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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: : 12/31/07
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<page>
Elfun Funds
Annual Report
December 31, 2007
[GRAPHIC ART OMITTED]
<page>
Contents
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NOTES TO PERFORMANCE .................................................... 1
MANAGER REVIEWS AND SCHEDULES OF INVESTMENTS
ELFUN INTERNATIONAL EQUITY FUND .................................... 2
ELFUN TRUSTS ....................................................... 10
ELFUN DIVERSIFIED FUND ............................................. 16
ELFUN TAX-EXEMPT INCOME FUND ....................................... 33
ELFUN INCOME FUND .................................................. 48
ELFUN MONEY MARKET FUND ............................................ 63
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 .................................................. 91
INVESTMENT TEAM ......................................................... 94
SHAREHOLDER SERVICES .................................................... 97
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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.
<page>
Notes to Performance (unaudited)
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Information on the subsequent performance pages relating to the Elfun 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 all dividends and capital gains distributions, if any.
The performance data quoted represent past performance; past performance does
not guarantee future results. Investment return and principal value will
fluctuate so your shares, when redeemed, may be worth more or less than their
original cost. Current performance may be higher or lower than the performance
data quoted. Periods less than one year are not annualized. Please call
800-242-0134 for the most recent month-end performance data.
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(R) Composite Price Index of stocks (S&P 500
Index), Morgan Stanley Capital International Europe, Australasia, Far East Index
(MSCI EAFE Index), Lehman Brothers Aggregate Bond Index (LB Aggregate Bond
Index), 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 Index 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) Index 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 Bond Index is a market value-weighted index
of taxable investment-grade debt issues, including government, corporate,
asset-backed and mortgage-backed securities, with maturities of one year or
more. This index is designed to represent the performance of the U.S.
investment-grade first-rate bond market. 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.
- ---------------------
GE INVESTMENT DISTRIBUTORS, INC., MEMBER OF FINRA & SIPC, IS THE PRINCIPAL
UNDERWRITER AND DISTRIBUTOR OF THE ELFUN FUNDS AND A WHOLLY OWNED SUBSIDIARY OF
GE ASSET MANAGEMENT INCORPORATED, THE INVESTMENT ADVISER OF THE FUNDS.
1
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Elfun International Equity Fund
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THE ELFUN INTERNATIONAL EQUITY FUND IS MANAGED BY A TEAM OF PORTFOLIO MANAGERS
THAT INCLUDES BRIAN HOPKINSON, RALPH R. LAYMAN (PICTURED BELOW), PAUL NESTRO,
JONATHAN L. PASSMORE, MICHAEL J. SOLECKI AND MAKOTO SUMINO. 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 THE
PORTION WHICH 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 94.
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, 2007?
A. For the twelve-month period ended December 31, 2007, the Elfun International
Equity Fund returned 23.78%. The MSCI EAFE Index, the Fund's benchmark
returned 11.18%, and the Fund's Lipper peer group of 206 International
Large-Cap Core funds returned an average of 12.27% for the same period.
Q. WHAT MARKET CONDITIONS IMPACTED
FUND PERFORMANCE?
A. Strong corporate performance in revenue and cash generation and continued
productivity enhancements more than compensated for a rising input cost
environment, currency headwinds and the turmoil created by the collapse of
the sub-prime mortgage market. Market volatility at certain times of the
year was extreme and the dilemma facing central bankers torn between rising
inflation concerns and diminishing market liquidity was a constant talking
point late in the year.
Q. WHAT DOMESTIC OR WORLD EVENTS HAD A MAJOR IMPACT ON THE FINANCIAL MARKETS?
A. The developing sub-prime crisis spread throughout the financial sector as
the year progressed. Initially confined to over-zealous mortgage lenders in
the U.S., it was soon apparent that many financial institutions around the
globe would be affected. The full extent of the problem is as yet unknown
but the reduction in market liquidity plus grave concerns over the quality
of borrowers at all levels of the economy have served to tighten credit
conditions throughout the entire global system. Key, however, is the
dramatic fall in available liquidity, the fuel for asset prices in many
segments of the economy.
[PHOTO OMITTED]
2
<page>
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Q&A
Q. WHICH STOCKS AND SECTORS SIGNIFICANTLY AFFECTED FUND PERFORMANCE?
A. Materials companies in the agricultural/chemicals field (Potash - Canada)
and mining industry (CVRD - Brazil; BHP Billiton - UK) were top performers
for the Fund. Other major contributions came from industrials such as
Orascom Construction (Egypt), ABB (Switzerland) and Alstom (France); energy
companies, Petrobras (Brazil) and Saipem (Italy); and telecom services
holdings Telenor (Norway) and MTN (South Africa).
However, the Fund was negatively impacted by consumer staples stocks such as
Seven and I Holdings (Japan) and the Fund's holdings in the financial sector
such as Mitsubishi UFJ and Nomura (Japan), which while modest, still had a
negative impact.
Two consistent themes here are the high growth coming from emerging markets
(influencing materials, energy and telecom) and infrastructure development
in both the developed and developing worlds (industrials).
Q. DID THE WEIGHTINGS/COUNTRY ALLOCATIONS OF THE FUND CHANGE? WHY?
A. The Fund added to its consumer staples holdings through the purchase of food
manufacturers with global operations, attractive valuations and a business
outlook that were particularly attractive in this challenging environment.
The Fund reduced its overall position in healthcare due to concerns over the
current pipeline and regulatory environments, but added to energy through
purchases of gas related companies with strong market positions while
eliminating a small oil holding in China.
The Fund also reduced its position in the financials sector via the sale of
European banks exposed to the credit crisis, and adjusted its holdings in
consumer discretionary by moving out of underperforming Japanese retail and
into a broad market watch manufacturer.
Q. WHAT WERE THE MAJOR BUYS AND SELLS FOR THE PERIOD AND WHY?
A. The Fund made the following new additions its portfolio holdings in the last
fiscal year: Danone (France), a major food producer; Ibiden (Japan), a
manufacturer of technology for computer chips and filters for diesel
engines, two high growth areas; Novozymes (Denmark), for its important role
in enzymes and micro-organisms. The Fund also increased its position in the
following companies: Nestle, for its global superiority; Roche, as a
standout drug company in a challenged sector; Siemens, for its restructuring
and new management approach. However, the Fund eliminated the following
companies from its portfolio holdings during the last fiscal year: Credit
Suisse Group and ING Group, as they are being confronted by the credit
crisis; Novartis, Glaxo and Sanofi for their problems in the pharmaceutical
space; and Chiyoda Corp, for its inability to control costs in a buoyant
environment.
3
<page>
Elfun International Equity Fund
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Understanding Your Fund's Expenses
As a shareholder of the Fund you incur ongoing expenses, which include portfolio
management 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, 2007.
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 $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JULY 1, 2007 - DECEMBER 31, 2007
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ACCOUNT VALUE AT ACCOUNT VALUE EXPENSES
THE BEGINNING OF AT THE END OF PAID DURING
THE PERIOD ($) THE PERIOD ($) THE PERIOD ($)*
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Actual Fund Return** 1,000.00 1,095.78 1.07
Hypothetical 5% Return
(2.5% for the period) 1,000.00 1,023.92 1.02
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* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.20% (FROM
PERIOD JULY 1, 2007 - DECEMBER 31, 2007), 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, 2007 WAS: 9.58%.
4
<page>
Elfun International Equity Fund
CHANGE IN VALUE OF A $10,000 INVESTMENT
[LINE CHART OMITTED PLOT POINTS FOLLOWS]
ELFUN INTERNATIONAL MSCI
EQUITY FUND EAFE INDEX
12/97 $10000 $10000
12/98 11736 11999
12/99 16301 15235
12/00 14840 13077
12/01 12010 10250
12/02 9604 8616
12/03 13546 11941
12/04 15835 14359
12/05 18952 16302
12/06 23885 20596
12/07 29565 22899
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED DECEMBER 31, 2007
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ONE FIVE TEN
YEAR YEAR YEAR
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Elfun International
Equity Fund 23.78% 25.22% 11.45%
MSCI EAFE Index 11.18% 21.59% 8.64%
Elfun International Equity Fund (ending value $29,565)
MSCI EAFE Index (ending value $22,899)
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 circumstances. The Fund invests primarily in equity securities of
companies located in developed and developing countries
outside the United States.
* LIPPER PERFORMANCE COMPARISON
INTERNATIONAL LARGE-CAP CORE PEER GROUP
BASED ON AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/07
ONE FIVE TEN
YEAR YEAR YEAR
Fund's rank in peer group: 8 4 4
Number of Funds in peer group: 206 168 93
Peer group average annual total return: 12.27% 19.39% 7.78%
Lipper categories in peer group: International Large-Cap Core
* SEE NOTES TO PERFORMANCE FOR THE EXPLANATION OF PEER CATEGORIES.
TOP TEN LARGEST HOLDINGS
AS OF DECEMBER 31, 2007
AS A % OF MARKET VALUE
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Telenor ASA 2.79%
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Nestle S.A. (Regd.) 2.69%
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Nokia OYJ 2.58%
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Roche Holding AG 2.57%
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BHP Billiton PLC 2.44%
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Vodafone Group, PLC 2.31%
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Siemens AG (Regd.) 2.16%
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Cia Vale do Rio Doce ADR 2.16%
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Saipem S.p.A. 2.10%
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Koninklijke Philips
- --------------------------------------------------------------------------------
Electronics N.V. 2.10%
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SEE NOTES TO PERFORMANCE ON PAGE 1 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.
5
<page>
ELFUN INTERNATIONAL EQUITY FUND
Schedule of Investments
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(dollars in thousands)-- December 31, 2007
ELFUN INTERNATIONAL EQUITY FUND
PORTFOLIO COMPOSITION AS A % OF THE MARKET VALUE OF $482,413 AS OF DECEMBER 31,
2007.
[PIE CHART OMITTED PLOT POINTS FOLLOWS]
Continental Europe 49.1%
Japan 16.2%
United Kingdom 14.2%
Latin America 5.0%
Emerging Europe 3.7%
Pacific Rim 3.3%
Emerging Asia 3.1%
Canada 2.9%
United States 2.5%
NUMBER
OF SHARES VALUE
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COMMON STOCK -- 94.6%+
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AUSTRALIA -- 1.0%
Brambles Ltd. 193,250 $ 1,957
Paladin Resources Ltd. 445,769 2,658 (a)
4,615
BRAZIL -- 1.4%
Petroleo Brasileiro S.A. ADR 69,975 6,733
CANADA -- 2.9%
Canadian National
Railway Co. 89,510 4,231
Potash Corp of Saskatchewan 67,922 9,875
14,106
DENMARK -- 1.4%
Group 4 Securicor PLC 494,939 2,387
Novozymes (Series B) 38,610 4,406
6,793
NUMBER
OF SHARES VALUE
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EGYPT -- 0.8%
Orascom Construction
Industries 37,588 $ 3,911
FINLAND -- 2.6%
Nokia OYJ 320,729 12,436
FRANCE -- 12.5%
Accor S.A. 21,723 1,737
Alstom 21,709 4,666
AXA S.A. 81,810 3,276
BNP Paribas 49,211 5,340
Credit Agricole S.A. 81,341 2,743
Groupe Danone 98,076 8,804
LVMH Moet Hennessy
Louis Vuitton S.A. 21,183 2,561
Renault S.A. 13,732 1,948
Schneider Electric S.A. 15,179 2,057
Suez S.A. 68,269 4,648
Total S.A. 102,816 8,543
Unibail-Rodamco (REIT) 10,960 2,402
Veolia Environnement 87,473 7,987
Vinci S.A. 48,647 3,603
60,315
GERMANY -- 9.2%
Allianz AG (Regd.) 7,565 1,636
Bayer AG 95,687 8,748
DaimlerChrysler AG (Regd.) 33,112 3,219
E.ON AG 42,011 8,943
Linde AG 49,331 6,524
Metro AG 38,238 3,211
RWE AG 14,328 2,011
Siemens AG (Regd.) 65,447 10,417
44,709
GREECE -- 1.2%
Hellenic Telecommunications
Organization S.A. 151,659 5,588
HONG KONG -- 0.9%
Esprit Holdings Ltd. 100,000 1,499
Sun Hung Kai
Properties Ltd. 143,550 3,045
4,544
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See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
6
<page>
ELFUN INTERNATIONAL EQUITY FUND
Schedule of Investments
(dollars in thousands)-- December 31, 2007
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NUMBER
OF SHARES VALUE
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INDIA -- 0.7%
Larsen & Toubro Ltd. 27,049 $ 2,858
Reliance Capital Ltd. ADR 7,427 488 (a,b)
3,346
ITALY -- 4.9%
Banca Intesa S.p.A. 737,935 5,837
Saipem S.p.A. 252,773 10,137
UniCredito Italiano S.p.A. 940,657 7,812
23,786
JAPAN -- 16.2%
Asahi Glass Company Ltd. 244,014 3,274
Bank of Yokohama Ltd. 399,026 2,800
East Japan Railway Co. 643 5,307
Hoya Corp. 29,300 934
Ibiden Company Ltd. 95,496 6,625
Komatsu Ltd. 107,150 2,916
Mitsubishi Estate
Company Ltd. 307,946 7,429
Mitsubishi Heavy
Industries Ltd. 846,000 3,642
Mitsubishi UFJ Financial
Group, Inc. 759,353 7,117
Nidec Corp. 33,451 2,479
Nintendo Company Ltd. 1,000 599
Nomura Holdings, Inc. 508,196 8,620
Shiseido Company Ltd. 208,000 4,925
Sony Financial Holdings Inc. 939 3,589 (a)
Sumitomo Realty & Development
Company Ltd. 72,000 1,782
Toray Industries Inc. 1,243,997 9,743
Toyota Motor Corp. 122,192 6,607
78,388
MEXICO -- 1.1%
America Movil S.A. de C.V.
ADR (Series L) 83,199 5,107
NETHERLANDS -- 2.1%
Koninklijke Philips
Electronics N.V. 234,562 10,124
NUMBER
OF SHARES VALUE
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NORWAY -- 4.3%
Acergy S.A. 211,268 $ 4,718
Orkla ASA 130,421 2,528
Telenor ASA 564,026 13,478
20,724
RUSSIA -- 1.3%
Mobile Telesystems
OJSC ADR 22,631 2,304
OAO Gazprom ADR 71,155 4,035
6,339
SINGAPORE -- 1.3%
CapitaLand Ltd. 589,000 2,565
Singapore
Telecommunications Ltd. 1,417,342 3,938
6,503
SOUTH AFRICA -- 1.5%
Anglo Platinum Ltd. 13,303 1,966
MTN Group, Ltd. 292,249 5,476
7,442
SOUTH KOREA -- 1.4%
Kookmin Bank 44,663 3,292 (a)
Samsung Electronics
Company Ltd. 6,280 3,730
7,022
SPAIN -- 1.5%
Banco Santander Central
Hispano S.A. (Regd.) 336,349 7,273
SWEDEN -- 0.8%
Sandvik AB 232,737 4,006
SWITZERLAND -- 8.5%
ABB Ltd. (Regd.) 257,707 7,425
Holcim Ltd. (Regd.) 2,206 236
Nestle S.A. (Regd.) 28,216 12,960 (h)
Roche Holding AG 71,839 12,411
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See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
7
<page>
ELFUN INTERNATIONAL EQUITY FUND
Schedule of Investments
(dollars in thousands)-- December 31, 2007
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Swatch Group AG 10,890 $ 3,282
Swiss Reinsurance 17,559 1,248
Syngenta AG (Regd) 13,689 3,488
41,050
TAIWAN -- 0.9%
Taiwan Semiconductor
Manufacturing
Company Ltd. 2,288,229 4,374
UNITED KINGDOM -- 14.2%
BG Group, PLC 327,626 7,500
BHP Billiton PLC 382,684 11,777 (h)
British American Tobacco PLC 17,950 702
Diageo PLC 275,081 5,914
Group 4 Securicor PLC 414,882 2,021
Lloyds TSB Group, PLC 270,453 2,541
National Grid PLC 225,496 3,744
Prudential PLC 335,632 4,757
Reed Elsevier PLC 162,326 2,196
Rio Tinto PLC (Regd.) 60,432 6,396
Royal Bank of Scotland
Group, PLC 527,883 4,665
Tesco PLC 548,195 5,208
Vodafone Group, PLC 2,986,865 11,166
68,587
TOTAL COMMON STOCK
(COST $311,141) 457,821
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
PREFERRED STOCK -- 2.6%
- --------------------------------------------------------------------------------
All America Latina
Logistica S.A. 152,400 $ 1,973
Cia Vale do Rio Doce ADR 372,058 10,410
TOTAL PREFERRED STOCK
(COST $5,888) 12,383
TOTAL INVESTMENTS IN SECURITIES
(COST $317,029) 470,204
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 2.5%
- --------------------------------------------------------------------------------
GEI Short Term Investment Fund
4.96% 12,209,277 12,209 (d,k)
(COST $12,209)
TOTAL INVESTMENTS
(COST $329,238) 482,413
OTHER ASSETS AND LIABLITES,
NET-- 0.3% 1,437
--------
NET ASSETS-- 100.0% $483,850
========
- -------------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
8
<page>
ELFUN INTERNATIONAL EQUITY FUND
Schedule of Investments
(dollars in thousands)-- December 31, 2007
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OTHER INFORMATION
- --------------------------------------------------------------------------------
The Elfun International Equity Fund had the following short futures contracts
open at December 31, 2007
NUMBER CURRENT
EXPIRATION OF NOTIONAL UNREALIZED
DESCRIPTION DATE CONTRACTS VALUE DEPRECIATION
- --------------------------------------------------------------------------------
DJ Euro Stoxx
Index Futures March 2008 46 $(2,983) $ (49)
FTSE 100 Index
Futures March 2008 10 (1,285) (16)
Topix Index
Futures March 2008 12 (1,579) 2
------
$ (63)
======
The Elfun International Equity Fund was invested in the
following sectors at December 31, 2007
SECTOR PERCENTAGE (BASED ON MARKET VALUE)
- --------------------------------------------------------------------------------
Financials 18.70%
Materials 15.28%
Industrials 14.34%
Telecommunication Services 9.75%
Energy 9.19%
Consumer Staples 8.65%
Consumer Discretionary 6.87%
Information Technology 6.46%
Utilities 5.66%
Healthcare 2.57%
Short-Term 2.53%
-------
100.00%
=======
- -------------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
9
<page>
Elfun Trusts
- --------------------------------------------------------------------------------
THE ELFUN TRUSTS IS MANAGED BY DAVID B. CARLSON.
SEE PORTFOLIO MANAGERS' BIOGRAPHICAL INFORMATION BEGINNING ON PAGE 94.
Q. HOW DID THE ELFUNTRUSTS PERFORM COMPARED TO ITS BENCHMARK AND LIPPER PEER
GROUP FOR THE TWELVE-MONTH PERIOD ENDED DECEMBER 31, 2007?
A. For the twelve-month period ended December 31, 2007, the Elfun Trusts
returned 5.05%. The S&P 500 Index, the Fund's benchmark, returned 5.50% and
the Fund's Lipper peer group of 723 Large-Cap Growth funds returned an
average of 14.17% for the same period
Q. WHAT MARKET CONDITIONS IMPACTED FUND PERFORMANCE?
A. Volatility returned to the equity market in 2007 with several sharp
sell-offs during the year. The market reached new highs in early October,
only to sell off in the final two months. The year ended with a total return
of 5.50% for the S&P 500.
Eight out of ten S&P 500 sectors had positive returns, and seven of these
were in the double-digits, led by sectors tilted toward global
infrastructure investment and booming commodity prices. The best performing
sectors were energy (+35%), materials (+23%), utilities (+20%) and
technology (+16%). Two sectors had negative returns for the year, financials
(-19%) and consumer-discretionary (-13%), due to the mortgage crisis and
fears around consumer spending.
Q. WHAT WERE THE PRIMARY DRIVERS OF
FUND PERFORMANCE?
A. From a sector standpoint, financials were our best performing sector as we
were underweighted in the sector and our holdings had better performance
(down 1.6% versus a decline of 18.8% for the S&P 500 financials sector). Our
strongest performers were State Street (+22%), Berkshire Hathaway (+29%) and
AFLAC (+38%). On the negative side, our holdings in CB Richard Ellis (-35%)
and Fannie Mae (-30%) declined sharply in the deteriorating credit
environment. We ended the year underweighted in the financials sector as we
believe that the housing/mortgage issues will continue to persist.
Healthcare was our worst performing sector as our holdings declined (-7.6%)
versus a gain of +7.2% for the S&P 500 healthcare sector. Amgen was our
worst performer with a decline of (-32%). Healthcare makes up about 17% of
the portfolio.
Technology was our largest sector weight at 28% of the portfolio at
year-end. Performance in our tech holdings was mixed last year. Microsoft
(+21%), First Data (+27%) and Iron Mountain (+34%) did well, while Yahoo
(-9%), Paychex (-6%) and Molex (-4%) lagged. We were a net buyer of
technology stocks during the year as we saw attractive value in many names.
[PHOTO OMITTED]
10
<page>
- --------------------------------------------------------------------------------
Q&A
For the full year, Monsanto was our best performer with a gain of +114%, and
Amgen was the worst performer with a loss of (-32%).
Q. WERE THERE ANY SIGNIFICANT CHANGES IN THE PORTFOLIO DURING THE YEAR?
A. There were no significant changes in the Fund during the period and turnover
remained low at 12% of the portfolio. We ended the year with 59 stocks in
the portfolio, little changed from the start of the year. On the margin, we
reduced our overweight in consumer discretionary stocks and took profits in
energy. Our largest overweights remain in information technology, healthcare
and media, as we believe these areas can withstand the slowing of the U.S.
economy and benefit from a relatively stronger outlook for global economic
growth.
As this is written early in the new year, the stock market is declining and
there is a growing conviction by economists of a U.S. recession. We believe
the market will favor stocks that characterize the current holdings in the
Fund, i.e. industry leaders, financially strong, well managed with
above-average growth rates. We believe we are well positioned for the
environment ahead.
11
<page>
Elfun Trusts
- --------------------------------------------------------------------------------
Understanding Your Fund's Expenses
As a shareholder of the Fund you incur ongoing expenses, which include portfolio
management 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, 2007.
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 $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JULY 1, 2007 - DECEMBER 31, 2007
- ---------------------------------------------------------------------------------------------------------------------------
ACCOUNT VALUE AT ACCOUNT VALUE EXPENSES
THE BEGINNING OF AT THE END OF PAID DURING
THE PERIOD ($) THE PERIOD ($) THE PERIOD ($)*
- --------------------------------------------------------------------------------------------------------------------------
Actual Fund Return** 1,000.00 992.37 0.65
Hypothetical 5% Return
(2.5% for the period) 1,000.00 1,024.26 0.66
- ---------------------------------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.13% (FROM
PERIOD JULY 1, 2007 - DECEMBER 31, 2007), 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, 2007 WAS: (0.76)%.
12
<page>
Elfun Trusts
- --------------------------------------------------------------------------------
CHANGE IN VALUE OF A $10,000 INVESTMENT
[LINE CHART OMITTED PLOT POINTS FOLLOWS]
ELFUN TRUSTS S&P 500 INDEX
12/97 $10000 $10000
12/98 12294 12870
12/99 14721 15581
12/00 15589 14150
12/01 14656 12465
12/02 11738 9710
12/03 14431 12499
12/04 15577 13859
12/05 15702 14541
12/06 17760 16837
12/07 18656 17763
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED DECEMBER 31, 2007
- --------------------------------------------------------------------------------
ONE FIVE TEN
YEAR YEAR YEAR
- --------------------------------------------------------------------------------
Elfun Trusts 5.05% 9.71% 6.43%
S&P 500 5.50% 12.84% 5.91%
Elfun Trusts (ending value $18,656)
S&P 500 (ending value $17,763)
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.
* LIPPER PERFORMANCE COMPARISON
LARGE CAP CORE PEER GROUP
BASED ON AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/07
ONE FIVE TEN
YEAR YEAR YEAR
Fund's rank in peer group: 663 426 53
Number of Funds in peer group: 723 515 239
Peer group average annual total return: 14.17% 11.75% 5.00%
Lipper categories in peer group: Large Cap Growth
* SEE NOTES TO PERFORMANCE FOR THE EXPLANATION OF PEER CATEGORIES.
TOP TEN LARGEST HOLDINGS
AS OF DECEMBER 31, 2007
AS A % OF MARKET VALUE
- --------------------------------------------------------------------------------
Monsanto Co. 4.22%
- --------------------------------------------------------------------------------
State Street Corp. 4.21%
- --------------------------------------------------------------------------------
Microsoft Corp. 3.97%
- --------------------------------------------------------------------------------
Schlumberger Ltd. 3.89%
- --------------------------------------------------------------------------------
Dover Corp. 3.72%
- --------------------------------------------------------------------------------
Carnival Corp. 3.19%
- --------------------------------------------------------------------------------
Western Union Co. 3.15%
- --------------------------------------------------------------------------------
Intuit Inc. 3.09%
- --------------------------------------------------------------------------------
Liberty Media Holding Corp -
- --------------------------------------------------------------------------------
Capital (Series A) 3.07%
- --------------------------------------------------------------------------------
UnitedHealth Group, Inc. 3.04%
- --------------------------------------------------------------------------------
SEE NOTES TO PERFORMANCE ON PAGE 1 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.
13
<page>
ELFUN TRUSTS
Schedule of Investments
- --------------------------------------------------------------------------------
(dollars in thousands)-- December 31, 2007
ELFUN TRUSTS
PORTFOLIO COMPOSITION AS A % OF THE MARKET VALUE OF $2,198,834 AS OF DECEMBER
31, 2007.
[PIE CHART OMITTED PLOT POINTS FOLLOWS]
Information Technology 27.8%
Consumer Discretionary 16.8%
Healthcare 16.6%
Financials 15.3%
Energy 8.3%
Materials 4.4%
Industrials 3.9%
Consumer Staples 3.5%
Telecommunication Services 1.9%
Short-Term 1.5%
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK -- 98.5%+
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 16.8%
Bed Bath & Beyond, Inc. 1,100,000 $ 32,329 (a)
Carnival Corp. 1,575,000 70,072
Comcast Corp. (Class A) 2,870,000 52,004 (a)
Liberty Global, Inc.
(Series C) 1,800,000 65,862 (a)
Liberty Media Holding Corp -
Capital (Series A) 580,000 67,564 (a)
Liberty Media Holding Corp -
Interactive (Series A) 1,280,000 24,422 (a)
Lowe's Companies, Inc. 1,300,000 29,406
News Corp. (Class A) 750,000 15,368
Target Corp. 260,000 13,000
370,027
CONSUMER STAPLES -- 3.5%
Colgate-Palmolive Co. 120,000 9,355
McCormick & Company, Inc. 60,000 2,275
PepsiCo, Inc. 850,000 64,515
76,145
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
ENERGY -- 8.3%
Baker Hughes Incorporated 110,000 $ 8,921
Exxon Mobil Corp. 700,000 65,583
Schlumberger Ltd. 870,000 85,582
Transocean, Inc. 160,000 22,904
182,990
FINANCIALS -- 15.2%
AFLAC Incorporated 700,000 43,841
Alleghany Corp. 37,884 15,229 (a)
American International
Group, Inc. 325,000 18,948
Berkshire Hathaway, Inc.
(Class B) 14,000 66,304 (a)
CB Richard Ellis Group, Inc.
