notes to consolidated financial statements LONG-TERM BORROWINGS 2006 December 31 (Dollars in millions) Average rate(a) Maturities 2006 2005 GE Senior notes 5.06% 2008–2013 $ 6,488 $ 6,486 Industrial development/ pollution control bonds 4.11 2011–2027 307 299 Payable to banks, principally U.S. 5.68 2008–2015 1,836 1,912 Other(b) 454 384 9,085 9,081 GECS Senior notes Unsecured 4.95 2008–2055 235,952 180,546 Asset-backed (c) 5.83 2008–2035 5,810 6,845 Extendible notes 5.32 2009–2011 6,000 14,022 Subordinated notes (d) 5.92 2009–2066 5,201 2,984 252,963 204,397 ELIMINATIONS (1,244) (1,197) Total $260,804 $212,281 (a) Based on year-end balances and year-end local currency interest rates, including the effects of related interest rate and currency swaps, if any, directly associated with the original debt issuance. (b) A variety of obligations having various interest rates and maturities, including certain borrowings by parent operating components and affi liates. (c) Included $4,684 million and $6,845 million of asset-backed senior notes, issued by consolidated, liquidating securitization entities at December 31, 2006 and 2005, respectively. See note 28. (d) Included $750 million of subordinated notes guaranteed by GE at December 31, 2006 and 2005. Our borrowings are addressed below from the perspectives of liquidity, interest rate and currency risk management. Additional information about borrowings and associated swaps can be found in note 27. LIQUIDITY is affected by debt maturities and our ability to repay or refinance such debt. Long-term debt maturities over the next fi ve years follow. (In millions) 2007 2008 2009 2010 2011 GE $ 32 $ 1,572 $ 1,716 $ 42 $ 39 GECS 44,522(a) 53,282(b) 44,069 34,175 20,889 (a) Floating rate extendible notes of $256 million are due in 2007, but are extendible at the option of the investors to a final maturity in 2008. Fixed and fl oating rate notes of $975 million contain put options with exercise dates in 2007, and which have final maturity dates in 2008 ($350 million), 2009 ($100 million) and beyond 2012 ($525 million). (b) Floating rate extendible notes of $6,000 million are due in 2008, of which $2,000 million are extendible at the option of the investors to a final maturity in 2009, and $4,000 million are extendible to a final maturity in 2011. Committed credit lines totaling $59.9 billion had been extended to us by 75 banks at year-end 2006. Included in this amount was $50.4 billion provided directly to GECS and $9.5 billion provided by 16 banks to GE, to which GECS also has access. The GECS lines include $28.6 billion of revolving credit agreements under which we can borrow funds for periods exceeding one year. The remaining $31.3 billion are 364-day lines of which $31.2 billion contain a term-out feature that allows GE or GECS to extend the borrowings for one year from the date of expiration of the lending agreement. We pay banks for credit facilities, but compensation amounts were insignificant in each of the past three years. INTEREST RATE AND CURRENCY RISK is managed through the direct issuance of debt or use of derivatives. We take positions in view of anticipated behavior of assets, including prepayment behavior. We use a variety of instruments, including interest rate and cur- rency swaps and currency forwards, to achieve our interest rate objectives. The following table provides additional information about derivatives designated as hedges of borrowings in accordance with SFAS 133, Accounting for Derivative Instruments and Hedging Activities, as amended. DERIVATIVE FAIR VALUES BY ACTIVITY/INSTRUMENT December 31 (In millions) 2006 2005 Cash fl ow hedges $ 763 $ 726 Fair value hedges (147) (39) Total $ 616 $ 687 Interest rate swaps $ (860) $ (423) Currency swaps 1,476 1,110 Total $ 616 $ 687 We regularly assess the effectiveness of all other hedge positions using a variety of techniques, including cumulative dollar offset and regression analysis, depending on which method was selected at inception of the respective hedge. Adjustments related to fair value hedges decreased the carrying amount of debt outstanding at December 31, 2006, by $111 million. At December 31, 2006, the maximum term of derivative instru- ments that hedge forecasted transactions was 29 years and related to hedges of long-term, non-U.S. dollar denominated fixed rate debt. See note 27. 94 ge 2006 annual report

