management’s discussion and analysis Global Operations Our global activities span all geographic regions and primarily encompass manufacturing for local and export markets, import and sale of products produced in other regions, leasing of aircraft, sourcing for our plants domiciled in other global regions and provision of financial services within these regional economies. Thus, when countries or regions experience currency and/or economic stress, we often have increased exposure to certain risks, but also often have new profit opportunities. Potential increased risks include, among other things, higher receivable delinquencies and bad debts, delays or cancellations of sales and orders principally related to power and aircraft equipment, higher local currency financing costs and slowdown in established financial services activities. New profit opportunities include, among other things, more opportunities for lower cost outsourc- ing, expansion of industrial and financial services activities through purchases of companies or assets at reduced prices and lower U.S. debt fi nancing costs. Estimated results of global activities include the results of our operations located outside the United States plus all U.S. exports. We classify certain GECS operations that cannot meaningfully be associated with specific geographic areas as “Other Global” for this purpose. GLOBAL REVENUES BY REGION (In millions) 2006 2005 2004 Europe $39,700 $34,600 $31,700 Pacific Basin 18,000 16,000 13,000 Americas 9,600 7,500 7,000 Other Global 7,000 6,100 5,700 74,300 64,200 57,400 Exports from the U.S. to external customers 13,100 11,400 8,800 Total(a) $87,400 $75,600 $66,200 (a) Included $7.7 billion, $6.6 billion and $5.8 billion of intercompany revenues in 2006, 2005 and 2004, respectively. Global revenues rose 16% to $87.4 billion in 2006, compared with $75.6 billion and $66.2 billion in 2005 and 2004, respec- tively. Global revenues to external customers as a percentage of consolidated revenues were 49% in 2006, compared with 47% and 45% in 2005 and 2004, respectively. The effects of currency fluctuations on reported results were to decrease revenues by $0.1 billion in 2006 and increase revenues by $0.9 billion and $4.1 billion in 2005 and 2004, respectively and to increase earn- ings by $0.1 billion in both 2005 and 2004, compared with an inconsequential effect on earnings in 2006. GE global revenues in 2006 were $56.5 billion, up 17% over 2005, led by increases at Infrastructure, primarily in Europe and the Americas. U.S. exports grew 14% in 2006 on strong growth led by Infrastructure, again showing strength in Europe and the Americas. GE global revenues were $48.2 billion in 2005, up 15% over 2004, led by increases at Infrastructure and NBC Universal, mainly in Europe and the Pacific Basin. Exports from the U.S. were up 30%, led by Infrastructure, again showing strength in Europe and the Pacifi c Basin. 2006 GLOBAL REVENUES BY REGION A. Europe 54% B. Pacific Basin 24% C. Americas 13% D. Other Global 9% GECS global revenues rose 12% to $30.9 billion in 2006, compared with $27.4 billion and $24.5 billion in 2005 and 2004, respectively. GECS revenues in Other Global increased 21% in 2006, primarily as a result of organic revenue growth at the Aviation Financial Services business of Infrastructure. GECS revenues increased 19% in the Americas, primarily as a result of organic revenue growth and acquisitions at Commercial Finance and GE Money, partially offset by dispositions at Commercial Finance. GECS revenues increased 10% in Europe, primarily as a result of organic revenue growth and acquisitions at Commercial Finance and GE Money, partially offset by results of our remaining insurance activities. Global operating profit was $15.2 billion in 2006, an increase of 20% over 2005, which was 20% higher than in 2004. GE global operating profit in 2006 rose 18%, primarily from gains on the sale of Advanced Materials in the Pacific Basin and core growth in Europe, primarily at Infrastructure. 2006 GLOBAL ASSETS BY REGION A. Europe 53% B. Pacific Basin 22% C. Americas 10% D. Other Global 15% Total assets of global operations on a continuing basis were $344.9 billion in 2006, an increase of $59.9 billion, or 21%, over 2005. GECS global assets on a continuing basis of $305.9 billion at the end of 2006 were 24% higher than at the end of 2005, reflecting core growth and acquisitions in Europe, the Pacifi c Basin and the Americas, primarily at Commercial Finance and GE Money. Financial results of our global activities reported in U.S. dollars are affected by currency exchange. We use a number of techniques to manage the effects of currency exchange, including selective borrowings in local currencies and selective hedging of significant cross-currency transactions. Such principal currencies are the pound sterling, the euro, the Japanese yen and the Canadian dollar. ge 2006 annual report 57

