350 420
Motorola, Inc.
4.61% 11/16/07 ....... 550 547
- ---------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
56
ELFUN INCOME FUND
Schedule of Investments
(dollars in thousands) -- December 31, 2005
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
National Power Corp.
8.63% 08/23/11 ....... $ 325 $ 349(b,i)
Navistar International
Corp. (Series B)
6.25% 03/01/12 ....... 1,495 1,338(h)
NB Capital Trust IV
8.25% 04/15/27 ....... 440 472(h)
Nell AF SARL
8.38% 08/15/15 ....... 400 396(b)
Nelnet, Inc.
5.13% 06/01/10 ....... 600 587
New Cingular Wireless
Services Inc.
8.75% 03/01/31 ....... 570 755(h)
News America, Inc.
7.25% 05/18/18 ....... 300 336
Nexstar Broadcasting
Group, Inc.
7.00% 01/15/14 ....... 970 889
Nextel Communications,0
Inc. (Series D)
7.38% 08/01/15 ....... 825 871(h)
Nordea Bank AB
5.42% 12/29/49 ....... 295 292(b,i)
Norfolk Southern Corp.
6.00% 04/30/08 ....... 40 41
Norfolk Southern Railway Co.
9.75% 06/15/20 ....... 353 499
Northeast Utilities (Series B)
3.30% 06/01/08 ....... 330 316
Northrop Grumman Corp.
4.08% 11/16/06 ....... 610 605
NorthWestern Corp.
5.88% 11/01/14 ....... 340 341
Novelis Inc.
7.50% 02/15/15 ....... 970 905(b)
Ocean Energy, Inc.
4.38% 10/01/07 ....... 195 193
Odyssey Re Holdings Corp.
7.65% 11/01/13 ....... 570 596
Ohio Power Co. (Series E)
6.60% 02/15/33 ....... 165 182
Owens Brockway Glass
Container Inc.
6.75% 12/01/14 ....... 880 854
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Pacific Gas & Electric Co.
6.05% 03/01/34 ....... $ 255 $ 263
PanAmSat Corp.
9.00% 08/15/14 ....... 970 1,016(h)
Pemex Finance Ltd.
9.03% 02/15/11 ....... 710 776
9.69% 08/15/09 ....... 795 857(h)
Pemex Project Funding
Master Trust
6.13% 08/15/08 ....... 380 388
7.38% 12/15/14 ....... 300 333(j)
Pepco Holdings, Inc.
5.04% 06/01/10 ....... 595 598(i)
Potomac Edison Company
5.35% 11/15/14 ....... 245 245(h)
Procter & Gamble - Esop (Series A)
9.36% 01/01/21 ....... 500 643
Puget Energy, Inc.
3.36% 06/01/08 ....... 335 322
5.48% 06/01/35 ....... 330 320
Quest Diagnostics Inc.
6.75% 07/12/06 ....... 325 328
Qwest Corp.
7.63% 06/15/15 ....... 1,200 1,284(b,h)
Rabobank Capital Funding II
5.26% 12/31/49 ....... 735 728(b,i)
Rabobank Capital Funding Trust
5.25% 12/29/49 ....... 340 333(b,i)
RBS Capital Trust I
5.51% 09/29/49 ....... 505 503(i)
Residential Capital Corp.
6.13% 11/21/08 ....... 650 652
Road King Infrastructure
Finance 2004 Ltd.
6.25% 07/15/11 ....... 420 419
Rogers Cable Inc.
5.50% 03/15/14 ....... 800 749
Royal Bank of Scotland Group PLC
7.65% 08/31/49 ....... 530 640(i)
SBC Communications, Inc.
5.10% 09/15/14 ....... 440 430
Simon Property Group LP (REIT)
4.60% 06/15/10 ....... 330 322
4.88% 08/15/10 ....... 520 512
- ---------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
57
ELFUN INCOME FUND
Schedule of Investments
(dollars in thousands) -- December 31, 2005
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Sinclair Broadcast Group, Inc.
8.00% 03/15/12 ....... $ 965 $ 994(h)
Smithfield Foods Inc.
7.63% 02/15/08 ....... 860 888
Sprint Capital Corp.
6.00% 01/15/07 ....... 840 848(h)
8.38% 03/15/12 ....... 230 267
8.75% 03/15/32 ....... 1,120 1,482(h)
St. Paul Travelers Companies, Inc.
5.50% 12/01/15 ....... 330 333
Standard Chartered Bank
Hong Kong Ltd.
4.38% 12/03/14 ....... 310 310(i)
State of Illinois
4.95% 06/01/23 ....... 170 166
5.10% 06/01/33 ....... 330 326
Stewart Enterprises, Inc.
7.75% 02/15/13 ....... 1,050 1,008(b,h)
Sumitomo Mitsui Banking Corp.
5.63% 07/29/49 ....... 235 234(b,i)
Telefonos de Mexico S.A. de C.V.
4.50% 11/19/08 ....... 240 235
5.50% 01/27/15 ....... 250 247
TELUS Corp.
7.50% 06/01/07 ....... 605 625
8.00% 06/01/11 ....... 330 371
Tesoro Corp.
6.25% 11/01/12 ....... 250 251(b)
6.63% 11/01/15 ....... 430 434(b)
The Kroger Company
6.80% 12/15/18 ....... 320 342
Thomson Corp.
5.50% 08/15/35 ....... 325 316
Time Warner Entertainment Co. LP
8.38% 07/15/33 ....... 460 543
Time Warner, Inc.
6.88% 05/01/12 ....... 150 160
TXU Electric Delivery Co.
5.00% 09/01/07 ....... 335 334
6.38% 05/01/12 ....... 120 126
Tyson Foods, Inc.
7.25% 10/01/06 ....... 19 19
UBS Preferred Funding Trust I
8.62% 10/29/49 ....... 335 383(i)
UFJ Bank Ltd.
7.40% 06/15/11 ....... 505 557
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
UFJ Finance Aruba AEC
6.75% 07/15/13 ....... $ 205 $ 223
Union Pacific Corp.
6.65% 01/15/11 ....... 350 375
United Rentals North America, Inc.
7.75% 11/15/13 ....... 1,010 985(h)
Valero Energy Corp.
3.50% 04/01/09 ....... 535 510
Verizon
6.50% 09/15/11 ....... 340 351
Verizon Global Funding Corp.
7.75% 06/15/32 ....... 455 541
Verizon Pennsylvania Inc.
8.75% 08/15/31 ....... 330 405
Viacom, Inc.
5.63% 05/01/07 ....... 200 201
VTB Capital SA for Vneshtorgbank
5.25% 09/21/07 ....... 1,065 1,065(b,i)
Wells Fargo & Co.
5.25% 12/01/07 ....... 180 181
Westar Energy, Inc.
5.15% 01/01/17 ....... 230 224
Westfield Capital
Corporation Limited
4.38% 11/15/10 ....... 485 469(b)
Westlake Chemical Corp.
8.75% 07/15/11 ....... 760 813
Weyerhaeuser Co.
6.13% 03/15/07 ....... 123 125
Wisconsin Electric Power
3.50% 12/01/07 ....... 410 400
XTO Energy, Inc.
7.50% 04/15/12 ....... 425 476
119,465
NON-AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 7.7%
Banc of America Large Loan
4.53% 06/15/18 ....... 1,000 1,000(b,h,i)
Bank of America Alternative
Loan Trust
6.50% 07/25/35 ....... 448 457(h)
Bear Stearns Commercial
Mortgage Securities
6.02% 02/14/31 ....... 750 769(h)
CalSTRS Trust
4.13% 11/20/12 ....... 938 924(b,h)
- ---------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
58
ELFUN INCOME FUND
Schedule of Investments
(dollars in thousands) -- December 31, 2005
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Countrywide Asset-Backed
Certificates
4.66% 07/25/35 ....... $ 1,000 $ 1,000(h,i)
Crusade Global Trust (Class A)
4.69% 09/18/34 ....... 98 98(h,i)
CS First Boston Mortgage
Securities Corp.
1.54% 03/15/35 ....... 13,208 606(b,g,h,i)
5.00% 07/15/37 ....... 8,090 252(b,d,g,h,i)
6.13% 04/15/37 ....... 520 547(h)
CS First Boston Mortgage
Securities Corp. (Class A)
4.51% 07/15/37 ....... 485 474(h)
First Union-Lehman Brothers-
Bank of America
6.56% 11/18/35 ....... 725 744(h)
GMAC Commercial Mortgage
Securities, Inc.
6.42% 05/15/35 ....... 1,115 1,149(h)
6.47% 04/15/34 ....... 300 318(h)
GMAC Commercial Mortgage
Securities, Inc. (Class X)
5.00% 12/10/41 ....... 13,089 357(d,g,h,i)
Granite Mortgages PLC (Class 1)
4.35% 01/20/43 ....... 1,391 1,394(h,i)
Greenwich Capital Commercial
Funding Corp.
5.12% 04/10/37 ....... 626 628(h)
Impac CMB Trust
4.64% 04/25/35 ....... 1,545 1,545(h,i)
Impac CMB Trust (Class A)
4.76% 12/25/33 ....... 298 298(h,i)
JPMorgan Chase Commercial
Mortgage Securities Corp.
1.16% 01/12/39 ....... 7,571 313(b,g,h,i)
6.47% 11/15/35 ....... 457 487(h)
LB-UBS Commercial
Mortgage Trust
4.06% 09/15/27 ....... 1,033 1,004(h,i)
4.51% 12/15/29 ....... 467 453(h)
4.53% 01/15/36 ....... 3,221 228(b,d,g,h)
4.74% 03/15/34 ....... 1,953 30(b,d,g,h,i)
4.92% 01/18/12 ....... 10,589 348(d,g,h,i)
6.23% 03/15/26 ....... 371 384(h)
7.01% 02/15/40 ....... 8,216 177(b,d,g,h,i)
7.33% 03/15/36 ....... 8,489 246(b,d,g,h,i)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
LB-UBS Commercial Mortgage
Trust (Class A)
6.13% 12/15/30 ....... $ 832 $ 876(h)
6.65% 11/15/27 ....... 1,505 1,612(h)
LB-UBS Commercial Mortgage
Trust (Class B)
6.65% 07/14/16 ....... 103 110(b,h)
LB-UBS Commercial Mortgage
Trust (Class X)
7.20% 12/15/39 ....... 7,039 126(b,d,g,h,i)
Master Alternative Loans Trust
5.00% 08/25/18 ....... 483 65(g,h)
6.50% 08/25/34 - 05/25/35 1,909 1,941(h)
Master Alternative Loans
Trust (Class 3)
6.50% 01/25/35 ....... 467 473(h)
Morgan Stanley Dean Witter
Capital I
4.57% 04/15/34 ....... 1,422 34(b,d,g,h,i)
4.81% 10/15/35 ....... 2,179 49(b,d,g,h,i)
Morgan Stanley Dean
Witter Capital I (Class A)
6.39% 10/15/35 ....... 1,000 1,065(h)
6.54% 02/15/31 ....... 675 698(h)
Morgan Stanley Dean Witter
Capital I (Class X)
1.46% 02/01/31 ....... 221 10(b,g,h,i)
Nomura Asset Securities
Corp. (Class A)
6.59% 03/15/30 ....... 1,409 1,456(h)
Puma Finance Ltd. (Class A)
4.31% 10/11/34 ....... 392 392(h,i)
4.68% 03/25/34 ....... 312 312(h,i)
Residential Mortgage Securities
4.38% 08/10/30 ....... 1,884 1,884(b,h,i)
Structured Asset Securities
Corp. (Class X)
2.05% 02/25/28 ....... 781 40(g,i)
Wachovia Bank Commercial
Mortgage Trust
5.22% 07/15/42 ....... 50 50(h,i)
Washington Mutual Inc.
4.71% 01/25/45 ....... 1,565 1,567(h,i)
4.72% 01/25/45 ....... 802 803(h,i)
29,793
- ---------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
59
ELFUN INCOME FUND
Schedule of Investments
(dollars in thousands) -- December 31, 2005
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
SOVEREIGN BONDS -- 1.6%
Government of Bahamas
6.63% 05/15/33 ....... $ 405 $ 469(b,h)
Government of Brazil
8.75% 02/04/25 ....... 425 470
Government of Brazilian
11.00% 08/17/40 ....... 860 1,109(j)
Government of Colombia
6.14% 11/16/15 ....... 270 275(h,i)
Government of Indonesia
7.50% 01/15/16 ....... 430 446(b)
8.50% 10/12/35 ....... 420 457(b)
Government of Peru
7.35% 07/21/25 ....... 1,015 1,000
Government of Turkey
7.38% 02/05/25 ....... 415 428
11.88% 01/15/30 ....... 415 638
Government of Vietnam
6.88% 01/15/16 ....... 420 438(b,h)
Province of Saskatchewan
Canada
8.50% 07/15/22 ....... 170 234
5,964
TOTAL BONDS AND NOTES
(COST $399,971) ........ 393,935
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
PREFERRED STOCK -- 0.2%
- --------------------------------------------------------------------------------
Zurich Regcaps Funding Trust I
(COST $702) ............ 680 684 (b)
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
SECURITIES PURCHASED WITH COLLATERAL FROM
SECURITIES ON LOAN -- 19.9%
- --------------------------------------------------------------------------------
ASSET BACKED -- 10.1%
American Express Credit Account
Master Trust (Class A)
4.49% 12/15/08 ....... $ 600 600(i)
Arran Master Trust (Class A)
4.46% 12/15/10 ....... 2,000 2,000(i)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Capital Auto Receivables Asset
Trust (Class A)
4.43% 04/15/08 ....... $3,000 $ 3,001(i)
Citibank Credit Card
Issuance Trust
4.57% 03/20/09 ....... 1,000 1,000(i)
4.75% 03/07/08 ....... 1,062 1,062(i)
CNH Wholesale Master Note
Trust (Class A)
4.48% 06/15/11 ....... 1,000 1,000(i)
Countrywide Asset-Backed
Certificates
4.47% 11/25/35 ....... 2,981 2,982(i)
4.81% 05/25/33 ....... 82 82(i)
Countrywide Asset-Backed
Certificates (Class 2)
4.68% 06/25/33 ....... 36 36(i)
Countrywide Home Equity Loan
Trust (Class A)
4.61% 05/15/28 ....... 1,515 1,516(i)
First USA Credit Card Master
Trust (Class A)
4.52% 05/17/10 ....... 1,500 1,504(i)
Fremont Home Loan Trust
4.58% 04/25/35 ....... 2,000 2,001(i)
GMAC Mortgage Corp. Loan Trust
4.47% 08/25/35 ....... 2,000 1,998(i)
Gracechurch Card Funding
PLC (Class A)
4.39% 11/16/09 ....... 2,680 2,681(i)
4.40% 02/17/09 ....... 3,000 3,001(i)
GSAA Trust
4.78% 05/25/34 ....... 232 232(h,i)
Long Beach Mortgage Loan Trust
4.50% 09/25/35 ....... 3,421 3,422(i)
4.65% 11/25/34 ....... 390 390(i)
Residential Asset Mortgage
Products, Inc.
4.65% 12/25/33 ....... 2,000 2,003(i)
Residential Asset Securities Corp.
4.63% 01/25/36 ....... 3,000 3,000(i)
Saxon Asset Securities Trust
4.67% 08/25/35 ....... 203 204(i)
Structured Asset Securities Corp.
4.58% 02/25/35 ....... 4,000 4,003(i)
- ---------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
60
ELFUN INCOME FUND
Schedule of Investments
(dollars in thousands) -- December 31, 2005
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Wachovia Asset Securitization
Inc. (Class A)
4.60% 06/25/34 ....... $1,182 $ 1,183(i)
38,901
CORPORATE NOTES -- 3.5%
Countrywide Financial Corp.
4.34% 11/03/06 ....... 2,000 2,000(i)
Countrywide Home Loans, Inc.