(Class A) 1,470,000 31,678 (a)
Citigroup, Inc. 850,000 25,024
Federal National
Mortgage Assoc. 600,000 23,988
Goldman Sachs Group, Inc. 45,000 9,677
Metlife, Inc. 130,000 8,011
State Street Corp. 1,140,000 92,568 (e)
335,268
HEALTHCARE -- 16.6%
Abbott Laboratories 480,000 26,952
Amgen, Inc. 1,000,000 46,440 (a)
DENTSPLY International, Inc. 60,000 2,701
Gilead Sciences, Inc. 120,000 5,521 (a)
Johnson & Johnson 750,000 50,025
Lincare Holdings Inc. 1,310,000 46,060 (a)
Medtronic Inc. 1,040,000 52,281
Pfizer Inc. 1,000,000 22,730
UnitedHealth Group, Inc. 1,150,000 66,930
Wyeth 280,000 12,373
Zimmer Holdings, Inc. 490,000 32,414 (a)
364,427
INDUSTRIALS -- 3.9%
Dover Corp. 1,775,000 81,810
Stericycle, Inc. 55,000 3,267 (a)
85,077
- ------------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
14
<page>
ELFUN TRUSTS
Schedule of Investments
- --------------------------------------------------------------------------------
(dollars in thousands)-- December 31, 2007
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY -- 27.9%
Analog Devices, Inc. 625,000 $ 19,813
Automatic Data
Processing, Inc. 680,000 30,280
Cisco Systems, Inc. 2,300,000 62,261 (a)
Corning Incorporated 550,000 13,194
eBay, Inc. 1,150,000 38,168 (a)
Intel Corp. 200,000 5,332
Intuit Inc. 2,150,000 67,961 (a)
Iron Mountain Incorporated 220,000 8,144 (a)
Microsoft Corp. 2,450,000 87,220
Molex, Inc. (Class A) 2,180,000 57,269
NAVTEQ Corp. 65,000 4,914 (a)
Paychex, Inc. 1,200,000 43,464
QUALCOMM, Inc. 1,360,000 53,516
Research In Motion Ltd. 90,000 10,206 (a)
Western Union Co. 2,850,000 69,198
Yahoo! Inc. 1,750,000 40,705 (a)
611,645
MATERIALS -- 4.4%
Allegheny Technologies
Incorporated 50,000 4,320
Monsanto Co. 830,000 92,703
97,023
TELECOMMUNICATION SERVICES -- 1.9%
American Tower Corp. (Class A) 240,000 10,224 (a)
NII Holdings Inc. (Class B) 130,000 6,282 (a)
Vodafone Group, PLC ADR 700,000 26,124
42,630
TOTAL INVESTMENTS IN SECURITIES
(COST $1,445,825) 2,165,232
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 1.5%
- -------------------------------------------------------------------------------
GEI Short Term Investment Fund
4.96% 33,601,632 $ 33,602 (d,k)
(Cost $33,602)
TOTAL INVESTMENTS
(COST $1,479,427) 2,198,834
OTHER ASSETS AND LIABILITIES,
NET-- 0.0%* 183
----------
NET ASSETS-- 100.0% $2,199,017
==========
* less than 0.1%
- ------------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
15
<page>
Elfun Diversified Fund
THE ELFUN DIVERSIFIED FUND IS MANAGED BY A TEAM OF PORTFOLIO MANAGERS THAT
INCLUDES (PICTURED BELOW FROM LEFT TO RIGHT) RALPH R. LAYMAN, JUDITH A. STUDER,
THOMAS R. LINCOLN AND PAUL M. COLONNA. EACH OF THE FOREGOING PORTFOLIO MANAGERS
IS RESPONSIBLE FOR MANAGING ONE OF THREE SUB-PORTFOLIOS: U.S. EQUITY,
INTERNATIONAL EQUITY AND FIXED INCOME. MS. STUDER IS VESTED WITH OVERSIGHT
AUTHORITY FOR DETERMINING ASSET ALLOCATIONS FOR THE FUND, MR. LINCOLN 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 PORTFOLIO
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 THE FUND'S OBJECTIVES. SEE PORTFOLIO
MANAGERS' BIOGRAPHICAL INFORMATION BEGINNING ON PAGE 94.
Q. HOW DID THE ELFUN DIVERSIFIED FUND PERFORM COMPARED TO ITS BENCHMARK AND
LIPPER PEER GROUP FOR THE TWELVE-MONTH PERIOD ENDED DECEMBER 31, 2007?
A. For the twelve-month period ended December 31, 2007, the Elfun Diversified
Fund returned 8.74%. The Fund's broad based benchmarks, the S&P 500 Index
and the Lehman Brothers Aggregate Bond Index,
[PHOTO OMITTED]
16
<page>
- --------------------------------------------------------------------------------
Q&A
returned 5.50% and 6.97%, respectively. The Fund's Lipper peer group of 646
Mixed Asset Target Allocation Growth funds returned an average of 6.42% for
the same period.
Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE AND WHAT
MARKET CONDITIONS IMPACTED THE PERFORMANCE OF THE FUND?
A. The solid performance of the Elfun Diversified Fund for the twelve-month
period was primarily driven by the Fund's overweight in equities through
much of the year, particularly in international equities (with additional
benefit from excellent stock selection in that area of the Fund), and
partially offset by issues in the credit market.
In the first half of the year, U.S. stocks rallied due to strong corporate
earnings, record M&A activity, cooling inflation worries and the absence of
Federal Reserve rate hikes. The market's climb was interrupted by global
liquidity concerns in February, and again beginning in late June and July of
2007, amid a credit crunch brought about by rising sub-prime mortgage
defaults. However, accommodative actions by the Fed in late summer/early
fall propelled markets higher, and the S&P 500 reached a record high close
of 1,565 in early October as Fed remarks allayed investors concerns that the
economy was headed for recession. However, stocks pulled back sharply during
the balance of the fourth quarter, reflecting investors' concerns over the
economic impact of the housing- and credit-market turmoil and record-high
oil prices. In this environment, the growth style of investing outperformed
the value style by over 10%, its first period of outperformance in seven
years.
The Fund's U.S. equity performance broadly tracked the S&P 500 benchmark.
The portfolio benefited from a focus on large cap companies with sustainable
earnings growth. In the U.S., larger cap stocks outperformed small, as these
higher-quality companies are perceived to have the financial strength and
scale to better weather a significant economic slowdown. Our focus on
disciplined growth avoided the worst of the year's sub-prime mortgage
debacle and resulting credit market turmoil, as the Fund's financial sector
holdings was concentrated in companies that derive the majority of their
revenues from fee-based (versus credit-based) activities. Underweighting
financials in this environment also aided Fund performance, as did stock
selection in the strong energy, materials and industrials segments.
Offsetting these positives were an overweighting in the weak consumer
discretionary sector, an underweight in telecommunications stocks, and
adverse stock selection in the healthcare area.
The international equity markets were up strongly during the last year, as
shown by the MSCI EAFE's +11.2% return and an even-stronger +39.4% advance
in the MSCI Emerging Markets Index. The weak US dollar helped international
equity returns for US investors. In international stock markets, strong
corporate performance in revenue and cash generation and continued
productivity enhancements more than compensated for a rising input cost
environment, currency headwinds for exporters and the turmoil created by the
collapse of the sub-prime mortgage market. Market volatility at certain
times of the year was extreme, similar to what was observed in the U.S. The
developing sub-prime crisis
17
<page>
Elfun Diversified Fund
- --------------------------------------------------------------------------------
Q&A
spread through the financial sector as the year progressed. Initially
confined to over-zealous mortgage lenders in the U.S., it was soon apparent
that many financial institutions around the globe would be affected. The
reduction in market liquidity, plus concerns over the quality of borrowers
at all levels of the economy, has served to tighten credit conditions
through the global system. The international portfolio substantially
exceeded its benchmark. Two investment themes that led to the strong
performance of our International equity portfolios were the high growth
coming from emerging markets (influencing materials, energy and telecom
stocks) and infrastructure development in both developed and developing
countries.
In the fixed income market, the fallout from the sub-prime mortgage crisis
became apparent in the fourth quarter as confidence in valuing securities
backed by these loans disappeared and ratings agencies moved quickly to
downgrade hundreds of securities. Broker/dealers across Wall Street began
reporting writedowns in the billions. In the latter half of the year,
investors shied away from risky assets and fled to the safety of U.S.
treasuries, pushing interest rates downward and credit spreads wider.
As the year matured, economic fundamentals slowed and the housing market
failed to stabilize, leading the Fed to cut its target rate in September,
October and December. The Fed also injected reserves into the financial
system to mitigate year-end liquidity issues. The drop in interest rates
helped the Lehman Brothers Aggregate Bond index to rise in the fourth
quarter as equity markets fell. Within the broader fixed income market, the
U.S. treasuries and government-related securities sectors performed the
best, with credit-related sectors falling short. The Fund's fixed income
portfolio underperformed the index for the year, negatively impacted by
credit exposures, including some in the sub-prime and high yield spaces.
Q. WERE THERE ANY SIGNIFICANT CHANGES TO THE FUND DURING THE PERIOD?
A. As the year progressed, turmoil in the financial markets ensued accompanied
by weakening economic reports. The portfolio segments became more
defensively oriented underweighting financial and consumer discretionary
stocks and paring positions in high yield bonds.
18
<page>
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, 2007.
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 $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JULY 1, 2007 - DECEMBER 31, 2007
- ---------------------------------------------------------------------------------------------------------------------------
ACCOUNT VALUE AT ACCOUNT VALUE EXPENSES
THE BEGINNING OF AT THE END OF PAID DURING
THE PERIOD ($) THE PERIOD ($) THE PERIOD ($)*
- ---------------------------------------------------------------------------------------------------------------------------
Actual Fund Return** 1,000.00 1,024.36 1.08
Hypothetical 5% Return
(2.5% for the period) 1,000.00 1,023.87 1.07
- ---------------------------------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.21% (FROM
PERIOD JULY 1, 2007 - DECEMBER 31, 2007), 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, 2007 WAS: 2.44%.
19
<page>
Elfun Diversified Fund
- --------------------------------------------------------------------------------
CHANGE IN VALUE OF A $10,000 INVESTMENT
[LINE CHART OMITTED PLOT POINTS FOLLOWS]
ELFUN S&P 500 LB AGGREGATE
DIVERSIFIED FUND INDEX BOND INDEX
12/97 $10000 $10000 $10000
12/98 11714 12870 10869
12/99 13359 15581 10779
12/00 14088 14150 12033
12/01 13704 12465 13049
12/02 12450 9710 14387
12/03 15105 12499 14977
12/04 16418 13859 15627
12/05 17078 14541 16007
12/06 19572 16837 16700
12/07 21282 17763 17864
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED DECEMBER 31, 2007
- --------------------------------------------------------------------------------
ONE FIVE TEN
YEAR YEAR YEAR
- --------------------------------------------------------------------------------
Elfun Diversified Fund 8.74% 11.32% 7.84%
S&P 500 Index 5.50% 12.84% 5.91%
LB Aggregate Bond
Index 6.97% 4.42% 5.97%
Elfun Diversified Fund (ending value $21,282)
S&P 500 Index (ending value $17,763)
LB Aggregate Bond Index (ending value $17,864)
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.
* LIPPER PERFORMANCE COMPARISON
MIXED-ASSET TARGET ALLOCATION GROWTH PEER GROUP
BASED ON AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/07
ONE FIVE TEN
YEAR YEAR YEAR
Fund's rank in peer group: 149 150 29
Number of Funds in peer group: 646 421 209
Peer group average annual total return: 6.42% 10.71% 5.91%
Lipper categories in peer group: Mixed-Asset Target Allocation Growth
* SEE NOTES TO PERFORMANCE FOR THE EXPLANATION OF PEER CATEGORIES.
TOP TEN LARGEST HOLDINGS
AS OF DECEMBER 31, 2007
AS A % OF MARKET VALUE
- --------------------------------------------------------------------------------
UnitedHealth Group, Inc. 2.00%
- --------------------------------------------------------------------------------
State Street Corp. 1.99%
- --------------------------------------------------------------------------------
Cisco Systems, Inc. 1.93%
- --------------------------------------------------------------------------------
American International
Group, Inc. 1.91%
- --------------------------------------------------------------------------------
QUALCOMM, Inc. 1.88%
- --------------------------------------------------------------------------------
Schlumberger Ltd. 1.88%
- --------------------------------------------------------------------------------
Procter & Gamble Co. 1.69%
- --------------------------------------------------------------------------------
NII Holdings Inc. (Class B) 1.63%
- --------------------------------------------------------------------------------
PepsiCo, Inc. 1.59%
- --------------------------------------------------------------------------------
Washington Mutual Master
- --------------------------------------------------------------------------------
Note Trust 5.06%, 05/15/14 1.59%
- --------------------------------------------------------------------------------
SEE NOTES TO PERFORMANCE ON PAGE 1 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.
20
<page>
ELFUN DIVERSIFIED FUND
Schedule of Investments
- --------------------------------------------------------------------------------
(dollars in thousands)-- December 31, 2007
ELFUN DIVERSIFIED FUND
PORTFOLIO COMPOSITION AS A % OF THE MARKET VALUE OF $300,853 AS OF DECEMBER 31,
2007.
[PIE CHART OMITTED PLOT POINTS FOLLOWS]
DOMESTIC EQUITY 55.2%
BONDS AND NOTES 22.7%
FOREIGN EQUITY 20.7%
SHORT-TERM & OTHERS 1.4%
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
DOMESTIC EQUITY -- 55.0%+
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY -- 6.8%
Bed Bath & Beyond, Inc. 115,003 $ 3,380 (a,h)
Carnival Corp. 70,016 3,115 (h)
Comcast Corp. (Class A) 221,602 4,015 (a,h)
Kohl's Corp. 18,183 833 (a)
Liberty Global, Inc. (Series C) 35,895 1,313 (a)
Liberty Media Holding Corp -
Capital (Series A) 18,962 2,209 (a)
Lowe's Companies, Inc. 92,493 2,092
Omnicom Group, Inc. 34,692 1,649
Target Corp. 16,385 819
The Cheesecake Factory 22,679 538 (a)
19,963
CONSUMER STAPLES -- 5.4%
Alberto-Culver Co. 38,915 955
Colgate-Palmolive Co. 58,662 4,573 (h)
Kimberly-Clark Corp. 7,254 503
PepsiCo, Inc. 63,077 4,787
Procter & Gamble Co. 69,073 5,071
15,889
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
ENERGY -- 5.9%
EOG Resources, Inc. 18,923 $ 1,689
Exxon Mobil Corp. 49,343 4,623
Halliburton Co. 28,385 1,076
Schlumberger Ltd. 57,401 5,646
Transocean, Inc. 29,432 4,213
17,247
FINANCIALS -- 6.9%
Alleghany Corp. 917 369 (a)
American International
Group, Inc. 98,402 5,737 (h)
CB Richard Ellis Group, Inc.
(Class A) 85,789 1,849 (a)
Citigroup, Inc. 63,414 1,867
Federal National
Mortgage Assoc. 36,680 1,466
HCC Insurance Holdings, Inc. 24,091 691
Metlife, Inc. 15,138 933
State Street Corp. 73,802 5,993 (e)
SunTrust Banks, Inc. 18,291 1,143
20,048
HEALTHCARE -- 9.2%
Abbott Laboratories 59,291 3,329 (h)
Aetna, Inc. 40,425 2,334 (h)
Amgen, Inc. 99,217 4,608 (a)
Gilead Sciences, Inc. 45,412 2,089 (a)
Lincare Holdings Inc. 6,980 245 (a)
Medtronic Inc. 64,891 3,262
Resmed, Inc. 44,318 2,328 (a)
UnitedHealth Group, Inc. 103,482 6,023
Wyeth 62,445 2,759
26,977
INDUSTRIALS -- 3.7%
Dover Corp. 57,491 2,650
Hexcel Corp. 42,579 1,034 (a)
Textron Inc. 59,618 4,251
United Technologies Corp. 37,846 2,897
10,832
- -------------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
21
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Schedule of Investments
- --------------------------------------------------------------------------------
(dollars in thousands)-- December 31, 2007
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY -- 14.1%
Automatic Data Processing,
Inc. 44,154 $ 1,966 (h)
Cisco Systems, Inc. 215,005 5,820 (a,h)
Corning Incorporated 50,464 1,211
Intel Corp. 140,666 3,750
Intuit Inc. 88,308 2,791 (a)
Microchip Technology Inc. 22,078 694
Microsoft Corp. 119,845 4,266
Molex, Inc. (Class A) 76,953 2,022
Oracle Corp. 176,616 3,988 (a)
Paychex, Inc. 90,092 3,263
QUALCOMM, Inc. 144,122 5,671
Western Union Co. 153,596 3,729
Yahoo! Inc. 87,047 2,025 (a)
41,196
MATERIALS -- 1.3%
Allegheny Technologies
Incorporated 12,336 1,066
Monsanto Co. 25,176 2,812
3,878
TELECOMMUNICATION SERVICES -- 1.7%
NII Holdings Inc. (Class B) 101,449 4,902 (a)
TOTAL DOMESTIC EQUITY
(COST $141,452) 160,932
- --------------------------------------------------------------------------------
FOREIGN EQUITY -- 21.3%
- --------------------------------------------------------------------------------
COMMON STOCK -- 20.8%
CONSUMER DISCRETIONARY -- 1.4%
Accor S.A. 2,720 217
DaimlerChrysler AG (Regd.) 4,142 403
Esprit Holdings Ltd. 12,000 180
Koninklijke Philips
Electronics N.V. 29,358 1,267
LVMH Moet Hennessy
Louis Vuitton S.A. 2,652 321
Reed Elsevier PLC 20,318 275
Renault S.A. 1,718 244
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Swatch Group AG 1,166 $ 351
Toyota Motor Corp. 15,246 824
4,082
CONSUMER STAPLES -- 1.7%
Diageo PLC 33,662 724
Groupe Danone 12,274 1,102
Metro AG 4,786 402
Nestle S.A. (Regd.) 3,387 1,556
Shiseido Company Ltd. 26,000 616
Tesco PLC 68,622 652
5,052
ENERGY -- 1.8%
Acergy S.A. 26,116 583
BG Group, PLC 35,775 819
OAO Gazprom ADR 8,313 471
Paladin Resources Ltd. 55,793 333 (a)
Petroleo Brasileiro S.A. ADR 8,671 834
Saipem S.p.A. 34,178 1,371
Total S.A. 11,886 988
5,399
FINANCIALS -- 3.8%
Allianz AG (Regd.) 947 205
AXA S.A. 10,240 410
Banca Intesa S.p.A. 91,608 725
Banco Santander Central
Hispano S.A. (Regd.) 42,100 910
Bank of Yokohama Ltd. 47,605 334
BNP Paribas 6,161 669
CapitaLand Ltd. 73,000 318
Credit Agricole S.A. 8,623 291
Kookmin Bank 5,587 412 (a)
Lloyds TSB Group, PLC 30,398 286
Mitsubishi Estate
Company Ltd. 38,982 940
Mitsubishi UFJ Financial
Group, Inc. 96,052 900
Nomura Holdings, Inc. 63,399 1,075
Prudential PLC 42,011 595
Reliance Capital Ltd. ADR 1,221 80 (a,b)
Royal Bank of Scotland
Group, PLC 66,078 584
- -----------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
22
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Schedule of Investments
- --------------------------------------------------------------------------------
(dollars in thousands)-- December 31, 2007
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Sony Financial Holdings Inc. 97 $ 371 (a)
Sumitomo Realty & Development
Company Ltd. 9,000 223
Sun Hung Kai Properties Ltd. 17,177 364
Swiss Reinsurance 2,372 169
Unibail-Rodamco (REIT) 1,371 300
UniCredito Italiano S.p.A. 117,741 978
11,139
HEALTHCARE -- 0.5%
Roche Holding AG 8,992 1,554
INDUSTRIALS -- 3.7%
ABB Ltd. (Regd.) 32,261 929
Alstom 2,716 584
Asahi Glass Company Ltd. 31,003 416
Brambles Ltd. 25,962 263
CAE, Inc. 182,929 2,467
Canadian National
Railway Co. 11,204 530
East Japan Railway Co. 80 660
Group 4 Securicor PLC 61,951 299
Group 4 Securicor PLC 51,931 253
Komatsu Ltd. 14,358 391
Larsen & Toubro Ltd. 3,386 358
Mitsubishi Heavy
Industries Ltd. 102,000 439
Orascom Construction
Industries 4,667 486
Orkla ASA 16,323 316
Sandvik AB 27,204 468
Schneider Electric S.A. 1,934 262
Siemens AG (Regd.) 7,614 1,212
Vinci S.A. 6,088 451
10,784
INFORMATION TECHNOLOGY -- 2.0%
Alibaba.com Ltd. 13,644 49 (a,b)
Hoya Corp. 4,700 150
Ibiden Company Ltd. 11,699 812
Nidec Corp. 4,058 301
Nintendo Company Ltd. 200 120
Nokia OYJ 40,154 1,557
Research In Motion Ltd. 16,104 1,826 (a)
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
Samsung Electronics
Company Ltd. 800 $ 475
Taiwan Semiconductor
Manufacturing
Company Ltd. 286,770 548
5,838
MATERIALS -- 2.7%
Anglo Platinum Ltd. 1,602 237
Bayer AG 11,976 1,095
BHP Billiton PLC 47,901 1,474
Holcim Ltd. (Regd.) 276 30
Linde AG 6,174 816
Novozymes (Series B) 3,881 443
Potash Corp of Saskatchewan 8,971 1,304
Rio Tinto PLC (Regd.) 7,563 800
Syngenta AG (Regd) 1,713 436
Toray Industries Inc. 152,999 1,198
7,833
TELECOMMUNICATION SERVICES -- 2.0%
America Movil S.A. de C.V.
ADR (Series L) 9,712 596 (h)
Hellenic Telecommunications
Organization S.A. 18,550 683
Mobile Telesystems OJSC ADR 2,849 290
MTN Group, Ltd. 36,579 685
Singapore
Telecommunications Ltd. 178,254 495
Telenor ASA 70,203 1,678
Vodafone Group, PLC 373,949 1,398
5,825
UTILITIES -- 1.2%
E.ON AG 5,259 1,119
National Grid PLC 28,219 468
RWE AG 1,793 252
Suez S.A. 8,076 550
Veolia Environnement 10,948 1,000
3,389
TOTAL COMMON STOCK
(COST $42,112) 60,895
- ------------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
23
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Schedule of Investments
- --------------------------------------------------------------------------------
(dollars in thousands)-- December 31, 2007
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
PREFERRED STOCK -- 0.5%
- --------------------------------------------------------------------------------
All America Latina
Logistica S.A. 7,000 $ 91
Cia Vale do Rio Doce ADR 46,573 1,303 (h)
TOTAL PREFERRED STOCK
(COST $565) 1,394
TOTAL FOREIGN EQUITY
(COST $42,677) 62,289
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
BONDS AND NOTES -- 23.5%
- --------------------------------------------------------------------------------
U.S. TREASURIES -- 5.4%
U.S. Treasury Bonds
4.50% 02/15/36 $ 70 70
4.75% 02/15/37 2,131 2,230
U.S. Treasury Notes
3.63% 10/31/09 3,565 3,600
4.25% 09/30/12 2,765 2,862
4.50% 11/15/10 - 05/15/17 843 874
4.63% 11/15/09 - 02/15/17 2,240 2,341
4.75% 08/15/17 2,569 2,713
4.88% 06/30/12 900 954
15,644
FEDERAL AGENCIES -- 0.3%
Federal Home Loan
Mortgage Corp.
4.88% 02/09/10 960 985
AGENCY MORTGAGE BACKED -- 6.2%
Federal Home Loan
Mortgage Corp.
4.50% 06/01/33 - 02/01/35 134 126(h)
5.00% 07/01/35 - 10/01/35 768 751(h)
5.50% 05/01/20 15 15(h)
6.00% 04/01/17 - 05/01/35 302 309(h)
6.50% 01/01/27 - 07/01/36 267 278(h)
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
7.00% 10/01/16 - 08/01/36$ 103 $ 106 (h)
7.50% 11/01/09 - 09/01/33 43 44(h)
8.00% 07/01/26 - 11/01/30 10 10(h)
8.50% 04/01/30 - 05/01/30 29 31(h)
6.00% TBA 675 685(c)
Federal National Mortgage Assoc.
4.00% 05/01/19 - 06/01/19 114 110(h)
4.50% 05/01/18 - 02/01/35 641 623(h)
5.00% 07/01/20 - 08/01/35 626 613(h)
5.00% 07/01/35 274 277(h,i)
5.10% 08/01/35 180 181(h,i)
5.26% 04/01/37 81 81(i)
5.44% 04/01/37 7 7(i)
5.50% 04/01/14 - 03/01/37 537 544(h)
5.53% 04/01/37 101 103(i)
5.59% 04/01/37 181 184(i)
5.62% 03/01/37 6 6(i)
5.63% 06/01/37 133 135(i)
5.66% 05/01/37 54 54(i)
5.68% 04/01/37 65 66(i)
5.70% 04/01/37 129 131(i)
5.71% 04/01/37 105 107(i)
5.72% 04/01/37 32 33(i)
5.85% 06/01/37 167 170(i)
6.00% 02/01/14 - 11/01/37 681 691(h)
6.04% 10/01/37 104 106(i)
6.50% 12/01/14 - 08/01/36 1,092 1,125(h)
7.00% 01/01/16 - 06/01/36 251 261(h)
7.50% 12/01/09 - 03/01/34 73 79(h)
8.00% 12/01/11 - 11/01/33 79 83(h)
8.50% 05/01/31 4 4(h)
9.00% 06/01/09 - 12/01/22 35 37(h)
5.00% TBA 3,566 3,496(c)
5.50% TBA 4,171 4,176(c)
6.00% TBA 253 257(c)
6.50% TBA 325 334(c)
Government National
Mortgage Assoc.
4.50% 08/15/33 - 09/15/34 201 194(h)
5.00% 08/15/33 53 52(h)
6.00% 04/15/30 - 09/15/36 84 86(h)
6.50% 06/15/24 - 07/15/36 130 135(h)
- ------------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
24
<page>
ELFUN DIVERSIFIED FUND
Schedule of Investments
- --------------------------------------------------------------------------------
(dollars in thousands)-- December 31, 2007
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
7.00% 03/15/12 - 10/15/36$ 130 $ 137 (h)
7.50% 07/15/23 - 04/15/28 42 43(h)
8.00% 05/15/30 2 2(h)
8.50% 10/15/17 41 44(h)
9.00% 11/15/16 - 12/15/21 38 40(h)
5.50% TBA 1,060 1,064(c)
18,226
AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.8%
Collateralized Mortgage
Obligation Trust (Class B)
3.74% 11/01/18 3 3(d,f,h)
Federal Home Loan
Mortgage Corp.
1.42% 04/15/37 264 20(d,g,i)
1.72% 05/15/37 356 26(d,g,i)
1.79% 04/25/37 218 17(d,g,i)
2.12% 12/15/30 335 21(d,g,h,i)
2.75% 09/15/36 242 27(d,g,h,i)
4.30% 12/15/33 50 42(d,h,i)
4.50% 04/15/13 - 03/15/19 285 24(d,g,h)
5.00% 04/15/14 - 12/01/34 1,818 351(d,g,h)
5.50% 04/15/17 - 06/15/33 220 36(d,g,h)
5.50% 04/15/26 - 12/15/36 262 266(d)
5.63% 06/15/33 250 256(d,h,i)
7.50% 01/15/16 14 15(d,h)
7.50% 07/15/27 38 7(d,g,h)
8.00% 04/15/20 2 2(d,h)
8.00% 02/01/23 - 07/01/24 8 2(d,g,h)
8.61% 11/15/37 144 107(d,f)
21.57% 09/25/43 496 6(d,g,h,i)
Federal Home Loan
Mortgage STRIPS
6.04% 08/01/27 2 1(d,f,h)
Federal National Mortgage Assoc.