management’s discussion and analysis Environmental Matters Our operations, like operations of other companies engaged in similar businesses, involve the use, disposal and cleanup of substances regulated under environmental protection laws. We are involved in a sizable number of remediation actions to clean up hazardous wastes as required by federal and state laws. Such statutes require that responsible parties fund reme- diation actions regardless of fault, legality of original disposal or ownership of a disposal site. Expenditures for site remediation actions amounted to $0.2 billion in 2006 and $0.1 billion in both 2005 and 2004. We presently expect that such remediation actions will require average annual expenditures in the range of $0.2 billion to $0.3 billion over the next two years. The U.S. Environmental Protection Agency (EPA) ruled in February 2002 that approximately 150,000 pounds of polychlori- nated biphenyls (PCBs) must be dredged from a 40-mile stretch of the upper Hudson River in New York state. On November 2, 2006, the U.S. District Court for the Northern District of New York approved a consent decree entered into between GE and the EPA that represents a comprehensive framework for implementation of the EPA’s 2002 decision to dredge PCB-containing sediments in the upper Hudson River. The dredging will be performed in two phases with an intervening peer review of performance after phase 1. Under this consent decree, we have committed up to $0.1 billion to reimburse the EPA for its past and future project oversight costs and agreed to perform the first phase of dredging. We further committed that, subject to future agreement with the EPA about completion of dredging after completion of phase 1 and the peer review, we will be responsible for further costs, including costs of phase 2 dredging. Our Statement of Financial Position as of December 31, 2006 and 2005, included liabilities for the estimated costs of this remediation. Financial Resources and Liquidity This discussion of financial resources and liquidity addresses the Statement of Financial Position, the Statement of Changes in Shareowners’ Equity, the Statement of Cash Flows, Contractual Obligations, Off-Balance Sheet Arrangements, and Debt Instruments, Guarantees and Covenants. The fundamental differences between GE and GECS are reflected in the measurements commonly used by investors, rating agencies and financial analysts. These differences will become clearer in the discussion that follows with respect to the more significant items in the fi nancial statements. Overview of Financial Position Major changes in our financial position resulted from the following: • During 2006, we substantially completed our insurance exit, which reduced assets and liabilities of discontinued opera- tions by $61.1 billion and $49.1 billion, respectively. • During 2006, we completed the acquisitions of ZENON Environmental Inc. at Infrastructure IDX Systems Corporation and Biacore International AB at Healthcare iVillage Inc. at NBC Universal Banque Artesia Nederland N.V., Arden Realty, Inc., the custom fleet business of National Australia Bank Ltd., and the senior housing portfolios of Formation Capital LLC at Commercial Finance and the private-label credit card portfolio of Hudson’s Bay Company at GE Money. • The U.S. dollar was weaker at December 31, 2006, than it was at December 31, 2005, increasing the translated levels of our non-U.S. dollar assets and liabilities. Overall, on average, the U.S. dollar in 2006 was slightly stronger than during the comparable 2005 period stronger in the first half and weaker in the second half of the year. Depending on the timing of our non-U.S. dollar operations, this resulted in either decreasing or increasing the translated levels of our operations as noted in the preceding Operations section. Statement of Financial Position Because GE and GECS share certain significant elements of their Statements of Financial Position — property, plant and equipment and borrowings, for example — the following discussion addresses significant captions in the “consolidated” statement. Within the following discussions, however, we distinguish between GE and GECS activities in order to permit meaningful analysis of each individual consolidating statement. INVESTMENT SECURITIES comprise mainly investment-grade debt securities supporting obligations to annuitants and policyholders. Investment securities were $47.8 billion at December 31, 2006, compared with $42.1 billion at December 31, 2005. We regularly review investment securities for impairment based on both quantitative and qualitative criteria. Quantitative criteria include length of time and amount that each security is in an unrealized loss position and, for fixed maturities, whether the issuer is in compliance with terms and covenants of the security. Qualitative criteria include the financial health of and specific prospects for the issuer, as well as our intent and ability to hold the security to maturity or until forecasted recovery. Our impairment reviews involve our finance, risk and asset management teams as well as the portfolio management and research capabilities of our internal and third-party asset managers. Our qualitative review attempts to identify those issuers with a greater than 50% chance of default in the following 12 months. These securities are characterized as “at-risk” of impairment. Of investment securities with unrealized losses at December 31, 2006, an insignificant amount was at risk of being charged to earnings in the next 12 months. Impairment losses for both 2006 and 2005 totaled $0.1 billion. We recognized impairments in both periods for issuers in a variety of industries we do not believe that any of the impairments indi- cate likely future impairments in the remaining portfolio. Gross unrealized gains and losses totaled $2.9 billion and $0.3 billion, respectively, at December 31, 2006, compared with $2.3 billion and $0.5 billion, respectively, at December 31, 2005, primarily reflecting an increase in the estimated fair value of equity securities, partially offset by a decrease in the estimated fair value of debt securities as interest rates increased. At December 31, 2006, available 2007 accounting gains could be as much as $1.7 billion, net of consequential adjustments to certain insurance assets that are amortized based on anticipated 58 ge 2006 annual report