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General Electric Company

Fairfi eld, Connecticut 06828

www.ge.com

GE 2011 Annual Report

2011 Annual Report

GE Works

3.EPC055148101A.102

150

154

180

170

147

133

139

163

155 142

20082007 2009 2010 2011

CONSOLIDATED REVENUES

(In $ billions)

NBCU

GE

ex NBCU

16.8

16.0

20082007

GECS

Dividend

Industrial

CFOA

2009 2010 2011

19.1

23.3

16.4 14.7

12.1

CASH FLOW FROM OPERATING

ACTIVITIES (CFOA)

(In $ billions)

10.8

17.8

22.3

12.5 14.1

9.5

15.9

20.4

11.3 13.0

20082007 2009 2010 2011

EARNINGS ATTRIBUTABLE TO GE

(In $ billions)

NBCU

GE

ex NBCU

22%

GROWTH CONTINUES

22% increase in Operating

EPS excluding impact

of the preferred stock

redemption, and 20% rise

in Operating earnings.

$200B

RECORD INDUSTRIAL

BACKLOG

Record equipment and service

orders drove the backlog to a

record of $200 billion.

$85B

FINANCIAL FLEXIBILITY

GE had $85 billion of cash and

equivalents at year-end 2011.

70%

DIVIDEND INCREASES

GE announced two dividend

increases in 2011 following

two increases in 2010: a total

70% increase over the two years.

18%

INTERNATIONAL GROWTH

GE’s global growth initiative

helped drive 18% growth in

industrial international revenue.

$18B

U.S. EXPORTS

International sales of American-

made products totaled $18 billion

in 2011, a $1 billion increase

from 2010.

6%

R&D SPEND

GE continued its strong research

and development investment

with total spending at 6% of

industrial revenue.

13,000

U.S. JOBS

GE has announced the creation

of 13,000 jobs in the United States

since 2009.

2011 SUMMARY fi nancial and strategic highlights

Note: Financial results from continuing operations unless otherwise noted.

CONTENTS

2 Letter to Shareowners

10 Business Overview

29 Board of Directors

31 Financial Section

142 Corporate Information

ON THE COVER

Wellington Pereira dos Santos

Operator II

GE’s Wellstream facility in Niterói, Brazil,

is a leading producer of high-quality

fl exible pipe equipment for the Brazilian

offshore drilling market, part of a

$500 million expansion of operations

in the country.

GE Works

At GE, we put our ideas to work. Taking them off the paper, out

of the lab and into the world. Engineers, scientists, teachers,

leaders and doers, all sharing a belief that things can be made

to work better. It’s why we come to work every day. To build,

power, move and cure the world. We are at work making the

world work better.

Jeffrey R. Immelt

Chairman of the Board and

Chief Executive Offi cer

John Krenicki, Jr.

Vice Chairman, GE and

President & Chief Executive

Offi cer, Energy Infrastructure

Keith S. Sherin

Vice Chairman, GE and

Chief Financial Offi cer

Michael A. Neal

Vice Chairman, GE

and Chairman &

Chief Executive Offi cer,

GE Capital Corp.

John G. Rice

Vice Chairman, GE and

President & Chief Executive

Offi cer, Global Growth &

Operations

Pictured, left to right:

GE 2011 ANNUAL REPORT 1

We look at

what the

world needs

A belief

in a better

way

A relentless

drive to invent

and build things

that matter

A world

that works

better

X+=

THE GE WORKS EQUATION

Culture is the foundation for any

successful enterprise, and ours

inspires our people to improve

every day. It is why GE Works.

It starts by being “mission-based.” We have a relentless

drive to invent things that matter: innovations that

build, power, move and help cure the world. We make

things that very few in the world can, but that everyone

needs. This is a source of pride. To our employees and

customers, it defi nes GE.

We build on this mission with a belief

in a better way. We are constantly

learning and driving best practices. We

invest to train our people and develop

leaders. We learn from customers,

competitors, peers and each other.

Because we know we can get better,

we are never afraid. Competition is in

our blood.

GE is a “We Company,” not a “Me

Company.” We want people who listen

more than they talk. We want leaders

who build teams. Bob Santamoor

represents labor; he is the Chairman of

the IUE-CWA GE Aerospace Conference

Board. We have worked together for

years. We don’t agree on everything,

but we respect each other. When we

meet, we talk about jobs. We need

each other to be successful.

We made the decision to invest $1 billion

in our Appliance business, modernizing

our factories in the U.S. Our fi rst two

new products will be introduced early

in 2012, with other major launches

throughout the next two years. Most of

LETTER TO SHAREOWNERS

2 GE 2011 ANNUAL REPORT

THE ECONOMY IN 2012

Four things we’re watching

Infl ation is the

“wild card”

Prepare for

high infl ation

Prices have

moderated in

recent quarters

INFLATION

Will it derail the

recovery?

Do not believe

European

governments

will allow for a

“catastrophic

event”

Plan for a

recession

Committed for the

long term to an

important region

EUROPE

What’s the

outlook?

U.S. economy

strengthening

each day

Could be a

pleasant surprise

UNITED STATES

Will politics hurt

the consumer?

Transitioning to a

consumer-driven

economy

Government

investing in

growth

The economic

engine for most

of the emerging

markets

CHINA

Will it grow?

our appliance product manufacturing

will move back from China and Mexico

to the U.S. We think we can make

more money and serve our customers

better. We also think this will make us

a better manufacturing company in

every corner of the world. But it is only

possible because our designers, factory

workers, managers and marketers

work together. GE is a “We Company.”

We are solving problems, tough prob-

lems. We are in the seventh year of a

clean energy business strategy called

ecomagination. Clean energy goes in

and out of focus for governments and

consumers. But, at GE, we are steadfast

in our investing. In 2011, we had $21 bil-

lion of clean energy revenue, growing

twice as fast as the Company average.

Ecomagination drives growth because

we are solving problems for our custom-

ers. At coal mines, from Pennsylvania

to Peru, our water solutions allow

custom ers to operate productively

while achieving high environmental

standards. We demonstrate every day

that, through innovation, we can meet

societal needs and do it profi tably.

We deliver results. That is the ultimate

output of a strong culture. Over the

next few years, our performance will

accelerate. We aim to reward investors

by delivering a more valuable company

and returning cash. We want to earn

your trust.

We believe that culture and resiliency

count in a company. At GE we have a

quiet confi dence in our willingness to

work hard, to learn and, ultimately,

to prevail. This is how we work and how

we earn your trust. It is how we com-

pete and win. GE Works.

A POSITION OF STRENGTH

GE’s Operating EPS growth was 22%

last year. We bought back preferred

shares of stock we issued during the

fi nancial crisis and increased our

dividend twice. Our stock price fi nished

about fl at, in line with the broader

S&P 500 Index. We outperformed the

S&P Financial and Industrial sectors—

the “GE neighborhood”—which declined

by 18% and 3%, respectively, in 2011.

Despite our growth, it was tough for GE

to break away from investor concerns

about macroeconomic risk. Investor

anxiety is understandable. Europe took

center stage as a source of instability.

Daily headlines about Greece, Italy and

the volatility of the European banks

frayed nerves. And, U.S. politics and

defi cit concerns worried investors in

the second half of 2011.

I have been CEO for ten years. In that

time, we have experienced the 9/11

tragedy, Hurricane Katrina, the 2002

recession, the 2008 fi nancial crisis, the

Gulf oil spill, “Arab Spring,” the Japan

tsunami, and now the European crisis—

quite a bit.

Today, we live in what most business

commentators call a volatile world.

I would argue that when the environ-

ment is continuously unstable, it is no

longer volatile. Rather, we have entered

a new economic era. The emerging

economies grow, while the developed

world slows. Some of the world’s largest

economies face massive fi scal defi cits

and must deleverage. Interest rates are

likely to stay low for extended periods.

Material prices are moving higher. There

is broad-based social unrest. And, it

could remain this way for a long time.

I have learned that nothing is certain

except for the need to have strong risk

management, a lot of cash, the willing-

ness to invest even when the future is

unclear, and great people.

We have great fi nancial strength.

Between GE Capital and GE Parent, we

have $85 billion of cash. And we sur-

rounded the Company with a strong

enterprise risk model that has been

GE 2011 ANNUAL REPORT 3

tested. We are restructuring our

European operations to sustain our

profi tability at lower levels of growth.

We accelerated global and technical

investments, ahead of competition,

during the downturn to ensure growth

in a choppy environment. We redeployed

capital from NBCU to support $11 billion

of Energy acquisitions, which should

provide an earnings boost in 2012. We

fi nished 2011 with $200 billion of product

and service backlog, more than at any

time in our history.

We also have a talented and committed

team. In December, I had dinner with

our Aviation supply chain leaders from

around the world. I do this regularly

with different operating teams. It allows

me to “go deep” and understand chal-

lenges through their eyes. My dinner

partners are the ones who have to

meet record engine demand with high

quality and low cost. They are also the

leaders of our fi ne frontline workforce,

the best in the world. They understand

technology, globalization, innovation

and lean manufacturing. Their tough-

minded, competitive attitude inspires

me. I know that with our team, we will

succeed in this environment.

GE Works for investors, and you should

benefi t from our people and our prep-

aration. As business leaders, we cannot

create the environment, but we can

shape our own destiny. Today, GE has

a stronger portfolio, large-scale

competitive advantage, product and

technology leadership, and strength in

the growth markets. We are ready

to compete. We are positioned to win

right now.

WE HAVE BUILT A

STRONGER PORTFOLIO

We have our strongest portfolio in

recent history. This year, we expect to

have organic growth of 5 to 10% with

expanding margins. GE Capital is

smaller and focused on specialty

fi nance, particularly in mid-market

segments. We expect GE Capital’s

earnings rebound to continue in 2012.

Together, this portfolio is built to grow

earnings and return cash to investors.

Our top strategic priority has been to

build a strong, competitively advan-

taged infrastructure business that

grows ahead of our peers and faster

than the global GDP. Over the last

decade, we have refashioned GE from

an “industrial conglomerate” to an

“infrastructure leader.” This has been

disruptive at times, but it has several

advantages. Infrastructure businesses

use GE’s core strengths in technology,

globalization and services. Infra struc-

ture is also positioned to benefi t from

several long-term tailwinds, especially

growth in emerging markets. Infra-

structure requires scale and fi nancial

strength. Deep customer relationships,

built on long-term thinking, really count.

We have diversifi ed and strengthened

our core businesses, like Energy.

Historically, this business was based

largely on selling one product—heavy

duty gas turbines—in one market—the

U.S. That kind of concentration creates

volatility as markets rise and fall.

Today, we have a broad Energy portfolio,

including a range of gas power

generation products, oil and gas tech-

nology, renewables, smart grid

services, energy management tech-

nologies and controls; these products

and services are sold around the world.

As an energy leader, our earnings are

more diversifi ed, less volatile and

should grow through the cycles. This is

the same model we are using in the

rest of our businesses.

We have boosted the growth rate

of our infrastructure portfolio by

investing in adjacencies, promising

opportunities that are outside of, but

closely related to, our core businesses.

PORTFOLIO STRATEGY

Improved portfolio positioned for a variety of outcomes

Revenue ~$150B

+ $100B of cash: 2012–2016

+ Fund growth and reward investors

EARLY DECADE

Transformation

Begins

MID-DECADE

Reposition, Simplify

and Invest

GOING FORWARD

Growth and Value

Creation

GE Capital

24%

Insurance

15%

Plastics, Media

20%

Infrastructure

41%

36%

Focused Leader

Simple and Safe

64%

High Tech

Global Leader

High Margin/

Returns

15%

8%

43%

34%

4 GE 2011 ANNUAL REPORT

I have written in the past about “bets”

we have made in Aviation Systems,

Life Sciences and other industries.

Adjacencies have allowed us to grow

$35 billion of incremental revenue in a

decade, with more to come. We believe

in a long-term approach to entering

these fast growth segments. For

instance, we have about a $4 billion

position in Life Sciences that could

double in the next few years. We are

building strength in drug discovery,

molecular medicine, bioprocess

manufacturing and digital pathology.

All of these segments will grow at two to

three times global GDP.

GE Capital’s earnings grew more than

100% in 2011. It is stronger and safer.

Our Capital team has executed on

every commitment it made during the

fi nancial crisis. We have reduced

leverage, improved liquidity and shed

assets, while growing at high margins.

Commercial Real Estate, previously a

major investor concern, is positioned

for solid earnings growth in the future.

From 2008 to 2011, GE Capital’s fi nancial

performance compares favorably to

most other fi nancial services fi rms in

the world.

Financial services have been deeply

out of favor with investors.

Nonethe less, there are large segments

where GE Capital will lead and build

upon GE’s strengths. These include

mid-market lending and leasing,

fi nancing in GE domains and a few

other specialty fi nance segments.

Here, we have a clear advantage over

banks and can grow profi tably.

GE Capital has strengthened its balance

sheet immensely. Our Tier One Common

Ratio is about 10%, well in excess of the

levels set by fi nancial regulators. Now,

because of our fi nancial strength and

earnings power, and subject to Federal

Reserve review, we expect GE Capital

to resume paying a dividend this year

to GE. Ultimately, the size of GE Capital

depends on several factors: returns,

competitive advantage, dividend

capability and regulatory burdens. In

the near term, GE Capital should see

sustained earnings growth with good

margins and lower risk.

Our goal is to have GE Capital make

sense for GE investors. First and

foremost, we have more liquidity and

a safer profi le. We believe that having

the Federal Reserve as a regulator is

a positive. We are winning in the mar-

ketplace. The one area that we cannot

control is external “headline risk.” The

fi nancial services industry is still going

through transitions, and we are part

of that change. Regulators, governments

and rating agencies will have their say.

But that doesn’t change our fundamental

strength. We have successfully navigated

through this volatility, and we aim

to create value through GE Capital.

We have the world’s best infrastructure

company, positioned for multi-year

growth. We have a valuable specialty

fi nance company that is safer and

stronger than ever. Together we build,

power, move and help cure the world.

INITIATIVES DRIVE PERFORMANCE

We aspire to drive organic growth

faster than our peers, with expanding

margins. We drive company-wide

initiatives to achieve technical superiority,

growth market leadership, service

expansion based on profi table cus-

tomer relationships, and operational

action to achieve margin growth.

For each initiative we have bold

aspirations, and we utilize the

GE enterprise to achieve results.

We have a full pipeline of great new

products. Technical superiority is the

most sustainable form of competitive

advantage. We will invest $16 billion

in R&D from 2010 to 2012, more than

double our historical average and about

GE CAPITAL

TRANSFORMATION

Pre-Crisis 2011

TIER ONE

COMMON RATIO 4% 10%

LEVERAGE 8:1 4:1

CP COVERAGE 74% 292%

DEBT RATING AAA AA

GROWTH ADJACENCIES

Promising opportunities for expansion, such as in Oil & Gas

and Life Sciences, are closely related to our core businesses

and have helped fuel GE’s growth over the last decade.

FOCUS:

Life Sciences, Aviation Systems, Oil & Gas, Mining, Distributed Energy and Pathology,

among others

(Revenues)

2011 $39B

2001 $4B

GE 2011 ANNUAL REPORT 5

6% of our revenue. This has impacted

our margins in the short term, but the

bet is paying off.

Technology allows us to win in the

market. GE Aviation and its partners

are the world’s largest producers of

jet engines, and last year received

$23 billion of orders, our biggest year

in history. Together, we will launch

12 new jet engines this decade. This

will result in signifi cant future growth.

Technical strength drives growth.

Based on our industry-leading technol-

ogy, we will install about 40% of the

wind turbines in the U.S. this year. At

Healthcare, we are launching 100 new

products that lower cost, improve

quality and expand access. Over the

next fi ve years, GE will be dedicating

$1 billion to the development of new

cancer solutions. In Transportation, we

are building six new rail platforms that

capitalize on global growth. We have

launched new businesses in solar

energy and power management.

Technology adds value to our acquisi-

tions. In 2007, we acquired Smith’s

Aerospace Group to give us a small

position in aircraft avionics and energy

management. Then our researchers

went to work. We are building solutions

for integrated power management,

distributed engine control and onboard

advanced computing. These technolo-

gies will help our engines be even

more fuel-effi cient, and allow us to

develop more content on the plane. We

are building novel solutions for our

customers and should be in the top tier

of the avionics industry by the end of

the decade.

We have scale advantage in technol-

ogy. We have the fi nancial strength to

make big bets. Our Global Research

Center spreads ideas and lowers risks.

Our technical teams execute complex

projects better than anyone.

We win in growth markets. In 2012,

our growth market revenues will near

$40 billion, expanding by about 15%.

We are a reliable, high-integrity

partner and are actively investing in

our leadership, capability, coverage

and the supply chain.

Operating around the world is not

without its challenges. There is

volatility and risk. But there is also

great opportunity. In the emerging

markets, we’ve added about 1,000

infrastructure salespeople every year

for the last four years. Since 2005,

we have increased our senior leaders

outside the United States by 50%.

We are committed to serve our global

customers better and faster.

Our geographic footprint is diversifi ed.

Latin America will approach $10 billion

in revenue in 2012, and could double

again in a few years. In Russia, we are

building ventures in two important

growth markets: gas power generation

and diagnostic imaging equipment.

In Nigeria, we are building out a com-

prehensive “Company-to-Country”

approach to address infrastructure

challenges; Nigeria should be our next

billion-dollar country. In Saudi Arabia,

we will invest to localize capability,

better serve our customers and help

the government address healthcare

needs for its citizens. We are playing to

win in every corner of the world.

The best global companies are devel-

oping new business models tailored

for growth markets. For instance, in the

next 25 years, 1.5 billion people will

gain access to power, much of it “off”

the electricity grid. This will result in a

$16 trillion power opportunity. Today

we have $5 billion of revenue in distrib-

uted energy, and our revenue should

almost double in the next three years.

Similarly, there are 50,000 locomotives

around the world that are more than

25 years old. Replacing or retrofi tting

those locomotives to be more fuel-

effi cient is a $15 billion opportunity.

GE has deep relationships and operating

advantages in growth markets.

John Rice, our vice chairman, leads the

initiative to win globally. I consider the

development of growth markets to

be the most profound economic change

for this generation of GE leaders. This is

a transition where GE must win.

BUILDING COMPETITIVE

ADVANTAGE

Superior technology

Leadership in growth markets

Services & customer relationships

Margin expansion

Smart capital allocation

6 GE 2011 ANNUAL REPORT

We are building mutually profi table

relationships with our customers. Our

service business has a $147 billion

backlog and will generate $45 billion in

revenue in 2012. Service is a strength

for GE because we understand our

products and the ways in which

they are used. When we do well, our

customers benefi t. And we’re continuing

to do everything we can to increase

their productivity and help them

optimize their assets. That is why last

year we invested so heavily in

analytics, controls, monitoring and

diagnostics integration. And we are

building a new software center of

excellence in California.

I don’t see GE as a software company.

However, we will lead in the productivity

of our installed products and their

ecosystems. This will require leadership

of the “Industrial Internet,” making

infrastructure systems more intelligent.

This will show up in more profi table

Contractual Service Agreements (CSAs)

and a software business that could

double to $5 billion in the next few years.

Here is how it could work. The GE90 is

the world’s most powerful engine; it

powers the Boeing 777. Each engine has

17 sensors. These sensors constantly

take complete performance data from

the engine. From this data, we can

build sophisticated analytics that can

avoid unplanned outages, provide

repair data in real time, increase fuel

performance and optimize fl eet

performance. This analytical capability,

applied with domain expertise across

our large fl eet of engines, could save

billions for our customers.

Relationships are also a critical part of

what differentiates the smaller, more

focused GE Capital. We decided from a

strategic standpoint that we should

concentrate on the industries and

sectors where we have a strong com-

petitive advantage versus banks.

That’s the way we think about the

portfolio. Last year we helped launch a

center at The Ohio State University that

is dedicated to the middle market, the

segment that consists of companies

ranging in revenues from $10 million to

$1 billion, including almost 200,000

businesses in the U.S. We have great

origination capability, industry domain

expertise and relationships in that

segment, all of which will fuel GE Capital’s

recovery and growth.

Deep relationships are a competitive

advantage at GE. They are long-term,

and they start at the top. Our leaders

spend a lot of time in the market with

our customers. I chair our Service and

Commercial Councils so that I can

relate to our leaders, follow the metrics

and understand competition. We must

execute for our customers.

We aim to grow margins. Our margins

were about 15% in 2011; we expect

to drive them up by 50 basis points

next year. We are near the top of all

industrial companies, but we can get

even better.

It begins with the way we think about

our cost structure. In the last generation,

GE and our industrial peers began a

long-term trend to outsource our supply

==

GE90 ANALYTICS BENEFIT

90,000

fl ight records analyzed

~200

parameters per

fl ight record

~18MM

parameters per

month

Enhances asset utilization

Increases system performance

Drives strong alignment with

customers

Facilitates securing of long-term

service agreements

Provides additional revenue

streams

THE POWER OF THE INDUSTRIAL INTERNET

Advanced Analytics drives strong alignment with customers

GE 2011 ANNUAL REPORT 7

chain to other companies. This made

sense in an era when labor was expen-

sive and material was cheap. Today, our

material costs are more important. So

we have to control our supply chain to

achieve long-term productivity.

To control our product cost, we leverage

both human and technical innovation.

Human innovation comes in the form of

lean manufacturing. At Appliance Park,

in Louisville, Kentucky, we have torn

down functional silos and replaced them

with a “one team” mentality. We know

that one key to success is driving down

manufacturing hours per unit. In some

factories it takes nine hours to build a

refrigerator. Our employees in Louisville

are working to cut that to three hours.

By revamping what was a 25-year-old

dishwasher line, the Appliance Park

team has reduced the time to produce

by up to 68%, and the space required by

more than 80%.

Our Aviation business and its sophisti-

cation—in advanced manufacturing,

computer modeling, and material

sciences and composites—is a great

example of technical innovation. For

instance, the use of different qualities

of carbon fi ber and resins enabled us

to create unique fan blades, fan cases

and components that sharply reduce

engine weight compared to traditional

all-metal versions. Impact-resistant

properties make these fan blades

extremely durable. This allows us to

substantially lower engine cost and

accelerate “speed to market.”

In 2010, we launched an enterprise

initiative called “GE Advantage”

to drive operating results. We have

30 industrial projects under way,

utilizing ideas from thousands of

employees and targeting $2 billion of

margin improvements. Our team is

using classic GE tools like lean, work

out and Six Sigma. Projects have

big payoffs.

In our Oil & Gas business, our goal is to

give customers a new business quote in

a day, have a project be operational

in a year, and have our equipment

always available for customers’ use.

This would result in several hundred

million dollars of benefi t for our

customers and GE. Our Aviation supply

chain team is trying to compress the

learning curve on new engines, again

with a huge payoff in margins and

cash, with improved customer quality.

This is the GE team, fi nding a better

way. This is how we will become leaner

and more productive. This is how we

will sustain improvements in margins.

We will reward investors through

smart allocation of capital. Our busi-

ness model generates a lot of cash.

Over the next few years, thanks to

NBCU monetization, dividends from GE

Capital and solid growth, we expect to

have about $30 billion in available cash.

This will provide us with an opportunity

to reward investors while protecting us

against a volatile economy.

One of our top priorities is to grow

dividends. We’ve increased the

dividend four times in the last two

years, and we have a dedicated

focus on increasing the GE dividend

in line with future earnings. We have

found that focusing on acquisitions

between $1 billion and $3 billion in

industries we know improves our

chance for success. Don’t look for

any big deals in 2012. Ultimately, if

GE ADVANTAGE

Our rejuvenated focus on process excellence and process improvement is already delivering big returns.

Nearly 40 GE-wide projects currently under way will yield billions in margins over the next three years.

New product

introduction

Commercial

excellence

Service and Contractual

Service Agreement

excellence

Acquisition

integration

Order to

remittance

Inquiry

to order

GE Capital

deal conversion

Speed/

Bureaucracy

8 GE 2011 ANNUAL REPORT

2012: FOCUS FOR INVESTORS

you view GE as a safe growth company,

with an attractive dividend yield

that can invest and achieve returns

well above our cost of capital, we are

in a good place for investors.

Competitive advantage is about

outperforming our peers, building an

attractive fi nancial profi le and

rewarding investors. In our chosen

industries, we are ahead today. Our

fi nancial results should exceed the

S&P 500, with a more valuable profi le.

THE VALUE OF COMPETITIVENESS

We live in a tough era in which the

public discourse, in general, is negative.

I worry that the mood of the times

prevents us from moving forward.

American companies, particularly

big companies, are vilifi ed. There is

social unrest in many corners of the

world. This should not be a surprise.

Our problems are diffi cult; when

economic progress is uneven and

unemployment is high, we need to

work together to fi nd a better way.

In these times, it is diffi cult to explain

the benefi ts of globalization. GE is an

infrastructure company. The U.S. is

not investing much in infrastructure,

but most other countries are. We will

sell 140 heavy duty gas turbines in

2012; fewer than fi ve will go to the U.S.

So, we must sell in 120 countries;

we must build global capability; we

must export. In the last decade our

exports have more than doubled,

creating thousands of high-paying

American jobs. We are consistently

among America’s top exporters. Are

we “un-American” because we sell

around the world? No. Our company,

because of our great people, can win.

And, that is the American spirit.

Last year, I told you that I was asked to

lead the President’s Council on Jobs and

Competitiveness. When the President

asked, and given the state of the coun-

try, I felt that saying “yes” was the right

thing to do. I was honored to do so.

In January, we gave our year-end

report to the President. We had three

key messages: the country has lost

ground in relative global capability; we

have multiple ways to create more

jobs, but they require leadership and

teamwork; and our long-term success

must be built on a foundation of com-

petitiveness. The Council delivered

more than 80 specifi c recommenda-

tions to the President, half of which are

being implemented. I know that the

U.S. can and will do better in the future.

In the process of leading the Council,

I learned a few things. Competitiveness

comes fi rst. As a country, we must

love to compete again. As a nation,

we must love to win. We simply must

create more competitive structures

in this country, improving areas like

education, infrastructure and regulation.

If we focus again on competition and

innovation, I know we will win and

create jobs.

Words and actions count. People in this

country can work together, but only

if they are properly led. It starts by

solving tough problems together, like

the defi cit. We need to be a country of

action, not just words. We need to be

a country where we engage everyone,

the entire team.

At GE, we like working together. We see

the future as interesting, exciting and

fi lled with opportunity. We have a

better portfolio, we have invested in

competitive advantage, and we have

the culture of GE Works.

GE will compete. And we will win in

every corner of the world. We are

optimistic and ready for the future. We

are proud of our company.

GE Works. For investors, this means

solid earnings growth and a solid

dividend foundation. For employees,

it means a belief in a better way,

a relentless drive to invent and build

things that matter. For customers,

it means more profi table solutions.

And for society, GE will help create a

world that works better.

Jeffrey R. Immelt

Chairman of the Board

and Chief Executive Offi cer

February 24, 2012

1

INDUSTRIAL

GROWS 10%+

AND

RETURN CASH

FROM

GE CAPITAL

2

BUILD

SOFTWARE

AND

ANALYTICS

CAPABILITY

3

INVEST IN

GLOBAL

GROWTH

AND BUILD

SUSTAINABLE

PROCESSES

4

BEST-IN-

CLASS

OPERATING

PERFORMANCE:

GROW

MARGINS

5

CAPITAL

ALLOCATION:

ATTRACTIVE

DIVIDEND

GE 2011 ANNUAL REPORT 9

GE Model C30ACi Locomotive Assembly

Transnet Freight Rail

Pretoria, South Africa

GE works on things that matter. The best

people and the best technologies taking on the

toughest challenges. Finding solutions in energy,

health and home, transportation and fi nance.

Building, powering, moving and curing the world.

Not just imagining. Doing. GE works.

ge 2011 annual report 11

BUILDING

GE Builds the World

GE builds the world by providing capital, expertise and infrastructure for a global

economy. In the past year, GE Capital provided billions in financing so businesses

could build and grow their operations and consumers could build their financial futures.

We build appliances, lighting, power systems and other products that help millions

of homes, offices, factories and retail facilities around the world work better. We aren’t

afraid of the future. We build it.

BUILDING

GE GeoSpring™ Hybrid

Water Heater Assembly

GE Appliances

Louisville, Kentucky

Left to right:

Travis Saylor

Final Assembly Operator

Randy Barger

Replacement Operator

Kevin Moore

Final Assembly Operator

Middle market businesses lead the way in the U.S. in creating jobs and

pumping life into the economy. They can’t do it without funding, expertise

and solid business-building advice. GE Capital is a major source of funding

for the middle market, committing $122 billion in the U.S. in the past

year. For example, we helped snack manufacturer Shearer’s Foods, Inc.

with financing. Shearer’s Foods updated and expanded operations, added

359 new jobs and grew revenue to $405 million in 2011. GE works for

customers—helping them build businesses, and build them better.

Photo above and right: Shearer’s Foods, Millennium Manufacturing Facility, Massillon, Ohio

Dan Henson (third from left),

President & CEO, GE Capital, Americas,

pictured with (from left to right):

Bob Shearer, Lee Cooper, Scott W.

Smith, Sharon Garavel, Tom Quindlen

and Fritz Kohmann.

Leading from

the Middle

14 GE 2011 ANNUAL REPORT

REBUILDING

EXCELLENCE America needs investment to stay

competitive, create jobs and drive economic

opportunity. GE is investing more than $1 billion to

transform the appliances we make, leading to

the creation of 1,300 U.S. jobs. By combining

design and production in one site and using lean

manufacturing, we’re able to bring better products to

market faster and more cost-effectively, reflecting

the world-class competitiveness of our U.S. facilities. ACCESSING

GE’S EXPERTISE Through Access GE,

GE Capital brings a broad range of tools,

resources and expertise to help customers

solve their most pressing challenges and find

new ways to grow. When electronic security

provider ADT was looking to upgrade its fleet

of full-size service vans, GE Capital helped

determine the most cost-effective and fuel-

efficient replacement. The deployment of the

new vehicles will help ADT save more than

$6 million a year and reduce CO2 emissions 40%.

This year, GE Capital will launch the Access GE

online portal, a new way to deliver crucial

knowledge and expertise to our customers.

GE 2011 ANNUAL REPORT 15

Stephen Fitzgibbon

Mechanical Fitter I

Gorgon Tree

Subsea Control Systems

GE Oil & Gas

Aberdeen, Scotland

GE Powers the World

GE’s advanced technologies and energy solutions provide a powerful advantage for

millions of people. Our technology helps to deliver a quarter of the world’s electricity.

We are one of the largest clean energy companies in the world. We deliver innovation

that the world needs: from an integrated wind, solar and natural gas project, to smart

grids that help utilities manage electricity demand, to gas engines that run on organic

waste, to more accessible charging stations for electric vehicles. We don’t just imagine

a cleaner and more productive world. We power it.

PIPELINE OF

INNOVATION Competitive and

environmental challenges in the oil and gas

industry are driving energy producers to seek

better efficiency, reliability and environmental

protection. Tackling these complex challenges

takes leadership, teamwork and innovation.

The GE Oil & Gas team in Aberdeen, Scotland,

is leading many of our technology and service

solutions for the sector.

Innovations in recent years have included

next-generation valves with improved nano-

coatings for increased safety and reliability;

pipe inspection technology; and other

advances that enable oil and gas companies

to produce the energy the world needs more

safely, reliably and cost-effectively.

Rod Christie (second from left),

VP & GM, GE Advanced Subsea

Power & Processing Systems,

pictured with (from left to right):

Balazs Somogyi, Gerry McCue

and Neil Saunders.

LEADERSHIP IN

WIND POWER The world needs

clean, renewable energy, and wind power

is a big part of the answer. GE wind

turbines, among the most widely used

in the world, will soon power the largest

wind farm in the U.S. The Shepherds

Flat project in Oregon, developed by

Caithness Energy, will get its power from

338 advanced GE 2.5xl ecomagination-

qualified wind turbines, which deliver

greater efficiency, reliability and grid

connectivity. The Shepherds Flat turbines

will produce enough clean energy

to power about 235,000 households.

18 ge 2011 annual report

To integrate more renewable resources into the power grid, the world

needs a better way to obtain power when the sun isn’t shining or the wind

blowing. The ecomagination-qualified Flex family of products helps meet

this need. The FlexEfficiency 50 Heavy Duty Gas Turbine and the FlexAero

LM6000-PH Aeroderivative Gas Turbine allow for flexible, efficient and

environmentally friendly power generation day or night. The FlexAero is

the world’s most efficient combined-cycle gas turbine in its class and will

save 26 million gallons of water annually with its innovative eco-friendly

technology. The first FlexEfficiency 50 plant will go online in 2015.

Fast, Flexible

Power

Anytime

FlexAero LM6000-PH

Aeroderivative Gas Turbine,

being built in Houston, Texas.

ge 2011 annual report 19

GE Moves the World

When the world needs a better way to get there faster, we work to make the trip safer

and more cost-effective, with lower carbon emissions, too. We make the world’s largest

jet engine—and among the world’s most efficient. We build locomotives that reduce

emissions. And we provide advanced air traffic and rail freight management systems.

We don’t just dream of a world where people and goods travel more safely, quickly and

efficiently around the globe. We move it.

GE90 Aircraft Engine Testing

GE Aviation

Peebles, Ohio

Airlines are demanding record numbers of advanced aircraft

engines, including the GEnx and LEAP, to power their next-

generation fleets. Our aviation supply chain team is meeting the

challenge. New manufacturing facilities in Ellisville, Mississippi,

and Auburn, Alabama, will add capacity and create jobs. We

are also integrating suppliers into new programs and driving

big improvements in quality and delivery through a team-based

culture and lean manufacturing techniques. We do all this so

we can deliver a record number of aircraft engine orders with

maximum cost-efficiency, productivity and quality.

Photo: GE Aviation’s Evendale, Ohio, world headquarters

Strong Supply

Chain Links

Colleen Athans (third from left),

VP & GM, GE Aviation Supply Chain,

pictured with (from left to right):

Bob Briggs, Joe Allen,

Melissa Twiningdavis and

Denice Biocca.

22 ge 2011 annual report

ON TRACK FOR EXPANSION

Transnet Freight Rail (TFR), one of South

Africa’s largest rail freight operators,

is striving to meet the growing needs

of a rapidly developing region. The GE

locomotive is delivering the solution. Three

of our locomotives can do the work of

four older models, with lower costs, better

fuel efficiency and reduced emissions.

Producing the 143 locomotives ordered by

TFR will be a global effort: locomotive

components manufactured at GE plants

in the U.S. will be fully assembled in South

Africa. This will create jobs in both countries

and help TFR meet the demand for reliable

freight transportation.

A LEAP FORWARD IN AIRCRAFT

ENGINES Airlines are purchasing new

planes to update and expand their fleet

while balancing high fuel costs and new

international environmental standards.

GE and its CFM International 50/50 joint

venture partner Snecma, created the

LEAP engine to meet this demand.

Ecomagination-qualified LEAP engines use

the latest-generation materials and design

processes to reduce weight, improve

performance and lower maintenance.

This means planes are more likely to

take off and land on time and spend less

time in the shop and more time moving

passengers and cargo around the world.

ge 2011 annual report 23

William Hunn

CT Gantry Assembly Production Associate

Optima 580 CT System

GE Healthcare

Waukesha, Wisconsin

GE Helps Cure the World

GE Healthcare technology is helping doctors and caregivers save nearly 3,000 lives

every day and address the world’s biggest healthcare challenges. GE is at work providing

advanced diagnostic tools as well as systems that help researchers discover lifesaving

solutions, and patient record systems that help lower costs and enhance patient care. Our

technology is designed to help medical professionals detect disease earlier and treat it

better. And, we’re investing to create new solutions to develop groundbreaking products

and processes. We see a world where cost, quality and lack of access prevent too many

people from getting the healthcare they need. We’re helping to cure it.

A CLEAR PICTURE

OF HEALTH To help physicians provide patients

with accurate diagnoses and targeted treatments,

healthcare organizations need advanced imaging

technology. GE entered into a strategic alliance with

OhioHealth, a nationally recognized, not-for-profit

healthcare system, to bring cutting-edge computed

tomography (CT) and magnetic resonance (MR)

imaging systems to patients across central Ohio.

The GE Healthcare team listened to OhioHealth’s

needs and delivered a better way—including our

Optima CT660, Optima MR450w and Discovery

MR750w systems—that provide real-time, high-

resolution imaging.

SOLUTIONS FOR THE

PHARMA INDUSTRY Advanced medicines

create new challenges for pharmaceutical

companies. GE technology is used to manufacture

many of these medicines, which gives us the

experience to help these companies tackle key

issues such as safe and cost-effective delivery

and reducing time to market. Our innovative

ReadyToProcessTM single-use platform enables

flexible manufacturing, faster process design and

quicker changeover between production campaigns,

without compromising quality or safety. Single-use

technologies: an affordable solution that drives

medical progress and helps save lives.

HIGH DEFINITION,

LOW-DOSE SCANS Computed

tomography is widely used to help

physicians detect cancers, other

diseases and injuries. GE continues

to work to produce CT systems that

provide high image clarity for physicians

and reduced patient exposure to

radiation. Our Veo image reconstruction

technology uses modeling and complex

data analysis to enhance clinical images

even at lowered doses. GE not only

makes tools to help doctors, we also

provide entire healthcare systems with

services and technology to meet the

needs of their patients.

26 GE 2011 ANNUAL REPORT

Taking

the Fight

to Cancer

Yousef Alohali (second from

right), Director, Clinical

Education, GE Healthcare Saudi

Arabia, pictured with (from left

to right): Victor Delos Santos,

Noor Hanifa Palala (Saudi

Ministry of Health), Majed Nasser

and Golnar Kamalvand.

Cancer is among the world’s leading causes of death, and GE is committed

to helping cure it. GE’s global fight against cancer is backed by a five-

year, $1 billion commitment to improve screening and diagnosis to help

doctors fight cancer more effectively. In 2011, as part of this commitment

and in partnership with prominent venture capitalists, GE launched a

$100 million healthymagination open innovation Challenge to find the

next generation of cancer diagnostic tools and treatments, starting with

breast cancer. Innovations now in the pipeline include a mobile mammography

device and molecular diagnostics to enable patient-specific cancer

therapies. We’re also bringing new weapons to the fight against breast cancer

by increasing access to mammography screenings in underserved areas,

like Wyoming, Saudi Arabia and China.

