letter to investors OPERATING PROFIT (In $ billions) (%) REVENUES (In $ billions) 0.6 1996 2007* 4.0 In 2007, Healthcare should have $20 billion in revenues and $4 billion in operating profit. In addition, we now have $16 billion of assets in Healthcare Financial Services built around our customers’ needs. This was the result of multiple strategic and operational decisions over the last 10 years, by people motivated to make technological and commercial breakthroughs. Long-term commitment to Invest and Deliver: GE Healthcare 1996 Inorganic growth A. Organic Growth: $6.9 B. Inorganic Growth from acquisitions in Healthcare Information Technology, Clinical Systems, Life Sciences & Medical Diagnostics, Interventional and In Vitro Diagnostics: $9.1 9% Organic growth per year 16% Average annual growth rate 20.0 2007* 4.0 14 1996 2007* OPERATING PROFIT RATE 20 B B A *Forecast *Forecast *Forecast By serving our customers, taking the business global and adding capability in clinical systems, life sciences, information technology, laboratory diagnostics and diagnostic pharmaceuticals, we are consistently moving ahead of the competition and in synch with our customers. For investors, we have built a business that has the capability to generate 20% returns over the long term. We are building leadership in Healthcare. But, sometimes, markets move away from our strategic principles. That is the case in our Advanced Materials and Plastics businesses. We have strong leadership teams, but because of commodity cost volatility, it has been difficult for them to predict or hit their fi nancial commitments. As a result, we sold our Advanced Materials business in 2006 for $3.8 billion. And we have announced the potential disposition of our Plastics business. These are strong franchises and they will do well outside GE. We are reinvesting this capital into faster growth platforms. Since the beginning of 2007, we have announced almost $15 billion of industrial acquisitions. These include Abbott’s Healthcare Diagnostic business (for $8.1 billion), Smiths’ Aerospace business (for $4.8 billion) and ABB’s former Oil & Gas business (for $1.9 billion). These acquisitions will extend our leadership in Healthcare, Aviation and Oil & Gas. They will add to our earnings in 2007 and beyond, while increasing our industrial growth rate. We expect these investments to generate 15% cash returns by their fifth year and 20% returns over the long term. Because we have invested in our leadership businesses over time, we were able to deliver for you in 2006 and are even better positioned for 2007. Infrastructure (34% of GE’s segment profi t) grew earnings 16%, driven by superior technology and strong global growth. Commercial Finance (19% of GE) grew earnings 17%, fueled by origination excellence and strong risk management. GE Money (13% of GE) grew earnings 15%, by leveraging marketing excellence and a diversified global position. Healthcare (12% of GE) grew earnings 18%, with excellent products satisfying customers around the world. Consumer & Industrial, Equipment Services and many of our other Industrial businesses also had record years. NBCU (11% of GE) saw earnings slip 6%. But this allows me to illustrate an important point about a team that invests and delivers. NBCU is capable of consistent 10%+ earnings growth and 20%+ returns. Entertainment assets are highly valued by investors. We have a strong team of leaders in place and the business can benefit from GE capabilities. Momentarily, we are underperforming, and our priority is to improve this business. We have invested in content and the team is delivering. “Heroes,” “Sunday Night Football” and “The Office” are among the industry’s best new programs. Meanwhile, our news, cable and Hispanic platforms are winning. We have dramatically improved our Internet offerings. Our team knows that they must deliver great content with digital distribution to their customers. NBCU should grow earnings in 2007 and is well positioned for the future. I would ask investors to think about the progress we have made with our portfolio over the last five years. In 2001, one-third of our earnings were generated by businesses that could not consistently hit our 10% earnings growth and 20% return goals. Since then, we have executed a disciplined portfolio strategy to create a sustainable competitive advantage based on technology, brand and a valuable installed base. As we go forward, all of our portfolio will be capable of delivering on our financial goals. In addition, each of our businesses can capitalize on the major growth trends of this era. 6 ge 2006 annual report

letter to investors Execution and Financial Discipline Building a reliable growth company requires excellent execution around margin expansion, cash flow generation and the capital allocation required to achieve high returns. These results must be achieved with high levels of transparency and controllership. We must deliver to earn the “right” to invest. The core of our financial strength is the ability to generate excess cash. In 2007, we should generate $40 billion of cash from earnings, working capital reductions and potential divestitures. This is cash that will be available after we have invested in R&D, programming and capital expenditures. We allocate this cash with discipline. Our first priority is to pay your dividends. We are committed to return 50% of our earnings back to you in dividends. We reinvest 