4.64% 03/29/06 ....... 2,500 2,500(i)
Marsh & McLennan
Companies Inc.
4.27% 07/13/07 ....... 1,000 997(i)
Toyota Motor Credit Corp.
4.44% 09/15/06 ....... 8,000 8,000(i)
13,497
NON-AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 6.3%
Banc of America Large Loan
4.58% 03/15/08 ....... 3,500 3,499(b,i)
Granite Master Issuer PLC
4.45% 12/20/54 ....... 5,000 5,005(i)
4.58% 12/20/24 ....... 4,000 4,005(i)
GSAMP Trust
4.53% 12/25/35 ....... 1,000 1,000(i)
Holmes Financing PLC (Class A)
4.30% 01/15/08 ....... 2,000 2,000(i)
Impac CMB Trust (Class 1)
4.74% 10/25/34 ....... 1,633 1,633(i)
Interstar Millennium Trust (Class A)
4.69% 03/14/36 ....... 143 143(i)
Lehman Brothers Floating Rate
Commercial Mortgage Trust
4.54% 10/15/17 ....... 1,989 1,989(b,i)
MortgageIT Trust (Class A)
4.68% 08/25/35 ....... 4,510 4,509(i)
National RMBS Trust
4.61% 03/20/34 ....... 318 318(i)
24,101
TOTAL SECURITIES PURCHASED WITH COLLATERAL
FROM SECURITIES ON LOAN
(COST $76,495*) ........ 76,499
TOTAL INVESTMENTS IN SECURITIES
(COST $477,168) ........ 471,118
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 7.1%
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 1.9%
GEI Short Term Investment Fund
4.42% ..................... 7,487,934 $ 7,488 (d,l)
SHORT-TERM SECURITIES PURCHASED WITH COLLATERAL
FROM SECURITIES ON LOAN -- 5.2%
GEI Short Term Investment Fund
4.42% ..................... 20,028,109 20,028 (d,l)
TOTAL SHORT-TERM INVESTMENTS
(COST $27,516) ......... 27,516
TOTAL INVESTMENTS
(COST $504,684) ........ 498,634
LIABILITIES IN EXCESS OF OTHER ASSETS,
NET -- (29.5)% ......... (113,558)
--------
NET ASSETS-- 100.0% ....... $385,076
========
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
The Elfun Income Fund had the following long futures contracts open at December
31, 2005:
NUMBER CURRENT UNREALIZED
EXPIRATION OF NOTIONAL APPRECIATION/
DESCRIPTION DATE CONTRACTS VALUE DEPRECIATION
- --------------------------------------------------------------------------------
U.S. Treasury Notes
5 Yr. Futures March 2006 155 $16,483 $ (16)
------
The Elfun Income Fund had the following short futures contracts open at December
31, 2005:
NUMBER CURRENT UNREALIZED
EXPIRATION OF NOTIONAL APPRECIATION/
DESCRIPTION DATE CONTRACTS VALUE DEPRECIATION
- --------------------------------------------------------------------------------
U.S. Treasury Notes
10 Yr. Futures March 2006 50 $(5,470) $ 8
------
$ (8)
======
* $62,196 of the cost of these securities reflects the investment of cash
collateral from securities on loan at December 31, 2005.
- ---------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
61
Elfun Money Market Fund
- --------------------------------------------------------------------------------
Q&A
THE ELFUN MONEY MARKET FUND IS MANAGED BY DONALD J. DUNCAN. SEE PORTFOLIO
MANAGERS' BIOGRAPHICAL INFORMATION BEGINNING ON PAGE 93.
Q. HOW DID THE ELFUN MONEY MARKET FUND PERFORM COMPARED TO ITS BENCHMARK AND
LIPPER PEER GROUP FOR THE TWELVE-MONTH PERIOD ENDED DECEMBER 31, 2005?
A. For the twelve-month period ended December 31, 2005, the Elfun Money Market
Fund returned 3.00%. The 90-Day U.S. Treasury Bill, the Fund's benchmark,
returned 3.22% and the Fund's Lipper peer group of 353 Money Market funds
returned an average of 2.37% for the same period.
Q. DESCRIBE WHAT HAPPENED IN THE U.S. ECONOMY DURING THE TWELVE-MONTH PERIOD
ENDING DECEMBER 31, 2005.
A. Despite major problems announced by both General Motors and Ford in the
spring, hurricanes hitting the gulf coast in early fall, and continued high
energy prices, the U.S. economy maintained a robust pace of growth in 2005.
Low interest rates and new affordability mortgage-products (e.g.
interest-only, negative amortization) have helped home sales stay at lofty
levels. Consumer health improved which supported spending and business
investment improved as well. Although still moderate by historical
standards, inflation figures picked up slightly during the year, which kept
the Federal Reserve Board steadfast in its goal of removing accommodation by
raising rates. In 2005, the Federal Reserve Board met and raised its target
Fed funds rate 8 times, in increments of 25 bps to 4.25%. As a result of the
Federal Reserve's continued endorsement of higher rates, the yield on the
2-year treasuries increased 133 bps to 4.4%. Due to moderate inflation
expectations and strong foreign buying, the 10-year treasury yields rose
only 17 bps to 4.39%.
Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE?
A. The primary driver of Fund performance relative to the benchmark resulted
from positioning along the short end of the yield curve. The average
maturity of the Fund was kept shorter than the 90-day benchmark to take
advantage of rising short-term rates as a result of the Federal Reserve's
policy during the year. However, as the yield curve flattened, the benchmark
yield rose less than yields in the Fund, which proved detrimental to Fund
performance.
[PHOTO OF DONALD J. DUNCAN OMITTED]
- --------------------------------------------------------------------------------
62
Elfun Money Market Fund
Understanding Your Fund's Expenses
- --------------------------------------------------------------------------------
As a shareholder of the Fund you incur transaction and ongoing expenses.
Transaction expenses including sales charges on purchase payments, reinvested
dividends (or other distributions), and redemption fees directly reduce the
investment return of the Fund. Ongoing costs include portfolio management fees,
distribution and service fees, professional fees, administrative fees and other
Fund expenses. The following example is intended to help you understand your
ongoing costs (in dollars) of investing in the Fund and to compare these costs
with the ongoing costs of investing in other mutual funds.
To illustrate these ongoing costs, we have provided an example and calculated
the expenses paid by investors in each share class of the Fund during the
period. The information in the following table is based on an investment of
$1,000, which is invested at the beginning of the period and held for the entire
six-month period ended December 31, 2005.
ACTUAL EXPENSES
The first section of the table provides information about actual account values
and actual expenses. You may use the information in this section, together with
the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
TJULY 1, 2005 - DECEMBER 31, 2005
- ---------------------------------------------------------------------------------------------------------------
ACCOUNT VALUE AT ACCOUNT VALUE EXPENSES
THE BEGINNING OF AT THE END OF PAID DURING
THE PERIOD ($) THE PERIOD ($) THE PERIOD ($)*
- ---------------------------------------------------------------------------------------------------------------
Actual Fund Return** 1,000.00 1,017.50 1.12
- ---------------------------------------------------------------------------------------------------------------
Hypothetical 5% Return
(2.5% for the period) 1,000.00 1,023.81 1.13
- ---------------------------------------------------------------------------------------------------------------
<FN>
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.22% (FROM
PERIOD JULY 1, 2005 - DECEMBER 31, 2005), MULTIPLIED BY THE AVERAGE ACCOUNT
VALUE OVER THE PERIOD, MULTIPLIED BY 184/365 (TO REFLECT THE SIX-MONTH
PERIOD).
** ACTUAL FUND RETURN FOR SIX-MONTH PERIOD ENDED DECEMBER 31, 2005 WAS: 1.75%.
</FN>
63
Elfun Money Market Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CHANGE IN VALUE OF A $10,000 INVESTMENT
- --------------------------------------------------------------------------------
[LINE GRAPH OMITTED]
Elfun Money Market Fund 90-Day U.S. T-Bill
(ending value $14,614) (ending value $14,330)
12/95 $10,000.00 $10,000.00
12/96 10,523.37 10,515.71
12/97 11,096.57 11,062.53
12/98 11,694.85 11,604.58
12/99 12,292.90 12,158.65
12/00 13,080.08 12,888.82
12/01 13,624.70 13,335.04
12/02 13,885.92 13,552.48
12/03 14,026.63 13,691.66
12/04 14,188.19 13,883.02
12/05 14,614.17 14,329.60
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED DECEMBER 31, 2005
- ----------------------------------------------------
ONE FIVE TEN
YEAR YEAR YEAR
- ----------------------------------------------------
Elfun Money Market Fund 3.00% 2.24% 3.87%
90 Day U.S. T-Bill 3.22% 2.14% 3.66%
- --------------------------------------------------------------------------------
LIPPER PERFORMANCE COMPARISON
MONEY MARKET PEER GROUP
BASED ON AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/05
ONE FIVE TEN
YEAR YEAR YEAR
Fund's rank in peer group: .................... 11 2 1
Number of Funds in peer group: ................ 353 298 186
Peer group average annual total return: ....... 2.37% 1.59% 3.32%
- --------------------------------------------------------------------------------
- --------------------------------------------
FUND YIELD AT DECEMBER 31, 2005
- --------------------------------------------
IBC'S
FUND MONEY FUND*
- --------------------------------------------
7-day current 4.24%+ 3.65%
- --------------------------------------------
7-day effective 4.33% 3.72%
- --------------------------------------------
CURRENT YIELD REPRESENTS INCOME EARNED ON AN
INVESTMENT IN THE ELFUN MONEY MARKET FUND FOR
A SEVEN DAY PERIOD AND THEN ANNUALIZED.
EFFECTIVE YIELD IS CALCULATED SIMILARLY BUT
COULD BE SLIGHTLY HIGHER BECAUSE IT REFLECTS
THE COMPOUNDING EFFECT OF EARNINGS ON
REINVESTED DIVIDENDS.
- --------------------------------------------
INVESTMENT PROFILE
A fund designed for investors who seek a high level of
current income consistent with prudent investment management
and the preservation of capital by investing primarily
in short-term, U.S. dollar denominated money market instruments.
- --------------------------------------------------------------------------------
AN INVESTMENT IN THE ELFUN MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR BY ANY OTHER GOVERNMENT AGENCY.
ALTHOUGH THE FUND SEEKS TO PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER
SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUND.
- --------------------------------------------------------------------------------
+ THE SEVEN DAY CURRENT YIELD, RATHER THAN THE TOTAL RETURN, MORE CLOSELY
REFLECTS THE CURRENT EARNINGS OF THE MONEY MARKET FUND AT DECEMBER 31, 2005.
* IBC'S MONEY FUND REPORT PROVIDES AVERAGE YIELD FOR ALL MAJOR MONEY MARKET
FUNDS.
SEE NOTES TO PERFORMANCE ON PAGE 67 FOR FURTHER INFORMATION, INCLUDING AN
EXPLANATION OF LIPPER PEER CATEGORIES. PAST PERFORMANCE DOES NOT PREDICT FUTURE
PERFORMANCE AND THE GRAPH AND TABLE DO NOT REFLECT THE DEDUCTION OF TAXES.
64
ELFUN MONEY MARKET FUND
Schedule of Investments
(dollars in thousands) -- December 31, 2005
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ELFUN MONEY MARKET FUND
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION AS A % OF THE MARKET VALUE OF $312,542 AS OF DECEMBER 31,
2005.
[PIE CHART OMITTED]
Time Deposit 0.1%
Commercial Paper 32.3%
Certificates of Deposit 23.8%
Corporate Notes 18.2%
U.S. Governments 14.0%
Repurchase Agreements 11.6%
- --------------------------------------------------------------------------------
PRINCIPAL AMORTIZED
AMOUNT COST
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 99.6%+
- --------------------------------------------------------------------------------
U.S. GOVERNMENTS -- 14.0%
U.S. AGENCIES
Federal Home Loan
Mortgage Corp.
3.73% 01/10/06 ........ $18,020 $ 18,003(d)
3.80% 07/12/06 ........ 12,500 12,500
4.01% 01/17/06 ........ 510 509(d)
4.32% 04/25/06 ........ 13,010 12,836(d)
43,848
COMMERCIAL PAPER -- 32.2%
Abbey National PLC
4.50% 01/03/06 ........ 15,310 15,306
Bank of America Corp.
4.19% 01/31/06 ........ 12,560 12,516
Barclays PLC
4.16% 01/09/06 ........ 12,560 12,548
Credit Suisse First Boston
4.21% 01/23/06 ........ 12,310 12,278
- --------------------------------------------------------------------------------
PRINCIPAL AMORTIZED
AMOUNT COST
- --------------------------------------------------------------------------------
Deutsche Bank AG
4.39% 01/03/06 ........ $12,230 $ 12,227
Goldman Sachs Group
4.36% 01/04/06 ........ 12,230 12,226
HBOS PLC
4.16% 02/02/06 ........ 12,540 12,494
Preferred Receivables
Funding Corp.
4.24% 01/24/06 ........ 7,890 7,869
Sheffield Receivables Corp.
4.29% 01/13/06 ........ 3,550 3,545
101,009
REPURCHASE AGREEMENTS -- 11.6%
UBS
4.27% dated 12/30/05,
$36,327 to be received on
01/03/06, collateralized
by $37,040 Government-
Sponsored Enterprise
Bond, 6.25%, maturing
02/01/11 ................ 36,310 36,310
CERTIFICATES OF DEPOSIT -- 23.7%
Calyon
4.17% 01/09/06 ........ 12,570 12,570
Dexia Credit Local S.A.
4.34% 02/02/06 ........ 12,350 12,350
First Tennessee Bank
4.31% 01/31/06 ........ 6,560 6,560
4.35% 01/31/06 ........ 5,810 5,810
Lloyds Bank PLC
4.04% 01/06/06 ........ 12,430 12,430
Toronto-Dominion Bank
4.45% 03/23/06 ........ 12,260 12,260
Wells Fargo Bank
4.34% 01/09/06 ........ 10,550 10,550
4.40% 01/06/06 ........ 1,760 1,760
74,290
CORPORATE NOTES -- 18.1%
American Express Credit Corp.
4.39% 01/05/06 ........ 6,460 6,465(i)
4.51% 09/19/06 ........ 530 531(i)
- ---------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
65
ELFUN MONEY MARKET FUND
Schedule of Investments
(dollars in thousands) -- December 31, 2005
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRINCIPAL AMORTIZED
AMOUNT COST
- --------------------------------------------------------------------------------
Canadian Imperial Bank
4.35% 01/23/06 ........ $12,280 $ 12,280(i)
HSBC Finance Corp.
4.55% 06/22/06 ........ 12,530 12,535(i)
Morgan Stanley
4.30% 02/03/06 ........ 12,560 12,560(i)
Societe Generale
4.33% 10/31/06 ........ 12,560 12,558(i)
56,929
TIME DEPOSIT -- 0.0%*
State Street Corp.
3.95% 01/03/06 ........ 156 156(e)
TOTAL SHORT-TERM INVESTMENTS
(COST $312,542) ......... 312,542
OTHER ASSETS AND LIABILITIES,
NET-- 0.4% .............. 1,099
--------
NET ASSETS-- 100% .......... $313,641
========
- ---------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
66
Notes to Performance (unaudited)
- --------------------------------------------------------------------------------
Information on the preceding performance pages relating to the Funds' one year
total return is audited, all other information, including the portfolio manager
Q&A pages, is unaudited.
Total returns take into account changes in share price and assume reinvestment
of dividends and capital gains distributions, if any. Investment returns and net
asset value on an investment will fluctuate and you may have a gain or loss when
you sell your shares.
A portion of the Elfun Tax-Exempt Income Fund's income may be subject to state,
federal and/or alternative minimum tax. Capital gains, if any, are subject to
capital gains tax.
Shares of the Funds are neither insured nor guaranteed by the U.S. Government,
and their prices will fluctuate with market conditions.