1.59% 05/25/37 - 06/25/37 3,481 231(d,g,i)
1.91% 03/25/37 211 20(d,g,i)
2.34% 07/25/37 564 52(d,g,i)
2.64% 05/25/18 765 58(d,g,h,i)
2.74% 09/25/42 356 28(d,g,h,i)
2.79% 04/25/17 - 10/25/17 166 12(d,g,h,i)
2.84% 08/25/16 35 2(d,g,h,i)
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
3.24% 06/25/42 $ 88 $ 7 (d,g,h,i)
4.00% 02/25/28 7 7(d,h)
4.50% 05/25/18 49 4(d,g,h)
4.75% 11/25/14 29 1(d,g,h)
5.00% 02/25/32 25 2(d,g,h)
5.00% 10/25/35 45 40(d)
5.50% 03/25/29 230 233(d)
8.00% 07/25/14 10 10(d,h)
39.31% 12/25/42 135 4(d,g,h,i)
Federal National Mortgage
Assoc. (Class 2)
5.50% 12/01/33 - 05/25/37 50 12(d,g)
Federal National Mortgage
Assoc. (Class S)
2.24% 02/25/31 105 5(d,g,h,i)
Federal National Mortgage
Assoc. REMIC
4.50% 11/25/13 47 1(d,g,h)
5.00% 10/25/22 55 8(d,g,h)
5.91% 03/25/31 99 102(d,h,i)
Federal National Mortgage Assoc.
REMIC (Class B)
4.49% 12/25/22 3 3(d,f,h)
Federal National Mortgage
Assoc. STRIPS (Class 2)
5.00% 08/01/34 665 170(d,g)
7.50% 11/01/23 79 22(d,g,h)
8.00% 08/01/23 - 07/01/24 17 4(d,g,h)
8.50% 03/01/17 - 07/25/22 7 1(d,g,h)
9.00% 05/25/22 3 1(d,g,h)
2,269
ASSET BACKED -- 2.2%
Bear Stearns Asset Backed
Securities Inc. (Class A)
5.24% 01/25/34 13 12(d,h,i)
Capital One Master Trust (Class C)
6.70% 06/15/11 100 101(b,d,h)
Carmax Auto Owner Trust
4.35% 03/15/10 64 64(d,h)
Chase Credit Card Master
Trust (Class A)
5.14% 07/15/10 120 120(d,h,i)
- -------------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
25
<page>
ELFUN DIVERSIFIED FUND
Schedule of Investments
- --------------------------------------------------------------------------------
(dollars in thousands)-- December 31, 2007
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Chase Funding Mortgage Loan
Asset-Backed Certificates
5.37% 03/25/32 $ 25 $ 24(h,i)
Citibank Credit Card Issuance Trust
4.45% 04/07/10 59 59(h)
Countrywide Asset-Backed
Certificates
5.30% 05/25/33 6 6(h,i)
Countrywide Asset-Backed
Certificates (Class A)
5.53% 04/25/32 21 21(h,i)
Fleet Home Equity Loan
Trust (Class A)
5.20% 01/20/33 17 16(h,i)
Honda Auto Receivables
Owner Trust (Class A)
4.15% 10/15/10 69 69(h)
Mid-State Trust
7.54% 07/01/35 12 13(h)
Peco Energy Transition Trust
6.52% 12/31/10 45 48(h)
Residential Asset Mortgage
Products, Inc.
5.11% 03/25/34 5 5(h,i)
Residential Asset Mortgage
Products, Inc. (Class A)
5.43% 06/25/32 20 20(h,i)
Residential Asset Securities Corp.
5.37% 07/25/32 8 8(h,i)
Residential Asset Securities
Corp. (Class A)
4.16% 07/25/30 15 15(h,i)
Superior Wholesale Inventory
Financing Trust (Class A)
5.21% 06/15/10 1,000 996(h,i)
Washington Mutual Master
Note Trust
5.06% 05/15/14 5,000 4,782(b,i)
Wells Fargo Home Equity Trust
3.97% 05/25/34 23 21(h,i)
6,400
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
CORPORATE NOTES -- 5.8%
Abbey National PLC
7.95% 10/26/29 $ 51 $ 58(h)
AES Ironwood LLC
8.86% 11/30/25 115 126(h)
American Electric Power
Company, Inc. (Series C)
5.38% 03/15/10 340 345(h)
American Electric Power
Company, Inc. (Series D)
5.25% 06/01/15 35 34(h)
American International Group, Inc.
5.85% 01/16/18 373 376
American Railcar Industries, Inc.
7.50% 03/01/14 25 24(h)
Amgen Inc.
5.85% 06/01/17 90 91(b,h)
Archer-Daniels-Midland Co.
6.45% 01/15/38 243 248
Arizona Public Service Co.
6.25% 08/01/16 80 81(h)
AT&T, Inc.
4.13% 09/15/09 155 154
BAC CAP TRUST V
5.63% 03/08/35 80 68(h)
Banco Mercantil del Norte S.A.
6.14% 10/13/16 210 208(b,h,i)
Banco Santander Chile
5.38% 12/09/14 90 90(b,h)
Basell AF SCA
8.38% 08/15/15 125 101(b)
Bear Stearns Companies Inc.
5.85% 07/19/10 250 250
6.95% 08/10/12 855 879
BellSouth Corp.
4.20% 09/15/09 75 75(h)
6.55% 06/15/34 75 77(h)
BJ Services Co.
5.75% 06/01/11 80 82(h)
Bristol-Myers Squibb Co.
5.88% 11/15/36 60 59(h)
- ------------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
26
<page>
ELFUN DIVERSIFIED FUND
Schedule of Investments
- --------------------------------------------------------------------------------
(dollars in thousands)-- December 31, 2007
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
British Telecommunications PLC
8.63% 12/15/10 $ 30 $ 33(h)
Cadbury Schweppes US
Finance LLC
3.88% 10/01/08 75 75(b,h)
Capital One Bank
6.50% 06/13/13 40 39(h)
Cargill Inc.
6.00% 11/27/17 605 604(b)
Carolina Power & Light Co.
5.15% 04/01/15 40 40(h)
5.70% 04/01/35 20 19(h)
6.13% 09/15/33 35 36(h)
Chubb Corp.
6.00% 05/11/37 75 72(h)
Citigroup Capital
8.30% 12/21/57 56 59(i)
Citigroup, Inc.
5.13% 02/14/11 - 05/05/14 200 199(h)
Clarendon Alumina
Production Ltd.
8.50% 11/16/21 200 208(b,h)
Consumers Energy Co.
5.15% 02/15/17 50 48(h)
COX Communications, Inc.
7.13% 10/01/12 35 37(h)
7.75% 11/01/10 70 75(h)
CSX Transportation, Inc.
9.75% 06/15/20 8 10(h)
DaimlerChrysler NA Holding Corp.
4.05% 06/04/08 50 50(h)
Diageo Capital PLC
5.20% 01/30/13 247 249
Dominion Resources, Inc.
(Series B)
6.30% 09/30/66 395 383(h,i)
Dover Corp.
6.50% 02/15/11 55 57(h)
DP WORLD Ltd.
6.85% 07/02/37 200 190(b)
Duke Energy Corp.
5.38% 01/01/09 60 60(h)
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
EI Du Pont de Nemours & Co.
4.88% 04/30/14 $ 60 $ 59(h)
El Paso Electric Co.
6.00% 05/15/35 45 42
Empresa Energetica de Sergipe
and Sociedade Anonima
de Eletrificaao da Paraiba
10.50% 07/19/13 55 59(b,h)
FirstEnergy Corp. (Series B)
6.45% 11/15/11 120 124(h)
GMAC LLC
5.63% 05/15/09 740 698
Goldman Sachs Group, Inc.
6.60% 01/15/12 365 388(h)
GTE Corp.
6.94% 04/15/28 100 107(h)
7.51% 04/01/09 55 57(h)
Hexion US Finance Corp.
9.75% 11/15/14 160 173
HSBC Bank USA NA
4.63% 04/01/14 100 95
HSBC Capital Funding LP
4.61% 12/31/49 100 92(b,h,i)
HSBC Capital Funding LP
(Series 1)
9.55% 12/31/49 85 93(b,h,i)
HSBC Finance Corp.
6.75% 05/15/11 50 53
Hydro Quebec
8.50% 12/01/29 120 170(h)
Idearc, Inc.
8.00% 11/15/16 150 138
IIRSA Norte Finance Ltd.
8.75% 05/30/24 112 127(b,h)
ING Capital Funding TR III
8.44% 12/29/49 95 101(i)
ING Groep N.V.
5.78% 12/29/49 375 349(i)
Intergen N.V.
9.00% 06/30/17 435 458(b)
International Steel Group Inc.
6.50% 04/15/14 75 77
- -----------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
27
<page>
ELFUN DIVERSIFIED FUND
Schedule of Investments
- --------------------------------------------------------------------------------
(dollars in thousands)-- December 31, 2007
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
iStar Financial, Inc. (REIT)
7.00% 03/15/08 $ 50 $ 50(h)
JBS S.A.
9.38% 02/07/11 100 98
JP Morgan Chase & Co.
7.00% 11/15/09 110 115(h)
JP Morgan Chase Bank
5.88% 06/13/16 75 76
Kansas Gas & Electric
5.65% 03/29/21 44 43(h)
Landsbanki Islands
5.73% 08/25/09 100 100(b,h,i)
Libbey Glass Inc.
11.91% 06/01/11 105 111(i)
Majestic Star Casino LLC
9.50% 10/15/10 155 146(h)
Marfrig Overseas Ltd.
9.63% 11/16/16 100 99(b)
Markel Corp.
7.35% 08/15/34 35 37(h)
McDonald's Corp.
5.80% 10/15/17 254 262
Mediacom LLC
9.50% 01/15/13 145 135(h)
Metropolitan Life Global
Funding I
4.25% 07/30/09 105 105(b,h)
Midamerican Energy Holdings Co.
6.13% 04/01/36 55 55(h)
Mizuho Financial Group
Cayman Ltd.
8.38% 12/29/49 95 96
Munich Re America Corp.
(Series B)
7.45% 12/15/26 55 61(h)
Nakilat Inc.
6.27% 12/31/33 100 91(b,h)
Nelnet, Inc.
5.13% 06/01/10 65 62(h)
Nevada Power Co. (Series N)
6.65% 04/01/36 40 39(h)
NGPL PipeCo LLC
7.12% 12/15/17 259 266(b)
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Nisource Finance Corp.
7.88% 11/15/10 $ 30 $ 32(h)
Norfolk Southern Corp.
6.00% 04/30/08 50 50(h)
8.63% 05/15/10 100 109(h)
Norfolk Southern Railway Co.
9.75% 06/15/20 22 30(h)
Northeast Utilities (Series B)
3.30% 06/01/08 35 35(h)
Northern States Power Co.
6.25% 06/01/36 30 31(h)
NorthWestern Corp.
5.88% 11/01/14 100 99(h)
Ohio Power Co. (Series E)
6.60% 02/15/33 35 35(h)
OPTI Canada Inc.
8.25% 12/15/14 75 74(b)
Pacific Bell
7.13% 03/15/26 35 37(h)
Pacific Gas & Electric Co.
5.80% 03/01/37 120 115
PanAmSat Corp.
9.00% 08/15/14 120 121(h)
Pemex Finance Ltd.
9.03% 02/15/11 52 56(h)
Pemex Project Funding
Master Trust
6.13% 08/15/08 6 6
7.88% 02/01/09 28 29
Petrobras International
Finance Co.
5.88% 03/01/18 375 375
PNC Preferred Funding Trust I
6.52% 12/31/49 270 243(b,i)
Potomac Edison Co.
5.35% 11/15/14 40 39(h)
Public Service Company
of Colorado
7.88% 10/01/12 95 106(h)
Puget Sound Energy, Inc.
3.36% 06/01/08 35 35(h)
5.48% 06/01/35 55 47(h)
- ----------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
28
<page>
ELFUN DIVERSIFIED FUND
Schedule of Investments
- --------------------------------------------------------------------------------
(dollars in thousands)-- December 31, 2007
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Puget Sound Energy, Inc. (Series A)
6.97% 06/01/67 $120 $ 108(i)
Rabobank Capital Funding II
5.26% 12/31/49 78 73(b,i)
Rede Empresas de Energia
Eletrica S.A.
11.13% 04/02/49 100 98(b)
Rock-Tenn Co.
8.20% 08/15/11 160 166
Royal Bank of Scotland
Group PLC
5.00% 10/01/14 70 67(h)
Sabine Pass LNG LP
7.25% 11/30/13 110 105
7.50% 11/30/16 140 134
Security Benefit Life Insurance
8.75% 05/15/16 60 69(b)
Sierra Pacific Resources
8.63% 03/15/14 240 256
Simon Property Group, L.P. (REIT)
4.60% 06/15/10 55 55(h)
Southern Copper Corp.
7.50% 07/27/35 20 21
Sovereign Capital Trust VI
7.91% 06/13/36 175 169(h)
Sprint Capital Corp.
7.63% 01/30/11 360 374
Stallion Oilfield Finance Corp.
9.75% 02/01/15 120 110(b)
Standard Chartered Bank
Hong Kong Ltd.
4.38% 12/03/14 90 89(i)
Stewart Enterprises, Inc.
6.25% 02/15/13 70 66(h)
Telecom Italia Capital S.A.
6.20% 07/18/11 115 118
Telefonica Emisiones SAU
5.86% 02/04/13 375 386
Titan Petrochemicals
Group Ltd.
8.50% 03/18/12 100 88(b)
Tronox Worldwide LLC
9.50% 12/01/12 105 101(h)
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
UBS Preferred Funding Trust I
8.62% 10/29/49 $ 70 $ 75(i)
Valspar Corp.
5.63% 05/01/12 60 61
Verizon Global Funding Corp.
7.25% 12/01/10 120 128
Verizon Pennsylvania, Inc.
8.35% 12/15/30 40 48(h)
8.75% 08/15/31 55 69(h)
Weatherford International, Inc.
5.95% 06/15/12 95 98(b)
Wells Fargo & Co.
5.63% 12/11/17 125 126
Wells Fargo Bank NA
5.95% 08/26/36 80 78
Westar Energy, Inc.
7.13% 08/01/09 150 154(h)
Westlake Chemical Corp.
6.63% 01/15/16 145 137(h)
Wisconsin Electric Power
5.70% 12/01/36 20 19(h)
16,826
NON-AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 2.7%
Banc of America Commercial
Mortgage Inc.
4.13% 07/10/42 100 99
5.32% 10/10/11 87 87(h)
Banc of America Commercial
Mortgage Inc. (Class A)
5.79% 05/11/35 187 191
Banc of America Commercial
Mortgage Inc. (Class C)
5.70% 04/10/17 100 91
Banc of America Funding Corp.
5.74% 03/20/36 50 51(h,i)
5.82% 02/20/36 100 97(h,i)
Banc of America Mortgage
Securities (Class B)
5.38% 01/25/36 50 47(h,i)
Bank of America Alternative
Loan Trust
6.50% 07/25/35 70 69(h)
- ------------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
29
<page>
ELFUN DIVERSIFIED FUND
Schedule of Investments
- --------------------------------------------------------------------------------
(dollars in thousands)-- December 31, 2007
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Bear Stearns Commercial
Mortgage Securities
5.41% 03/11/39 $ 39 $ 39(h,i)
5.48% 10/12/41 145 146(h,i)
5.53% 10/12/41 145 145(h,i)
6.02% 02/14/31 97 98(h)
Bear Stearns Commercial
Mortgage Securities (Class A)
5.66% 06/11/40 800 813(i)
Bear Stearns Commercial
Mortgage Securities (Class D)
5.99% 09/11/42 20 16(b,i)
Countrywide Alternative
Loan Trust
5.98% 05/25/36 25 16(h,i)
6.00% 03/25/36 - 08/25/36 96 24(h)
Countrywide Alternative Loan
Trust (Class B)
6.00% 05/25/36 - 08/25/36 45 23(h)
Credit Suisse Mortgage
Capital Certificates
5.47% 09/15/39 128 129(h)
Credit Suisse Mortgage Capital
Certificates (Class C)
5.65% 02/25/36 24 21(h,i)
CS First Boston Mortgage
Securities Corp.
5.25% 08/25/34 37 36(h)
5.33% 10/25/35 44 36(h,i)
5.37% 07/15/37 1,185 26(b,d,h,i)
CS First Boston Mortgage
Securities Corp. (Class A)
5.44% 09/15/34 99 100
6.53% 06/15/34 100 104
DLJ Commercial
Mortgage Corp.
6.24% 11/12/31 313 315(h)
DLJ Commercial Mortgage
Corp. (Class A)
7.18% 11/10/33 90 94
GMAC Commercial Mortgage
Securities, Inc.
6.42% 05/15/35 269 270(h)
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
MAC Commercial Mortgage
Securities, Inc. (Class X)
5.29% 12/10/41 $1,713 $ 31(d,h,i)
Greenwich Capital Commercial
Funding Corp.
5.12% 04/10/37 90 90(h)
Indymac INDA Mortgage
Loan Trust
5.14% 01/25/36 100 90(h,i)
Indymac INDA Mortgage Loan
Trust (Class B)
5.14% 01/25/36 100 94(h,i)
JP Morgan Chase Commercial
Mortgage Securities Corp.
1.11% 01/12/39 1,006 25(b,h,i)
6.20% 02/12/51 30 26(b,i)
6.47% 11/15/35 64 67(h)
LB-UBS Commercial
Mortgage Trust
4.06% 09/15/27 144 142(h,i)
5.20% 01/18/12 1,497 32(d,h,i)
6.23% 03/15/26 87 88(h)
6.97% 01/15/36 491 28(b,d,h)
7.70% 10/15/35 520 21(b,d,h,i)
8.47% 03/15/36 1,271 33(b,d,h,i)
8.57% 02/15/40 1,247 25(b,d,h,i)
LB-UBS Commercial Mortgage
Trust (Class B)
6.65% 07/14/16 26 28(b,h)
LB-UBS Commercial Mortgage
Trust (Class F)
6.24% 07/15/40 50 43(i)
LB-UBS Commercial Mortgage
Trust (Class X)
8.36% 12/15/39 1,083 18(b,d,h,i)
Master Alternative Loans Trust
5.00% 08/25/18 49 8(g,h)
6.50% 08/25/34 - 05/25/35 205 203(h)
Master Alternative Loans Trust
(Class 3)
6.50% 01/25/35 55 55(h)
- ------------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
30
<page>
ELFUN DIVERSIFIED FUND
Schedule of Investments
- --------------------------------------------------------------------------------
(dollars in thousands)-- December 31, 2007
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Merrill Lynch Mortgage
Trust (Class A)
5.61% 05/12/39 $300 $ 305(h,i)
MLCC Mortgage Investors, Inc.
5.37% 02/25/36 50 48(h,i)
Morgan Stanley Capital I
5.28% 12/15/43 58 58(h,i)
5.33% 12/15/43 58 58(h,i)
5.39% 11/12/41 162 152(h,i)
5.44% 02/12/44 500 499(b,i)
5.69% 04/15/49 300 306(i)
5.71% 07/12/44 100 102(h)
6.53% 03/15/31 199 201(h)
Morgan Stanley Capital I (Class A)
5.36% 02/12/44 74 74(i)
Morgan Stanley Dean
Witter Capital I
7.20% 10/15/33 188 196(h)
Nomura Asset Securities
Corp. (Class A)
6.59% 03/15/30 102 102(h)
Opteum Mortgage
Acceptance Corp.
5.17% 02/25/35 224 204(h,i)
PNC Mortgage Acceptance
Corp. (Class A)
6.36% 03/12/34 200 207
Residential Accredit Loans, Inc.
6.00% 01/25/36 243 202(h)
Residential Asset Securitization
Trust (Class A)
5.27% 05/25/35 102 92(h,i)
Structured Asset Securities
Corp. (Class X)
15.58% 02/25/28 74 2(d,i)
Wachovia Bank Commercial
Mortgage Trust
5.42% 04/15/47 500 500
Wells Fargo Mortgage Backed
Securities Trust
5.50% 01/25/36 - 03/25/36 198 159(h)
7,797
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
SOVEREIGN BONDS -- 0.1%
Government of Bahamas
6.63% 05/15/33 $50$ 57(b,h)
Government of Canada
7.50% 09/15/29 90 117
Government of
Manitoba Canada
4.90% 12/06/16 60 62(h)
Government of Panama
6.70% 01/26/36 55 58
294
TOTAL BONDS AND NOTES
(COST $68,885) 68,441
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
EXCHANGE TRADED FUNDS -- 1.7%
- --------------------------------------------------------------------------------
Financial Select Sector
SPDR Fund 25,449 736 (p)
Industrial Select Sector
SPDR Fund 108,773 4,260 (p)
TOTAL EXCHANGE TRADED FUNDS
(COST $3,584) 4,996
TOTAL INVESTMENTS IN SECURITIES
(COST $256,598) 296,658
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 1.4%
- --------------------------------------------------------------------------------
GEI Short Term Investment Fund
4.96% 4,195,290 4,195 (d,k)
(COST $4,195)
TOTAL INVESTMENTS
(COST $260,793) 300,853
LIABILITIES IN EXCESS OF OTHER
ASSETS, NET-- (2.9)% (8,629)
--------
NET ASSETS-- 100.0% $292,224
========
- ------------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
31
<page>
ELFUN DIVERSIFIED FUND
Schedule of Investments
- --------------------------------------------------------------------------------
(dollars in thousands)-- December 31, 2007
OTHER INFORMATION
- --------------------------------------------------------------------------------
The Elfun Diversified Fund had the following long futures contracts open at
December 31, 2007:
NUMBER CURRENT UNREALIZED
EXPIRATION OF NOTIONAL APPRECIATION/
DESCRIPTION DATE CONTRACTS VALUE DEPRECIATION
- --------------------------------------------------------------------------------
U.S. Treasury
Notes 10 Yr.
Futures March 2008 26 $2,948 $ 16
- --------------------------------------------------------------------------------
The Elfun Diversified Fund had the following short futures contracts open at
December 31, 2007:
NUMBER CURRENT UNREALIZED
EXPIRATION OF NOTIONAL APPRECIATION/
DESCRIPTION DATE CONTRACTS VALUE DEPRECIATION
- --------------------------------------------------------------------------------
S&P 500 Index
Futures March 2008 32 $(11,818) $ (89)
U.S. Treasury
Notes 2 Yr.
Futures March 2008 6 (1,262) (3)
----
$(76)
====
- -----------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
32
<page>
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 94.
Q. HOW DID THE ELFUN TAX-EXEMPT INCOME FUND PERFORM COMPARED TO ITS BENCHMARK
AND LIPPER PEER GROUP FOR THE TWELVE-MONTH PERIOD ENDED DECEMBER 31, 2007?
A. For the twelve-month period ended December 31, 2007, the Elfun-Tax-Exempt
Fund returned 2.96%. The Lehman Brothers Municipal Bond Index, the Fund's
benchmark, returned 3.36% and the Fund's Lipper peer group of 237 General
Municipal Bond funds returned an average of 1.15% for the same period.
Q. WHAT WERE THE PRIMARY DRIVERS OF
FUND PERFORMANCE?
A. For the year, performance was driven by the short and intermediate sectors
of the curve, which clearly benefited from several Federal Reserve interest
rate cuts. Municipal bonds dramatically underperformed treasuries throughout
the curve as relationships were de-linked by a flight to quality in U.S.
treasuries. The turmoil in the mortgage and credit markets and the aftermath
of the credit crunch that surfaced in mid-August hindered municipal bond
market performance throughout the second half of 2007. As a result, the
ratio of 30 year AAA rated municipals to U.S. treasuries rose to a five year
high of 102% before correcting to 96% by year-end. After four years of
stellar results, the high yield sector was the hardest hit, as periods of
illiquidity widened credit spreads and tax-exempt investors joined the
global flight to quality.
The Fund maintained its investment discipline throughout 2007, one of the
most turbulent periods in recent memory. As external technical factors
replaced fundamental credit factors as the key price determinant, the Fund
continued to adhere to its long-term strategy of not sacrificing long-term
income for short-term performance gains, which resulted in limited returns
for the period compared to its benchmark index.
Q. WHAT HAPPENED IN THE U.S. ECONOMY DURING THE TWELVE-MONTH PERIOD ENDED
DECEMBER 31, 2007 AND HOW WAS THE FUND POSITIONED WITH RESPECT TO
ECONOMIC CONDITIONS?
A. An element of uncertainty contributed to a volatile interest rate
environment over the last twelve months. Mixed economic signals were driven
by a stable employment sector on one hand and inflationary concerns fueled
by rising commodity and energy prices as well a slowdown in the housing
sector. While these trends contributed to a steeper
[PHOTO OMITTED]
33
<page>
Elfun Tax-Exempt Income Fund
- --------------------------------------------------------------------------------
Q&A
municipal curve, the widening credit spreads and several Federal Reserve rate
cuts caused the municipal market to suffer, along with other markets that were
similarly affected by the sub-prime housing market. The exposure of municipal
bond insurers in the asset-backed market led to concerns regarding the claims
paying ability of monoline bond insurers, who guarantee about one-half of the
$2.5 trillion in municipal debt outstanding. When the rating agencies acted to
reassess the capital adequacy of all monoline insurers, a temporary loss of
confidence occurred in the sector, having a dramatic affect on trading
relationships between insured credits and the benchmark yield curve. The Fund,
with a significant market underweight (-15%) in the insured sector, performed
well during these unstable periods. The Fund's moderate duration, high credit
quality and a strong income component were all notable performance contributors
during a year of unprecedented volatility. The Fund lagged the benchmark index
primarily due to its healthcare component, which performed poorly during the
fourth quarter, as high yield fund and hedge fund margin calls required
excessive selling, thereby negatively impacting asset prices.
Q. WHAT HAS BEEN THE INVESTMENT STRATEGY OF THE FUND OVER THE LAST YEAR?
A. On balance, 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. Sound credit principles
continue to form the foundation of our process, the average credit quality
of the portfolio as a result, remained at the Aa1 level. While we have
utilized our in-house research expertise to enhance income, we have limited
our high yield credit exposure to less than 5% of our holdings. Portfolio
duration continued to be managed within a narrow band, ranging from 5.0 -
5.2 years, insulating the portfolio to some degree from the significant
interest rate volatility experienced in the second half of the year. Our
curve positioning, with a modest bias to the intermediate part of the curve
remains a key return variant.
Our long-term strategy continues to rank it strongly among its peer group in
terms of overall performance. The Fund's adherence to a disciplined
investment process, emphasizing credit quality, maximization of tax-exempt
income and capital preservation, while limiting capital gains, has
contributed to a trend of consistent, above average returns compared to its
peer group.
34
<page>
Elfun Tax-Exempt Income Fund
- --------------------------------------------------------------------------------
Understanding Your Fund's Expenses
As a shareholder of the Fund you incur ongoing expenses, which include portfolio
management 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, 2007.
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 $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JULY 1, 2007 - DECEMBER 31, 2007
- ---------------------------------------------------------------------------------------------------------------------------
ACCOUNT VALUE AT ACCOUNT VALUE EXPENSES
THE BEGINNING OF AT THE END OF PAID DURING
THE PERIOD ($) THE PERIOD ($) THE PERIOD ($)*
- ---------------------------------------------------------------------------------------------------------------------------
Actual Fund Return** 1,000.00 1,028.02 0.61
Hypothetical 5% Return
(2.5% for the period) 1,000.00 1,024.31 0.61
- ---------------------------------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.12% (FROM
PERIOD JULY 1, 2007 - DECEMBER 31, 2007), 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, 2007 WAS: 2.80%.