Photo left and above: Riyadh, Saudi Arabia

GE 2011 ANNUAL REPORT 27

At GE, we aren’t afraid of the future,

we’re building it. We’re growing

global leaders, investing in new

technologies, developing advanced

manufacturing skills, applying

intelligent software to make things

work smarter, and partnering with

customers and communities around

the globe. GE works by delivering

economic growth, shareholder value

and, most of all, solutions that make

the world work better.

Board members focus on the areas that are important to

shareowners—strategy, risk management, leadership development

and regulatory and compliance matters. In 2011, they received

briefi ngs on a variety of issues, including capital allocation and

business development, risk management, technology excellence,

regulatory trends, social cost, capital market trends, service

contract performance, political contributions and lobbying

activities, and GE’s branding, marketing and operating initiatives.

At the end of the year, the Board and each of its committees

conducted a thorough self-evaluation.

The GE Board held 15 meetings during

2011, including three meetings of the

non-management directors of the Board.

Each outside Board member is expected to

visit at least two GE businesses without the

involvement of corporate management

in order to develop his or her own feel for

the Company.

Directors (left to right)

Rochelle B. Lazarus

3,4

Chairman of the Board and former

Chief Executive Offi cer, Ogilvy & Mather

Worldwide, global marketing

communications company,

New York, New York. Director since 2000.

Robert W. Lane

1,2

Former Chairman of the Board and

Chief Executive Offi cer, Deere & Company,

agricultural, construction and forestry

equipment, Moline, Illinois.

Director since 2005.

Alan G. (A.G.) Lafl ey

3,5

Former Chairman of the Board and

Chief Executive Offi cer, Procter & Gamble

Company, personal and household

products, Cincinnati, Ohio.

Director since 2002.

Roger S. Penske

4

Chairman of the Board, Penske Corporation,

diversifi ed transportation company,

and Penske Truck Leasing Corporation,

Chairman of the Board and Chief Executive

Offi cer, Penske Automotive Group, Inc.,

automotive retailer, Detroit, Michigan.

Director since 1994.

Sam Nunn

2,4

Co-Chairman and Chief Executive Offi cer,

Nuclear Threat Initiative, Washington, D.C.

Director since 1997.

Andrea Jung

2,3

Chairman of the Board and

Chief Executive Offi cer, Avon Products, Inc.,

beauty products, New York, New York.

Director since 1998.

Ann M. Fudge

4

Former Chairman of the Board and

Chief Executive Offi cer, Young & Rubicam

Brands, global marketing communications

network, New York, New York.

Director since 1999.

Ralph S. Larsen

2,3,6

Former Chairman of the Board and Chief

Executive Offi cer, Johnson & Johnson,

pharmaceutical, medical and consumer

products, New Brunswick, New Jersey.

Director since 2002.

W. Geoffrey Beattie

1,5

President, The Woodbridge Company

Limited, Toronto, Canada.

Director since 2009.

James S. Tisch

5

President and Chief Executive Offi cer,

Loews Corporation, diversifi ed holding

company, New York, New York.

Director since 2010.

Susan Hockfi eld

3,4

President, Massachusetts Institute

of Technology, Cambridge, Massachusetts.

Director since 2006.

James J. Mulva

1,4

Chairman of the Board and Chief Executive

Offi cer, ConocoPhillips, international,

integrated energy company,

Houston, Texas. Director since 2008.

Douglas A. Warner III

1,2,3

Former Chairman of the Board, J.P. Morgan

Chase & Co., The Chase Manhattan Bank,

and Morgan Guaranty Trust Company,

investment banking, New York, New York.

Director since 1992.

Robert J. Swieringa

1

Professor of Accounting and former

Anne and Elmer Lindseth Dean, Johnson

Graduate School of Management,

Cornell University, Ithaca, New York.

Director since 2002.

James I. Cash, Jr.

1,2,4

Emeritus James E. Robison

Professor of Business Administration,

Harvard Graduate School of Business,

Boston, Massachusetts.

Director since 1997.

Jeffrey R. Immelt

4

Chairman of the Board and Chief

Executive Offi cer, General Electric

Company, Fairfi eld, Connecticut.

Director since 2000.

(pictured on page 1)

1 Audit Committee

2 Management Development and

Compensation Committee

3 Nominating and Corporate

Governance Committee

4 Public Responsibilities Committee

5 Risk Committee

6 Presiding Director

GE 2011 ANNUAL REPORT 29

At its heart,

the Board believes

GE Works is about GE’s

most valuable asset:

its people.

long- and short-term incentives, we reward our

executives’ discipline in consistently making

smart decisions over the course of their careers

at GE. We particularly value those individuals

who have the good judgment and ability to

balance risk and return and deliver long-term

results for shareowners.

At the same time, we do not ignore annual

performance, because we understand that if we

don’t turn in good short-term performance,

there won’t be a long term. We evaluate annual

performance both in terms of executing on long-

term strategies and in meeting specifi c annual

objectives. What is critical to note, however, is

that because we take the long view, good years

do not result in outsized payouts.

Similarly, in off years, compensation appropriately

considers the current year’s performance, but also

aligns it in the context of long-term performance.

Furthermore, we measure executives’ contribu-

tions to the Company’s overall performance rather

than focusing only on their individual business

or function. We reward sustained fi nancial

and operating performance and leadership

excellence. In short, we use a balanced approach,

one that enables us to attract and retain the best

people for the Company’s long-term success.

All our investors should know that the directors of

GE remain committed to working on your behalf.

And we will continue to take seriously our role in

ensuring that GE has the right strategies and the

right people to help make the world work better.

Sincerely,

Ralph S. Larsen

Presiding Director

February 24, 2012

As Presiding Director and Chair of the Management

Development and Compensation Committee of

GE’s Board of Directors, I write each year to

share our perspective on how GE measures

performance, how we motivate and reward our

executives, and how we work to align both

performance measurement and compensation

with the interests of our shareowners. This year,

I will focus on three areas: fi rst, how the theme

of our annual report, GE Works, fi ts with our

governing philosophy and why we believe it

provides an important business-building

advantage; second, our commitment to developing

leaders; and fi nally, executive compensation.

At its heart, the Board believes GE Works is about

GE’s most valuable asset: its people. It provides a

valuable platform for the Company to talk about

its defi ning culture and to tell the story of the

impact our people make around the world.

Furthermore, it serves as a powerful reminder

that GE works to deliver shareholder value

by offering real and sustainable solutions to the

world’s toughest problems.

It is a fi tting way to talk about the Company,

because GE has always taken a long-term view.

Through its more than 130-year history, the

Company has successfully weathered many

economic cycles. GE has done this over and over

again by fostering innovation, making smart

investments, and, of course, hiring and training

disciplined leaders who focus on achieving our

long-term strategies.

Developing leaders has always been a hallmark of

the Company, refl ecting a commitment to

meritocracy and a belief that when one person

grows and improves, all may grow and improve—

that together, we all rise. The collaborative,

evolutionary nature of GE’s leadership culture

inspires many of our top executives to spend most

or all of their careers here. This provides the

Company with unparalleled domain expertise; it

also creates an environment of loyalty where our

leaders are deeply invested in and committed to

the Company. Today, GE’s senior management,

under the exceptional leadership of Jeff Immelt, is

a proven team that we believe is among the best

in the world.

Our compensation programs are designed and

operate to support our leadership culture and

long-term emphasis. They are not formula-driven,

nor do we reward our executives for taking

outsized risks that produce short-term gains.

Instead, with a mix of cash and equity and

TO OUR SHAREOWNERS

30 GE 2011 ANNUAL REPORT

GE 2011 ANNUAL REPORT 31

financial section

Contents

32 Management’s Discussion of Financial Responsibility ............................ We begin with a letter from our Chief Executive and Financial Offi cers

discussing our unyielding commitment to rigorous oversight, control-

lership, informative disclosure and visibility to investors.

32 Management’s Annual Report on Internal Control

Over Financial Reporting ...................................................................................... In this report our Chief Executive and Financial Offi cers provide

their assessment of the effectiveness of our internal control over

fi nancial reporting.

33 Report of Independent Registered Public Accounting Firm .................. Our independent auditors, KPMG LLP, express their opinions on our

fi nancial statements and our internal control over fi nancial reporting.

34 Management’s Discussion and Analysis (MD&A)

34 Operations ........................................................................................................... We begin the Operations section of MD&A with an overview of our

earnings, including a perspective on how the global economic

environment has affected our businesses over the last three years.

We then discuss various key operating results for GE industrial (GE)

and fi nancial services (GECS). Because of the fundamental differences

in these businesses, reviewing certain information separately for

GE and GECS offers a more meaningful analysis. Next we provide a

description of our global risk management process. Our discussion

of segment results includes quantitative and qualitative disclosure

about the factors affecting segment revenues and profi ts, and the

effects of recent acquisitions, dispositions and signifi cant trans-

actions. We conclude the Operations section with an overview of

our operations from a geographic perspective and a discussion

of environmental matters.

49 Financial Resources and Liquidity .......................................................... In the Financial Resources and Liquidity section of MD&A, we provide

an overview of the major factors that affected our consolidated

fi nancial position and insight into the liquidity and cash fl ow activities

of GE and GECS.

64 Critical Accounting Estimates .................................................................. Critical Accounting Estimates are necessary for us to prepare

our fi nancial statements. In this section, we discuss what these

estimates are, why they are important, how they are developed

and uncertainties to which they are subject.

68 Other Information .......................................................................................... We conclude MD&A with a brief discussion of new accounting

standards that will become effective for us beginning in 2012.

69 Selected Financial Data ............................................................................... Selected Financial Data provides fi ve years of fi nancial information

for GE and GECS. This table includes commonly used metrics that

facilitate comparison with other companies.

70 Audited Financial Statements and Notes

70 Statement of Earnings

70 Consolidated Statement of Changes in Shareowners’ Equity

72 Statement of Financial Position

74 Statement of Cash Flows

76 Notes to Consolidated Financial Statements

137 Supplemental Information ................................................................................... We provide Supplemental Information to reconcile certain “non-GAAP

fi nancial measures” referred to in our report to the most closely

associated GAAP fi nancial measures. We also provide information

about our stock performance over the last fi ve years.

140 Glossary ....................................................................................................................... For your convenience, we also provide a Glossary of key terms used in

our fi nancial statements.

We also present our fi nancial information electronically at

www.ge.com/investor.

32 GE 2011 ANNUAL REPORT

Management’s Discussion of Financial Responsibility

We believe that great companies are built on a foundation of

reliable fi nancial information and compliance with the spirit and

letter of the law. For General Electric Company, that foundation

includes rigorous management oversight of, and an unyielding

dedication to, controllership. The fi nancial disclosures in this

report are one product of our commitment to high-quality

fi nancial reporting. In addition, we make every effort to adopt

appropriate accounting policies, we devote our full resources

to ensuring that those policies are applied properly and consis-

tently and we do our best to fairly present our fi nancial results in a

manner that is complete and understandable.

Members of our corporate leadership team review each of our

businesses routinely on matters that range from overall strategy

and fi nancial performance to staffi ng and compliance. Our busi-

ness leaders monitor fi nancial and operating systems, enabling us

to identify potential opportunities and concerns at an early stage

and positioning us to respond rapidly. Our Board of Directors over-

sees management’s business conduct, and our Audit Committee,

which consists entirely of independent directors, oversees our

internal control over fi nancial reporting. We continually examine

our governance practices in an effort to enhance investor trust

and improve the Board’s overall effectiveness. The Board and

its committees annually conduct a performance self-evaluation

and recommend improvements. Our Presiding Director led three

meetings of non-management directors this year, helping us

sharpen our full Board meetings to better cover signifi cant top-

ics. Compensation policies for our executives are aligned with the

long-term interests of GE investors.

We strive to maintain a dynamic system of internal controls

and procedures—including internal control over fi nancial

reporting—designed to ensure reliable fi nancial recordkeeping,

transparent fi nancial reporting and disclosure, and protection of

physical and intellectual property. We recruit, develop and retain

a world-class fi nancial team. Our internal audit function, includ-

ing members of our Corporate Audit Staff, conducts thousands

of fi nancial, compliance and process improvement audits each

year. Our Audit Committee oversees the scope and evaluates the

overall results of these audits, and members of that Committee

regularly attend GE Capital Board of Directors, Corporate Audit

Staff and Controllership Council meetings. Our global integrity

policies—“The Spirit & The Letter”—require compliance with law

and policy, and pertain to such vital issues as upholding fi nan-

cial integrity and avoiding confl icts of interest. These integrity

policies are available in 31 languages, and are provided to all of

our employees, holding each of them accountable for compli-

ance. Our strong compliance culture reinforces these efforts by

requiring employees to raise any compliance concerns and by

prohibiting retribution for doing so. To facilitate open and candid

communication, we have designated ombudspersons through-

out the Company to act as independent resources for reporting

integrity or compliance concerns. We hold our directors, con-

sultants, agents and independent contractors to the same

integrity standards.

We are keenly aware of the importance of full and open

presentation of our fi nancial position and operating results, and

rely for this purpose on our disclosure controls and procedures,

including our Disclosure Committee, which comprises senior

executives with detailed knowledge of our businesses and the

related needs of our investors. We ask this committee to review

our compliance with accounting and disclosure requirements,

to evaluate the fairness of our fi nancial and non-fi nancial dis-

closures, and to report their fi ndings to us. We further ensure

strong disclosure by holding approximately 300 analyst and

investor meetings annually.

We welcome the strong oversight of our fi nancial reporting

activities by our independent registered public accounting

fi rm, KPMG LLP, engaged by and reporting directly to the Audit

Committee. U.S. legislation requires management to report on

internal control over fi nancial reporting and for auditors to

render an opinion on such controls. Our report follows and the

KPMG LLP report for 2011 appears on the following page.

Management’s Annual Report on Internal Control

Over Financial Reporting

Management is responsible for establishing and maintaining

adequate internal control over fi nancial reporting for the

Company. With our participation, an evaluation of the effective-

ness of our internal control over fi nancial reporting was

conducted as of December 31, 2011, based on the framework

and criteria established in Internal Control—Integrated Framework,

issued by the Committee of Sponsoring Organizations of the

Treadway Commission.

Based on this evaluation, our management has concluded

that our internal control over fi nancial reporting was effective as

of December 31, 2011.

Our independent registered public accounting fi rm has issued

an audit report on our internal control over fi nancial reporting.

Their report follows.

JEFFREY R. IMMELT KEITH S. SHERIN

Chairman of the Board and Vice Chairman and

Chief Executive Offi cer Chief Financial Offi cer

February 24, 2012

GE 2011 ANNUAL REPORT 33

Report of Independent Registered

Public Accounting Firm

To Shareowners and Board of Directors

of General Electric Company:

We have audited the accompanying statement of fi nancial

position of General Electric Company and consolidated affi liates

(“GE”) as of December 31, 2011 and 2010, and the related state-

ments of earnings, changes in shareowners’ equity and cash

fl ows for each of the years in the three-year period ended

December 31, 2011. We also have audited GE’s internal control

over fi nancial reporting as of December 31, 2011, based on

criteria established in Internal Control—Integrated Framework

issued by the Committee of Sponsoring Organizations of the

Treadway Commission (“COSO”). GE management is responsible

for these consolidated fi nancial statements, for maintaining

effective internal control over fi nancial reporting, and for its

assessment of the effectiveness of internal control over fi nancial

reporting. Our responsibility is to express an opinion on these

consolidated fi nancial statements and an opinion on GE’s internal

control over fi nancial reporting based on our audits.

We conducted our audits in accordance with the standards of

the Public Company Accounting Oversight Board (United States).

Those standards require that we plan and perform the audits to

obtain reasonable assurance about whether the fi nancial state-

ments are free of material misstatement and whether effective

internal control over fi nancial reporting was maintained in all

material respects. Our audits of the consolidated fi nancial state-

ments included examining, on a test basis, evidence supporting

the amounts and disclosures in the fi nancial statements, assess-

ing the accounting principles used and signifi cant estimates

made by management, and evaluating the overall fi nancial state-

ment presentation. Our audit of internal control over fi nancial

reporting included obtaining an understanding of internal control

over fi nancial reporting, assessing the risk that a material weak-

ness exists, and testing and evaluating the design and operating

effectiveness of internal control based on the assessed risk. Our

audits also included performing such other procedures as we

considered necessary in the circumstances. We believe that our

audits provide a reasonable basis for our opinions.

A company’s internal control over fi nancial reporting is a pro-

cess designed to provide reasonable assurance regarding the

reliability of fi nancial reporting and the preparation of fi nancial

statements for external purposes in accordance with generally

accepted accounting principles. A company’s internal control

over fi nancial reporting includes those policies and procedures

that (1) pertain to the maintenance of records that, in reason-

able detail, accurately and fairly refl ect the transactions and

dispositions of the assets of the company; (2) provide reasonable

assurance that transactions are recorded as necessary to permit

preparation of fi nancial statements in accordance with generally

accepted accounting principles, and that receipts and expendi-

tures of the company are being made only in accordance with

authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or

timely detection of unauthorized acquisition, use, or disposition

of the company’s assets that could have a material effect on the

fi nancial statements.

Because of its inherent limitations, internal control over

fi nancial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future

periods are subject to the risk that controls may become inad-

equate because of changes in conditions, or that the degree of

compliance with the policies or procedures may deteriorate.

In our opinion, the consolidated fi nancial statements appear-

ing on pages 70, 72, 74, 76–136 and the Summary of Operating

Segments table on page 42 present fairly, in all material

respects, the fi nancial position of GE as of December 31, 2011

and 2010, and the results of its operations and its cash fl ows for

each of the years in the three-year period ended December 31,

2011, in conformity with U.S. generally accepted accounting

principles. Also, in our opinion, GE maintained, in all material

respects, effective internal control over fi nancial reporting as

of December 31, 2011, based on criteria established in Internal

Control—Integrated Framework issued by COSO.

As discussed in Note 1 to the consolidated fi nancial state-

ments, GE, in 2010, changed its method of accounting for

consolidation of variable interest entities; and, in 2009, changed

its method of accounting for impairment of debt securities, busi-

ness combinations and noncontrolling interests.

Our audits of GE’s consolidated fi nancial statements were

made for the purpose of forming an opinion on the consoli-

dated fi nancial statements taken as a whole. The accompanying

consolidating information appearing on pages 71, 73 and 75

is presented for purposes of additional analysis of the consoli-

dated fi nancial statements rather than to present the fi nancial

position, results of operations and cash fl ows of the individual

entities. The consolidating information has been subjected to

the auditing procedures applied in the audits of the consoli-

dated fi nancial statements and, in our opinion, is fairly stated

in all material respects in relation to the consolidated fi nancial

statements taken as a whole.

KPMG LLP

Stamford, Connecticut

February 24, 2012

34 GE 2011 ANNUAL REPORT

management’s discussion and analysis

Operations

The consolidated fi nancial statements of General Electric

Company (the Company) combine the industrial manufacturing

and services businesses of General Electric Company (GE) with

the fi nancial services businesses of General Electric Capital

Services, Inc. (GECS or fi nancial services). Unless otherwise indi-

cated by the context, we use the terms “GE,” “GECS” and “GECC”

on the basis of consolidation described in Note 1 to the consoli-

dated fi nancial statements.

In the accompanying analysis of fi nancial information, we

sometimes use information derived from consolidated fi nan-

cial information but not presented in our fi nancial statements

prepared in accordance with U.S. generally accepted account-

ing principles (GAAP). Certain of these data are considered

“non-GAAP fi nancial measures” under the U.S. Securities and

Exchange Commission (SEC) rules. For such measures, we have

provided supplemental explanations and reconciliations in the

Supplemental Information section.

We present Management’s Discussion of Operations in fi ve

parts: Overview of Our Earnings from 2009 through 2011, Global

Risk Management, Segment Operations, Geographic Operations

and Environmental Matters. Unless otherwise indicated, we

refer to captions such as revenues and earnings from continu-

ing operations attributable to the company simply as “revenues”

and “earnings” throughout this Management’s Discussion and

Analysis. Similarly, discussion of other matters in our consolidated

fi nancial statements relates to continuing operations unless

otherwise indicated.

Effective January 1, 2011, we reorganized the former

Technology Infrastructure segment into three segments—

Aviation, Healthcare and Transportation. The prior-period results

of the Aviation, Healthcare and Transportation businesses are

unaffected by this reorganization. Results for 2011 and prior

periods are reported on the basis under which we managed our

businesses in 2011.

On February 22, 2012, we merged our wholly-owned sub-

sidiary, GECS, with and into GECS’ wholly-owned subsidiary,

GECC. The merger simplifi ed our fi nancial services’ corporate

structure by consolidating fi nancial services entities and assets

within our organization and simplifying Securities and Exchange

Commission and regulatory reporting. Upon the merger, GECC

became the surviving corporation and assumed all of GECS’ rights

and obligations and became wholly-owned directly by General

Electric Company. Our fi nancial services segment, GE Capital, will

continue to comprise the continuing operations of GECC, which

now includes the run-off insurance operations previously held

and managed in GECS. References to GECS, GECC and the GE

Capital segment in this Management’s Discussion and Analysis

relate to the entities or segment as they existed during 2011 and

do not refl ect the February 22, 2012 merger.

We supplement our GAAP net earnings and earnings per share

(EPS) reporting by also reporting an operating earnings and EPS

measure (non-GAAP). Operating earnings and EPS include service

cost and plan amendment amortization for our principal pen-

sion plans as these costs represent expenses associated with

employee benefi ts earned. Operating earnings and EPS exclude

non-operating pension cost/income such as interest cost,

expected return on plan assets and non-cash amortization of

actuarial gains and losses. We believe that this reporting provides

better transparency to the employee benefi t costs of our principal

pension plans and Company operating results.

Overview of Our Earnings from 2009 through 2011

Earnings from continuing operations attributable to the Company

increased 12% in 2011 and 16% in 2010, refl ecting the stabiliza-

tion of overall economic conditions during the last two years,

following the challenging conditions of 2009. Operating earnings

(non-GAAP measure) which exclude non-operating pension costs

increased 20% to $14.8 billion in 2011 compared with $12.3 billion

in 2010. Operating earnings per share (non-GAAP measure)

increased 15% to $1.29 in 2011 compared with $1.12 in 2010.

Operating earnings per share excluding the effects of our pre-

ferred stock redemption (non-GAAP measure) increased 22% to

$1.37 in 2011 compared with $1.12 in 2010. We believe that we

are seeing continued signs of stabilization in much of the global

economy, including in fi nancial services, as GECS earnings from

continuing operations attributable to the Company increased

113% in 2011 and 157% in 2010. Net earnings attributable to the

Company increased 22% in 2011 refl ecting the lack of prior year

losses from discontinued operations and a 12% increase in earn-

ings from continuing operations, after increasing 6% in 2010, as

losses from discontinued operations in 2010 partially offset the

16% increase in earnings from continuing operations. We begin

2012 with a record backlog of $200 billion and expect to continue

our trend of revenue and earnings growth.

Energy Infrastructure (27% and 39% of consolidated three-

year revenues and total segment profi t, respectively) revenues

increased 16% in 2011 primarily as a result of acquisitions dur-

ing 2011 and higher volume due to increased sales of services at

Energy and Oil & Gas, after decreasing 8% in 2010 as the world-

wide demand for new sources of power, such as wind and thermal

declined with the overall economic conditions. Segment profi t

decreased 9% in 2011 primarily on lower productivity, driven

by the wind turbines business, acquisitions and investment in

our global organization and new technology, and lower prices.

Segment profi t increased 2% in 2010 primarily on higher prices

and lower material and other costs. We continue to invest in mar-

ket-leading technology and services at Energy and Oil & Gas.

Aviation (12% and 20% of consolidated three-year revenues

and total segment profi t, respectively) revenues and segment

profi t increased 7% and 6%, respectively, in 2011 and fell 6%

management’s discussion and analysis

GE 2011 ANNUAL REPORT 35

and 16%, respectively, in 2010. We continue to invest in market-

leading technologies and services at Aviation. Aviation revenues

and earnings increased in 2011 as a result of higher volume

and higher prices primarily driven by increased services and

equipment sales. In 2010, Aviation revenues decreased from a

reduction in volume refl ecting decreased commercial and mili-

tary equipment sales and services. Earnings decreased as a result

of lower productivity primarily due to product launch and produc-

tion costs associated with the GEnx engine shipments.

Healthcare (11% and 15% of consolidated three-year revenues

and total segment profi t, respectively) revenues and segment

profi t increased 7% and 2%, respectively, in 2011 and 6% and 13%,

respectively, in 2010. We continue to invest in market-leading

technologies and services at Healthcare. Healthcare revenues

increased over this period on increased volume from higher equip-

ment sales and services and the effects of the weaker U.S. dollar.

Healthcare earnings improved over this period on increased pro-

ductivity, higher volume and the effects of the weaker U.S. dollar.

Transportation (3% and 3% of consolidated three-year rev-

enues and total segment profi t, respectively) revenues and

segment profi t increased 45% and more than 100%, respectively,

in 2011 and fell 12% and 33%, respectively, in 2010. We con-

tinue to invest in market-leading technologies and services at

Transportation. Transportation revenues improved in 2011 due

to higher volume related to increased equipment sales and ser-

vices. Transportation earnings increased as a result of increased

productivity, refl ecting improved service margins and higher vol-

ume, while they declined in 2010 as the weakened economy had

driven overall reductions in U.S. freight traffi c and we updated our

estimates of long-term product service costs in our maintenance

service agreements.

Home & Business Solutions (6% and 2% of consolidated

three-year revenues and total segment profi t, respectively) rev-

enues have decreased 2% in 2011 and increased 2% in 2010.

Home & Business Solutions revenues trended down as a result

of lower volume in Appliances. The revenue increase in 2010 was

related to increased volume across all businesses. Segment profi t

decreased 34% in 2011 after increasing 24% in 2010 primarily as a

result of lower volume and the effects of infl ation.

GE Capital (31% and 21% of consolidated three-year revenues

and total segment profi t, respectively) net earnings increased

to $6.5 billion in 2011 and $3.2 billion in 2010 due to the contin-

ued stabilization in the overall economic environment. Over the

last several years, we tightened underwriting standards, shifted

teams from origination to collection and maintained a proactive

risk management focus. This, along with recent increased sta-

bility in the fi nancial markets, contributed to lower losses and a

signifi cant increase in segment profi t in 2011 and 2010. We also

reduced our ending net investment (ENI), excluding cash and

equivalents, from $526 billion at January 1, 2010 to $445 billion at

December 31, 2011. General Electric Capital Corporation (GECC)

is a diversely funded and smaller, more focused fi nance company

with strong positions in several commercial mid-market and con-

sumer fi nancing segments.

Overall, acquisitions contributed $4.6 billion, $0.3 billion and

$2.9 billion to consolidated revenues in 2011, 2010 and 2009,

respectively, excluding the effects of acquisition gains follow-

ing our adoption of an amendment to Financial Accounting

Standards Board (FASB) Accounting Standards Codifi cation (ASC)

810, Consolidation. Our consolidated net earnings included an

insignifi cant amount, $0.1 billion and $0.5 billion in 2011, 2010

and 2009, respectively, from acquired businesses. We integrate

acquisitions as quickly as possible. Only revenues and earnings

from the date we complete the acquisition through the end of

the fourth following quarter are attributed to such businesses.

Dispositions also affected our ongoing results through lower

revenues of $12.6 billion, $3.0 billion and $4.7 billion in 2011, 2010

and 2009, respectively. The effects of dispositions on net earnings

was a decrease of $0.3 billion in 2011 and increases of $0.1 billion

and $0.6 billion in 2010 and 2009, respectively.

DISCONTINUED OPERATIONS. Consistent with our goal of reducing

GECC ENI and focusing our businesses on selective fi nancial

services products where we have domain knowledge, broad

distribution, and the ability to earn a consistent return on capital,

while managing our overall balance sheet size and risk, in 2011,

we sold Consumer RV Marine, Consumer Mexico, Consumer

Singapore and Australian Home Lending. Discontinued operations

also includes BAC Credomatic GECF Inc. (BAC), our U.S. mortgage

business (WMC) and GE Money Japan (our Japanese personal loan

business, Lake, and our Japanese mortgage and card businesses,

excluding our investment in GE Nissen Credit Co., Ltd.). All of these

operations were previously reported in the GE Capital segment.

We reported the operations described above as discontin-

ued operations for all periods presented. For further information

about discontinued operations, see the “Segment Operations—

Discontinued Operations” section and Note 2.

WE DECLARED $7.5 BILLION IN DIVIDENDS IN 2011. Common per-

share dividends of $0.61 increased 33% from 2010, following a

25% decrease from the preceding year. In February 2009, we

announced the reduction of the quarterly GE stock dividend by

68% from $0.31 per share to $0.10 per share, effective with the

dividend approved by the Board in June 2009, which was paid in

the third quarter of 2009. In July 2010, our Board of Directors

approved a 20% increase in our regular quarterly dividend from

$0.10 per share to $0.12 per share and in December 2010,

approved an additional 17% increase from $0.12 per share to

$0.14 per share. On April 21, 2011, our Board of Directors

approved an increase in our regular quarterly dividend to $0.15

per share. On December 9, 2011, our Board of Directors approved

an increase in our regular quarterly dividend to $0.17 per share.

On February 10, 2012, our Board of Directors approved a regular

quarterly dividend of $0.17 per share of common stock, which is

payable April 25, 2012, to shareowners of record at close of busi-

ness on February 27, 2012. In 2011, 2010 and 2009, we declared

$1.0 billion (including $0.8 billion as a result of our redemption of

preferred stock), $0.3 billion and $0.3 billion in preferred stock

dividends, respectively. See Note 15 for additional information.

management’s discussion and analysis

36

GE 2011 ANNUAL REPORT

Except as otherwise noted, the analysis in the remainder of

this section presents the results of GE (with GECS included on a

one-line basis) and GECS. See the Segment Operations section for

a more detailed discussion of the businesses within GE and GECS.

Signifi cant matters relating to our Statement of Earnings are

explained below.

GE SALES OF PRODUCT SERVICES were $41.9 billion in 2011, an

increase of 14% compared with 2010, and operating profi t from

product services was $11.8 billion in 2011, an increase of 15%

compared with 2010. Both the sales and operating profi t of prod-

uct services increases were at Energy Infrastructure, Aviation,

Transportation and Healthcare.

POSTRETIREMENT BENEFIT PLANS costs were $4.1 billion, $3.0 bil-

lion and $2.6 billion in 2011, 2010 and 2009, respectively. Costs

increased in 2011 primarily due to the continued amortization of

2008 investment losses and the effects of lower discount rates

(principal pension plans discount rate decreased from 5.78% at

December 31, 2009 to 5.28% at December 31, 2010). Costs

increased in 2010 primarily due to the amortization of 2008

investment losses and the effects of lower discount rates (princi-

pal pension plans discount rate decreased from 6.11% at

December 31, 2008 to 5.78% at December 31, 2009), partially

offset by lower early retirement costs.

Our discount rate for our principal pension plans at

December 31, 2011 was 4.21%, which refl ected current histori-

cally low interest rates. Considering the current and expected

asset allocations, as well as historical and expected returns on

various categories of assets in which our plans are invested, we

have assumed that long-term returns on our principal pension

plan assets will be 8.0% for cost recognition in 2012, compared

to 8.0% in 2011 and 8.5% in both 2010 and 2009. GAAP pro-

vides recognition of differences between assumed and actual

returns over a period no longer than the average future service

of employees. See the Critical Accounting Estimates section for

additional information.

We expect the costs of our postretirement benefi ts to

increase in 2012 by approximately $1.3 billion as compared to

2011, primarily because of the effects of additional 2008 invest-

ment loss amortization and lower discount rates.

Pension expense for our principal pension plans on a GAAP

basis was $2.4 billion, $1.1 billion and $0.5 billion for 2011, 2010

and 2009, respectively. Operating pension costs (non-GAAP) for

these plans were $1.4 billion in both 2011 and 2010 and $2.0 billion

in 2009. Operating earnings include service cost and plan amend-

ment amortization for our principal pension plans as these costs

represent expenses associated with employee benefi ts earned.

Operating earnings exclude non-operating pension cost/income

such as interest cost, expected return on plan assets and non-cash

amortization of actuarial gains and losses. We expect operating

pension costs for these plans will be about $1.7 billion in 2012.

The GE Pension Plan was underfunded by $13.2 billion at the

end of 2011 as compared to $2.8 billion at December 31, 2010.

The GE Supplementary Pension Plan, which is an unfunded plan,

had projected benefi t obligations of $5.2 billion and $4.4 billion

at December 31, 2011 and 2010, respectively. The increase in

underfunding from year-end 2010 was primarily attributable to

the effects of lower discount rates and lower investment returns.

Our principal pension plans discount rate decreased from 5.28%

at December 31, 2010 to 4.21% at December 31, 2011, which

increased the pension benefi t obligation at year-end 2011 by

approximately $7.4 billion. A 100 basis point increase in our pen-

sion discount rate would decrease the pension benefi t obligation

at year end by approximately $7.0 billion. Our GE Pension Plan

assets decreased from $44.8 billion at the end of 2010 to $42.1 bil-

lion at December 31, 2011, primarily driven by benefi t payments

made during the year which were partially offset by investment

returns. Assets of the GE Pension Plan are held in trust, solely for

the benefi t of Plan participants, and are not available for general

company operations.

On an Employee Retirement Income Security Act (ERISA) basis,

the GE Pension Plan was 92% funded at January 1, 2012. We will

contribute approximately $1.0 billion to the GE Pension Plan in

2012. Funding requirements are determined as prescribed by

ERISA and for GE, are based on the Plan’s funded status as of the

beginning of the previous year and future contributions may vary

based on actual plan results. Assuming our 2012 actual experi-

ence is consistent with our current benefi t assumptions (e.g.,

expected return on assets and interest rates), we expect to make

about $2.1 billion in contributions to the GE Pension Plan in 2013.

At December 31, 2011, the fair value of assets for our other

pension plans was $3.3 billion less than the respective projected

benefi t obligations. The comparable amount at December 31,

2010, was $2.1 billion. We expect to contribute $0.7 billion to our

other pension plans in 2012, compared with actual contributions

of $0.7 billion and $0.6 billion in 2011 and 2010, respectively. We

fund our retiree health benefi ts on a pay-as-you-go basis. The

unfunded liability for our principal retiree health and life plans

was $12.1 billion and $10.9 billion at December 31, 2011 and

2010, respectively. This increase was primarily attributable to the

effects of lower discount rates (retiree health and life plans dis-

count rate decreased from 5.15% at December 31, 2010 to 4.09%

at December 31, 2011), partially offset by lower cost trends. We

expect to contribute $0.6 billion to these plans in 2012 compared

with actual contributions of $0.6 billion in both 2011 and 2010.

The funded status of our postretirement benefi ts plans and

future effects on operating results depend on economic condi-

tions and investment performance. For additional information

about funded status, components of earnings effects and actu-

arial assumptions, see Note 12.

management’s discussion and analysis

GE 2011 ANNUAL REPORT 37

GE OTHER COSTS AND EXPENSES are selling, general and adminis-

trative expenses. These costs were 18.5%, 16.3% and 14.3% of

total GE sales in 2011, 2010 and 2009, respectively. The vast major-

ity of this 2011 increase was driven by higher pension costs and

increased research and development spending. The increase in

2010 was primarily due to higher research and development

spending, increased selling expenses to support global

growth and higher pension costs, partially offset by lower restruc-

turing and other charges.

INTEREST ON BORROWINGS AND OTHER FINANCIAL CHARGES

amounted to $14.5 billion, $15.6 billion and $17.7 billion in 2011,

2010 and 2009, respectively. Substantially all of our borrowings

are in fi nancial services, where interest expense was $13.9 billion,

$14.5 billion and $16.9 billion in 2011, 2010 and 2009, respectively.

GECS average borrowings declined from 2010 to 2011 and from

2009 to 2010, in line with changes in average GECS assets.

Interest rates have decreased over the three-year period primar-

ily attributable to declining global benchmark interest rates. GECS

average borrowings were $453.2 billion, $472.6 billion and

$484.9 billion in 2011, 2010 and 2009, respectively. The GECS

average composite effective interest rate was 3.1% in 2011, 3.1%

in 2010 and 3.5% in 2009. In 2011, GECS average assets of

$592.9 billion were 3% lower than in 2010, which in turn were

3% lower than in 2009. See the Liquidity and Borrowings

section for a discussion of liquidity, borrowings and interest

rate risk management.

INCOME TAXES have a signifi cant effect on our net earnings. As a

global commercial enterprise, our tax rates are affected by many

factors, including our global mix of earnings, the extent to which

those global earnings are indefi nitely reinvested outside the

United States, legislation, acquisitions, dispositions and tax char-

acteristics of our income. Our tax rates are also affected by tax

incentives introduced in the U.S. and other countries to encour-

age and support certain types of activity. Our tax returns are

routinely audited and settlements of issues raised in these audits

sometimes affect our tax provisions.

GE and GECS fi le a consolidated U.S. federal income tax return.

This enables GE to use GECS tax deductions and credits to reduce

the tax that otherwise would have been payable by GE.

Our consolidated income tax rate is lower than the U.S. statu-

tory rate primarily because of benefi ts from lower-taxed global

operations, including the use of global funding structures, and

our 2009 decision to indefi nitely reinvest prior-year earnings out-

side the U.S. There is a benefi t from global operations as non-U.S.

income is subject to local country tax rates that are signifi cantly

below the 35% U.S. statutory rate. These non-U.S. earnings have

been indefi nitely reinvested outside the U.S. and are not subject

to current U.S. income tax. The rate of tax on our indefi nitely rein-

vested non-U.S. earnings is below the 35% U.S. statutory rate

because we have signifi cant business operations subject to tax

in countries where the tax on that income is lower than the U.S.

statutory rate and because GE funds the majority of its non-U.S.

operations through foreign companies that are subject to low

foreign taxes.

Income taxes (benefi t) on consolidated earnings from continu-

ing operations were 28.5% in 2011 compared with 7.3% in 2010

and (11.6)% in 2009.

We expect our ability to benefi t from non-U.S. income taxed

at less than the U.S. rate to continue, subject to changes of U.S. or

foreign law, including, as discussed in Note 14, the expiration of

the U.S. tax law provision deferring tax on active fi nancial services

income. In addition, since this benefi t depends on management’s

intention to indefi nitely reinvest amounts outside the U.S., our tax

provision will increase to the extent we no longer indefi nitely rein-

vest foreign earnings.