The Standard & Poor's ("S&P") 500 Composite Price Index of stocks (S&P 500),
Morgan Stanley Capital International Europe, Australasia, Far East Index (MSCI
EAFE), Lehman Brothers Aggregate Bond Index (LB Aggregate), and the Lehman
Brothers Municipal Bond Index (LBMI) are unmanaged indices and do not reflect
the actual cost of investing in the instruments that comprise each index.
S&P 500 is an unmanaged, market capitalization-weighted index of stocks of 500
large U.S. companies, which is widely used as a measure of large-cap stock
market performance. MSCI(R) EAFE(R) is a market capitalization-weighted index of
equity securities of companies domiciled in various countries. The Index is
designed to represent the performance of developed stock markets outside the
U.S. and Canada and excludes certain market segments unavailable to U.S. based
investors. LB Aggregate is a market value-weighted index of investment-grade
debt issues, including government, corporate, asset-backed and mortgage-backed
securities, with maturities of one year or more. LBMI is an unmanaged index
comprised of investment-grade, fixed rate securities with maturities of at least
eight years and less than twelve years.
90 Day T-Bill is an unmanaged measure/index of the performance of U.S. Treasury
bills currently available in the marketplace having a remaining maturity of 90
days.
The results shown for the foregoing indices assume the reinvestment of net
dividends or interest.
The peer universe of funds used in our peer ranking calculation is based on the
blend of Lipper peer categories, as shown. This blend is the same as the
category blend used by the Wall Street Journal (except for the Elfun Diversified
Fund for which we use the specific Lipper peer group and the Elfun Money Market
Fund which is not in the Wall Street Journal). The actual number of funds and
numerical rankings in the Lipper and Wall Street Journal universes could differ
since the Wall Street Journal excludes certain funds which do not meet their net
asset or shareholder publication thresholds. Lipper is an independent mutual
fund rating service. A Fund's performance may be compared to or ranked within a
universe of mutual funds with investment objectives and policies similar but not
necessarily identical to the Fund's. Such comparisons or rankings are made on
the basis of several factors, including the Fund's objectives and policies,
management style and strategy, and portfolio composition, and may change over
time if any of those factors change. Lipper is an independent mutual fund rating
service.
67
Notes to Schedules of Investments
- --------------------------------------------------------------------------------
(dollars in thousands) -- December 31, 2005
The views expressed in this document reflect our judgment as of the publication
date and are subject to change at any time without notice. The securities cited
may not represent future holdings and should not be considered as a
recommendation to purchase or sell a particular security. See the prospectus for
complete descriptions of investment objectives, policies, risks and permissible
investments.
(a) Non-income producing security.
(b) Pursuant to Rule 144A of the Securities Act of 1933, as amended, these
Securities may be resold in transactions exempt from registration, normally
to qualified institutional buyers. At December 31, 2005, these securities
amounted to $4,722; $5,908; $12,549; and $41,745 or 1.64%, 2.27%, 0.72% and
10.84% of net assets for the Elfun International Equity Fund, Elfun
Diversified Fund, Elfun Tax-Exempt Income and Elfun Income Fund
respectively. These securities have been determined to be liquid using
procedures established by the Board of Trustees.
(c) Settlement is on a delayed delivery or when-issued basis with final maturity
to be announced (TBA) in the future.
(d) Coupon amount represents effective yield.
(e) State Street Corp. is the parent company of State Street Bank & Trust Co.,
the Fund's custodian and accounting agent.
(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) At December 31, 2005, all or a portion of this security was pledged to cover
collateral requirements for futures, options, forward foreign currency
contracts and/or TBA's.
(i) Variable or floating rate security. The stated rate represents the rate at
December 31, 2005.
(j) All or a portion of the security is out on loan.
(k) Step coupon Bond. Security becomes interest bearing at a future date.
(l) GEAM, the investment adviser of the Fund, also serves as investment adviser
of the Trust.
(m) Escrowed to maturity. Bonds are collateralized by U.S. Treasury securities
which are held in escrow by a trustee and used to pay principal and interest
on such bonds
(n) Prerefunded. Bonds are collateralized by U.S. Treasury securities, which are
held in escrow and are used to pay principal and interest on the tax-exempt
issue and to retire the bonds at the earliest refunding date.
(o) The security is insured by AMBAC, MBIA, FSA or FGIC. The Elfun Tax-Exempt
Fund had insurance concentrations of 5% or greater as of December 31, 2005
(as a percentage of net assets) as follows:
AMBAC 15.1%
MBIA 14.4%
FSA 9.3%
FGIC 5.8%
(p) Sponsored by SSgA Funds Management, Inc., an affiliate of State Street Bank
& Trust Co., the Fund's custodian and accounting agent.
+ Percentages are based on net assets as of December 31, 2005.
* Less than 0.1%.
** Principal amount is less than $500 (dollars not in thousands).
ABBREVIATIONS:
ADR -- American Depositary Receipt
AMBAC -- AMBAC Indemnity Corporation
FGIC -- Financial Guaranty Insurance Corporation
FSA -- Financial Security Assurance
GDR -- Global Depositary Receipt
MBIA -- Municipal Bond Investors Assurance Corporation
Regd. -- Registered
REIT -- Real Estate Investment Trust
REMIC -- Real Estate Mortgage Investment Conduit
SPDR -- Standard & Poor's Depository Receipts
STRIPS -- Separate Trading of Registered Interest and Principal of Security
68
Financial Highlights
- --------------------------------------------------------------------------------
SELECTED DATA BASED ON A UNIT OUTSTANDING DURING THE YEARS INDICATED
ELFUN INTERNATIONAL EQUITY FUND 2005 2004 2003 2002 2001
- ------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ................. $18.57 $16.17 $11.63 $14.82 $18.68
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income ........................... 0.42 0.34 0.24 0.19 0.30
Net realized and unrealized
gains (losses) on investments ................ 3.24 2.39 4.53 (3.16) (3.87)
- ------------------------------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM INVESTMENT OPERATIONS ..... 3.66 2.73 4.77 (2.97) (3.57)
- ------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ........................... 0.41 0.33 0.23 0.19 0.27
Net realized gains .............................. -- -- -- -- 0.02
Return of capital ............................... -- -- -- 0.03 --
- ------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ................................ 0.41 0.33 0.23 0.22 0.29
- ------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR ....................... $21.82 $18.57 $16.17 $11.63 $14.82
==================================================================================================================
TOTAL RETURN(A) .................................... 19.69% 16.90% 41.04% (20.03)% (19.07)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in thousands) .......... $287,527 $239,329 $204,211 $146,832 $194,306
Ratios to average net assets:
Net investment income ........................ 2.16% 2.01% 1.82% 1.33% 1.74%
Net expenses ................................. 0.23% 0.31% 0.42% 0.63% 0.26%
Gross expenses ............................... 0.23% 0.32% 0.42% 0.63% 0.26%
Portfolio turnover rate ......................... 42% 38% 34% 44% 53%
- ------------------------------------------------------------------------------------------------------------------
ELFUN TRUSTS 2005 2004 2003 2002 2001
- ------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ................. $55.13 $55.28 $46.47 $60.19 $67.52
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income ........................... 0.62 0.76 0.47 0.46 0.50
Net realized and unrealized
gains (losses) on investments ................ (0.14) 3.63 10.17 (12.46) (4.53)
- ------------------------------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM INVESTMENT OPERATIONS ..... 0.48 4.39 10.64 (12.00) (4.03)
- ------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ........................... 0.64 0.76 0.46 0.47 0.50
Net realized gains .............................. 4.23 3.78 1.37 1.23 2.80
Return of capital ............................... -- -- -- 0.02 --
- ------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ................................ 4.87 4.54 1.83 1.72 3.30
- ------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR ....................... $50.74 $55.13 $55.28 $46.47 $60.19
==================================================================================================================
TOTAL RETURN(A) .................................... 0.80% 7.94% 22.95% (19.91)% (5.98)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in thousands) ..........$2,273,709 $2,444,850 $2,377,213 $1,986,967 $2,552,776
Ratios to average net assets:
Net investment income ........................ 1.12% 1.34% 0.92% 0.85% 0.79%
Net expenses ................................. 0.11% 0.15% 0.19% 0.17% 0.16%
Gross expenses ............................... 0.11% 0.15% 0.19% 0.17% 0.16%
Portfolio turnover rate ......................... 13% 13% 9% 11% 9%
- ---------
See Notes to Financial Highlights and Notes to Financial Statements.
69
Financial Highlights
- --------------------------------------------------------------------------------
SELECTED DATA BASED ON A UNIT OUTSTANDING DURING THE YEARS INDICATED
ELFUN DIVERSIFIED FUND 2005 2004 2003 2002 2001
- ------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year .................. $19.43 $19.34 $16.25 $18.39 $20.01
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income ............................ 0.44 0.42 0.34 0.43 0.56
Net realized and unrealized
gains (losses) on investments ................. 0.35 1.26 3.11 (2.12) (1.10)
- ------------------------------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM INVESTMENT OPERATIONS ...... 0.79 1.68 3.45 (1.69) (0.54)
- ------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ............................ 0.44 0.42 0.36 0.45 0.57
Net realized gains ............................... 1.04 1.17 0.00* -- 0.51
- ------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ................................. 1.48 1.59 0.36 0.45 1.08
- ------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR ........................ $18.74 $19.43 $19.34 $16.25 $18.39
==================================================================================================================
TOTAL RETURN(A) ..................................... 4.02% 8.70% 21.25% (9.15)% (2.73)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in thousands) ........... $259,930 $256,472 $235,832 $194,980 $212,490
Ratios to average net assets:
Net investment income ......................... 2.21% 2.13% 1.93% 2.42% 2.92%
Net expenses .................................. 0.22% 0.23% 0.27% 0.32% 0.21%
Gross expenses ................................ 0.22% 0.24% 0.27% 0.32% 0.21%
Portfolio turnover rate .......................... 118% 138% 124% 123% 109%
- ------------------------------------------------------------------------------------------------------------------
ELFUN TAX-EXEMPT INCOME FUND 2005 2004 2003 2002 2001
- ------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ................ $11.91 $12.00 $12.05 $11.60 $11.68
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income .......................... 0.54 0.55 0.57 0.59 0.60
Net realized and unrealized
gains (losses) on investments ............... (0.12) (0.03) 0.01 0.51 (0.06)
- ------------------------------------------------------------------------------------------------------------------
TOTAL INCOME FROM INVESTMENT OPERATIONS ........... 0.42 0.52 0.58 1.10 0.54
- ------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income .......................... 0.54 0.55 0.57 0.59 0.60
Net realized gains ............................. 0.04 0.06 0.06 0.06 0.02
- ------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ............................... 0.58 0.61 0.63 0.65 0.62
- ------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR ...................... $11.75 $11.91 $12.00 $12.05 $11.60
==================================================================================================================
TOTAL RETURN(A) ................................... 3.64% 4.49% 4.95% 9.71% 4.70%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in thousands) ......... $1,741,535 $1,697,548 $1,773,090 $1,724,282 $1,590,697
Ratios to average net assets:
Net investment income ....................... 4.56% 4.60% 4.72% 4.99% 5.13%
Net expenses ................................ 0.13% 0.12% 0.12% 0.10% 0.14%
Gross expenses .............................. 0.13% 0.12% 0.12% 0.10% 0.14%
Portfolio turnover rate ........................ 32% 32% 41% 22% 22%
- ---------
See Notes to Financial Highlights and Notes to Financial Statements.
70
Financial Highlights
- --------------------------------------------------------------------------------
SELECTED DATA BASED ON A UNIT OUTSTANDING DURING THE YEARS INDICATED
ELFUN INCOME FUND 2005 2004 2003 2002 2001
- -------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ............... $11.42 $11.60 $11.78 $11.27 $11.10
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income ......................... 0.54 0.46 0.45 0.53 0.68
Net realized and unrealized
gains (losses) on investments .............. (0.25) (0.00)* 0.02 0.60 0.18
- -------------------------------------------------------------------------------------------------------------------
TOTAL INCOME FROM INVESTMENT OPERATIONS .......... 0.29 0.46 0.47 1.13 0.86
- -------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ......................... 0.53 0.46 0.47 0.55 0.69
Net realized gains ............................ 0.04 0.18 0.18 0.07 --
- -------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS .............................. 0.57 0.64 0.65 0.62 0.69
- -------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR ..................... $11.14 $11.42 $11.60 $11.78 $11.27
===================================================================================================================
TOTAL RETURN(A) .................................. 2.58% 4.07% 4.04% 10.24% 7.97%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in thousands) ........ $385,076 $396,359 $413,209 $416,565 $336,747
Ratios to average net assets:
Net investment income ...................... 4.74% 3.99% 3.82% 4.59% 5.94%
Net expenses ............................... 0.21% 0.19% 0.18% 0.24% 0.19%
Gross expenses ............................. 0.21% 0.19% 0.18% 0.24% 0.19%
Portfolio turnover rate ....................... 317% 351% 361% 317% 238%
- -------------------------------------------------------------------------------------------------------------------
ELFUN MONEY MARKET FUND 2005 2004 2003 2002 2001
- -------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ............... $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ......................... 0.03 0.01 0.01 0.02 0.04
- -------------------------------------------------------------------------------------------------------------------
TOTAL INCOME FROM INVESTMENT OPERATIONS .......... 0.03 0.01 0.01 0.02 0.04
- -------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ......................... 0.03 0.01 0.01 0.02 0.04
- -------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS .............................. 0.03 0.01 0.01 0.02 0.04
- -------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR ..................... $1.00 $1.00 $1.00 $1.00 $1.00
===================================================================================================================
TOTAL RETURN(A) .................................. 3.00% 1.15% 1.01% 1.91% 4.16%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in thousands) ........ $313,641 $315,279 $351,686 $378,462 $383,171
Ratios to average net assets:
Net investment income ...................... 3.06% 1.24% 1.05% 1.65% 4.05%
Net expenses ............................... 0.19% 0.18% 0.17% 0.20% 0.17%
Gross expenses ............................. 0.19% 0.18% 0.17% 0.20% 0.17%
<FN>
- ---------
NOTES TO FINANCIAL HIGHLIGHTS
(A) TOTAL RETURNS ARE HISTORICAL AND ASSUME CHANGES IN SHARE PRICE, REINVESTMENT
OF DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS AND ASSUME NO SALES CHARGE.
* LESS THAN 0.01 PER SHARE.
</FN>
- ---------
See Notes to Financial Statements.