35
<page>
Elfun Tax-Exempt Income Fund
- --------------------------------------------------------------------------------
CHANGE IN VALUE OF A $10,000 INVESTMENT
[LINE CHART OMITTED PLOT POINTS FOLLOWS]
ELFUN TAX-EXEMPT FUND LB MUNI BOND INDEX
12/97 $10000 $10000
12/98 10621 10648
12/99 10300 10429
12/00 11575 11648
12/01 12119 12244
12/02 13296 13421
12/03 13953 14134
12/04 14579 14767
12/05 15110 15286
12/06 15840 16026
12/07 16309 16565
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED DECEMBER 31, 2007
- --------------------------------------------------------------------------------
ONE FIVE TEN
YEAR YEAR YEAR
- --------------------------------------------------------------------------------
Elfun Tax-Exempt
Income Fund 2.96% 4.17% 5.01%
LBMI 3.36% 4.30% 5.18%
Elfun Tax-Exempt Income Fund (ending value $16,309)
LBMI (ending value $16,565)
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 circumstances, 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.
* LIPPER PERFORMANCE COMPARISON
GENERAL MUNICIPAL DEBT FUNDS PEER GROUP
BASED ON AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/07
ONE FIVE TEN
YEAR YEAR YEAR
Fund's rank in peer group: 36 33 8
Number of Funds in peer group: 237 211 143
Peer group average annual total return: 1.15% 3.48% 4.08%
Lipper categories in peer group: General Municipal Debt
* SEE NOTES TO PERFORMANCE FOR THE EXPLANATION OF PEER CATEGORIES.
QUALITY RATINGS
AS OF DECEMBER 31, 2007
AS A % OF MARKET VALUE
- --------------------------------------------------------------------------------
MOODY'S/S&P/ PERCENTAGE OF
FITCH RATING* MARKET VALUE
- --------------------------------------------------------------------------------
Aaa/AAA 61.68%
- --------------------------------------------------------------------------------
Aa/AA 21.99%
- --------------------------------------------------------------------------------
A/A 11.91%
- --------------------------------------------------------------------------------
Below A 4.42%
- --------------------------------------------------------------------------------
* MOODY'S INVESTORS SERVICES INC., STANDARD & POOR'S AND FITCH ARE NATIONALLY R
ECOGNIZED STATISTICAL RATING ORGANIZATIONS.
SEE NOTES TO PERFORMANCE ON PAGE 1 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
<page>
ELFUN TAX-EXEMPT INCOME FUND
Schedule of Investments
- --------------------------------------------------------------------------------
(dollars in thousands)-- December 31, 2007
ELFUN TAX-EXEMPT INCOME FUND
PORTFOLIO COMPOSITION AS A % OF THE MARKET VALUE OF $1,740,506 AS OF DECEMBER
31, 2007.
[PIE CHART OMITTED PLOT POINTS FOLLOWS]
GENERAL OBLIGATION 21.1%
TRANSPORTATION 16.9%
HOSPITAL 16.9%
WATER & SEWER 15.1%
EDUCATION 11.1%
UTILITIES 8.2%
LEASE 5.4%
RESOURCE & OTHER 4.4%
HOUSING 0.7%
SHORT - TERM 0.2%
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
MUNICIPAL BONDS -- 98.8%+
- --------------------------------------------------------------------------------
ALABAMA -- 1.6%
Alabama Public School & College
Authority (Series D)
5.75% 08/01/13 $5,000 $ 5,276
Alabama Water Pollution Control
Authority (Series A)
(AMBAC Insured)
4.75% 08/15/21 5,000 5,003(n)
City of Birmingham (Series C)
5.25% 05/01/17 3,395 3,618
City of Birmingham AL (Series B)
5.25% 06/01/24 205 213
5.25% 06/01/24 2,035 2,117(m)
Montgomery BMC Special Care
Facilities Financing Authority
(Series A) (MBIA Insured)
4.58% 11/15/20 8,375 9,103(m,n)
Montgomery Medical Clinic Board
5.25% 03/01/31 - 03/01/36 3,000 2,763
28,093
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
ALASKA -- 0.2%
City of Anchorage AK
(MBIA Insured)
6.50% 12/01/10 $ 2,825 $ 3,079(n)
ARIZONA -- 2.2%
Arizona State Transportation
Board (Series A)
6.00% 07/01/08 5,000 5,073
Arizona State University
(FSA Insured)
5.25% 07/01/15 5,000 5,419(n)
City of Phoenix (Series B)
5.00% 07/01/19 5,000 5,466
City of Scottsdale AZ
5.00% 07/01/24 5,000 5,146(m)
Maricopa County Industrial
Development Authority
5.50% 07/01/26 7,500 7,731
Maricopa County Stadium
District (AMBAC Insured)
5.38% 06/01/16 2,145 2,304(n)
Phoenix Civic Improvement
Corp. (FGIC Insured)
5.50% 07/01/23 - 07/01/24 7,260 8,304(n)
39,443
CALIFORNIA -- 6.8%
Abag Finance Authority for
Nonprofit Corporations
5.00% 12/01/37 2,500 2,436
Bay Area Toll Authority (Series F)
5.00% 04/01/31 10,000 10,467
California Educational Facilities
Authority (Series T)
5.00% 03/15/39 6,500 7,265
California Health Facilities
Financing Authority (Series A)
5.25% 11/15/46 10,000 10,105
Coast Community College
District (FSA Insured)
4.61% 08/01/33 8,750 6,902(d,n)
- ----------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
37
<page>
ELFUN TAX-EXEMPT INCOME FUND
Schedule of Investments
- --------------------------------------------------------------------------------
(dollars in thousands)-- December 31, 2007
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Foothill-De Anza Community
College District (Series A)
(AMBAC Insured)
4.50% 08/01/31 $ 5,000 $ 4,858(n)
Los Angeles Department of
Water & Power
(AMBAC Insured)
5.00% 07/01/32 5,000 5,239(n)
Los Angeles Department of
Water & Power (Series A)
(AMBAC Insured)
5.00% 07/01/37 5,000 5,223(n)
Port of Oakland (Series M)
(FGIC Insured)
5.25% 11/01/16 - 11/01/17 13,800 15,081(n)
San Diego Unified School District
(Series E) (FSA Insured)
5.25% 07/01/17 - 07/01/19 8,795 9,649(n)
State of California
5.00% 03/01/32 - 11/01/37 35,000 35,318
University of California
(AMBAC Insured)
5.00% 05/15/34 2,225 2,288(n)
University of California (Series A)
(AMBAC Insured)
5.00% 05/15/34 3,775 4,089(m,n)
118,920
COLORADO -- 1.4%
Colorado Health
Facilities Authority
5.25% 11/15/27 6,465 6,640
Colorado Water Resources &
Power Development
Authority (Series A)
5.25% 09/01/17 - 09/01/18 5,880 6,287
E-470 Public Highway Authority
(Series A) (MBIA Insured)
5.75% 09/01/35 4,000 4,342(n)
University of Colorado Hospital
Authority (Series A)
5.25% 11/15/39 9,000 8,163
25,432
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
CONNECTICUT -- 4.5%
City of Stamford CT
5.25% 07/15/11 $ 3,450 $ 3,489
City of Stamford CT (Series A)
4.60% 08/01/14 2,235 2,257(m)
Connecticut State Health &
Educational Facility
Authority (Series Y)
5.00% 07/01/35 6,000 6,239
Connecticut State Health &
Educational Facility
Authority (Series Z)
5.00% 07/01/42 10,000 10,429
Mashantucket Western
Pequot Tribe (Series A)
6.50% 09/01/31 5,000 5,307(b)
Mashantucket Western
Pequot Tribe (Series B)
5.70% 09/01/12 2,500 2,529(b)
5.75% 09/01/18 9,500 9,548(b)
South Central Regional Water
Authority Water System
Revenue (MBIA Insured)
5.00% 08/01/27 6,755 7,011(n)
State of Connecticut
(MBIA Insured)
6.00% 10/01/09 5,250 5,507(n)
State of Connecticut (Series A)
5.25% 03/15/14 3,175 3,221
State of Connecticut (Series C)
5.25% 10/15/13 1,250 1,285(m)
State of Connecticut (Series D)
5.50% 12/01/08 10,890 11,020
State of Connecticut (Series E)
5.00% 12/15/18 10,000 10,903
78,745
DELAWARE -- 0.5%
Delaware State Economic
Development Authority
(MBIA Insured)
4.50% 10/01/39 8,565 8,325(n)
- -----------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
38
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Schedule of Investments
- --------------------------------------------------------------------------------
(dollars in thousands)-- December 31, 2007
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
DISTRICT OF COLUMBIA -- 1.3%
District of Columbia
(MBIA Insured)
5.25% 06/01/27 $ 2,065 $ 2,105(m,n)
5.25% 06/01/27 6,600 6,700(n)
5.75% 09/15/20 5,000 5,247(n)
District of Columbia (Series A)
(MBIA Insured)
5.25% 06/01/27 1,335 1,361(m,n)
District of Columbia (Series B)
(FSA Insured)
5.25% 06/01/26 6,900 7,006(n)
22,419
FLORIDA -- 4.0%
Alachua County Health
Facilities Authority
4.30% 12/01/37 5,000 4,489(i)
Brevard County Health
Facilities Authority
5.00% 04/01/34 6,000 5,730
County of Seminole
5.00% 10/01/25 8,195 8,627
Florida State Board of
Education (Series B)
5.38% 06/01/16 10,000 10,858
Florida State Board of Education
(Series D)
4.50% 06/01/21 5,000 5,028
Hillsborough County Industrial
Development Authority
5.25% 10/01/41 5,740 5,512
Hillsborough County Industrial
Development Authority
(Series A)
5.00% 10/01/18 5,000 5,105
5.25% 10/01/24 5,500 5,548
Hillsborough County Industrial
Development Authority
(Series B)
5.25% 10/01/15 5,130 5,381
North Broward Hospital District
5.70% 01/15/16 1,915 2,069
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Orlando Utilities Commission
5.00% 10/01/19 $ 3,000 $ 3,222
Seminole Indian Tribe of
Florida (Series A)
5.50% 10/01/24 2,000 1,932(b)
South Miami Health
Facilities Authority
5.25% 11/15/33 6,380 6,923
70,424
GEORGIA -- 5.1%
Athens-Clarke County Unified
Government Development
Authority
4.50% 06/15/38 4,000 3,840
City of Atlanta GA (FSA Insured)
5.75% 11/01/27 5,000 5,916(n)
City of Atlanta GA (Series B)
(FSA Insured)
5.25% 01/01/33 4,000 4,158(n)
City of Augusta GA (FSA Insured)
5.25% 10/01/34 8,500 8,983(n)
County of Fulton GA
(FGIC Insured)
5.00% 01/01/30 5,000 5,151(n)
5.25% 01/01/35 10,500 10,954(n)
De Kalb County GA
5.00% 10/01/28 6,500 6,782(m)
De Kalb County Ga (Series B)
(FSA Insured)
5.25% 10/01/32 15,000 16,924(n)
Fayette County School District
(FSA Insured)
4.48% 03/01/22 2,520 2,275(d,n)
4.54% 03/01/23 2,290 2,063(d,n)
Henry County Hospital Authority
(MBIA Insured)
5.00% 07/01/24 1,865 1,955(n)
Marietta Development Authority
5.00% 09/15/29 2,365 2,346
Metropolitan Atlanta Rapid
Transit Authority (Series B)
(FSA Insured)
4.50% 07/01/32 3,500 3,474(n)
- ------------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
39
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ELFUN TAX-EXEMPT INCOME FUND
Schedule of Investments
- --------------------------------------------------------------------------------
(dollars in thousands)-- December 31, 2007
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Private Colleges &
Universities Authority
5.25% 06/01/18 - 06/01/20$ 5,250 $ 5,603
Private Colleges & Universities
Authority (Series A)
6.00% 06/01/21 2,410 2,465
Private Colleges & Universities
Facilities Authority
(MBIA Insured)
6.50% 11/01/15 4,010 4,630(l,n)
State of Georgia (Series C)
6.50% 04/01/08 15 15(l)
State of Georgia (Series D)
6.50% 08/01/08 5 5
6.50% 08/01/08 2,495 2,546(l)
90,085
HAWAII -- 0.5%
City & County of Honolulu HI
(Series A)
6.00% 01/01/12 735 810(l)
6.00% 01/01/12 1,265 1,389
State of Hawaii (FSA Insured)
5.75% 02/01/14 6,500 7,324(n)
9,523
IDAHO -- 1.1%
Idaho Housing & Finance Assoc.
(MBIA Insured)
5.00% 07/15/22 - 07/15/24 18,000 19,102(n)
ILLINOIS -- 2.3%
County of Cook IL (Series C)
(AMBAC Insured)
5.50% 11/15/26 10,000 11,009(m,n)
Illinois Finance Authority
(Series A)
5.50% 08/15/43 5,000 5,620
Illinois Health Facilities Authority
6.13% 11/15/22 3,500 3,788(m)
Metropolitan Pier & Exposition
Authority (MBIA Insured)
4.29% 06/15/19 4,000 3,503(d,n)
4.47% 06/15/22 4,505 3,122(d,n)
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Southwestern Illinois Development
Authority (MBIA Insured)
5.00% 10/01/21 $ 4,000 $ 4,349(n)
University of Illinois
(FGIC Insured)
5.25% 04/01/32 2,540 2,635(n)
5.25% 04/01/32 5,960 6,341(m,n)
40,367
INDIANA -- 1.5%
Delaware County Hospital
Authority
5.25% 08/01/36 3,250 2,976
Indiana Health & Educational
Facilities Finance Authority
(Series A)
5.25% 02/15/40 10,000 9,757
Indiana Health Facility Financing
Authority (Series A)
(AMBAC Insured)
5.38% 03/01/34 5,500 5,783(n)
Indiana Transportation
Finance Authority
5.50% 12/01/20 5,000 5,331(m)
Indianapolis Local Public
Improvement Bond Bank
(Series A)
6.00% 01/01/15 2,425 2,583(m)
26,430
KANSAS -- 0.3%
University of Kansas
Hospital Authority
5.63% 09/01/32 4,150 4,571
KENTUCKY -- 1.6%
Kentucky Turnpike Authority
(Series B) (AMBAC Insured)
5.00% 07/01/26 5,000 5,240(n)
Louisville & Jefferson County
Metropolitan Government
5.25% 10/01/36 19,000 18,477
University of Kentucky (Series Q)
(FGIC Insured)
5.25% 05/01/20 4,545 4,764(m,n)
28,481
- ------------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
40
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ELFUN TAX-EXEMPT INCOME FUND
Schedule of Investments
- --------------------------------------------------------------------------------
(dollars in thousands)-- December 31, 2007
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
LOUISIANA -- 1.6%
Louisiana Local Government
Environmental Facilities
6.75% 11/01/32 $ 5,000 $ 4,972
Louisiana Public Facilities
Authority (MBIA Insured)
5.25% 07/01/33 10,925 11,264(n)
Louisiana Public Facilities
Authority (Series A)
(MBIA Insured)
5.38% 05/15/16 7,870 8,650(n)
Parish of St. John Baptist
(Series A)
5.13% 06/01/37 3,550 3,412
28,298
MAINE -- 0.5%
Maine Health & Higher
Educational Facilities
Authority (Series C)
5.13% 07/01/31 5,000 5,136
Maine Health & Higher
Educational Facilities
Authority (Series D)
(FSA Insured)
5.50% 07/01/23 55 55(n)
Maine Municipal Bond
Bank (Series B)
5.50% 11/01/21 3,325 3,603
8,794
MARYLAND -- 2.5%
County of Montgomery
MD (Series A)
5.00% 05/01/20 7,710 8,411
County of Prince Georges
MD (Series A)
5.00% 10/01/22 6,820 7,418
Maryland Health & Higher
Educational Facilities Authority
5.00% 07/01/36 3,000 2,946
5.25% 05/15/46 7,000 6,743
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Maryland State Health & Higher
Educational Facilities Authority
5.13% 11/15/34 $ 7,200 $ 7,883
University System of Maryland
(Series A)
5.25% 04/01/17 4,380 4,653
5.25% 04/01/17 5,655 6,102(m)
44,156
MASSACHUSETTS -- 4.4%
Commonwealth of
Massachusetts (Series B)
5.50% 11/01/08 18,035 18,406
Massachusetts Bay
Transportation Authority
(Series A) (MBIA Insured)
4.75% 03/01/16 4,500 4,552(n)
Massachusetts State Turnpike
Authority (Series B)
(MBIA Insured)
5.13% 01/01/23 - 01/01/37 20,500 20,688(n)
Massachusetts State Water
Pollution Abatement (Series 6)
5.63% 08/01/18 6,885 7,379(m)
Massachusetts State Water
Resources Authority (Series A)
6.50% 07/15/08 - 07/15/19 23,370 26,272
77,297
MICHIGAN -- 3.0%
Detroit MI (Series A)
(FSA Insured)
5.25% 07/01/21 - 07/01/22 4,545 5,076(n)
Detroit MI (Series A)
(MBIA Insured)
5.00% 07/01/27 7,145 7,210(n)
Detroit MI (Series D)
(MBIA Insured)
5.00% 07/01/33 10,000 10,300(n)
Grand Rapids MI
(FGIC Insured)
5.25% 01/01/17 3,000 3,134(n)
- -----------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
41
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ELFUN TAX-EXEMPT INCOME FUND
Schedule of Investments
- --------------------------------------------------------------------------------
(dollars in thousands)-- December 31, 2007
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Michigan Municipal Bond
Authority
5.25% 10/01/17 $ 6,465 $ 6,926
Michigan State Hospital
Finance Authority
5.38% 12/01/30 2,000 2,051
Michigan State Trunk Line
(Series A) (MBIA Insured)
5.00% 11/01/26 4,000 4,080(n)
Muskegon Heights Public
Schools (MBIA Insured)
5.00% 05/01/24 2,650 2,719(m,n)
State of Michigan (FSA Insured)
5.25% 09/15/27 5,000 5,394(n)
State of Michigan (Series A)
5.50% 11/01/18 6,000 6,852
53,742
MINNESOTA -- 1.5%
Minneapolis & St. Paul
Metropolitan Airports
Commission (Series A)
(AMBAC Insured)
5.00% 01/01/30 8,500 8,585(n)
State of Minnesota
5.00% 08/01/12 - 08/01/18 15,790 17,268
25,853
MISSISSIPPI -- 0.5%
State of Mississippi
5.50% 09/01/14 7,500 8,384
MISSOURI -- 0.6%
Missouri Joint Municipal Electric
Utility Commission (Series A)
(AMBAC Insured)
5.00% 01/01/42 8,895 9,155(n)
Missouri State Health &
Educational Facilities
Authority
5.25% 05/15/23 2,300 2,382
11,537
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
NEBRASKA -- 0.3%
Omaha Public Power District
(Series A)
5.00% 02/01/39 $ 5,000 $ 5,158
NEVADA -- 0.9%
County of Clark NV
5.50% 07/01/20 7,565 7,997(m)
County of Clark NV
(MBIA Insured)
5.50% 07/01/30 6,500 6,874(m,n)
Las Vegas Special Improvement
District No 707 (Series A)
(FSA Insured)
5.55% 06/01/16 1,795 1,847(n)
16,718
NEW JERSEY -- 8.1%
Cape May County Municipal
Utilities Authority (Series A)
(FSA Insured)
5.75% 01/01/15 - 01/01/16 8,500 9,717(n)
Essex County Improvement
Authority (FSA Insured)
5.25% 12/15/17 235 259(m,n)
5.25% 12/15/17 9,765 10,588(n)
New Jersey Economic
Development Authority
5.75% 06/15/29 3,000 2,971
New Jersey Economic
Development Authority
(Series U) (AMBAC Insured)
5.00% 09/01/37 6,550 6,814(n)
New Jersey State Educational
Facilities Authority
5.25% 07/01/32 2,625 2,869
New Jersey State Educational
Facilities Authority (Series D)
5.25% 07/01/19 4,000 4,536
New Jersey State Turnpike
Authority (AMBAC Insured)
6.50% 01/01/16 42,050 48,726(l,n)
6.50% 01/01/16 7,910 9,132(n)
- ------------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
42
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Schedule of Investments
- --------------------------------------------------------------------------------
(dollars in thousands)-- December 31, 2007
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
New Jersey Transportation
Trust Fund Authority
(FSA Insured)
5.75% 12/15/14 $ 1,390 $ 1,583(n)
5.75% 12/15/14 4,610 5,278(l,n)
New Jersey Transportation
Trust Fund Authority (Series C)
5.50% 06/15/19 - 06/15/24 31,280 34,669(m)
New Jersey Wastewater
Treatment Trust (Series C)
6.88% 06/15/08 5,905 6,007
143,149
NEW MEXICO -- 0.7%
New Mexico Hospital Equipment
Loan Council (Series A)
5.50% 08/01/25 - 08/01/30 10,750 11,663(m)
NEW YORK -- 10.3%
City of New York
5.13% 12/01/22 6,000 6,386
City of New York (Series B)
5.25% 08/01/13 5 5
City of New York NY (Series J)
5.00% 06/01/26 - 06/01/28 25,270 26,050
Dutchess County Industrial
Development Agency
4.50% 08/01/36 3,500 3,348
Hudson Yards Infrastructure
Corp. (Series A) (FGIC Insured)
5.00% 02/15/47 12,500 12,701(n)
Metropolitan Transportation
Authority (Series B)
5.00% 11/15/37 15,000 15,339
New York City Industrial
Development Agency
(AMBAC Insured)
5.00% 01/01/36 3,000 3,092(n)
New York City Industrial
Development Agency
(FGIC Insured)
5.00% 03/01/46 7,500 7,615(n)
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
New York City Industrial
Development Agency
(MBIA Insured)
5.00% 03/01/36 $ 4,000 $ 4,119(n)
New York City Municipal Water
Finance Authority
5.50% 06/15/33 5,000 5,333(m)
New York City Transitional
Finance Authority
5.50% 11/01/19 - 05/01/25 19,070 20,118(m)
6.00% 11/15/19 3,750 4,037(m)
New York City Transitional
Finance Authority (Series A)
5.30% 11/15/09 1,000 1,042(l)
New York City Transitional
Finance Authority (Series B)
5.50% 11/15/11 1,250 1,326
6.00% 11/15/10 - 11/15/11 2,545 2,740(m)
New York City Transitional
Finance Authority (Series C)
5.50% 05/01/25 30 31(m)
New York State Dormitory
Authority (FSA Insured)
5.00% 08/15/36 5,000 5,136(n)
New York State Dormitory
Authority (Series A)
4.84% 07/01/39 4,000 3,287(d)
5.00% 07/01/25 2,550 2,653
New York State Dormitory
Authority (Series B)
5.25% 11/15/23 10,400 11,139
5.38% 07/01/20 3,695 4,030(m)
6.50% 08/15/10 5 5(l)
6.50% 08/15/10 3,490 3,772
New York State Dormitory
Authority (Series C)
5.00% 12/15/18 - 12/15/19 15,485 16,831
New York State Dormitory
Authority (Series D)
7.00% 07/01/09 2,055 2,124(l)
New York State Environmental
Facilities Corp.
5.50% 06/15/13 10,000 11,110
- -------------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
43
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ELFUN TAX-EXEMPT INCOME FUND
Schedule of Investments
- --------------------------------------------------------------------------------
(dollars in thousands)-- December 31, 2007
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
New York State Urban
Development Corp.
5.50% 07/01/16 $ 630 $ 638(m)
5.50% 07/01/16 6,370 6,446
180,453
NORTH CAROLINA -- 1.0%
Cary NC
5.00% 03/01/21 2,400 2,532
City of Charlotte NC
5.60% 06/01/20 2,800 3,014(m)
City of Charlotte NC (Series C)
5.00% 07/01/24 1,460 1,524
City of Greensboro
5.25% 06/01/23 3,185 3,589
Town of Mooresville
5.00% 09/01/32 3,500 3,495
University of North Carolina
(Series A) (MBIA Insured)
5.00% 10/01/18 2,750 2,978(n)
17,132
OHIO -- 3.5%
County of Cuyahoga OH
6.00% 01/01/32 10,000 10,628
County of Hamilton OH (Series A)
(MBIA Insured)
5.00% 12/01/19 4,250 4,492(n)
County of Hamilton OH (Series B)
(AMBAC Insured)
5.25% 12/01/32 1,520 1,583(n)
5.25% 12/01/32 5,980 6,338(m,n)
Franklin County Convention
Facilities Authority
5.00% 12/01/25 - 12/01/27 3,955 4,195
Franklin County OH (Series C)
5.00% 05/15/21 2,685 2,773
5.25% 05/15/24 1,400 1,453
Ohio State Higher Educational
Facility Commission
5.20% 11/01/26 9,450 10,216
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Ohio State University (Series A)
5.25% 12/01/11 $ 3,150 $ 3,385
Ohio State Water
Development Authority
5.50% 12/01/20 5,000 5,509(m)
State of Ohio
5.00% 11/01/32 3,600 3,750
Steubenville Oh
4.73% 10/01/30 5,815 5,417(i)
6.38% 10/01/20 1,660 1,802
61,541
OKLAHOMA -- 1.1%
Claremore Public Works Authority
(Series A) (FSA Insured)
5.25% 06/01/34 6,315 7,037(n)
Oklahoma Transportation
Authority (Series A)
(AMBAC Insured)
5.25% 01/01/15 1,120 1,204(m,n)
5.25% 01/01/15 8,005 8,538(n)
Tulsa Industrial Authority
(MBIA Insured)
5.00% 10/01/22 2,000 2,023(n)
18,802
PENNSYLVANIA -- 5.3%
Allegheny County Hospital
Development Authority
5.00% 11/15/28 12,500 10,743
Commonwealth of
Pennsylvania (FSA Insured)
5.38% 07/01/17 10,000 11,373(n)
Montgomery County Higher
Education & Health Authority
(AMBAC Insured)
5.00% 10/01/09 2,405 2,433(n)
5.10% 10/01/10 2,670 2,701(n)
Pennsylvania Industrial
Development Authority
(AMBAC Insured)
5.50% 07/01/17 3,100 3,347(n)
- ------------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
44
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Schedule of Investments
- --------------------------------------------------------------------------------
(dollars in thousands)-- December 31, 2007
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Pennsylvania State Higher
Educational Facilities Authority
5.50% 07/15/38 $10,750 $ 10,896(m)
6.00% 05/01/30 5,000 5,308
Pennsylvania Turnpike
Commission (Series A)
(AMBAC Insured)
5.00% 12/01/23 460 470(n)
5.00% 12/01/23 1,665 1,712(m,n)
5.00% 12/01/23 2,875 2,945(l,n)
5.25% 12/01/32 12,695 13,518(n)
Philadelphia Authority for
Industrial Development
5.25% 09/01/36 1,750 1,685
Philadelphia Hospitals & Higher
Education Facilities Authority
4.50% 07/01/37 5,000 4,682
Pittsburgh Public Parking
Authority (AMBAC Insured)
5.35% 12/01/10 520 547(m,n)
5.45% 12/01/11 440 464(m,n)
5.55% 12/01/12 1,015 1,073(m,n)
5.60% 12/01/13 1,125 1,190(m,n)
5.70% 12/01/14 1,245 1,320(m,n)
5.75% 12/01/15 - 12/01/16 2,330 2,473(m,n)
Southcentral General Authority
5.38% 05/15/28 900 964(l)
5.38% 05/15/28 4,100 4,422(m)
State Public School Building
Authority (FSA Insured)
5.25% 06/01/27 8,000 8,763(n)
93,029
SOUTH CAROLINA -- 7.4%
Beaufort County SC
(MBIA Insured)
5.50% 06/01/17 - 06/01/18 4,150 4,505(n)
Berkeley County School District
5.25% 12/01/24 15,000 15,304
Charleston Educational
Excellence Finance Corp.