Our benefi ts from lower taxed global operations declined to

$2.1 billion in 2011 from $2.8 billion in 2010 and from $3.9 billion

in 2009 principally because of lower earnings in our operations

subject to tax in countries where the tax on that income is lower

than the U.S. statutory rate, and from losses for which there was

not a full tax benefi t. These decreases also refl ected manage-

ment’s decision in 2009 to indefi nitely reinvest prior year earnings

outside the U.S. The benefi t from lower taxed global operations

increased in 2011 by $0.1 billion and in 2010 by $0.4 billion due

to audit resolutions. To the extent global interest rates and non-

U.S. operating income increase we would expect tax benefi ts to

increase, subject to management’s intention to indefi nitely rein-

vest those earnings.

Our benefi t from lower taxed global operations included the

effect of the lower foreign tax rate on our indefi nitely reinvested

non-U.S. earnings which provided a tax benefi t of $1.5 billion in

2011, $2.0 billion in 2010 and $3.0 billion in 2009. The tax benefi t

from non-U.S. income taxed at a local country rather than the U.S.

statutory tax rate is reported in the effective tax rate reconcilia-

tion in the line “Tax on global earnings including exports.”

The increase in the consolidated effective tax rate from 2010

to 2011 was due in signifi cant part to the high effective tax rate

on the pre-tax gain on the NBC Universal (NBCU) transaction

with Comcast Corporation (Comcast) discussed in Note 2. This

gain increased the consolidated effective tax rate by 12.9 per-

centage points. The effective tax rate was also higher because

of the increase in 2011 of income in higher taxed jurisdictions.

This decreased the relative effect of our tax benefi ts from lower-

taxed global operations. In addition, the consolidated income tax

rate increased from 2010 to 2011 due to the decrease, discussed

above, in the benefi t from lower-taxed global operations and the

lower benefi t from audit resolutions.

Cash income taxes paid in 2011 were $2.9 billion, refl ecting

the effects of changes to temporary differences between the car-

rying amount of assets and liabilities and their tax bases and the

timing of tax payments to governments.

management’s discussion and analysis

38

GE 2011 ANNUAL REPORT

Our consolidated income tax rate increased from 2009 to 2010

primarily because of an increase during 2010 of income in higher-

taxed jurisdictions. This decreased the relative effect of our tax

benefi ts from lower-taxed global operations. In addition, the con-

solidated income tax rate increased from 2009 to 2010 due to the

decrease, discussed above, in the benefi t from lower-taxed global

operations. These effects were partially offset by an increase in

the benefi t from audit resolutions, primarily a decrease in the bal-

ance of our unrecognized tax benefi ts from the completion of our

2003–2005 audit with the Internal Revenue Service (IRS).

A more detailed analysis of differences between the U.S. fed-

eral statutory rate and the consolidated rate, as well as other

information about our income tax provisions, is provided in

Note 14. The nature of business activities and associated income

taxes differ for GE and for GECS and a separate analysis of each is

presented in the paragraphs that follow.

We believe that the GE effective tax rate is best analyzed in

relation to GE earnings before income taxes excluding the GECS

net earnings from continuing operations, as GE tax expense does

not include taxes on GECS earnings. GE pre-tax earnings from

continuing operations, excluding GECS earnings from continuing

operations, were $12.6 billion, $12.0 billion and $12.6 billion for

2011, 2010 and 2009, respectively. On this basis, GE’s effective tax

rate was 38.3% in 2011, 16.8% in 2010 and 21.8% in 2009.

Resolution of audit matters reduced the GE effective tax

rate throughout this period. The effects of such resolutions are

included in the following captions in Note 14.

Audit resolutions—effect on GE

tax rate, excluding GECS earnings

2011 2010 2009

Tax on global activities

including exports (0.9)% (3.3)% (0.4)%

U.S. business credits (0.4) (0.5) —

All other—net (0.7) (0.8) (0.2)

(2.0)% (4.6)% (0.6)%

The GE effective tax rate increased from 2010 to 2011 primarily

because of the high effective tax rate on the pre-tax gain on the

NBCU transaction with Comcast refl ecting the low tax basis in our

investments in the NBCU business and the recognition of deferred

tax liabilities related to our 49% investment in NBCUniversal LLC

(NBCU LLC). See Note 2. This gain increased the GE effective tax

rate by 19.7 percentage points. In addition, the effective tax rate

increased because of the 2.6 percentage point decrease in the

benefi t from audit resolutions shown above.

The GE effective tax rate decreased from 2009 to 2010 primar-

ily because of the 4.0 percentage point increase in the benefi t

from audit resolutions shown above.

The GECS effective income tax rate is lower than the U.S. stat-

utory rate primarily because of benefi ts from lower-taxed global

operations, including the use of global funding structures. There

is a tax benefi t from global operations as non-U.S. income is sub-

ject to local country tax rates that are signifi cantly below the 35%

U.S. statutory rate. These non-U.S. earnings have been indefi nitely

reinvested outside the U.S. and are not subject to current U.S.

income tax. The rate of tax on our indefi nitely reinvested non-

U.S. earnings is below the 35% U.S. statutory rate because we

have signifi cant business operations subject to tax in countries

where the tax on that income is lower than the U.S. statutory rate

and because GECS funds the majority of its non-U.S. operations

through foreign companies that are subject to low foreign taxes.

We expect our ability to benefi t from non-U.S. income taxed

at less than the U.S. rate to continue subject to changes of U.S. or

foreign law, including, as discussed in Note 14, the expiration of

the U.S. tax law provision deferring tax on active fi nancial services

income. In addition, since this benefi t depends on management’s

intention to indefi nitely reinvest amounts outside the U.S., our tax

provision will increase to the extent we no longer indefi nitely rein-

vest foreign earnings.

As noted above, GE and GECS fi le a consolidated U.S. federal

income tax return. This enables GE to use GECS tax deductions

and credits to reduce the tax that otherwise would have been

payable by GE. The GECS effective tax rate for each period refl ects

the benefi t of these tax reductions in the consolidated return.

GE makes cash payments to GECS for these tax reductions at

the time GE’s tax payments are due. The effect of GECS on the

amount of the consolidated tax liability from the formation of the

NBCU joint venture will be settled in cash when GECS tax deduc-

tions and credits otherwise would have reduced the liability of the

group absent the tax on joint venture formation.

The GECS effective tax rate was 12.0% in 2011, compared with

(48.4)% in 2010 and 144.3% in 2009. Comparing a tax benefi t to

pre-tax income resulted in a negative tax rate in 2010. Comparing

a tax benefi t to a pre-tax loss resulted in the positive tax rate in

2009. The GECS tax expense of $0.9 billion in 2011 increased by

$1.9 billion from a $1.0 billion benefi t in 2010. The higher 2011

tax expense resulted principally from higher pre-tax income

in 2011 than in 2010, which increased pre-tax income $5.4 bil-

lion and increased the expense ($1.9 billion). Also increasing the

expense was a benefi t from resolution of the 2006–2007 IRS audit

($0.2 billion) that was less than the benefi t from resolution of the

2003–2005 IRS audit ($0.3 billion) both of which are reported in

the caption “All other—net” in the effective tax rate reconciliation

in Note 14.

The GECS tax benefi t of $3.9 billion in 2009 decreased by

$2.9 billion to $1.0 billion in 2010. The lower 2010 tax benefi t

resulted in large part from the change from a pre-tax loss in

2009 to pre-tax income in 2010, which increased pre-tax income

$4.7 billion and decreased the benefi t ($1.7 billion), the non-repeat

of the one-time benefi t related to the 2009 decision to indefi nitely

reinvest undistributed prior year non-U.S. earnings ($0.7 billion),

and a decrease in lower-taxed global operations in 2010 as com-

pared to 2009 ($0.6 billion) caused in part by an increase in losses

for which there was not a full tax benefi t, including an increase

in the valuation allowance associated with the deferred tax asset

related to the 2008 loss on the sale of GE Money Japan ($0.2 billion).

These lower benefi ts were partially offset by the benefi t from the

resolution of the 2003–2005 IRS audit ($0.3 billion).

management’s discussion and analysis

GE 2011 ANNUAL REPORT 39

Global Risk Management

A disciplined approach to risk is important in a diversifi ed organi-

zation like ours in order to ensure that we are executing according

to our strategic objectives and that we only accept risk for which

we are adequately compensated. We evaluate risk at the indi-

vidual transaction level, and evaluate aggregated risk at the

customer, industry, geographic and collateral-type levels,

where appropriate.

Risk assessment and risk management are the responsibility

of management. The GE Board of Directors (Board) has oversight

for risk management with a focus on the most signifi cant risks

facing the Company, including strategic, operational, fi nancial and

legal and compliance risks. At the end of each year, management

and the Board jointly develop a list of major risks that GE plans to

prioritize in the next year. Throughout the year, the Board and the

committees to which it has delegated responsibility dedicate a

portion of their meetings to review and discuss specifi c risk top-

ics in greater detail. Strategic, operational and reputational risks

are presented and discussed in the context of the CEO’s report

on operations to the Board at regularly scheduled Board meet-

ings and at presentations to the Board and its committees by the

vice chairmen, Chief Risk Offi cer (CRO), general counsel and other

employees. The Board has delegated responsibility for the over-

sight of specifi c risks to Board committees as follows:

• In 2011, the Board established a Risk Committee. This

Committee oversees GE’s risk management of key risks,

including strategic, operational (including product risk), fi nan-

cial (including credit, liquidity and exposure to broad market

risk) and reputational risks, and the guidelines, policies and

processes for monitoring and mitigating such risks. Starting

in 2011, as part of its overall risk oversight responsibilities for

GE, the Risk Committee also began overseeing risks related

to GE Capital, which previously was subject to direct Audit

Committee oversight.

• The Audit Committee oversees GE’s and GE Capital’s policies

and processes relating to the fi nancial statements, the fi nan-

cial reporting process, compliance and auditing. The Audit

Committee monitors ongoing compliance issues and matters,

and also annually conducts an assessment of compliance

issues and programs.

• The Public Responsibilities Committee oversees risk manage-

ment related to GE’s public policy initiatives, the environment

and similar matters, and monitors the Company’s environ-

mental, health and safety compliance.

• The Management Development and Compensation

Committee oversees the risk management associated with

management resources, structure, succession planning, man-

agement development and selection processes, and includes

a review of incentive compensation arrangements to confi rm

that incentive pay does not encourage unnecessary risk taking

and to review and discuss, at least annually, the relationship

between risk management policies and practices, corporate

strategy and senior executive compensation.

• The Nominating and Corporate Governance Committee over-

sees risk related to the Company’s governance structure and

processes and risks arising from related-person transactions.

The GE Board’s risk oversight process builds upon management’s

risk assessment and mitigation processes, which include stan-

dardized reviews of long-term strategic and operational planning;

executive development and evaluation; code of conduct compli-

ance under the Company’s The Spirit & The Letter; regulatory

compliance; health, safety and environmental compliance; fi nan-

cial reporting and controllership; and information technology and

security. GE’s CRO is responsible for overseeing and coordinating

risk assessment and mitigation on an enterprise-wide basis. The

CRO leads the Corporate Risk Function and is responsible for the

identifi cation of key business risks, providing for appropriate

management of these risks within GE Board guidelines, and

enforcement through policies and procedures. Management has

two committees to further assist it in assessing and mitigating

risk. The Corporate Risk Committee (CRC) meets periodically, is

chaired by the CRO and comprises the Chairman and CEO, vice

chairmen, general counsel and other senior level business and

functional leaders. It has principal responsibility for evaluating

and addressing risks escalated to the CRO and Corporate Risk

Function. The Policy Compliance Review Board met 15 times in

2011, is chaired by the Company’s general counsel and includes

the Chief Financial Offi cer and other senior level functional lead-

ers. It has principal responsibility for monitoring compliance

matters across the Company.

GE’s Corporate Risk Function leverages the risk infrastructures

in each of our businesses, which have adopted an approach that

corresponds to the Company’s overall risk policies, guidelines and

review mechanisms. Our risk infrastructure operates at the busi-

ness and functional levels and is designed to identify, evaluate

and mitigate risks within each of the following categories:

•

STRATEGIC. Strategic risk relates to the Company’s future

business plans and strategies, including the risks associated

with the markets and industries in which we operate, demand

for our products and services, competitive threats, technol-

ogy and product innovation, mergers and acquisitions and

public policy.

•

OPERATIONAL. Operational risk relates to risks (systems, pro-

cesses, people and external events) that affect the operation

of our businesses. It includes product life cycle and execution,

product safety and performance, information management

and data protection and security, business disruption, human

resources and reputation.

•

FINANCIAL. Financial risk relates to our ability to meet fi nancial

obligations and mitigate credit risk, liquidity risk and exposure

to broad market risks, including volatility in foreign currency

exchange rates and interest rates and commodity prices.

Liquidity risk is the risk of being unable to accommodate

liability maturities, fund asset growth and meet contractual

management’s discussion and analysis

40

GE 2011 ANNUAL REPORT

obligations through access to funding at reasonable market

rates, and credit risk is the risk of fi nancial loss arising from a

customer or counterparty failure to meet its contractual obli-

gations. We face credit risk in our industrial businesses, as well

as in our GE Capital investing, lending and leasing activities

and derivative fi nancial instruments activities.

•

LEGAL AND COMPLIANCE. Legal and compliance risk relates to

risks arising from the government and regulatory environment

and action, compliance with integrity policies and procedures,

including those relating to fi nancial reporting, environmental

health and safety, and intellectual property risks. Government

and regulatory risk includes the risk that the government or

regulatory actions will impose additional cost on us or cause

us to have to change our business models or practices.

Risks identifi ed through our risk management processes are

prioritized and, depending on the probability and severity of the

risk, escalated to the CRO. The CRO, in coordination with the CRC,

assigns responsibility for the risks to the business or functional

leader most suited to manage the risk. Assigned owners are

required to continually monitor, evaluate and report on risks for

which they bear responsibility. Enterprise risk leaders within each

business and corporate function are responsible to present to the

CRO and CRC risk assessments and key risks at least annually. We

have general response strategies for managing risks, which

categorize risks according to whether the Company will avoid,

transfer, reduce or accept the risk. These response strategies are

tailored to ensure that risks are within acceptable GE Board

general guidelines.

Depending on the nature of the risk involved and the particular

business or function affected, we use a wide variety of risk mitiga-

tion strategies, including delegation of authorities, standardized

processes and strategic planning reviews, operating reviews,

insurance, and hedging. As a matter of policy, we generally hedge

the risk of fl uctuations in foreign currency exchange rates, inter-

est rates and commodity prices. Our service businesses employ

a comprehensive tollgate process leading up to and through the

execution of a contractual service agreement to mitigate legal,

fi nancial and operational risks. Furthermore, we centrally man-

age some risks by purchasing insurance, the amount of which

is determined by balancing the level of risk retained or assumed

with the cost of transferring risk to others. We manage the risk of

fl uctuations in economic activity and customer demand by moni-

toring industry dynamics and responding accordingly, including

by adjusting capacity, implementing cost reductions and engag-

ing in mergers, acquisitions and dispositions.

GE CAPITAL RISK MANAGEMENT AND OVERSIGHT

GE Capital has a robust risk infrastructure and robust processes

to manage risks related to its businesses, and the GE Corporate

Risk Function relies upon them in fulfi lling its mission.

The GE Risk Committee was established to oversee GE

Capital’s risk appetite, risk assessment and management pro-

cesses previously undertaken by the GE Audit Committee. The

GECC Board of Directors oversees the GE Capital risk manage-

ment framework, and approves all signifi cant acquisitions and

dispositions as well as signifi cant borrowings and investments.

The GECC Board of Directors exercises control over investment

activities in the business units through delegations of authority.

All participants in the GE Capital risk management process must

comply with approval limits established by the GECC Board.

The Enterprise Risk Management Committee (ERMC), which

comprises the most senior leaders in GE Capital as well as the

GE CRO, oversees the implementation of GE Capital’s risk appetite,

and senior management’s establishment of appropriate systems

(including policies, procedures, and management committees) to

ensure enterprise risks are effectively identifi ed, measured, mon-

itored, and controlled. Day-to-day risk oversight for GE Capital is

provided by an independent global risk management organiza-

tion which includes the GE Capital corporate function in addition

to risk offi cers embedded in the individual business units. The

Risk Leaders in the business units have dual reporting relation-

ships, reporting both into the local business management and

also to the GE Capital corporate-level function leader, which fur-

ther strengthens their independence.

GE Capital’s risk management approach rests upon three

major tenets: a broad spread of risk based on managed exposure

limits; senior, secured commercial fi nancings; and a hold-to-

maturity model with transactions underwritten to “on-book”

standards. Dedicated risk professionals across the businesses

include underwriters, portfolio managers, collectors, envi-

ronmental or engineering specialists, and specialized asset

managers. The senior risk offi cers have, on average, over 25 years

of experience.

GE Capital manages risk categories identifi ed in GE Capital’s

business environment, which if materialized, could prevent GE

Capital from achieving its risk objectives and/or result in losses.

These risks are defi ned as GE Capital’s Enterprise Risk Universe,

which includes the following risks: strategic (including earnings

and capital), liquidity, credit, market and operational (including

fi nancial, compliance, information technology, human resources

and legal). Reputational risk is considered and managed

across each of the categories. GE Capital has made signifi cant

investments in resources to enhance its risk management infra-

structure, in particular with regard to compliance, market and

operational risk, liquidity and capital management.

GE Capital’s Corporate Risk function, in consultation with the

ERMC, updates the Enterprise Risk Appetite Statement annually.

This document articulates the enterprise risk objectives, its key

universe of risks and the supporting limit structure. GE Capital’s

risk appetite is determined relative to its desired risk objectives,

including, but not limited to credit ratings, capital levels, liquidity

management’s discussion and analysis

GE 2011 ANNUAL REPORT 41

management, regulatory assessments, earnings, dividends and

compliance. GE Capital determines its risk appetite through

consideration of portfolio analytics, including stress testing and

economic capital measurement, experience and judgment of

senior risk offi cers, current portfolio levels, strategic planning,

and regulatory and rating agency expectations.

The Enterprise Risk Appetite is presented to the GECC Board

and the GE Risk Committee for review and approval at least annu-

ally. On a quarterly basis, the status of GE Capital’s performance

against these limits is reviewed by the GE Risk Committee.

GE Capital acknowledges risk-taking as a fundamental charac-

teristic of providing fi nancial services. It is inherent to its business

and arises in lending, leasing and investment transactions under-

taken by GE Capital. GE Capital utilizes its risk capacity judiciously

in pursuit of its strategic goals and risk objectives.

GE Capital uses stress testing for risk, liquidity and capital

adequacy assessment and management purposes, and as an

integral part of GE Capital’s overall planning processes. Stress

testing results inform key strategic portfolio decisions such

as capital allocation, assist in developing the risk appetite and

limits, and help in assessing product specifi c risk to guide the

development and modifi cation of product structures. The ERMC

approves the high-level scenarios for, and reviews the results of,

GE Capital-wide stress tests across key risk areas, such as credit

and investment, liquidity and market risk. Stress test results are

also expressed in terms of impact to capital levels and metrics,

and that information is reviewed with the GECC Board and the

GE Risk Committee at least twice a year. Stress testing require-

ments are set forth in GE Capital’s approved risk policies. Key

policies, such as the Enterprise Risk Management Policy, the

Enterprise Risk Appetite Statement and the Liquidity and Capital

Management policies are approved by the GECC Board and the

GE Risk Committee at least annually. GE Capital, in coordination

with and under the oversight of the GE CRO, provides risk reports

to the GE Risk Committee. At these meetings, which occur at least

four times a year, GE Capital senior management focuses on the

risk strategy and the risk oversight processes used to manage the

elements of risk managed by the ERMC.

Operational risks are inherent in GE Capital’s business

activities and are typical of any large enterprise. GE Capital’s

Operational Risk Management program seeks to effectively

manage operational risk to reduce the potential for signifi cant

unexpected losses, and to minimize the impact of losses experi-

enced in the normal course of business.

Additional information about our liquidity and how we man-

age this risk can be found in the Financial Resources and Liquidity

section. Additional information about our credit risk and GECS

portfolio can be found in the Financial Resources and Liquidity

and Critical Accounting Estimates sections. Additional informa-

tion about our market risk and how we manage this risk can be

found in the Financial Resources and Liquidity section.

Segment Operations

Effective January 1, 2011, we reorganized the former Technology

Infrastructure segment into three segments—Aviation,

Healthcare, and Transportation. The prior-period results of the

Aviation, Healthcare and Transportation businesses are unaf-

fected by this reorganization. Results of our formerly consolidated

subsidiary, NBCU, and our current equity method investment in

NBCU LLC are reported in the Corporate items and eliminations

line on the Summary of Operating Segments.

Our six segments are focused on the broad markets they

serve: Energy Infrastructure, Aviation, Healthcare, Transportation,

Home & Business Solutions and GE Capital. In addition to pro-

viding information on segments in their entirety, we have also

provided supplemental information for certain businesses within

the segments for greater clarity.

Segment profi t is determined based on internal performance

measures used by the Chief Executive Offi cer to assess the per-

formance of each business in a given period. In connection with

that assessment, the Chief Executive Offi cer may exclude matters

such as charges for restructuring; rationalization and other simi-

lar expenses; in-process research and development and certain

other acquisition-related charges and balances; technology and

product development costs; certain gains and losses from acqui-

sitions or dispositions; and litigation settlements or other charges,

responsibility for which preceded the current management team.

Segment profi t excludes results reported as discontinued

operations, earnings attributable to noncontrolling interests of

consolidated subsidiaries and accounting changes. Segment

profi t excludes or includes interest and other fi nancial charges

and income taxes according to how a particular segment’s man-

agement is measured—excluded in determining segment profi t,

which we sometimes refer to as “operating profi t,” for Energy

Infrastructure, Aviation, Healthcare, Transportation and Home &

Business Solutions; included in determining segment profi t, which

we sometimes refer to as “net earnings,” for GE Capital. Prior to

January 1, 2011, segment profi t excluded the effects of principal

pension plans. Beginning January 1, 2011, we began allocating

service costs related to our principal pension plans and no longer

allocate the retiree costs of our postretirement healthcare ben-

efi ts to our segments. This revised allocation methodology better

aligns segment operating costs to the active employee costs,

which are managed by the segments. This change does not sig-

nifi cantly affect reported segment results.

To better serve Oil & Gas customers, Energy’s Measurement

& Control business was moved to Oil & Gas in October 2011.

Measurement & Control addresses sensor-based measurement,

inspection, asset condition monitoring and controls needs. In

addition, three business units from Energy’s acquisition of Dresser

were also transferred to Oil & Gas in 2011. We have reclassifi ed

certain prior-period amounts to conform to the current-period

presentation. For additional information about our segments,

see Note 28.

management’s discussion and analysis

42

GE 2011 ANNUAL REPORT

Summary of Operating Segments

General Electric Company and consolidated affiliates

(In millions) 2011 2010 2009 2008 2007

REVENUES

Energy Infrastructure $ 43,694 $ 37,514 $ 40,648 $ 43,046 $ 34,880

Aviation 18,859 17,619 18,728 19,239 16,819

Healthcare 18,083 16,897 16,015 17,392 16,997

Transportation 4,885 3,370 3,827 5,016 4,523

Home & Business Solutions 8,465 8,648 8,443 10,117 11,026

Total industrial revenues 93,986 84,048 87,661 94,810 84,245

GE Capital 45,730 46,422 48,906 65,900 65,625

Total segment revenues 139,716 130,470 136,567 160,710 149,870

Corporate items and eliminations (a) 7,584 19,123 17,871 19,127 20,094

CONSOLIDATED REVENUES $147,300 $149,593 $154,438 $179,837 $169,964

SEGMENT PROFIT

Energy Infrastructure $ 6,650 $ 7,271 $ 7,105 $ 6,497 $ 5,238

Aviation 3,512 3,304 3,923 3,684 3,222

Healthcare 2,803 2,741 2,420 2,851 3,056

Transportation 757 315 473 962 936

Home & Business Solutions 300 457 370 365 983

Total industrial segment profit 14,022 14,088 14,291 14,359 13,435

GE Capital 6,549 3,158 1,325 7,841 12,179

Total segment profit 20,571 17,246 15,616 22,200 25,614

Corporate items and eliminations (a) (359) (1,105) (593) 1,184 1,441

GE interest and other financial charges (1,299) (1,600) (1,478) (2,153) (1,993)

GE provision for income taxes (4,839) (2,024) (2,739) (3,427) (2,794)

Earnings from continuing operations 14,074 12,517 10,806 17,804 22,268

Earnings (loss) from discontinued operations, net of taxes 77 (873) 219 (394) (60)

CONSOLIDATED NET EARNINGS ATTRIBUTABLE TO THE COMPANY $ 14,151 $ 11,644 $ 11,025 $ 17,410 $ 22,208

(a) Includes the results of NBCU, our formerly consolidated subsidiary, and our current equity method investment in NBCUniversal LLC.

See accompanying notes to consolidated financial statements.

management’s discussion and analysis

GE 2011 ANNUAL REPORT 43

ENERGY INFRASTRUCTURE

(In millions) 2011 2010 2009

REVENUES $43,694 $37,514 $40,648

SEGMENT PROFIT $ 6,650 $ 7,271 $ 7,105

REVENUES

Energy $31,080 $29,040 $31,858

Oil & Gas 13,663 9,483 9,701

SEGMENT PROFIT

Energy $ 4,992 $ 5,887 $ 5,736

Oil & Gas 1,872 1,553 1,532

Energy Infrastructure revenues increased 16% or $6.2 billion

(including $4.1 billion from acquisitions) in 2011 as higher volume

($5.8 billion) and the effects of the weaker U.S. dollar ($0.9 billion)

were partially offset by lower prices ($0.5 billion). Higher volume

was mainly driven by acquisitions and an increase in sales of

services at both Energy and Oil & Gas. The effects of the weaker

U.S. dollar and lower prices were at both Energy and Oil & Gas.

Segment profi t decreased 9%, or $0.6 billion, as lower produc-

tivity ($1.4 billion), driven primarily by the wind turbines business,

acquisitions and investment in our global organization and new

technology, and lower prices ($0.5 billion), driven primarily by the

wind turbines business, were partially offset by higher volume

($1.1 billion), and the effects of defl ation ($0.1 billion). Lower pro-

ductivity, lower prices, higher volume and the effects of defl ation

were at both Energy and Oil & Gas.

Energy Infrastructure segment revenues decreased 8%, or

$3.1 billion, in 2010 as lower volume ($3.3 billion) and the stron-

ger U.S. dollar ($0.4 billion) were partially offset by higher prices

($0.5 billion) and higher other income ($0.1 billion). Lower volume

primarily refl ected decreases in thermal and wind equipment

sales at Energy. The effects of the stronger U.S. dollar were at

both Energy and Oil & Gas. Higher prices at Energy were partially

offset by lower prices at Oil & Gas. The increase in other income at

Energy was partially offset by lower other income at Oil & Gas.

Segment profi t increased 2% to $7.3 billion in 2010, compared

with $7.1 billion in 2009 as higher prices ($0.5 billion), the effects

of defl ation ($0.4 billion) and higher other income ($0.1 billion)

were partially offset by lower volume ($0.6 billion), the stronger

U.S. dollar ($0.1 billion) and decreased productivity ($0.1 billion).

Higher prices at Energy were partially offset by lower prices at

Oil & Gas. The effects of defl ation primarily refl ected decreased

material costs at both Energy and Oil & Gas. An increase in other

income at Energy was partially offset by lower other income at Oil

& Gas. Lower volume primarily refl ected decreases in wind and

thermal equipment sales at Energy and was partially offset by

higher volume at Oil & Gas. The effects of the stronger U.S. dollar

were at both Energy and Oil & Gas. The effects of decreased pro-

ductivity were primarily at Energy.

Energy Infrastructure equipment orders increased 39% to

$25.6 billion at December 31, 2011. Total Energy Infrastructure

backlog increased 8% to $72.7 billion at December 31, 2011, com-

posed of equipment backlog of $23.0 billion and services backlog

of $49.7 billion. Comparable December 31, 2010 equipment

and service order backlogs were $18.3 billion and $48.8 billion,

respectively. See Corporate Items and Eliminations for a discus-

sion of items not allocated to this segment.

AVIATION revenues of $18.9 billion in 2011 increased $1.2 billion,

or 7%, due primarily to higher volume ($1.1 billion) and higher

prices ($0.2 billion), partially offset by lower other income ($0.1 bil-

lion). Higher volume and higher prices were driven by increased

services ($0.9 billion) and equipment sales ($0.4 billion). The

increase in services revenue was primarily due to higher commer-

cial spares sales while the increase in equipment revenue was

primarily due to commercial engines.

Segment profi t of $3.5 billion in 2011 increased $0.2 billion, or

6%, due primarily to higher volume ($0.2 billion) and higher prices

($0.2 billion), partially offset by higher infl ation, primarily non-

material related ($0.1 billion), and lower other income ($0.1 billion).

Incremental research and development and GEnx product launch

costs offset higher productivity.

Aviation revenues of $17.6 billion in 2010 decreased $1.1 bil-

lion, or 6%, as lower volume ($1.2 billion) and lower other income

($0.1 billion), refl ecting lower transaction gains, were partially

offset by higher prices ($0.2 billion). The decrease in volume

refl ected decreased commercial and military equipment sales

and services. Lower transaction gains refl ect the absence of gains

related to the Airfoils Technologies International—Singapore

Pte. Ltd. (ATI) acquisition and the Times Microwave Systems dis-

position in 2009, partially offset by a gain on a partial sale of a

materials business and a franchise fee.

Segment profi t of $3.3 billion in 2010 decreased $0.6 billion,

or 16%, due to lower productivity ($0.4 billion), lower volume

($0.2 billion) and lower other income ($0.2 billion), refl ecting lower

transaction gains, partially offset by higher prices ($0.2 billion).

Lower productivity was primarily due to product launch and pro-

duction costs associated with the GEnx engine shipments.

Aviation equipment orders increased 33% to $11.9 billion

at December 31, 2011. Total Aviation backlog increased 24%

to $99.0 billion at December 31, 2011, composed of equipment

backlog of $22.5 billion and services backlog of $76.5 billion.

Comparable December 31, 2010 equipment and service order

backlogs were $20.0 billion and $59.5 billion, respectively. See

Corporate Items and Eliminations for a discussion of items not

allocated to this segment.

management’s discussion and analysis

44

GE 2011 ANNUAL REPORT

HEALTHCARE revenues of $18.1 billion in 2011 increased $1.2 bil-

lion, or 7%, due to higher volume ($1.0 billion) and the weaker U.S.

dollar ($0.4 billion), partially offset by lower prices ($0.3 billion). The

revenue increase was split between equipment sales ($0.7 billion)

and services ($0.5 billion). Revenue increased in the U.S. and inter-

national markets, with the strongest growth in emerging markets.

Segment profi t of $2.8 billion in 2011 increased 2%, or $0.1 bil-

lion, refl ecting increased productivity ($0.3 billion), higher volume

($0.2 billion) and the weaker U.S. dollar ($0.1 billion), partially offset

by lower prices ($0.3 billion) and higher infl ation ($0.1 billion), pri-

marily non-material related.

Healthcare revenues of $16.9 billion in 2010 increased $0.9 billion,

or 6%, refl ecting higher volume ($1.0 billion) and the weaker U.S.

dollar ($0.1 billion), partially offset by lower prices ($0.2 billion). The

increase in volume refl ected increased equipment sales ($0.7 billion)

and services ($0.2 billion).

Segment profi t of $2.7 billion in 2010 increased $0.3 billion,

or 13%, due to higher productivity ($0.3 billion), higher volume

($0.2 billion) and the weaker U.S. dollar ($0.1 billion), partially offset

by lower prices ($0.2 billion).

Healthcare equipment orders increased 7% to $10.5 billion

at December 31, 2011. Total Healthcare backlog increased 1%

to $13.5 billion at December 31, 2011, composed of equip-

ment backlog of $3.9 billion and services backlog of $9.6 billion.

Comparable December 31, 2010 equipment and service order

backlogs were $3.9 billion and $9.5 billion, respectively. See

Corporate Items and Eliminations for a discussion of items not

allocated to this segment.

TRANSPORTATION revenues of $4.9 billion in 2011 increased

$1.5 billion, or 45%, due to higher volume ($1.5 billion) related to

increased equipment sales ($0.9 billion) and services ($0.6 billion).

The increase in equipment revenue was primarily driven by an

increase in U.S. and international locomotive sales and growth in

our global mining equipment business. The increase in service

revenue was due to higher overhauls and increased

service productivity.

Segment profi t of $0.8 billion in 2011 increased $0.4 billion,

or over 100%, as a result of increased productivity ($0.4 billion),

refl ecting improved service margins, and higher volume ($0.1 bil-

lion), partially offset by higher infl ation ($0.1 billion).

Transportation revenues of $3.4 billion in 2010 decreased

$0.5 billion, or 12%, primarily due to lower volume ($0.5 billion).

The decrease in volume refl ected decreased equipment sales

($0.3 billion) and services ($0.1 billion).

Segment profi t of $0.3 billion in 2010 decreased $0.2 billion,

or 33%, due to lower productivity ($0.1 billion) and lower volume

($0.1 billion). Lower productivity was primarily due to higher

service costs.

Transportation equipment orders decreased 31% to $2.2 bil-

lion at December 31, 2011. Total Transportation backlog

decreased 1% to $15.1 billion at December 31, 2011, composed

of equipment backlog of $3.3 billion and services backlog of

$11.8 billion. Comparable December 31, 2010 equipment and

service order backlogs were $3.7 billion and $11.6 billion, respec-

tively. See Corporate Items and Eliminations for a discussion of

items not allocated to this segment.

HOME & BUSINESS SOLUTIONS revenues of $8.5 billion decreased

$0.2 billion, or 2%, in 2011 refl ecting a decrease in Appliances

partially offset by higher revenues at Lighting and Intelligent

Platforms. Overall, revenues decreased primarily as a result of

lower volume ($0.3 billion) principally in our appliances business,

partially offset by the weaker U.S. dollar ($0.1 billion) and

increased prices.

Segment profi t of $0.3 billion in 2011 decreased 34%, or

$0.2 billion, as the effects of infl ation ($0.3 billion) and lower vol-

ume were partially offset by the effects of the weaker U.S. dollar,

increased productivity and increased prices.

Home & Business Solutions revenues increased 2%, or

$0.2 billion, to $8.6 billion in 2010 compared with 2009 as higher

volume ($0.4 billion) and higher other income ($0.1 billion) was

partially offset by lower prices ($0.2 billion). The increase in vol-

ume refl ected increased sales across all businesses. The decrease

in price was primarily at Appliances.

Segment profi t increased 24%, or $0.1 billion, to $0.5 bil-

lion in 2010, primarily as a result of the effects of productivity

($0.2 billion) and increased other income primarily related to

associated companies ($0.1 billion), partially offset by lower prices

($0.2 billion).

management’s discussion and analysis

GE 2011 ANNUAL REPORT 45

GE CAPITAL

(In millions) 2011 2010 2009

REVENUES $ 45,730 $ 46,422 $ 48,906

SEGMENT PROFIT $ 6,549 $ 3,158 $ 1,325

December 31 (In millions) 2011 2010

TOTAL ASSETS $552,514 $565,337

(In millions) 2011 2010 2009

REVENUES

Commercial Lending and

Leasing (CLL) $ 18,178 $ 18,447 $ 20,762

Consumer 16,781 17,204 16,794

Real Estate 3,712 3,744 4,009

Energy Financial Services 1,223 1,957 2,117

GE Capital Aviation

Services (GECAS) 5,262 5,127 4,594

SEGMENT PROFIT (LOSS)

CLL $ 2,720 $ 1,554 $ 963

Consumer 3,551 2,523 1,282

Real Estate (928) (1,741) (1,541)

Energy Financial Services 440 367 212

GECAS 1,150 1,195 1,016

December 31 (In millions) 2011 2010

TOTAL ASSETS

CLL $193,869 $202,650

Consumer 139,000 147,327

Real Estate 60,873 72,630

Energy Financial Services 18,357 19,549

GECAS 48,821 49,106

GE Capital revenues decreased 1% and net earnings increased

favorably in 2011 as compared with 2010. Revenues for 2011 and

2010 included $0.3 billion and $0.2 billion, respectively, from

acquisitions and were reduced by $1.1 billion and $2.3 billion,

respectively, as a result of dispositions. Revenues also increased

as a result of the gain on sale of a substantial portion of our

Garanti Bank equity investment (the Garanti Bank transaction),

the weaker U.S. dollar and higher gains and investment income,

partially offset by reduced revenues from lower ENI. Net earnings

increased by $3.4 billion in 2011, primarily due to lower provisions

for losses on fi nancing receivables, the gain on the Garanti Bank

transaction and lower impairments. GE Capital net earnings in

2011 also included restructuring, rationalization and other

charges of $0.1 billion and net losses of $0.2 billion related to our

Treasury operations.

During 2011, GE Capital provided approximately $104 billion

of new fi nancings in the U.S. to various companies, infrastruc-

ture projects and municipalities. Additionally, we extended

approximately $87 billion of credit to approximately 56 million U.S.

consumers. GE Capital provided credit to approximately 19,600

new commercial customers and 37,000 new small businesses

in the U.S. during 2011 and ended the period with outstanding

credit to more than 284,000 commercial customers and 191,000

small businesses through retail programs in the U.S.

GE Capital revenues decreased 5% and net earnings increased

favorably in 2010 as compared with 2009. Revenues for 2010

and 2009 included $0.2 billion and $0.1 billion of revenues

from acquisitions, respectively, and in 2010 were increased by

$0.1 billion and in 2009 were reduced by $2.3 billion as a result

of dispositions, including the effects of the 2010 deconsolida-

tion of Regency Energy Partners L.P. (Regency) and the 2009

deconsolidation of Penske Truck Leasing Co., L.P. (PTL). The 2010

deconsolidation of Regency included a $0.1 billion gain on the

sale of our general partnership interest in Regency and remea-

surement of our retained investment (the Regency transaction).

Revenues for 2010 also decreased $0.6 billion compared with

2009 as a result of organic revenue declines primarily driven by a

lower asset base and a lower interest rate environment, partially

offset by the weaker U.S. dollar. Net earnings increased for 2010

compared with 2009, primarily due to lower provisions for losses

on fi nancing receivables, lower selling, general and administrative

costs and the gain on the Regency transaction, offset by higher

marks and impairments, mainly at Real Estate, the absence of

the fi rst quarter 2009 tax benefi t from the decision to indefi nitely

reinvest prior-year earnings outside the U.S., and the absence of

the fi rst quarter 2009 gain related to the PTL sale. GE Capital net

earnings in 2010 also included restructuring, rationalization and

other charges of $0.2 billion and net losses of $0.1 billion related

to our Treasury operations.

Additional information about certain GE Capital businesses

follows.