71
- -------------------------------------------------------------------------------------------------------------------------
STATEMENTS OF ASSETS
AND LIABILITIES DECEMBER 31, 2005
(AMOUNTS IN THOUSANDS)
- -------------------------------------------------------------------------------------------------------------------------
ELFUN
INTERNATIONAL ELFUN ELFUN
EQUITY FUND TRUSTS DIVERSIFIED FUND
- -------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments in securities, at market* (cost $207,123;
$1,443,380; $237,157; $1,634,629; $477,168
and $0, respectively) .................................... $282,126 $2,233,902 $262,185
Short-term investments (at amortized cost) ................... 50,408 37,176 16,711
Short-term affiliated investments (at amortized cost) ........ 3,938 39,172 2,571
Restricted cash** ............................................ 127 -- --
Foreign currency (cost $763; $0; $29; $0; $0;
and $0, respectively) .................................... 759 -- 29
Receivable for investments sold .............................. -- -- 112
Income receivables ........................................... 310 2,722 819
Receivable for fund shares sold .............................. 560 214 16
Variation margin receivable .................................. -- -- 17
- -------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS .............................................. 338,228 2,313,186 282,460
- -------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Distribution payable to unitholders .......................... -- 75 --
Payable upon return of securities loaned ..................... 50,408 37,176 16,711
Payable for investments purchased ............................ -- -- 5,563
Payable for fund units redeemed .............................. 126 1,409 70
Payable to GEAM .............................................. 142 817 186
Variation margin payable ..................................... 25 -- --
- -------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES ......................................... 50,701 39,477 22,530
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS ...................................................... $287,527 $2,273,709 $259,930
=========================================================================================================================
NET ASSETS CONSIST OF:
Capital paid in .............................................. 226,508 1,481,374 235,496
Undistributed (distribution in excess of)
net investment income .................................... 126 -- --
Accumulated net realized gain (loss) ......................... (14,149) 1,813 (649)
Net unrealized appreciation/(depreciation) on:
Investments .............................................. 75,002 790,522 25,028
Futures .................................................. 52 -- 57
Foreign currency related transactions .................... (12) -- (2)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS ...................................................... $287,527 $2,273,709 $259,930
- -------------------------------------------------------------------------------------------------------------------------
Units outstanding (Par value $10; $10; $10; $10; $10;
and $1, respectively; unlimited shares authorized) ........... 13,177 44,813 13,867
Net asset value, offering and redemption price per unit ......... $ 21.82 $ 50.74 $ 18.74
- -----------------------------------------------------------------------------------------------------------------------
ELFUN
TAX-EXEMPT ELFUN ELFUN
INCOME FUND INCOME FUND MONEY MARKET FUND
- -----------------------------------------------------------------------------------------------------------------------
ASSETS
Investments in securities, at market* (cost $207,123;
$1,443,380; $237,157; $1,634,629; $477,168
and $0, respectively) .................................... $1,720,523 $471,118 $ --
Short-term investments (at amortized cost) ................... -- -- 312,542
Short-term affiliated investments (at amortized cost) ........ 14,485 27,516 --
Restricted cash** ............................................ -- -- --
Foreign currency (cost $763; $0; $29; $0; $0;
and $0, respectively) .................................... -- -- --
Receivable for investments sold .............................. -- 6,779 --
Income receivables ........................................... 23,297 3,671 458
Receivable for fund shares sold .............................. 160 170 1,587
Variation margin receivable .................................. -- 1 --
- -----------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS .............................................. 1,758,465 509,255 314,587
- -----------------------------------------------------------------------------------------------------------------------
LIABILITIES
Distribution payable to unitholders .......................... 1,931 514 68
Payable upon return of securities loaned ..................... -- 82,224 --
Payable for investments purchased ............................ 13,711 40,966 --
Payable for fund units redeemed .............................. 451 148 565
Payable to GEAM .............................................. 837 327 313
Variation margin payable ..................................... -- -- --
- -----------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES ......................................... 16,930 124,179 946
- -----------------------------------------------------------------------------------------------------------------------
NET ASSETS ...................................................... $1,741,535 $385,076 $313,641
=======================================================================================================================
NET ASSETS CONSIST OF:
Capital paid in .............................................. 1,655,820 393,769 313,780
Undistributed (distribution in excess of)
net investment income .................................... -- 663 (139)
Accumulated net realized gain (loss) ......................... (180) (3,296) --
Net unrealized appreciation/(depreciation) on:
Investments .............................................. 85,895 (6,052) --
Futures .................................................. -- (8) --
Foreign currency related transactions .................... -- -- --
- -----------------------------------------------------------------------------------------------------------------------
NET ASSETS ...................................................... $1,741,535 $385,076 $313,641
- -----------------------------------------------------------------------------------------------------------------------
Units outstanding (Par value $10; $10; $10; $10; $10;
and $1, respectively; unlimited shares authorized) ........... 148,248 34,570 313,793
Net asset value, offering and redemption price per unit ......... $ 11.75 $ 11.14 $ 1.00
<FN>
* Includes $47,824; $36,172; $15,993 and $80,050 of securities on loan in the
Elfun International Equity Fund, Elfun Trusts, Elfun Diversified Fund and
Elfun Income Fund, respectively.
** Cash on deposit with a broker as collateral for international futures
contracts.
</FN>
- ---------
See Notes to Financial Statements.
72 & 73
- -------------------------------------------------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2005
(AMOUNTS IN THOUSANDS)
- -------------------------------------------------------------------------------------------------------------------------
ELFUN
INTERNATIONAL ELFUN ELFUN
EQUITY FUND TRUSTS DIVERSIFIED FUND
- -------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividends ................................................ $ 6,349 $ 26,111 $ 3,147
Interest* ................................................ 210 70 2,920
Interest from affliated investments** .................... 129 2,724 256
Less: Foreign taxes withheld ............................. (661) (158) (131)
- -------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME ................................................ 6,027 28,747 6,192
- -------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Advisory and administration expenses ..................... 148 1,267 188
Transfer agent expenses .................................. 145 613 112
Unitholder servicing agent expenses ...................... 108 456 84
Custody and accounting expenses .......................... 128 93 136
Professional fees ........................................ 14 133 14
Registration, filing, printing and
miscellaneous expenses ................................ 35 125 33
- -------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES .......................................... 578 2,687 567
Less: Fee reimbursement from transfer
agent (See note 2) .................................... (5) (20) (4)
- -------------------------------------------------------------------------------------------------------------------------
NET EXPENSES ............................................ 573 2,667 563
- -------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME ....................................... 5,454 26,080 5,629
=========================================================================================================================
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments .............................................. 23,552 178,622 13,818
Futures .................................................. 373 -- (50)
Written options .......................................... -- -- 9
Foreign currency related transactions .................... (135) -- (29)
INCREASE (DECREASE) IN UNREALIZED APPRECIATION/
(DEPRECIATION) ON:
Investments .............................................. 18,088 (187,638) (9,190)
Futures .................................................. (2) -- 38
Written options .......................................... -- -- (9)
Foreign currency related transactions .................... (21) -- (9)
- -------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments .......................................... 41,855 (9,016) 4,578
- -------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ......................................... $47,309 $ 17,064 $10,207
=========================================================================================================================
- -----------------------------------------------------------------------------------------------------------------------
ELFUN
TAX-EXEMPT ELFUN ELFUN
INCOME FUND INCOME FUND MONEY MARKET FUND
- -----------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividends ................................................ $ -- $ 41 $ --
Interest* ................................................ 80,203 18,522 10,131
Interest from affliated investments** .................... 799 836 --
Less: Foreign taxes withheld ............................. -- -- --
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INCOME ................................................ 81,002 19,399 10,131
- -----------------------------------------------------------------------------------------------------------------------
EXPENSES:
Advisory and administration expenses ..................... 1,518 374 286
Transfer agent expenses .................................. 244 143 115
Unitholder servicing agent expenses ...................... 180 106 86
Custody and accounting expenses .......................... 74 148 44
Professional fees ........................................ 97 22 18
Registration, filing, printing and
miscellaneous expenses ................................ 81 46 40
- -----------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES .......................................... 2,194 839 589
Less: Fee reimbursement from transfer
agent (See note 2) .................................... (8) (5) (4)
- -----------------------------------------------------------------------------------------------------------------------
NET EXPENSES ............................................ 2,186 834 585
- -----------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME ....................................... 78,816 18,565 9,546
=======================================================================================================================
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments .............................................. 4,813 (2,136) --
Futures .................................................. -- (514) --
Written options .......................................... -- 54 --
Foreign currency related transactions .................... -- (58) --
INCREASE (DECREASE) IN UNREALIZED APPRECIATION/
(DEPRECIATION) ON:
Investments .............................................. (23,019) (5,845) --
Futures .................................................. -- (136) --
Written options .......................................... -- (53) --
Foreign currency related transactions .................... -- (34) --
- -----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments .......................................... (18,206) (8,722) --
- -----------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ......................................... $ 60,610 $ 9,843 $ 9,546
=======================================================================================================================
<FN>
* Income attributable to security lending activity, net of rebate expenses,
for the Elfun International Equity Fund, Elfun Trusts, Elfun Diversified
Fund and Elfun Income Fund was $198, $72, $49 and $305, respectively.
** Income attributable to security lending activity, net of rebate expenses,
for the Elfun Income Fund was $136.
</FN>
- ---------
See Notes to Financial Statements.
74 & 75
- -------------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES
IN NET ASSETS FOR THE YEARS ENDED
DECEMBER 31, 2005 AND 2004 (AMOUNTS IN THOUSANDS)
- -------------------------------------------------------------------------------------------------------------------
ELFUN
INTERNATIONAL ELFUN
EQUITY FUND TRUSTS
- -------------------------------------------------------------------------------------------------------------------
2005 2004 2005 2004
- -------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income .......................... $ 5,454 $ 4,266 $ 26,080 $ 31,804
Net realized gain (loss) on investments, futures,
written options, and foreign currency
related transactions ........................ 23,790 14,412 178,622 158,149
Net increase (decrease) in unrealized appreciation/
(depreciation) on investments, futures and
foreign currency related transactions ....... 18,065 15,741 (187,638) (6,503)
- -------------------------------------------------------------------------------------------------------------------
Net increase from operations ................... 47,309 34,419 17,064 183,450
- -------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO UNITHOLDERS FROM:
Net investment income .......................... (5,292) (4,209) (26,967) (31,602)
Net realized gains ............................. -- -- (176,836) (157,754)
- -------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ............................... (5,292) (4,209) (203,803) (189,356)
- -------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations
and distributions .............................. 42,017 30,210 (186,739) (5,906)
- -------------------------------------------------------------------------------------------------------------------
UNIT TRANSACTIONS:
Proceeds from sale of units .................... 19,837 18,418 45,696 76,407
Value of distributions reinvested .............. 4,685 3,724 151,295 141,334
Cost of units redeemed ......................... (18,341) (17,234) (181,393) (144,198)
- -------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from unit transactions .... 6,181 4,908 15,598 73,543
- -------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ........... 48,198 35,118 (171,141) 67,637
NET ASSETS
Beginning of year ................................. 239,329 204,211 2,444,850 2,377,213
- -------------------------------------------------------------------------------------------------------------------
END OF YEAR ....................................... $287,527 $239,329 $2,273,709 $2,444,850
===================================================================================================================
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF)
NET INVESTMENT INCOME, END OF YEAR ................ $ 126 $ 64 $ -- $ 519
- -------------------------------------------------------------------------------------------------------------------
CHANGES IN FUND UNITS
- -------------------------------------------------------------------------------------------------------------------
Units sold by subscription ........................... 1,024 1,094 852 1,370
Issued for distribution reinvested ................... 213 202 2,958 2,564
Units redeemed ....................................... (948) (1,038) (3,346) (2,589)
- -------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund units ................ 289 258 464 1,345
===================================================================================================================
- ---------------------------------------------------------------------------------------------------------------------
ELFUN
ELFUN TAX-EXEMPT
DIVERSIFIED FUND INCOME FUND
- ---------------------------------------------------------------------------------------------------------------------
2005 2004 2005 2004
- ---------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income .......................... $ 5,629 $ 5,160 $ 78,816 $ 79,319
Net realized gain (loss) on investments, futures,
written options, and foreign currency
related transactions ........................ 13,748 14,290 4,813 10,107
Net increase (decrease) in unrealized appreciation/
(depreciation) on investments, futures and
foreign currency related transactions ....... (9,170) 1,132 (23,019) (15,093)
- ---------------------------------------------------------------------------------------------------------------------
Net increase from operations ................... 10,207 20,582 60,610 74,333
- ---------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO UNITHOLDERS FROM:
Net investment income .......................... (5,633) (5,174) (78,816) (79,336)
Net realized gains ............................. (13,505) (14,306) (6,489) (9,053)
- ---------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ............................... (19,138) (19,480) (85,305) (88,389)
- ---------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations
and distributions .............................. (8,931) 1,102 (24,695) (14,056)
- ---------------------------------------------------------------------------------------------------------------------
UNIT TRANSACTIONS:
Proceeds from sale of units .................... 16,585 22,668 100,437 83,826
Value of distributions reinvested .............. 16,440 16,737 58,169 61,252
Cost of units redeemed ......................... (20,636) (19,867) (89,924) (206,564)
- ---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from unit transactions .... 12,389 19,538 68,682 (61,486)
- ---------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ........... 3,458 20,640 43,987 (75,542)
NET ASSETS
Beginning of year ................................. 256,472 235,832 1,697,548 1,773,090
- ---------------------------------------------------------------------------------------------------------------------
END OF YEAR ....................................... $259,930 $256,472 $1,741,535 $1,697,548
=====================================================================================================================
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF)
NET INVESTMENT INCOME, END OF YEAR ................ $ -- $ 2 $ -- $ --
- ---------------------------------------------------------------------------------------------------------------------
CHANGES IN FUND UNITS
- ---------------------------------------------------------------------------------------------------------------------
Units sold by subscription ........................... 860 1,154 8,446 7,027
Issued for distribution reinvested ................... 872 863 4,904 5,149
Units redeemed ....................................... (1,064) (1,011) (7,578) (17,468)
- ---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund units ................ 668 1,006 5,772 (5,292)
=====================================================================================================================
- --------------------------------------------------------------------------------------------------------------
ELFUN ELFUN
INCOME FUND MONEY MARKET FUND
- --------------------------------------------------------------------------------------------------------------
2005 2004 2005 2004
- --------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income .......................... $ 18,565 $ 15,937 $ 9,546 $ 4,055
Net realized gain (loss) on investments, futures,
written options, and foreign currency
related transactions ........................ (2,654) 5,912 -- --
Net increase (decrease) in unrealized appreciation/
(depreciation) on investments, futures and
foreign currency related transactions ....... (6,068) (6,018) -- --
- --------------------------------------------------------------------------------------------------------------
Net increase from operations ................... 9,843 15,831 9,546 4,055
- --------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO UNITHOLDERS FROM:
Net investment income .......................... (18,463) (16,105) (9,227) (3,735)
Net realized gains ............................. (1,242) (6,071) -- --
- --------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ............................... (19,705) (22,176) (9,227) (3,735)
- --------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations
and distributions .............................. (9,862) (6,345) 319 320
- --------------------------------------------------------------------------------------------------------------
UNIT TRANSACTIONS:
Proceeds from sale of units .................... 21,282 27,634 134,457 120,758
Value of distributions reinvested .............. 13,718 15,724 8,079 3,230
Cost of units redeemed ......................... (36,421) (53,863) (144,493) (160,715)
- --------------------------------------------------------------------------------------------------------------
Net increase (decrease) from unit transactions .... (1,421) (10,505) (1,957) (36,727)
- --------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ........... (11,283) (16,850) (1,638) (36,407)
NET ASSETS
Beginning of year ................................. 396,359 413,209 315,279 351,686
- --------------------------------------------------------------------------------------------------------------
END OF YEAR ....................................... $385,076 $396,359 $313,641 $ 315,279
==============================================================================================================
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF)
NET INVESTMENT INCOME, END OF YEAR ................ $ 663 $ 619 $ (139) $ (458)
- --------------------------------------------------------------------------------------------------------------
CHANGES IN FUND UNITS
- --------------------------------------------------------------------------------------------------------------
Units sold by subscription ........................... 1,880 2,373 134,457 120,758
Issued for distribution reinvested ................... 1,216 1,366 8,079 3,230
Units redeemed ....................................... (3,226) (4,655) (144,493) (160,715)
- --------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund units ................ (130) (916) (1,957) (36,727)
==============================================================================================================
- ---------
See Notes to Financial Statements.
76 & 77
December 31, 2005
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. ORGANIZATION OF THE FUNDS
The Elfun Funds (each a "Fund" and collectively the "Funds") are registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as
open-end management investment companies. The Funds operate as Employees'
Securities Companies (as defined in the 1940 Act) and as such are exempt from
certain provisions of the 1940 Act.
GE Asset Management Incorporated ("GEAM"), the Funds' investment adviser, is a
wholly owned subsidiary of General
Electric Company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions at the date of the financial statements. Actual results may differ
from those estimates.