5.25% 12/01/27 - 12/01/30 24,000 24,713
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
City of Greenville SC
5.13% 02/01/22 $ 5,195 $ 5,436
Greenville County
School District
5.25% 12/01/21 2,000 2,112
5.50% 12/01/28 16,725 18,570(m)
Lexington County SC
5.00% 11/01/36 5,000 4,855
5.50% 11/01/13 5,000 5,389
South Carolina Educational
Facilities Authority
(Series A)
5.00% 10/01/38 9,600 9,626
South Carolina State Public
Service Authority (Series B)
(FSA Insured)
5.13% 01/01/32 17,000 17,566(n)
5.50% 01/01/36 5,000 5,420(n)
South Carolina Transportation
Infrastructure Bank
(Series A) (MBIA Insured)
5.50% 10/01/30 11,000 11,569(m,n)
South Carolina Transportation
Infrastructure Bank (Series B)
(AMBAC Insured)
5.20% 10/01/22 5,000 5,357(n)
130,422
TENNESSEE -- 1.1%
Johnson City Health &
Educational Facilities Board
(Series A)
5.50% 07/01/36 5,000 4,901
Knox County Health
Educational & Housing
Facilities Board
5.25% 04/01/36 10,000 9,671
Knox County Health
Educational & Housing
Facilities Board (Series B)
(MBIA Insured)
7.25% 01/01/09 4,500 4,671(n)
19,243
- -------------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
45
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Schedule of Investments
- --------------------------------------------------------------------------------
(dollars in thousands)-- December 31, 2007
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
TEXAS -- 5.2%
City of Austin TX
5.38% 09/01/16 - 09/01/17 $10,350 $ 10,743(m)
City of Austin TX (Series A)
(AMBAC Insured)
5.00% 08/15/20 4,675 4,756(n)
City of Dallas TX (Series A)
(AMBAC Insured)
5.50% 11/15/16 5,450 6,159(n)
City of Fort Worth TX
5.00% 02/15/18 2,800 2,806(m)
City of Houston (FSA Insured)
5.00% 11/15/35 4,000 4,134(n)
City of Houston TX (Series A)
(FSA Insured)
5.25% 05/15/22 16,000 17,095(n)
City of Houston TX (Series B)
(AMBAC Insured)
5.75% 12/01/14 5,000 5,560(m,n)
City of Plano TX
4.88% 09/01/19 1,500 1,545(m)
McKinney Independent
School District
5.25% 02/15/20 2,000 2,168
North Central Texas Health
Facility Development Corp.
5.13% 05/15/22 4,500 4,567
San Antonio Independent
School District (Series A)
5.38% 08/15/19 - 08/15/20 6,250 6,719(m)
Texas Municipal Gas
Acquisition & Supply Corp. II
4.18% 09/15/17 18,500 17,630(i)
University of Houston
(MBIA Insured)
5.50% 02/15/30 8,000 8,393(m,n)
92,275
UTAH -- 0.4%
City of Salt Lake City UT
5.13% 06/15/19 3,715 3,936
Murray UT (MBIA Insured)
4.75% 05/15/20 2,285 2,259(n)
6,195
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
VERMONT -- 0.1%
University of Vermont & State
Agricultural College
(AMBAC Insured)
5.13% 10/01/27 $ 1,000 $ 1,082(n)
VIRGINIA -- 0.7%
Chesterfield County Industrial
Development Authority
5.88% 06/01/17 3,000 3,178
City of Norfolk VA (MBIA Insured)
5.88% 11/01/20 1,920 1,924(n)
Virginia Commonwealth
Transportation Board (Series A)
5.75% 05/15/21 1,945 2,034(m)
Virginia Resources Authority
(Series A)
5.13% 11/01/34 5,000 5,263
12,399
WASHINGTON -- 2.4%
Central Puget Sound Regional
Transportation Authority/WA
(Series A)
5.00% 11/01/36 20,000 20,834
County of King
5.50% 12/01/13 970 1,083(l)
County of King WA
5.50% 12/01/13 3,795 4,238(l)
5.50% 12/01/13 5,235 5,828
Seattle Museum
Development Authority
5.13% 04/01/31 10,000 10,464
42,447
WEST VIRGINIA -- 0.3%
West Virginia Housing
Development Fund (Series B)
5.30% 05/01/24 4,000 4,062
West Virginia Housing
Development Fund (Series C)
5.35% 11/01/27 570 580
4,642
- ------------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
46
<page>
ELFUN TAX-EXEMPT INCOME FUND
Schedule of Investments
- --------------------------------------------------------------------------------
(dollars in thousands)-- December 31, 2007
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
WISCONSIN -- 0.5%
State of Wisconsin (Series 1)
(AMBAC Insured)
5.75% 07/01/14 $2,990 $ 3,270(n)
State of Wisconsin (Series A)
5.30% 07/01/18 5,800 6,107(m)
9,377
TOTAL INVESTMENT IN SECURITIES
(COST $1,682,142) 1,737,227
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 0.2%
- --------------------------------------------------------------------------------
GEI Short Term Investment Fund
4.96% 3,279,309 3,279 (d,k)
(COST $3,279)
TOTAL INVESTMENTS
(COST $1,685,421) 1,740,506
OTHER ASSETS AND LIABLITIES,
NET -- 1.0% 16,984
----------
NET ASSETS -- 100.0% $1,757,490
==========
- -----------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
47
<page>
Elfun Income Fund
THE ELFUN INCOME FUND IS MANAGED BY A TEAM OF PORTFOLIO MANAGERS THAT INCLUDES
PAUL M. COLONNA (PICTURED BELOW), WILLIAM M. HEALEY, MARK H. JOHNSON, JAMES F.
PALMIERI, LEWIS TATANANNI, AND VITA MARIE PIKE. THE TEAM IS LEAD BY MR. COLONNA
WHO IS VESTED WITH OVERSIGHT AUTHORITY. 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 94.
Q. HOW DID THE ELFUN INCOME FUND PERFORM COMPARED TO ITS BENCHMARK AND ITS
LIPPER PEER GROUP FOR THE TWELVE-MONTH PERIOD ENDED DECEMBER 31, 2007?
A. For the twelve-month period ended December 31, 2007, the Elfun Income Fund
returned 6.16%. The Lehman Brothers Aggregate Bond Index, the Fund's
benchmark, returned 6.97% and the Fund's Lipper peer group of 547
Intermediate Investment Grade Debt funds returned an average of 4.71% for
the same period.
Q. DESCRIBE WHAT HAPPENED IN THE U.S. ECONOMY DURING THE 12-MONTH PERIOD
ENDING DECEMBER 31, 2007.
A. The U.S. economy will most likely post a GDP growth of approximately 2% in
2007, held back by recessionary conditions in the housing market. Rising
delinquencies and defaults in sub-prime mortgage loans resulted in large
pricing dislocations of securities backed by these loan types. In the
fallout, Wall Street broker/dealers were forced in the third and fourth
quarters to take write-downs in the billions from owning such securities as
well as structured vehicles backed by these security types. Investor's lack
of confidence in valuations of sub-prime mortgages spread to all risky
assets, significantly widening yield spreads in high grade and high yield
credit and emerging market debt. A flight to the safety of U.S. treasuries
pushed interest rates down, which generated a 9% total return for the
treasury sector. By year-end, 2 and 10-year note yields had fallen by 176
and 68 bps to finish at 3.05% and 4.02% respectively. All other U.S. fixed
income sectors posted positive returns for the year, but less than that of
treasuries. The Fed responded to the housing recession/sub-prime crisis by
reducing the fed funds target by 100 basis points to 4.25% starting in
September, while also injecting reserves into the financial system to
provide liquidity to banks unwilling to lend to each other. At the
[PHOTO OMITTED]
48
<page>
- --------------------------------------------------------------------------------
Q&A
December meeting, the FOMC stated "the upside risks to inflation roughly
balance the downside risks to growth". However, market pricing at year-end
indicated further rate cuts in 2008.
Q. WHAT WERE THE PRIMARY DRIVERS OF
FUND PERFORMANCE?
A. Duration and yield curve positioning biased toward lower rates and a steeper
yield curve were positive contributors to Fund performance during the year.
The underweight to investment grade corporate securities also added to
relative performance. Although allocations to high yield and emerging market
debt helped earlier in the year, exposure to these sectors hurt performance
in the final quarter as yield spreads widened quite dramatically. The Fund's
exposure to sub-prime related securities through securities lending and
mortgage-rolls negatively impacted total return for the year.
49
<page>
Elfun Income Fund
- --------------------------------------------------------------------------------
Understanding Your Fund's Expenses
As a shareholder of the Fund you incur ongoing expenses, which include portfolio
management 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, 2007.
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 $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JULY 1, 2007 - DECEMBER 31, 2007
- ---------------------------------------------------------------------------------------------------------------------------
ACCOUNT VALUE AT ACCOUNT VALUE EXPENSES
THE BEGINNING OF AT THE END OF PAID DURING
THE PERIOD ($) THE PERIOD ($) THE PERIOD ($)*
- ---------------------------------------------------------------------------------------------------------------------------
Actual Fund Return** 1,000.00 1,048.92 1.08
Hypothetical 5% Return
(2.5% for the period) 1,000.00 1,023.87 1.07
- ---------------------------------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.21% (FROM
PERIOD JULY 1, 2007 - DECEMBER 31, 2007), 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, 2007 WAS: 4.89%.
50
<page>
Elfun Income Fund
- --------------------------------------------------------------------------------
CHANGE IN VALUE OF A $10,000 INVESTMENT
[LINE CHART OMITTED PLOT POINTS FOLLOWS]
ELFUN INCOME FUND LB AGGREGATE BOND INDEX
12/97 $10000 $10000
12/98 10849 10869
12/99 10781 10779
12/00 11979 12033
12/01 12933 13049
12/02 14258 14387
12/03 14835 14977
12/04 15439 15627
12/05 15838 16007
12/06 16581 16700
12/07 17602 17864
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED DECEMBER 31, 2007
- --------------------------------------------------------------------------------
ONE FIVE TEN
YEAR YEAR YEAR
- --------------------------------------------------------------------------------
Elfun Income Fund 6.16% 4.30% 5.82%
LB Aggregate Bond
Index 6.97% 4.42% 5.97%
Elfun Income Fund (ending value $17,602)
LB Aggregate Bond Index (ending value $17,864)
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
circumstances. 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.
* LIPPER PERFORMANCE COMPARISON
INTERMEDIATE INVESTMENT GRADE DEBT FUNDS PEER GROUP
BASED ON AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/07
ONE FIVE TEN
YEAR YEAR YEAR
Fund's rank in peer group: 148 142 33
Number of Funds in peer group: 547 395 184
Peer group average annual total return: 4.71% 3.88% 5.19%
Lipper categories in peer group: Intermediate Investment Grade Debt
* SEE NOTES TO PERFORMANCE FOR THE EXPLANATION OF PEER CATEGORIES.
QUALITY RATINGS
AS OF DECEMBER 31, 2007
AS A % OF MARKET VALUE
- --------------------------------------------------------------------------------
MOODY'S/S&P/ PERCENTAGE OF
FITCH RATING* MARKET VALUE
- --------------------------------------------------------------------------------
Aaa/AAA 85.16%
- --------------------------------------------------------------------------------
Aa/AA 4.25%
- --------------------------------------------------------------------------------
A/A 3.56%
- --------------------------------------------------------------------------------
Baa/BBB 3.44%
- --------------------------------------------------------------------------------
Ba/BB and lower 3.59%
- --------------------------------------------------------------------------------
* MOODY'S INVESTORS SERVICES INC., STANDARD & POOR'S AND FITCH ARE NATIONALLY
RECOGNIZED STATISTICAL RATING ORGANIZATIONS.
SEE NOTES TO PERFORMANCE ON PAGE 1 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.
51
<page>
ELFUN INCOME FUND
Schedule of Investments
- --------------------------------------------------------------------------------
(dollars in thousands)-- December 31, 2007
ELFUN INCOME FUND
PORTFOLIO COMPOSITION AS A % OF THE MARKET VALUE OF $524,741 AS OF DECEMBER 31,
2007.
[PIE CHART OMITTED PLOT POINTS FOLLOWS]
ASSET BACKED & OTHER 33.8%
MORTGAGE BACKED 30.5%
U.S. TREASURIES 22.5%
CORPORATE NOTES 12.0%
FEDERAL AGENCIES 1.2%
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
BONDS AND NOTES -- 99.3%+
- --------------------------------------------------------------------------------
U.S. TREASURIES -- 32.5%
U.S. Treasury Bonds
4.50% 02/15/36 $ 385 $ 387(j)
4.75% 02/15/37 13,500 14,129(j)
U.S. Treasury Notes
3.63% 10/31/09 15,732 15,888(j)
4.25% 09/30/12 20,908 21,638(j)
4.50% 11/15/10 - 05/15/17 5,292 5,484(j)
4.63% 11/15/09 - 02/15/17 21,272 22,228(j)
4.75% 08/15/17 15,729 16,611(j)
4.88% 06/30/12 20,462 21,700(j)
118,065
FEDERAL AGENCIES -- 1.7%
Federal Home Loan
Mortgage Corp.
4.88% 02/09/10 5,975 6,129
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
AGENCY MORTGAGE BACKED -- 27.0%
Federal Home Loan
Mortgage Corp.
4.50% 06/01/33 - 02/01/35 $ 782 $ 739(h)
5.00% 07/01/35 - 10/01/35 1,111 1,084(h)
5.50% 05/01/20 170 173(h)
6.00% 04/01/17 - 11/01/36 1,988 2,025(h)
6.50% 01/01/27 - 08/01/36 1,668 1,718(h)
7.00% 10/01/16 - 08/01/36 568 596(h)
7.50% 01/01/08 - 09/01/33 103 109(h)
8.00% 11/01/30 17 18(h)
6.00% TBA 2,955 2,998(c)
Federal National Mortgage Assoc.
4.00% 05/01/19 - 06/01/19 746 721(h)
4.50% 05/01/18 - 02/01/35 2,338 2,282(h)
5.00% 07/01/20 - 05/01/36 2,453 2,402(h)
5.00% 07/01/35 1,458 1,474(h,i)
5.10% 08/01/35 957 963(h,i)
5.26% 04/01/37 411 414(i)
5.44% 04/01/37 38 38(i)
5.50% 03/01/14 - 08/01/35 2,742 2,766(h)
5.53% 04/01/37 521 528(i)
5.59% 04/01/37 922 937(i)
5.62% 03/01/37 33 33(i)
5.63% 06/01/37 671 681(i)
5.66% 05/01/37 268 272(i)
5.68% 04/01/37 339 345(i)
5.70% 04/01/37 647 657(i)
5.71% 04/01/37 539 548(i)
5.72% 04/01/37 168 171(i)
5.85% 06/01/37 831 847(i)
6.00% 02/01/14 - 08/01/36 4,782 4,865(h)
6.04% 10/01/37 586 597(i)
6.50% 02/01/14 - 12/01/36 5,768 5,938(h)
7.00% 08/01/13 - 06/01/36 1,745 1,829(h)
7.50% 08/01/13 - 03/01/34 628 666(h)
8.00% 12/01/11 - 11/01/33 298 317(h)
8.50% 04/01/30 - 05/01/31 35 38(h)
9.00% 06/01/09 - 12/01/22 111 117(h)
5.00% TBA 16,542 16,214(c)
5.50% TBA 19,355 19,344(c)
6.00% TBA 12,466 12,682(c)
- ------------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
52
<page>
ELFUN INCOME FUND
Schedule of Investments
- --------------------------------------------------------------------------------
(dollars in thousands)-- December 31, 2007
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Government National
Mortgage Assoc.
4.50% 08/15/33 - 09/15/34 $ 1,403 $ 1,350 (h)
5.00% 08/15/33 331 327(h)
6.00% 04/15/27 - 09/15/36 1,345 1,379(h)
6.50% 04/15/19 - 09/15/36 1,201 1,244(h)
7.00% 03/15/12 - 10/15/36 694 726(h)
7.50% 03/15/23 - 10/15/33 127 135(h)
8.00% 09/15/27 - 06/15/30 42 45(h)
8.50% 10/15/17 81 88(h)
9.00% 11/15/16 - 12/15/21 160 172(h)
5.50% TBA 4,565 4,583(c)
98,195
AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS -- 3.5%
Collateralized Mortgage
Obligation Trust (Class B)
3.74% 11/01/18 24 21(d,f,h)
Federal Home Loan
Mortgage Corp.
1.42% 04/15/37 1,333 101(d,g,i)
1.72% 05/15/37 1,783 130(d,g,i)
1.79% 04/25/37 1,039 79(d,g,i)
2.12% 12/15/30 2,156 135(d,g,h,i)
2.75% 09/15/36 1,265 140(d,g,h,i)
4.30% 12/15/33 315 264(d,h,i)
4.50% 04/15/13 - 03/15/19 1,576 130(d,g,h)
5.00% 04/15/14 - 12/01/34 10,775 2,042(d,g,h)
5.50% 04/15/17 - 06/15/33 1,078 217(d,g,h)
5.50% 04/15/26 1,235 1,251(d)
5.63% 06/15/33 1,000 1,025(d,h,i)
7.50% 01/15/16 81 84(d,h)
8.00% 04/15/20 16 17(d,h)
8.00% 02/01/23 - 07/01/24 24 6(d,g,h)
8.61% 11/15/37 876 651(d,f)
21.57% 09/25/43 3,391 38(d,g,h,i)
Federal Home Loan
Mortgage STRIPS
6.04% 08/01/27 6 5(d,f,h)
Federal National Mortgage Assoc.
1.59% 05/25/37 - 06/25/37 15,691 1,041(d,g,i)
1.91% 03/25/37 1,066 101(d,g,i)
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
2.14% 10/25/29 $ 840 $ 51(d,g,h,i)
2.24% 12/25/30 1,094 55(d,g,h,i)
2.34% 07/25/37 2,454 228(d,g,i)
2.74% 09/25/42 2,048 161(d,g,h,i)
2.79% 04/25/17 - 10/25/17 1,700 121(d,g,h,i)
2.84% 08/25/16 485 25(d,g,h,i)
3.24% 06/25/42 693 52(d,g,h,i)
4.00% 02/25/28 33 33(d,h)
4.50% 05/25/18 314 27(d,g,h)
4.75% 11/25/14 151 6(d,g,h)
5.00% 08/25/17 - 02/25/32 374 36(d,g,h)
5.00% 10/25/35 255 229(d)
5.50% 03/25/29 - 01/25/33 1,443 1,432(d)
8.00% 07/25/14 134 135(d,h)
39.31% 12/25/42 946 28(d,g,h,i)
Federal National Mortgage
Assoc. (Class 2)
5.50% 12/01/33 - 05/25/37 243 58(d,g)
Federal National Mortgage
Assoc. (Class S)
2.24% 02/25/31 765 40(d,g,h,i)
Federal National Mortgage
Assoc. REMIC
4.50% 11/25/13 290 8(d,g,h)
5.00% 10/25/22 344 51(d,g,h)
5.91% 03/25/31 750 769(d,h,i)
Federal National Mortgage
Assoc. REMIC (Class B)
4.49% 12/25/22 18 15(d,f,h)
Federal National Mortgage
Assoc. REMIC (Class K)
1008.00%** 05/25/22 -- 1(d,g,h)
Federal National Mortgage
Assoc. STRIPS (Class 1)
5.31% 11/01/34 902 682(d,f,h)
Federal National Mortgage
Assoc. STRIPS (Class 2)
5.00% 08/01/34 3,710 948(d,g)
7.50% 11/01/23 81 23(d,g,h)
8.00% 08/01/23 - 07/01/24 52 13(d,g,h)
8.50% 03/01/17 - 07/25/22 56 13(d,g,h)
9.00% 05/25/22 18 5(d,g,h)
12,723
- ------------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
53
<page>
ELFUN INCOME FUND
Schedule of Investments
- --------------------------------------------------------------------------------
(dollars in thousands)-- December 31, 2007
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
ASSET BACKED -- 7.3%
AESOP Funding II LLC (Class A)
5.07% 04/20/10 $1,000 $ 988(b,h,i)
Capital One Auto Finance Trust
5.03% 04/15/12 4,000 3,866(h,i)
Capital One Master Trust
(Class C)
6.70% 06/15/11 149 150(b,h)
Capital One Multi-Asset Execution
Trust (Class A)
5.06% 03/16/15 290 287(i)
Chase Funding Mortgage Loan
Asset-Backed Certificates
5.75% 05/25/32 64 42(h)
Citibank Credit Card
Issuance Trust
4.45% 04/07/10 496 495(h)
Countrywide Asset-Backed
Certificates (Class A)
5.14% 05/25/36 51 51(h,i)
5.43% 08/25/32 41 41(h,i)
Discover Card Master Trust I
(Class A)
5.06% 04/17/12 8,000 7,975(h,i)
GSAA Trust
5.27% 05/25/34 105 105(h,i)
Honda Auto Receivables Owner
Trust (Class A)
4.15% 10/15/10 427 426(h)
Indymac Residential Asset
Backed Trust
6.87% 04/25/37 146 18(i)
JP Morgan Mortgage
Acquisition Corp.
5.02% 03/01/37 1,000 897(i)
Mid-State Trust
7.54% 07/01/35 67 71(h)
Option One Mortgage Loan Trust
5.00% 06/25/37 1,500 1,370(i)
Peco Energy Transition Trust
6.52% 12/31/10 400 424(h)
Residential Asset Mortgage
Products, Inc.
5.11% 03/25/34 17 17(h,i)
5.20% 12/25/33 3 3(h,i)
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Residential Asset Securities Corp.
5.37% 07/25/32 $ 47 $ 43(h,i)
Residential Asset Securities
Corp. (Class A)
4.16% 07/25/30 85 84(h,i)
5.45% 06/25/33 84 83(h,i)
Structured Asset Investment
Loan Trust
5.10% 02/25/35 73 72(b,h,i)
Superior Wholesale Inventory
Financing Trust (Class A)
5.21% 06/15/10 4,000 3,983(h,i)
Swift Master Auto Receivables
Trust (Class A)
5.13% 06/15/12 3,000 2,870(h,i)
Triad Auto Receivables Owner
Trust (Class A)
5.29% 02/12/14 2,000 1,952(h,i)
Wachovia Asset Securitization
Inc. (Class A)
5.09% 06/25/34 205 203(h,i)
Wells Fargo Home Equity Trust
3.97% 05/25/34 136 128(h,i)
26,644
CORPORATE NOTES -- 16.9%
Abbey National PLC
7.95% 10/26/29 330 379(h)
AES Ironwood LLC
8.86% 11/30/25 851 932(h)
American Electric Power
Company, Inc. (Series D)
5.25% 06/01/15 335 322(h)
American International
Group, Inc.
5.85% 01/16/18 454 457
American Railcar Industries, Inc.
7.50% 03/01/14 170 161(h)
Amgen Inc.
5.85% 06/01/17 425 432(b,h)
Archer-Daniels-Midland Co.
6.45% 01/15/38 303 310
Arizona Public Service Co.
6.25% 08/01/16 485 494(h)
- -------------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
54
<page>
ELFUN INCOME FUND
Schedule of Investments
- --------------------------------------------------------------------------------
(dollars in thousands)-- December 31, 2007
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
BAC CAP TRUST V
5.63% 03/08/35 $ 495 $ 420(h)
Banco Santander Chile
5.38% 12/09/14 545 545(b,h)
Basell AF SCA
8.38% 08/15/15 880 711(b)
Bear Stearns Companies Inc.
5.85% 07/19/10 300 300
6.95% 08/10/12 1,050 1,080
BellSouth Corp.
4.20% 09/15/09 460 457(h)
6.55% 06/15/34 180 186(h)
Bertin Ltd.
10.25% 10/05/16 200 209(b,h)
BJ Services Co.
5.75% 06/01/11 485 498(h)
Bristol-Myers Squibb Co.
5.88% 11/15/36 255 252(h)
British Telecommunications PLC
8.63% 12/15/10 195 214(h)
Capital One Bank
6.50% 06/13/13 195 192(h)
Cargill Inc.
6.00% 11/27/17 755 753(b)
Carolina Power & Light Co.
5.15% 04/01/15 230 228(h)
5.70% 04/01/35 130 125(h)
6.13% 09/15/33 240 245(h)
Chubb Corp.
6.00% 05/11/37 385 369(h)
Citigroup Capital
8.30% 12/21/57 151 160(i)
Citigroup, Inc.
5.13% 02/14/11 590 594(h)
Clarendon Alumina
Production Ltd.
8.50% 11/16/21 235 245(b,h)
ConAgra Foods, Inc.
7.88% 09/15/10 133 144(h)
Consumers Energy Co.
5.15% 02/15/17 330 315(h)
COX Communications, Inc.
7.13% 10/01/12 665 711(h)
7.75% 11/01/10 360 385(h)
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
CSX Transportation, Inc.
9.75% 06/15/20 $ 202 $ 261(h)
DaimlerChrysler NA Holding Corp.
4.05% 06/04/08 330 329(h)
Diageo Capital PLC
5.20% 01/30/13 300 302
Dominion Resources, Inc.
(Series B)
6.30% 09/30/66 1,155 1,120(h,i)
Dover Corp.
6.50% 02/15/11 230 239(h)
DP WORLD Ltd.
6.85% 07/02/37 300 285(b)
Duke Energy Corp.
5.38% 01/01/09 150 151(h)
EI Du Pont de Nemours & Co.
4.88% 04/30/14 310 302(h)
El Paso Electric Co.
6.00% 05/15/35 245 229
Empresa Energetica de Sergipe
and Sociedade Anonima de
Eletrificaao da Paraiba
10.50% 07/19/13 340 367(b,h)
FirstEnergy Corp. (Series B)
6.45% 11/15/11 485 501(h)
Galaxy Entertainment
Finance Company Ltd.
9.88% 12/15/12 150 160(h)
Globo Comunicacoes e
Participacoes S.A.
7.25% 04/26/22 230 222(b)
GMAC LLC
5.63% 05/15/09 892 842
Goldman Sachs Group, Inc.
6.60% 01/15/12 1,260 1,340(h)
GTE Corp.
6.94% 04/15/28 400 429(h)
7.51% 04/01/09 330 340(h)
Hexion US Finance Corp.
9.75% 11/15/14 835 902
HSBC Bank USA NA
4.63% 04/01/14 375 355
HSBC Capital Funding LP
4.61% 12/31/49 405 373(b,h,i)
- ------------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
55
<page>
ELFUN INCOME FUND
Schedule of Investments
- --------------------------------------------------------------------------------
(dollars in thousands)-- December 31, 2007
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
HSBC Capital Funding LP (Series 1)
9.55% 12/31/49 $585 $ 639(b,h,i)
HSBC Finance Corp.
6.75% 05/15/11 260 275
HSBC Holdings PLC
6.50% 05/02/36 100 97(h)
Hydro Quebec
8.50% 12/01/29 215 305(h)
Idearc, Inc.
8.00% 11/15/16 805 739
IIRSA Norte Finance Ltd.
8.75% 05/30/24 464 525(b,h)
ING Capital Funding TR III
8.44% 12/29/49 480 511(i)
ING Groep N.V.
5.78% 12/29/49 485 451(i)
Intergen N.V.
9.00% 06/30/17 515 542(b)
International Steel Group Inc.
6.50% 04/15/14 400 411
Interoceanica IV Finance Ltd.
4.03% 11/30/18 400 259(b,d)
4.21% 11/30/25 400 190(b,d)
iStar Financial, Inc. (REIT)
7.00% 03/15/08 330 329(h)
JBS S.A.
9.38% 02/07/11 420 411
JP Morgan Chase & Co.
7.00% 11/15/09 590 614(h)
JP Morgan Chase Bank
5.88% 06/13/16 420 427
Kansas Gas & Electric
5.65% 03/29/21 266 256(h)
Kazkommerts International BV
7.00% 11/03/09 30 28(b)
Landsbanki Islands
5.73% 08/25/09 200 200(b,h,i)
Libbey Glass Inc.