CLL 2011 revenues decreased 1% and net earnings increased

75% compared with 2010. Revenues decreased as a result of

organic revenue declines ($1.1 billion), primarily due to lower ENI,

partially offset by the weaker U.S. dollar ($0.5 billion) and higher

gains and investment income ($0.4 billion). Net earnings increased in

2011, refl ecting lower provisions for losses on fi nancing receivables

($0.6 billion), higher gains and investment income ($0.3 billion), core

increases ($0.2 billion) and lower impairments ($0.1 billion).

CLL 2010 revenues decreased 11% and net earnings increased

61% compared with 2009. Revenues in 2010 and 2009 included

$0.2 billion and $0.1 billion, respectively, from acquisitions, and

in 2010 were reduced by $1.2 billion from dispositions, primarily

related to the 2009 deconsolidation of PTL. Revenues in 2010 also

decreased $1.2 billion compared with 2009 as a result of organic

revenue declines ($1.4 billion), partially offset by the weaker U.S.

dollar ($0.2 billion). Net earnings increased by $0.6 billion in 2010,

refl ecting lower provisions for losses on fi nancing receivables

($0.6 billion), higher gains ($0.2 billion) and lower selling, gen-

eral and administrative costs ($0.1 billion). These increases were

partially offset by the absence of the gain on the PTL sale and

remeasurement ($0.3 billion) and declines in lower-taxed earnings

from global operations ($0.1 billion).

Consumer 2011 revenues decreased 2% and net earnings

increased 41% compared with 2010. Revenues included $0.3 bil-

lion from acquisitions and were reduced by $0.4 billion as a result

of dispositions. Revenues in 2011 also decreased $0.3 billion as a

management’s discussion and analysis

46

GE 2011 ANNUAL REPORT

result of organic revenue declines ($1.4 billion), primarily due to

lower ENI, and higher impairments ($0.1 billion), partially offset by

the gain on the Garanti Bank transaction ($0.7 billion), the weaker

U.S. dollar ($0.5 billion) and higher gains ($0.1 billion). The increase

in net earnings resulted primarily from lower provisions for losses

on fi nancing receivables ($1.0 billion), the gain on the Garanti Bank

transaction ($0.3 billion) and acquisitions ($0.1 billion), partially

offset by lower Garanti results ($0.2 billion), and core decreases

($0.2 billion).

Consumer 2010 revenues increased 2% and net earnings

increased 97% compared with 2009. Revenues in 2010 were

reduced by $0.3 billion as a result of dispositions. Revenues in

2010 increased $0.7 billion compared with 2009 as a result of

the weaker U.S. dollar ($0.4 billion) and organic revenue growth

($0.4 billion). The increase in net earnings resulted primarily from

core growth ($1.3 billion) and the weaker U.S. dollar ($0.1 bil-

lion), partially offset by the effects of dispositions ($0.1 billion).

Core growth included lower provisions for losses on fi nancing

receivables across most platforms ($1.5 billion) and lower selling,

general and administrative costs ($0.2 billion), partially offset by

declines in lower-taxed earnings from global operations ($0.7 bil-

lion) including the absence of the fi rst quarter 2009 tax benefi t

($0.5 billion) from the decision to indefi nitely reinvest prior-year

earnings outside the U.S. and an increase in the valuation allow-

ance associated with Japan ($0.2 billion).

Real Estate 2011 revenues decreased 1% and net earnings

increased 47% compared with 2010. Revenues decreased as

organic revenue declines ($0.4 billion), primarily due to lower

ENI, were partially offset by increases in net gains on property

sales ($0.2 billion) and the weaker U.S. dollar ($0.1 billion). Real

Estate net earnings increased compared with 2010, as lower

impairments ($0.7 billion), a decrease in provisions for losses

on fi nancing receivables ($0.4 billion) and increases in net

gains on property sales ($0.2 billion) were partially offset by

core declines ($0.4 billion). Depreciation expense on real estate

equity investments totaled $0.9 billion and $1.0 billion in 2011

and 2010, respectively.

Real Estate 2010 revenues decreased 7% and net earn-

ings decreased 13% compared with 2009. Revenues for 2010

decreased $0.3 billion compared with 2009 as a result of

organic revenue declines and a decrease in property sales,

partially offset by the weaker U.S. dollar. Real Estate net earn-

ings decreased $0.2 billion compared with 2009, primarily from

an increase in impairments related to equity properties and

investments ($0.9 billion), partially offset by a decrease in provi-

sions for losses on fi nancing receivables ($0.4 billion), and core

increases ($0.3 billion). Depreciation expense on real estate

equity investments totaled $1.0 billion and $1.2 billion for 2010

and 2009, respectively.

Energy Financial Services 2011 revenues decreased 38%

and net earnings increased 20% compared with 2010. Revenues

decreased primarily as a result of the deconsolidation of Regency

($0.7 billion) and organic revenue declines ($0.3 billion), primarily

from an asset sale in 2010 by an investee. These decreases were

partially offset by higher gains ($0.2 billion). The increase in net

earnings resulted primarily from higher gains ($0.2 billion), partially

offset by the deconsolidation of Regency ($0.1 billion) and core

decreases, primarily from an asset sale in 2010 by an investee.

Energy Financial Services 2010 revenues decreased 8% and

net earnings increased 73% compared with 2009. Revenues in

2010 included a $0.1 billion gain related to the Regency trans-

action and in 2009 were reduced by $0.1 billion of gains from

dispositions. Revenues in 2010 decreased compared with 2009 as

a result of organic revenue growth ($0.4 billion), primarily increases

in associated company revenues resulting from an asset sale by an

investee ($0.2 billion), more than offset by the deconsolidation of

Regency. The increase in net earnings resulted primarily from core

increases ($0.1 billion), primarily increases in associated company

earnings resulting from an asset sale by an investee ($0.2 billion)

and the gain related to the Regency transaction ($0.1 billion).

GECAS 2011 revenues increased 3% and net earnings decreased

4% compared with 2010. Revenues for 2011 increased compared

with 2010 as a result of organic revenue growth ($0.1 billion). The

decrease in net earnings resulted primarily from core decreases

($0.1 billion), refl ecting the 2010 benefi t from resolution of the 2003–

2005 IRS audit, partially offset by lower impairments ($0.1 billion).

GECAS 2010 revenues increased 12% and net earnings increased

18% compared with 2009. Revenues in 2010 increased compared

with 2009 as a result of organic revenue growth ($0.5 billion), includ-

ing higher investment income. The increase in net earnings resulted

primarily from core increases ($0.2 billion), including the benefi t from

resolution of the 2003–2005 IRS audit, lower credit losses and higher

investment income, partially offset by higher impairments related to

our operating lease portfolio of commercial aircraft.

CORPORATE ITEMS AND ELIMINATIONS

(In millions) 2011 2010 2009

REVENUES

Gains on disposed businesses $ 3,705 $ 105 $ 303

Insurance activities 3,437 3,596 3,383

NBCU/NBCU LLC 1,981 16,901 15,436

Eliminations and other (1,539) (1,479) (1,251)

Total $ 7,584 $19,123 $17,871

OPERATING PROFIT (COST)

Gains on disposed businesses $ 3,705 $ 105 $ 303

NBCU/NBCU LLC 830 2,261 2,264

Insurance activities (58) (58) (79)

Principal retirement plans (a) (1,898) (493) (230)

Underabsorbed corporate

overhead and other costs (2,938) (2,920) (2,851)

Total $ (359) $ (1,105) $ (593)

(a) Included non-operating (non-GAAP) pension income (cost) of $(1.1) billion,

$0.3 billion and $1.5 billion in 2011, 2010 and 2009, respectively, which includes

interest costs, expected return on plan assets and non-cash amortization of

actuarial gains and losses. Also included operating (non-GAAP) pension income

(costs) of $(1.4) billion, $(1.4) billion and $(2.0) billion in 2011, 2010 and 2009,

respectively, which includes service cost and plan amendment amortization.

See the Supplemental Information section.

management’s discussion and analysis

GE 2011 ANNUAL REPORT 47

Corporate items and eliminations revenues of $7.6 billion in 2011

decreased $11.5 billion as a $14.9 billion reduction in revenues

from NBCU LLC operations resulting from the deconsolidation of

NBCU effective January 28, 2011 and $0.3 billion of lower rev-

enues from other disposed businesses were partially offset by a

$3.7 billion pre-tax gain related to the NBCU transaction.

Corporate items and eliminations costs decreased by $0.7 billion

as $3.6 billion of higher gains from disposed businesses, primarily

the NBCU transaction, and a $0.6 billion decrease in restructuring,

rationalization, acquisition-related and other charges were par-

tially offset by $1.4 billion of higher costs of our principal

retirement plans, $1.4 billion of lower earnings from NBCU/NBCU

LLC operations and a $0.6 billion increase in research and devel-

opment spending and global corporate costs.

Certain amounts included in Corporate items and eliminations

cost are not allocated to GE operating segments because they are

excluded from the measurement of their operating performance

for internal purposes. For 2011, these included $0.4 billion at

Energy Infrastructure for acquisition-related costs and $0.4 billion

at Healthcare, $0.3 billion at Energy Infrastructure, $0.2 billion at

Aviation and $0.1 billion at both Home & Business Solutions and

Transportation, primarily for technology and product develop-

ment costs and restructuring, rationalization and other charges.

In 2011, underabsorbed corporate overhead and other costs

was fl at compared with 2010, as increased costs at our global

research centers and global corporate costs were offset by lower

restructuring and other charges (including acquisition-related

costs) of $0.6 billion. In 2010, underabsorbed corporate overhead

and other costs increased by $0.1 billion as compared with 2009,

as increased costs at our global research centers and staff costs

and lower income from operations of disposed businesses were

partially offset by lower restructuring and other charges (includ-

ing environmental remediation costs related to the Hudson River

dredging project) of $0.6 billion.

DISCONTINUED OPERATIONS

(In millions) 2011 2010 2009

Earnings (loss) from discontinued

operations, net of taxes $77 $(873) $219

Discontinued operations primarily comprised BAC, GE Money

Japan, WMC, Consumer RV Marine, Consumer Mexico, Consumer

Singapore and Australian Home Lending. Associated results of

operations, fi nancial position and cash fl ows are separately

reported as discontinued operations for all periods presented.

In 2011, earnings from discontinued operations, net of taxes,

included a $0.3 billion gain related to the sale of Consumer

Singapore and earnings from operations at Australian Home

Lending of $0.1 billion, partially offset by incremental reserves for

excess interest claims related to our loss-sharing arrangement

on the 2008 sale of GE Money Japan of $0.2 billion and the loss on

the sale of Australian Home Lending of $0.1 billion.

In 2010, loss from discontinued operations, net of taxes, primar-

ily refl ected incremental reserves for excess interest claims related

to our loss-sharing arrangement on the 2008 sale of GE Money

Japan of $1.7 billion and estimated after-tax losses of $0.2 billion

and $0.1 billion on the planned sales of Consumer Mexico and

Consumer RV Marine, respectively, partially offset by an after-tax

gain on the sale of BAC of $0.8 billion and earnings from operations

at Consumer Mexico of $0.2 billion and at BAC of $0.1 billion.

In 2009, earnings from discontinued operations, net of taxes,

primarily refl ected earnings from operations of BAC of $0.3 billion,

Australian Home Lending of $0.1 billion and Consumer Mexico

of $0.1 billion, partially offset by incremental reserves for excess

interest claims related to our loss-sharing arrangement on the

2008 sale of GE Money Japan of $0.2 billion and loss from opera-

tions at Consumer RV Marine of $0.1 billion.

For additional information related to discontinued operations,

see Note 2.

Geographic Operations

Our global activities span all geographic regions and primarily

encompass manufacturing for local and export markets, import

and sale of products produced in other regions, leasing of aircraft,

sourcing for our plants domiciled in other global regions and

provision of fi nancial services within these regional economies.

Thus, when countries or regions experience currency and/or

economic stress, we often have increased exposure to certain

risks, but also often have new profi t opportunities. New profi t

opportunities include, among other things, more opportunities

for expansion of industrial and fi nancial services activities

through purchases of companies or assets at reduced prices and

lower U.S. debt fi nancing costs.

Revenues are classifi ed according to the region to which prod-

ucts and services are sold. For purposes of this analysis, the U.S.

is presented separately from the remainder of the Americas. We

classify certain operations that cannot meaningfully be associated

with specifi c geographic areas as “Other Global” for this purpose.

GEOGRAPHIC REVENUES

(In billions) 2011 2010 2009

U.S. $ 69.8 $ 75.1 $ 75.8

Europe 29.1 31.0 36.3

Pacific Basin 23.2 20.8 19.3

Americas 13.2 11.7 11.3

Middle East and Africa 9.8 9.0 9.8

Other Global 2.2 2.0 1.9

Total $147.3 $149.6 $154.4

Global revenues increased 4% to $77.5 billion in 2011, compared

with $74.5 billion and $78.6 billion in 2010 and 2009, respectively.

Global revenues to external customers as a percentage of con-

solidated revenues were 53% in 2011, compared with 50% in

management’s discussion and analysis

48

GE 2011 ANNUAL REPORT

2010 and 51% in 2009. The effects of currency fl uctuations on

reported results increased revenues by $2.5 billion in 2011,

increased revenues by $0.5 billion in 2010 and decreased rev-

enues by $3.9 billion in 2009.

GE global revenues, excluding GECS, in 2011 were $54.3 bil-

lion, up 9% over 2010. Increases in growth markets of 29% in

Latin America, 28% in China and 46% in Australia more than off-

set decreases of 12% in Western Europe. These revenues as a

percentage of GE total revenues, excluding GECS, were 55% in

2011, compared with 50% and 52% in 2010 and 2009, respec-

tively. GE global revenues, excluding GECS, were $49.8 billion in

2010, down 6% from 2009, primarily resulting from decreases

in Europe, Middle East and Africa, partially offset by an increase in

Latin America.

GECS global revenues decreased 6% to $23.2 billion in 2011,

compared with $24.7 billion and $25.7 billion in 2010 and 2009,

respectively, primarily as a result of decreases in Western Europe.

GECS global revenues as a percentage of total GECS revenues

were 47% in 2011, compared with 50% in both 2010 and 2009.

GECS global revenue decreased by 4% in 2010 from $25.7 billion

in 2009, primarily as a result of decreases in Europe, partially off-

set by an increase in Australia.

TOTAL ASSETS (CONTINUING OPERATIONS)

December 31 (In billions) 2011 2010

U.S. $335.6 $322.8

Europe 213.0 250.2

Pacific Basin 62.3 62.6

Americas 46.7 41.9

Other Global 58.4 57.9

Total $716.0 $735.4

Total assets of global operations on a continuing basis were

$380.4 billion in 2011, a decrease of $32.2 billion, or 8%, from

2010. GECS global assets on a continuing basis of $319.3 billion at

the end of 2011 were 1% lower than at the end of 2010, refl ecting

declines in Europe, primarily due to dispositions and portfolio

run-off in various businesses at Consumer and lower fi nancing

receivables and equipment leased to others at CLL.

Financial results of our global activities reported in U.S. dollars

are affected by currency exchange. We use a number of tech-

niques to manage the effects of currency exchange, including

selective borrowings in local currencies and selective hedging of

signifi cant cross-currency transactions. Such principal currencies

are the pound sterling, the euro, the Japanese yen, the Canadian

dollar and the Australian dollar.

Environmental Matters

Our operations, like operations of other companies engaged in

similar businesses, involve the use, disposal and cleanup of sub-

stances regulated under environmental protection laws. We are

involved in a number of remediation actions to clean up hazard-

ous wastes as required by federal and state laws. Such statutes

require that responsible parties fund remediation actions regard-

less of fault, legality of original disposal or ownership of a disposal

site. Expenditures for site remediation actions amounted to

approximately $0.3 billion in 2011, $0.2 billion in 2010 and $0.3 bil-

lion in 2009. We presently expect that such remediation actions

will require average annual expenditures of about $0.4 billion for

each of the next two years.

In 2006, we entered into a consent decree with the

Environmental Protection Agency (EPA) to dredge PCB-containing

sediment from the upper Hudson River. The consent decree

provided that the dredging would be performed in two phases.

Phase 1 was completed in May through November of 2009.

Between Phase 1 and Phase 2 there was an intervening peer

review by an independent panel of national experts. The panel

evaluated the performance of Phase 1 dredging operations with

respect to Phase 1 Engineering Performance Standards and rec-

ommended proposed changes to the standards. On December 17,

2010, EPA issued its decision setting forth the fi nal performance

standards for Phase 2 of the Hudson River dredging project,

incorporating aspects of the recommendations from the inde-

pendent peer review panel and from GE. In December 2010, we

agreed to perform Phase 2 of the project in accordance with the

fi nal performance standards set by EPA and increased our reserve

by $0.8 billion in the fourth quarter of 2010 to account for the

probable and estimable costs of completing Phase 2. In 2011, we

completed the fi rst year of Phase 2 dredging and commenced

work on planned upgrades to the Hudson River wastewater pro-

cessing facility. Based on the results from 2011 dredging and

our best professional engineering judgment, we believe that our

current reserve continues to refl ect our probable and estimable

costs for the remainder of Phase 2 of the dredging project.

management’s discussion and analysis

GE 2011 ANNUAL REPORT 49

Financial Resources and Liquidity

This discussion of fi nancial resources and liquidity addresses the

Statement of Financial Position, Liquidity and Borrowings, Debt

and Derivative Instruments, Guarantees and Covenants, the

Consolidated Statement of Changes in Shareowners’ Equity, the

Statement of Cash Flows, Contractual Obligations, and Variable

Interest Entities.

Overview of Financial Position

Major changes to our shareowners’ equity are discussed in the

Consolidated Statement of Changes in Shareowners’ Equity

section. In addition, other signifi cant changes to balances in our

Statement of Financial Position follow.

Statement of Financial Position

Because GE and GECS share certain signifi cant elements of their

Statements of Financial Position—property, plant and equipment

and borrowings, for example—the following discussion addresses

signifi cant captions in the “consolidated” statement. Within the

following discussions, however, we distinguish between GE and

GECS activities in order to permit meaningful analysis of each

individual consolidating statement.

INVESTMENT SECURITIES comprise mainly investment grade debt

securities supporting obligations to annuitants, policyholders and

holders of guaranteed investment contracts (GICs) in our run-off

insurance operations and Trinity, and investment securities at our

treasury operations and investments held in our CLL business

collateralized by senior secured loans of high-quality, middle-

market companies in a variety of industries. The fair value of

investment securities increased to $47.4 billion at December 31,

2011 from $43.9 billion at December 31, 2010. Of the amount at

December 31, 2011, we held debt securities with an estimated fair

value of $46.3 billion, which included corporate debt securities,

asset-backed securities (ABS), residential mortgage-backed secu-

rities (RMBS) and commercial mortgage-backed securities (CMBS)

with estimated fair values of $26.1 billion, $5.0 billion, $2.6 billion

and $2.8 billion, respectively. Net unrealized gains on debt securi-

ties were $3.0 billion and $0.6 billion at December 31, 2011 and

December 31, 2010, respectively. This amount included unrealized

losses on corporate debt securities, ABS, RMBS and CMBS of

$0.6 billion, $0.2 billion, $0.3 billion and $0.2 billion, respectively, at

December 31, 2011, as compared with $0.4 billion, $0.2 billion,

$0.4 billion and $0.2 billion, respectively, at December 31, 2010.

We regularly review investment securities for impairment

using both qualitative and quantitative criteria. We presently

do not intend to sell the vast majority of our debt securities and

believe that it is not more likely than not that we will be required

to sell these securities that are in an unrealized loss position

before recovery of our amortized cost. We believe that the unreal-

ized loss associated with our equity securities will be recovered

within the foreseeable future.

Our RMBS portfolio is collateralized primarily by pools of indi-

vidual, direct mortgage loans (a majority of which were originated

in 2006 and 2005), not other structured products such as collateral-

ized debt obligations. Substantially all of our RMBS are in a senior

position in the capital structure of the deals and more than 75% are

agency bonds or insured by Monoline insurers (on which we con-

tinue to place reliance). Of our total RMBS portfolio at December 31,

2011 and December 31, 2010, approximately $0.5 billion and

$0.7 billion, respectively, relate to residential subprime credit, pri-

marily supporting our guaranteed investment contracts. A majority

of exposure to residential subprime credit related to investment

securities backed by mortgage loans originated in 2006 and 2005.

Substantially all of the subprime RMBS were investment grade at

the time of purchase and approximately 70% have been subse-

quently downgraded to below investment grade.

Our CMBS portfolio is collateralized by both diversifi ed pools

of mortgages that were originated for securitization (conduit

CMBS) and pools of large loans backed by high quality properties

(large loan CMBS), a majority of which were originated in 2007 and

2006. Substantially all of the securities in our CMBS portfolio have

investment grade credit ratings and the vast majority of the secu-

rities are in a senior position in the capital structure.

Our ABS portfolio is collateralized by senior secured loans of

high-quality, middle-market companies in a variety of industries,

as well as a variety of diversifi ed pools of assets such as student

loans and credit cards. The vast majority of our ABS are in a senior

position in the capital structure of the deals. In addition, substan-

tially all of the securities that are below investment grade are in

an unrealized gain position.

If there has been an adverse change in cash fl ows for RMBS,

management considers credit enhancements such as Monoline

insurance (which are features of a specifi c security). In evaluating

the overall creditworthiness of the Monoline insurer (Monoline),

we use an analysis that is similar to the approach we use for cor-

porate bonds, including an evaluation of the suffi ciency of the

Monoline’s cash reserves and capital, ratings activity, whether

the Monoline is in default or default appears imminent, and the

potential for intervention by an insurance or other regulator.

Monolines provide credit enhancement for certain of our

investment securities, primarily RMBS and municipal securities.

The credit enhancement is a feature of each specifi c security that

guarantees the payment of all contractual cash fl ows, and is not

purchased separately by GE. The Monoline industry continues to

experience fi nancial stress from increasing delinquencies and

defaults on the individual loans underlying insured securities. We

continue to rely on Monolines with adequate capital and claims

paying resources. We have reduced our reliance on Monolines

that do not have adequate capital or have experienced regula-

tor intervention. At December 31, 2011, our investment securities

insured by Monolines on which we continue to place reliance

were $1.6 billion, including $0.3 billion of our $0.5 billion invest-

ment in subprime RMBS. At December 31, 2011, the unrealized loss

management’s discussion and analysis

50

GE 2011 ANNUAL REPORT

associated with securities subject to Monoline credit enhance-

ment, for which there is an expected credit loss, was $0.3 billion.

Total pre-tax, other-than-temporary impairment losses dur-

ing 2011 were $0.5 billion, of which $0.4 billion was recognized

in earnings and primarily relates to credit losses on non-U.S.

government and non-U.S. corporate securities and other-than-

temporary losses on equity securities and $0.1 billion primarily

relates to non-credit related losses on RMBS and is included

within accumulated other comprehensive income.

Total pre-tax, other-than-temporary impairment losses dur-

ing 2010 were $0.5 billion, of which $0.3 billion was recognized

in earnings and primarily relates to credit losses on RMBS, non-

U.S. government securities, non-U.S. corporate securities and

other-than-temporary losses on equity securities, and $0.2 bil-

lion primarily relates to non-credit related losses on RMBS and is

included within accumulated other comprehensive income.

Our qualitative review attempts to identify issuers’ securi-

ties that are “at-risk” of other-than-temporary impairment, that

is, for securities that we do not intend to sell and it is not more

likely than not that we will be required to sell before recovery of

our amortized cost, whether there is a possibility of credit loss

that would result in an other-than-temporary impairment recog-

nition in the following 12 months. Securities we have identifi ed

as “at-risk” primarily relate to investments in RMBS and non-U.S.

corporate debt securities across a broad range of industries.

The amount of associated unrealized loss on these securities

at December 31, 2011, is $0.6 billion. Unrealized losses are not

indicative of the amount of credit loss that would be recognized

as credit losses are determined based on adverse changes in

expected cash fl ows rather than fair value. For further informa-

tion relating to how credit losses are calculated, see Note 3.

Uncertainty in the capital markets may cause increased levels of

other-than-temporary impairments.

At both December 31, 2011 and December 31, 2010, unrealized

losses on investment securities totaled $1.6 billion, including

$1.2 billion aged 12 months or longer at December 31, 2011

and $1.3 billion aged 12 months or longer at December 31, 2010.

Of the amount aged 12 months or longer at December 31, 2011,

more than 70% are debt securities that were considered to be

investment grade by the major rating agencies. In addition, of

the amount aged 12 months or longer, $0.7 billion and $0.3 billion

related to structured securities (mortgage-backed, asset-backed

and securitization retained interests) and corporate debt secu-

rities, respectively. With respect to our investment securities

that are in an unrealized loss position at December 31, 2011, the

majority relate to debt securities held to support obligations

to holders of GICs. We presently do not intend to sell the vast

majority of our debt securities and believe that it is not more likely

than not that we will be required to sell these securities that are in

an unrealized loss position before recovery of our amortized cost.

For additional information, see Note 3.

FAIR VALUE MEASUREMENTS. For fi nancial assets and liabilities

measured at fair value on a recurring basis, fair value is the price

we would receive to sell an asset or pay to transfer a liability in an

orderly transaction with a market participant at the measurement

date. In the absence of active markets for the identical assets or

liabilities, such measurements involve developing assumptions

based on market observable data and, in the absence of such

data, internal information that is consistent with what market

participants would use in a hypothetical transaction that occurs

at the measurement date. Additional information about our appli-

cation of this guidance is provided in Notes 1 and 21. At

December 31, 2011, the aggregate amount of investments that

are measured at fair value through earnings totaled $5.9 billion

and consisted primarily of various assets held for sale in the

ordinary course of business, as well as equity investments.

WORKING CAPITAL, representing GE current receivables and

inventories, less GE accounts payable and progress collections,

increased $1.6 billion at December 31, 2011, compared to

December 31, 2010 due to increases in receivables and inventory,

and lower progress collections, partially offset by increased

accounts payable. As Energy Infrastructure and Aviation deliver

units out of their backlogs over the next few years, progress

collections of $11.3 billion at December 31, 2011, will be earned,

which, along with progress collections on new orders, will impact

working capital. Throughout the last fi ve years, we have executed

a signifi cant number of initiatives through our Operating Council,

such as lean cycle time projects, which have resulted in a more

effi cient use of working capital. The Operating Council meets at

least eight times per year and is led by our Chairman. We discuss

current receivables and inventories, two important elements of

working capital, in the following paragraphs.

CURRENT RECEIVABLES for GE totaled to $11.8 billion at the end of

2011 and $10.4 billion at the end of 2010, and included $9.0 billion

due from customers at the end of 2011 compared with $8.1 billion

at the end of 2010. GE current receivables turnover was 8.3 in

2011, compared with 8.6 in 2010. The overall increase in current

receivables was primarily due to the higher volume and acquisi-

tions at Energy Infrastructure ($1.1 billion).

management’s discussion and analysis

GE 2011 ANNUAL REPORT 51

INVENTORIES for GE totaled to $13.7 billion at December 31, 2011,

up $2.3 billion from the end of 2010. This increase refl ected higher

inventories at Energy Infrastructure, partially due to acquisitions

($1.0 billion), Aviation and Transportation. GE inventory turnover

was 7.0 and 7.2 in 2011 and 2010, respectively. See Note 5.

FINANCING RECEIVABLES is our largest category of assets and

represents one of our primary sources of revenues. Our portfolio

of fi nancing receivables is diverse and not directly comparable to

major U.S. banks. A discussion of the quality of certain elements

of the fi nancing receivables portfolio follows.

Our consumer portfolio is largely non-U.S. and primarily com-

prises mortgage, sales fi nance, auto and personal loans in various

European and Asian countries. Our U.S. consumer fi nancing

receivables comprise 16% of our total portfolio. Of those, approxi-

mately 65% relate primarily to credit cards, which are often

subject to profi t and loss-sharing arrangements with the retailer

(the results of which are refl ected in revenues), and have a smaller

average balance and lower loss severity as compared to bank

cards. The remaining 35% are sales fi nance receivables, which

provide electronics, recreation, medical and home improvement

fi nancing to customers. In 2007, we exited the U.S. mortgage

business and we have no U.S. auto or student loans.

Our commercial portfolio primarily comprises senior, secured

positions with comparatively low loss history. The secured receiv-

ables in this portfolio are collateralized by a variety of asset

classes, which for our CLL business primarily include: industrial-

related facilities and equipment, vehicles, corporate aircraft, and

equipment used in many industries, including the construction,

manufacturing, transportation, media, communications, entertain-

ment and healthcare industries. The portfolios in our Real Estate,

GECAS and Energy Financial Services businesses are collateral-

ized by commercial real estate, commercial aircraft and operating

assets in the global energy industry, respectively. We are in a

secured position for substantially all of our commercial portfolio.

Losses on fi nancing receivables are recognized when they are

incurred, which requires us to make our best estimate of probable

losses inherent in the portfolio. The method for calculating the

best estimate of losses depends on the size, type and risk char-

acteristics of the related fi nancing receivable. Such an estimate

requires consideration of historical loss experience, adjusted for

current conditions, and judgments about the probable effects of

relevant observable data, including present economic conditions

such as delinquency rates, fi nancial health of specifi c custom-

ers and market sectors, collateral values (including housing price

indices as applicable), and the present and expected future lev-

els of interest rates. The underlying assumptions, estimates and

assessments we use to provide for losses are updated periodi-

cally to refl ect our view of current conditions. Changes in such

estimates can signifi cantly affect the allowance and provision for

losses. It is possible to experience credit losses that are different

from our current estimates.

Our risk management process includes standards and policies

for reviewing major risk exposures and concentrations, and eval-

uates relevant data either for individual loans or fi nancing leases,

or on a portfolio basis, as appropriate.

Loans acquired in a business acquisition are recorded at fair

value, which incorporates our estimate at the acquisition date

of the credit losses over the remaining life of the portfolio. As a

result, the allowance for losses is not carried over at acquisition.

This may have the effect of causing lower reserve coverage ratios

for those portfolios.

For purposes of the discussion that follows, “delinquent” receiv-

ables are those that are 30 days or more past due based on their

contractual terms; and “nonearning” receivables are those that

are 90 days or more past due (or for which collection is otherwise

doubtful). Nonearning receivables exclude loans purchased at a

discount (unless they have deteriorated post acquisition). Under

FASB ASC 310, Receivables, these loans are initially recorded at

fair value and accrete interest income over the estimated life of

the loan based on reasonably estimable cash fl ows even if the

underlying loans are contractually delinquent at acquisition. In

addition, nonearning receivables exclude loans that are paying on

a cash accounting basis but classifi ed as nonaccrual and impaired.

“Nonaccrual” fi nancing receivables include all nonearning receiv-

ables and are those on which we have stopped accruing interest.

We stop accruing interest at the earlier of the time at which col-

lection of an account becomes doubtful or the account becomes

90 days past due. Recently restructured fi nancing receivables are

not considered delinquent when payments are brought current

according to the restructured terms, but may remain classifi ed as

nonaccrual until there has been a period of satisfactory payment

performance by the borrower and future payments are reasonably

assured of collection.

Further information on the determination of the allowance

for losses on fi nancing receivables and the credit quality and cat-

egorization of our fi nancing receivables is provided in the Critical

Accounting Estimates section and Notes 1, 6 and 23.

management’s discussion and analysis

52

GE 2011 ANNUAL REPORT

Financing receivables Nonearning receivables Allowance for losses

December 31 (In millions) 2011 2010 2011 2010 2011 2010

COMMERCIAL

CLL

Americas (a) $ 80,505 $ 88,558 $1,862 $ 2,573 $ 889 $1,288

Europe 36,899 37,498 1,167 1,241 400 429

Asia 11,635 11,943 269 406 157 222

Other (a) 436 664 11 646

Total CLL 129,475 138,663 3,309 4,226 1,450 1,945

Energy Financial Services 5,912 7,011 22 62 26 22

GECAS 11,901 12,615 55 —17 20

Other 1,282 1,788 65 102 37 58

Total Commercial 148,570 160,077 3,451 4,390 1,530 2,045

REAL ESTATE

Debt (b) 24,501 30,249 541 961 949 1,292

Business Properties (c) 8,248 9,962 249 386 140 196

Total Real Estate 32,749 40,211 790 1,347 1,089 1,488

CONSUMER

Non-U.S. residential mortgages (d) 36,170 40,011 3,349 3,738 706 803

Non-U.S. installment and revolving credit 18,544 20,132 263 289 717 937

U.S. installment and revolving credit 46,689 43,974 990 1,201 2,008 2,333

Non-U.S. auto 5,691 7,558 43 46 101 168

Other 7,244 8,304 419 478 199 259

Total Consumer 114,338 119,979 5,064 5,752 3,731 4,500

Total $295,657 $320,267 $9,305 $11,489 $6,350 $8,033

(a) During 2011, we transferred our Railcar lending and leasing portfolio from CLL Other to CLL Americas. Prior-period amounts were reclassified to conform to the current-

period presentation.

(b) Financing receivables included $0.1 billion and $0.2 billion of construction loans at December 31, 2011 and December 31, 2010, respectively.

(c) Our Business Properties portfolio is underwritten primarily by the credit quality of the borrower and secured by tenant and owner-occupied commercial properties.

(d) At December 31, 2011, net of credit insurance, approximately 25% of our secured Consumer non-U.S. residential mortgage portfolio comprised loans with introductory,

below market rates that are scheduled to adjust at future dates; with high loan-to-value ratios at inception (greater than 90%); whose terms permitted interest-only

payments; or whose terms resulted in negative amortization. At origination, we underwrite loans with an adjustable rate to the reset value. Of these loans, 79% are in our

U.K. and France portfolios, which comprise mainly loans with interest-only payments and introductory below market rates, have a delinquency rate of 15%, have a loan-to-

value ratio at origination of 76% and have re-indexed loan-to-value ratios of 84% and 56%, respectively. At December 31, 2011, 6% (based on dollar values) of these loans in

our U.K. and France portfolios have been restructured.

The portfolio of fi nancing receivables, before allowance for losses,

was $295.7 billion at December 31, 2011, and $320.3 billion at

December 31, 2010. Financing receivables, before allowance for

losses, decreased $24.6 billion from December 31, 2010, primarily

as a result of collections exceeding originations ($14.9 billion)

(which includes sales), write-offs ($7.2 billion) and the stronger

U.S. dollar ($1.5 billion), partially offset by acquisitions ($3.6 billion).

The $24.6 billion decline in fi nancing receivables excludes fi nanc-

ing receivables of $11.5 billion, previously reported in

Discontinued operations or Assets of businesses held for sale

(primarily non-U.S. residential mortgages and non-U.S. install-

ment and revolving credit) associated with 2011 business and

portfolio dispositions. See Note 2.

Related nonearning receivables totaled $9.3 billion (3.1% of

outstanding receivables) at December 31, 2011, compared with

$11.5 billion (3.6% of outstanding receivables) at December 31,

2010. Nonearning receivables decreased from December 31, 2010,

primarily due to write-offs and discounted payoffs in Real Estate,

improved performance in Commercial and improvements in our

entry rates in Consumer.

The allowance for losses at December 31, 2011 totaled

$6.4 billion compared with $8.0 billion at December 31, 2010,

representing our best estimate of probable losses inherent in

the portfolio. Allowance for losses decreased $1.7 billion from

December 31, 2010, primarily because provisions were lower than

write-offs, net of recoveries by $1.5 billion, which is attributable

to a reduction in the overall fi nancing receivables balance and an

improvement in the overall credit environment. The allowance

for losses as a percent of total fi nancing receivables decreased

from 2.5% at December 31, 2010 to 2.1% at December 31, 2011

primarily due to a decrease in the allowance for losses as dis-

cussed above, partially offset by a decline in the overall fi nancing

receivables balance as collections exceeded originations. Further

information surrounding the allowance for losses related to each

of our portfolios is detailed below.

The following table provides information surrounding selected

ratios related to nonearning fi nancing receivables and the allow-

ance for losses.

management’s discussion and analysis

GE 2011 ANNUAL REPORT 53

Nonearning financing

receivables as a percent of

financing receivables

Allowance for losses as a

percent of nonearning

financing receivables

Allowance for losses as a

percent of total

financing receivables

December 31 2011 2010 2011 2010 2011 2010

COMMERCIAL

CLL

Americas 2.3% 2.9% 47.7% 50.1% 1.1% 1.5%

Europe 3.2 3.3 34.3 34.6 1.1 1.1

Asia 2.3 3.4 58.4 54.7 1.3 1.9

Other 2.5 0.9 36.4 100.0 0.9 0.9

Total CLL 2.6 3.0 43.8 46.0 1.1 1.4

Energy Financial Services 0.4 0.9 118.2 35.5 0.4 0.3

GECAS 0.5 —30.9 —0.1 0.2

Other 5.1 5.7 56.9 56.9 2.9 3.2

Total Commercial 2.3 2.7 44.3 46.6 1.0 1.3

REAL ESTATE

Debt 2.2 3.2 175.4 134.4 3.9 4.3

Business Properties 3.0 3.9 56.2 50.8 1.7 2.0

Total Real Estate 2.4 3.3 137.8 110.5 3.3 3.7

CONSUMER

Non-U.S. residential mortgages 9.3 9.3 21.1 21.5 2.0 2.0

Non-U.S. installment and revolving credit 1.4 1.4 272.6 324.2 3.9 4.7

U.S. installment and revolving credit 2.1 2.7 202.8 194.3 4.3 5.3

Non-U.S. auto 0.8 0.6 234.9 365.2 1.8 2.2

Other 5.8 5.8 47.5 54.2 2.7 3.1

Total Consumer 4.4 4.8 73.7 78.2 3.3 3.8

Total 3.1 3.6 68.2 69.9 2.1 2.5

Included below is a discussion of fi nancing receivables, allowance

for losses, nonearning receivables and related metrics for each of

our signifi cant portfolios.

CLL—AMERICAS. Nonearning receivables of $1.9 billion repre-

sented 20.0% of total nonearning receivables at December 31,

2011. The ratio of allowance for losses as a percent of nonearning

receivables decreased from 50.1% at December 31, 2010, to 47.7%

at December 31, 2011, refl ecting an overall improvement in the

credit quality of the remaining portfolio and an overall decrease in

nonearning receivables. The ratio of nonearning receivables as a

percent of fi nancing receivables decreased from 2.9% at

December 31, 2010, to 2.3% at December 31, 2011, primarily due

to reduced nonearning exposures in our healthcare, media, fran-

chise and inventory fi nancing portfolios, which more than offset

deterioration in our corporate aircraft portfolio. Collateral sup-

porting these nonearning fi nancing receivables primarily includes

assets in the restaurant and hospitality, trucking and industrial

equipment industries and corporate aircraft and, for our lever-

aged fi nance business, equity of the underlying businesses.