The following summarizes the significant accounting policies of the Funds:
SECURITY VALUATION AND TRANSACTIONS
Securities for which exchange 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. Securities listed on the NASDAQ will be valued at the NASDAQ's official
close price. Certain fixed income securities are valued by a dealer or by a
pricing service based upon a matrix system, which considers market transactions
as well as dealer supplied valuations. Short-term investments maturing within
sixty days are valued at amortized cost. If quotations are not readily available
for a portfolio security, or if it is believed that a quotation or other market
price for a portfolio security does not represent its fair value, the security
may be valued using procedures approved by the Funds' Board of Trustees that are
designed to establish its "fair value". These procedures require that the fair
value of a security be established by the valuation committee. The fair value
committee follows different protocols for different types of investments and
circumstances.
Foreign securities may be valued with the assistance of an independent fair
value pricing service in circumstances where it is believed that they have been
or would be materially affected by events occuring after the close of the
portfolio security's primary market and before the close of regular trading on
the NYSE. This independent fair value pricing service uses a computerized system
to appraise affected securities and portfolios taking into consideration various
factors and the fair value of such securities may be something other than the
last available quotation or other market price. GE Asset Management may also
separately monitor portfolio securities and, consistent with the Funds' fair
value procedures, apply a different value to a porfolio security than would be
applied had it been priced using market quotations or by an independent fair
value pricing service.
Determining the fair value of securities involves the application of both
subjective and objective considerations. Security values may differ depending on
the methodology used to determine their values, and may differ from the last
quoted sale or closing price. No assurance can be given that use of these fair
value procedures will always better represent the price at which a Fund could
sell the affected portfolio security.
Security transactions are accounted for as of the trade date. Realized gains and
losses on investments sold are recorded on the basis of identified cost for both
financial statement and federal tax purposes.
REPURCHASE AGREEMENTS
Each of the Funds may enter into repurchase agreements. The Funds' custodian
takes possession of the collateral pledged for investments in repurchase
agreements on behalf of the Funds. The Funds value the underlying collateral
daily on a mark-to-market basis to determine that the value, including accrued
interest, is at least equal to 102% of the repurchase price. In the event the
seller defaults and the value of the security declines, or if the seller enters
an insolvency proceeding, realization of the collateral by the Funds may be
delayed or limited.
78
December 31, 2005
Notes to Financial Statements
- --------------------------------------------------------------------------------
SECURITY LENDING
Each of the Funds may loan securities to brokers, dealers, and financial
institutions determined by GEAM to be creditworthy, subject to certain
limitations. The Funds continue to receive the interest and dividends on the
loaned securities during the term of the loan. The loans of securities are
secured by collateral in the form of cash or other liquid assets, which are
segregated and maintained with the custodian in an amount at least equal to 102%
of the current market value of the loaned securities. During the term of the
loan, the Funds will record any gain or loss in the market value of its loaned
securities and of securities in which cash collateral is invested. A Fund will
also earn interest, net of any rebate, from securities in which cash collateral
is invested. In the event the counterparty (borrower) does not meet its
contracted obligation to return the securities, the Funds may be exposed to the
risk of loss of reacquiring the loaned securities at prevailing market prices
using the proceeds of the sale of the collateral.
FOREIGN CURRENCY
Accounting records of the Funds are maintained in U.S. dollars. Investment
securities and other assets and liabilities denominated in foreign currency are
translated to U.S. dollars at the prevailing rates of exchange at year end.
Purchases and sales of securities, income receipts and expense payments
denominated in foreign currencies are translated into U.S. dollars at the
prevailing exchange rate on the respective dates of such transactions.
The Funds do not isolate the portion of the results of operations resulting from
changes in foreign exchange rates from the fluctuations arising from changes in
the market prices of securities during the year. Such fluctuations are included
in net realized or unrealized gain or loss from investments. Net realized
exchange gains or losses on foreign currency transactions represent net gains or
losses on sales and maturities of foreign currency contracts, disposition of
foreign currencies, the difference between the amount of net investment income
and withholding taxes accrued and the U.S. dollar amount actually received and
paid, and gains or losses between the trade and settlement date on purchases and
sales of securities. Net unrealized foreign exchange gains and losses arising
from changes in the value of other assets and liabilities as a result of changes
in foreign exchange rates are included as increases or decreases in unrealized
appreciation/depreciation on foreign currency related transactions.
FUTURES CONTRACTS
Certain Funds may invest in futures contracts subject to certain limitations.
The Funds may invest in futures contracts to manage their exposure to the stock
and bond markets and fluctuations in currency values. Buying futures tends to
increase a Fund's exposure to the underlying instrument while selling futures
tends to decrease a Fund's exposure to the underlying instrument, or hedge other
Fund investments. A Fund will not enter into a transaction involving futures for
speculative purposes. The Fund's risks in using these contracts include changes
in the value of the underlying instruments, non-performance of the
counterparties under the contracts' terms and changes in the liquidity of the
secondary market for the contracts. Futures contracts are valued at the
settlement price established each day by the board of trade or exchange on which
they principally trade.
Upon entering into a financial futures contract, the Funds are required to
pledge to the broker an amount of cash and/or other assets equal to a certain
percentage of the contract amount, known as initial margin deposit. Subsequent
payments, known as variation margin, are made or received by the Funds each day,
depending on the daily fluctuation in the fair value of the underlying security.
The Funds record an unrealized gain or loss equal to the daily variation margin.
Should market conditions move unexpectedly, the Fund may not achieve the
anticipated benefits of the futures contracts and may incur a loss. The Fund
recognizes a realized gain or loss on the expiration or closing of a futures
contract.
OPTIONS
Certain Funds may purchase and write options, subject to certain limitations.
The Funds may invest in options contracts to manage their exposure to the stock
and bond
79
December 31, 2005
Notes to Financial Statements
- --------------------------------------------------------------------------------
markets and fluctuations in foreign currency values. Writing puts and buying
calls tend to increase a Fund's exposure to the underlying instrument while
buying puts and writing calls tend to decrease a Fund's exposure to the
underlying instrument, or economically hedge other Fund investments. A Fund will
not enter into a transaction involving options for speculative purposes. The
Fund's risks in using these contracts include changes in the value of the
underlying instruments, non-performance of the counterparties under the
contracts' terms and changes in the liquidity of the secondary market for the
contracts. Options are valued at the last sale price, or if no sales occurred on
that day, at the last quoted bid price.
When a Fund writes an option, the amount of the premium received is recorded as
a liability and is subsequently adjusted to the current fair value of the option
written. Premiums received from writing options that expire unexercised are
treated by the Funds on the expiration date as realized gains from investments.
The difference between the premium and the amount paid on effecting a closing
purchase transaction, including brokerage commissions, is also treated as a
realized gain, or if the premium is less than the amount paid for the closing
purchase, as a realized loss. When an option is exercised, the proceeds from the
sale of the underlying security or the cost basis of the securities purchased is
adjusted by the original premium received or paid.
SWAP CONTRACTS
As part of their investment strategies, certain Funds may invest in swap
agreements which are agreements to exchange the return generated by one
instrument for the return generated by another instrument. Swaps are marked to
market daily based upon the underlying security or index. Payments received or
made are recorded as realized gain or loss in the Statement of Operations.
Entering into swap agreements involves, to varying degrees, elements of credit
and market risk in excess of the amounts recognized on the Statement of Assets
and Liabilities. Such risks involve the possibility that there will be no liquid
market for these agreements, that the counterparty to the agreements may default
on its obligation to perform and that there may be unfavorable changes in the
value of the index or securities underlying the agreement. Notional principal
amounts are used to express the extent of involvement in these transactions, but
the amounts potentially subject to credit risk are much smaller.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS
Each of the Funds may purchase or sell securities on a when-issued and forward
commitment basis. These transactions are arrangements in which the Funds
purchase and sell securities with payment and delivery scheduled a month or more
after entering into the transactions. The price of the underlying securities and
the date when these securities will be delivered and paid for are fixed at the
time the transaction is negotiated. Losses may arise due to changes in the
market value of the underlying securities or if the counterparty does not
perform under the contract. In connection with such purchases, the Funds
maintain cash or liquid assets in an amount equal to purchase commitments for
such underlying securities until settlement date and for sales commitments the
Funds maintain equivalent deliverable securities as "cover" for the transaction.
Unsettled commitments are valued at the current market value of the underlying
security. Daily fluctuations in the value of such contracts are recorded as
unrealized gains or losses. The Funds will not enter into such commitments for
the purpose of investment leverage.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
Certain Funds may enter into forward foreign currency exchange contracts to
facilitate transactions in foreign denominated securities and to manage the
Fund's currency exposure. Forward foreign currency exchange contracts are valued
at the mean between the bid and the offered forward rates as last quoted by a
recognized dealer. The aggregate principal amounts of the contracts are not
recorded in the Fund's financial statements. Such amounts would appear under the
caption forward foreign currency contracts in the Schedule of Investments.
Fluctuations in the value of the contracts are recorded in the Statement of
Assets and Liabilities as an asset (or lia-
80
December 31, 2005
Notes to Financial Statements
- --------------------------------------------------------------------------------
bility) and in the Statement of Operations as unrealized appreciation
(depreciation) until the contracts are closed, when they are recorded as
realized gains or losses on foreign currency related transactions. The Fund's
risks in using these contracts include changes in the value of foreign currency
or the possibility that the counterparties do not perform under the contract's
terms. When a Fund enters into a forward foreign currency exchange contract, it
is required to segregate cash or liquid securities with its custodian in an
amount equal to the value of the Fund's total assets committed to the
consummation of the forward contract. If the value of the segregated securities
declines, additional cash or securities is segregated so that the value of the
account will equal the amount of the Fund's commitment with respect to the
contract.
INVESTMENTS IN FOREIGN MARKETS
Investments in foreign markets may involve special risks and considerations not
typically associated with investing in the United States. These risks include
revaluation of currencies, high rates of inflation, repatriation on income and
capital, and adverse political and economic developments. Moreover, securities
issued in these markets may be less liquid, subject to government ownership
controls, tariffs and taxes, subject to delays in settlements, and their prices
may be more volatile.
The Funds may be subject to capital gains and repatriation taxes imposed by
certain countries in which they invest. Such taxes are generally based on income
and/or capital gains earned or repatriated. Taxes are accrued based upon net
investment income, net realized gains and net unrealized appreciation as income
and/or capital gains are earned.
INCOME TAXES
(DOLLARS IN THOUSANDS)
The Funds intend to comply with all sections of the Internal Revenue Code
applicable to regulated investment companies, including the distribution of
substantially all of their taxable net investment income, tax-exempt income, and
net realized capital gains to their shareholders. Therefore, no provision for
federal income tax has been made. Each Fund is treated as a separate taxpayer
for federal income tax purposes.
At December 31, 2005, information on the tax components of capital is as
follows:
NET TAX
COST OF GROSS TAX GROSS TAX APPRECIATION/
INVESTMENTS UNREALIZED UNREALIZED (DEPRECIATION)
FOR TAX PURPOSES APPRECIATION DEPRECIATION ON INVESTMENTS
- ----------------------------------------------------------------------------------------------------------------
Elfun International
Equity Fund $ 262,246 $ 77,049 $ (2,823) $ 74,226
Elfun Trusts 1,519,728 810,925 (20,403) 790,522
Elfun Diversified Fund 257,134 31,953 (7,620) 24,333
Elfun Tax-Exempt
Income Fund 1,649,113 86,412 (517) 85,895
Elfun Income Fund 504,960 2,330 (8,656) (6,326)
Elfun Money
Market Fund 312,542 -- -- --
81
December 31, 2005
Notes to Financial Statements
- --------------------------------------------------------------------------------
NET TAX
APPRECIATION/ UNDISTRIBUTED UNDISTRIBUTED POST
(DEPRECIATION) ON INCOME/ LONG-TERM GAINS/ OCTOBER
DERIVATIVES, CURRENCY (ACCUMULATED (ACCUMULATED LOSSES
AND OTHER NET ASSETS ORDINARY LOSS) CAPITAL LOSS) (SEE DETAIL BELOW)
- -------------------------------------------------------------------------------------------------------------------
Elfun International Equity Fund $40 $ 126 $(13,373) $ --
Elfun Trusts -- -- 1,813 --
Elfun Diversified Fund (1) -- 102 --
Elfun Tax-Exempt Income Fund -- -- -- (180)
Elfun Income Fund -- 700 (1,896) (1,171)
Elfun Money Market Fund -- (139) -- --
As of December 31, 2005, the following Funds have capital loss carryovers as
indicated below. The capital loss carryover is available to offset future
realized capital gains to the extent provided in the Internal Revenue Code and
regulations thereunder. To the extent that 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.
During the year ended December 31, 2005, the Elfun International Equity Fund
utilized approximately $23,215 of capital loss carryovers.
FUND AMOUNT EXPIRES
- --------------------------------------------------------------------------------
Elfun International Equity Fund $13,373 12/31/11
Elfun Income Fund 1,896 12/31/13
Any net capital and currency losses incurred after October 31, within each
Fund's tax year, are deemed to arise on the first day of the Fund's next tax
year if the Fund so elects to defer such losses.
The Funds elected to defer losses incurred after October 31, 2005 as follows:
CAPITAL CURRENCY
- --------------------------------------------------------------------------------
Elfun Tax-Exempt Income Fund $ 180 $--
Elfun Income Fund 1,133 38
The tax composition of distributions paid (other than return of capital
distributions for the year) during the year ended December 31, 2005 was as
follows:
EXEMPT ORDINARY LONG-TERM
INTEREST INCOME CAPITAL GAINS TOTAL
- ------------------------------------------------------------------------------------------------------------------
Elfun International Equity Fund $ -- $ 5,292 $ -- $ 5,292
Elfun Trusts -- 28,266 175,537 203,803
Elfun Diversified Fund -- 5,708 13,430 19,138
Elfun Tax-Exempt Income Fund 76,561 4,138 4,606 85,305
Elfun Income Fund -- 19,525 180 19,705
Elfun Money Market Fund -- 9,227 -- 9,227
82
December 31, 2005
Notes to Financial Statements
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
(DOLLARS IN THOUSANDS)
Elfun Tax-Exempt Income Fund, Elfun Income Fund and Elfun Money Market Fund
declare net investment income dividends daily and pay them monthly. All other
Funds declare and pay dividends from net investment income annually. All Funds
declare and pay net realized capital gains distributions annually. The character
of income and gains to be distributed is determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These differences include (but are not limited to) treatment of realized gains
and losses on foreign currency contracts. Reclassifications are made to the
Funds' capital accounts to reflect income and gains available for distribution
(or available capital loss carryovers) under income tax regulations. These
reclassifications have no impact on net investment income, realized gains or
losses, or net asset value of the Funds. The calculation of net investment
income per share in the Financial Highlights table excludes these adjustments.
The reclassifications for the year ended December 31, 2005 were as follows:
UNDISTRIBUTED
NET INVESTMENT ACCUMULATED PAID IN
INCOME NET REALIZED LOSS CAPITAL
- ------------------------------------------------------------------------------------------
Elfun International Equity Fund $(100) $ 136 $(36)
Elfun Trusts 368 (368) --
Elfun Diversified Fund 2 (2) --
Elfun Tax-Exempt Income Fund -- -- --
Elfun Income Fund (58) 58 --
Elfun Money Market Fund -- -- --
INVESTMENT INCOME
Corporate actions (including cash dividends) are recorded on the ex-dividend
date, net of applicable withholding taxes, except for certain foreign corporate
actions, which are recorded as soon after ex-dividend date as such information
becomes available. Interest income is recorded on the accrual basis, including
accounting of discounts and amortizing of premiums on bonds to call or maturity
date, whichever is shorter, using the effective yield method. Withholding taxes
on foreign dividends have been provided for in accordance with the Funds'
understanding of the applicable country's tax rules and rates.
EXPENSES
Expenses of the Funds which are directly identifiable to a specific Fund are
allocated to that Fund. Expenses which are not directly identifiable to a
specific Fund are allocated in such a manner as deemed equitable, taking into
consideration the nature and type of expense and the relative sizes of the
Funds. All expenses of the Funds are paid by GEAM and reimbursed by the Funds.