11.91% 06/01/11 390 411(i)
Lippo Karawaci Finance BV
8.88% 03/09/11 350 335
Lukoil International Finance BV
6.36% 06/07/17 290 274(b)
Majestic Star Casino LLC
9.50% 10/15/10 900 850(h)
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Marfrig Overseas Ltd.
9.63% 11/16/16 $ 415 $ 412(b)
Markel Corp.
7.35% 08/15/34 175 184(h)
McDonald's Corp.
5.80% 10/15/17 303 313
Mediacom LLC
9.50% 01/15/13 840 780(h)
Merck & Company, Inc.
5.75% 11/15/36 170 169(h)
Metropolitan Life Global
Funding I
4.25% 07/30/09 460 460(b,h)
Midamerican Energy
Holdings Co.
6.13% 04/01/36 330 329(h)
Mizuho Financial Group
Cayman Ltd.
8.38% 12/29/49 445 450
Morgan Stanley
5.95% 12/28/17 500 499
Morgan Stanley (Series F)
5.33% 01/18/08 2,000 2,000(h,i)
Munich Re America Corp.
(Series B)
7.45% 12/15/26 290 323(h)
NAK Naftogaz Ukrainy
8.13% 09/30/09 500 474
Nakilat Inc.
6.07% 12/31/33 100 91(b,h)
6.27% 12/31/33 405 368(b,h)
Nelnet, Inc.
5.13% 06/01/10 600 575(h)
Nevada Power Co. (Series N)
6.65% 04/01/36 220 223(h)
NGPL PipeCo LLC
7.12% 12/15/17 318 326(b)
Nisource Finance Corp.
7.88% 11/15/10 130 138(h)
Norfolk Southern Corp.
6.00% 04/30/08 40 40(h)
8.63% 05/15/10 465 506(h)
Norfolk Southern Railway Co.
9.75% 06/15/20 353 482(h)
- -------------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
56
<page>
ELFUN INCOME FUND
Schedule of Investments
- --------------------------------------------------------------------------------
(dollars in thousands)-- December 31, 2007
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Northeast Utilities (Series B)
3.30% 06/01/08 $330 $ 327(h)
Northern States Power Co.
6.25% 06/01/36 190 197(h)
NorthWestern Corp.
5.88% 11/01/14 600 591(h)
Ohio Power Co. (Series E)
6.60% 02/15/33 165 166(h)
OPTI Canada Inc.
8.25% 12/15/14 402 398(b)
Pacific Bell
7.13% 03/15/26 225 238(h)
Pacific Gas & Electric Co.
5.80% 03/01/37 165 158
PanAmSat Corp.
9.00% 08/15/14 725 729(h)
Pemex Finance Ltd.
9.03% 02/15/11 588 628(h)
Pemex Project Funding
Master Trust
6.13% 08/15/08 13 13
7.88% 02/01/09 150 154
Petrobras International
Finance Co.
5.88% 03/01/18 450 450
PNC Preferred Funding Trust I
6.52% 12/31/49 630 567(b,i)
Potomac Edison Co.
5.35% 11/15/14 245 238(h)
Public Service Company
of Colorado
7.88% 10/01/12 495 552(h)
Puget Sound Energy, Inc.
3.36% 06/01/08 335 332(h)
5.48% 06/01/35 330 285(h)
Puget Sound Energy, Inc.
(Series A)
6.97% 06/01/67 545 488(i)
Rede Empresas de Energia
Eletrica S.A.
11.13% 04/02/49 350 343(b)
Rock-Tenn Co.
8.20% 08/15/11 785 813
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Royal Bank of Scotland
Group PLC
5.00% 10/01/14 $ 355 $ 341(h)
Sabine Pass LNG LP
7.25% 11/30/13 470 449
7.50% 11/30/16 715 683
Security Benefit Life Insurance
8.75% 05/15/16 325 374(b)
Sierra Pacific Resources
8.63% 03/15/14 1,180 1,261
Simon Property Group, L.P.
(REIT)
4.60% 06/15/10 330 328(h)
Skandinaviska Enskilda
Banken AB
7.50% 03/29/49 295 304(b,h,i)
Southern Copper Corp.
7.50% 07/27/35 76 81
Sovereign Capital Trust VI
7.91% 06/13/36 895 865(h)
Sprint Capital Corp.
7.63% 01/30/11 1,815 1,887(h)
Stallion Oilfield Finance Corp.
9.75% 02/01/15 640 589(b)
Standard Chartered Bank
Hong Kong Ltd.
4.38% 12/03/14 510 505(i)
Stewart Enterprises, Inc.
6.25% 02/15/13 415 390(h)
Telecom Italia Capital S.A.
6.20% 07/18/11 600 617
Telefonica Emisiones SAU
5.86% 02/04/13 450 463
Time Warner, Inc.
6.88% 05/01/12 150 158(h)
Titan Petrochemicals Group Ltd.
8.50% 03/18/12 235 208(b)
TNK-BP Finance S.A.
6.63% 03/20/17 195 178(b)
Tronox Worldwide LLC
9.50% 12/01/12 560 540(h)
UBS Preferred Funding Trust I
8.62% 10/29/49 330 353(i)
- -------------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
57
<page>
ELFUN INCOME FUND
Schedule of Investments
- --------------------------------------------------------------------------------
(dollars in thousands)-- December 31, 2007
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Valspar Corp.
5.63% 05/01/12 $310 $ 314
Verizon Global Funding Corp.
7.25% 12/01/10 590 632
Verizon Pennsylvania, Inc.
8.35% 12/15/30 200 239(h)
VTB Capital S.A.
5.49% 08/01/08 335 332(b,h,i)
Wells Fargo & Co.
5.63% 12/11/17 155 156
Wells Fargo Bank NA
5.95% 08/26/36 350 340(h)
Westar Energy, Inc.
7.13% 08/01/09 335 344(h)
Westlake Chemical Corp.
6.63% 01/15/16 775 732(h)
Wisconsin Electric Power
5.70% 12/01/36 115 110(h)
61,535
NON-AGENCY COLLATERALIZED
MORTGAGE OBLIGATIONS -- 9.9%
Banc of America Commercial
Mortgage Inc.
4.13% 07/10/42 600 591(h)
5.32% 10/10/11 750 752(h)
Banc of America Commercial
Mortgage Inc. (Class A)
5.79% 05/11/35 655 670(h)
Banc of America Commercial
Mortgage Inc. (Class C)
5.70% 04/10/17 300 272(h)
Banc of America Funding Corp.
5.74% 03/20/36 263 272(h,i)
5.82% 02/20/36 454 449(h,i)
Banc of America Mortgage
Securities (Class B)
5.38% 01/25/36 273 270(h,i)
5.55% 02/25/36 209 215(h,i)
Bank of America Alternative
Loan Trust
6.50% 07/25/35 331 329(h)
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Bear Stearns Asset Backed
Securities Trust (Class A)
5.04% 07/25/36 $ 1,483 $ 1,460(h,i)
Bear Stearns Commercial
Mortgage Securities
5.41% 03/11/39 222 224(h,i)
5.48% 10/12/41 758 764(h,i)
5.53% 10/12/41 758 758(h,i)
6.02% 02/14/31 726 731(h)
Bear Stearns Commercial
Mortgage Securities (Class A)
5.66% 06/11/40 1,600 1,625(i)
Bear Stearns Commercial
Mortgage Securities (Class D)
5.99% 09/11/42 100 82(b,i)
Countrywide Alternative
Loan Trust
5.98% 05/25/36 98 66(h,i)
6.00% 03/25/36 - 08/25/36 480 112(h)
Countrywide Alternative
Loan Trust (Class B)
6.00% 05/25/36 - 08/25/36 296 158(h)
Countrywide Asset-Backed
Certificates
5.06% 11/25/35 403 398(h,i)
Credit Suisse Mortgage
Capital Certificates
5.47% 09/15/39 689 694(h)
Credit Suisse Mortgage Capital
Certificates (Class C)
5.65% 02/25/36 147 125(h,i)
Crusade Global Trust (Class A)
5.16% 09/18/34 52 51(h,i)
CS First Boston Mortgage
Securities Corp.
1.39% 03/15/35 10,651 289(b,h,i)
5.25% 08/25/34 192 190(h)
5.33% 10/25/35 251 202(h,i)
5.37% 07/15/37 7,309 158(b,d,h,i)
6.13% 04/15/37 520 539(h)
CS First Boston Mortgage
Securities Corp. (Class A)
5.44% 09/15/34 397 401(h)
6.53% 06/15/34 400 417(h)
- ------------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
58
<page>
ELFUN INCOME FUND
Schedule of Investments
- --------------------------------------------------------------------------------
(dollars in thousands)-- December 31, 2007
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
DLJ Commercial Mortgage
Corp. (Class A)
7.18% 11/10/33 $ 539 $ 564(h)
First Horizon Alternative
Mortgage Securities
(Class B)
5.98% 05/25/36 98 36(h,i)
First Union-Lehman Brothers-
Bank of America
6.56% 11/18/35 449 449(h)
GMAC Commercial Mortgage
Securities, Inc.
6.42% 05/15/35 886 888(h)
6.47% 04/15/34 299 310(h)
GMAC Commercial Mortgage
Securities, Inc. (Class X)
5.29% 12/10/41 10,765 195(d,h,i)
Greenwich Capital Commercial
Funding Corp.
5.12% 04/10/37 626 627(h)
Impac CMB Trust
5.13% 04/25/35 669 651(h,i)
Indymac INDA Mortgage
Loan Trust
5.14% 01/25/36 100 90(h,i)
Indymac INDA Mortgage Loan
Trust (Class B)
5.14% 01/25/36 144 135(h,i)
JP Morgan Chase Commercial
Mortgage Securities Corp.
1.11% 01/12/39 6,550 173(b,h,i)
6.20% 02/12/51 155 133(b,i)
6.47% 11/15/35 457 477(h)
LB-UBS Commercial
Mortgage Trust
4.06% 09/15/27 1,033 1,020(h,i)
5.20% 01/18/12 9,710 205(d,h,i)
5.26% 09/15/39 800 803(h)
6.23% 03/15/26 371 375(h)
6.97% 01/15/36 3,075 178(b,d,h)
7.70% 10/15/35 2,500 100(b,d,h,i)
8.47% 03/15/36 8,306 217(b,d,h,i)
8.57% 02/15/40 8,093 163(b,d,h,i)
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
LB-UBS Commercial Mortgage
Trust (Class A)
6.13% 12/15/30 $ 832 $ 862(h)
LB-UBS Commercial Mortgage
Trust (Class B)
6.65% 07/14/16 103 109(b,h)
LB-UBS Commercial Mortgage
Trust (Class F)
6.24% 07/15/40 280 241(i)
LB-UBS Commercial Mortgage
Trust (Class X)
5.56% 09/15/39 21,163 612(d,h,i)
8.36% 12/15/39 6,877 113(b,d,h,i)
Master Alternative Loans Trust
5.00% 08/25/18 334 51(g,h)
6.50% 08/25/34 - 05/25/35 1,264 1,250(h)
Master Alternative Loans
Trust (Class 3)
6.50% 01/25/35 321 320(h)
Merrill Lynch Mortgage
Trust (Class A)
5.61% 05/12/39 757 769(h,i)
MLCC Mortgage Investors, Inc.
5.37% 02/25/36 225 216(h,i)
Morgan Stanley Capital I
5.28% 12/15/43 296 298(h,i)
5.33% 12/15/43 296 296(h,i)
5.39% 11/12/41 848 797(h,i)
5.44% 02/12/44 295 294(b,i)
5.69% 04/15/49 1,600 1,631(h,i)
5.71% 07/12/44 350 356(h)
Morgan Stanley Capital I
(Class A)
5.36% 02/12/44 500 502(i)
Morgan Stanley Dean Witter
Capital I (Class A)
6.54% 02/15/31 259 268(h)
Nomura Asset Securities
Corp. (Class A)
6.59% 03/15/30 650 652(h)
PNC Mortgage Acceptance
Corp. (Class A)
6.36% 03/12/34 700 726
- -------------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
59
<page>
ELFUN INCOME FUND
Schedule of Investments
- --------------------------------------------------------------------------------
(dollars in thousands)-- December 31, 2007
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Puma Finance Ltd. (Class A)
5.02% 03/25/34 $ 137 $ 133(h,i)
5.44% 10/11/34 180 178(h,i)
Residential Accredit Loans, Inc.
6.00% 01/25/36 389 306(h)
6.04% 01/25/36 153 159(h,i)
Residential Funding
Mortgage Security I
5.75% 01/25/36 277 231(h)
Structured Asset Securities
Corp. (Class X)
15.58% 02/25/28 509 13(d,i)
Wachovia Bank Commercial
Mortgage Trust
5.42% 04/15/47 1,200 1,200
Wachovia Bank Commercial
Mortgage Trust (Class E)
5.90% 02/15/51 875 757(i)
Washington Mutual Inc.
5.20% 01/25/45 507 480(h,i)
Wells Fargo Mortgage Backed
Securities Trust
5.39% 08/25/35 627 609(h,i)
5.50% 01/25/36 363 292(h)
Wells Fargo Mortgage Backed
Securities Trust (Class B)
5.50% 03/25/36 498 418(h)
36,192
SOVEREIGN BONDS -- 0.5%
Government of Bahamas
6.63% 05/15/33 380 434(b,h)
Government of Canada
7.50% 09/15/29 460 596
Government of
Manitoba Canada
4.90% 12/06/16 315 323(h)
Government of Panama
6.70% 01/26/36 290 306
1,659
TOTAL BONDS AND NOTES
(COST $365,029) 361,142
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
SECURITIES PURCHASED WITH COLLATERAL FROM
SECURITIES ON LOAN -- 10.5%
- --------------------------------------------------------------------------------
ASSET BACKED -- 6.4%
Arran Master Trust (Class A)
5.05% 12/15/10 $2,000 $ 1,986(i)
Chase Issuance Trust (Class A)
5.05% 11/15/11 2,000 1,993(i)
CNH Wholesale Master Note
Trust (Class A)
5.14% 06/15/11 1,000 998(i)
Countrywide Asset-Backed
Certificates
5.30% 05/25/33 44 43(i)
Countrywide Asset-Backed
Certificates (Class 2)
5.47% 06/25/33 2 2(i)
Discover Card Master Trust I
5.04% 04/15/10 5,000 4,970(i)
First Franklin Mortgage Loan
Asset Backed Certificates
(Class M)
5.32% 03/25/35 5,000 4,497(i)
Fleet Home Equity Loan
Trust (Class A)
5.20% 01/20/33 353 335(i)
GMAC Mortgage Corp.
Loan Trust
4.96% 08/25/35 2,000 1,995(i)
GSAA Trust
5.27% 05/25/34 105 105(h,i)
GSAMP Trust
5.02% 12/25/35 1,000 992(i)
JP Morgan Mortgage
Acquisition Corp.
4.98% 01/25/36 647 642(i)
Nissan Auto Lease Trust
5.10% 02/15/13 2,200 2,167(i)
Residential Asset
Securities Corp.
5.12% 01/25/36 2,427 2,259(i)
- -------------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
60
<page>
ELFUN INCOME FUND
Schedule of Investments
- --------------------------------------------------------------------------------
(dollars in thousands)-- December 31, 2007
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
Structured Asset Securities Corp.
5.07% 02/25/35 $ 40 $ 40(i)
Wachovia Asset Securitization
Inc. (Class A)
5.09% 06/25/34 411 405(h,i)
23,429
CORPORATE NOTES -- 0.5%
Morgan Stanley
4.93% 05/07/09 1,640 1,620(i)
NON-AGENCY COLLATERALIZED
MORTGAGE OBLIGATIONS -- 3.6%
Banc of America Large Loan
5.24% 03/15/22 3,500 3,409(b,i)
Granite Master Issuer PLC
5.03% 12/20/54 1,267 1,266(i)
Granite Mortgages PLC (Class 1)
5.36% 01/20/43 413 413(i)
Impac CMB Trust (Class 1)
5.23% 10/25/34 602 602(i)
Interstar Millennium Trust
(Class A)
5.26% 03/14/36 76 76(i)
Lehman Brothers Floating Rate
Commercial Mortgage Trust
5.20% 10/15/17 391 391(b,i)
Morgan Stanley Capital I
5.57% 01/15/21 2,000 1,940(b,i)
MortgageIT Trust (Class A)
5.17% 08/25/35 2,954 2,914(i)
National RMBS Trust
5.04% 03/20/34 150 148(i)
Nomura Asset Acceptance Corp.
5.00% 03/25/37 1,674 1,670(i)
Washington Mutual Inc.
5.21% 01/25/45 245 233(i)
13,062
TOTAL SECURITIES PURCHASED WITH COLLATERAL
FROM SECURITIES ON LOAN
(COST $39,168) 38,111
TOTAL INVESTMENTS IN SECURITIES
(COST $404,198) 399,253
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 34.5%*
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 4.8%
GEI Short Term Investment Fund
4.96% 17,536,174 $ 17,536 (d,k)
PRINCIPAL
AMOUNT
- --------------------------------------------------------------------------------
FEDERAL AGENCIES -- 4.4%
Federal Home Loan Bank
Discount Notes
4.05% 01/03/08 $16,000 15,996(d)
COMMERCIAL PAPER -- 4.1%
Rabobank USA Finance Corp.
4.44% 01/03/08 15,000 14,996
REPURCHASE AGREEMENT -- 1.1%
State Street Corp.
3.75% 01/02/08 4,000 4,000(e)
NUMBER
OF SHARES
- --------------------------------------------------------------------------------
SHORT-TERM SECURITIES PURCHASED WITH
COLLATERAL FROM SECURITIES ON LOAN -- 20.1%
GEI Short Term Investment Fund
4.96% 72,959,438 72,960 (d,k)
TOTAL SHORT-TERM INVESTMENTS
(COST $125,488) 125,488
TOTAL INVESTMENTS
(COST $529,686) 524,741
LIABILITIES IN EXCESS OF OTHER
ASSETS, NET-- (44.3)% (161,046)
---------
NET ASSETS-- 100.0% $ 363,695
=========
- ------------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
61
<page>
ELFUN INCOME FUND
Schedule of Investments
- --------------------------------------------------------------------------------
(dollars in thousands)-- December 31, 2007
OTHER INFORMATION
- --------------------------------------------------------------------------------
The Elfun Income Fund had the following long futures contracts open at December
31, 2007
NUMBER CURRENT
EXPIRATION OF NOTIONAL UNREALIZED
DESCRIPTION DATE CONTRACTS VALUE APPRECIATION
- --------------------------------------------------------------------------------
U.S. Treasury
Notes 2 Yr.
Futures March 2008 76 $15,979 $ 8
U.S. Treasury
Notes 10 Yr.
Futures March 2008 141 15,988 43
-----
$ 51
=====
* The financial statement figure presented above for Short-Term Investments
includes collateral received from transactions such as loans of portfolio
securities and amounts held pending settlement of securities transactions. In
evaluating the Fund's net cash level, portfolio management takes into account
certain of the Fund's liabilities in excess of other assets, such as
liabilities associated with loans of portfolio securities and securities
pending settlement, and equitized cash. The Fund's net cash level is not
expected to exceed 5%.
- -------------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
62
<page>
Elfun Money Market Fund
- --------------------------------------------------------------------------------
Q&A
THE ELFUN MONEY MARKET FUND IS MANAGED BY A TEAM OF PORTFOLIO MANAGERS THAT
INCLUDES JAMES C. GANNON, WILLIAM M. HEALEY AND ANDREW A. MASELLI. THE TEAM IS
LED BY MR. HEALEY (PICTURED BELOW), WHO IS VESTED WITH OVERSIGHT AUTHORITY. SEE
PORTFOLIO MANAGERS' BIOGRAPHICAL INFORMATION BEGINNING ON PAGE 94.
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, 2007?
A. For the twelve-month period ended December 31, 2007, the Elfun Money Market
Fund returned 5.24%. The 90-Day U.S. Treasury Bill, the Fund's benchmark,
returned 4.46% and the Fund's Lipper peer group of 330 Money Market funds
returned an average of 4.49% for the same period.
Q. DESCRIBE WHAT HAPPENED IN THE U.S. ECONOMY DURING THE TWELVE-MONTH PERIOD
ENDING DECEMBER 31, 2007.
A. The U.S. economy will most likely post a GDP growth of approximately 2% in
2007, held back by recessionary conditions in the housing market. Rising
delinquencies and defaults in sub-prime mortgage loans resulted in large
pricing dislocations of securities backed by these loan types. In the
fallout, Wall Street broker/dealers were forced in the third and fourth
quarters to take write-downs in the billions from owning such securities as
well as structured vehicles backed by these security types. Investor's lack
of confidence in valuations of sub-prime mortgages spread to all risky
assets, significantly widening yield spreads in high grade and high yield
credit and emerging market debt. A flight to the safety of U.S. treasuries
pushed interest rates down, which generated a 9% total return for the
treasury sector. By year-end, 2 and 10-year note yields had fallen by 176
and 68 bps to finish at 3.05% and 4.02% respectively. All other U.S. fixed
income sectors posted positive returns for the year, but less than that of
treasuries. The Fed responded to the housing recession/sub-prime crisis by
reducing the fed funds target by 100 basis points to 4.25% starting in
September, while also injecting reserves into the financial system to
provide liquidity to banks unwilling to lend to each other. At the December
meeting, the FOMC stated "the upside risks to inflation roughly balance the
downside risks to growth". However, market pricing at year-end indicated
further rate cuts in 2008.
Q. WHAT WERE THE PRIMARY DRIVERS OF FUND PERFORMANCE?
A. The primary driver behind Fund performance was the positioning of the
portfolios average maturity during the year to take advantage of the
changing yields at the short end of the yield curve. As the Federal Reserve
began lowering the fed funds target, the average maturity of the Fund was
lengthened to take advantage of declining yields.
[PHOTO OMITTED]
63
<page>
Elfun Money Market Fund
- --------------------------------------------------------------------------------
Understanding Your Fund's Expenses
As a shareholder of the Fund you incur ongoing expenses, which include portfolio
management 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, 2007.
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 $1,000 = 8.6), then multiply the result by the number
given for your class under the heading "Expenses Paid During Period."
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholders
reports of other funds.
Please note that the expenses shown in the table do not reflect any transaction
costs, such as sales charges or redemption fees.
JULY 1, 2007 - DECEMBER 31, 2007
- ---------------------------------------------------------------------------------------------------------------------------
ACCOUNT VALUE AT ACCOUNT VALUE EXPENSES
THE BEGINNING OF AT THE END OF PAID DURING
THE PERIOD ($) THE PERIOD ($) THE PERIOD ($)*
- ---------------------------------------------------------------------------------------------------------------------------
Actual Fund Return** 1,000.00 1,025.65 0.92
Hypothetical 5% Return
(2.5% for the period) 1,000.00 1,024.01 0.92
- ---------------------------------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.18% (FROM
PERIOD JULY 1, 2007 - DECEMBER 31, 2007), 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, 2007 WAS: 2.56%.
64
<page>
Elfun Money Market Fund
- --------------------------------------------------------------------------------
CHANGE IN VALUE OF A $10,000 INVESTMENT
[LINE CHART OMITTED PLOT POINTS FOLLOWS]
ELFUN MONEY MARKET FUND 90 DAY T-BILL
12/97 $10000 $10000
12/98 10539 10490
12/99 11078 10991
12/00 11788 11651
12/01 12278 12054
12/02 12514 12251
12/03 12641 12377
12/04 12786 12550
12/05 13170 12953
12/06 13819 13579
12/07 14543 14185
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED DECEMBER 31, 2007
- --------------------------------------------------------------------------------
ONE FIVE TEN
YEAR YEAR YEAR
- --------------------------------------------------------------------------------
Elfun Money Market Fund 5.24% 3.05% 3.82%
90 Day U.S. T-Bill 4.46% 2.98% 3.56%
Elfun Money Market Fund (ending value $14,543)
90-Day U.S. T-Bill (ending value $14,185)
* LIPPER PERFORMANCE COMPARISON
MONEY MARKET PEER GROUP
BASED ON AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED 12/31/07
ONE FIVE TEN
YEAR YEAR YEAR
Fund's rank in peer group: 3 5 1
Number of Funds in peer group: 330 288 190
Peer group average annual total return: 4.49% 2.40% 3.80%
Lipper categories in peer group: Money Market
* SEE NOTES TO PERFORMANCE FOR THE EXPLANATION OF PEER CATEGORIES.
FUND YIELD AT DECEMBER 31, 2007
- --------------------------------------------------------------------------------
IBC'S
FUND MONEY FUND*
- --------------------------------------------------------------------------------
7-day current 4.72%+ 3.99%
- --------------------------------------------------------------------------------
7-day effective 4.83% 4.07%
- --------------------------------------------------------------------------------
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, 2007.
* IBC'S MONEY FUND REPORT PROVIDES AVERAGE YIELD FOR ALL MAJOR MONEY MARKET
FUNDS.
SEE NOTES TO PERFORMANCE ON PAGE 1 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.
65
<page>
ELFUN MONEY MARKET FUND
Schedule of Investments
- --------------------------------------------------------------------------------
(dollars in thousands)-- December 31, 2007
ELFUN MONEY MARKET FUND
PORTFOLIO COMPOSITION AS A % OF THE MARKET VALUE OF $326,537 AS OF DECEMBER 31,
2007.
[PIE CHART OMITTED]
CERTIFICATES OF DEPOSIT 51.8%
U.S. GOVERNMENTS 13.8%
COMMERCIAL PAPER 11.4%
CORPORATE NOTES 8.9%
REPURCHASE AGREEMENTS 8.6%
TIME DEPOSIT 5.5%
PRINCIPAL AMORTIZED
AMOUNT COST
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 99.6%+
- --------------------------------------------------------------------------------
U.S. GOVERNMENTS -- 13.8%
U.S. AGENCIES
Federal Home Loan Bank
Discount Notes
4.39% 02/15/08 $15,780 $ 15,694(d)
Federal Home Loan Mortgage
Corp. Discount Notes
4.30% 01/08/08 14,610 14,598(d)
Federal National Mortgage
Assoc. Discount Notes
4.24% 03/31/08 15,000 14,843(d)
45,135
COMMERCIAL PAPER -- 11.3%
Bank of America Corp.
4.87% 04/15/08 15,770 15,546
ING Group.
5.45% 01/07/08 9,340 9,332
JP Morgan
4.95% 04/01/08 12,490 12,334
37,212
PRINCIPAL AMORTIZED
AMOUNT COST
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 8.6%
Barclays Bank
4.75% dated 12/31/07, to be
repurchased at $9,402 on
01/02/08 collateralized by
$9,588 U.S. Government
Agency Bond, 6.00%,
maturing 01/12/22
01/02/08 $ 9,400 $ 9,400
Deutsche Bank 4.75% dated
12/31/07, to be repurchased
at $18,705 on 01/02/08
collateralized by $19,074 U.S.
Government Agency Bond, 5.78%
and 5.82% maturing 02/01/37
and 01/01/38 respectively
01/02/08 18,700 18,700
28,100
CERTIFICATES OF DEPOSIT -- 51.6%
Bank of Montreal
5.20% 06/06/08 14,000 14,000
Barclays Bank PLC
5.25% 03/03/08 12,600 12,600
BNP Paribas
4.68% 04/28/08 9,600 9,600
Calyon
5.33% 01/15/08 15,500 15,500
Canadian Imperial Bank
4.90% 10/22/08 12,280 12,280(i)
Citibank
4.68% 04/24/08 6,680 6,680
4.90% 01/24/08 6,680 6,680
Credit Suisse
5.20% 04/14/08 12,520 12,520
Deutsche Bank
4.70% 02/04/08 11,000 11,000
Dexia Credit
4.83% 02/08/08 12,000 12,000
Dresdner Bank AG
5.30% 01/10/08 4,930 4,930
Fortis Bank
4.77% 01/31/08 13,000 13,000
- ------------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
66
<page>
ELFUN MONEY MARKET FUND
Schedule of Investments
- --------------------------------------------------------------------------------
(dollars in thousands)-- December 31, 2007
PRINCIPAL AMORTIZED
AMOUNT COST
- --------------------------------------------------------------------------------
abobank Nederland
4.50% 05/09/08 $ 5,680 $ 5,680
4.59% 04/09/08 5,680 5,680
Societe Generale
5.20% 02/04/08 6,695 6,695
5.38% 03/27/08 9,000 9,000
Toronto-Dominion
4.70% 05/13/08 5,590 5,590
4.80% 03/13/08 5,590 5,590
169,025
CORPORATE NOTES -- 8.8%
American Express Credit Corp.