CLL—EUROPE. Nonearning receivables of $1.2 billion represented

12.5% of total nonearning receivables at December 31, 2011. The

ratio of allowance for losses as a percent of nonearning receiv-

ables decreased from 34.6% at December 31, 2010, to 34.3% at

December 31, 2011, primarily due to an increase in nonearning

receivables in our senior secured lending portfolio, partially offset

by a reduction in nonearning receivables related to account

restructuring in our asset-backed lending portfolio and improved

delinquency in our equipment fi nance portfolio. The majority of

nonearning receivables are attributable to the Interbanca S.p.A.

portfolio, which was acquired in 2009. The loans acquired with

Interbanca S.p.A. were recorded at fair value, which incorporates

an estimate at the acquisition date of credit losses over their

remaining life. Accordingly, these loans generally have a lower

ratio of allowance for losses as a percent of nonearning receiv-

ables compared to the remaining portfolio. Excluding the

nonearning loans attributable to the 2009 acquisition of

Interbanca S.p.A., the ratio of allowance for losses as a percent of

nonearning receivables decreased from 65.7% at December 31,

2010, to 55.9% at December 31, 2011, for the reasons described

above. The ratio of nonearning receivables as a percent of fi nanc-

ing receivables decreased from 3.3% at December 31, 2010, to

3.2% at December 31, 2011, as a result of a decrease in nonearning

receivables across our equipment fi nance and asset-backed

lending portfolios, partially offset by the increase in nonearning

receivables in our senior secured lending portfolio, for the reasons

described above. Collateral supporting these secured nonearning

fi nancing receivables are primarily equity of the underlying busi-

nesses for our senior secured lending and Interbanca S.p.A.

businesses, and equipment for our equipment fi nance portfolio.

CLL—ASIA. Nonearning receivables of $0.3 billion represented 2.9%

of total nonearning receivables at December 31, 2011. The ratio of

allowance for losses as a percent of nonearning receivables

increased from 54.7% at December 31, 2010, to 58.4% at

management’s discussion and analysis

54

GE 2011 ANNUAL REPORT

December 31, 2011, primarily as a result of collections and write-

offs of nonearning receivables in our asset-based fi nancing

businesses in Japan, Australia and New Zealand. The ratio of

nonearning receivables as a percent of fi nancing receivables

decreased from 3.4% at December 31, 2010, to 2.3% at

December 31, 2011, primarily due to the decline in nonearning

receivables related to our asset-based fi nancing businesses in

Japan, Australia and New Zealand, partially offset by a lower

fi nancing receivables balance. Collateral supporting these non-

earning fi nancing receivables is primarily commercial real estate,

manufacturing equipment, corporate aircraft, and assets in the

auto industry.

REAL ESTATE—DEBT. Nonearning receivables of $0.5 billion repre-

sented 5.8% of total nonearning receivables at December 31,

2011. The decrease in nonearning receivables from December 31,

2010, was driven primarily by the resolution of U.S. multi-family

and offi ce nonearning loans, as well as European hotel and retail

loans, through restructurings, payoffs and foreclosures, partially

offset by new European multi-family delinquencies. The ratio of

allowance for losses as a percent of nonearning receivables

increased from 134.4% to 175.4% refl ecting resolution of non-

earning loans as mentioned above. The ratio of allowance for

losses as a percent of total fi nancing receivables decreased from

4.3% at December 31, 2010 to 3.9% at December 31, 2011, driven

primarily by write-offs related to settlements and payoffs from

impaired loan borrowers and improvement in collateral values.

The Real Estate fi nancing receivables portfolio is collateralized

by income-producing or owner-occupied commercial properties

across a variety of asset classes and markets. At December 31,

2011, total Real Estate fi nancing receivables of $32.7 billion were

primarily collateralized by owner-occupied properties ($8.2 billion),

offi ce buildings ($7.2 billion), apartment buildings ($4.5 billion) and

hotel properties ($3.8 billion). In 2011, commercial real estate mar-

kets showed signs of improved stability and liquidity in certain

markets; however, the pace of improvement varies signifi cantly

by asset class and market and the long term outlook remains

uncertain. We have and continue to maintain an intense focus on

operations and risk management. Loan loss reserves related to our

Real Estate—Debt fi nancing receivables are particularly sensitive to

declines in underlying property values. Assuming global property

values decline an incremental 1% or 5%, and that decline occurs

evenly across geographies and asset classes, we estimate incre-

mental loan loss reserves would be required of less than $0.1 billion

and approximately $0.2 billion, respectively. Estimating the impact

of global property values on loss performance across our portfolio

depends on a number of factors, including macroeconomic condi-

tions, property level operating performance, local market dynamics

and individual borrower behavior. As a result, any sensitivity

analyses or attempts to forecast potential losses carry a high

degree of imprecision and are subject to change. At December 31,

2011, we had 119 foreclosed commercial real estate properties

totaling $0.7 billion.

CONSUMER—NON-U.S. RESIDENTIAL MORTGAGES. Nonearning

receivables of $3.3 billion represented 36.0% of total nonearn-

ing receivables at December 31, 2011. The ratio of allowance for

losses as a percent of nonearning receivables decreased from

21.5% at December 31, 2010, to 21.1% at December 31, 2011. In

the year ended 2011, our nonearning receivables decreased

primarily due to improving portfolio quality in the U.K. Our non-

U.S. mortgage portfolio has a loan-to-value ratio of approximately

75% at origination and the vast majority are fi rst lien positions.

Our U.K. and France portfolios, which comprise a majority of our

total mortgage portfolio, have reindexed loan-to-value ratios of

84% and 56%, respectively. About 4% of these loans are without

mortgage insurance and have a reindexed loan-to-value ratio

equal to or greater than 100%. Loan-to-value information is

updated on a quarterly basis for a majority of our loans and con-

siders economic factors such as the housing price index. At

December 31, 2011, we had in repossession stock 461 houses in

the U.K., which had a value of approximately $0.1 billion. The ratio

of nonearning receivables as a percent of fi nancing receivables

remained constant at 9.3% at December 31, 2011.

CONSUMER—NON-U.S. INSTALLMENT AND REVOLVING CREDIT.

Nonearning receivables of $0.3 billion represented 2.8% of total

non earning receivables at December 31, 2011. The ratio of allow-

ance for losses as a percent of nonearning receivables decreased

from 324.2% at December 31, 2010 to 272.6% at December 31,

2011, refl ecting the effects of loan repayments and reduced

originations primarily in our European platforms.

CONSUMER—U.S. INSTALLMENT AND REVOLVING CREDIT. Nonearn-

ing receivables of $1.0 billion represented 10.6% of total non earning

receivables at December 31, 2011. The ratio of allowance for losses

as a percent of nonearning receivables increased from 194.3% at

December 31, 2010, to 202.8% at December 31, 2011, as a result

of lower entry rates and improved collections resulting in reduc-

tions in our nonearning receivables balance. The ratio of

nonearning receivables as a percentage of fi nancing receivables

decreased from 2.7% at December 31, 2010 to 2.1% at

December 31, 2011, primarily due to lower delinquencies refl ect-

ing an improvement in the overall credit environment.

management’s discussion and analysis

GE 2011 ANNUAL REPORT 55

Nonaccrual Financing Receivables

The following table provides details related to our nonaccrual and

nonearning fi nancing receivables. Nonaccrual fi nancing receiv-

ables include all nonearning receivables and are those on which

we have stopped accruing interest. We stop accruing interest at

the earlier of the time at which collection becomes doubtful

or the account becomes 90 days past due. Substantially all of the

differences between nonearning and nonaccrual fi nancing

receivables relate to loans which are classifi ed as nonaccrual

fi nancing receivables but are paying on a cash accounting basis,

and therefore excluded from nonearning receivables. Of our

$17.0 billion nonaccrual loans at December 31, 2011, $7.5 billion

are currently paying in accordance with their contractual terms.

December 31, 2011 (In millions)

Nonaccrual

financing

receivables

Nonearning

financing

receivables

Commercial

CLL $ 4,512 $3,309

Energy Financial Services 22 22

GECAS 69 55

Other 115 65

Total Commercial 4,718 3,451

Real Estate 6,949 790

Consumer 5,316 5,064

Total $16,983 $9,305

Impaired Loans

“Impaired” loans in the table below are defi ned as larger balance

or restructured loans for which it is probable that the lender will be

unable to collect all amounts due according to original contractual

terms of the loan agreement. The vast majority of our Consumer

and a portion of our CLL nonaccrual receivables are excluded from

this defi nition, as they represent smaller balance homogeneous

loans that we evaluate collectively by portfolio for impairment.

Impaired loans include nonearning receivables on larger balance

or restructured loans, loans that are currently paying interest under

the cash basis (but are excluded from the nonearning category), and

loans paying currently but which have been previously restructured.

Specifi c reserves are recorded for individually impaired loans

to the extent we have determined that it is probable that we will

be unable to collect all amounts due according to original con-

tractual terms of the loan agreement. Certain loans classifi ed as

impaired may not require a reserve because we believe that we

will ultimately collect the unpaid balance (through collection or

collateral repossession).

Further information pertaining to loans classifi ed as impaired

and specifi c reserves is included in the table below.

December 31 (In millions) 2011 2010

LOANS REQUIRING ALLOWANCE FOR LOSSES

Commercial (a) $ 2,357 $ 2,733

Real Estate 4,957 6,812

Consumer 3,036 2,446

Total loans requiring allowance for losses 10,350 11,991

LOANS EXPECTED TO BE FULLY RECOVERABLE

Commercial (a) 3,305 3,087

Real Estate 3,790 3,005

Consumer 69 102

Total loans expected to be fully recoverable 7,164 6,194

TOTAL IMPAIRED LOANS $17,514 $18,185

ALLOWANCE FOR LOSSES (SPECIFIC RESERVES)

Commercial (a) $ 812 $ 1,031

Real Estate 822 1,150

Consumer 717 555

Total allowance for losses (specific reserves) $ 2,351 $ 2,736

Average investment during the period $18,384 $15,538

Interest income earned while impaired (b) 733 391

(a) Includes CLL, Energy Financial Services, GECAS and Other.

(b) Recognized principally on a cash basis.

We regularly review our Real Estate loans for impairment using

both quantitative and qualitative factors, such as debt service

coverage and loan-to-value ratios. We classify Real Estate loans

as impaired when the most recent valuation refl ects a projected

loan-to-value ratio at maturity in excess of 100%, even if the loan

is currently paying in accordance with contractual terms.

Of our $8.7 billion impaired loans at Real Estate at

December 31, 2011, $7.9 billion are currently paying in accordance

with the contractual terms of the loan and are typically loans

where the borrower has adequate debt service coverage to meet

contractual interest obligations. Impaired loans at CLL primarily

represent senior secured lending positions.

Our impaired loan balance at December 31, 2011 and 2010,

classifi ed by the method used to measure impairment was

as follows.

December 31 (In millions) 2011 2010

METHOD USED TO MEASURE IMPAIRMENT

Discounted cash flow $ 8,981 $ 7,644

Collateral value 8,533 10,541

Total $17,514 $18,185

See Note 1 for further information on collateral dependent loans

and our valuation process.

management’s discussion and analysis

56

GE 2011 ANNUAL REPORT

Our loss mitigation strategy is intended to minimize economic

loss and, at times, can result in rate reductions, principal forgive-

ness, extensions, forbearance or other actions, which may cause

the related loan to be classifi ed as a Troubled Debt Restructuring

(TDR), and also as impaired. Changes to Real Estate’s loans primar-

ily include maturity extensions, principal payment acceleration,

changes to collateral terms and cash sweeps, which are in addi-

tion to, or sometimes in lieu of, fees and rate increases. The

determination of whether these changes to the terms and con-

ditions of our commercial loans meet the TDR criteria includes

our consideration of all relevant facts and circumstances. At

December 31, 2011, TDRs included in impaired loans were

$13.7 billion, primarily relating to Real Estate ($7.0 billion), CLL

($3.6 billion) and Consumer ($2.9 billion).

Real Estate TDRs increased from $4.9 billion at December 31,

2010 to $7.0 billion at December 31, 2011, primarily driven by

loans scheduled to mature during 2011, some of which were

modifi ed during 2011 and classifi ed as TDRs upon modifi ca-

tion. For borrowers with demonstrated operating capabilities,

we work to restructure loans when the cash fl ow and projected

value of the underlying collateral support repayment over the

modifi ed term. We deem loan modifi cations to be TDRs when we

have granted a concession to a borrower experiencing fi nancial

diffi culty and we do not receive adequate compensation in the

form of an effective interest rate that is at current market rates

of interest given the risk characteristics of the loan or other con-

sideration that compensates us for the value of the concession.

For the year ended December 31, 2011, we modifi ed $4.0 billion

of loans classifi ed as TDRs, substantially all in our Debt portfolio.

Changes to these loans primarily included maturity extensions,

principal payment acceleration, changes to collateral or covenant

terms and cash sweeps, which are in addition to, or sometimes

in lieu of, fees and rate increases. The limited liquidity and higher

return requirements in the real estate market for loans with

higher loan-to-value (LTV) ratios has typically resulted in the con-

clusion that the modifi ed terms are not at current market rates

of interest, even if the modifi ed loans are expected to be fully

recoverable. We received the same or additional compensation in

the form of rate increases and fees for the majority of these TDRs.

Of our modifi cations classifi ed as TDRs in the last twelve months,

$0.1 billion have subsequently experienced a payment default.

The substantial majority of the Real Estate TDRs have reserves

determined based upon collateral value. Our specifi c reserves

on Real Estate TDRs were $0.6 billion at December 31, 2011 and

$0.4 billion at December 31, 2010, and were 8.4% and 8.9%,

respectively, of Real Estate TDRs. Although we experienced an

increase in TDRs over this period, in many situations these loans

did not require a specifi c reserve as collateral value adequately

covered our recorded investment in the loan. While these modi-

fi ed loans had adequate collateral coverage, we were still required

to complete our TDR classifi cation evaluation on each of the mod-

ifi cations without regard to collateral adequacy.

We utilize certain short-term (three months or less) loan modi-

fi cation programs for borrowers experiencing temporary fi nancial

diffi culties in our Consumer loan portfolio. These loan modifi cation

programs are primarily concentrated in our non-U.S. residential

mortgage and non-U.S. installment and revolving portfolios. We

sold our U.S. residential mortgage business in 2007 and as such,

do not participate in the U.S. government-sponsored mortgage

modifi cation programs. For the year ended December 31, 2011, we

provided short-term modifi cations of approximately $1.0 billion

of consumer loans for borrowers experiencing fi nancial diffi cul-

ties, substantially all in our non-U.S. residential mortgage, credit

card and personal loan portfolios, which are not classifi ed as TDRs.

For these modifi ed loans, we provided insignifi cant interest rate

reductions and payment deferrals, which were not part of the

terms of the original contract. We expect borrowers whose loans

have been modifi ed under these short-term programs to continue

to be able to meet their contractual obligations upon the conclu-

sion of the short-term modifi cation. In addition, we have modifi ed

$2.0 billion of Consumer loans for the year ended December 31,

2011, which are classifi ed as TDRs. Further information on

Consumer impaired loans is provided in Note 23.

Delinquencies

For additional information on delinquency rates at each of our

major portfolios, see Note 23.

management’s discussion and analysis

GE 2011 ANNUAL REPORT 57

GECS Selected European Exposures

At December 31, 2011, we had $92 billion in fi nancing receivables to consumer and commercial customers in Europe. The GECS fi nancing

receivables portfolio in Europe is well diversifi ed across European geographies and customers. Approximately 85% of the portfolio is

secured by collateral and represents approximately 500,000 commercial customers. Several European countries, including Spain, Portugal,

Ireland, Italy, Greece and Hungary (“focus countries”), have been subject to credit deterioration due to weaknesses in their economic and

fi scal situations. The carrying value of GECS funded exposures in these focus countries and in the rest of Europe comprised the following at

December 31, 2011.

December 31, 2011 (In millions) Spain Portugal Ireland Italy Greece Hungary

Rest of

Europe

Total

Europe

Financing receivables, net of allowance for loan

losses (a) (b) $2,316 $601 $881 $7,231 $ 88 $3,060 $78,208 $92,385

Investments (c) (d) 2 — 24 611 36 152 2,650 3,475

Derivatives, net of collateral (c) (e) 47 — — 86 — — 177 310

Total funded exposures (f) $2,365 $601 $905 $7,928 $124 $3,212 $81,035 $96,170

Unfunded commitments $ — $ — $ — $ 311 $ — $ 557 $ 8,168 $ 9,036

(a) Financing receivable amounts are classified based on the location or nature of the related obligor.

(b) Substantially all relates to non-sovereign obligors. Includes residential mortgage loans of approximately $35.4 billion before consideration of purchased credit protection.

We have third-party mortgage insurance for approximately 28% of these residential mortgage loans, substantially all of which were originated in the U.K., Poland and

France.

(c) Investments and derivatives are classified based on the location of the parent of the obligor or issuer.

(d) Includes $1.1 billion related to financial institutions, $0.5 billion related to non-financial institutions and $1.9 billion related to sovereign issuers. Sovereign issuances totaled

$0.1 billion, $0.1 billion and $0.1 billion related to Italy, Hungary and Greece, respectively. We held no investments issued by sovereign entities in the other focus countries.

(e) Net of cash collateral, entire amount is non-sovereign.

(f) Excludes other GECS funded assets in European countries, which comprise cash and equivalents ($41.6 billion), ELTO ($11.9 billion), real estate held for investment ($7.3 billion),

and cost and equity method investments ($2.5 billion). GECS cash and equivalents in European countries include cash on short-term placement with highly rated global

financial institutions based in Europe, sovereign central banks and agencies or supranational entities ($24.2 billion) and the remaining $17.4 billion of cash and equivalents is

placed with highly rated European financial institutions on a short-term basis and is secured by U.S. Treasury securities ($9.6 billion) and sovereign bonds of non-focus

countries ($7.8 billion), where the value of our collateral exceeds the amount of our cash exposure.

We manage counterparty exposure, including credit risk, on an

individual counterparty basis. We place defi ned risk limits around

each obligor and review our risk exposure on the basis of both the

primary and parent obligor, as well as the issuer of securities held

as collateral. These limits are adjusted on an ongoing basis based

on our continuing assessment of the credit risk of the obligor or

issuer. In setting our counterparty risk limits, we focus on high

quality credits and diversifi cation through spread of risk in an

effort to actively manage our overall exposure. We actively moni-

tor each exposure against these limits and take appropriate

action when we believe that risk limits have been exceeded or

there are excess risk concentrations. Our collateral position and

ability to work out problem accounts has historically mitigated

our actual loss experience. Delinquency experience has been

improving in our European commercial and consumer platforms

in the aggregate, and we actively monitor and take action to

reduce exposures where appropriate. Uncertainties surrounding

European markets could have an impact on the judgments and

estimates used in determining the carrying value of these assets.

OTHER GECS RECEIVABLES totaled $13.4 billion at December 31,

2011 and $12.9 billion at December 31, 2010, and consisted pri-

marily of amounts due from GE (primarily related to material

procurement programs of $3.5 billion and $2.7 billion at

December 31, 2011 and December 31, 2010, respectively), insur-

ance receivables, nonfi nancing customer receivables, amounts

due under operating leases, amounts accrued from investment

income, tax receivables and various sundry items.

PROPERTY, PLANT AND EQUIPMENT totaled $65.7 billion at

December 31, 2011, down $0.5 billion from 2010, primarily refl ect-

ing a reduction in equipment leased to others principally as a

result of the disposal of our CLL marine container leasing busi-

ness. GE property, plant and equipment consisted of investments

for its own productive use, whereas the largest element for GECS

was equipment provided to third parties on operating leases.

Details by category of investment are presented in Note 7.

GE additions to property, plant and equipment totaled

$3.0 billion and $2.4 billion in 2011 and 2010, respectively. Total

expenditures, excluding equipment leased to others, for the past

fi ve years were $13.1 billion, of which 40% was investment for

growth through new capacity and product development; 24%

was investment in productivity through new equipment and pro-

cess improvements; and 36% was investment for other purposes

such as improvement of research and development facilities and

safety and environmental protection.

GECS additions to property, plant and equipment were

$9.9 billion and $7.7 billion during 2011 and 2010, respectively, pri-

marily refl ecting additions of commercial aircraft at GECAS.

GOODWILL AND OTHER INTANGIBLE ASSETS totaled $84.7 billion

and $74.4 billion, respectively, at December 31, 2011. Goodwill

increased $8.2 billion from 2010, primarily from the acquisitions of

Converteam, the Well Support division of John Wood Group PLC,

Dresser, Inc., Wellstream PLC and Lineage Power Holdings, Inc.,

partially offset by the stronger U.S. dollar. Other intangible assets

increased $2.1 billion from 2010, primarily from acquisitions,

management’s discussion and analysis

58

GE 2011 ANNUAL REPORT

partially offset by amortization expense. Goodwill and intangible

assets were reduced by $19.6 billion and $2.6 billion in 2010 in

connection with our decision to transfer the assets of the NBCU

business to a joint venture. See Note 8.

ALL OTHER ASSETS comprise mainly real estate equity properties

and investments, equity and cost method investments, derivative

instruments and assets held for sale, and totaled $111.7 billion at

December 31, 2011, an increase of $17.4 billion, primarily related

to our investment in NBCU LLC ($18.0 billion), increases in the fair

value of derivative instruments ($4.6 billion) and our investment in

PTL ($1.2 billion), partially offset by a decrease in real estate equity

investments ($3.3 billion) and the sale of a substantial portion of

our equity investment in Garanti Bank ($3.0 billion). During 2011,

we recognized other-than-temporary impairments of cost and

equity method investments, excluding those related to real

estate, of $0.1 billion.

Included in other assets are Real Estate equity investments

of $23.9 billion and $27.2 billion at December 31, 2011 and

December 31, 2010, respectively. Our portfolio is diversifi ed, both

geographically and by asset type. We review the estimated values

of our commercial real estate investments at least annually, or

more frequently as conditions warrant. Based on the most recent

valuation estimates available, the carrying value of our Real Estate

investments exceeded their estimated value by about $2.6 bil-

lion. Commercial real estate valuations in 2011 showed signs of

improved stability and liquidity in certain markets, primarily in

the U.S.; however, the pace of improvement varies signifi cantly

by asset class and market. Accordingly, there continues to be

risk and uncertainty surrounding commercial real estate values.

Declines in estimated value of real estate below carrying amount

result in impairment losses when the aggregate undiscounted

cash fl ow estimates used in the estimated value measurement

are below the carrying amount. As such, estimated losses in the

portfolio will not necessarily result in recognized impairment

losses. During 2011, Real Estate recognized pre-tax impairments

of $1.2 billion in its real estate held for investment, which were

driven by declining cash fl ow projections for properties in certain

markets, most notably Japan and Spain, as well as properties

we have identifi ed for short-term disposition based upon our

updated outlook of local market conditions. Real Estate invest-

ments with undiscounted cash fl ows in excess of carrying value

of 0% to 5% at December 31, 2011 had a carrying value of $1.6 bil-

lion and an associated estimated unrealized loss of approximately

$0.2 billion. Continued deterioration in economic conditions or

prolonged market illiquidity may result in further impairments

being recognized.

Contract costs and estimated earnings refl ect revenues

earned in excess of billings on our long-term contracts to con-

struct technically complex equipment (such as power generation,

aircraft engines and aeroderivative units) and long-term prod-

uct maintenance or extended warranty arrangements. Our total

contract costs and estimated earnings balances at December 31,

2011 and 2010, were $9.0 billion and $8.1 billion, respectively,

refl ecting the timing of billing in relation to work performed,

as well as changes in estimates of future revenues and costs.

Our total contract costs and estimated earnings balance at

December 31, 2011, primarily related to customers in our Energy,

Aviation and Transportation businesses. Further information is

provided in the Critical Accounting Estimates section.

LIQUIDITY AND BORROWINGS

We maintain a strong focus on liquidity. At both GE and GECS we

manage our liquidity to help ensure access to suffi cient funding to

meet our business needs and fi nancial obligations throughout

business cycles.

Our liquidity and borrowing plans for GE and GECS are estab-

lished within the context of our annual fi nancial and strategic

planning processes. At GE, our liquidity and funding plans take

into account the liquidity necessary to fund our operating com-

mitments, which include primarily purchase obligations for

inventory and equipment, payroll and general expenses (including

pension funding). We also take into account our capital allocation

and growth objectives, including paying dividends, repurchas-

ing shares, investing in research and development and acquiring

industrial businesses. At GE, we rely primarily on cash generated

through our operating activities and also have historically main-

tained a commercial paper program that we regularly use to fund

operations in the U.S., principally within fi scal quarters.

GECS’ liquidity position is targeted to meet our obligations

under both normal and stressed conditions. GECS establishes a

funding plan annually that is based on the projected asset size

and cash needs of the Company, which over the past few years,

has included our strategy to reduce our ending net investment in

GE Capital. GECS relies on a diversifi ed source of funding, includ-

ing the unsecured term debt markets, the global commercial

paper markets, deposits, secured funding, retail funding prod-

ucts, bank borrowings and securitizations to fund its balance

sheet, in addition to cash generated through collection of princi-

pal, interest and other payments on our existing portfolio of loans

and leases to fund its operating and interest expense costs.

Our 2012 GECS funding plan anticipates repayment of princi-

pal on outstanding short-term borrowings, including the current

portion of its long-term debt ($82.7 billion at December 31, 2011,

which includes $2.7 billion of alternative and other funding),

through issuance of long-term debt and reissuance of com-

mercial paper, cash on hand, collections of fi nancing receivables

exceeding originations, dispositions, asset sales, and deposits

and other alternative sources of funding. Interest on borrowings

is primarily repaid through interest earned on existing fi nancing

receivables. During 2011, GECS earned interest income on fi nanc-

ing receivables of $22.4 billion, which more than offset interest

expense of $13.9 billion.

We maintain a detailed liquidity policy for GECS which includes

a requirement to maintain a contingency funding plan. The

liquidity policy defi nes GECS’ liquidity risk tolerance under dif-

ferent stress scenarios based on its liquidity sources and also

establishes procedures to escalate potential issues. We actively

monitor GECS’ access to funding markets and its liquidity profi le

through tracking external indicators and testing various stress

scenarios. The contingency funding plan provides a framework

for handling market disruptions and establishes escalation proce-

dures in the event that such events or circumstances arise.

management’s discussion and analysis

GE 2011 ANNUAL REPORT 59

GECS is a savings and loan holding company under U.S. law

and became subject to Federal Reserve Board (FRB) supervision

on July 21, 2011, the one-year anniversary of the Dodd-Frank

Wall Street Reform and Consumer Protection Act. The FRB has

recently fi nalized a regulation that requires certain organizations

it supervises to submit annual capital plans for review, including

institutions’ plans to make capital distributions, such as divi-

dend payments. The applicability and timing of this proposed

regulation to GECS is not yet determined; however, the FRB has

indicated that it expects to extend these requirements to large

savings and loan holding companies through separate rulemak-

ing or by order. We expect that GECS capital allocation planning

will be subject to FRB review, which could affect the timing of the

GE Capital dividend to the parent.

Actions taken to strengthen and maintain our liquidity are

described in the following section.

Liquidity Sources

We maintain liquidity sources that consist of cash and equivalents

and a portfolio of high-quality, liquid investments (Liquidity

Portfolio) and committed unused credit lines.

We have consolidated cash and equivalents of $84.5 billion

at December 31, 2011, which is available to meet our needs. See

Statement of Financial Position. At GECS, about $9 billion is in

regulated bank and insurance entities and is subject to regulatory

restrictions. Most of GE’s cash is held outside the U.S. and is avail-

able to fund operations and other growth of non-U.S. subsidiaries;

it is also available to fund our needs in the U.S. on a short-term

basis without being subject to U.S. tax. Under current tax laws,

should GE or GECS determine to repatriate cash and equivalents

held outside the U.S., we may be subject to additional U.S. income

taxes and foreign withholding taxes. Less than $1 billion is held in

restricted countries.

In addition to our $84.5 billion of cash and equivalents, we

have a centrally-managed portfolio of high-quality, liquid invest-

ments with a fair value of $3.6 billion at December 31, 2011. The

Liquidity Portfolio is used to manage liquidity and meet the oper-

ating needs of GECS under both normal and stress scenarios.

The investments consist of unencumbered U.S. government

securities, U.S. agency securities, securities guaranteed by the

government, supranational securities, and a select group of non-

U.S. government securities. We believe that we can readily obtain

cash for these securities, even in stressed market conditions.

We have committed, unused credit lines totaling $52.4 bil-

lion that have been extended to us by 58 fi nancial institutions at

December 31, 2011. These lines include $35.1 billion of revolving

credit agreements under which we can borrow funds for peri-

ods exceeding one year. Additionally, $16.7 billion are 364-day

lines that contain a term-out feature that allows us to extend

borrowings for one year from the date of expiration of the

lending agreement.

At December 31, 2011, our aggregate cash and equivalents

and committed credit lines were more than twice GECS’ commer-

cial paper borrowings balance.

Funding Plan

We have reduced our GE Capital ending net investment, exclud-

ing cash and equivalents, from $526 billion at January 1, 2010 to

$445 billion at December 31, 2011.

In 2011, we completed issuances of $26.9 billion of senior

unsecured debt and $2.0 billion of subordinated notes with

maturities up to 25 years (and subsequent to December 31, 2011,

an additional $11.6 billion). Average commercial paper borrow-

ings for GECS and GE during the fourth quarter were $42.4 billion

and $15.6 billion, respectively, and the maximum amount of com-

mercial paper borrowings outstanding for GECS and GE during

the fourth quarter was $45.0 billion and $18.7 billion, respectively.

GECS commercial paper maturities are funded principally through

new issuances and at GE are substantially repaid by quarter-end

using overseas cash which is available for use in the U.S. on a

short-term basis without being subject to U.S. tax.

Under the Federal Deposit Insurance Corporation’s (FDIC)

Temporary Liquidity Guarantee Program (TLGP), the FDIC guaran-

teed certain senior, unsecured debt issued by GECC on or before

October 31, 2009 for which we paid $2.3 billion of fees to the FDIC

for our participation. Our TLGP-guaranteed debt has remaining

maturities of $35 billion in 2012. We anticipate funding these and

our other long-term debt maturities through a combination of

existing cash, new debt issuances, collections exceeding origi-

nations, dispositions, asset sales, deposits and other alternative

sources of funding. GECC and GE are parties to an Eligible Entity

Designation Agreement and GECC is subject to the terms of a

Master Agreement, each entered into with the FDIC. The terms

of these agreements include, among other things, a requirement

that GE and GECC reimburse the FDIC for any amounts that the

FDIC pays to holders of GECC debt that is guaranteed by the FDIC.

We securitize fi nancial assets as an alternative source of fund-

ing. During 2011, we completed $11.8 billion of non-recourse

issuances and had maturities of $12.0 billion. At December 31,

2011, consolidated non-recourse borrowings were $29.3 billion.

We anticipate that securitization will remain a part of our overall

funding capabilities notwithstanding the changes in consolida-

tion rules described in Notes 1 and 24.

Our issuances of securities repurchase agreements are

insignifi cant and are limited to activities at certain of our for-

eign banks. At December 31, 2011 and December 31, 2010, we

were party to repurchase agreements totaling $0.1 billion and

$0.2 billion, respectively, which were accounted for as on-book

fi nancings. We have had no repurchase agreements which were

not accounted for as fi nancings and we do not engage in securi-

ties lending transactions.

We have deposit-taking capability at 11 banks outside of the

U.S. and two banks in the U.S.—GE Capital Retail Bank (formerly

GE Money Bank), a Federal Savings Bank (FSB), and GE Capital

Financial Inc., an industrial bank (IB). The FSB and IB currently

issue certifi cates of deposit (CDs) in maturity terms from three

months to ten years.

Total alternative funding at December 31, 2011 was $66 bil-

lion, composed mainly of $43 billion bank deposits, $9 billion

of funding secured by real estate, aircraft and other collateral

and $8 billion GE Interest Plus notes. The comparable amount at

December 31, 2010 was $60 billion.

management’s discussion and analysis

60

GE 2011 ANNUAL REPORT

Preferred Share Redemption

On October 16, 2008, we issued 30,000 shares of 10% cumulative

perpetual preferred stock (par value $1.00 per share) having an

aggregate liquidation value of $3.0 billion, and warrants to pur-

chase 134,831,460 shares of common stock (par value $0.06 per

share) to Berkshire Hathaway Inc. (Berkshire Hathaway) for net

proceeds of $3.0 billion in cash. The proceeds were allocated to

the preferred shares ($2.5 billion) and the warrants ($0.5 billion) on

a relative fair value basis and recorded in other capital. The war-

rants are exercisable for fi ve years at an exercise price of $22.25

per share of common stock and settled through physical

share issuance.

The preferred stock was redeemable at our option three

years after issuance at a price of 110% of liquidation value plus

accrued and unpaid dividends. On September 13, 2011, we

provided notice to Berkshire Hathaway that we would redeem

the shares for the stated redemption price of $3.3 billion, plus

accrued and unpaid dividends. In connection with this notice,

we recognized a preferred dividend of $0.8 billion (calculated as

the difference between the carrying value and redemption value

of the preferred stock), which was recorded as a reduction to

our third quarter earnings attributable to common shareown-

ers and common shareowners’ equity and a related EPS charge

of $0.08. As a result and beginning in the fourth quarter of 2011,

we are no longer required to pay the preferred share dividends

of $0.3 billion annually. The preferred shares were redeemed on

October 17, 2011.

EXCHANGE RATE AND INTEREST RATE RISKS are managed with a

variety of techniques, including match funding and selective use

of derivatives. We use derivatives to mitigate or eliminate certain

fi nancial and market risks because we conduct business in

diverse markets around the world and local funding is not always

effi cient. In addition, we use derivatives to adjust the debt we are

issuing to match the fi xed or fl oating nature of the assets we are

originating. We apply strict policies to manage each of these risks,

including prohibitions on speculative activities. Following is an

analysis of the potential effects of changes in interest rates and

currency exchange rates using so-called “shock” tests that seek

to model the effects of shifts in rates. Such tests are inherently

limited based on the assumptions used (described further below)

and should not be viewed as a forecast; actual effects would

depend on many variables, including market factors and the

composition of the Company’s assets and liability portfolio at

that time.

• It is our policy to minimize exposure to interest rate changes.

We fund our fi nancial investments using debt or a combina-

tion of debt and hedging instruments so that the interest rates

of our borrowings match the expected interest rate profi le on

our assets. To test the effectiveness of our fi xed rate positions,

we assumed that, on January 1, 2012, interest rates increased

by 100 basis points across the yield curve (a “parallel shift” in

that curve) and further assumed that the increase remained

in place for 2012. We estimated, based on the year-end 2011

portfolio and holding all other assumptions constant, that our

2012 consolidated net earnings would decline by less than

$0.1 billion as a result of this parallel shift in the yield curve.

• It is our policy to minimize currency exposures and to con-

duct operations either within functional currencies or using

the protection of hedge strategies. We analyzed year-end

2011 consolidated currency exposures, including derivatives

designated and effective as hedges, to identify assets and

liabilities denominated in other than their relevant functional

currencies. For such assets and liabilities, we then evaluated

the effects of a 10% shift in exchange rates between those

currencies and the U.S. dollar, holding all other assumptions

constant. This analysis indicated that our 2012 consolidated

net earnings would decline by less than $0.1 billion as a result

of such a shift in exchange rates.

Debt and Derivative Instruments, Guarantees and Covenants

PRINCIPAL DEBT AND DERIVATIVE CONDITIONS are described below.

Certain of our derivative instruments can be terminated if speci-

fi ed credit ratings are not maintained and certain debt and

derivatives agreements of other consolidated entities have provi-

sions that are affected by these credit ratings. As of December 31,

2011, GE and GECC’s long-term unsecured debt credit rating from

Standard and Poor’s Ratings Service (S&P) was “AA+” with a stable

outlook and from Moody’s Investors Service (“Moody’s”) was “Aa2”

with a stable outlook. As of December 31, 2011, GE, GECS and

GECC’s short-term credit rating from S&P was “A-1+” and from

Moody’s was “P-1”. We are disclosing these ratings to enhance

understanding of our sources of liquidity and the effects of our

ratings on our costs of funds. Although we currently do not

expect a downgrade in the credit ratings, our ratings may be

subject to revision or withdrawal at any time by the assigning

rating organization, and each rating should be evaluated indepen-

dently of any other rating.

Fair values of our derivatives can change signifi cantly from

period to period based on, among other factors, market move-

ments and changes in our positions. We manage counterparty

credit risk (the risk that counterparties will default and not make

payments to us according to the terms of our standard master

agreements) on an individual counterparty basis. Where we have

agreed to netting of derivative exposures with a counterparty,

we offset our exposures with that counterparty and apply the

value of collateral posted to us to determine the net exposure.

Accordingly, we actively monitor these net exposures against

defi ned limits and take appropriate actions in response, including

requiring additional collateral.

Swap, forward and option contracts are executed under stan-

dard master agreements that typically contain mutual downgrade

provisions that provide the ability of the counterparty to require

termination if the long-term credit rating of the applicable GE

entity were to fall below A-/A3. In certain of these master agree-

ments, the counterparty also has the ability to require termination

if the short-term rating of the applicable GE entity were to fall

below A-1/P-1. The net derivative liability after consideration

of netting arrangements, outstanding interest payments and

management’s discussion and analysis

GE 2011 ANNUAL REPORT 61

collateral posted by us under these master agreements was esti-

mated to be $1.2 billion at December 31, 2011. See Note 22.

Other debt and derivative agreements of consolidated entities:

• Trinity comprises two consolidated entities that hold invest-

ment securities, the majority of which are investment grade,

and are funded by the issuance of GICs. Since 2004, GECC

has fully guaranteed repayment of these entities’ GIC obliga-

tions. If the long-term credit rating of GECC were to fall below

AA-/Aa3 or its short-term credit rating were to fall below

A-1+/P-1, certain GIC holders could require immediate repay-

ment of their investment. To the extent that amounts due

exceed the ultimate value of proceeds realized from Trinity

assets, GECC would be required to provide such excess

amount. As of December 31, 2011, the carrying value of the

liabilities of these entities was $5.6 billion and the fair value

of their assets was $4.7 billion (which included net unrealized

losses on investment securities of $0.7 billion). With respect

to these investment securities, we intend to hold them at

least until such time as their individual fair values exceed their

amortized cost. We have the ability to hold all such debt secu-

rities until maturity.

