management’s discussion and analysis OTHER LOSS CONTINGENCIES are recorded as liabilities when it is probable that a liability has been incurred and the amount of the loss is reasonably estimable. Disclosure is required when there is a reasonable possibility that the ultimate loss will materially exceed the recorded provision. Contingent liabilities are often resolved over long time periods. Estimating probable losses requires analysis of multiple forecasts that often depend on judgments about potential actions by third parties such as regulators. Further information is provided in notes 20 and 29. Other Information New Accounting Standards In July 2006, the Financial Accounting Standards Board (FASB) issued two related standards that address accounting for income taxes: FASB Interpretation (FIN) 48, Accounting for Uncertainty in Income Taxes, and FASB Staff Position (FSP) FAS 13–2, Accounting for a Change or Projected Change in the Timing of Cash Flows Relating to Income Taxes Generated by a Leveraged Lease Transaction. Among other things, FIN 48 requires application of a “more likely than not” threshold to the recognition and derecognition of tax positions and that changes related to prior years’ tax positions be recognized in the quarter of change. FSP FAS 13–2 requires a recalculation of returns on leveraged leases if there is a change or projected change in the timing of cash flows relating to income taxes generated by the leveraged lease. Both new standards became effective for us on January 1, 2007. The FASB is currently engaged in a project to provide implementation guidance on FIN 48. While the effects of FIN 48 will depend somewhat upon this implementation guidance, we expect the transition effects of these standards to be modest and consist of reclassification of certain liabilities on our Statement of Financial Position and an adjustment to the opening balance of retained earnings. Prior periods will not be restated as a result of these required accounting changes. In February 2006, the FASB issued Statement of Financial Accounting Standards (SFAS) 155, Accounting for Certain Hybrid Financial Instruments— an Amendment of FASB Statements No. 133 and 140 (SFAS 155). This Statement amended SFAS 133 to include within its scope prepayment features in newly created or acquired retained interests related to securitizations. SFAS 155 will have the effect of changing, from level yield to fair value, the basis on which we recognize earnings on these retained interests. We expect these effects to be immaterial to our 2007 operations. Selected Financial Data The facing page is divided into three sections: upper portion — consolidated data middle portion — GE data that refl ect various conventional measurements for such enterprises and lower portion — GECS data that reflect key information pertinent to financial services businesses. GE’S TOTAL RESEARCH AND DEVELOPMENT expenditures were $3.7 billion in 2006, compared with $3.4 billion and $3.1 billion in 2005 and 2004, respectively. In 2006, expenditures from GE’s own funds were $3.0 billion compared with $2.7 billion in 2005. Expenditures funded by customers (mainly the U.S. government) were $0.7 billion in both 2006 and 2005. Expenditures reported above reflect the definition of research and development required by U.S. generally accepted accounting principles. For operating and management purposes, we consider amounts spent on product and services technology to include our reported research and development expenditures, but also amounts for improving our existing products and services, and the productivity of our plant, equipment and processes. On this basis, our technology expenditures in 2006 were $5.7 billion. GE’S TOTAL BACKLOG of fi rm unfilled orders at the end of 2006 was $46.5 billion, an increase of 29% from year-end 2005, reflecting increased demand at Infrastructure. Of the total back- log, $32.2 billion related to products, of which 63% was scheduled for delivery in 2007. Product services orders, included in this reported backlog for only the succeeding 12 months, were $14.3 billion at the end of 2006. Orders constituting this backlog may be cancelled or deferred by customers, subject in certain cases to penalties. See the Segment Operations section for further information. 66 ge 2006 annual report

management’s discussion and analysis Selected Financial Data (Dollars in millions per-share amounts in dollars) 2006 2005 2004 2003 2002 GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES Revenues $163,391 $147,956 $134,291 $113,421 $111,967 Earnings from continuing operations before accounting changes 20,666 18,661 16,601 14,091 14,629 Earnings (loss) from discontinued operations, net of taxes 163 (1,950) 559 2,057 (616) Earnings before accounting changes 20,829 16,711 17,160 16,148 14,013 Net earnings 20,829 16,711 17,160 15,561 12,998 Dividends declared 10,675 9,647 8,594 7,759 7,266 Return on average shareowners’ equity(a) 19.5% 17.8% 17.9% 20.0% 25.2% Per share Earnings from continuing operations before accounting changes — diluted $ 1.99 $ 1.76 $ 1.59 $ 1.40 $ 1.46 Earnings (loss) from discontinued operations — diluted 0.02 (0.18) 0.05 0.20 (0.06) Earnings before accounting changes — diluted 2.00 1.57 1.64 1.60 1.40 Net earnings — diluted 2.00 1.57 1.64 1.54 1.30 Earnings from continuing operations before accounting changes — basic 1.99 1.77 1.60 1.41 1.47 Earnings (loss) from discontinued operations — basic 0.02 (0.18) 0.05 0.21 (0.06) Earnings before accounting changes — basic 2.01 1.58 1.65 1.61 1.41 Net earnings — basic 2.01 1.58 1.65 1.55 1.31 Dividends declared 1.03 0.91 0.82 0.77 0.73 Stock price range 38.49–32.06 37.34–32.67 37.75–28.88 32.42–21.30 41.84–21.40 Year-end closing stock price 37.21 35.05 36.50 30.98 24.35 Total assets of continuing operations 697,239 612,255 604,338 503,616 441,550 Total assets 697,239 673,321 750,617 647,834 575,018 Long-term borrowings 260,804 212,281 207,871 170,309 138,570 Shares outstanding — average (in thousands) 10,359,320 10,569,805 10,399,629 10,018,587 9,947,113 Shareowner accounts — average 624,000 634,000 658,000 670,000 655,000 Employees at year end United States 155,000 161,000 165,000 155,000 161,000 Other countries 164,000 155,000 142,000 150,000 154,000 Total employees 319,000 316,000(b) 307,000 305,000 315,000 GE DATA Short-term borrowings $ 2,212 $ 1,127 $ 3,409 $ 2,555 $ 8,786 Long-term borrowings 9,085 9,081 7,625 8,388 970 Minority interest 5,623 5,806 7,701 1,079 1,028 Shareowners’ equity 112,314 109,351 110,908 79,662 63,979 Total capital invested $129,234 $125,365 $129,643 $ 91,684 $ 74,763 Return on average total capital invested(a) 18.4% 16.6% 16.2% 18.1% 24.0% Borrowings as a percentage of total capital invested(a) 8.7% 8.1% 9.0% 11.9% 13.0% Working capital(a) $ 7,566 $ 8,399 $ 8,328 $ 5,282 $ 3,821 GECS DATA Revenues $ 63,602 $ 57,551 $ 52,704 $ 43,513 $ 38,456 Earnings from continuing operations before accounting changes 10,495 9,527 8,169 6,256 4,122 Earnings (loss) from discontinued operations, net of taxes 163 (1,950) 559 2,057 (616) Earnings before accounting changes 10,658 7,577 8,728 8,313 3,506 Net earnings 10,658 7,577 8,728 7,974 2,491 Shareowner’s equity 54,097 50,812 54,379 45,790 37,202 Total borrowings 426,279 362,069 355,501 316,593 267,014 Ratio of debt to equity at GE Capital 7.52:1 7.09:1 6.45:1 6.62:1 6.48:1 Total assets $564,668 $540,584 $618,614 $554,877 $489,602 Transactions between GE and GECS have been eliminated from the consolidated information. (a) Indicates terms are defined in the Glossary. (b) Excludes employees of Genworth in 2005 as a result of the third quarter deconsolidation. ge 2006 annual report 67