notes to consolidated financial statements Note 3 GE Other Income (In millions) 2006 2005 2004 Sales of business interests $1,375 $ 630 $ 464 Associated companies 309 256 191 Marketable securities and bank deposits 280 96 92 Licensing and royalty income 221 227 145 Other items 505 555 184 Total $2,690 $1,764 $1,076 Note 4 GECS Revenues from Services (In millions) 2006 2005 2004 Interest on loans $22,568 $20,096 $17,314 Equipment leased to others 12,940 11,582 10,744 Financing leases 4,298 3,990 4,160 Fees 4,229 4,180 3,254 Real estate investments 3,138 1,919 1,637 Investment income 2,614 2,839 2,428 Premiums earned by insurance activities 2,084 2,333 2,195 Associated companies 2,079 1,320 708 Gross securitization gains 1,199 939 1,195 Other items 5,872 5,285 5,711 Total $61,021 $54,483 $49,346 Note 5 Supplemental Cost Information Total expenditures for research and development were $3,659 million, $3,425 million and $3,091 million in 2006, 2005 and 2004, respectively. The portion we funded was $2,969 million in 2006, $2,741 million in 2005 and $2,443 million in 2004. Rental expense under operating leases is shown below. (In millions) 2006 2005 2004 GE $932 $939 $874 GECS 991 993 931 At December 31, 2006, minimum rental commitments under noncancellable operating leases aggregated $2,605 million and $4,016 million for GE and GECS, respectively. Amounts payable over the next fi ve years follow. (In millions) 2007 2008 2009 2010 2011 GE $509 $434 $371 $311 $297 GECS 757 681 617 463 370 GE’s selling, general and administrative expenses totaled $13,841 million in 2006, $13,279 million in 2005 and $12,001 million in 2004. Note 6 Retiree Health and Life Benefits We sponsor a number of retiree health and life insurance benefi t plans (retiree benefit plans). Principal retiree benefit plans are discussed below other such plans are not signifi cant individually or in the aggregate. We use a December 31 measurement date for our plans. PRINCIPAL RETIREE BENEFIT PLANS provide health and life insurance benefits to employees who retire under the GE Pension Plan with 10 or more years of service. Eligible retirees share in the cost of healthcare benefits. Effective January 1, 2005, we amended our principal retiree benefit plans to provide that, upon retirement of salaried employees who commenced service after that date, such retirees will pay in full for their participation in the GE retiree health benefit plans. These plans cover approximately 240,000 retirees and dependents. Effective December 31, 2006, we adopted SFAS 158, Employers’ Accounting for Defi ned Benefit Pension and Other Postretirement Plans. See note 1 for the incremental effects of the initial adoption of SFAS 158 on our Statement of Financial Position at December 31, 2006. ge 2006 annual report 79

notes to consolidated financial statements The effect on operations of principal retiree benefit plans follows. COST OF PRINCIPAL RETIREE BENEFIT PLANS (In millions) 2006 2005 2004 Expected return on plan assets $(127) $ (138) $(149) Service cost for benefi ts earned 229 243 210 Interest cost on benefi t obligation 455 507 518 Prior service cost 363 326 298 Net actuarial loss recognized 64 70 60 Retiree benefit plans cost $ 984 $1,008 $ 937 ACTUARIAL ASSUMPTIONS. The discount rates at December 31 were used to measure the year-end benefit obligations and the earnings effects for the subsequent year. Actuarial assumptions used to determine benefit obligations and earnings effects for principal retiree benefit plans follow. ACTUARIAL ASSUMPTIONS December 31 2006 2005 2004 2003 Discount rate(a) 5.75% 5.25% 5.75% 6.00% Compensation increases 5.00 5.00 5.00 5.00 Expected return on assets 8.50 8.50 8.50 8.50 Initial healthcare trend rate (b) 9.20 10.00 10.30 10.50 (a) Weighted average discount rates of 5.90% and 6.40% were used for determination of costs in 2004 and 2003, respectively. (b) For 2006, gradually declining to 5% for 2013 and thereafter. To determine the expected long-term rate of return on retiree life plan assets, we consider the current and expected asset allocations, as well as historical and expected returns on various categories of plan assets. We apply our expected rate of return to a market-related value of assets, which stabilizes variability in assets to which we apply that expected return. We amortize experience gains and losses, as well as the effects of changes in actuarial assumptions and plan provisions, over a period no longer than the average future service of employees. FUNDING POLICY. We fund retiree health benefits on a pay-as- you-go basis. We expect to contribute approximately $700 million in 2007 to fund such benefits. We fund retiree life insurance benefits at our discretion. Changes in the accumulated postretirement benefi t obligation for retiree benefit plans follow. ACCUMULATED POSTRETIREMENT BENEFIT OBLIGATION (APBO) (In millions) 2006 2005 Balance at January 1 $9,084 $9,250 Service cost for benefi ts earned 229 243 Interest cost on benefi t obligation 455 507 Participant contributions 43 41 Actuarial gain (707) (55) Benefi ts paid(a) (810) (856) Other (32) (46) Balance at December 31(b) $8,262 $9,084 (a) Net of Medicare Part D subsidy of $75 million in 2006. (b) The APBO for the retiree health plans was $6,001 million and $6,713 million at year-end 2006 and 2005, respectively. Increasing or decreasing the healthcare cost trend rates by one percentage point would have had an insignificant effect on the December 31, 2006, accumulated postretirement benefi t obliga- tion and the annual cost of retiree health plans. Our principal retiree benefit plans are collectively bargained and have provisions that limit our per capita costs. Changes in the fair value of assets for retiree benefi t plans follow. FAIR VALUE OF PLAN ASSETS (In millions) 2006 2005 Balance at January 1 $1,619 $1,652 Actual gain on plan assets 222 107 Employer contributions 636 675 Participant contributions 43 41 Benefi ts paid(a) (810) (856) Balance at December 31 $1,710 $1,619 (a) Net of Medicare Part D subsidy of $75 million in 2006. Plan assets are held in trust, as follows: PLAN ASSET ALLOCATION 2006 2005 Target Actual Actual December 31 allocation allocation allocation U.S. equity securities 35–55% 44% 51% Non-U.S. equity securities 15–25 22 19 Debt securities 15–30 18 20 Real estate 1–10 4 2 Private equities 1–11 3 1 Other 1–13 9 7 Total 100% 100% Plan fiduciaries set investment policies and strategies for the trust. Long-term strategic investment objectives include preserving the funded status of the plan and balancing risk and return. The plan fiduciaries oversee the investment allocation process, which includes selecting investment managers, setting long-term strategic targets and monitoring asset allocations. Target alloca- tion ranges are guidelines, not limitations, and occasionally plan fiduciaries will approve allocations above or below a target range. 80 ge 2006 annual report