• Another consolidated entity also had issued GICs where pro-

ceeds are loaned to GECC. If the long-term credit rating of

GECC were to fall below AA-/Aa3 or its short-term credit rat-

ing were to fall below A-1+/P-1, GECC could be required to

provide up to approximately $1.7 billion as of December 31,

2011, to repay holders of GICs, compared to $2.3 billion at

December 31, 2010. These obligations are included in long-

term borrowings in our Statement of Financial Position.

• If the short-term credit rating of GECC were reduced below

A-1/P-1, GECC would be required to partially cash collateral-

ize certain covered bonds. The maximum amount that would

be required to be provided in the event of such a downgrade

is determined by contract and amounted to $0.7 billion and

$0.8 billion at December 31, 2011 and December 31, 2010,

respectively. These obligations are included in long-term bor-

rowings in our Statement of Financial Position.

RATIO OF EARNINGS TO FIXED CHARGES, INCOME MAINTENANCE

AGREEMENT AND SUBORDINATED DEBENTURES.

On March 28,

1991, GE entered into an agreement with GECC to make payments

to GECC, constituting additions to pre-tax income under the

agreement, to the extent necessary to cause the ratio of earnings

to fi xed charges of GECC and consolidated affi liates (determined

on a consolidated basis) to be not less than 1.10:1 for the period,

as a single aggregation, of each GECC fi scal year commencing

with fi scal year 1991. GECC’s ratio of earnings to fi xed charges

was 1.52:1 for 2011. No payment is required in 2012 pursuant to

this agreement.

Any payment made under the Income Maintenance Agreement

will not affect the ratio of earnings to fi xed charges as determined

in accordance with current SEC rules because it does not constitute

an addition to pre-tax income under current U.S. GAAP.

In addition, in connection with certain subordinated deben-

tures for which GECC receives equity credit by rating agencies, GE

has agreed to promptly return dividends, distributions or other

payments it receives from GECC during events of default or inter-

est deferral periods under such subordinated debentures. There

were $7.2 billion of such debentures outstanding at December 31,

2011. See Note 10.

Consolidated Statement of Changes in Shareowners’ Equity

GE shareowners’ equity decreased by $2.5 billion in 2011, com-

pared with an increase of $1.6 billion in 2010 and an increase of

$12.6 billion in 2009.

Net earnings increased GE shareowners’ equity by $14.2 bil-

lion, $11.6 billion and $11.0 billion, partially offset by dividends

declared of $7.5 billion (including $0.8 billion related to our pre-

ferred stock redemption), $5.2 billion and $6.8 billion in 2011, 2010

and 2009, respectively.

Elements of other comprehensive income (OCI) decreased

shareowners’ equity by $6.1 billion in 2011 and $2.3 billion in 2010,

respectively, compared with an increase of $6.6 billion in 2009,

inclusive of changes in accounting principles. The components of

these changes are as follows:

• Changes in benefi t plans decreased shareowners’ equity by

$7.0 billion in 2011, primarily refl ecting lower discount rates

used to measure pension and postretirement benefi t obliga-

tions and lower asset values, partially offset by amortization

of actuarial losses and prior service costs out of accumulated

other comprehensive income (AOCI). This compared with

an increase of $1.1 billion and a decrease of $1.8 billion in

2010 and 2009, respectively. The increase in 2010 primarily

refl ected prior service cost and net actuarial loss amortiza-

tion out of AOCI and higher fair value of plans assets, partially

offset by lower discount rates used to measure pension and

postretirement benefi t obligations. The decrease in 2009

primarily related to lower discount rates used to measure

pension and postretirement benefi t obligations. Further infor-

mation about changes in benefi t plans is provided in Note 12.

• Currency translation adjustments increased shareowners’

equity by $0.2 billion in 2011, decreased equity by $3.9 billion

in 2010 and increased equity by $4.1 billion in 2009. Changes

in currency translation adjustments refl ect the effects of

changes in currency exchange rates on our net investment

in non-U.S. subsidiaries that have functional currencies other

than the U.S. dollar. At year end 2011 and 2010, the U.S. dol-

lar strengthened against most major currencies, including

the pound sterling and the euro, and weakened against the

Australian dollar and the Japanese yen. Releases from AOCI

related to dispositions and changes in deferred taxes more

than offset the effect in 2011. At year end 2009, the dollar

weakened against most major currencies.

• The change in fair value of investment securities increased

shareowners’ equity by $0.6 billion in 2011, refl ecting lower

interest rates and improved market conditions related to U.S.

corporate securities, partially offset by adjustments to refl ect

the effect of the unrealized gains on insurance-related assets

and equity. The change in fair value of investment securities

increased shareowners’ equity by an insignifi cant amount and

$2.7 billion in 2010 and 2009, respectively. Further information

about investment securities is provided in Note 3.

management’s discussion and analysis

62

GE 2011 ANNUAL REPORT

• Changes in the fair value of derivatives designated as cash

fl ow hedges increased shareowners’ equity by $0.1 billion

in 2011, primarily refl ecting lower fair values of interest rate

and cross-currency hedges which were more than offset

by releases from AOCI contemporaneous with the earnings

effects of the related hedged items, principally as an adjust-

ment of interest expense on borrowings. The change in the

fair value of derivatives designated as cash fl ow hedges

increased shareowners’ equity by $0.5 billion and $1.6 billion

in 2010 and 2009, respectively. Further information about the

fair value of derivatives is provided in Note 22.

Statement of Cash Flows—Overview from 2009 through 2011

Consolidated cash and equivalents were $84.5 billion at

December 31, 2011, an increase of $5.6 billion from December 31,

2010. Cash and equivalents totaled $78.9 billion at December 31,

2010, an increase of $7.1 billion from December 31, 2009.

We evaluate our cash fl ow performance by reviewing our

industrial (non-fi nancial services) businesses and fi nancial ser-

vices businesses separately. Cash from operating activities (CFOA)

is the principal source of cash generation for our industrial busi-

nesses. The industrial businesses also have liquidity available via

the public capital markets. Our fi nancial services businesses use

a variety of fi nancial resources to meet our capital needs. Cash for

fi nancial services businesses is primarily provided from the issu-

ance of term debt and commercial paper in the public and private

markets and deposits, as well as fi nancing receivables collections,

sales and securitizations.

GE Cash Flow

GE cash and equivalents were $8.4 billion at December 31, 2011,

compared with $19.2 billion at December 31, 2010. GE CFOA

totaled $12.1 billion in 2011 compared with $14.7 billion and

$16.4 billion in 2010 and 2009, respectively. With respect to GE

CFOA, we believe that it is useful to supplement our GE Statement

of Cash Flows and to examine in a broader context the business

activities that provide and require cash.

GE CFOA decreased $2.7 billion compared with 2010, primar-

ily due to the impact of the disposal of NBCU. In 2010, GE CFOA

decreased $1.7 billion compared with 2009, primarily refl ecting

a decrease in progress collections.

(In billions) 2011 2010 2009

Operating cash collections (a) $ 93.6 $ 98.2 $104.1

Operating cash payments (81.5) (83.5) (87.7)

GE cash from operating

activities (GE CFOA) (a) $ 12.1 $ 14.7 $ 16.4

(a) GE sells customer receivables to GECS in part to fund the growth of our industrial

businesses. These transactions can result in cash generation or cash use. During

any given period, GE receives cash from the sale of receivables to GECS. It also

foregoes collection of cash on receivables sold. The incremental amount of cash

received from sale of receivables in excess of the cash GE would have otherwise

collected had those receivables not been sold, represents the cash generated or

used in the period relating to this activity. The incremental cash generated in GE

CFOA from selling these receivables to GECS increased GE CFOA by $0.9 billion in

2011, decreased GE CFOA by $0.4 billion in 2010 and increased GE CFOA by an

insignificant amount in 2009. See Note 27 for additional information about the

elimination of intercompany transactions between GE and GECS.

The most signifi cant source of cash in GE CFOA is customer-

related activities, the largest of which is collecting cash following

a product or services sale. GE operating cash collections

decreased by $4.6 billion in 2011 and decreased by $5.9 billion in

2010. These changes are consistent with the changes in compa-

rable GE operating segment revenues, including the impact of the

disposal of NBCU. Analyses of operating segment revenues dis-

cussed in the preceding Segment Operations section are the best

way of understanding their customer-related CFOA.

The most signifi cant operating use of cash is to pay our sup-

pliers, employees, tax authorities and others for a wide range of

material and services. GE operating cash payments decreased in

2011 and 2010 by $2.0 billion and $4.2 billion, respectively. These

changes are consistent with the changes in GE total costs and

expenses, including the impact of the disposal of NBCU.

Dividends from GECS represented the distribution of a por-

tion of GECS retained earnings and are distinct from cash from

continuing operating activities within the fi nancial services busi-

nesses. The amounts included in GE CFOA are the total dividends,

including normal dividends as well as any special dividends from

excess capital, primarily resulting from GECS business sales.

Beginning in the fi rst quarter of 2009, GECS suspended its normal

dividend to GE. There were no special dividends received from

GECS in 2011, 2010 or 2009.

GECS Cash Flow

GECS cash and equivalents were $76.7 billion at December 31,

2011, compared with $60.3 billion at December 31, 2010. GECS

cash from operating activities totaled $21.1 billion for 2011, com-

pared with cash from operating activities of $21.6 billion for the

same period of 2010. This was primarily due to increases, com-

pared to the prior year, in cash paid for income taxes of $0.7 billion

and decreases in accrued expenses of $1.4 billion, partially offset

by increases in net cash collateral held from counterparties on

derivative contracts of $1.2 billion.

Consistent with our plan to reduce GECS asset levels, cash

from investing activities was $29.2 billion in 2011, resulting from a

$14.4 billion reduction in fi nancing receivables due to collections

exceeding originations. We received proceeds of $11.6 billion

from sales of GE Capital’s Australian Home Lending operations

($4.6 billion), Consumer businesses in Mexico ($1.9 billion), Canada

($1.4 billion) and Singapore ($0.7 billion), Consumer RV Marine

($1.8 billion), our Real Estate Interpark business ($0.7 billion), our

CLL marine container leasing business ($0.4 billion) and our CLL

trailer fl eet services business in Mexico ($0.1 billion). Additionally,

we received proceeds of $4.4 billion from the sale of our equity

method investments in Garanti Bank ($3.8 billion) and Banco

Colpatria ($0.6 billion). These increases are partially offset by

an increase in equipment purchases, mainly at our GECAS and

CLL businesses.

GECS cash used for fi nancing activities in 2011 of $33.1 billion

related primarily to a $37.8 billion reduction in total borrowings,

consisting primarily of reductions in long-term borrowings and

commercial paper, partially offset by an increase in deposits at

our banks.

GECS pays dividends to GE through a distribution of its

retained earnings, including special dividends from proceeds of

certain business sales.

management’s discussion and analysis

GE 2011 ANNUAL REPORT 63

Intercompany Eliminations

Effects of transactions between related companies are made on an arms-length basis, are eliminated and consist primarily of GECS

dividends to GE or capital contributions from GE to GECS; GE customer receivables sold to GECS; GECS services for trade receivables

management and material procurement; buildings and equipment (including automobiles) leased between GE and GECS; information

technology (IT) and other services sold to GECS by GE; aircraft engines manufactured by GE that are installed on aircraft purchased by

GECS from third-party producers for lease to others; and various investments, loans and allocations of GE corporate overhead costs.

For further information related to intercompany eliminations, see Note 27.

Contractual Obligations

As defi ned by reporting regulations, our contractual obligations for future payments as of December 31, 2011, follow.

Payments due by period

(In billions) Total 2012 2013–2014 2015–2016

2017 and

thereafter

Borrowings and bank deposits (Note 10) $453.4 $173.8 $104.5 $52.6 $122.5

Interest on borrowings and bank deposits 116.1 12.2 17.5 12.8 73.6

Purchase obligations (a) (b) 57.3 32.5 15.1 4.7 5.0

Insurance liabilities (Note 11) (c) 23.7 2.9 3.6 2.5 14.7

Operating lease obligations (Note 19) 4.5 1.0 1.4 0.9 1.2

Other liabilities (d) 73.6 23.5 12.5 8.0 29.6

Contractual obligations of discontinued operations (e) 1.4 1.4 — — —

(a) Included all take-or-pay arrangements, capital expenditures, contractual commitments to purchase equipment that will be leased to others, contractual commitments

related to factoring agreements, software acquisition/license commitments, contractual minimum programming commitments and any contractually required cash

payments for acquisitions.

(b) Excluded funding commitments entered into in the ordinary course of business by our financial services businesses. Further information on these commitments and other

guarantees is provided in Note 25.

(c) Included contracts with reasonably determinable cash flows such as structured settlements, certain property and casualty contracts, and guaranteed investment

contracts.

(d) Included an estimate of future expected funding requirements related to our pension and postretirement benefit plans and included liabilities for unrecognized tax

benefits. Because their future cash outflows are uncertain, the following non-current liabilities are excluded from the table above: deferred taxes, derivatives, deferred

revenue and other sundry items. For further information on certain of these items, see Notes 14 and 22.

(e) Included payments for other liabilities.

Variable Interest Entities (VIEs)

We securitize fi nancial assets and arrange other forms of asset-

backed fi nancing in the ordinary course of business as an

alternative source of funding. The securitization transactions we

engage in are similar to those used by many fi nancial institutions.

The assets we securitize include: receivables secured by

equipment, commercial real estate, credit card receivables, fl oor-

plan inventory receivables, GE trade receivables and other assets

originated and underwritten by us in the ordinary course of

business. The securitizations are funded with asset-backed com-

mercial paper and term debt.

Substantially all of our securitization VIEs are consolidated

because we are considered to be the primary benefi ciary of the

entity. Our interests in other VIEs for which we are not the primary

benefi ciary are accounted for as investment securities, fi nanc-

ing receivables or equity method investments depending on the

nature of our involvement.

At December 31, 2011, consolidated variable interest entity

assets and liabilities were $46.7 billion and $35.2 billion, respectively,

a decrease of $4.1 billion and $3.1 billion from 2010, respectively.

Assets held by these entities are of equivalent credit quality to

our on-book assets. We monitor the underlying credit quality in

accordance with our role as servicer and apply rigorous controls to

the execution of securitization transactions. With the exception of

credit and liquidity support discussed below, investors in these enti-

ties have recourse only to the underlying assets.

At December 31, 2011, investments in unconsolidated VIEs,

including our noncontrolling interest in PTL, were $16.5 billion, an

increase of $3.9 billion from 2010, primarily related to an increase

of $2.1 billion in an investment in asset-backed securities issued

by a senior secured loan fund and $1.2 billion in PTL. In addition to

our existing investments, we have contractual obligations to fund

additional investments in the unconsolidated VIEs to fund new

asset origination. At December 31, 2011, these contractual obliga-

tions were $4.3 billion, a decrease of $0.7 billion from 2010.

We do not have implicit support arrangements with any VIE.

We did not provide non-contractual support for previously trans-

ferred fi nancing receivables to any VIE in either 2011 or 2010.

management’s discussion and analysis

64

GE 2011 ANNUAL REPORT

Critical Accounting Estimates

Accounting estimates and assumptions discussed in this section

are those that we consider to be the most critical to an under-

standing of our fi nancial statements because they involve

signifi cant judgments and uncertainties. Many of these estimates

include determining fair value. All of these estimates refl ect our

best judgment about current, and for some estimates future,

economic and market conditions and their effects based on

information available as of the date of these fi nancial statements.

If these conditions change from those expected, it is reasonably

possible that the judgments and estimates described below could

change, which may result in future impairments of investment

securities, goodwill, intangibles and long-lived assets, incremen-

tal losses on fi nancing receivables, increases in reserves for

contingencies, establishment of valuation allowances on deferred

tax assets and increased tax liabilities, among other effects. Also

see Note 1, Summary of Signifi cant Accounting Policies, which

discusses the signifi cant accounting policies that we have

selected from acceptable alternatives.

LOSSES ON FINANCING RECEIVABLES are recognized when they are

incurred, which requires us to make our best estimate of probable

losses inherent in the portfolio. The method for calculating the

best estimate of losses depends on the size, type and risk charac-

teristics of the related fi nancing receivable. Such an estimate

requires consideration of historical loss experience, adjusted for

current conditions, and judgments about the probable effects of

relevant observable data, including present economic conditions

such as delinquency rates, fi nancial health of specifi c customers

and market sectors, collateral values (including housing price

indices as applicable), and the present and expected future levels

of interest rates. The underlying assumptions, estimates and

assessments we use to provide for losses are updated periodi-

cally to refl ect our view of current conditions. Changes in such

estimates can signifi cantly affect the allowance and provision for

losses. It is possible that we will experience credit losses that are

different from our current estimates. Write-offs in both our con-

sumer and commercial portfolios can also refl ect both losses that

are incurred subsequent to the beginning of a fi scal year and

information becoming available during that fi scal year which may

identify further deterioration on exposures existing prior to the

beginning of that fi scal year, and for which reserves could not

have been previously recognized. Our risk management process

includes standards and policies for reviewing major risk expo-

sures and concentrations, and evaluates relevant data either for

individual loans or fi nancing leases, or on a portfolio basis,

as appropriate.

Further information is provided in the Global Risk Management

section and Financial Resources and Liquidity—Financing

Receivables sections, the Asset Impairment section that follows

and in Notes 1, 6 and 23.

REVENUE RECOGNITION ON LONG-TERM PRODUCT SERVICES

AGREEMENTS

requires estimates of profi ts over the multiple-year

terms of such agreements, considering factors such as the fre-

quency and extent of future monitoring, maintenance and

overhaul events; the amount of personnel, spare parts and other

resources required to perform the services; and future billing rate

and cost changes. We routinely review estimates under product

services agreements and regularly revise them to adjust for

changes in outlook. We also regularly assess customer credit risk

inherent in the carrying amounts of receivables and contract

costs and estimated earnings, including the risk that contractual

penalties may not be suffi cient to offset our accumulated invest-

ment in the event of customer termination. We gain insight into

future utilization and cost trends, as well as credit risk, through

our knowledge of the installed base of equipment and the close

interaction with our customers that comes with supplying critical

services and parts over extended periods. Revisions that affect a

product services agreement’s total estimated profi tability result

in an adjustment of earnings; such adjustments increased earn-

ings by $0.4 billion in 2011, decreased earnings by $0.2 billion in

2010 and increased earnings by $0.2 billion in 2009. We provide

for probable losses when they become evident.

Further information is provided in Notes 1 and 9.

ASSET IMPAIRMENT assessment involves various estimates and

assumptions as follows:

Investments. We regularly review investment securities for

impairment using both quantitative and qualitative criteria.

Effective April 1, 2009, the FASB amended ASC 320 and modifi ed

the requirements for recognizing and measuring other-than-

temporary impairment for debt securities. If we do not intend to

sell the security and it is not more likely than not that we will be

required to sell the security before recovery of our amortized

cost, we evaluate other qualitative criteria to determine whether

a credit loss exists, such as the fi nancial health of and specifi c

prospects for the issuer, including whether the issuer is in compli-

ance with the terms and covenants of the security. Quantitative

criteria include determining whether there has been an adverse

change in expected future cash fl ows. For equity securities, our

criteria include the length of time and magnitude of the amount

that each security is in an unrealized loss position. Our other-

than-temporary impairment reviews involve our fi nance, risk and

asset management functions as well as the portfolio manage-

ment and research capabilities of our internal and third-party

asset managers. See Note 1, which discusses the determination

of fair value of investment securities.

Further information about actual and potential impairment

losses is provided in the Financial Resources and Liquidity—

Investment Securities section and in Notes 1, 3 and 9.

management’s discussion and analysis

GE 2011 ANNUAL REPORT 65

Long-Lived Assets. We review long-lived assets for impairment

whenever events or changes in circumstances indicate that the

related carrying amounts may not be recoverable. Determining

whether an impairment has occurred typically requires various

estimates and assumptions, including determining which undis-

counted cash fl ows are directly related to the potentially impaired

asset, the useful life over which cash fl ows will occur, their

amount, and the asset’s residual value, if any. In turn, measure-

ment of an impairment loss requires a determination of fair value,

which is based on the best information available. We derive the

required undiscounted cash fl ow estimates from our historical

experience and our internal business plans. To determine fair

value, we use quoted market prices when available, our internal

cash fl ow estimates discounted at an appropriate interest rate

and independent appraisals, as appropriate.

Our operating lease portfolio of commercial aircraft is a sig-

nifi cant concentration of assets in GE Capital, and is particularly

subject to market fl uctuations. Therefore, we test recoverabil ity

of each aircraft in our operating lease portfolio at least annually.

Additionally, we perform quarterly evaluations in circumstances

such as when aircraft are re-leased, current lease terms have

changed or a specifi c lessee’s credit standing changes. We

consider market conditions, such as global demand for com-

mercial aircraft. Estimates of future rentals and residual values

are based on historical experience and information received rou-

tinely from independent appraisers. Estimated cash fl ows from

future leases are reduced for expected downtime between leases

and for estimated technical costs required to prepare aircraft to

be redeployed. Fair value used to measure impairment is based

on manage ment’s best estimate. In determining its best estimate,

management evaluates average current market values (obtained

from third parties) of similar type and age aircraft, which are

adjusted for the attributes of the specifi c aircraft under lease.

We recognized impairment losses on our operating lease port-

folio of commercial aircraft of $0.3 billion and $0.4 billion in 2011

and 2010, respectively. Provisions for losses on fi nancing receiv-

ables related to commercial aircraft were an insignifi cant amount

for both 2011 and 2010.

Further information on impairment losses and our exposure to

the commercial aviation industry is provided in the Operations—

Overview section and in Notes 7 and 25.

Real Estate. We review the estimated value of our commercial real

estate investments at least annually, or more frequently as condi-

tions warrant. The cash fl ow estimates used for both estimating

value and the recoverability analysis are inherently judgmental,

and refl ect current and projected lease profi les, available industry

information about expected trends in rental, occupancy and

capitalization rates and expected business plans, which include

our estimated holding period for the asset. Our portfolio is diversi-

fi ed, both geographically and by asset type. However, the global

real estate market is subject to periodic cycles that can cause

signifi cant fl uctuations in market values. Based on the most recent

valuation estimates available, the carrying value of our Real Estate

investments exceeded their estimated value by about $2.6 billion.

Commercial real estate valuations in 2011 showed signs of

improved stability and liquidity in certain markets, primarily in the

U.S.; however, the pace of improvement varies signifi cantly by

asset class and market. Accordingly, there continues to be risk and

uncertainty surrounding commercial real estate values. Declines

in the estimated value of real estate below carrying amount result

in impairment losses when the aggregate undiscounted cash fl ow

estimates used in the estimated value measurement are below the

carrying amount. As such, estimated losses in the portfolio will not

necessarily result in recognized impairment losses. When we

recognize an impairment, the impairment is measured using the

estimated fair value of the underlying asset, which is based upon

cash fl ow estimates that refl ect current and projected lease pro-

fi les and available industry information about capitalization rates

and expected trends in rents and occupancy and is corroborated

by external appraisals. During 2011, Real Estate recognized pre-

tax impairments of $1.2 billion in its real estate held for

investment, as compared to $2.3 billion in 2010. Continued dete-

rioration in economic conditions or prolonged market illiquidity

may result in further impairments being recognized. Furthermore,

signifi cant judgment and uncertainty related to forecasted valua-

tion trends, especially in illiquid markets, results in inherent

imprecision in real estate value estimates. Further information is

provided in the Global Risk Management and the All Other Assets

sections and in Note 9.

Goodwill and Other Identifi ed Intangible Assets. We test good-

will for impairment annually and more frequently if circumstances

warrant. We determine fair values for each of the reporting units

using an income approach. When available and appropriate, we

use comparative market multiples to corroborate discounted

cash fl ow results. For purposes of the income approach, fair value

is determined based on the present value of estimated future

cash fl ows, discounted at an appropriate risk-adjusted rate. We

use our internal forecasts to estimate future cash fl ows and include

an estimate of long-term future growth rates based on our most

recent views of the long-term outlook for each business. Actual

results may differ from those assumed in our forecasts. We derive

our discount rates using a capital asset pricing model and analyz-

ing published rates for industries relevant to our reporting units to

estimate the cost of equity fi nancing. We use discount rates that

are commensurate with the risks and uncertainty inherent in the

respective businesses and in our internally developed forecasts.

Discount rates used in our reporting unit valuations ranged from

9.0% to 13.75%. Valuations using the market approach refl ect

prices and other relevant observable information generated by

market transactions involving comparable businesses.

management’s discussion and analysis

66

GE 2011 ANNUAL REPORT

Compared to the market approach, the income approach

more closely aligns each reporting unit valuation to our business

profi le, including geographic markets served and product offer-

ings. Required rates of return, along with uncertainty inherent

in the forecasts of future cash fl ows, are refl ected in the selec-

tion of the discount rate. Equally important, under this approach,

reasonably likely scenarios and associated sensitivities can be

developed for alternative future states that may not be refl ected

in an observable market price. A market approach allows for

comparison to actual market transactions and multiples. It can

be somewhat more limited in its application because the popula-

tion of potential comparables is often limited to publicly-traded

companies where the characteristics of the comparative business

and ours can be signifi cantly different, market data is usually not

available for divisions within larger conglomerates or non-public

subsidiaries that could otherwise qualify as comparable, and the

specifi c circumstances surrounding a market transaction (e.g.,

synergies between the parties, terms and conditions of the trans-

action, etc.) may be different or irrelevant with respect to our

business. It can also be diffi cult, under certain market conditions,

to identify orderly transactions between market participants in

similar businesses. We assess the valuation methodology based

upon the relevance and availability of the data at the time we per-

form the valuation and weight the methodologies appropriately.

Estimating the fair value of reporting units requires the use of

estimates and signifi cant judgments that are based on a number

of factors including actual operating results. If current conditions

persist longer or deteriorate further than expected, it is reason-

ably possible that the judgments and estimates described above

could change in future periods.

We review identifi ed intangible assets with defi ned use-

ful lives and subject to amortization for impairment whenever

events or changes in circumstances indicate that the related car-

rying amounts may not be recoverable. Determining whether

an impairment loss occurred requires comparing the carrying

amount to the sum of undiscounted cash fl ows expected to be

generated by the asset. We test intangible assets with indefi nite

lives annually for impairment using a fair value method such as

discounted cash fl ows. For our insurance activities remaining in

continuing operations, we periodically test for impairment our

deferred acquisition costs and present value of future profi ts.

Further information is provided in the Financial Resources and

Liquidity—Goodwill and Other Intangible Assets section and in

Notes 1 and 8.

PENSION ASSUMPTIONS are signifi cant inputs to the actuarial mod-

els that measure pension benefi t obligations and related effects on

operations. Two assumptions—discount rate and expected return

on assets—are important elements of plan expense and asset/

liability measurement. We evaluate these critical assumptions at

least annually on a plan and country-specifi c basis. We periodically

evaluate other assumptions involving demographic factors, such

as retirement age, mortality and turnover, and update them to

refl ect our experience and expectations for the future. Actual

results in any given year will often differ from actuarial assump-

tions because of economic and other factors.

Accumulated and projected benefi t obligations are measured

as the present value of expected payments. We discount those

cash payments using the weighted average of market-observed

yields for high-quality fi xed-income securities with maturities

that correspond to the payment of benefi ts. Lower discount rates

increase present values and subsequent-year pension expense;

higher discount rates decrease present values and subsequent-

year pension expense.

Our discount rates for principal pension plans at December 31,

2011, 2010 and 2009 were 4.21%, 5.28% and 5.78%, respectively,

refl ecting market interest rates.

To determine the expected long-term rate of return on pension

plan assets, we consider current and expected asset allocations,

as well as historical and expected returns on various categories

of plan assets. In developing future long-term return expecta-

tions for our principal benefi t plans’ assets, we formulate views

on the future economic environment, both in the U.S. and abroad.

We evaluate general market trends and historical relationships

among a number of key variables that impact asset class returns

such as expected earnings growth, infl ation, valuations, yields and

spreads, using both internal and external sources. We also take

into account expected volatility by asset class and diversifi cation

across classes to determine expected overall portfolio results

given current and expected allocations. Asset earnings in our

principal pension plans were fl at in 2011, and had average annual

earnings of 4.7%, 6.7% and 8.7% per year in the 10-, 15- and

25-year periods ended December 31, 2011, respectively. These

average historical returns were signifi cantly affected by invest-

ment losses in 2008. Based on our analysis of future expectations

of asset performance, past return results, and our current and

expected asset allocations, we have assumed an 8.0% long-term

expected return on those assets for cost recognition in 2012 com-

pared to 8.0% in 2011 and 8.5% in both 2010 and 2009.

Changes in key assumptions for our principal pension plans

would have the following effects.

• Discount rate—A 25 basis point increase in discount rate

would decrease pension cost in the following year by $0.2 bil-

lion and would decrease the pension benefi t obligation at

year-end by about $1.9 billion.

• Expected return on assets—A 50 basis point decrease in the

expected return on assets would increase pension cost in the

following year by $0.2 billion.

Further information on our pension plans is provided in the

Operations—Overview section and in Note 12.

INCOME TAXES. Our annual tax rate is based on our income, statu-

tory tax rates and tax planning opportunities available to us in the

various jurisdictions in which we operate. Tax laws are complex and

subject to different interpretations by the taxpayer and respective

governmental taxing authorities. Signifi cant judgment is required

in determining our tax expense and in evaluating our tax positions,

including evaluating uncertainties. We review our tax positions

quarterly and adjust the balances as new information becomes

available. Our income tax rate is signifi cantly affected by the tax

rate on our global operations. In addition to local country tax laws

and regulations, this rate depends on the extent earnings are

management’s discussion and analysis

GE 2011 ANNUAL REPORT 67

indefi nitely reinvested outside the United States. Indefi nite rein-

vestment is determined by management’s judgment about and

intentions concerning the future operations of the Company. At

December 31, 2011 and 2010, $102 billion and $94 billion of earn-

ings, respectively, have been indefi nitely reinvested outside the

United States. Most of these earnings have been reinvested in

active non-U.S. business operations, and we do not intend to

repatriate these earnings to fund U.S. operations. Because of the

availability of U.S. foreign tax credits, it is not practicable to deter-

mine the U.S. federal income tax liability that would be payable if

such earnings were not reinvested indefi nitely. Deferred income

tax assets represent amounts available to reduce income taxes

payable on taxable income in future years. Such assets arise

because of temporary differences between the fi nancial report-

ing and tax bases of assets and liabilities, as well as from net

operating loss and tax credit carryforwards. We evaluate the

recoverability of these future tax deductions and credits by

assessing the adequacy of future expected taxable income from

all sources, including reversal of taxable temporary differences,

forecasted operating earnings and available tax planning strate-

gies. These sources of income rely heavily on estimates. We use

our historical experience and our short and long-range business

forecasts to provide insight. Further, our global and diversifi ed

business portfolio gives us the opportunity to employ various

prudent and feasible tax planning strategies to facilitate the

recoverability of future deductions. Amounts recorded for

deferred tax assets related to non-U.S. net operating losses, net

of valuation allowances, were $4.8 billion and $4.4 billion at

December 31, 2011 and 2010, respectively, including $0.9 billion

and $1.0 billion at December 31, 2011 and 2010, respectively, of

deferred tax assets, net of valuation allowances, associated with

losses reported in discontinued operations, primarily related to

our loss on the sale of GE Money Japan. Such year-end 2011

amounts are expected to be fully recoverable within the appli-

cable statutory expiration periods. To the extent we do not

consider it more likely than not that a deferred tax asset will be

recovered, a valuation allowance is established.

Further information on income taxes is provided in the

Operations—Overview section and in Note 14.

DERIVATIVES AND HEDGING. We use derivatives to manage a

variety of risks, including risks related to interest rates, foreign

exchange and commodity prices. Accounting for derivatives as

hedges requires that, at inception and over the term of the

arrangement, the hedged item and related derivative meet the

requirements for hedge accounting. The rules and interpretations

related to derivatives accounting are complex. Failure to apply this

complex guidance correctly will result in all changes in the fair

value of the derivative being reported in earnings, without regard

to the offsetting changes in the fair value of the hedged item.

In evaluating whether a particular relationship qualifi es for

hedge accounting, we test effectiveness at inception and each

reporting period thereafter by determining whether changes in

the fair value of the derivative offset, within a specifi ed range,

changes in the fair value of the hedged item. If fair value changes

fail this test, we discontinue applying hedge accounting to that

relationship prospectively. Fair values of both the derivative

instrument and the hedged item are calculated using internal

valuation models incorporating market-based assumptions, sub-

ject to third-party confi rmation, as applicable.

At December 31, 2011, derivative assets and liabilities were

$10.0 billion and $0.7 billion, respectively. Further information

about our use of derivatives is provided in Notes 1, 9, 21 and 22.

FAIR VALUE MEASUREMENTS. Assets and liabilities measured at fair

value every reporting period include investments in debt and

equity securities and derivatives. Assets that are not measured at

fair value every reporting period but that are subject to fair value

measurements in certain circumstances include loans and long-

lived assets that have been reduced to fair value when they are

held for sale, impaired loans that have been reduced based on the

fair value of the underlying collateral, cost and equity method

investments and long-lived assets that are written down to fair

value when they are impaired and the remeasurement of retained

investments in formerly consolidated subsidiaries upon a change

in control that results in deconsolidation of a subsidiary, if we sell

a controlling interest and retain a noncontrolling stake in the

entity. Assets that are written down to fair value when impaired

and retained investments are not subsequently adjusted to fair

value unless further impairment occurs.

A fair value measurement is determined as the price we would

receive to sell an asset or pay to transfer a liability in an orderly

transaction between market participants at the measurement

date. In the absence of active markets for the identical assets or

liabilities, such measurements involve developing assumptions

based on market observable data and, in the absence of such

data, internal information that is consistent with what market

participants would use in a hypothetical transaction that occurs

at the measurement date. The determination of fair value often

involves signifi cant judgments about assumptions such as deter-

mining an appropriate discount rate that factors in both risk and

liquidity premiums, identifying the similarities and differences

in market transactions, weighting those differences accordingly

and then making the appropriate adjustments to those market

transactions to refl ect the risks specifi c to our asset being valued.

Further information on fair value measurements is provided in

Notes 1, 21 and 22.

OTHER LOSS CONTINGENCIES are uncertain and unresolved matters

that arise in the ordinary course of business and result from events

or actions by others that have the potential to result in a future loss.

Such contingencies include, but are not limited to environmental

obligations, litigation, regulatory proceedings, product quality and

losses resulting from other events and developments.

When a loss is considered probable and reasonably estimable,

we record a liability in the amount of our best estimate for the

ultimate loss. When there appears to be a range of possible costs

with equal likelihood, liabilities are based on the low-end of such

range. However, the likelihood of a loss with respect to a par-

ticular contingency is often diffi cult to predict and determining

a meaningful estimate of the loss or a range of loss may not be

practicable based on the information available and the potential

effect of future events and decisions by third parties that will

determine the ultimate resolution of the contingency. Moreover,

it is not uncommon for such matters to be resolved over many

years, during which time relevant developments and new

management’s discussion and analysis

68

GE 2011 ANNUAL REPORT

information must be continuously evaluated to determine both

the likelihood of potential loss and whether it is possible to rea-

sonably estimate a range of possible loss. When a loss is probable

but a reasonable estimate cannot be made, disclosure is provided.

Disclosure also is provided when it is reasonably possible that

a loss will be incurred or when it is reasonably possible that the

amount of a loss will exceed the recorded provision. We regularly

review all contingencies to determine whether the likelihood of

loss has changed and to assess whether a reasonable estimate

of the loss or range of loss can be made. As discussed above,

development of a meaningful estimate of loss or a range of poten-

tial loss is complex when the outcome is directly dependent on

negotiations with or decisions by third parties, such as regulatory

agencies, the court system and other interested parties. Such fac-

tors bear directly on whether it is possible to reasonably estimate

a range of potential loss and boundaries of high and low estimates.

Further information is provided in Notes 13 and 25.

Other Information

New Accounting Standards

In June 2011, the FASB issued amendments to existing standards

for reporting comprehensive income. Accounting Standards

Update (ASU) 2011-05 rescinds the requirement to present a

Consolidated Statement of Changes in Shareowners’ Equity and

introduces a new statement, the Consolidated Statement of

Comprehensive Income. The new statement begins with net

income and adds or deducts other recognized changes in assets

and liabilities that are not included in net earnings under GAAP.

For example, unrealized changes in currency translation adjust-

ments are included in the measure of comprehensive income but

are excluded from net earnings. The amendments are effective

for our fi rst quarter 2012 fi nancial statements. The amendments

affect only the display of those components of equity categorized

as other comprehensive income and do not change existing

recognition and measurement requirements that determine

net earnings.

In May 2011, the FASB issued amendments to existing stan-

dards for fair value measurement and disclosure, which are

effective in the fi rst quarter of 2012. The amendments clarify

or change the application of existing fair value measurements,

including: that the highest and best use and valuation premise in

a fair value measurement are relevant only when measuring the

fair value of nonfi nancial assets; that a reporting entity should

measure the fair value of its own equity instrument from the per-

spective of a market participant that holds that instrument as

an asset; to permit an entity to measure the fair value of certain

fi nancial instruments on a net basis rather than based on its gross

exposure when the reporting entity manages its fi nancial instru-

ments on the basis of such net exposure; that in the absence of

a Level 1 input, a reporting entity should apply premiums and

discounts when market participants would do so when pricing

the asset or liability consistent with the unit of account; and that

premiums and discounts related to size as a characteristic of the

reporting entity’s holding are not permitted in a fair value mea-

surement. The impact of adopting these amendments is expected

to be immaterial to the fi nancial statements.

Research and Development

GE-funded research and development expenditures were $4.6 bil-

lion, $3.9 billion and $3.3 billion in 2011, 2010 and 2009,

respectively. In addition, research and development funding from

customers, principally the U.S. government, totaled $0.8 billion,

$1.0 billion and $1.1 billion in 2011, 2010 and 2009, respectively.

Aviation accounts for the largest share of GE’s research and devel-

opment expenditures with funding from both GE and customer

funds. Energy Infrastructure’s Energy business and Healthcare

also made signifi cant expenditures funded primarily by GE.

Orders and Backlog

GE Infrastructure equipment orders increased 24% to $50.1 billion

at December 31, 2011. Total GE Infrastructure backlog increased

14% to $200.2 billion at December 31, 2011, composed of equip-

ment backlog of $52.7 billion and services backlog of $147.5 billion.

