financial section Contents 46 Management’s Discussion of Financial Responsibility .......................... We begin with a letter from our Chief Executive and Financial Officers discussing our unyielding commitment to rigorous oversight, controllership, informative disclosure and visibility to investors. 46 Management’s Annual Report on Internal Control Over Financial Reporting ..................................................................................... In this report our Chief Executive and Financial Offi cers provide their assessment of the effectiveness of our internal control over fi nancial reporting. 47 Report of Independent Registered Public Accounting Firm ................ Our independent auditors, KPMG LLP, express their opinions on our financial statements and our internal control over fi nancial reporting. 48 Management’s Discussion and Analysis (MD&A) 48 Operations ........................................................................................................ We begin the Operations section of MD&A with an overview of our earnings, including a perspective on how the global economic environment has affected our businesses over the last three years. We then discuss various key operating results for GE industrial (GE) and financial services (GECS). Because of the fundamental differences in these businesses, reviewing certain information separately for GE and GECS offers a more meaningful analysis. Next we provide a description of our global risk management process. Our discussion of segment results includes quantitative and qualitative disclosure about the factors affecting segment revenues and profits, and the effects of recent acquisitions, dispositions and significant transactions. We conclude the Operations section with an overview of our operations from a global perspective and a discussion of environmental matters. 58 Financial Resources and Liquidity ......................................................... In the Financial Resources and Liquidity section of MD&A, we provide an overview of the major factors that affected our consolidated financial position and insight into the liquidity and cash fl ow activities of GE and GECS. 63 Critical Accounting Estimates ................................................................. Critical Accounting Estimates are necessary for us to prepare our financial statements. In this section, we discuss what these estimates are, why they are important, how they are developed and uncertainties to which they are subject. 66 Other Information ......................................................................................... We conclude MD&A with a brief discussion of new accounting standards that will become effective for us in 2007. 66 Selected Financial Data.............................................................................. Selected Financial Data provides five years of fi nancial information for GE and GECS. This table includes commonly used metrics that facilitate comparison with other companies. 68 Audited Financial Statements and Notes 68 Statement of Earnings 68 Consolidated Statement of Changes in Shareowners’ Equity 70 Statement of Financial Position 72 Statement of Cash Flows 74 Notes to Consolidated Financial Statements 109 Supplemental Information .................................................................................. We provide Supplemental Information to reconcile certain “non-GAAP financial measures” referred to in our report to the most closely associated GAAP fi nancial measures. 112 Glossary ....................................................................................................................... For your convenience, we also provide a Glossary of key terms used in our fi nancial statements. We also present our financial information electronically at www.ge.com/investor. This award-winning site is interactive and informative. ge 2006 annual report 45

Management’s Discussion of Financial Responsibility We believe that great companies are built on a foundation of reliable financial information and compliance with the spirit and letter of the law. For GE, that foundation includes rigorous management oversight of, and an unyielding dedication to, controllership. The fi nancial disclo- sures in this report are one product of our commitment to high quality financial reporting. In addition, we make every effort to adopt appro- priate accounting policies, we devote our full resources to ensuring that those policies are applied properly and consistently and we do our best to fairly present our financial results in a manner that is complete and understandable. We also recognize that we operate in an environ- ment that requires us to apply complex accounting guidance to a broad range of transactions and events. Regulators, standard setters and other financial reporting stakeholders have acknowledged that accounting and financial reporting complexity is a major challenge facing companies, auditors and investors alike. This complexity gives rise to the possibility that knowledgeable individuals will reach different, well-reasoned judgments based on the same underlying facts. How to respond to this challenge is a matter of continuing debate. Rigorous Management Oversight Members of our corporate leadership team review each of our busi- nesses routinely on matters that range from overall strategy and financial performance to staffing and compliance. Our business lead- ers monitor financial and operating