TRANSFER AGENT CONVERSION EXPENSES
On September 18, 2004, the Funds changed its Transfer Agent from Boston
Financial Data Services (BFDS) to PFPC Inc. (PFPC). PFPC has agreed to pay for
certain conversion expenses incurred by GEAM for the entire GEAM Mutual Fund
complex. For the year ended December 31, 2005, PFPC paid $46,348 (total dollars
not in thousands) of those conversion expenses related to the Funds.
83
December 31, 2005
Notes to Financial Statements
- --------------------------------------------------------------------------------
3. LINE OF CREDIT
The Funds share a revolving credit facility of up to $25 million with a number
of their affiliates. The credit facility is with its custodian bank, State
Street Bank and Trust Company. The revolving credit facility requires the
payment of a commitment fee equal to 0.09% per annum on the daily unused portion
of the credit facility, payable quarterly. The portion borne by the Funds
generally is borne proportionally based upon net assets. Generally, borrowings
under the credit facility would accrue interest at the Federal Funds Rate plus
50 bps and is borne by the borrowing Fund. The maximum amount allowed to be
borrowed by any one Fund is the lesser of its prospectus limitation, 20% of its
net assets, or $25 million. The credit facility was not utilized by the Funds
during the period ended December 31, 2005.
4. AMOUNTS PAID TO AFFILIATES
ADVISORY AND ADMINISTRATION EXPENSES
During 2005, the Funds incurred expenses for the cost of services rendered by
GEAM as investment adviser and for services GEAM rendered as unitholder
servicing agent. These expenses are included as advisory and administration
expenses and unitholder servicing agent expenses in the Statements of
Operations. The Trustees received no compensation as Trustees for the Elfun
Funds.
GENPACT (formerly General Electric Capital International Services*) performs
certain accounting and certain administration services not provided by GEAM. For
the year ending December 31, 2005, $31,143 (dollars in thousands) was charged to
the Funds and was allocated pro rata across Funds based upon relative net
assets. Administrative services not performed by GEAM or GENPACT were provided
by an unaffiliated service provider.
* AS OF SEPTEMBER 28, 2005 THE NAME WAS CHANGED FROM GENERAL ELECTRIC CAPITAL
INTERNATIONAL SERVICES TO GENPACT.
5. INVESTMENT TRANSACTIONS
(DOLLARS IN THOUSANDS)
PURCHASES AND SALES OF SECURITIES
The cost of purchases and the proceeds from sales of investments, other than
short-term securities and options, for the year ended December 31, 2005, were as
follows:
PURCHASES SALES
- --------------------------------------------------------------------------------
Elfun International Equity Fund $ 110,157 $ 102,831
Elfun Trusts 296,641 445,550
Elfun Diversified Fund 308,096 299,579
Elfun Tax-Exempt Income Fund 620,248 538,715
Elfun Income Fund 1,566,469 1,487,865
84
December 31, 2005
Notes to Financial Statements
- --------------------------------------------------------------------------------
OPTIONS
During the year ended December 31, 2005, the following option contracts were
written:
ELFUN DIVERSIFIED FUND ELFUN INCOME FUND
---------------------------- -----------------------------
NUMBER NUMBER
OF CONTRACTS PREMIUM OF CONTRACTS PREMIUM
- -----------------------------------------------------------------------------------------------------------------
Balance as of December 31, 2004 56 $ 22 344 $ 133
Written 330,208 45 2,041,267 274
Closed and Expired (330,264) (67) (2,041,611) (407)
- -----------------------------------------------------------------------------------------------------------------
Balance as of December 31, 2005 -- -- -- --
- -----------------------------------------------------------------------------------------------------------------
SECURITY LENDING
At December 31, 2005, the following Funds participated in securities lending:
LOANED SECURITIES
AT MARKET VALUE CASH
(INCLUDING ACCRUED INTEREST) COLLATERAL*
- --------------------------------------------------------------------------------------------------
Elfun International Equity Fund $47,824 $50,260
Elfun Trusts 36,172 37,031
Elfun Diversified Fund 15,993 16,624
Elfun Income Fund 80,506 82,224
<FN>
* COLLATERAL OF $50,408; $37,176; AND $16,711 FOR ELFUN INTERNATIONAL EQUITY
FUND, ELFUN TRUSTS, AND ELFUN DIVERSIFIED FUND DECREASED BY $148, $145, AND
$87, RESPECTIVELY, ON JANUARY 3, 2006 TO REFLECT THE DECEMBER 30, 2005
CHANGE IN VALUE OF SECURITIES ON LOAN.
</FN>
85
Report of Independent Registered Public Accounting Firm
- --------------------------------------------------------------------------------
[LOGO OMITTED]
KPMG
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES
ELFUN FUNDS:
We have audited the accompanying statements of assets and liabilities of the
Elfun International Equity Fund, Elfun Trusts, Elfun Diversified Fund, Elfun
Tax-Exempt Income Fund, Elfun Income Fund, and Elfun Money Market Fund,
including the schedules of investments, as of December 31, 2005, 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 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 the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform our 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, 2005 by correspondence with the custodians
and brokers, or by other appropriate auditing procedures where replies from
brokers were not received. 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 Elfun
International Equity Fund, Elfun Trusts, Elfun Diversified Fund, Elfun
Tax-Exempt Income Fund, Elfun Income Fund, and Elfun Money Market Fund, as of
December 31, 2005, and the results of their operations, the changes in their net
assets and their financial highlights for each of the years described above, in
conformity with U.S generally accepted accounting principles.
/S/KPMG LLP
Boston, Massachusetts
February 15, 2006
86
Tax Information, unaudited
- --------------------------------------------------------------------------------
For the year ended December 31, 2005
The following funds intend to make an election under Internal Revenue Code
Section 853. The election will allow shareholders to treat their attributable
share of foreign taxes paid by the Funds to be paid by them directly. For the
fiscal year ended December 31, 2005, the total amount of income received by the
Funds from sources within foreign countries and possessions of the United States
and the total amount of taxes paid by the Funds follows:
TOTAL FOREIGN TOTAL FOREIGN
FUND SOURCE INCOME TAXES PAID
-------------------------------------------------------------------------
Elfun International Equity Fund $6,326,971 $550,972
Of the dividends paid from net investment income by the Elfun Tax-Exempt Fund
for the calendar year ended December 31, 2005, 97.21% represent exempt interest
dividends for Federal income tax purposes.
During the year ended December 31, 2005, the following Funds paid to
shareholders of record on December 27, 2005, the following long-term capital
gain dividends reported on Form 1099 for 2005:
FUND PER SHARE AMOUNT
-------------------------------------------------------------------------
Elfun Trusts $4.19671
Elfun Diversified Fund 1.03510
Elfun Tax-Exempt Income Fund 0.03126
Elfun Income Fund 0.00525
For the year ended December 31, 2005, certain dividends paid by the fund may be
subject to maximum income tax rate of 15% as provided for by the Jobs and Growth
Tax Relief Reconciliation Act of 2003. Of the distributions paid from net
investment income during the fiscal year, the following represent the amounts
that may be considered qualified dividend income:
FUND QUALIFIED DIVIDEND INCOME
-------------------------------------------------------------------------
Elfun International Equity Fund $ 3,412,993
Elfun Trusts 20,433,404
Elfun Diversified Fund 2,487,764
For corporate shareholders, the following represents the amounts that may be
eligible for the dividends received deduction:
FUND DIVIDENDS RECEIVED DEDUCTION
-------------------------------------------------------------------------
Elfun Trusts 63.45%
Elfun Diversified Fund 28.97%
Please consult a tax advisor if you have any questions about Federal or State
income tax laws or on how to prepare your tax returns. If you have specific
questions about your Fund account, please consult your investment representative
or call 1-800-242-0134.
87
Advisory Agreement Renewal, unaudited
- --------------------------------------------------------------------------------
The Board of Trustees of each Fund considered and unanimously approved the
continuance of the investment advisory agreements with GE Asset Management
Incorporated ("GEAM") at a meeting held on April 4, 2005.
In considering whether to approve the Funds' investment advisory agreements, the
Board members considered and discussed a substantial amount of information and
analysis provided, at the Board's request, by GEAM personnel. In advance of the
meeting, and in response to their request, the Board members received memoranda
prepared by GEAM personnel, which set forth detailed information, including
substantial exhibits and other materials, related to GEAM's business and the
services it provides to each Fund. The Board members also considered detailed
information regarding performance and expenses of other investment companies
with similar investment objectives and sizes, which was prepared by an
independent third-party provider, Lipper Inc. ("Lipper"). The Board members
reviewed the fees charged by GEAM for other mutual funds and investment products
that employ the same investment strategies as the Funds. The Board members also
reviewed materials discussing the legal standards for the consideration of the
proposed continuances. Before approving the Funds' advisory agreements, the
Board members reviewed and discussed the proposed continuance of the agreements
with GEAM personnel, including representatives from the legal and compliance
departments, senior members of each relevant investment group (e.g., equity,
fixed income) and research personnel. During the meeting, the Board members also
had an opportunity to hear presentations by these representatives, and posed
questions and engaged in substantive discussions with them concerning the Funds'
operations and the investment process employed for each Fund.
In reaching their determinations relating to continuance of the agreements with
respect to each Fund, the Board members considered all factors they believed
relevant, including the factors discussed below. In their deliberations, the
Board members did not identify any particular information that was all-important
or controlling, and each Board member attributed different weights to the
various factors. The Board members evaluated this information, and all other
information available to them, for each Fund separately, and their
determinations were made separately in respect of each Fund. In particular, the
Board members focused on the following with respect to each Fund:
THE NATURE, EXTENT AND QUALITY OF SERVICES PROVIDED.
The Board members reviewed the services provided by GEAM and concurred that GEAM
provides high quality advisory and administrative services to the Funds. In
connection with their consideration of GEAM's services, the Board members
focused on the favorable attributes of GEAM, including (i) an investment
philosophy oriented toward long-term performance; (ii) effective processes used
for selecting investments, selecting brokers and with respect to Fund
administration, controllership and compliance activities; (iii) highly skilled
professionals, including analysts, research professionals and portfolio managers
with a depth of experience involving the types of Funds they oversee; (iv)
access to significant technological resources from which the Funds may benefit;
and (v) a favorable history and reputation. The Board members discussed the
personnel changes made, and proposed to be made, by GEAM, and that GEAM would be
expending significant sums to enhance services, including improvements to its
information technology capabilities. The Board members noted that the Funds
represent a proportionately smaller amount of the overall assets managed by
GEAM, but benefit from a full array of services and resources provided by GEAM.
In particular, the Board members discussed that the Funds benefit from a large
staff of research analysts employed by GEAM. In light of the foregoing, the
Board members concluded that the services provided by GEAM were of a high
quality and had benefited the Funds.
INVESTMENT PERFORMANCE OF THE FUNDS.
The Board members considered the investment performance of the Funds for various
periods. The Board members reviewed detailed comparisons of the performance of
the Funds with the relevant securities indexes and peer groupings of mutual
funds prepared by Lipper with respect to various periods. The Board members also
engaged in discussions regarding the investment process for each Fund, the
portfolio management and supporting research personnel, the investment style and
approach employed for each Fund, the likely market cycles for the investment
style, and, in some instances, relative underperformance in certain periods in
light of GEAM's commit-
88
Advisory Agreement Renewal, unaudited
- --------------------------------------------------------------------------------
ment to long-term satisfactory performance with respect to the Fund's investment
objective and investment approach. The Board members concluded that the Funds'
performance was acceptable over the relevant periods, particularly from a
longer-term perspective, which the Board members believed was most relevant.
COST OF THE SERVICES TO BE PROVIDED TO THE FUNDS.
The Board members considered the cost of the services provided by GEAM. The
Board members noted that, under the investment advisory agreement, GEAM is
reimbursed for its reasonable costs incurred in providing the services
contemplated by the agreement and for the reasonable costs incurred by its
affiliate, GE Investment Distributors, Inc. ("GEID"), in providing services
specified in its agreement with the Funds as unitholder servicing agent. The
Board members considered that the charges resulting from this arrangement
involve all of the expenses incurred by GEAM and GEID with respect to the
management and operations of the Funds, including, without limitation, indirect
allocable overhead costs and the direct and indirect costs of GEAM and GEID
personnel providing investment management and other services to the Funds. The
Board members also noted that these charges may not include any element of
profit. The Board members reviewed the information they had requested from GEAM
personnel concerning the underlying assumptions and methods of cost allocation
used by GEAM in allocating its costs and those of the other Fund service
providers, including GEID. The Board members also discussed with GEAM personnel
the basis for their belief that the methods of allocation used were reasonable
and consistent across GEAM's business. Based on their review, the Board members
concluded that they were satisfied that the assumptions and methods used in cost
allocation and the level of expenses incurred by the Funds were not unreasonable
or excessive.
THE EXTENT TO WHICH ECONOMIES OF SCALE WOULD BE REALIZED FOR THE BENEFIT OF FUND
SHAREHOLDERS AS THE FUNDS GROW.
The Board members considered the extent to which economies of scale would be
realized for the benefit of Fund investors as the Funds grow. The Board members
recognized the significant benefits to the Funds resulting from their
arrangement with GEAM, which causes them to bear only the reasonable costs
incurred by GEAM and GEID, without any element of profit, for the substantial
services they provide to the Funds. The Board members also recognized the
benefits to the Funds of being able to leverage a favorable cost structure
achieved with respect to the Funds' other operating expenses as a result of
GEAM's large overall base of assets under management and its vendor management
practices. The Board members reviewed and concurred with information provided by
GEAM personnel, which showed how significant Fund asset growth can reduce a
Fund's operating expenses.
COMPARISON OF SERVICES TO BE RENDERED AND COSTS TO BE INCURRED.
The Board members discussed the services provided to the Funds by GEAM, and the
costs incurred by the Funds for those services. The Board members reviewed
information concerning the Funds' expense ratios, and comparative information
with respect to similar products. They discussed that, in all cases, the Funds
enjoy expense levels within or below the group of lowest cost funds in each peer
group comparison. In light of this information, the Board members determined
that the level of expenses incurred was reasonable in relation to the services
provided to the Funds.
FALL-OUT BENEFITS.
The Board members considered other actual and potential financial benefits to
GEAM, including, where applicable, soft dollar commission benefits generated
through Fund portfolio transactions. The Board members noted, however, that the
Funds benefit from the vast array of resources available through GEAM, and that
the Funds represent a proportionately smaller amount of the overall assets
managed by GEAM.
CONCLUSION.
No single factor was determinative to the Board members' decision. Based on
their discussion and such other matters as were deemed relevant, the Board
members concluded that the proposed level of cost reimbursement to GEAM and
projected total expense ratios for the Funds are reasonable in relation to the
services provided. In view of these facts, the Board members concluded that the
renewal of each advisory agreement was in the best interests of the Funds and
their shareholders.
89
Additional Information, unaudited
- --------------------------------------------------------------------------------
INFORMATION ABOUT TRUSTEES AND EXECUTIVE OFFICERS: The business and affairs of
the Funds are managed under the direction of the Funds' Board of Trustees.
Information pertaining to the Trustees and officers of the Company is set forth
below.
INTERESTED TRUSTEES AND EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
JOHN H. MYERS
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 60
POSITION(S) HELD WITH FUND Trustee
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected
and qualified - 19 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS President, Chief Executive Officer
and Director of GEAM since 1997, Director of GEAM since 1988, and Executive Vice
President of GEAM - Fixed Income and Alternative Investments from 1988-1996;
President, Chief Executive Officer and Director of GEIC from 1997-2000 (when
GEIC was merged into GEAM), Director of GEIC from 1987-2000, Executive Vice
President - Fixed Income and Alternative Investments of GEIC from 1986-1996.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE 8
OTHER DIRECTORSHIPS HELD BY TRUSTEE Hilton Hotels Corporation since 2000; Laffer
Investments since 2000; The Pebble Beach Company since 1999; GE Capital
Services, Inc. since 1997; Building with Books since 2000; The Pension Managers
Advisory Committee of the New York Stock Exchange since 1997; The Warburg Pincus
Advisory Board since 1995. He is also a Trustee of Wagner College. Trustee of GE
Savings & Security Funds and General Electric Pension Trust since 1986.