5.35% 03/05/08 6,460 6,461(i)
Merrill Lynch & Company, Inc.
4.98% 08/22/08 10,000 10,000(i)
Morgan Stanley Group Inc.
5.35% 01/02/09 12,560 12,560(i)
29,021
TIME DEPOSIT -- 5.5%
Royal Bank of Canada
4.25% 01/02/08 5,300 5,300
State Street Corp.
3.75% 01/02/08 12,744 12,744(e)
18,044
TOTAL SHORT-TERM INVESTMENTS
(COST $326,537) 326,537
OTHER ASSETS AND LIABILITIES,
NET-- 0.4% 1,229
--------
NET ASSETS-- 100% $327,766
========
- -----------
See Notes to Schedules of Investments on page 68 and Notes to Financial
Statements.
67
<page>
Notes to Schedules of Investments
(dollars in thousands)-- December 31, 2007
(a) Non-income producing security.
(b) Pursuant to Rule 144A of the Securities Act of 1933, these Securities may be
resold in transactions exempt from registration, normally to qualified
institutional buyers. At December 31, 2007, these securities amounted to
$488; $9,724; $19,316 and $21,142; or 0.10%, 3.33%, 1.10%, and 5.81% of net
assets for the Elfun International Equity Fund, Elfun Diversified Fund,
Elfun Tax-Exempt Income Fund, 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, 2007, 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, 2007.
(j) All or a portion of the security is out on loan.
(k) GE Asset Management (GEAM), the investment adviser of the Funds, also serves
as investment adviser of the GEI Short-Term Investment Fund.
(l) 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 (m) 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.
(m) 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.
(n) 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, 2007
(as a percentage of net assets) as follows:
AMBAC 12.33%
MBIA 11.22%
FSA 11.28%
(o) Treasury Inflation Protected Securities.
(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, 2007.
* Less than 0.1% ** Amount is less than $500 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
<page>
Financial Highlights
SELECTED DATA BASED ON A UNIT OUTSTANDING DURING THE YEARS INDICATED
- ---------------------------------------------------------------------------------------------------------------------------
ELFUN INTERNATIONAL EQUITY FUND 2007 2006 2005 2004 2003
- ---------------------------------------------------------------------------------------------------------------------------
INCEPTION DATE -- -- -- -- 1/1/88
Net asset value, beginning of year ................ $25.69 $21.82 $18.57 $16.17 $11.63
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income .......................... 0.63 0.51 0.42 0.34 0.24
Net realized and unrealized
gains (losses) on investments ............... 5.45 5.16 3.24 2.39 4.53
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM INVESTMENT OPERATIONS .... 6.08 5.67 3.66 2.73 4.77
LESS DISTRIBUTIONS FROM:
Net investment income .......................... 0.61 0.52 0.41 0.33 0.23
Net realized gains ............................. 2.84 1.28 -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ............................... 3.45 1.80 0.41 0.33 0.23
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR ...................... $28.32 $25.69 $21.82 $18.57 $16.17
===========================================================================================================================
TOTAL RETURN(A) ................................... 23.78% 26.03% 19.69% 16.90% 41.04%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in thousands) ......... $483,850 $385,518 $287,527 $239,329 $204,211
Ratios to average net assets:
Net investment income ....................... 2.23% 2.11% 2.16% 2.01% 1.82%
Net expenses ................................ 0.20% 0.18% 0.23% 0.31% 0.42%
Gross expenses .............................. 0.20% 0.18% 0.23% 0.32% 0.42%
Portfolio turnover rate ........................ 31% 30% 42% 38% 34%
===========================================================================================================================
ELFUN TRUSTS ...................................... 2007 2006 2005 2004 2003
===========================================================================================================================
INCEPTION DATE .................................... -- -- -- -- 5/27/35
Net asset value, beginning of year ................ $51.58 $50.74 $55.13 $55.28 $46.47
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income .......................... 0.61 0.69 0.62 0.76 0.47
Net realized and unrealized
gains (losses) on investments ............... 2.01 5.97 (0.14) 3.63 10.17
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM INVESTMENT OPERATIONS .... 2.62 6.66 0.48 4.39 10.64
- ---------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income .......................... 0.61 0.70 0.64 0.76 0.46
Net realized gains ............................. 4.86 5.12 4.23 3.78 1.37
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ............................... 5.47 5.82 4.87 4.54 1.83
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR ...................... $48.73 $51.58 $50.74 $55.13 $55.28
===========================================================================================================================
TOTAL RETURN(A) ................................... 5.05% 13.10% 0.80% 7.94% 22.95%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in thousands) ......... $2,199,017 $2,302,024 $2,273,709 $2,444,850 $2,377,213
Ratios to average net assets:
Net investment income ....................... 1.10% 1.29% 1.12% 1.34% 0.92%
Net expenses ................................ 0.12% 0.13% 0.11% 0.15% 0.19%
Gross expenses .............................. 0.12% 0.13% 0.11% 0.15% 0.19%
Portfolio turnover rate ........................ 12% 14% 13% 13% 9%
- -----------
See Notes to Financial Highlights and Notes to Financial Statements.
69
<page>
Financial Highlights
SELECTED DATA BASED ON A UNIT OUTSTANDING DURING THE YEARS INDICATED
- ---------------------------------------------------------------------------------------------------------------------------
ELFUN DIVERSIFIED FUND 2007 2006 2005 2004 2003
- ---------------------------------------------------------------------------------------------------------------------------
INCEPTION DATE -- -- -- -- 1/1/88
Net asset value, beginning of year ................ $20.15 $18.74 $19.43 $19.34 $16.25
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income .......................... 0.50 0.50 0.44 0.42 0.34
Net realized and unrealized
gains (losses) on investments ............... 1.26 2.24 0.35 1.26 3.11
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM INVESTMENT OPERATIONS .... 1.76 2.74 0.79 1.68 3.45
- ---------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income .......................... 0.49 0.50 0.44 0.42 0.36
Net realized gains ............................. 1.62 0.83 1.04 1.17 0.00*
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ............................... 2.11 1.33 1.48 1.59 0.36
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR ...................... $19.80 $20.15 $18.74 $19.43 $19.34
===========================================================================================================================
TOTAL RETURN(A) ................................... 8.74%(B) 14.60% 4.02% 8.70% 21.25%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in thousands) ......... $292,224 $283,069 $259,930 $256,472 $235,832
Ratios to average net assets:
Net investment income ....................... 2.31% 2.45% 2.21% 2.13% 1.93%
Net expenses ................................ 0.20% 0.20% 0.22% 0.23% 0.27%
Gross expenses .............................. 0.20% 0.20% 0.22% 0.24% 0.27%
Portfolio turnover rate ........................ 171% 119% 118% 138% 124%
===========================================================================================================================
ELFUN TAX-EXEMPT INCOME FUND ...................... 2007 2006 2005 2004 2003
===========================================================================================================================
INCEPTION DATE .................................... -- -- -- -- 1/1/80
Net asset value, beginning of year ................ $11.74 $11.75 $11.91 $12.00 $12.05
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income .......................... 0.54 0.54 0.54 0.55 0.57
Net realized and unrealized
gains (losses) on investments ............... (0.20) 0.01 (0.12) (0.03) 0.01
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME FROM INVESTMENT OPERATIONS ........... 0.34 0.55 0.42 0.52 0.58
- ---------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income .......................... 0.54 0.54 0.54 0.55 0.57
Net realized gains ............................. 0.00* 0.02 0.04 0.06 0.06
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ............................... 0.54 0.56 0.58 0.61 0.63
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR ...................... $11.54 $11.74 $11.75 $11.91 $12.00
===========================================================================================================================
TOTAL RETURN(A) ................................... 2.96% 4.83% 3.64% 4.49% 4.95%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in thousands) ......... $1,757,490 $1,771,290 $1,741,535 $1,697,548 1,773,090
Ratios to average net assets:
Net investment income ....................... 4.63% 4.64% 4.56% 4.60% 4.72%
Net expenses ................................ 0.12% 0.12% 0.13% 0.12% 0.12%
Gross expenses .............................. 0.12% 0.12% 0.13% 0.12% 0.12%
Portfolio turnover rate ........................ 39% 36% 32% 32% 41%
- -------------
See Notes to Financial Highlights and Notes to Financial Statements.
70
<page>
Financial Highlights
SELECTED DATA BASED ON A UNIT OUTSTANDING DURING THE YEARS INDICATED
- ---------------------------------------------------------------------------------------------------------------------------
ELFUN INCOME FUND 2007 2006 2005 2004 2003
- ---------------------------------------------------------------------------------------------------------------------------
INCEPTION DATE -- -- -- -- 12/31/84
Net asset value, beginning of year .............. $11.05 $11.14 $11.42 $11.60 $11.78
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income ........................ 0.61 0.59 0.54 0.46 0.45
Net realized and unrealized
gains (losses) on investments ............. 0.05 (0.09) (0.25) (0.00)* 0.02
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME FROM INVESTMENT OPERATIONS ......... 0.66 0.50 0.29 0.46 0.47
- ---------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ........................ 0.62 0.59 0.53 0.46 0.47
Net realized gains ........................... 0.00* -- 0.04 0.18 0.18
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ............................. 0.62 0.59 0.57 0.64 0.65
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR .................... $11.09 $11.05 $11.14 $11.42 $11.60
===========================================================================================================================
TOTAL RETURN(A) ................................. 6.16% 4.69% 2.58% 4.07% 4.04%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in thousands) ....... $363,695 $363,142 $385,076 $396,359 $413,209
Ratios to average net assets:
Net investment income ..................... 5.58% 5.41% 4.74% 3.99% 3.82%
Net expenses .............................. 0.20% 0.19% 0.21% 0.19% 0.18%
Gross expenses ............................ 0.20% 0.19% 0.21% 0.19% 0.18%
Portfolio turnover rate ...................... 432% 328% 317% 351% 361%
===========================================================================================================================
ELFUN MONEY MARKET FUND ......................... 2007 2006 2005 2004 2003
===========================================================================================================================
INCEPTION DATE .................................. -- -- -- -- 6/13/90
Net asset value, beginning of year .............. $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ........................ 0.05 0.05 0.03 0.01 0.01
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME FROM INVESTMENT OPERATIONS ......... 0.05 0.05 0.03 0.01 0.01
- ---------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income ........................ 0.05 0.05 0.03 0.01 0.01
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ............................. 0.05 0.05 0.03 0.01 0.01
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR .................... $1.00 $1.00 $1.00 $1.00 $1.00
===========================================================================================================================
TOTAL RETURN(A) ................................. 5.24% 4.93% 3.00% 1.15% 1.01%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in thousands) ....... $327,766 $306,582 $313,641 $315,279 $351,686
Ratios to average net assets:
Net investment income ..................... 5.12% 4.87% 3.06% 1.24% 1.05%
Net expenses .............................. 0.18% 0.18% 0.19% 0.18% 0.17%
Gross expenses ............................ 0.18% 0.18% 0.19% 0.18% 0.17%
- ----------
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.
(B) THE TOTAL RETURN INCLUDES .03% RELATED TO THE PURCHASE AND SALES OF INITIAL
PUBLIC OFFERINGS.
* LESS THAN 0.01 PER SHARE.
- ------------
See Notes to Financial Statements.
71
<page>
STATEMENTS OF ASSETS
AND LIABILITIES DECEMBER 31, 2007
(AMOUNTS IN THOUSANDS)
- ------------------------------------------------------------------------------------------------------------------------------------
ELFUN
INTERNATIONAL ELFUN
EQUITY FUND TRUSTS
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments in securities, at market* (cost $317,029;
$1,445,825; $256,598; $1,682,142; $404,198
and $0 respectively) ........................................ $470,204 $2,165,232
Short-term Investments (at amortized cost) ...................... -- --
Short-term affiliated investments (at amortized cost) ........... 12,209 33,602
Cash ............................................................ -- --
Foreign currency (cost $548; $0; $324; $0; $722;
and $0, respectively) ....................................... 554 --
Income receivables .............................................. 523 2,063
Receivable for fund units sold .................................. 363 444
Variation margin receivable ..................................... 55 --
Receivable from GEAM ............................................ -- --
Other assets .................................................... 394 --
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS ................................................. 484,302 2,201,341
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Distribution payable to unitholders ............................. -- --
Payable upon return of securities loaned ........................ -- --
Payable for investments purchased ............................... -- --
Payable for fund units redeemed ................................. 308 1,659
Payable to GEAM ................................................. 143 665
Interest/Dividend payable ....................................... 1 --
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES ............................................ 452 2,324
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS ......................................................... $483,850 $2,199,017
====================================================================================================================================
NET ASSETS CONSIST OF:
Capital paid in ................................................. 330,546 1,478,444
Undistributed net investment income ............................. 388 575
Accumulated net realized gain (loss) ............................ (201) 591
Net unrealized appreciation/(depreciation) on:
Investments ................................................. 153,175 719,407
Futures ..................................................... (63) --
Foreign currency related transactions ....................... 5 --
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS ......................................................... $483,850 $2,199,017
- ------------------------------------------------------------------------------------------------------------------------------------
Units outstanding (Par value $10; $10; $10; $10; $10; and $1,
respectively; unlimited shares authorized) ...................... 17,084 45,127
Net asset value, offering and redemption price per unit ............ $ 28.32 $ 48.73
STATEMENTS OF ASSETS
AND LIABILITIES DECEMBER 31, 2007
(AMOUNTS IN THOUSANDS)
- ----------------------------------------------------------------------------------------------------------------------------
ELFUN ELFUN
DIVERSIFIED TAX-EXEMPT
FUND INCOME FUND
- ----------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments in securities, at market* (cost $317,029;
$1,445,825; $256,598; $1,682,142; $404,198
and $0 respectively) ....................................... $296,658 $1,737,227
Short-term Investments (at amortized cost) ..................... -- --
Short-term affiliated investments (at amortized cost) .......... 4,195 3,279
Cash ........................................................... 3 --
Foreign currency (cost $548; $0; $324; $0; $722;
and $0, respectively) ...................................... 324 --
Income receivables ............................................. 826 22,818
Receivable for fund units sold ................................. 225 1,194
Variation margin receivable .................................... 77 --
Receivable from GEAM ........................................... 304 --
Other assets ................................................... 3 --
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS ................................................ 302,615 1,764,518
- ----------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Distribution payable to unitholders ............................ -- 1,958
Payable upon return of securities loaned ....................... -- --
Payable for investments purchased .............................. 10,063 3,852
Payable for fund units redeemed ................................ 233 575
Payable to GEAM ................................................ 95 643
Interest/Dividend payable ...................................... -- --
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES ........................................... 10,391 7,028
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSETS ........................................................ $292,224 $1,757,490
============================================================================================================================
NET ASSETS CONSIST OF:
Capital paid in ................................................ 252,491 1,703,493
Undistributed net investment income ............................ -- --
Accumulated net realized gain (loss) ........................... (253) (1,088)
Net unrealized appreciation/(depreciation) on:
Investments ................................................ 40,060 55,085
Futures .................................................... (76) --
Foreign currency related transactions ...................... 2 --
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSETS ........................................................ $292,224 $1,757,490
- ----------------------------------------------------------------------------------------------------------------------------
Units outstanding (Par value $10; $10; $10; $10; $10; and $1,
respectively; unlimited shares authorized) ..................... 14,761 152,302
Net asset value, offering and redemption price per unit ........... $ 19.80 $ 11.54
STATEMENTS OF ASSETS
AND LIABILITIES DECEMBER 31, 2007
(AMOUNTS IN THOUSANDS)
- ------------------------------------------------------------------------------------------------------------------------------------
ELFUN
ELFUN MONEY MARKET
INCOME FUND FUND
- ---------------------------------------------------------------------------------------------------------------------
ASSETS
Investments in securities, at market* (cost $317,029;
$1,445,825; $256,598; $1,682,142; $404,198
and $0 respectively) ....................................... $399,253 $ --
Short-term Investments (at amortized cost) ..................... 34,992 326,537
Short-term affiliated investments (at amortized cost) .......... 90,496 --
Cash ........................................................... 3 --
Foreign currency (cost $548; $0; $324; $0; $722;
and $0, respectively) ...................................... 759 --
Income receivables ............................................. 3,936 1,962
Receivable for fund units sold ................................. 307 1,046
Variation margin receivable .................................... 48 --
Receivable from GEAM ........................................... -- 268
Other assets ................................................... -- --
- ---------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS ................................................ 529,794 329,813
- ---------------------------------------------------------------------------------------------------------------------
LIABILITIES
Distribution payable to unitholders ............................ 499 139
Payable upon return of securities loaned ....................... 109,146 --
Payable for investments purchased .............................. 56,104 --
Payable for fund units redeemed ................................ 156 1,866
Payable to GEAM ................................................ 194 42
Interest/Dividend payable ...................................... -- --
- ---------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES ........................................... 166,099 2,047
- ---------------------------------------------------------------------------------------------------------------------
NET ASSETS ........................................................ $363,695 $327,766
=====================================================================================================================
NET ASSETS CONSIST OF:
Capital paid in ................................................ 374,260 327,766
Undistributed net investment income ............................ 652 --
Accumulated net realized gain (loss) ........................... (6,360) --
Net unrealized appreciation/(depreciation) on:
Investments ................................................ (4,945) --
Futures .................................................... 51 --
Foreign currency related transactions ...................... 37 --
- ---------------------------------------------------------------------------------------------------------------------
NET ASSETS ........................................................ $363,695 $327,766
- ---------------------------------------------------------------------------------------------------------------------
Units outstanding (Par value $10; $10; $10; $10; $10; and $1,
respectively; unlimited shares authorized) ..................... 32,799 327,778
Net asset value, offering and redemption price per unit ........... $ 11.09 $ 1.00
* Includes $106,943 of securities on loan in the Elfun Income Fund.
- ----------
See Notes to Financial Statements.
72 & 73
<page>
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2007
(AMOUNTS IN THOUSANDS)
- ------------------------------------------------------------------------------------------------------------------------------------
ELFUN
INTERNATIONAL ELFUN
EQUITY FUND TRUSTS
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividends .................................................... $10,628 $ 24,336
Interest* .................................................... 364 461
Interest from affliated investments** ........................ 572 3,381
Less: Foreign taxes withheld ................................. (943) --
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME .................................................... 10,621 28,178
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Administration expenses ...................................... 380 1,555
Transfer agent expenses ...................................... 176 628
Unit holders service agent expense ........................... 71 257
Custody and accounting expenses .............................. 169 165
Professional fees ............................................ 22 59
Registration, filing, printing and
miscellaneous expenses .................................... 46 109
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES .............................................. 864 2,773
- ------------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME ........................................... 9,757 25,405
====================================================================================================================================
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments .................................................. 44,147 200,810
Futures ...................................................... (554) --
Options ...................................................... -- --
Foreign currency related transactions ........................ (3) --
INCREASE (DECREASE) IN UNREALIZED APPRECIATION/
(DEPRECIATION) ON:
Investments .................................................. 39,385 (111,610)
Futures ...................................................... (64) --
Foreign currency related transactions ........................ 5 --
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments .............................................. 82,916 89,200
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ................................... $92,673 $114,605
====================================================================================================================================
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2007
(AMOUNTS IN THOUSANDS)
- ------------------------------------------------------------------------------------------------------------------------------------
ELFUN ELFUN
DIVERSIFIED TAX-EXEMPT
FUND INCOME FUND
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividends .................................................... $ 3,565 $ --
Interest* .................................................... 3,532 83,187
Interest from affliated investments** ........................ 337 921
Less: Foreign taxes withheld ................................. (127) --
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME .................................................... 7,307 84,108
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Administration expenses ...................................... 219 1,461
Transfer agent expenses ...................................... 125 265
Unit holders service agent expense ........................... 51 5
Custody and accounting expenses .............................. 121 120
Professional fees ............................................ 20 50
Registration, filing, printing and
miscellaneous expenses .................................... 48 203
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES .............................................. 584 2,104
- ------------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME ........................................... 6,723 82,004
====================================================================================================================================
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments .................................................. 21,486 (1,087)
Futures ...................................................... (8) --
Options ...................................................... (2) --
Foreign currency related transactions ........................ (3) --
INCREASE (DECREASE) IN UNREALIZED APPRECIATION/
(DEPRECIATION) ON:
Investments .................................................. (3,820) (29,673)
Futures ...................................................... (76) --
Foreign currency related transactions ........................ 2 --
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments .............................................. 17,579 (30,760)
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ................................... $24,302 $51,244
====================================================================================================================================
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2007
(AMOUNTS IN THOUSANDS)
- ------------------------------------------------------------------------------------------------------------------------------------
ELFUN
ELFUN MONEY MARKET
INCOME FUND FUND
- -------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME:
Dividends .................................................... $ -- $ --
Interest* .................................................... 18,760 16,452
Interest from affliated investments** ........................ 2,125 --
Less: Foreign taxes withheld ................................. -- --
- -------------------------------------------------------------------------------------------------------------------
TOTAL INCOME .................................................... 20,885 16,452
- -------------------------------------------------------------------------------------------------------------------
EXPENSES:
Administration expenses ...................................... 287 249
Transfer agent expenses ...................................... 145 122
Unit holders service agent expense ........................... 60 51
Custody and accounting expenses .............................. 148 50
Professional fees ............................................ 20 25
Registration, filing, printing and
miscellaneous expenses .................................... 51 59
- -------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES .............................................. 711 556
- -------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME ........................................... 20,174 15,896
===================================================================================================================
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
REALIZED GAIN (LOSS) ON:
Investments .................................................. 140 --
Futures ...................................................... 144 --
Options ...................................................... (8) --
Foreign currency related transactions ........................ 100 --
INCREASE (DECREASE) IN UNREALIZED APPRECIATION/
(DEPRECIATION) ON:
Investments .................................................. 1,114 --
Futures ...................................................... 51 --
Foreign currency related transactions ........................ 37 --
- -------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments .............................................. 1,578 --
- -------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ................................... $21,752 $15,896
===================================================================================================================
* Income attributable to securities lending activity, net of rebate expenses,
for the Elfun International Fund, Elfun Diversified Fund and Elfun Income
Fund was $284, $14 and $449, respectively.
** Income attributable to securities lending activity, net of rebate, for Elfun
Income Fund was $550.
- -----------
See Notes to Financial Statements.
74 & 75
<page>
STATEMENTS OF CHANGES
IN NET ASSETS FOR THE YEARS ENDED
DECEMBER 31, 2007 AND 2006 (AMOUNTS IN THOUSANDS)
ELFUN
INTERNATIONAL ELFUN
EQUITY FUND TRUSTS
- ------------------------------------------------------------------------------------------------------------------------------------
2007 2006 2007 2006
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income ........................... $ 9,757 $ 7,147 $ 25,405 $ 29,353
Net realized gain (loss) on investments, futures,
written options, foreign currency related
transactions and swaps ....................... 43,590 31,969 200,810 211,119
Net increase (decrease) in unrealized appreciation/
(depreciation) on investments, futures and
foreign currency related transactions ........ 39,326 38,749 (111,610) 40,495
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations ......... 92,673 77,865 114,605 280,967
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO UNITHOLDERS FROM:
Net investment income ........................... (9,300) (7,387) (25,190) (28,993)
Net realized gains .............................. (43,535) (18,031) (202,395) (210,756)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ................................ (52,835) (25,418) (227,585) (239,749)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations
and distributions ............................... 39,838 52,447 (112,980) 41,218
- ------------------------------------------------------------------------------------------------------------------------------------
UNIT TRANSACTIONS:
Proceeds from sale of units ..................... 47,920 50,784 35,365 35,483
Value of distributions reinvested ............... 46,994 22,546 170,557 178,795
Cost of units redeemed .......................... (36,420) (27,786) (195,949) (227,181)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from unit transactions ..... 58,494 45,544 9,973 (12,903)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ............ 98,332 97,991 (103,007) 28,315
NET ASSETS
Beginning of year .................................. 385,518 287,527 2,302,024 2,273,709
- ------------------------------------------------------------------------------------------------------------------------------------
END OF YEAR ........................................ $483,850 $385,518 $2,199,017 $2,302,024
====================================================================================================================================
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF)
NET INVESTMENT INCOME, END OF YEAR ................. $ 388 $ (15) $ 575 $ 360
- ------------------------------------------------------------------------------------------------------------------------------------
CHANGES IN FUND UNITS
- ------------------------------------------------------------------------------------------------------------------------------------
Units sold by subscription ............................ 1,688 2,103 674 661
Issued for distribution reinvested .................... 1,674 880 3,491 3,454
Units redeemed ........................................ (1,286) (1,151) (3,668) (4,298)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund units ................. 2,076 1,832 497 (183)
- ------------------------------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES
IN NET ASSETS FOR THE YEARS ENDED
DECEMBER 31, 2007 AND 2006 (AMOUNTS IN THOUSANDS)
ELFUN ELFUN
DIVERSIFIED TAX-EXEMPT
FUND INCOME FUND
- ------------------------------------------------------------------------------------------------------------------------
2007 2006 2007 2006
- ------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income ........................... $ 6,723 $ 6,609 $ 82,004 $ 81,126
Net realized gain (loss) on investments, futures,
written options, foreign currency related
transactions and swaps ....................... 21,473 11,530 (1,087) 3,555
Net increase (decrease) in unrealized appreciation/
(depreciation) on investments, futures and
foreign currency related transactions ........ (3,894) 18,797 (29,673) (1,137)
- ------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations ......... 24,302 36,936 51,244 83,544
- ------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO UNITHOLDERS FROM:
Net investment income ........................... (6,593) (6,564) (82,004) (81,126)
Net realized gains .............................. (21,725) (11,062) (244) (3,132)
- ------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ................................ (28,318) (17,626) (82,248) (84,258)
- ------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations
and distributions ............................... (4,016) 19,310 (31,004) (714)
- ------------------------------------------------------------------------------------------------------------------------
UNIT TRANSACTIONS:
Proceeds from sale of units ..................... 16,479 15,306 110,110 91,794
Value of distributions reinvested ............... 24,452 15,043 56,680 57,078
Cost of units redeemed .......................... (27,760) (26,520) (149,586) (118,403)
- ------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from unit transactions ..... 13,171 3,829 17,204 30,469
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ............ 9,155 23,139 (13,800) 29,755
NET ASSETS
Beginning of year .................................. 283,069 259,930 1,771,290 1,741,535
- ------------------------------------------------------------------------------------------------------------------------
END OF YEAR ........................................ $292,224 $283,069 $1,757,490 $1,771,290
========================================================================================================================
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF)
NET INVESTMENT INCOME, END OF YEAR ................. $ -- $ 55 $ -- $ --
- ------------------------------------------------------------------------------------------------------------------------
CHANGES IN FUND UNITS
- ------------------------------------------------------------------------------------------------------------------------
Units sold by subscription ............................ 788 776 9,502 7,845
Issued for distribution reinvested .................... 1,237 745 4,894 4,880
Units redeemed ........................................ (1,313) (1,340) (12,935) (10,133)
- ------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund units ................. 712 181 1,461 2,592
- ------------------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES
IN NET ASSETS FOR THE YEARS ENDED
DECEMBER 31, 2007 AND 2006 (AMOUNTS IN THOUSANDS)
ELFUN
ELFUN MONEY MARKET
INCOME FUND FUND
- -------------------------------------------------------------------------------------------------------------
2007 2006 2007 2006
- -------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income ........................... $ 20,174 $ 19,971 $ 15,896 $ 14,940
Net realized gain (loss) on investments, futures,
written options, foreign currency related
transactions and swaps ....................... 376 (3,319) -- --
Net increase (decrease) in unrealized appreciation/
(depreciation) on investments, futures and
foreign currency related transactions ........ 1,202 1 -- --
- -------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations ......... 21,752 16,653 15,896 14,940
- --------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO UNITHOLDERS FROM:
Net investment income ........................... (20,362) (19,915) (15,896) (14,801)
Net realized gains .............................. -- -- -- --
- -------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ................................ (20,362) (19,915) (15,896) (14,801)
- -------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations
and distributions ............................... 1,390 (3,262) -- 139
- -------------------------------------------------------------------------------------------------------------
UNIT TRANSACTIONS:
Proceeds from sale of units ..................... 21,052 17,320 160,908 137,111
Value of distributions reinvested ............... 14,148 13,848 13,932 12,862
Cost of units redeemed .......................... (36,037) (49,840) (153,656) (157,171)
- -------------------------------------------------------------------------------------------------------------
Net increase (decrease) from unit transactions ..... (837) (18,672) 21,184 (7,198)
- -------------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ............ 553 (21,934) 21,184 (7,059)
NET ASSETS
Beginning of year .................................. 363,142 385,076 306,582 313,641
- -------------------------------------------------------------------------------------------------------------
END OF YEAR ........................................ $363,695 $363,142 $327,766 $306,582
=============================================================================================================
UNDISTRIBUTED (DISTRIBUTION IN EXCESS OF)
NET INVESTMENT INCOME, END OF YEAR ................. $ 652 $ 739 $ -- $ --
- -------------------------------------------------------------------------------------------------------------
CHANGES IN FUND UNITS
- -------------------------------------------------------------------------------------------------------------
Units sold by subscription ............................ 1,913 1,578 160,908 137,111
Issued for distribution reinvested .................... 1,285 1,261 13,932 12,862
Units redeemed ........................................ (3,271) (4,536) (153,657) (157,171)
- -------------------------------------------------------------------------------------------------------------
Net increase (decrease) in fund units ................. (73) (1,697) 21,183 (7,198)
- -------------------------------------------------------------------------------------------------------------
- -------------
See Notes to Financial Statements.
