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

notes to consolidated financial statements Trust assets invested in short-term securities must be invested in securities rated A1/P1 or better, other than 15% of short-term holdings which may be rated A2/P2. GE common stock represented 6.1% of trust assets at year-end 2006 and 2005 and is subject to a statutory limit when it reaches 10% of total trust assets. Our recorded balances for retiree benefit plans are as follows: RETIREE BENEFIT ASSET (LIABILITY) December 31 (In millions) 2006 2005 Funded status(a) $(6,552) $(7,465) Unrecognized prior service cost (b) 2,409 Unrecognized net actuarial loss (b) 902 Net liability recognized $(6,552) $(4,154) Liability recorded in the Statement of Financial Position Unfunded liabilities Retiree health plans Due within one year $ (681) $ (740) Due after one year (5,320) (3,395) Retiree life plans (551) (19) Net liability recognized $(6,552) $(4,154) Amounts recorded in shareowners’ equity Prior service cost $ 2,046 $ — Net actuarial loss 4 — Total $ 2,050 $ — (a) Fair value of assets less APBO, as shown in the preceding tables. (b) Amounts recognized in shareowners’ equity in 2006 upon adoption of SFAS 158. See note 1. The estimated prior service cost and net actuarial loss for our retiree benefit plans that will be amortized from shareowners’ equity into retiree benefit plans cost in 2007 are $290 million and $10 million, respectively. Comparable amortized amounts in 2006 were $363 million and $64 million, respectively. Our estimated future benefit payments are as follows: ESTIMATED FUTURE BENEFIT PAYMENTS 2012– 2016 (In millions) 2007 2008 2009 2010 2011 Gross $935 $920 $880 $860 $840 $3,760 Expected Medicare Part D subsidy 85 95 105 110 115 660 Net $850 $825 $775 $750 $725 $3,100 Our labor agreements with various U.S. unions expire in June 2007, and we will be engaged in negotiations to attain new agreements. Results of 2007 negotiations cannot be predicted. However, recent past negotiations have resulted in increased per capita costs as well as a corresponding increase in our APBO. There is no assurance that such increases pursuant to 2007 negotiations will be less than recent experience. Note 7 Pension Benefits We sponsor a number of pension plans. Principal pension plans, together with affiliate and certain other pension plans (other pension plans), detailed in this note, represent about 99% of our total pension assets. We use a December 31 measurement date for our plans. PRINCIPAL PENSION PLANS are the GE Pension Plan and the GE Supplementary Pension Plan. The GE Pension Plan provides benefits to certain U.S. employees based on the greater of a formula recognizing career earnings or a formula recognizing length of service and final average earnings. Certain benefit provisions are subject to collective bargaining. The GE Supplementary Pension Plan is an unfunded plan providing supplementary retirement benefits primarily to higher- level, longer-service U.S. employees. OTHER PENSION PLANS in 2006 included 27 U.S. and non-U.S. pension plans with pension assets or obligations greater than $50 million. These defi ned benefit plans provide benefi ts to employees based on formulas recognizing length of service and earnings. 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. PENSION PLAN PARTICIPANTS December 31, 2006 (In thousands) Total Principal pension plans Other pension plans Active employees 179 135 44 Vested former employees 223 185 38 Retirees and benefi ciaries 233 210 23 Total 635 530 105 ge 2006 annual report 81