systems, enabling us to identify potential opportunities and concerns at an early stage and positioning us to respond rapidly. Our Board of Directors oversees management’s business conduct, and our Audit Committee, which consists entirely of independent directors, oversees our internal control over fi nancial reporting. We continually examine our governance practices in an effort to enhance investor trust and improve the Board’s overall effec- tiveness. The Board and its committees annually conduct a performance self-evaluation and recommend improvements. Our Presiding Director led three meetings of non-management directors this year, helping us sharpen our full Board meetings to better cover signifi cant topics. Compensation policies for our executives are aligned with the long- term interests of GE investors. Dedication to Controllership We maintain a dynamic system of internal controls and procedures — including internal control over fi nancial reporting — designed to ensure reliable financial record-keeping, transparent fi nancial reporting and disclosure, and protection of physical and intellectual property. We recruit, develop and retain a world-class financial team. Our internal audit function, including members of our Corporate Audit Staff, conducts thousands of financial, compliance and process improvement audits each year. Our Audit Committee oversees the scope and evaluates the overall results of these audits, and its Chairman regularly attends GE Capital Services Board of Directors, Corporate Audit Staff and Controllership Council meetings. Our global integrity policies — “The Spirit & The Letter” — require compliance with law and policy, and pertain to such vital issues as upholding financial integrity and avoiding conflicts of interest. These integrity policies are available in 31 languages, and are provided to all of our employees, holding each of them accountable for compliance. Our strong compliance culture reinforces these efforts by requiring employees to raise any compliance concerns and by prohibiting retribution for doing so. To facilitate open and candid communication, we have designated ombudspersons throughout the Company to act as independent resources for reporting integrity or compliance concerns. We hold our directors, consultants, agents and independent contractors to the same integrity standards. Our internal controls proved inadequate to prevent a restatement of our financial reports. We concluded that the restatement resulted from a material weakness in our internal controls related to interest rate swaps designated as hedges of commercial paper, and we reported that weakness. We eliminated this program in 2007 pending satisfactory clarification of the related accounting requirements. Informative Disclosure and Visibility to Investors We are keenly aware of the importance of full and open presentation of our financial position and operating results and rely for this pur- pose on our disclosure controls and procedures, including our Disclosure Committee, which comprises senior executives with detailed knowledge of our businesses and the related needs of our investors. We ask this committee to review our compliance with accounting and disclosure requirements, to evaluate the fairness of our financial and non-financial disclosures, and to report their fi ndings to us. We further ensure strong disclosure by holding more than 350 analyst and investor meetings annually. Conclusion We welcome the strong oversight of our fi nancial reporting activities by our independent registered public accounting firm, KPMG LLP, engaged by and reporting directly to the Audit Committee. U.S. legis- lation requires management to report on internal control over fi nan- cial reporting and for auditors to render an opinion on such controls. Our report follows and the KPMG LLP report for 2006 appears on the following page. We present our financial information proudly, with the expecta- tion that those who use it will understand our Company, recognize our commitment to performance with integrity, and share our confi - dence in GE’s future. Management’s Annual Report on Internal Control Over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. With our participation, an evaluation of the effectiveness of our internal control over financial reporting was conducted as of December 31, 2006, based on the framework and criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. We identified the following material weakness in our internal con- trol over financial reporting — we did not have adequately designed procedures to designate each hedged commercial paper transaction with the specificity required by Statement of Financial Accounting Standards 133, Accounting for Derivative Instruments and Hedging Activities, as amended. This material weakness resulted in restate- ment, in January 2007, of our previously issued fi nancial statements as of and for each of the interim periods ended March 31, 2006, June 30, 2006 and September 30, 2006. Accordingly, we concluded that our internal control over financial reporting was not effective as of December 31, 2006. Our independent registered public accounting firm has issued an audit report on our management’s assessment of our internal control over financial reporting. Their report appears on the following page. JEFFREY R. IMMELT Chairman of the Board and Chief Executive Officer February 9, 2007 KEITH S. SHERIN Senior Vice President, Finance and Chief Financial Offi cer 46 ge 2006 annual report