- --------------------------------------------------------------------------------
DAVID B. CARLSON
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 48
POSITION(S) HELD WITH FUND Trustee
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 2 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, Domestic
Equities of GEAM since September 2003, Senior Vice President, Domestic Equities
of GEAM from 1989 to 2003.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE 8
OTHER DIRECTORSHIPS HELD BY TRUSTEE Trustee of GE Savings & Security Funds and
General Electric Pension Trust since 1991.
- --------------------------------------------------------------------------------
MICHAEL J. COSGROVE
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 56
POSITION(S) HELD WITH FUND Trustee
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 18 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS President, GE Asset Management
Services division ("GEAMS") of GE Financial Assurance Holdings, Inc., an
indirect wholly-owned subsidiary of General Electric Company ("GE"), since
February 1997; Vice President, GE Capital Corporation, an indirect wholly-owned
subsidiary of GE, since December 1999; Executive Vice President - Mutual Funds
of GEAM, a wholly-owned subsidiary of GE that is registered as an investment
adviser under the Investment Advisers Act of 1940, as amended, since March 1993;
Director of GEAM since 1988
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE 48
OTHER DIRECTORSHIPS HELD BY TRUSTEE Chairman of the Board and President of GE
Funds since 1993 and GE Institutional Funds, GE LifeStyle Funds and GE
Investments Funds, Inc. since 1997; Trustee of GE Savings & Security Funds and
General Electric Pension Trust since 1988; Trustee of Fordham University since
2003 and Marymount College from 1994 through 2002.
- --------------------------------------------------------------------------------
ALAN M. LEWIS
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 59
POSITION(S) HELD WITH FUND Trustee and Secretary
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 18 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General
Counsel and Secretary of GEAM since 1987
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE 48
OTHER DIRECTORSHIPS HELD BY TRUSTEE Trustee and Executive Vice President of GE
Funds since 1993 and GE Institutional Funds and GE LifeStyle Funds since 1997;
Director of GE Investments Funds, Inc. since 2001; Trustee of GE Savings &
Security Funds and General Electric Pension Trust since 1987.
90
Additional Information, unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RALPH R. LAYMAN
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 50
POSITION(S) HELD WITH FUND Trustee
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected
and qualified - 14 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President -
International Equity Investments of GEAM since 1993; Executive Vice President -
International Equity Investments of GEIC from 1993-2000 (when GEIC was merged
into GEAM); Senior Vice President - International Equity Investments of GEAM and
GEIC from 1991 until 1993; Executive Vice President, Partner and Portfolio
Manager of Northern Capital Management from 1989-1991; and prior thereto, Vice
President and Portfolio Manager of Templeton Investment Counsel.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE 8
OTHER DIRECTORSHIPS HELD BY TRUSTEE Trustee of GE Savings & Security Funds and
General Electric Pension Trust since 1993
- --------------------------------------------------------------------------------
ROBERT A. MACDOUGALL*
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 57
POSITION(S) HELD WITH FUND Trustee
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 10 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President - Fixed
Income and Director of GEAM since 1997; Executive Vice President - Fixed Income
and Director of GEIC from 1997-2000 (when GEIC was merged into GEAM); Senior
Vice President - Taxable Fixed Income of GEAM and GEIC from 1990-1996.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE 8
OTHER DIRECTORSHIPS HELD BY TRUSTEE Trustee of GE Savings & Security Funds and
General Electric Pension Trust since 1997
- --------------------------------------------------------------------------------
DONALD W. TOREY
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 49
POSITION(S) HELD WITH FUND Trustee
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected
and qualified - 12 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Director of GEAM since 1993;
Executive Vice President - Alternative Investments of GEAM since 1997; Director
of GEIC from 1993-2000 (when GEIC was merged into GEAM); Executive Vice
President - Alternative Investments of GEIC from 1997-2000; Executive Vice
President - Finance and Administration of GEAM and GEIC from 1993 to 1997;
Manager - Mergers and Acquisitions Finance for GE from 1989-1993; Vice President
- - Private Placements of GEIC from 1988-1989.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE 8
OTHER DIRECTORSHIPS HELD BY TRUSTEE Trustee of GE Savings & Security Funds and
General Electric Pension Trust since 1993
- --------------------------------------------------------------------------------
JOHN J. WALKER
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 52
POSITION(S) HELD WITH FUND Trustee
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 6 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Chief Financial Officer of GEAM
since 1999; Chief Financial Officer of GEIC from 1999-2000 (when GEIC was merged
into GEAM); Chief Financial Officer of GE Capital - Global Consumer Finance from
1996-1999; Chief Financial Officer of GE Capital Commercial Finance from 1992 to
1996; Finance Director of GE Capital - TIFC from 1988-1992.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE 8
OTHER DIRECTORSHIPS HELD BY TRUSTEE Trustee of GE Savings & Security Funds and
General Electric Pension Trust since 1999
* EFFECTIVE JANUARY 31, 2006, ROBERT A. MACDOUGALL RETIRED FROM ALL POSITIONS
HELD WITH THE TRUST AND WITH GEAM.
91
Additional Information, unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
JUDITH A. STUDER
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 53
POSITION(S) HELD WITH FUND Trustee
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 2 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Senior Vice President -
International Equities of GEAM since 1995; Senior Vice President - Domestic
Equities of GEAM from 1991-1995; Vice President of Domestic Equities from
1987-1991.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE 8
OTHER DIRECTORSHIPS HELD BY TRUSTEE Trustee of S&S Funds and General Electric
Pension Trust since 2004
- --------------------------------------------------------------------------------
The Statement of Additional Information for the Funds includes additional
information about the Trustees and Officers and is available, without charge,
upon request by calling 1-800-242-0134.
92
Elfun Funds' Investment Team
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER BIOGRAPHIES
The following sets forth biographical information for those individuals who are
primarily responsible for managing the specified Fund's investments. The
portfolio managers may change from time to time.
CHRISTOPHER D. BROWN is a Senior Vice President of GE Asset Management. He has
served on the portfolio management team for the ELFUN DIVERSIFIED FUND since
September 2003. Mr. Brown joined GE Asset Management in 1985 as a Manager of
Funds Accounting. He became a U.S. Equity Analyst in 1989, a Vice President and
portfolio manager in 1992, and a Senior Vice President in 1996.
DAVID B. CARLSON is a Director and Executive Vice President of GE Asset
Management. He manages the overall U.S. equity investments for GE Asset
Management. Mr. Carlson is portfolio manager for ELFUN TRUSTS and has served in
this capacity since 1988. Mr. Carlson joined GE Asset Management in 1982 as a
Securities Analyst for investment Operations. He became a Vice President for
Mutual Fund Portfolios in 1987, a Senior Vice President in 1989 and a Director
and Executive Vice President in 2003.
MICHAEL J. CAUFIELD is a Senior Vice President of GE Asset Management. He is
portfolio manager of the ELFUN TAX-EXEMPT INCOME FUND and has served in that
capacity since October 2000. Mr. Caufield joined GE Asset Management in 1987 as
Vice President, Manager of Fixed Income Research & Analysis and was promoted to
Senior Vice President in 1994.
ALFREDO CHANG is a Vice President of GE Asset Management. He has been a
portfolio manager of the ELFUN INCOME FUND since March 2005. Mr. Chang joined GE
Asset Management in July 2002 as a portfolio manager and was made responsible
for the emerging market fixed income effort at GE Asset Management in November
2003. Mr. Chang was an assistant portfolio manager with Genworth Financial,
formerly known as GE Financial Assurance, an affiliate of GE Asset Management,
from August 2000 until he joined GE Asset Management in July 2002. Prior to
that, he oversaw offshore investment portfolios at AIG Global Investment
Corporation.
PAUL M. COLONNA is a Senior Vice President of GE Asset Management. Since January
2005, he has led the team of portfolio managers for the ELFUN INCOME FUND and
has been responsible for the fixed income portion of the ELFUN DIVERSIFIED FUND.
Prior to joining GE Asset Management in February 2000, Mr. Colonna was a senior
portfolio manager with the Federal Home Loan Mortgage Corporation, overseeing
the Mortgage Investment Group.
MARK DELANEY is a Vice President of GE Asset Management. He has been a member of
the portfolio management team for the ELFUN INCOME FUND since joining GE Asset
Management in April 2002. Prior to joining GE Asset Management, Mr. Delaney was
the Assistant Investment Officer for the Public Employees Retirement System of
Ohio.
DONALD J. DUNCAN is a Vice President of GE Asset Management. He is a portfolio
manager of the ELFUN MONEY MARKET FUND and has served on the Fund's portfolio
management team since the Fund's inception. Mr. Duncan joined GE Asset
Management in 1988 in Trade Support and held several positions including Mutual
Fund Controller. He was appointed Investment Manager Short Term Securities in
1990 and Vice President - Money Markets in 2002.
ERIC H. GOULD is a Vice President of GE Asset Management. He has been a
portfolio manager for the ELFUN INCOME FUND since joining GE Asset Management in
September 2000. Prior to joining GE Asset Management, Mr. Gould was a Senior
Asset Manager for Metropolitan Life Insurance Company.
WILLIAM M. HEALEY is a Senior Vice President of GE Asset Management. He has
served on the portfolio management teams for the ELFUN INCOME FUND since joining
GE Asset Management in 1996. Prior to joining GE Asset Management, Mr. Healey
spent over 10 years in the Fixed Income Group at MetLife.
93
Elfun Funds' Investment Team
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER BIOGRAPHIES (CONTINUED)
BRIAN HOPKINSON is a Senior Vice President of GE Asset Management. He has been a
portfolio manager for the ELFUN INTERNATIONAL EQUITY FUND since joining GE Asset
Management in October 1996. Prior to joining GE Asset Management, Mr.
Hopkinson worked for Fiduciary Trust International in both London and New York.
RALPH R. LAYMAN is a Director and Executive Vice President of GE Asset
Management. He manages the overall international equity investments for GE Asset
Management. Mr. Layman has led the team of portfolio managers for the ELFUN
INTERNATIONAL EQUITY FUND since 1991 and has managed foreign investments for the
ELFUN DIVERSIFIED FUND since September 1997. Mr. Layman joined GE Asset
Management in 1991 as Senior Vice President for International Investments and
became and Executive Vice President in 1992.
JONATHAN L. PASSMORE is a Senior Vice President of GE Asset Management. He has
served as a portfolio manager of the ELFUN INTERNATIONAL EQUITY FUND since
January 2002. Prior to joining GE Asset Management in January 2001, he was with
Merrill Lynch for six years, most recently as Director, International Equity.
VITA MARIE PIKE is a Vice President of GE Asset Management. She has served on
the portfolio management team for the ELFUN INCOME FUND since March 2005. Prior
to joining GE Asset Management in January 2001, she was with Alliance Capital
for over nine years serving in a number of different capacities including
portfolio manager.
MICHAEL J. SOLECKI is a Senior Vice President of GE Asset Management. He has
served as a portfolio manager of the ELFUN INTERNATIONAL EQUITY FUND since
August 1999. He joined GE Asset Management in 1990 as an International Equity
Analyst. He became a Vice President for International Equity Portfolios in 1996
and Senior Vice President in 2000.
JUDITH A. STUDER is a Director and Senior Vice President of GE Asset Management.
She has served as a portfolio manager of the ELFUN INTERNATIONAL EQUITY FUND
since May 1995. Ms. Studer joined GE Asset Management in August 1984. She became
Senior Vice President - Domestic Equities in 1991 and Senior Vice President -
International Equities in 1995.
94
Elfun Funds' Investment Team
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS
ELFUN INTERNATIONAL EQUITY FUND
Team led by Ralph R. Layman
ELFUN TRUSTS
David B. Carlson
ELFUN DIVERSIFIED FUND
Christopher D. Brown
Ralph R. Layman
Paul M. Colonna
ELFUN TAX-EXEMPT INCOME FUND
Michael Caufield
ELFUN INCOME FUND
Team led by
Paul M. Colonna
ELFUN MONEY MARKET FUND
Donald J. Duncan
INVESTMENT ADVISER
GE Asset Management Incorporated
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
KPMG LLP
CUSTODIAN
State Street Bank & Trust Company
UNITHOLDER SERVICING AGENT
Address all inquiries to:
GE Funds
c/o PFPC, Inc
P.O. Box 9838
Providence, RI 02940
OFFICERS OF THE INVESTMENT ADVISER
John H. Myers, TRUSTEE, PRESIDENT,
AND CHIEF EXECUTIVE OFFICER
GE ASSET MANAGEMENT INCORPORATED
David B. Carlson, TRUSTEE, EVP, DOMESTIC EQUITIES
Michael J. Cosgrove, TRUSTEE, EVP, CHIEF COMMERCIAL OFFICER
Ralph R. Layman, TRUSTEE, EVP, INTERNATIONAL EQUITIES
Alan M. Lewis, TRUSTEE, EVP, GENERAL COUNSEL AND SECRETARY
Robert A. MacDougall, TRUSTEE, EVP, FIXED INCOME (RETIRED FROM ALL POSITIONS AS
OF JANUARY 31, 2006)
Donald W. Torey, TRUSTEE, EVP, ALTERNATIVE INVESTMENTS AND REAL ESTATE
John J. Walker, TRUSTEE, EVP, CHIEF FINANCIAL OFFICER
Judith A. Studer, TRUSTEE, SENIOR VICE PRESIDENT, INTERNATIONAL EQUITIES
Kathryn D. Karlic, TRUSTEE, EVP, FIXED INCOME (AS OF FEBRUARY 1, 2006)
95
Shareholder Services
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NEW ONLINE SERVICE
Your Elfun Mutual Fund accounts can now be accessed on the Internet at
WWW.ELFUN.ORG.
Here are some of the benefits of our online service:
o View account balance and transaction history o View and order tax forms
o Make exchanges o View quarterly statements
o Redeem shares o Change address
o Purchase shares o Re-order money market checks
Many more features will be added to the web site in the future for your
convenience.
NEW EXTENDED TELEPHONE SERVICE
Our Representatives at the Customer Service Center are available Monday to
Friday from 8:30 AM to 8:00 PM Eastern Standard Time. Call toll-free,
1-800-242-0134, for assistance.
AUTOMATED VOICE RESPONSE SYSTEM
You can also access your account anytime during the day, 7 days a week by
dialing 1-800-242-0134. Simply follow the menu to obtain information or make
certain transactions.
CONTACT US BY MAIL
If you'd like to write to us, address your inquiries regarding your account(s)
to:
GE Funds
c/o PFPC, Inc
P.O. Box 9838
Providence, RI 02940
We are continuing to upgrade a variety of services in order to give you the
tools you need to manage your financial objectives. In the meantime, we welcome
all your comments and suggestions.