60% of our fi nancial ser- vices earnings to sustain their future growth. That still leaves $20 billion to drive industrial growth through acquisitions and to buy back stock. As I mentioned earlier, we like investing in the Company and have announced almost $15 billion of industrial acquisitions for 2007. We target every investment to achieve a 20% return over time. We should also complete our current $25 billion stock buyback program by 2008. Our return hit 18.4% in 2006, a 180 basis point improvement. We are on track to hit 20% by 2008. With a return of 20% and capital cost of 9%, our investments create signifi cant economic value. Any private equity firm would “die” for our unlevered returns. Another way we improve investor returns is through a detailed focus on margin expansion. GE’s operating profit rate hit 15.2% in 2006, a 40 basis point improvement from the previous year. We have targeted a 100 basis point improvement for 2007. We should achieve gains through improving the mix of our high-margin services, driving product line profi tability and lowering overhead costs. GE’s long-term commitment to services growth will benefi t our investors. Our services revenues were $30 billion in 2006 and are growing more than 10% annually. With margin rates of nearly 30%, services have a significantly positive impact on GE’s profitability, and should fuel our margin rate growth for many years. We drive a lean structure through our simplifi cation initiative. Our overhead costs have declined by $4 billion since 2004. We are consolidating backrooms, restructuring old facilities and reducing management layers. Corporate costs should decline 5% in 2007. This initiative still has years of opportunity ahead. We continue to use tools such as Lean, a process for reduc- ing cycle time, and Six Sigma to reduce working capital. Our Transportation business has reduced the cycle time needed to build a locomotive from 31 days to 26 days, with a target of 10 days. This has created 30% more capacity and reduced inventory by 30%. This business has an ROTC of 33%. Our financial services businesses are also very profi table. The returns in Commercial Finance and GE Money exceed 25%. We have great origination and excellent risk management, and our capital markets capability allows us to keep only the highest margin assets on our books. Risk management is an important skill at GE. We manage more than $560 billion of financial assets with losses less than the industry average. The GE Capital Board meets monthly, where we approve all our significant deals. Before each meeting, our Chief Risk Officer, Jim Colica, sends a memo to the Board refl ecting his views of each deal. I spend an hour alone with Jim to review each deal through his eyes. There is no “deal heat” in my conference room. Jim’s keen eye for detail has saved GE billions. We are committed to having transparent and high-quality earnings. By that, we mean earnings that convert into cash and are repeatable. Over the past five years, 100% of our earnings have been converted into cash. Meanwhile, we believe the com- bined impact of non-cash pension effects, gains, restructuring and changes in tax rate — financial elements that are a part of a company our size — basically offset each other over time. GE’s earnings are driven by our businesses, which should always be transparent and well understood by investors. A key part of our operating discipline is excellence in control- lership. While I am confident in our processes and culture, we did restate our earnings from 2001 to 2005 due to differing accounting interpretations between us, together with our auditors, and the U.S. Securities and Exchange Commission. The restatement did not have a significant impact on our financial position, but the outcome is unacceptable. We are strengthening our processes even further. Building a reliable growth company requires the generation of cash and the discipline to invest with high returns. It requires ongoing process excellence to improve margins and returns over time. Invest and deliver this is our responsibility and a “right” that we earn by executing over time. Growth as a Process We have invested in capabilities that create organic growth. These capabilities include investing in leadership technology and innovation, taking an enterprise approach to customers and positioning GE for global success. Over the past two years, our organic growth has averaged 8%, higher than our industrial and financial peers, and twice our historic average. Our focus on technology has created a pipeline of 40 “$1 billion- revenue products” that will be introduced in the next three years. This results in an installed base that should generate decades of services growth. Improving customer value has made the Company more externally focused. We are further enhancing customer value throughout the Company using Lean and Net Promoter Score (NPS), a tool to measure how customers view GE. We are increas- ing share through commercial excellence. Enterprise selling is creating accelerated growth in Commercial Finance, Healthcare, Infrastructure and NBCU. Our increased focus on globalization has transformed GE. Our global revenues should equal our U.S. revenues in 2007 and grow at 15% annually. Innovation has become mainstream. We should have 60 Imagination Breakthroughs generating $25 billion revenues in 2007, and we have another 90 in the pipeline. ge 2006 annual report 7