notes to consolidated financial statements Note 19 GECS Investment Contracts, Insurance Liabilities and Insurance Annuity Benefits December 31 (In millions) 2006 2005 Investment contracts $ 5,089 $ 6,034 Guaranteed investment contracts of SPEs 11,870 11,685 Total investment contracts Life insurance benefi ts (a) 16,959 14,054 17,719 13,220 Unpaid claims and claims adjustment expenses Unearned premiums Universal life benefits 2,714 740 340 1,707 401 340 Total $34,807 $33,387 (a) Life insurance benefits are accounted for mainly by a net-level-premium method using estimated yields generally ranging from 3.0% to 8.5% in both 2006 and 2005. When insurance affiliates cede insurance to third parties, they are not relieved of their primary obligation to policyholders. Losses on ceded risks give rise to claims for recovery we establish allow- ances for probable losses on such receivables from reinsurers as required. We recognize reinsurance recoveries as a reduction of the Statement of Earnings caption “Investment contracts, insurance losses and insurance annuity benefits.” Reinsurance recoveries were $162 million, $183 million and $223 million for the years ended December 31, 2006, 2005 and 2004, respectively. Note 20 All Other Liabilities This caption includes liabilities for various items including non- current compensation and benefits, deferred income, interest on tax liabilities, accrued participation and residuals, environmental remediation, asset retirement obligations, derivative instruments, product warranties and a variety of sundry items. Accruals for non-current compensation and benefi ts amounted to $17,214 million and $13,856 million for year-end 2006 and 2005, respectively. These amounts include postretirement benefi ts, international and supplemental pension benefits, and other compensation and benefit accruals such as deferred incentive compensation. The increase in 2006 reflected our adoption of SFAS 158, Employers’ Accounting for Defi ned Benefi t Pension and Other Postretirement Plans, as of December 31, 2006. We are involved in numerous remediation actions to clean up hazardous wastes as required by federal and state laws. Liabilities for remediation costs at each site are based on our best estimate of undiscounted future costs, excluding possible insurance recov- eries. When there appears to be a range of possible costs with equal likelihood, liabilities are based on the low end of such range. Uncertainties about the status of laws, regulations, technology and information related to individual sites make it difficult to develop a meaningful estimate of the reasonably possible aggregate environ- mental remediation exposure. However, even in the unlikely event that remediation costs amounted to the high end of the range of costs for each site, the resulting additional liability would not be material to our financial position, results of operations or liquidity. Note 21 Deferred Income Taxes Aggregate deferred income tax amounts are summarized below. December 31 (In millions) 2006 2005 ASSETS GE $11,990 $ 9,928 GECS 8,563 6,209 20,553 16,137 LIABILITIES GE 13,944 13,661 GECS 20,780 18,684 34,724 32,345 Net deferred income tax liability $14,171 $16,208 Principal components of our net liability (asset) representing deferred income tax balances are as follows: December 31 (In millions) 2006 2005 GE Provision for expenses (a) Retiree insurance plans Non-U.S. loss carryforwards (b) Prepaid pension asset — principal plans Contract costs and estimated earnings Intangible assets Depreciation Other — net $ (7,218) (2,654) (1,214) 5,257 2,053 1,934 1,830 1,966 $ (6,521) (1,503) (731) 6,249 1,078 1,490 2,130 1,541 1,954 3,733 GECS Financing leases Operating leases Intangible assets Allowance for losses Non-U.S. loss carryforwards (b) Cash fl ow hedges Other — net 8,314 4,327 1,278 (1,763) (835) (226) 1,122 8,037 4,024 1,195 (2,025) (688) (372) 2,304 12,217 12,475 Net deferred income tax liability $14,171 $16,208 (a) Represented the tax effects of temporary differences related to expense accruals for a wide variety of items, such as employee compensation and benefi ts, interest on tax liabilities, product warranties and other sundry items that are not currently deductible. (b) Net of valuation allowances of $679 million and $890 million for GE and $203 million and $132 million for GECS, for 2006 and 2005, respectively. Of the net deferred tax asset as of December 31, 2006, of $2,049 million, $41 million relates to net operating loss carryforwards that expire in various years ending from December 31, 2007, through December 31, 2009, $698 million relates to net operating losses that expire in various years ending from December 31, 2010, through December 31, 2021, and $1,310 million relates to net operating loss carryforwards that may be carried forward indefi nitely. ge 2006 annual report 95