76 & 77
<page>
Notes to Financial Statements
- --------------------------------------------------------------------------------
December 31, 2007
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 that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the reporting period. Actual results may differ from
those estimates.
The following summarizes the significant accounting policies of the Funds:
SECURITY VALUATION AND TRANSACTIONS
A Fund's portfolio securities are valued generally on the basis of market
quotations. Equity securities generally are valued at the last reported sales
price on the primary market in which they are traded. Portfolio securities
listed on NASDAQ are valued using the NASDAQ Official Closing Price, which may
not necessarily represent the last sale price. If no sales occurred on the
exchange or NASDAQ that day, the portfolio security generally is valued using
the last reported bid price.
Debt securities (other than short-term securities described below) generally are
valued at an evaluated bid as reported by an independent pricing service. Values
obtained from pricing services are based on various factors such as market
transactions, dealer supplied valuations, security characteristics and other
market data. In the absence of a reliable price from such a pricing service,
debt securities may be valued based on dealer supplied valuations or quotations.
A Fund's written or purchased options are valued at the last sales price, or if
no sales occurred that day, at the last reported bid price. Short-term
investments with remaining maturities of sixty days or less at the time of
purchase are valued on the basis of amortized costs.
All assets and liabilities of the Funds initially expressed in foreign currency
values will be converted into U.S. dollars at the WM exchange rate computed at
11:00 a.m., Eastern time.
If prices are not readily available for a portfolio security, or if it is
believed that a 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. Those procedures
require that the fair value of a security be established by the fair valuation
committee. The fair valuation committee follows different protocols for
different types of investments and circumstances. The fair value procedures may
be used to value any investment by any Fund in the appropriate circumstances.
Examples of the types of securities that may be fair valued include: thinly
traded or illiquid investments, high-yield securities or foreign securities.
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 occurring 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.
GEAM may also separately monitor portfolio securities and, consistent with the
Funds' fair value procedures, apply a different value to a portfolio security
than would be applied had it been priced using market quotations or by an
independent fair value pricing service.
78
<page>
Notes to Financial Statements
- --------------------------------------------------------------------------------
December 31, 2007
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.
In September 2006, FASB issued Statement of Financial Accounting Standards No.
157, FAIR VALUE MEASUREMENTS ("FAS 157"). FAS 157 establishes a single
authoritative definition of fair value, establishes a framework for measuring
fair value and expands disclosures about fair value measurements. FAS 157
applies to fair value measurements already required or permitted by existing
standards. The change to current generally accepted accounting principles from
the application of FAS 157 relate to the definition of fair value, the methods
used to measure fair value, and the expanded disclosures about fair value
measurements. Management of the Elfun Funds does not believe the adoption of FAS
157 will materially impact the financial statement amounts, however, additional
disclosures may be required about the inputs used to develop the measurements
and the effect of certain of the measurements on changes in net assets for the
period. FAS 157 is effective for financial statements issued for fiscal years
beginning after November 15, 2007 and interim periods within those fiscal years.
REPURCHASE AGREEMENTS
Each of the Funds may engage in repurchase agreement transactions with respect
to instruments that are consistent with the Fund's investment objectives or
policies. 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.
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 on a daily basis
(on days the New York Stock Exchange is open). 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
79
<page>
Notes to Financial Statements
- --------------------------------------------------------------------------------
December 31, 2007
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 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
80
<page>
Notes to Financial Statements
- --------------------------------------------------------------------------------
December 31, 2007
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 liability) 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.
81
<page>
Notes to Financial Statements
- --------------------------------------------------------------------------------
December 31, 2007
At December 31, 2007, 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 $ 329,547 $158,710 $ (5,844) $152,866
Elfun Trusts 1,479,721 791,880 (72,767) 719,113
Elfun Diversified Fund 261,124 53,147 (13,418) 39,729
Elfun Tax-Exempt Income Fund 1,685,471 65,923 (10,888) 55,035
Elfun Income Fund 529,863 4,642 (9,764) (5,122)
Elfun Money Market Fund 326,537 -- -- --
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 $(58) $ 389 $ 107 $ --
Elfun Trusts -- 1,460 -- --
Elfun Diversified Fund 4 -- -- --
Elfun Tax-Exempt Income Fund -- -- (1,038) --
Elfun Income Fund 39 652 (6,009) (125)
Elfun Money Market Fund -- -- -- --
As of December 31, 2007, 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, 2007, the Elfun Income Fund utilized
approximately $338 of capital loss carryovers.
FUND AMOUNT EXPIRES
- --------------------------------------------------------------------------------
Elfun Income Fund $1,558 12/31/13
4,451 12/31/14
Elfun Tax-Exempt Income Fund 1,038 12/31/15
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, 2007 as follows:
CAPITAL CURRENCY
- --------------------------------------------------------------------------------
Elfun Income Fund $124 $1
82
<page>
Notes to Financial Statements
- --------------------------------------------------------------------------------
December 31, 2007
The tax composition of distributions paid (other than return of capital
distributions for the year) during the years ended December 31, 2007 and
December 31, 2006, were as follows:
EXEMPT ORDINARY LONG-TERM
INTEREST INCOME CAPITAL GAINS TOTAL
- ---------------------------------------------------------------------------------------------------------------------------
Elfun International Equity Fund
2007 $ -- $10,213 $ 42,622 $ 52,835
2006 -- 7,387 18,031 25,418
Elfun Trusts
2007 -- 27,628 199,957 227,585
2006 -- 28,993 210,756 239,749
Elfun Diversified Fund
2007 -- 6,792 21,526 28,318
2006 -- 6,564 11,062 17,626
Elfun Tax-Exempt Income Fund
2007 79,642 2,401 205 82,248
2006 78,598 3,134 2,526 84,258
Elfun Income Fund
2007 -- 20,362 -- 20,362
2006 -- 19,915 -- 19,915
Elfun Money Market Fund
2007 -- 15,896 -- 15,896
2006 -- 14,801 -- 14,801
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, futures and losses deferred due to
wash sale transactions. 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.
83
<page>
Notes to Financial Statements
- --------------------------------------------------------------------------------
December 31, 2007
The reclassifications for the year ended December 31, 2007 were as follows:
UNDISTRIBUTED
NET INVESTMENT ACCUMULATED PAID IN
INCOME NET REALIZED LOSS CAPITAL
- ---------------------------------------------------------------------------------------------------------------------------
Elfun International Equity Fund $ (54) $ 54 $--
Elfun Trusts -- -- --
Elfun Diversified Fund (185) 190 (5)
Elfun Tax-Exempt Income Fund -- -- --
Elfun Income Fund 101 (101) --
Elfun Money Market Fund -- --
On June 29, 2007, the Fund adopted FIN48, "Accounting for Uncertainty in Income
Taxes." FIN48 provides guidance for how certain uncertain tax positions should
be recognized, measured, presented and disclosed in the financial statements.
FIN48 requires evaluation of tax positions taken or expected to be taken in the
course of preparing the Fund's tax returns to determine whether the tax
positions are "more likely than not" of being sustained by the applicable tax
authority. The adoption of FIN48 did not have an impact on the Fund's net assets
and financial statements. The Funds' 2004, 2005, 2006 and 2007 calendar years
tax returns are still open to examination by the Federal and applicable state
tax authorities.
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
accreting 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.
3. LINE OF CREDIT
The Trust shares a revolving credit facility of up to $25 million with a number
of its 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. In addition, the Trust has a $100
million uncommitted, unsecured line of credit with State Street, which was
established November 7, 2007. Generally, borrowings under the credit facilities
would accrue interest at the Federal Funds Rate plus 50 basis points and would
be borne by the borrowing Fund. The maximum amount allowed to be borrowed by any
one Fund is the lesser of (i) its prospectus limitation or (ii) 20% of its net
assets. The credit facilities were not utilized by the Trust during the period
ended December 31,2007.
84
<page>
Notes to Financial Statements
- --------------------------------------------------------------------------------
December 31, 2007
4. AMOUNTS PAID TO AFFILIATES
During 2007, 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 administration expenses and
unitholder servicing agent expenses in the Statements of Operations. The
Trustees received no compensation as Trustees for the Elfun Funds.
GENPACT performs certain accounting and certain administration services not
provided by GEAM. For the year ending December 31, 2007, $72 (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.
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 short-term options, for the year ended December 31,
2007, were as follows:
PURCHASES SALES
- ---------------------------------------------------------------------------------------------------------------------------
Elfun International Equity Fund $ 140,044 $ 132,735
Elfun Trusts 262,593 446,619
Elfun Diversified Fund 504,591 511,463
Elfun Tax-Exempt Income Fund 694,288 692,929
Elfun Income Fund 1,825,963 1,811,440
OPTIONS
During the year ended December 31, 2007 there were no option contracts written.
SECURITY LENDING
At December 31, 2007, the following Funds participated in securities lending:
LOANED SECURITIES
AT MARKET VALUE CASH
(INCLUDING ACCRUED INTEREST) COLLATERAL
- ---------------------------------------------------------------------------------------------------------------------------
Elfun Income Fund $106,943 $109,146
85
<page>
Report of Independent Registered
Public Accounting Firm
- --------------------------------------------------------------------------------
KPMG
THE UNITHOLDERS 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, each a
series of Elfun Funds (collectively, the "Funds"), including the schedules of
investments, as of December 31, 2007, and the related statements of operations
for the year then ended, the statements of changes in net assets for each of the
years in the two-year period then ended, and the financial highlights for each
of the years in the five-year period then ended. These financial statements and
financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 2007 by correspondence with the custodian
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 the
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, 2007, the results of their operations, changes in their net assets
and financial highlights for the years described above, in conformity with U.S.
generally accepted accounting principles.
KPMG LLP
Boston, Massachusetts
February 25, 2008
86
<page>
Tax Information, unaudited
For the year ended December 31, 2007
- --------------------------------------------------------------------------------
SUMMARY
For the fiscal year ended December 31, 2007 certain dividends paid by the fund
may be subject to a maximum income tax rate of 15%, as provided for by the Jobs
and Growth Tax Relief Reconciliation Act of 2003. Of the ordinary dividends paid
during the fiscal year, the following represent the amounts that may be
considered qualified dividend income:
FUND NAME QUALIFIED DIVIDEND INCOME
- ---------------------------------------------------------------------------------------------------------------------------
Elfun International Equity Fund 63.21%
Elfun Diversified Fund 44.69%
Elfun Trusts 85.98%
Of the dividends paid from net investment income by the Elfun Tax Exempt Fund
during the calendar year ended December 31, 2007, 97.13% represent exempt
interest dividends for Federal income tax purposes.
For corporate shareholders, of the ordinary dividends paid, the following
represent the amounts that may be eligible for the dividends received deduction:
FUND NAME DIVIDENDS RECEIVED DEDUCTION
- ---------------------------------------------------------------------------------------------------------------------------
Elfun Diversified Fund 29.71%
Elfun Trusts 71.94%
During the year ended December 31, 2007, the following funds paid to
shareholders of record on December 26, 2007, the following long-term capital
gain dividends reported on Form 1099 for 2007:
FUND NAME PER SHARE AMOUNT
- ---------------------------------------------------------------------------------------------------------------------------
Elfun International Equity Fund $2.78209
Elfun Diversified Fund 1.60337
Elfun Trusts 4.80415
Elfun Tax-Exempt Income Fund 0.00133
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, 2007, the total amount of income received by the
Funds from sources within foreign countries and possessions of the United States
and the amount of taxes paid by the Funds follows:
TOTOL FOREIGN TOTAL FOREIGN
FUND NAME SOURCE INCOME TAXES PAID
- ---------------------------------------------------------------------------------------------------------------------------
Elfun International Equity Fund $11,496,297 $951,915
87
<page>
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 December 19, 2007.
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. The Board members
also considered detailed information regarding performance and expenses of other
investment companies, including those 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 other than mutual funds 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.
In connection with their approval of the Funds' investment advisory agreements,
the Board members received and considered memoranda prepared by GEAM personnel
that 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 reviewed and discussed the proposed continuance of the
agreements with GEAM personnel, including representatives from the legal,
compliance and finance departments, senior members of each relevant investment
group (e.g., equity, fixed income) and research personnel. The Board members
also heard 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. The Board members took into
account that many of them possess multi-year experience as Board members and
that all of them possess a great deal of knowledge about GEAM and the Funds in
their capacities as senior officers of GEAM. They also took into account their
consideration of these agreements in recent years, noting that the information
they received was presented in a similar manner and format.
In reaching their determinations relating to continuance of the Funds'
investment advisory agreements, 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. The Board members
noted that each Fund represents only a small amount of the overall assets
managed by GEAM, but benefits 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.
88
<page>
Advisory Agreement Renewal, unaudited
- --------------------------------------------------------------------------------
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 commitment to long-term satisfactory performance with respect to
each Fund's investment objective and investment approach. The Board members
concluded that the Funds' performance was acceptable overall taking into
consideration the factors discussed above.
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 each 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 unitholder 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 noted and discussed the additional services
provided by GEAM to the Funds compared to other investment products managed by
GEAM and the charges that result from those services. The Board members also
noted that none of the charges resulting from the Funds' arrangements with GEAM
and GEID may 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.
89
<page>
Advisory Agreement Renewal, unaudited
- --------------------------------------------------------------------------------
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 that
GEAM may derive from its relationship with the Funds, 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 each Fund represents
only a small 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.
90
<page>
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
- --------------------------------------------------------------------------------
JAMES W. IRELAND III
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM, 3001 Summer St. Stamford, CT 06905
AGE: 53
POSITION HELD WITH FUND: Trustee
TERM OF OFFICE AND LENGTH OF TIME SERVED: Less than one year
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: President, Chief Executive
Officer, and Director of GEAM since June 2007; President, NBC Universal
Television Stations from December 1999 to July 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 8
OTHER DIRECTORSHIPS HELD BY TRUSTEE: Trustee of the Norman Rockwell Museum and
St. Lawrence University; Trustee of Elfun/GE Savings & Security Funds and
General Electric Pension Trust since July 2007.
- --------------------------------------------------------------------------------
PAUL M. COLONNA
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM, 3001 Summer St. Stamford, CT 06905
AGE: 39
POSITION HELD WITH FUND: Trustee
TERM OF OFFICE AND LENGTH OF TIME SERVED: Until successor is elected and
qualified - Less than one year
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Executive Vice President of GEAM
since March 2007; President - Fixed Income at GEAM since March 2007; Senior Vice
President-Total Return Management at GEAM from March 2005 to March 2007; Senior
Vice President-Structured Products at GEAM from March 2002 to March 2005.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 8
OTHER DIRECTORSHIPS HELD BY TRUSTEE: N/A
- --------------------------------------------------------------------------------
MICHAEL J. COSGROVE
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 58
POSITION(S) HELD WITH FUND Trustee
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected
and qualified - 20 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President of GEAM
(formerly 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; President and Chief
Executive Officer - Mutual Funds at GEAM since March 2007; 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, Trustee of Elfun Foundation; Treasurer of GE Foundation; Director, GE
Asset Management (Ireland) since February 1999.
- --------------------------------------------------------------------------------
KATHRYN D. KARLIC
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 52
POSITIONS HELD WITH FUND Trustee
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - Less than one year
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President of GEAM
since March 2004; President - Institutional Sales at GEAM since March 2007;
President - Fixed Income at GEAM from March 2004 to March 2007, Senior Vice
President - Fixed Income of GEAM from 2002 to 2004.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE 8
OTHER DIRECTORSHIPS HELD BY TRUSTEE Trustee of GE Savings and Security Funds
and General Electric Pension Trust since 2006; Trustee of Babson College since
1999.
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Additional Information, unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RALPH R. LAYMAN
- --------------------------------------------------------------------------------
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 - 16 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President of GEAM
since 1993; President - International Equity Investments at GEAM since March
2007; Executive Vice President - International Equity Investments at GEAM from
1993 to March 2007; 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.
- --------------------------------------------------------------------------------
MATTHEW J. SIMPSON
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM, 3001 Summer St. Stamford, CT 06905
AGE 46
POSITION HELD WITH FUND Trustee
TERM OF OFFICE AND LENGTH OF TIME SERVED Less than one year
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President, General
Counsel and Secretary of GEAM since July 2007; Senior Vice President and General
Counsel - Marketing and Client Services (formerly Asset Management Services) at
GEAM and Senior Vice President and General Counsel of GEAMS from February 1997
to July 2007; from October 1992 to February 1997, Vice President and Associate
General Counsel of GEAM; Secretary of GE Funds, GE Institutional Funds, GE
LifeStyle Funds and GE Investments Funds, Inc. from 1997 to July 2007 and Vice
President from September 2003 to July 2007; Assistant Secretary of Elfun Funds
and GE Savings & Security Funds from 1998 to July 2007 and Vice President from
October 2003 to July 2007.
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE 48
OTHER DIRECTORSHIPS HELD BY TRUSTEE Trustee of GE Funds, GE Institutional Funds
and GE LifeStyle Funds since July 2007. Director of GE Investments Funds, Inc.
since July 2007; Trustee of Elfun Funds, GE Savings & Security Funds and General
Electric Pension Trust since July 2007.
- --------------------------------------------------------------------------------
JUDITH A. STUDER
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 55
POSITION(S) HELD WITH FUND Trustee
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected and
qualified - 4 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Executive Vice President of GEAM
since 2006; President - U.S. Equities at GEAM since June 2007; Executive Vice
President - Investment Strategies from July 2006 to June 2007; Senior Vice
President - International Equities of GEAM from 1995-2006; 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.
- --------------------------------------------------------------------------------
DONALD W. TOREY
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 51
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 of GEAM
since 1997; President - Executive Vice President - Alternative Investments at
GEAM since March 2007; Executive Vice President - Alternative Investments from
1997 to March 2007; 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.
92
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Additional Information, unaudited
- --------------------------------------------------------------------------------
JOHN J. WALKER
- --------------------------------------------------------------------------------
ADDRESS c/o GEAM 3001 Summer St. Stamford, CT 06905
AGE 54
POSITION(S) HELD WITH FUND Trustee
TERM OF OFFICE AND LENGTH OF TIME SERVED Until successor is elected
and qualified - 8 years
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS Chief Operating Officer of Geam
since January 2008; Chief Financial Officer of GEAM from 1999-2008; 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.
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.
93
<page>
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.
DAVID B. CARLSON is an Executive Vice President of GE Asset Management. He
manages the overall U.S. equity investments for GE Asset Management. Mr. Carlson
is the 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.
PAUL M. COLONNA is a Director and Executive Vice President of GE Asset
Management and President - Fixed Income at 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.
JAMES C. GANNON is an Assistant Portfolio Manager of GE Asset Management. He has
served on the portfolio management team for the ELFUN MONEY MARKET FUND since
December 2000. Since joining GE Asset Management in 1995, Mr. Gannon served in
various positions at GE Asset Management including Trade Operations Specialist
in fixed income, and became an Assistant Portfolio Manager in February 2003.
WILLIAM M. HEALEY is a Senior Vice President of GE Asset Management. He has
served on the portfolio management teams for the ELFUN MONEY MARKET FUND since
January 1, 2008 and 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.
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.
MARK H. JOHNSON is a Senior Vice President of GE Asset Management and Senior
Portfolio Manager of Structured Products. He has been a member of the portfolio
management team for the ELFUN INCOME FUND since September 2007. Mr. Johnson
joined GE in 1998 in its Employers Reinsurance Corporation as a taxable income
portfolio manager. Mr. Johnson joined GE Asset Management as a Vice President
and Portfolio Manager in 2002 and became a Senior Vice President and Senior
Portfolio Manager of Structured Products in 2007.
RALPH R. LAYMAN is a Director and Executive Vice President of GE Asset
Management and President - International Equities at 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 and President - International Equities in March
2007.
94
<page>
Elfun Funds' Investment Team
PORTFOLIO MANAGER BIOGRAPHIES (CONTINUED)
THOMAS R. LINCOLN is a Senior Vice President of GE Asset Management. He has
served on the portfolio management team for the ELFUN DIVERSIFIED FUND since May
2007. Mr. Lincoln joined GE Asset Management in 1994 as a financial analyst in
U.S. Equities. Mr. Lincoln became part of the investment management team for
U.S. Equities at GE Asset Management in 1997 and a portfolio manager for U.S.
Equities in 2003.
ANDREW A. MASELLI is an Assistant Portfolio Manager of GE Asset Management. He
has served on the portfolio management team for the ELFUN MONEY MARKET FUND
since April 2003. Mr. Maselli joined GE Asset Management in 1998 as a data
integrity analyst in trade operations, where he held various positions both in
equities and fixed income support. In 2002, he was promoted to Senior Trade
Support Specialist working on the short-term desk and became an Assistant
Portfolio Manager in June 2005.
PAUL NESTRO is a Vice President of GE Asset Management. He has been a member of
the portfolio management team for the ELFUN INTERNATIONAL EQUITY FUND since
February 2007. Mr. Nestro joined GE Asset Management in 1993 as a performance
and attribution analyst in U.S. Equities. He became a senior performance and
attribution analyst in 1994 and since 1996 has been an analyst and portfolio
manager in the International Equities group.
JAMES F. PALMIERI is a Portfolio Manager of GE Asset Management. Since March
2006, he has managed the mortgage-backed securities sector for the ELFUN INCOME
FUND. Prior to joining GE Asset Management in March 2006, Mr. Palmieri was a
Director of Investments for Constitution Corporate Federal Credit Union from
February 2005 to March 2006 and a Portfolio Manager for CIGNA Investment
Management from January 2000 to February 2005.
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 Executive Vice President of GE Asset
Management and President - U.S. Equities at GE Asset Management. She has led the
team of portfolio managers for the ELFUN DIVERSIFIED FUND since July 2004. Ms.
Studer joined GE Asset Management in August 1984. She became Senior Vice
President - U.S. Equities in 1991 and Senior Vice President - International
Equities in 1995 and President - Investment Strategies in July 2006 and
President - U.S. Equities in June 2007.
MAKOTO SUMINO is a Senior Vice President of GE Asset Management. He has been a
member of the portfolio management team for the ELFUN INTERNATIONAL EQUITY FUND
since February 2007. Mr. Sumino joined GE Asset Management in September 1996 as
a securities analyst and portfolio manager. He became Deputy Director of the
International Equity Research Team in January 2001 and Director in April 2005.
LEWIS TATANANNI is a Senior Corporate Trader at GE Asset Management. He has been
a member of the portfolio management team for the S&S INCOME FUND since December
2007. Mr. Tatananni joined GE Asset Management in October 2002 and was
responsible for executing the interest rate derivative hedging programs for GE
Asset Management's insurance clients. Mr. Tatananni joined GE in 1999 as an
associate at GE Capital Treasury and was responsible for debt origination and
derivative execution.
95
<page>
Elfun Funds' Investment Team
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS
ELFUN INTERNATIONAL EQUITY FUND
Team led by Ralph R. Layman
ELFUN TRUSTS
David B. Carlson
ELFUN DIVERSIFIED FUND
Judith A. Studer
Thomas R. Lincoln
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
Team led by
William M. Healey
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
James W. Ireland III, TRUSTEE, PRESIDENT AND CHIEF EXECUTIVE OFFICER, GE ASSET
MANAGEMENT INCORPORATED (EFFECTIVE AS OF JULY 1, 2007)
Michael J. Cosgrove, TRUSTEE, EVP, PRESIDENT AND CHIEF EXECUTIVE OFFICER -
MUTUAL FUNDS
Paul M. Colonna, TRUSTEE, EVP, PRESIDENT - FIXED INCOME
Kathryn D. Karlic, TRUSTEE, EVP, PRESIDENT - INSTITUTIONAL SALES AND MARKETING
Ralph R. Layman, TRUSTEE, EVP, PRESIDENT - INTERNATIONAL EQUITIES
Matthew J. Simpson, TRUSTEE, EVP, GENERAL COUNSEL AND SECRETARY
Judith A. Studer, TRUSTEE, EVP, U.S. PRESIDENT - U.S. EQUITIES
Donald W. Torey, TRUSTEE, EVP, PRESIDENT - ALTERNATIVE INVESTMENTS AND REAL
ESTATE
John J. Walker, TRUSTEE, EVP, CHIEF OPERATING OFFICER (AS OF JANUARY 31, 2008)
96
<page>
Shareholder Services
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.
97
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PRSRT STD
U.S. POSTAGE
PAID
Permit No. 1793
Lancaster, PA
ELFUN FUNDS
3001 SUMMER STREET
STAMFORD, CT 06905
DISTRIBUTOR
GE INVESTMENT DISTRIBUTORS INC.
MEMBER FINRA 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.
[GE LOGO OMITTED]
ELF 1 (2/08)
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 $21,000 in 2006 and
$22,000 in 2007.
(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 $0 in 2006 and $0 in 2007.
(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/JAMES W.IRELAND
James W.Ireland
TRUSTEE, PRESIDENT AND CHIEF EXECUTIVE OFFICER,
GE ASSET MANAGEMENT INCORPORATED
Date: March 07, 2008
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/JAMES W.IRELAND
James W.Ireland
TRUSTEE, PRESIDENT AND CHIEF EXECUTIVE OFFICER,
GE ASSET MANAGEMENT INCORPORATED
Date: March 07, 2008
By: /S/SCOTT RHODES
Scott Rhodes
TREASURER, ELFUN FUNDS
Date: March 07, 2008
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.