Orders constituting backlog may be cancelled or deferred by

customers, subject in certain cases to penalties. See the Segment

Operations section for further information.

management’s discussion and analysis

GE 2011 ANNUAL REPORT 69

Selected Financial Data

The following table provides key information for Consolidated, GE and GECS.

(Dollars in millions; per-share amounts in dollars) 2011 2010 2009 2008 2007

GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES

Revenues $147,300 $149,593 $154,438 $179,837 $169,964

Earnings from continuing operations attributable to the Company 14,074 12,517 10,806 17,804 22,268

Earnings (loss) from discontinued operations, net of taxes,

attributable to the Company 77 (873) 219 (394) (60)

Net earnings attributable to the Company 14,151 11,644 11,025 17,410 22,208

Dividends declared (a) 7,498 5,212 6,785 12,649 11,713

Return on average GE shareowners’ equity (b) 11.9% 12.1% 11.6% 17.0% 22.0%

Per common share

Earnings from continuing operations—diluted $ 1.23 $ 1.14 $ 0.99 $ 1.76 $ 2.18

Earnings (loss) from discontinued operations—diluted 0.01 (0.08) 0.02 (0.04) (0.01)

Net earnings—diluted 1.23 1.06 1.01 1.72 2.17

Earnings from continuing operations—basic 1.23 1.14 0.99 1.76 2.19

Earnings (loss) from discontinued operations—basic 0.01 (0.08) 0.02 (0.04) (0.01)

Net earnings—basic 1.24 1.06 1.01 1.72 2.18

Dividends declared 0.61 0.46 0.61 1.24 1.15

Stock price range 21.65–14.02 19.70–13.75 17.52–5.87 38.52–12.58 42.15–33.90

Year-end closing stock price 17.91 18.29 15.13 16.20 37.07

Cash and equivalents 84,501 78,943 70,479 48,378 15,553

Total assets of continuing operations 715,987 735,368 756,943 773,531 756,526

Total assets 717,242 747,793 781,949 797,876 795,758

Long-term borrowings 243,459 293,323 336,172 320,522 314,977

Common shares outstanding—average (in thousands) 10,591,146 10,661,078 10,613,717 10,079,923 10,182,083

Common shareowner accounts—average 570,000 588,000 605,000 604,000 608,000

Employees at year end

United States (c) 131,000 121,000 122,000 139,000 141,000

Other countries (c) 170,000 152,000 168,000 169,000 170,000

NBCU —14,000 14,000 15,000 16,000

Total employees 301,000 287,000 304,000 323,000 327,000

GE DATA

Short-term borrowings $ 2,184 $ 456 $ 504 $ 2,375 $ 4,106

Long-term borrowings 9,405 9,656 11,681 9,827 11,656

Noncontrolling interests 1,006 4,098 5,797 6,678 6,503

GE shareowners’ equity 116,438 118,936 117,291 104,665 115,559

Total capital invested $129,033 $133,146 $135,273 $123,545 $137,824

Return on average total capital invested (b) 11.6% 11.8% 10.6% 15.7% 20.2%

Borrowings as a percentage of total capital invested (b) 9.0% 7.6% 9.0% 9.9% 11.4%

Working capital (b) $ (10) $ (1,618) $ (1,596) $ 3,904 $ 6,433

GECS DATA

Revenues $ 49,081 $ 49,881 $ 51,818 $ 68,609 $ 69,412

Earnings from continuing operations attributable to GECS 6,432 3,023 1,177 7,489 12,227

Earnings (loss) from discontinued operations, net of taxes,

attributable to GECS 78 (868) 238 (434) (1,926)

Net earnings attributable to GECS 6,510 2,155 1,415 7,055 10,301

GECS shareowner’s equity 77,110 68,984 70,833 53,279 57,676

Total borrowings and bank deposits 443,097 470,520 493,324 512,745 497,431

Ratio of debt to equity at GECS 5.75:1 (d) 6.82:1 (d) 6.96:1 (d) 9.62:1 8.62:1

Total assets $584,536 $605,255 $650,372 $661,009 $646,560

Transactions between GE and GECS have been eliminated from the consolidated information.

(a) Included $1,031 million of preferred stock dividends ($806 million related to our preferred stock redemption) in 2011, $300 million in both 2010 and 2009 and $75 million in 2008.

(b) Indicates terms are defined in the Glossary.

(c) Excludes NBCU.

(d) Ratios of 4.23:1, 5.25:1 and 5.39:1 for 2011, 2010 and 2009, respectively, net of cash and equivalents and with classification of hybrid debt as equity.

70 GE 2011 ANNUAL REPORT

audited financial statements

Statement of Earnings

General Electric Company

and consolidated affiliates

For the years ended December 31 (In millions; per-share amounts in dollars) 2011 2010 2009

REVENUES

Sales of goods $ 66,875 $ 60,812 $ 65,067

Sales of services 27,648 39,625 38,710

Other income (Note 17) 5,063 1,151 1,006

GECS earnings from continuing operations ———

GECS revenues from services (Note 18) 47,714 48,005 49,655

Total revenues 147,300 149,593 154,438

COSTS AND EXPENSES (Note 19)

Cost of goods sold 51,455 46,005 50,580

Cost of services sold 16,823 25,708 25,341

Interest and other financial charges 14,545 15,553 17,697

Investment contracts, insurance losses and insurance annuity benefits 2,912 3,012 3,017

Provision for losses on financing receivables (Notes 6 and 23) 4,083 7,176 10,585

Other costs and expenses 37,384 38,054 37,354

Total costs and expenses 127,202 135,508 144,574

EARNINGS (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 20,098 14,085 9,864

Benefit (provision) for income taxes (Note 14) (5,732) (1,033) 1,142

EARNINGS FROM CONTINUING OPERATIONS 14,366 13,052 11,006

Earnings (loss) from discontinued operations, net of taxes (Note 2) 77 (873) 219

NET EARNINGS 14,443 12,179 11,225

Less net earnings attributable to noncontrolling interests 292 535 200

NET EARNINGS ATTRIBUTABLE TO THE COMPANY 14,151 11,644 11,025

Preferred stock dividends declared (1,031) (300) (300)

NET EARNINGS ATTRIBUTABLE TO GE COMMON SHAREOWNERS $ 13,120 $ 11,344 $ 10,725

AMOUNTS ATTRIBUTABLE TO THE COMPANY

Earnings from continuing operations $ 14,074 $ 12,517 $ 10,806

Earnings (loss) from discontinued operations, net of taxes 77 (873) 219

NET EARNINGS ATTRIBUTABLE TO THE COMPANY $ 14,151 $ 11,644 $ 11,025

PER-SHARE AMOUNTS (Note 20)

Earnings from continuing operations

Diluted earnings per share $ 1.23 $ 1.14 $ 0.99

Basic earnings per share 1.23 1.14 0.99

Net earnings

Diluted earnings per share 1.23 1.06 1.01

Basic earnings per share 1.24 1.06 1.01

DIVIDENDS DECLARED PER SHARE 0.61 0.46 0.61

See Note 3 for other-than-temporary impairment amounts.

See accompanying notes.

Consolidated Statement of Changes in Shareowners’ Equity

(In millions) 2011 2010 2009

CHANGES IN SHAREOWNERS’ EQUITY (Note 15)

GE shareowners’ equity balance at January 1 $118,936 $117,291 $104,665

Dividends and other transactions with shareowners (10,530) (5,701) (5,049)

Other comprehensive income (loss)

Investment securities—net 606 16 2,659

Currency translation adjustments—net 219 (3,874) 4,135

Cash flow hedges—net 104 454 1,598

Benefit plans—net (7,048) 1,079 (1,804)

Total other comprehensive income (loss) (6,119) (2,325) 6,588

Increases from net earnings attributable to the Company 14,151 11,644 11,025

Comprehensive income (loss) 8,032 9,319 17,613

Cumulative effect of changes in accounting principles (a) —(1,973) 62

Balance at December 31 116,438 118,936 117,291

Noncontrolling interests (b) 1,696 5,262 7,845

Total equity balance at December 31 $118,134 $124,198 $125,136

(a) On January 1, 2010, we adopted amendments to Accounting Standards Codification (ASC) 860, Transfers and Servicing and ASC 810, Consolidation, and recorded a

cumulative effect adjustment. See Notes 15 and 24. We adopted amendments to ASC 320, Investments—Debt and Equity Securities, and recorded a cumulative effect

adjustment to increase retained earnings as of April 1, 2009. See Notes 3 and 15.

(b) See Note 15 for further information about the changes in noncontrolling interests.

See accompanying notes.

GE 2011 ANNUAL REPORT 71

statement of earnings

GE (a) GECS

2011 2010 2009 2011 2010 2009

$ 67,012 $ 60,345 $ 64,211 $ 148 $ 533 $ 970

28,024 39,875 39,246 ———

5,269 1,285 1,179 ———

6,432 3,023 1,177 ———

———48,933 49,348 50,848

106,737 104,528 105,813 49,081 49,881 51,818

51,605 45,570 49,886 135 501 808

17,199 25,958 25,878 ———

1,299 1,600 1,478 13,883 14,526 16,870

———3,059 3,197 3,193

———4,083 7,176 10,585

17,556 16,340 14,841 20,469 22,433 23,051

87,659 89,468 92,083 41,629 47,833 54,507

19,078 15,060 13,730 7,452 2,048 (2,689)

(4,839) (2,024) (2,739) (893) 991 3,881

14,239 13,036 10,991 6,559 3,039 1,192

77 (873) 219 78 (868) 238

14,316 12,163 11,210 6,637 2,171 1,430

165 519 185 127 16 15

14,151 11,644 11,025 6,510 2,155 1,415

(1,031) (300) (300) ———

$ 13,120 $ 11,344 $ 10,725 $ 6,510 $ 2,155 $ 1,415

$ 14,074 $ 12,517 $ 10,806 $ 6,432 $ 3,023 $ 1,177

77 (873) 219 78 (868) 238

$ 14,151 $ 11,644 $ 11,025 $ 6,510 $ 2,155 $ 1,415

(a) Represents the adding together of all affiliated companies except General Electric Capital

Services, Inc. (GECS or financial services), which is presented on a one-line basis. See Note 1.

In the consolidating data on this page, “GE” means the basis of consolidation as described in Note 1

to the consolidated financial statements; “GECS” means General Electric Capital Services, Inc. and

all of its affiliates and associated companies. Separate information is shown for “GE” and “GECS.”

Transactions between GE and GECS have been eliminated from the “General Electric Company and

consolidated affiliates” columns on the prior page.

72 GE 2011 ANNUAL REPORT

audited financial statements

Statement of Financial Position

General Electric Company

and consolidated affiliates

At December 31 (In millions, except share amounts) 2011 2010

ASSETS

Cash and equivalents $ 84,501 $ 78,943

Investment securities (Note 3) 47,374 43,938

Current receivables (Note 4) 19,531 18,621

Inventories (Note 5) 13,792 11,526

Financing receivables—net (Notes 6 and 23) 280,378 303,012

Other GECS receivables 7,561 7,571

Property, plant and equipment—net (Note 7) 65,739 66,212

Investment in GECS ——

Goodwill (Note 8) 72,625 64,388

Other intangible assets—net (Note 8) 12,068 9,971

All other assets (Note 9) 111,707 94,299

Assets of businesses held for sale (Note 2) 711 36,887

Assets of discontinued operations (Note 2) 1,255 12,425

Total assets (a) $717,242 $747,793

LIABILITIES AND EQUITY

Short-term borrowings (Note 10) $137,611 $117,959

Accounts payable, principally trade accounts 16,400 14,656

Progress collections and price adjustments accrued 10,402 11,142

Dividends payable 1,797 1,563

Other GE current liabilities 14,796 11,396

Non-recourse borrowings of consolidated securitization entities (Note 10) 29,258 30,018

Bank deposits (Note 10) 43,115 37,298

Long-term borrowings (Note 10) 243,459 293,323

Investment contracts, insurance liabilities and insurance annuity benefits (Note 11) 29,774 29,582

All other liabilities (Note 13) 70,647 55,271

Deferred income taxes (Note 14) (131) 2,753

Liabilities of businesses held for sale (Note 2) 345 16,047

Liabilities of discontinued operations (Note 2) 1,635 2,587

Total liabilities (a) 599,108 623,595

Preferred stock (0 and 30,000 shares outstanding at year-end 2011 and 2010, respectively) ——

Common stock (10,573,017,000 and 10,615,376,000 shares outstanding at year-end 2011 and 2010, respectively) 702 702

Accumulated other comprehensive income—net (b)

Investment securities (30) (636)

Currency translation adjustments 133 (86)

Cash flow hedges (1,176) (1,280)

Benefit plans (22,901) (15,853)

Other capital 33,693 36,890

Retained earnings 137,786 131,137

Less common stock held in treasury (31,769) (31,938)

Total GE shareowners’ equity 116,438 118,936

Noncontrolling interests (c) 1,696 5,262

Total equity (Notes 15 and 16) 118,134 124,198

Total liabilities and equity $717,242 $747,793

(a) Our consolidated assets at December 31, 2011 include total assets of $45,514 million of certain variable interest entities (VIEs) that can only be used to settle the liabilities

of those VIEs. These assets include net financing receivables of $37,120 million and investment securities of $5,320 million. Our consolidated liabilities at December 31, 2011

include liabilities of certain VIEs for which the VIE creditors do not have recourse to GE. These liabilities include non-recourse borrowings of consolidated securitization

entities (CSEs) of $28,758 million. See Note 24.

(b) The sum of accumulated other comprehensive income—net was $(23,974) million and $(17,855) million at December 31, 2011 and 2010, respectively.

(c) Included accumulated other comprehensive income—net attributable to noncontrolling interests of $(168) million and $(153) million at December 31, 2011 and

2010, respectively.

See accompanying notes.

GE 2011 ANNUAL REPORT 73

statement of financial position

GE (a) GECS

2011 2010 2011 2010

$ 8,382 $ 19,241 $ 76,702 $ 60,257

18 19 47,359 43,921

11,807 10,383 ——

13,741 11,460 51 66

——289,307 312,234

——13,390 12,919

14,283 12,444 51,419 53,768

77,110 68,984 ——

45,395 36,880 27,230 27,508

10,522 8,088 1,546 1,883

36,675 17,454 75,618 77,197

—33,760 711 3,127

52 50 1,203 12,375

$217,985 $218,763 $584,536 $605,255

$ 2,184 $ 456 $136,333 $118,797

14,209 11,620 7,239 7,035

11,349 11,841 ——

1,797 1,563 ——

14,796 11,396 ——

——29,258 30,018

——43,115 37,298

9,405 9,656 234,391 284,407

——30,198 29,993

53,826 37,815 17,328 17,554

(7,183) (4,237) 7,052 6,990

—15,455 345 592

158 164 1,477 2,423

100,541 95,729 506,736 535,107

————

702 702 11

(30) (636) (33) (639)

133 (86) (399) (1,411)

(1,176) (1,280) (1,101) (1,281)

(22,901) (15,853) (563) (380)

33,693 36,890 27,627 27,626

137,786 131,137 51,578 45,068

(31,769) (31,938) ——

116,438 118,936 77,110 68,984

1,006 4,098 690 1,164

117,444 123,034 77,800 70,148

$217,985 $218,763 $584,536 $605,255

(a) Represents the adding together of all affiliated companies

except General Electric Capital Services, Inc. (GECS or

financial services), which is presented on a one-line basis.

See Note 1.

In the consolidating data on this page, “GE” means the basis of

consolidation as described in Note 1 to the consolidated

financial statements; “GECS” means General Electric Capital

Services, Inc. and all of its affiliates and associated companies.

Separate information is shown for “GE” and “GECS.” Transactions

between GE and GECS have been eliminated from the “General

Electric Company and consolidated affiliates” columns on the

prior page.

74 GE 2011 ANNUAL REPORT

audited financial statements

Statement of Cash Flows

General Electric Company

and consolidated affiliates

For the years ended December 31 (In millions) 2011 2010 2009

CASH FLOWS—OPERATING ACTIVITIES

Net earnings $ 14,443 $ 12,179 $ 11,225

Less net earnings attributable to noncontrolling interests 292 535 200

Net earnings attributable to the Company 14,151 11,644 11,025

(Earnings) loss from discontinued operations (77) 873 (219)

Adjustments to reconcile net earnings attributable to the

Company to cash provided from operating activities

Depreciation and amortization of property, plant and equipment 9,185 9,786 10,617

Earnings from continuing operations retained by GECS ———

Deferred income taxes (203) 930 (2,778)

Decrease (increase) in GE current receivables (466) (126) 3,273

Decrease (increase) in inventories (1,168) 342 1,101

Increase (decrease) in accounts payable 1,235 883 (464)

Increase (decrease) in GE progress collections (1,394) (1,177) (500)

Provision for losses on GECS financing receivables 4,083 7,176 10,585

All other operating activities 7,255 5,925 (9,828)

Cash from (used for) operating activities—continuing operations 32,601 36,256 22,812

Cash from (used for) operating activities—discontinued operations 758 (132) 1,605

CASH FROM (USED FOR) OPERATING ACTIVITIES 33,359 36,124 24,417

CASH FLOWS—INVESTING ACTIVITIES

Additions to property, plant and equipment (12,650) (9,800) (8,636)

Dispositions of property, plant and equipment 5,896 7,208 6,479

Net decrease (increase) in GECS financing receivables 14,652 21,773 36,665

Proceeds from sales of discontinued operations 8,950 2,510 —

Proceeds from principal business dispositions 8,877 3,062 9,978

Payments for principal businesses purchased (11,202) (1,212) (7,842)

Capital contribution from GE to GECS ———

All other investing activities 6,094 10,249 3,758

Cash from (used for) investing activities—continuing operations 20,617 33,790 40,402

Cash from (used for) investing activities—discontinued operations (735) (1,354) 1,976

CASH FROM (USED FOR) INVESTING ACTIVITIES 19,882 32,436 42,378

CASH FLOWS—FINANCING ACTIVITIES

Net increase (decrease) in borrowings (maturities of 90 days or less) 5,951 (1,228) (26,114)

Net increase (decrease) in bank deposits 6,748 4,603 (3,784)

Newly issued debt (maturities longer than 90 days) 43,847 47,643 82,846

Repayments and other reductions (maturities longer than 90 days) (85,706) (99,933) (83,290)

Repayment of preferred stock (3,300) ——

Net dispositions (purchases) of GE shares for treasury (1,456) (1,263) 623

Dividends paid to shareowners (6,458) (4,790) (8,986)

Capital contribution from GE to GECS ———

Purchases of subsidiary shares from noncontrolling interests (4,578) (2,633) —

All other financing activities (1,867) (3,648) (3,204)

Cash from (used for) financing activities—continuing operations (46,819) (61,249) (41,909)

Cash from (used for) financing activities—discontinued operations (44) (337) (1,604)

CASH FROM (USED FOR) FINANCING ACTIVITIES (46,863) (61,586) (43,513)

Effect of exchange rate changes on cash and equivalents (841) (333) 795

Increase (decrease) in cash and equivalents 5,537 6,641 24,077

Cash and equivalents at beginning of year 79,085 72,444 48,367

Cash and equivalents at end of year 84,622 79,085 72,444

Less cash and equivalents of discontinued operations at end of year 121 142 1,965

Cash and equivalents of continuing operations at end of year $ 84,501 $ 78,943 $ 70,479

SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION

Cash paid during the year for interest $(15,571) $(17,132) $(19,601)

Cash recovered (paid) during the year for income taxes (2,919) (2,671) (2,535)

See accompanying notes.

GE 2011 ANNUAL REPORT 75

statement of cash flows

GE (a) GECS

2011 2010 2009 2011 2010 2009

$ 14,316 $ 12,163 $ 11,210 $ 6,637 $ 2,171 $ 1,430

165 519 185 127 16 15

14,151 11,644 11,025 6,510 2,155 1,415

(77) 873 (219) (78) 868 (238)

2,068 2,034 2,311 7,117 7,752 8,306

(6,432) (3,023) (1,177) ———

(327) (377) (460) 124 1,307 (2,318)

(390) (963) 3,056 ———

(1,122) 409 1,188 15 5 (6)

1,938 1,052 (918) 50 (116) (363)

(1,146) (1,158) (257) ———

———4,083 7,176 10,585

3,394 4,255 1,856 3,281 2,487 (11,558)

12,057 14,746 16,405 21,102 21,634 5,823

——2758 (132) 1,603

12,057 14,746 16,407 21,860 21,502 7,426

(2,957) (2,418) (2,429) (9,882) (7,674) (6,445)

———5,896 7,208 6,479

———14,392 23,061 36,927

———8,950 2,510 —

6,254 1,721 890 2,623 1,171 9,088

(11,152) (653) (428) (50) (559) (7,414)

—— (9,500) ———

(384) (550) (198) 7,300 9,947 4,592

(8,239) (1,900) (11,665) 29,229 35,664 43,227

—— (2) (735) (1,354) 1,978

(8,239) (1,900) (11,667) 28,494 34,310 45,205

1,058 (671) 317 4,393 (652) (27,255)

———6,748 4,603 (3,784)

177 9,474 1,883 43,267 37,971 81,073

(270) (2,554) (1,675) (85,436) (97,379) (81,615)

(3,300) —————

(1,456) (1,263) 623 ———

(6,458) (4,790) (8,986) ———

————— 9,500

(4,303) (2,000) — (275) (633) —

(75) (330) (514) (1,792) (3,318) (2,691)

(14,627) (2,134) (8,352) (33,095) (59,408) (24,772)

———(44) (337) (1,604)

(14,627) (2,134) (8,352) (33,139) (59,745) (26,376)

(50) (125) 176 (791) (208) 619

(10,859) 10,587 (3,436) 16,424 (4,141) 26,874

19,241 8,654 12,090 60,399 64,540 37,666

8,382 19,241 8,654 76,823 60,399 64,540

———121 142 1,965

$ 8,382 $ 19,241 $ 8,654 $ 76,702 $ 60,257 $ 62,575

$ (553) $ (731) $ (768) $(15,018) $(16,401) $(18,833)

(2,303) (2,775) (3,078) (616) 104 543

(a) Represents the adding together of all affiliated companies except General Electric Capital

Services, Inc. (GECS or financial services), which is presented on a one-line basis. See Note 1.

In the consolidating data on this page, “GE” means the basis of consolidation as described in Note 1

to the consolidated financial statements; “GECS” means General Electric Capital Services, Inc. and

all of its affiliates and associated companies. Separate information is shown for “GE” and “GECS.”

Transactions between GE and GECS have been eliminated from the “General Electric Company and

consolidated affiliates” columns on the prior page and are discussed in Note 27.

76 GE 2011 ANNUAL REPORT

Note 1.

Summary of Significant Accounting Policies

Accounting Principles

Our fi nancial statements are prepared in conformity with U.S.

generally accepted accounting principles (GAAP).

Consolidation

Our fi nancial statements consolidate all of our affi liates—entities

in which we have a controlling fi nancial interest, most often

because we hold a majority voting interest. To determine if we

hold a controlling fi nancial interest in an entity we fi rst evaluate if

we are required to apply the variable interest entity (VIE) model to

the entity, otherwise the entity is evaluated under the voting

interest model.

Where we hold current or potential rights that give us the

power to direct the activities of a VIE that most signifi cantly impact

the VIE’s economic performance combined with a variable inter-

est that gives us the right to receive potentially signifi cant benefi ts

or the obligation to absorb potentially signifi cant losses, we have

a controlling fi nancial interest in that VIE. Rights held by others

to remove the party with power over the VIE are not considered

unless one party can exercise those rights unilaterally. When

changes occur to the design of an entity we reconsider whether it

is subject to the VIE model. We continuously evaluate whether we

have a controlling fi nancial interest in a VIE.

We hold a controlling fi nancial interest in other entities where

we currently hold, directly or indirectly, more than 50% of the

voting rights or where we exercise control through substantive

participating rights or as a general partner. Where we are a gen-

eral partner we consider substantive removal rights held by other

partners in determining if we hold a controlling fi nancial interest.

We reevaluate whether we have a controlling fi nancial interest

in these entities when our voting or substantive participating

rights change.

Associated companies are unconsolidated VIEs and other enti-

ties in which we do not have a controlling fi nancial interest, but

over which we have signifi cant infl uence, most often because we

hold a voting interest of 20% to 50%. Associated companies are

accounted for as equity method investments. Results of associ-

ated companies are presented on a one-line basis. Investments

in, and advances to, associated companies are presented on a

one-line basis in the caption “All other assets” in our Statement of

Financial Position, net of allowance for losses, that represents our

best estimate of probable losses inherent in such assets.

Financial Statement Presentation

We have reclassifi ed certain prior-year amounts to conform to the

current-year’s presentation.

Financial data and related measurements are presented in the

following categories:

• GE—This represents the adding together of all affi liates other

than General Electric Capital Services, Inc. (GECS), whose oper-

ations are presented on a one-line basis.

• GECS—This affi liate owns all of the common stock of General

Electric Capital Corporation (GECC). GECC and its respective

affi liates are consolidated in the accompanying GECS columns

and constitute the majority of its business.

• Consolidated—This represents the adding together of GE and

GECS, giving effect to the elimination of transactions between

GE and GECS.

• Operating Segments—These comprise our six busi-

nesses, focused on the broad markets they serve: Energy

Infrastructure, Aviation, Healthcare, Transportation, Home &

Business Solutions and GE Capital. Prior-period information

has been reclassifi ed to be consistent with how we managed

our businesses in 2011.

Unless otherwise indicated, information in these notes to consoli-

dated fi nancial statements relates to continuing operations.

Certain of our operations have been presented as discontinued.

See Note 2.

On February 22, 2012, we merged our wholly-owned sub-

sidiary, GECS, with and into GECS’ wholly-owned subsidiary,

GECC. The merger simplifi ed our fi nancial services’ corporate

structure by consolidating fi nancial services entities and assets

within our organization and simplifying Securities and Exchange

Commission and regulatory reporting. Upon the merger, GECC

became the surviving corporation and assumed all of GECS’ rights

and obligations and became wholly-owned directly by General

Electric Company. Our fi nancial services segment, GE Capital, will

continue to comprise the continuing operations of GECC, which

now includes the run-off insurance operations previously held

and managed in GECS. References to GECS, GECC and the GE

Capital segment in these consolidated fi nancial statements relate

to the entities or segment as they existed during 2011 and do not

refl ect the February 22, 2012 merger.

The effects of translating to U.S. dollars the fi nancial state-

ments of non-U.S. affi liates whose functional currency is the

local currency are included in shareowners’ equity. Asset and

liability accounts are translated at year-end exchange rates, while

revenues and expenses are translated at average rates for the

respective periods.

Preparing fi nancial statements in conformity with U.S. GAAP

requires us to make estimates based on assumptions about

current, and for some estimates future, economic and market

conditions (for example, unemployment, market liquidity, the real

estate market, etc.), which affect reported amounts and related

disclosures in our fi nancial statements. Although our current esti-

mates contemplate current conditions and how we expect them to

change in the future, as appropriate, it is reasonably possible that

in 2012 actual conditions could be worse than anticipated in those

estimates, which could materially affect our results of operations

and fi nancial position. Among other effects, such changes could

result in future impairments of investment securities, goodwill,

intangibles and long-lived assets, incremental losses on fi nancing

receivables, establishment of valuation allowances on deferred tax

assets and increased tax liabilities.

notes to consolidated financial statements

GE 2011 ANNUAL REPORT 77

notes to consolidated financial statements

Sales of Goods and Services

We record all sales of goods and services only when a fi rm sales

agreement is in place, delivery has occurred or services have

been rendered and collectibility of the fi xed or determinable sales

price is reasonably assured.

Arrangements for the sale of goods and services sometimes

include multiple components. Most of our multiple component

arrangements involve the sale of goods and services in the

Healthcare segment. Our arrangements with multiple compo-

nents usually involve an upfront deliverable of large machinery

or equipment and future service deliverables such as installa-

tion, commissioning, training or the future delivery of ancillary

products. In most cases, the relative values of the undelivered

components are not signifi cant to the overall arrangement and

are typically delivered within three to six months after the core

product has been delivered. In such agreements, selling price is

determined for each component and any difference between the

total of the separate selling prices and total contract consideration

(i.e. discount) is allocated pro rata across each of the components

in the arrangement. The value assigned to each component is

objectively determined and obtained primarily from sources such

as the separate selling price for that or a similar item or from com-

petitor prices for similar items. If such evidence is not available,

we use our best estimate of selling price, which is established

consistent with the pricing strategy of the business and considers

product confi guration, geography, customer type, and other mar-

ket specifi c factors.

Except for goods sold under long-term agreements, we rec-

ognize sales of goods under the provisions of U.S. Securities and

Exchange Commission (SEC) Staff Accounting Bulletin (SAB) 104,

Revenue Recognition. We often sell consumer products and com-

puter hardware and software products with a right of return. We

use our accumulated experience to estimate and provide for such

returns when we record the sale. In situations where arrange-

ments include customer acceptance provisions based on seller

or customer-specifi ed objective criteria, we recognize revenue

when we have reliably demonstrated that all specifi ed accep-

tance criteria have been met or when formal acceptance occurs,

respectively. In arrangements where we provide goods for trial

and evaluation purposes, we only recognize revenue after cus-

tomer acceptance occurs. Unless otherwise noted, we do not

provide for anticipated losses before we record sales.

We recognize revenue on agreements for sales of goods and

services under power generation unit and uprate contracts;

nuclear fuel assemblies; larger oil drilling equipment projects;

aeroderivative unit contracts; military development contracts;

locomotive production contracts; and long-term construction

projects, using long-term construction and production contract

accounting. We estimate total long-term contract revenue net of

price concessions as well as total contract costs. For goods sold

under power generation unit and uprate contracts, nuclear fuel

assemblies, aeroderivative unit contracts, military development

contracts and locomotive production contracts, we recognize

sales as we complete major contract-specifi ed deliverables, most

often when customers receive title to the goods or accept the

services as performed. For larger oil drilling equipment projects

and long-term construction projects, we recognize sales based

on our progress towards contract completion measured by

actual costs incurred in relation to our estimate of total expected

costs. We measure long-term contract revenues by applying our

contract-specifi c estimated margin rates to incurred costs. We

routinely update our estimates of future costs for agreements in

process and report any cumulative effects of such adjustments

in current operations. We provide for any loss that we expect to

incur on these agreements when that loss is probable.

We recognize revenue upon delivery for sales of aircraft engines,

military propulsion equipment and related spare parts not sold

under long-term product services agreements. Delivery of com-

mercial engines, non-U.S. military equipment and all related spare

parts occurs on shipment; delivery of military propulsion equip-

ment sold to the U.S. Government or agencies thereof occurs upon

receipt of a Material Inspection and Receiving Report, DD Form

250 or Memorandum of Shipment. Commercial aircraft engines

are complex equipment manufactured to customer order under a

variety of sometimes complex, long-term agreements. We measure

sales of commercial aircraft engines by applying our contract-spe-

cifi c estimated margin rates to incurred costs. We routinely update

our estimates of future revenues and costs for commercial aircraft

engine agreements in process and report any cumulative effects of

such adjustments in current operations. Signifi cant components of

our revenue and cost estimates include price concessions, perfor-

mance-related guarantees as well as material, labor and overhead

costs. We measure revenue for military propulsion equipment and

spare parts not subject to long-term product services agreements

based on the specifi c contract on a specifi cally measured output

basis. We provide for any loss that we expect to incur on these

agreements when that loss is probable; consistent with industry

practice, for commercial aircraft engines, we make such provision

only if such losses are not recoverable from future highly probable

sales of spare parts for those engines.

We sell product services under long-term product main-

tenance or extended warranty agreements in our Aviation,

Transportation and Energy Infrastructure segments, where costs

of performing services are incurred on other than a straight-line

basis. We also sell product services in our Healthcare segment,

where such costs generally are expected to be on a straight-line

basis. For the Aviation, Energy and Transportation agreements,

we recognize related sales based on the extent of our progress

towards completion measured by actual costs incurred in rela-

tion to total expected costs. We routinely update our estimates

of future costs for agreements in process and report any cumu-

lative effects of such adjustments in current operations. For the

Healthcare agreements, we recognize revenues on a straight-line

basis and expense related costs as incurred. We provide for any

loss that we expect to incur on any of these agreements when

that loss is probable.

NBC Universal (NBCU), which we deconsolidated on January 28,

2011, recorded broadcast and cable television and Internet adver-

tising sales when advertisements were aired, net of provision for

any viewer shortfalls (make goods). Sales from theatrical distri-

bution of fi lms were recorded as the fi lms were exhibited; sales

of home videos, net of a return provision, when the videos were

delivered to and available for sale by retailers; fees from cable/

satellite operators when services were provided; and licensing of

fi lm and television programming when the material was available

for airing.

78 GE 2011 ANNUAL REPORT

notes to consolidated financial statements

GECS Revenues from Services (Earned Income)

We use the interest method to recognize income on loans. Interest

on loans includes origination, commitment and other non-refund-

able fees related to funding (recorded in earned income on the

interest method). We stop accruing interest at the earlier of the

time at which collection of an account becomes doubtful or the

account becomes 90 days past due. Previously recognized interest

income that was accrued but not collected from the borrower is

evaluated as part of the overall receivable in determining the

adequacy of the allowance for losses. Although we stop accruing

interest in advance of payments, we recognize interest income as

cash is collected when appropriate, provided the amount does not

exceed that which would have been earned at the historical effec-

tive interest rate; otherwise, payments received are applied to

reduce the principal balance of the loan.

We resume accruing interest on nonaccrual, non-restructured

commercial loans only when (a) payments are brought current

according to the loan’s original terms and (b) future payments are

reasonably assured. When we agree to restructured terms with the

borrower, we resume accruing interest only when it is reasonably

assured that we will recover full contractual payments, and such

loans pass underwriting reviews equivalent to those applied to new

loans. We resume accruing interest on nonaccrual consumer loans

when the customer’s account is less than 90 days past due and

collection of such amounts is probable. Interest accruals on modi-

fi ed consumer loans that are not considered to be troubled debt

restructurings (TDRs) may return to current status (re-aged) only

after receipt of at least three consecutive minimum monthly pay-

ments or the equivalent cumulative amount, subject to a re-aging

limitation of once a year, or twice in a fi ve-year period.

We recognize fi nancing lease income on the interest method

to produce a level yield on funds not yet recovered. Estimated

unguaranteed residual values are based upon management’s

best estimates of the value of the leased asset at the end of the

lease term. We use various sources of data in determining this

estimate, including information obtained from third parties, which

is adjusted for the attributes of the specifi c asset under lease.

Guarantees of residual values by unrelated third parties are con-

sidered part of minimum lease payments. Signifi cant assumptions

we use in estimating residual values include estimated net cash

fl ows over the remaining lease term, anticipated results of future

remarketing, and estimated future component part and scrap

metal prices, discounted at an appropriate rate.

We recognize operating lease income on a straight-line basis

over the terms of underlying leases.

Fees include commitment fees related to loans that we do

not expect to fund and line-of-credit fees. We record these fees

in earned income on a straight-line basis over the period to

which they relate. We record syndication fees in earned income

at the time related services are performed, unless signifi cant

contingencies exist.

Depreciation and Amortization

The cost of GE manufacturing plant and equipment is depreciated

over its estimated economic life. U.S. assets are depreciated using

an accelerated method based on a sum-of-the-years digits formula;

non-U.S. assets are generally depreciated on a straight-line basis.

The cost of GECS equipment leased to others on operating

leases is depreciated on a straight-line basis to estimated residual

value over the lease term or over the estimated economic life of

the equipment.

The cost of GECS acquired real estate investments is depreci-

ated on a straight-line basis to the estimated salvage value over

the expected useful life or the estimated proceeds upon sale

of the investment at the end of the expected holding period if that

approach produces a higher measure of depreciation expense.

The cost of individually signifi cant customer relationships

is amortized in proportion to estimated total related sales; cost

of other intangible assets is generally amortized on a straight-

line basis over the asset’s estimated economic life. We review

long-lived assets for impairment whenever events or changes in

circumstances indicate that the related carrying amounts may

not be recoverable. See Notes 7 and 8.

NBC Universal Film and Television Costs

Prior to our deconsolidation of NBCU in 2011, our policies were to

defer fi lm and television production costs, including direct costs,

production overhead, development costs and interest. We did not

defer costs of exploitation, which principally comprised costs of

fi lm and television program marketing and distribution. We amor-

tized deferred fi lm and television production costs, as well as

associated participation and residual costs, on an individual

production basis using the ratio of the current period’s gross

revenues to estimated total remaining gross revenues from all

sources; we stated such costs at the lower of amortized cost or

fair value. Estimates of total revenues and costs were based on

anticipated release patterns, public acceptance and historical

results for similar products. We deferred the costs of acquired

broadcast material, including rights to material for use on NBC

Universal’s broadcast and cable/satellite television networks, at

the earlier of acquisition or when the license period began

and the material was available for use. We amortized acquired

broadcast material and rights when we broadcast the associated

programs; we stated such costs at the lower of amortized cost or

net realizable value.

Losses on Financing Receivables

Losses on fi nancing receivables are recognized when they are

incurred, which requires us to make our best estimate of probable

losses inherent in the portfolio. The method for calculating the

best estimate of losses depends on the size, type and risk charac-

teristics of the related fi nancing receivable. Such an estimate

requires consideration of historical loss experience, adjusted for

current conditions, and judgments about the probable effects of

relevant observable data, including present economic conditions

such as delinquency rates, fi nancial health of specifi c customers

GE 2011 ANNUAL REPORT 79

notes to consolidated financial statements

and market sectors, collateral values (including housing price

indices as applicable), and the present and expected future levels

of interest rates. The underlying assumptions, estimates and

assessments we use to provide for losses are updated periodi-

cally to refl ect our view of current conditions. Changes in such

estimates can signifi cantly affect the allowance and provision for

losses. It is possible that we will experience credit losses that are

different from our current estimates. Write-offs are deducted

from the allowance for losses when we judge the principal to be

uncollectible and subsequent recoveries are added to the allow-

ance at the time cash is received on a written-off account.

“Impaired” loans are defi ned as larger balance or restructured

loans for which it is probable that the lender will be unable to col-

lect all amounts due according to the original contractual terms

of the loan agreement.

“Troubled debt restructurings” (TDRs) are those loans for

which we have granted a concession to a borrower experiencing

fi nancial diffi culties where we do not receive adequate compen-

sation. Such loans are classifi ed as impaired, and are individually

reviewed for specifi c reserves.