96
Highly Rated Elfun Funds
MORNINGSTAR RATINGS(TM)
THROUGH DECEMBER 31, 2005
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FUND NUMBER OF STAR
(CATEGORY) FUNDS IN CATEGORY RATING
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ELFUN INTERNATIONAL EQUITY -- (Foreign Large Blend)
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Overall 513 [star] [star] [star] [star]
------------------------------------------------------------------------------------------------
3 year 513 [star] [star] [star] [star] [star]
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5 year 378 [star] [star] [star]
------------------------------------------------------------------------------------------------
10 year 148 [star] [star] [star] [star]
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ELFUN TRUSTS -- (Large Blend)
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Overall 1353 [star] [star] [star] [star]
------------------------------------------------------------------------------------------------
3 year 1353 [star] [star]
------------------------------------------------------------------------------------------------
5 year 1065 [star] [star] [star] [star]
------------------------------------------------------------------------------------------------
10 year 370 [star] [star] [star] [star] [star]
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ELFUN DIVERSIFIED -- (Moderate Allocation)
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Overall 868 [star] [star] [star] [star]
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3 year 868 [star] [star] [star]
------------------------------------------------------------------------------------------------
5 year 664 [star] [star] [star] [star]
------------------------------------------------------------------------------------------------
10 year 296 [star] [star] [star] [star]
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ELFUN TAX-EXEMPT INCOME -- (Muni National Intermediate)
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Overall 223 [star] [star] [star] [star] [star]
------------------------------------------------------------------------------------------------
3 year 223 [star] [star] [star] [star] [star]
------------------------------------------------------------------------------------------------
5 year 165 [star] [star] [star] [star] [star]
------------------------------------------------------------------------------------------------
10 year 117 [star] [star] [star] [star] [star]
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ELFUN INCOME -- (Intermediate-Term Bond)
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Overall 901 [star] [star] [star] [star]
------------------------------------------------------------------------------------------------
3 year 901 [star] [star] [star]
------------------------------------------------------------------------------------------------
5 year 691 [star] [star] [star] [star]
------------------------------------------------------------------------------------------------
10 year 351 [star] [star] [star] [star]
------------------------------------------------------------------------------------------------
================================================================================
Morningstar is an independent fund rating company that seeks to provide a
non-biased rating system used in making investment decisions. A fund is rated in
its broad asset class on a scale of one to five stars through the evaluation of
the historical balance of risk and return after 3 years of performance.
Morningstar calculates a Morningstar Rating based on a Morningstar Risk-Adjusted
Return measure that accounts for variation in a fund's monthly performance
(including the effects of sales charges, loads and redemption fees), placing
more emphasis on downward variations and rewarding consistent performance. The
top ten percent of the funds in each category receive five stars, the next 22.5%
receive four stars, the next 35% receive three stars, the next 22.5% receive 2
stars and the bottom 10% receive 1 star. The ratings are subject to change every
month. The overall Morningstar Rating for a fund is derived from a weighted
average of the performance figures associated with its three-, five- and ten
year (if applicable) Morningstar Rating metrics.
Investment return and principal value of an investment will fluctuate and you
may have a gain or loss when you sell your shares. Returns assume changes in
share price and reinvestment of dividends and capital gains.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
THIS DOES NOT CONSTITUTE A PART OF THE FUNDS' SHAREHOLDER REPORT
ELFUN FUNDS PRSRT STD
3001 SUMMER STREET U.S. POSTAGE
STAMFORD, CT 06905 PAID
Permit No. 1793
DISTRIBUTOR Lancaster, PA
GE INVESTMENT DISTRIBUTORS INC.
MEMBER NASD AND SIPC
3001 SUMMER STREET
P.O. BOX 7900
STAMFORD, CT 06904-7900
WWW.GEFUNDS.COM/ELFUN
- --------------------------------------------------------------------------------
The Funds file their complete schedules of portfolio holdings with the
Securities and Exchange Commission for the first, second and third quarters of
each fiscal year on Form N-Q. The Funds' Forms N-Q, as well as a description of
the policies and procedures that the Funds use to determine how to vote proxies
(if any) relating to portfolio securities is available without charge (i) upon
request, by calling 1-800-242-0134; (ii) on the Funds' website at
HTTP://WWW.GEFUNDS.COM; and (iii) on the Commission's website at
HTTP://WWW.SEC.GOV. The Funds' Forms N-Q may be reviewed and copied at the
Commission's Public Reference Room in Washington, DC -- information on the
operation of the Public Reference Room may be obtained by calling
1-800-SEC-0330.
Information (if any) regarding how the Funds voted proxies relating to portfolio
securities during the most recently disclosed 12-months period ended June 30 is
available without charge (i) through the Funds' website at
HTTP://WWW.GEFUNDS.COM; and (ii) on the Commission's website at
HTTP://WWW.SEC.GOV.
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[GE LOGO OMITTED]
ELF 2 (2/06)
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ITEM 2. CODE OF ETHICS.
Please refer to the Code of Ethics included in the following link:
www.ge.com/files/usa/en/commitment/social/integrity/downloads/english.pdf
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Board of Trustees of the registrant has determined that both John R.
Costantino and William J. Lucas are designated as audit committee financial
experts for the Funds; and further that it is the finding of the Boards that
Messrs. Costantino and Lucas, the audit committee financial experts, qualify
as being 'independent' pursuant to paragraph (a)(2) of Item 3 to Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) AUDIT FEES. The aggregate fees billed for each of the last two fiscal
years (the "Reporting Periods") for professional services rendered by the
Registrant's principal accountant (the "Auditor") for the audit of the
Registrant's annual financial statements, or services that are normally
provide by the Auditor in connection with the statutory and regulatory
filings or engagements for the Reporting Periods were $41,367 in 2004 and
$40,525 in 2005.
(b) AUDIT RELATED FEES. There were no fees billed by the Auditor for
assurance and related services that were related to the performance of the
audit for the Registrant during the Reporting Periods.
(c) TAX FEES. There were no fees billed for professional services
rendered by the Auditor for tax compliance, tax advice or tax planning for
the Registrant during the Reporting Periods.
(d) ALL OTHER FEES. There were no fees billed for products and services
provided by the Auditor, other than the services reported in paragraphs
(a) through (c) of this Item for the Registrant during the Reporting Periods.
(e) (1) AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES.
The Audit Committee of the Elfun Funds (the "Funds") Board of
Trustees is responsible, among other things, for the appointment,
compensation and oversight of the work of the Fund's independent
accountants/auditors (the "Auditor"). As part of this responsibility and
to ensure that the Auditor's independence is not impaired, the Audit Committee
(1) pre-approves the audit and non-audit services provided to the Funds by
the Auditor, and (2) all non-audit services provided to the Funds' investment
adviser and covered affiliates (as defined in the Audit Committee Charter) that
provide ongoing services to the Funds if the services directly impact the
Funds' operations or financial reporting, in accordance with the Audit
Committee Charter. Following are excerpts from the Audit Committee Charter
that sets forth the pre-approval policies and procedures:
1. Selection and Pre-Approval of Auditor and Approval of Fees.
(i) The Audit Committee shall pre-approve the selection of the Auditor and
shall recommend for ratification the selection, retention or termination of the
Auditor by the full Board, including the independent Trustees/Directors, and,
in connection therewith, shall evaluate the independence of the Auditor,
including: (i) an evaluation of whether the Auditor provides any consulting
services to the Fund's investment adviser and the extent to which the Auditor
provides non-audit services to the Fund's investment adviser and certain other
affiliated service providers as defined in Section 2(f) below, which services
are not subject to the pre-approval requirements set forth in Section 4 below;
(ii) an evaluation of the extent to which the Auditor has any relationships
with the Fund or its affiliated persons that are brought to the attention of
the Audit Committee by the Auditor in accordance with applicable standards of
the Independence Standards Board ("ISB"), because, in the Auditor's
professional judgment, such relationships may reasonably be thought to bear
on the Auditor's independence with respect to the Fund; and (iii) monitoring
the Auditor's compliance with respect to the rotation requirements for the
lead and coordinating partners having primary responsibility for the Fund's
audits and any partner responsible for the reviewing the Fund's audits.
The Audit Committee shall review the Auditor's specific representations as
to its independence.
(b) The Audit Committee shall pre-approve and review the fees charged by
the Auditor for audit and non-audit services to be provided to the Fund and
certain affiliated service providers (as defined in Section 2(f) below) in
accordance with the pre-approval requirements set forth in Section 4 below.
The Fund shall provide for appropriate funding, as determined by the Audit
Committee, to compensate the Auditor for any authorized service provided to
the Fund.
2. Meetings with the Auditor. The Audit Committee shall meet with the
Auditor, including private meetings, prior to the commencement of substantial
work on the audit and following the conclusion of the audit, as well as such
other times as the Audit Committee shall deem necessary or appropriate. The
Auditor shall report directly to the Audit Committee. The Auditor shall
report at least annually, concerning the following and other pertinent matters:
(a) to review the arrangements for and scope of the annual audit and any
special audits;
(b) to provide the Auditor the opportunity to report to the Audit
Committee, on a timely basis, all critical accounting policies and practices
to be used;
(c) to discuss any matters of concern relating to the Fund's financial
statements, including: (i) any adjustments to such statements recommended by
the Auditor, or other results of said audit(s), and (ii) any alternative
treatments of financial information within GAAP that have been discussed with
Fund management, the ramifications of the use of such alternative disclosures
and treatments, and the treatment preferred by the Auditor;
(d) to provide the Auditor the opportunity to report to the Audit
Committee, on a timely basis, any material written communication between the
Auditor and Fund management, such as any management letter or schedule of
unadjusted differences;
(e) to discuss the opinion the Auditor has rendered regarding the Fund's
financial statements;
(f) to report all non-audit services that do not require Audit Committee
pre-approval and are provided to certain affiliated persons of the Fund,
including: (1) the Fund's investment adviser or sub-advisers (but excluding
any investment sub-adviser whose role is primarily portfolio management and
is overseen by the investment adviser), (2) the Fund's principal underwriter,
and (3) any entity controlling, controlled by, or under common control with
the investment adviser or principal underwriter, that provides "ongoing"
services to the Funds in accordance with the pre-approval requirements of
paragraph (c)(7)(i) of Rule 2-01 of Regulation S-X (each, a "Covered Affiliate"
and collectively, "Covered Affiliates");
(g) to review, in accordance with current standards of ISB, all
relationships between the Auditor and the Fund or its affiliated persons that,
in the Auditor's professional judgment, may reasonably be thought to bear
on its independence, and to confirm, in light of such information, whether
the Auditor believes, in its professional judgment, that it may properly serve
as independent accountants/auditors with respect to the Fund;
(h) to consider the Auditor's comments with respect to the Fund's financial
policies, procedures and internal accounting controls and responses thereto by
the Fund's officers and Fund management, as well as other personnel;
(i) to investigate any improprieties or suspected improprieties in the
operations of the Fund to the extent necessary or appropriate in light of any
internal investigations by the Fund's officers and/or by officers or employees
of the Fund management of such improprieties;
(j) to receive periodic reports concerning regulatory changes and new
accounting pronouncements that significantly affect the value of the Fund's
assets and their financial reporting;
(k) to report on the Fund's qualification under Subchapter M of the Internal
Revenue Code, amounts distributed and reported to shareholders for Federal tax
purposes and the Fund's tax returns; and
(l) to provide the Auditor the opportunity to report on any other matter
that the Auditor deems necessary or appropriate to discuss with the Audit
Committee.
If the Auditor's report on the above-listed (and other pertinent)
matters is not made in person to the Audit Committee within 60 days following
the end of the Fund's fiscal year, the Auditor shall deliver a written report
to the Audit Committee concerning these matters within such 60 day period.
3. Change in Accounting Principles. The Audit Committee shall consider
the effect upon the Fund of any changes in accounting principles or practices
proposed by the Auditor or the Fund's officers.
4. Pre-Approval of Audit Related Services and Permissible Non-Audit
Services. The Audit Committee shall pre-approve both audit (including audit,
review, and attest) services and permissible non-audit services provided to
the Fund and, if the nature of the engagement relates directly to the
operations and financial reporting of the Fund, permissible non-audit services
provided to any Covered Affiliate.
The Audit Committee may determine to delegate the authority to grant
pre-approvals to one or more Audit Committee members, each acting on behalf
of the Audit Committee. In this event, the member of the Audit Committee so
delegated shall report each delegated pre-approval to the Audit Committee at
its next regularly scheduled meeting. The Audit Committee may also adopt and
follow, in lieu of explicit pre-approval described above, written policies
and procedures detailed as to the particular service, designed to safeguard
the continued independence of the Auditor, consistent with the requirements
of the Act and SEC regulations thereunder.
Notwithstanding the foregoing, the pre-approval requirement concerning
permissible non-audit services provided to the Fund or any Covered Affiliate
is waived if: (1) the aggregate amount of all such non-audit services provided
constitutes no more than five percent (5%) of the total amount of revenues paid
to the Auditor by the Fund and the Covered Affiliates during the fiscal year in
which the services are provided that would have to be pre-approved by the Audit
Committee, (2) the non-audit services were not recognized as non-audit services
at the time of the engagement, and (3) such non-audit services are promptly
brought to the attention of the Audit Committee and approved by the Audit
Committee or one or more designated members of the Audit Committee prior to the
completion of the audit.
5. Prohibited Activities of the Auditor. The Audit Committee shall confirm
with the Auditor that it is not performing contemporaneously (during the audit
and professional engagement period) non-audit services for the Fund that the
Audit Committee believes may taint the independence of the Auditor.
The Auditor will be responsible for informing the Audit Committee of whether it
believes that a particular non-audit service is permissible or prohibited
pursuant to applicable regulations and standards.
(2) PERCENTAGE OF SERVICES IN PARAGRAGHS (b) THROUGH (d) APPROVED BY AUDIT
COMMITTEE. No fees were charged during 2003 or 2004 for audit related, tax or
other services as indicated in sections (b) through (d) of this Item.
(f) Not applicable.
(g) NON-AUDIT FEES. The aggregate non-audit fees billed by the Auditor
for services rendered to the Registrant, and rendered to Service Affiliates,
for the Reporting Periods were $334,355 in 2004 and $159,743 in 2005.
(h) AUDITOR INDEPENDENCE. There were no non-audit services rendered to
Service Affiliates that were not pre-approved.
ITEM 5. Audit Committee of Listed Registrants
The Registrant has a separately-designated standing audit committee
established in accordance with Section 3(a)(58)(A) of the Exchange Act.
The Registrant's audit committee members are: John R. Costantino,
William J. Lucas and Robert P. Quinn.
ITEM 6. Schedule of Investments.
Attached as part of ITEM 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Applicable only to Closed-End Management Investment Companies.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Applicable only to Closed-End Management Investment Companies.
ITEM 9. Purchases of Equity Securities by Closed-End Management
Investment Company and Affiliated Purchasers.
Applicable only to Closed-End Management Investment Companies.
ITEM 10. Submission of Matters to a Vote of Security Holders.
No material changes.
ITEM 11. CONTROLS AND PROCEDURES.
The officers providing the certifications in this report in accordance
with Rule 30a-3 under the Investment Company Act of 1940 have concluded,
based on their evaluation of the registrant's disclosure controls and
procedures (as such term is defined in such rule), that such controls and
procedures are adequate and reasonably designed to achieve the purpose
described in paragraph (c) of such rule.
There were no significant changes in the registrant's internal controls or
in other factors that could significantly affect these controls subsequent
to the date of their last evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
ITEM 12. EXHIBITS.
(a) Not applicable.
(b) Attached hereto as Exhibit 1 and Exhibit 2 are the Certifications of
John H. Myers and Scott Rhodes as principal executive officer and
principal financial officer, respectively, as required by Rule 30a-2 under
the Investment Company Act of 1940.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, the Registrant has duly
caused this Report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Elfun Trusts
By: /S/John H. Myers
John H. Myers
TRUSTEE, PRESIDENT AND CHIEF EXECUTIVE OFFICER,
GE ASSET MANAGEMENT INCORPORATED
Date: March 07, 2006
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this Report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on
the dates indicated.
By: /S/John H. Myers
John H. Myers
TRUSTEE, PRESIDENT AND CHIEF EXECUTIVE OFFICER,
GE ASSET MANAGEMENT INCORPORATED
Date: March 07, 2006
By: /S/SCOTT RHODES
Scott Rhodes
TREASURER, ELFUN FUNDS
Date: March 07, 2006
EXHIBIT INDEX
(b)(1) Certifications of principal executive officer and
principal financial officer as required by Rule 30a-2 under the
Investment Company Act of 1940.
(b)(2) Certification of principal executive officer and
principal financial officer as required by Section 906 of the
Sarbanes-Oxley Act of 2002.