A folder must be on NTFS to be encrypted using EFS.
Log files The encrypting file system EFS Disk quotas
NTFS
Encrypting File System (EFS)
Microsoft EFS stands for Encryption File System. This is used when you want to encrypt and protect your data and personal information from others by using a password.
Encrypting File System (EFS)
EFS stands for Encrypted File System and is used to encrypt folders and files in Windows XP or Vista.This encryption works ONLY when using the Windows NTFS file system!
What NTFS file system component contains information about the owner of the folder or file? Read more:What_NTFS_file_system_component_contains_information_about_the_owner_of_the_folder_or_file
EFS Encrypting File System
%systemroot%
Master file. This file contains the permanent information for an organization or system, and it is updated by processing transactions that modify data within the system.
see http://support.microsoft.com/kb/941674