GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES NOTES TO FINANCIAL STATEMENTS-(Continued) Incentive compensation plans apply to over 3,000 employees. Amounts allotted by year for services performed in the previous year were as follows: 1971, $20.0 million; 1972, $24.0 million; 1973, $27.8 million; 1974, $30.7 million; 1975, $34.8 million; 1976, $33.0 million. The maximum amount that may be appropriated to the reserve from which allotments are made in any year is 10% of the excess of the net consolidated earnings, as defined in the Incentive Compensation Plan, over 5% of the average consolidated capital investment, as defined in the Plan. 13. OTHER INCOME Other income in "Statement of Current and Retained Earnings" consisted of the following: Six months ended Year ended December 31, June 30, 1971 1972 1973 1974 1975 1975 1976 (Amounts in millions) Net earnings of General Electric Credit Corporation........................... $ 30.9 $ 41.1 $ 41.7 $ 42.7 $ 52.2 $25.3 $ 26.8 Income from: Customer financing...................... 29.8 26.8 32.4 40.2 40.9 19.0 17.0 Royalty and technical agreements........................................ 31.9 30.2 36.9 42.8 43.6 17.2 15.0 Marketable securities and bank deposits..................................... 10.4 19.1 17.7 17.3 28.7 10.3 25.6 Other investments: Interest.................................. 16.3 10.5 13.1 16.9 21.4 11.6 13.3 Dividends............................. 10.6 10.3 16.2 12.9 8.2 4.2 2.2 Other sundry income.................... 22.1 51.2 25.7 13.0 _2.5 5.7 28.8 $152.0 $189.2 $183.7 $185.8 $197.5 $93.3 $128.7 Included in other sundry income were gains on sale of Honeywell stock computed on an average cost basis of $11.0 million in 1971, $29.5 million in 1972 and $7.8 million in 1973. Gains for 1974, 1975 and for the first six months of 1976 were nominal. Also included in other sundry income for the six months ended June 30, 1976 was a gain of $20.7 million realized on the sale of equity and convertible investments in AEG-TELEFUNKEN in April. 14. INCOME TAXES Provision for income taxes is shown below: Six months ended _Year ended December 31,_ June 30, 1971 1972 1973 1974 1975 1975 1976 (Amounts in millions) U.S. federal income taxes Estimated amount payable.......... $256.4 $315.3 $321.2 $262.1 $230.5 $45.6 $185.2 Effect of timing differences.......... 19.9 (21.0) 0.4 30.2 19.9 18.8 (28.1) Investment credit deferrednet.. _4.1 12.1 13.0 11.1 12.8 (1.4) (2.2) 280.4 306.4 334.6 303.4 263.2 63.0 154.9 Foreign income taxes Estimated amount payable.......... 32.0 48.1 71.4 74.5 115.2 67.5 44.1 Effect of timing differences.......... (2.6) (2.8) (0.4) (4.2) (28.9) (33.9) _2.3 29.4 45.3 71.0 70.3 86.3 33.6 46.4 Other (principally state and local income taxes)...................................... _7.3 12.4 13.1 _8.7 _8.5 _3.9 _5.9 $317.1 $364.1 $418.7 $382.4 $358.0 $100.5 $207.2 - The 1975 increases in foreign income taxes payable and in foreign timing differences shown above result principally from Canadian General Electric Company Limited's sale of its heavy-water plant. F-16 GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES NOTES TO FINANCIAL STATEMENTS-(Continued) The principal types of timing differences are shown by the following analysis of the increase (decrease) in the provision for U. S. federal income taxes for 1973, 1974 and 1975, and the first six months of 1975 and 1976: Six months (Amounts in millions) ended June 30, 1973 1974 1975 1975 1976 Tax over book depreciation.......................... $12.1 $16.7 $12.7 $ 6.4 $ 5.5 Undistributed earnings of affiliates.............. 6.7 10.5 15.4 3.9 7.7 Margin on installment sales.......................... 1.1 3.6 28.3 17.6 (15.1) Provision for warranties................................ (7.7) (6.6) (21.6) (1.9) (14.3) Othernet..................................................... (11.8) 6.0 (14.9) (7.2) (11.9) $ 0.4 $30.2 $19.9 $18.8 $(28.1) _ _ _ _ _ Investment credit amounted to $12.2 million in 1971, $20.4 million in 1972, $23.6 million in 1973, $23.9 million in 1974, $28.0 million in 1975 and $6.3 million and $6.7 million in the first six months of 1975 and 1976, respectively. The amounts added to net earnings were $8.1 million in 1971, $8.3 million in 1972, $10.6 million in 1973, $12.8 million in 1974, $15.0 million in 1975 and $7.7 million and $8.9 million in the first six months of 1975 and 1976, respectively. At December 31, 1975 the amount still deferred and to be included in net earnings in future periods was $96.9 million ($94.7 million at June 30, 1976). Provision has been made for federal income taxes to be paid on that portion of the undistributed earnings of affiliates and associated companies expected to be remitted to the parent company. Undistributed earnings intended to be reinvested indefinitely in affiliates and associated companies totaled $494 million and $555 million at December 31, 1975 and June 30, 1976, respectively. U. S. federal income tax returns of the parent General Electric Company have been settled through 1969. Provision for income taxes as a percentage of income before taxes was 40.0% in 1971 and 40.6% in 1972. Effective tax rates and a reconciliation to the U. S. federal statutory rate of 48.0% for the years 1973, 1974, 1975 and the first six months of 1975 and 1976 is shown in the table below: Six months ended June 30, 1973 1974 1975 1975 1976 U. S. federal statutory rate............................ 48.0% 48.0% 48.0% 48.0% 48.0% Reduction in taxes resulting from: Effect of consolidated affiliate earnings (including DISC) subject to aggregate effective tax rates generally less than 48.0%......................................... (2.5) (6.4) (6.4) (10.2) (3.9) Inclusion of earnings of the Credit Corporation in before-tax income on an "after-tax" basis...................... (2.0) (2.0) (2.7) (3.9) (2.4) Investment credit................................... (1.0) (1.3) (1.6) (2.5) (1.7) Income taxed at capital gains rate........ (0.3) (0.3) (0.5) (1.1) (2.0) Othernet............................................. (0.8) 0.2 0.9 2.2 1.2 Effective tax rate............................................ 41.4% 38.2% 37.7% 32.5% 39.2% The effective tax rate for the first six months of 1975 was abnormally low because domestic operating margins, which are generally subject to the 48% rate were depressed. In addition, the earnings of the Credit Corporation which are consolidated on an after-tax basis, accounted for a relatively high proportion of income. F-17 ?