“Nonaccrual fi nancing receivables” are those on which we

have stopped accruing interest. We stop accruing interest at the

earlier of the time at which collection of an account becomes

doubtful or the account becomes 90 days past due. Although

we stop accruing interest in advance of payments, we recognize

interest income as cash is collected when appropriate provided

the amount does not exceed that which would have been earned

at the historical effective interest rate. Recently restructured

fi nancing receivables are not considered delinquent when pay-

ments are brought current according to the restructured terms,

but may remain classifi ed as nonaccrual until there has been a

period of satisfactory payment performance by the borrower and

future payments are reasonably assured of collection.

“Nonearning fi nancing receivables” are a subset of nonac-

crual fi nancing receivables for which cash payments are not

being received or for which we are on the cost recovery method

of accounting (i.e., any payments are accounted for as a reduc-

tion of principal). This category excludes loans purchased at a

discount (unless they have deteriorated post acquisition). Under

Accounting Standards Codifi cation (ASC) 310, Receivables, these

loans are initially recorded at fair value and accrete interest

income over the estimated life of the loan based on reasonably

estimable cash fl ows even if the underlying loans are contractu-

ally delinquent at acquisition.

“Delinquent” receivables are those that are 30 days or more

past due based on their contractual terms.

The same fi nancing receivable may meet more than one of the

defi nitions above. Accordingly, these categories are not mutually

exclusive and it is possible for a particular loan to meet the defi ni-

tions of a TDR, impaired loan, nonaccrual loan and nonearning loan

and be included in each of these categories. The categorization of

a particular loan also may not be indicative of the potential for loss.

Our consumer loan portfolio consists of smaller-balance,

homogeneous loans, including credit card receivables, install-

ment loans, auto loans and leases and residential mortgages.

We collectively evaluate each portfolio for impairment quarterly.

The allowance for losses on these receivables is established

through a process that estimates the probable losses inherent

in the portfolio based upon statistical analyses of portfolio data.

These analyses include migration analysis, in which historical

delinquency and credit loss experience is applied to the current

aging of the portfolio, together with other analyses that refl ect

current trends and conditions. We also consider overall portfolio

indicators including nonearning loans, trends in loan volume and

lending terms, credit policies and other observable environmental

factors such as unemployment rates and home price indices.

Our commercial loan and lease portfolio consists of a variety

of loans and leases, including both larger-balance, non-homoge-

neous loans and leases and smaller-balance homogeneous loans

and leases. Losses on such loans and leases are recorded when

probable and estimable. We routinely evaluate our entire portfolio

for potential specifi c credit or collection issues that might indicate

an impairment.

For larger-balance, non-homogeneous loans and leases, we

consider the fi nancial status, payment history, collateral value,

industry conditions and guarantor support related to specifi c

customers. Any delinquencies or bankruptcies are indications of

potential impairment requiring further assessment of collectibil-

ity. We routinely receive fi nancial as well as rating agency reports

on our customers, and we elevate for further attention those

customers whose operations we judge to be marginal or deterio-

rating. We also elevate customers for further attention when we

observe a decline in collateral values for asset-based loans. While

collateral values are not always available, when we observe such

a decline, we evaluate relevant markets to assess recovery alter-

natives—for example, for real estate loans, relevant markets are

local; for commercial aircraft loans, relevant markets are global.

Measurement of the loss on our impaired commercial loans

is based on the present value of expected future cash fl ows dis-

counted at the loan’s effective interest rate or the fair value of

collateral, net of expected selling costs, if the loan is determined

to be collateral dependent. We determine whether a loan is col-

lateral dependent if the repayment of the loan is expected to be

provided solely by the underlying collateral. Our review process

can often result in reserves being established in advance of a

modifi cation of terms or designation as a TDR. After providing

for specifi c incurred losses, we then determine an allowance for

losses that have been incurred in the balance of the portfolio but

cannot yet be identifi ed to a specifi c loan or lease. This estimate is

based upon various statistical analyses considering historical and

projected default rates and loss severity and aging, as well as our

view on current market and economic conditions. It is prepared

by each respective line of business. For Real Estate, this includes

converting economic indicators into real estate market indicators

that are calibrated by market and asset class and which are used

to project expected performance of the portfolio based on spe-

cifi c loan portfolio metrics.

We consider multiple factors in evaluating the adequacy of

our allowance for losses on Real Estate fi nancing receivables,

including loan-to-value ratios, collateral values at the individual

loan level, debt service coverage ratios, delinquency status, and

economic factors including interest rate and real estate market

80 GE 2011 ANNUAL REPORT

notes to consolidated financial statements

forecasts. In addition to evaluating these factors, we deem a Real

Estate loan to be impaired if its projected loan-to-value ratio at

maturity is in excess of 100%, even if the loan is currently pay-

ing in accordance with its contractual terms. The allowance for

losses on Real Estate fi nancing receivables is based on a dis-

counted cash fl ow methodology, except in situations where the

loan is within 24 months of maturity or foreclosure is deemed

probable, in which case reserves are based on collateral values.

If foreclosure is deemed probable or if repayment is dependent

solely on the sale of collateral, we also include estimated selling

costs in our reserve. Collateral values for our Real Estate loans are

determined based upon internal cash fl ow estimates discounted

at an appropriate rate and corroborated by external appraisals,

as appropriate. Collateral valuations are updated at least annu-

ally, or more frequently for higher risk loans. A majority of our Real

Estate impaired loans have specifi c reserves that are determined

based on the underlying collateral values. Further discussion

on determination of fair value is in the Fair Value Measurements

section below.

Experience is not available for new products; therefore, while

we are developing that experience, we set loss allowances based

on our experience with the most closely analogous products in

our portfolio.

Our loss mitigation strategy intends to minimize economic

loss and, at times, can result in rate reductions, principal forgive-

ness, extensions, forbearance or other actions, which may cause

the related loan to be classifi ed as a TDR.

We utilize certain loan modifi cation programs for borrowers

experiencing temporary fi nancial diffi culties in our Consumer

loan portfolio. These loan modifi cation programs are primarily

concentrated in our non-U.S. residential mortgage and non-U.S.

installment and revolving portfolios and include short-term (three

months or less) interest rate reductions and payment deferrals,

which were not part of the terms of the original contract. We

sold our U.S. residential mortgage business in 2007 and as such,

do not participate in the U.S. government-sponsored mortgage

modifi cation programs.

Our allowance for losses on fi nancing receivables on these

modifi ed consumer loans is determined based upon a formulaic

approach that estimates the probable losses inherent in the port-

folio based upon statistical analyses of the portfolio. Data related

to redefault experience is also considered in our overall reserve

adequacy review. Once the loan has been modifi ed, it returns to

current status (re-aged) only after receipt of at least three consec-

utive minimum monthly payments or the equivalent cumulative

amount, subject to a re-aging limitation of once a year, or twice

in a fi ve-year period in accordance with the Federal Financial

Institutions Examination Council guidelines on Uniform Retail

Credit Classifi cation and Account Management policy issued in

June 2000. We believe that the allowance for losses would not be

materially different had we not re-aged these accounts.

For commercial loans, we evaluate changes in terms and

conditions to determine whether those changes meet the

criteria for classifi cation as a TDR on a loan-by-loan basis. In

Commercial Lending and Leasing (CLL), these changes primarily

include: changes to covenants, short-term payment deferrals and

maturity extensions. For these changes, we receive economic

consideration, including additional fees and/or increased inter-

est rates, and evaluate them under our normal underwriting

standards and criteria. Changes to Real Estate’s loans primar-

ily include maturity extensions, principal payment acceleration,

changes to collateral terms, and cash sweeps, which are in

addition to, or sometimes in lieu of, fees and rate increases. The

determination of whether these changes to the terms and condi-

tions of our commercial loans meet the TDR criteria includes our

consideration of all of the relevant facts and circumstances. When

the borrower is experiencing fi nancial diffi culty, we carefully eval-

uate these changes to determine whether they meet the form of

a concession. In these circumstances, if the change is deemed to

be a concession, we classify the loan as a TDR.

When we repossess collateral in satisfaction of a loan, we

write down the receivable against the allowance for losses.

Repossessed collateral is included in the caption “All other assets”

in the Statement of Financial Position and carried at the lower of

cost or estimated fair value less costs to sell.

For Consumer loans, we write off unsecured closed-end

installment loans when they are 120 days contractually past due

and unsecured open-ended revolving loans at 180 days con-

tractually past due. We write down consumer loans secured by

collateral other than residential real estate when such loans are

120 days past due. Consumer loans secured by residential real

estate (both revolving and closed-end loans) are written down to

the fair value of collateral, less costs to sell, no later than when

they become 360 days past due. Unsecured consumer loans in

bankruptcy are written off within 60 days of notifi cation of fi ling

by the bankruptcy court or within contractual write-off periods,

whichever occurs earlier.

Write-offs on larger balance impaired commercial loans are

based on amounts deemed uncollectible and are reviewed quar-

terly. Write-offs on Real Estate loans are recorded upon initiation

of foreclosure or early settlement by the borrower, or in some

cases, based on the passage of time depending on specifi c facts

and circumstances. In CLL, loans are written off when deemed

uncollectible (e.g., when the borrower enters restructuring, collat-

eral is to be liquidated or at 180 days past due for smaller balance,

homogeneous loans).

Partial Sales of Business Interests

Gains or losses on sales of affi liate shares where we retain a

controlling fi nancial interest are recorded in equity. Gains or

losses on sales that result in our loss of a controlling fi nancial

interest are recorded in earnings along with remeasurement

gains or losses on any investments in the entity that we retained.

GE 2011 ANNUAL REPORT 81

notes to consolidated financial statements

Cash and Equivalents

Debt securities and money market instruments with original

maturities of three months or less are included in cash equiva-

lents unless designated as available-for-sale and classifi ed as

investment securities.

Investment Securities

We report investments in debt and marketable equity securities,

and certain other equity securities, at fair value. See Note 21 for

further information on fair value. Unrealized gains and losses on

available-for-sale investment securities are included in shareown-

ers’ equity, net of applicable taxes and other adjustments. We

regularly review investment securities for impairment using both

quantitative and qualitative criteria.

For debt securities, if we do not intend to sell the security or it

is not more likely than not that we will be required to sell the secu-

rity before recovery of our amortized cost, we evaluate qualitative

criteria to determine whether we do not expect to recover the

amortized cost basis of the security, such as the fi nancial health of

and specifi c prospects for the issuer, including whether the issuer

is in compliance with the terms and covenants of the security. We

also evaluate quantitative criteria including determining whether

there has been an adverse change in expected future cash fl ows.

If we do not expect to recover the entire amortized cost basis of

the security, we consider the security to be other-than-temporar-

ily impaired, and we record the difference between the security’s

amortized cost basis and its recoverable amount in earnings and

the difference between the security’s recoverable amount and

fair value in other comprehensive income. If we intend to sell the

security or it is more likely than not we will be required to sell the

security before recovery of its amortized cost basis, the security

is also considered other-than-temporarily impaired and we rec-

ognize the entire difference between the security’s amortized

cost basis and its fair value in earnings. For equity securities, we

consider the length of time and magnitude of the amount that

each security is in an unrealized loss position. If we do not expect

to recover the entire amortized cost basis of the security, we con-

sider the security to be other-than-temporarily impaired, and we

record the difference between the security’s amortized cost basis

and its fair value in earnings.

Prior to April 1, 2009, unrealized losses that were other-than-

temporary were recognized in earnings at an amount equal to the

difference between the security’s amortized cost and fair value.

In determining whether the unrealized loss was other-than-tem-

porary, we considered both quantitative and qualitative criteria.

Quantitative criteria included the length of time and magnitude

of the amount that each security was in an unrealized loss posi-

tion and, for securities with fi xed maturities, whether the issuer

was in compliance with terms and covenants of the security.

For structured securities, we evaluated whether there was an

adverse change in the timing or amount of expected cash fl ows.

Qualitative criteria included the fi nancial health of and specifi c

prospects for the issuer, as well as our intent and ability to hold

the security to maturity or until forecasted recovery.

Realized gains and losses are accounted for on the specifi c

identifi cation method. Unrealized gains and losses on investment

securities classifi ed as trading and certain retained interests are

included in earnings.

Inventories

All inventories are stated at the lower of cost or realizable values.

Cost for a signifi cant portion of GE U.S. inventories is determined

on a last-in, fi rst-out (LIFO) basis. Cost of other GE inventories is

determined on a fi rst-in, fi rst-out (FIFO) basis. LIFO was used for

38% and 41% of GE inventories at December 31, 2011 and 2010,

respectively. GECS inventories consist of fi nished products held

for sale; cost is determined on a FIFO basis.

Intangible Assets

We do not amortize goodwill, but test it at least annually for

impairment at the reporting unit level. A reporting unit is the

operating segment, or a business one level below that operating

segment (the component level) if discrete fi nancial information is

prepared and regularly reviewed by segment management.

However, components are aggregated as a single reporting unit if

they have similar economic characteristics. We recognize an

impairment charge if the carrying amount of a reporting unit

exceeds its fair value and the carrying amount of the reporting

unit’s goodwill exceeds the implied fair value of that goodwill. We

use discounted cash fl ows to establish fair values. When available

and as appropriate, we use comparative market multiples to

corroborate discounted cash fl ow results. When all or a portion of

a reporting unit is disposed, goodwill is allocated to the gain or

loss on disposition based on the relative fair values of the busi-

ness disposed and the portion of the reporting unit that will

be retained.

We amortize the cost of other intangibles over their estimated

useful lives unless such lives are deemed indefi nite. The cost of

intangible assets is generally amortized on a straight-line basis

over the asset’s estimated economic life, except that individually

signifi cant customer-related intangible assets are amortized in

relation to total related sales. Amortizable intangible assets are

tested for impairment based on undiscounted cash fl ows and, if

impaired, written down to fair value based on either discounted

cash fl ows or appraised values. Intangible assets with indefi nite

lives are tested annually for impairment and written down to fair

value as required.

GECS Investment Contracts, Insurance Liabilities and

Insurance Annuity Benefits

Certain entities, which we consolidate, provide guaranteed

investment contracts, primarily to states, municipalities and

municipal authorities.

Our insurance activities also include providing insurance and

reinsurance for life and health risks and providing certain annuity

products. Three product groups are provided: traditional insur-

ance contracts, investment contracts and universal life insurance

contracts. Insurance contracts are contracts with signifi cant

82 GE 2011 ANNUAL REPORT

notes to consolidated financial statements

mortality and/or morbidity risks, while investment contracts are

contracts without such risks. Universal life insurance contracts

are a particular type of long-duration insurance contract whose

terms are not fi xed and guaranteed.

For short-duration insurance contracts, including accident

and health insurance, we report premiums as earned income

over the terms of the related agreements, generally on a pro-rata

basis. For traditional long-duration insurance contracts including

term, whole life and annuities payable for the life of the annuitant,

we report premiums as earned income when due.

Premiums received on investment contracts (including annui-

ties without signifi cant mortality risk) and universal life contracts

are not reported as revenues but rather as deposit liabilities. We

recognize revenues for charges and assessments on these con-

tracts, mostly for mortality, contract initiation, administration

and surrender. Amounts credited to policyholder accounts are

charged to expense.

Liabilities for traditional long-duration insurance contracts

represent the present value of such benefi ts less the present

value of future net premiums based on mortality, morbidity, inter-

est and other assumptions at the time the policies were issued

or acquired. Liabilities for investment contracts and universal life

policies equal the account value, that is, the amount that accrues

to the benefi t of the contract or policyholder including credited

interest and assessments through the fi nancial statement date.

Liabilities for unpaid claims and estimated claim settlement

expenses represent our best estimate of the ultimate obliga-

tions for reported and incurred-but-not-reported claims and

the related estimated claim settlement expenses. Liabilities for

unpaid claims and estimated claim settlement expenses are con-

tinually reviewed and adjusted through current operations.

Fair Value Measurements

For fi nancial assets and liabilities measured at fair value on a

recurring basis, fair value is the price we would receive to sell an

asset or pay to transfer a liability in an orderly transaction with a

market participant at the measurement date. In the absence of

active markets for the identical assets or liabilities, such measure-

ments involve developing assumptions based on market

observable data and, in the absence of such data, internal infor-

mation that is consistent with what market participants would

use in a hypothetical transaction that occurs at the

measurement date.

Observable inputs refl ect market data obtained from inde-

pendent sources, while unobservable inputs refl ect our market

assumptions. Preference is given to observable inputs. These two

types of inputs create the following fair value hierarchy:

Level 1— Quoted prices for identical instruments in

active markets.

Level 2— Quoted prices for similar instruments in active markets;

quoted prices for identical or similar instruments in

markets that are not active; and model-derived valua-

tions whose inputs are observable or whose signifi cant

value drivers are observable.

Level 3— Signifi cant inputs to the valuation model

are unobservable.

We maintain policies and procedures to value instruments using

the best and most relevant data available. In addition, we have risk

management teams that review valuation, including independent

price validation for certain instruments. With regards to Level 3

valuations (including instruments valued by third parties), we

perform a variety of procedures to assess the reasonableness of

the valuations. Such reviews, which may be performed quarterly,

monthly or weekly, include an evaluation of instruments whose

fair value change exceeds predefi ned thresholds (and/or does

not change) and consider the current interest rate, currency and

credit environment, as well as other published data, such as rating

agency market reports and current appraisals. These reviews are

performed within each business by the asset and risk managers,

pricing committees and valuation committees. A detailed review

of methodologies and assumptions is performed by individuals

independent of the business for individual measurements with a

fair value exceeding predefi ned thresholds. This detailed review

may include the use of a third-party valuation fi rm.

The following section describes the valuation methodologies

we use to measure different fi nancial instruments at fair value on

a recurring basis.

INVESTMENTS IN DEBT AND EQUITY SECURITIES. When available, we

use quoted market prices to determine the fair value of invest-

ment securities, and they are included in Level 1. Level 1

securities primarily include publicly-traded equity securities.

For large numbers of investment securities for which market

prices are observable for identical or similar investment secu-

rities but not readily accessible for each of those investments

individually (that is, it is diffi cult to obtain pricing information for

each individual investment security at the measurement date), we

obtain pricing information from an independent pricing vendor.

The pricing vendor uses various pricing models for each asset

class that are consistent with what other market participants

would use. The inputs and assumptions to the model of the pric-

ing vendor are derived from market observable sources including:

benchmark yields, reported trades, broker/dealer quotes, issuer

spreads, benchmark securities, bids, offers, and other market-

related data. Since many fi xed income securities do not trade on a

daily basis, the methodology of the pricing vendor uses available

information as applicable such as benchmark curves, benchmark-

ing of like securities, sector groupings, and matrix pricing. The

pricing vendor considers available market observable inputs in

determining the evaluation for a security. Thus, certain securities

may not be priced using quoted prices, but rather determined

from market observable information. These investments are

included in Level 2 and primarily comprise our portfolio of corpo-

rate fi xed income, and government, mortgage and asset-backed

securities. In infrequent circumstances, our pricing vendors may

provide us with valuations that are based on signifi cant unob-

servable inputs, and in those circumstances we classify the

investment securities in Level 3.

Annually, we conduct reviews of our primary pricing vendor

to validate that the inputs used in that vendor’s pricing process

are deemed to be market observable as defi ned in the standard.

GE 2011 ANNUAL REPORT 83

notes to consolidated financial statements

While we are not provided access to proprietary models of the

vendor, our reviews have included on-site walk-throughs of the

pricing process, methodologies and control procedures for each

asset class and level for which prices are provided. Our reviews

also include an examination of the underlying inputs and assump-

tions for a sample of individual securities across asset classes,

credit rating levels and various durations, a process we perform

each reporting period. In addition, the pricing vendor has an

established challenge process in place for all security valuations,

which facilitates identifi cation and resolution of potentially erro-

neous prices. We believe that the prices received from our pricing

vendor are representative of prices that would be received to sell

the assets at the measurement date (exit prices) and are classifi ed

appropriately in the hierarchy.

We use non-binding broker quotes and other third-party

pricing services as our primary basis for valuation when there

is limited, or no, relevant market activity for a specifi c instru-

ment or for other instruments that share similar characteristics.

We have not adjusted the prices we have obtained. Investment

securities priced using non-binding broker quotes and other

third-party pricing services are included in Level 3. As is the case

with our primary pricing vendor, third-party brokers and other

third-party pricing services do not provide access to their pro-

prietary valuation models, inputs and assumptions. Accordingly,

our risk management personnel conduct reviews of vendors, as

applicable, similar to the reviews performed of our primary pric-

ing vendor. In addition, we conduct internal reviews of pricing for

all such investment securities quarterly to ensure reasonable-

ness of valuations used in our fi nancial statements. These reviews

are designed to identify prices that appear stale, those that have

changed signifi cantly from prior valuations, and other anomalies

that may indicate that a price may not be accurate. Based on the

information available, we believe that the fair values provided by

the brokers and other third-party pricing services are represen-

tative of prices that would be received to sell the assets at the

measurement date (exit prices).

DERIVATIVES. We use closing prices for derivatives included in

Level 1, which are traded either on exchanges or liquid over-the-

counter markets.

The majority of our derivatives are valued using internal mod-

els. The models maximize the use of market observable inputs

including interest rate curves and both forward and spot prices

for currencies and commodities. Derivative assets and liabilities

included in Level 2 primarily represent interest rate swaps, cross-

currency swaps and foreign currency and commodity forward

and option contracts.

Derivative assets and liabilities included in Level 3 primarily

represent equity derivatives and interest rate products that con-

tain embedded optionality or prepayment features.

Non-Recurring Fair Value Measurements

Certain assets are measured at fair value on a non-recurring

basis. These assets are not measured at fair value on an ongoing

basis, but are subject to fair value adjustments only in certain

circumstances. These assets can include loans and long-lived

assets that have been reduced to fair value when they are held for

sale, impaired loans that have been reduced based on the fair

value of the underlying collateral, cost and equity method invest-

ments and long-lived assets that are written down to fair value

when they are impaired and the remeasurement of retained

investments in formerly consolidated subsidiaries upon a change

in control that results in deconsolidation of a subsidiary, if we sell

a controlling interest and retain a noncontrolling stake in the

entity. Assets that are written down to fair value when impaired

and retained investments are not subsequently adjusted to fair

value unless further impairment occurs.

The following describes the valuation methodologies we use

to measure fi nancial and non-fi nancial instruments accounted for

at fair value on a non-recurring basis and for certain assets within

our pension plans and retiree benefi t plans at each reporting

period, as applicable.

LOANS. When available, we use observable market data, including

pricing on recent closed market transactions, to value loans that

are included in Level 2. When this data is unobservable, we use

valuation methodologies using current market interest rate data

adjusted for inherent credit risk, and such loans are included in

Level 3. When appropriate, loans may be valued using collateral

values as a practical expedient (see Long-Lived Assets below).

COST AND EQUITY METHOD INVESTMENTS. Cost and equity method

investments are valued using market observable data such as

quoted prices when available. When market observable data is

unavailable, investments are valued using a discounted cash fl ow

model, comparative market multiples or a combination of both

approaches as appropriate and other third-party pricing sources.

These investments are generally included in Level 3.

Investments in private equity, real estate and collective funds

are valued using net asset values. The net asset values are deter-

mined based on the fair values of the underlying investments in

the funds. Investments in private equity and real estate funds are

generally included in Level 3 because they are not redeemable

at the measurement date. Investments in collective funds are

included in Level 2.

LONG-LIVED ASSETS. Fair values of long-lived assets, including

aircraft and real estate, are primarily derived internally and are

based on observed sales transactions for similar assets. In other

instances, for example, collateral types for which we do not have

comparable observed sales transaction data, collateral values are

developed internally and corroborated by external appraisal

information. Adjustments to third-party valuations may be per-

formed in circumstances where market comparables are not

specifi c to the attributes of the specifi c collateral or appraisal

information may not be refl ective of current market conditions

due to the passage of time and the occurrence of market events

since receipt of the information. For real estate, fair values are

84 GE 2011 ANNUAL REPORT

notes to consolidated financial statements

based on discounted cash fl ow estimates which refl ect current

and projected lease profi les and available industry information

about capitalization rates and expected trends in rents and occu-

pancy and are corroborated by external appraisals. These

investments are generally included in Level 3.

RETAINED INVESTMENTS IN FORMERLY CONSOLIDATED

SUBSIDIARIES.

Upon a change in control that results in deconsoli-

dation of a subsidiary, the fair value measurement of our retained

noncontrolling stake in the former subsidiary is valued using an

income approach, a market approach, or a combination of both

approaches as appropriate. In applying these methodologies, we

rely on a number of factors, including actual operating results,

future business plans, economic projections, market observable

pricing multiples of similar businesses and comparable transac-

tions, and possible control premium. These investments are

included in Level 1 or Level 3, as appropriate, determined at the

time of the transaction.

Accounting Changes

On January 1, 2011, we adopted Financial Accounting Standards

Board (FASB) ASU 2009-13 and ASU 2009-14, amendments to

ASC 605, Revenue Recognition and ASC 985, Software, respec-

tively, (ASU 2009-13 & 14). ASU 2009-13 requires the allocation of

consideration to separate components of an arrangement based

on the relative selling price of each component. ASU 2009-14

requires certain software-enabled products to be accounted for

under the general accounting standards for multiple component

arrangements. These amendments are effective for new revenue

arrangements entered into or materially modifi ed on or subse-

quent to January 1, 2011.

Although the adoption of these amendments eliminated the

allocation of consideration using residual values, which was

applied primarily in our Healthcare segment, the overall impact of

adoption was insignifi cant to our fi nancial statements. In addition,

there are no signifi cant changes to the number of components or

the pattern and timing of revenue recognition following adoption.

On July 1, 2011, we adopted FASB ASU 2011-02, an amend-

ment to ASC 310, Receivables. ASU 2011-02 provides guidance

for determining whether a restructuring of a debt constitutes a

TDR. ASU 2011-02 requires that a restructuring be classifi ed as a

TDR when it is both a concession and the debtor is experiencing

fi nancial diffi culties. The amendment also clarifi es the guidance

on a creditor’s evaluation of whether it has granted a concession.

The amendment applies to restructurings that have occurred

subsequent to January 1, 2011. As a result of adopting these

amendments on July 1, 2011, we have classifi ed an additional

$271 million of fi nancing receivables as TDRs and have recorded

an increase of $77 million to our allowance for losses on fi nancing

receivables. See Note 23.

On January 1, 2010, we adopted ASU 2009-16 and ASU

2009-17, amendments to ASC 860, Transfers and Servicing, and

ASC 810, Consolidation, respectively (ASU 2009-16 & 17). ASU

2009-16 eliminated the Qualifi ed Special Purpose Entity (QSPE)

concept, and ASU 2009-17 required that all such entities be evalu-

ated for consolidation as VIEs. Adoption of these amendments

resulted in the consolidation of all of our sponsored QSPEs. In

addition, we consolidated assets of VIEs related to direct invest-

ments in entities that hold loans and fi xed income securities, a

media joint venture and a small number of companies to which

we have extended loans in the ordinary course of business and

subsequently were subject to a TDR.

We consolidated the assets and liabilities of these entities at

amounts at which they would have been reported in our fi nancial

statements had we always consolidated them. We also decon-

solidated certain entities where we did not meet the defi nition

of the primary benefi ciary under the revised guidance; however,

the effect was insignifi cant at January 1, 2010. The incremen-

tal effect on total assets and liabilities, net of our investment in

these entities, was an increase of $31,097 million and $33,042 mil-

lion, respectively, at January 1, 2010. The net reduction of total

equity (including noncontrolling interests) was $1,945 million at

January 1, 2010, principally related to the reversal of previously

recognized securitization gains as a cumulative effect adjustment

to retained earnings. See Note 24 for additional information.

We adopted amendments to ASC 320, Investments—Debt and

Equity Securities, and recorded a cumulative effect adjustment to

increase retained earnings as of April 1, 2009, of $62 million.

GE 2011 ANNUAL REPORT 85

notes to consolidated financial statements

Note 2.

Assets and Liabilities of Businesses Held for Sale and

Discontinued Operations

Assets and Liabilities of Businesses Held for Sale

NBC UNIVERSAL

In December 2009, we entered into an agreement with Comcast

Corporation (Comcast) to transfer the assets of the NBCU busi-

ness to a newly formed entity, comprising our NBCU business and

Comcast’s cable networks, regional sports networks, certain

digital properties and certain unconsolidated investments, in

exchange for cash and a 49% interest in the newly-formed entity.

On March 19, 2010, NBCU entered into a three-year credit

agreement and a 364-day bridge loan agreement. On April 30,

2010, NBCU issued $4,000 million of senior, unsecured notes with

maturities ranging from 2015 to 2040 (interest rates ranging from

3.65% to 6.40%). On October 4, 2010, NBCU issued $5,100 million

of senior, unsecured notes with maturities ranging from 2014 to

2041 (interest rates ranging from 2.10% to 5.95%). Subsequent

to these issuances, the credit agreement and bridge loan agree-

ments were terminated, with a $750 million revolving credit

agreement remaining in effect. Proceeds from these issuances

were used to repay $1,678 million of existing debt and pay a divi-

dend of $7,394 million to GE.

On September 26, 2010, we acquired approximately 38% of

Vivendi S.A.’s (Vivendi) 20% interest in NBCU (7.7% of NBCU’s

outstanding shares) for $2,000 million. In January 2011 and prior

to the transaction with Comcast, we acquired the remaining

Vivendi interest in NBCU (12.3% of NBCU’s outstanding shares) for

$3,673 million and made an additional payment of $222 million

related to the previously purchased shares.

On January 28, 2011, we transferred the assets of the NBCU

business and Comcast transferred certain of its assets to a newly

formed entity, NBCUniversal LLC (NBCU LLC). In connection with

the transaction, we received $6,176 million in cash from Comcast

(which included $49 million of transaction-related cost reim-

bursements) and a 49% interest in NBCU LLC. Comcast holds the

remaining 51% interest in NBCU LLC.

With respect to our 49% interest in NBCU LLC, we hold

redemption rights, which, if exercised, would require NBCU LLC

or Comcast to purchase (either directly or indirectly by GE trans-

ferring common stock of our holding company that owns 49%

of NBCU LLC) half of our ownership interest after three and a half

years and the remaining half after seven years, subject to cer-

tain exceptions, conditions and limitations. Our interest in NBCU

LLC also is subject to call provisions, which, if exercised, allow

Comcast to purchase our interest (either directly or indirectly) at

specifi ed times subject to certain exceptions. The redemption

prices for such transactions are determined based on a contrac-

tually specifi ed formula.

In connection with the transaction, we also entered into a

number of agreements with Comcast governing the operation

of the venture and transitional services, employee, tax and other

matters. Under the operating agreement, excess cash generated

by the operations of NBCU LLC will be used to reduce borrow-

ings, except for distributions in amounts necessary to pay taxes

on NBCU LLC’s profi ts. In addition, Comcast is obligated to share

with us potential tax savings associated with Comcast’s purchase

of its NBCU LLC member interest, if realized. We did not recognize

these potential future payments as consideration for the sale, but

will record such payments in income as they are received.

Following the transaction, we deconsolidated NBCU and we

account for our investment in NBCU LLC under the equity method.

We recognized a pre-tax gain on the sale of $3,705 million

($526 million after tax). In connection with the sale, we recorded

income tax expense of $3,179 million, refl ecting the low tax basis

in our investment in the NBCU business and the recognition of

deferred tax liabilities related to our 49% investment in NBCU LLC.

As our investment in NBCU LLC is structured as a partnership for

U.S. tax purposes, U.S. taxes are recorded separately from the

equity investment.

At December 31, 2011, the carrying amount of our equity

investment in NBCU LLC was $17,955 million, reported in the

“All other assets” caption in our Statement of Financial Position.

Deferred tax liabilities related to our NBCU LLC investment

were $4,880 million at December 31, 2011 and were reported

in the “Deferred income taxes” caption in our Statement of

Financial Position.

We valued the initial carrying value of our investment in NBCU

LLC based on a combination of income and market approaches.

An income approach was used to determine the fair values of

NBCU LLC’s underlying businesses and, when available and

appropriate, an analysis of comparative market multiples was

also undertaken. The resulting fair values were weighted equally

between the two approaches. For purposes of the income

approach, fair value was determined based on the present values

of estimated future cash fl ows discounted at appropriate risk-

adjusted rates. We used NBCU LLC management projections to

estimate future cash fl ows and included an estimate of long-term

future growth rates based on management’s most recent views

of the long-term outlook for its businesses. We believe that these

assumptions are consistent with market participant assump-

tions. We derived discount rates using a weighted average cost of

capital. The cost of equity was determined using the capital asset

pricing model and the cost of debt fi nancing was based on pub-

lished rates for industries relevant to NBCU LLC. Under the market

approach, the most signifi cant assumption was the price multiple,

which was selected based on the operating performance and

fi nancial condition of comparable publicly traded companies in

industries similar to those of the NBCU LLC businesses. As NBCU

LLC is a partnership, the fair value of our investment in NBCU LLC

was determined based upon the amount a market participant

would pay for the partnership interest taking into consideration

the tax benefi t associated with such a purchase. The value of our

investment also incorporates the fair value of the redemption fea-

tures described above, which was determined based on an option

pricing framework that incorporates the specifi c contractual

terms of the redemption features.

86 GE 2011 ANNUAL REPORT

notes to consolidated financial statements

At December 31, 2010, we classifi ed the NBCU assets and

liabilities of $33,758 million and $15,455 million, respectively, as

held for sale. The major classes of assets at December 31, 2010

were current receivables ($2,572 million), property, plant and

equipment—net ($2,082 million), goodwill and other intangible

assets—net ($22,263 million) and all other assets ($6,841 million),

including fi lm and television production costs of $4,423 mil-

lion. The major classes of liabilities at December 31, 2010 were

accounts payable ($492 million), other GE current liabilities

($3,983 million), long-term debt ($9,906 million) and all other liabil-

ities ($1,073 million).

OTHER

In the third quarter of 2011, we committed to sell our GE Capital

CLL marine container leasing business, which consists of our

controlling interests in the GE SeaCo joint venture along with

other owned marine container assets, and our CLL trailer fl eet

services business in Mexico. In the fourth quarter of 2011, we

completed the sale of our interest in the CLL marine container

leasing business and our CLL trailer fl eet services business in

Mexico for proceeds of $500 million and $111 million, respectively.

In the second quarter of 2011, we committed to sell our GE

Capital Consumer business banking operations in Latvia.

In 2010, we committed to sell our GE Capital Consumer busi-

nesses in Argentina, Brazil, and Canada, a CLL business in South

Korea, and our Real Estate Interpark business. The GE Capital

Consumer Canada disposition was completed during the fi rst

quarter of 2011 for proceeds of $1,429 million. The GE Capital

Consumer Brazil and Real Estate Interpark business dispositions

were completed during the second quarter of 2011 for proceeds

of $22 million and $704 million, respectively. The GE Capital

Consumer Argentina disposition was completed during the third

quarter of 2011 for proceeds of $41 million.

Summarized fi nancial information for businesses held for sale

is shown below.

December 31 (In millions) 2011 2010

ASSETS

Cash and equivalents $149 $ 63

Current receivables —2,572

Financing receivables—net 412 1,917

Property, plant and equipment—net 81 2,185

Goodwill 20 19,606

Other intangible assets—net 72,844

All other assets 87,560

Other 34 140

Assets of businesses held for sale $711 $36,887

LIABILITIES

Short-term borrowings $252 $ 146

Accounts payable 21 538

Other GE current liabilities 93,994

Long-term borrowings 810,134

All other liabilities 55 1,235

Liabilities of businesses held for sale $345 $16,047

Discontinued Operations

Discontinued operations primarily comprised BAC Credomatic

GECF Inc. (BAC) (our Central American bank and card business), GE

Money Japan (our Japanese personal loan business, Lake, and our

Japanese mortgage and card businesses, excluding our invest-

ment in GE Nissen Credit Co., Ltd.), our U.S. mortgage business

(WMC), our U.S. recreational vehicle and marine equipment

fi nancing business (Consumer RV Marine), Consumer Mexico,

Consumer Singapore and our Consumer home lending operations

in Australia and New Zealand (Australian Home Lending).

Associated results of operations, fi nancial position and cash fl ows

are separately reported as discontinued operations for all

periods presented.

Summarized fi nancial information for discontinued operations

is shown below.

(In millions) 2011 2010 2009

OPERATIONS

Total revenues $ 316 $ 2,035 $2,341

Earnings (loss) from discontinued

operations before income taxes $ (30) $ 215 $ 340

Benefit (provision) for income taxes 85 96 (18)

Earnings (loss) from discontinued

operations, net of taxes $ 55 $ 311 $ 322

DISPOSAL

Gain (loss) on disposal before

income taxes $(329) $(1,420) $ (196)

Benefit (provision) for income taxes 351 236 93

Gain (loss) on disposal, net of taxes $ 22 $(1,184) $ (103)

Earnings (loss) from discontinued

operations, net of taxes

(a) $ 77 $ (873) $ 219

(a) The sum of GE industrial earnings (loss) from discontinued operations, net of

taxes, and GECS earnings (loss) from discontinued operations, net of taxes, is

reported as GE earnings (loss) from discontinued operations, net of taxes, on the

Statement of Earnings.

December 31 (In millions) 2011 2010

ASSETS

Cash and equivalents $ 121 $ 142

Financing receivables—net 61 10,589

All other assets —168

Other 1,073 1,526

Assets of discontinued operations $1,255 $12,425

LIABILITIES

Accounts payable, principally trade accounts $ 7 $ 110

Deferred income taxes 205 230

All other liabilities 1,423 2,205

Other —42

Liabilities of discontinued operations $1,635 $ 2,587

Assets at December 31, 2011 and December 31, 2010, primarily

comprised cash, fi nancing receivables and a deferred tax asset

for a loss carryforward, which expires principally in 2017 and in

part in 2019, related to the sale of our GE Money Japan business.

GE 2011 ANNUAL REPORT 87

notes to consolidated financial statements

BAC CREDOMATIC GECF INC.

During the fourth quarter of 2010, we classifi ed BAC as discontin-

ued operations and completed the sale of BAC for $1,920 million.

Immediately prior to the sale, and in accordance with terms of a

previous agreement, we increased our ownership interest in BAC

from 75% to 100% for a purchase price of $633 million. As a result

of the sale of our interest in BAC, we recognized an after-tax gain

of $780 million in 2010.

BAC revenues from discontinued operations were $983 million

and $943 million in 2010 and 2009, respectively. In total, BAC earn-

ings from discontinued operations, net of taxes, were $854 million

and $292 million in 2010 and 2009, respectively.

GE MONEY JAPAN

During the third quarter of 2007, we committed to a plan to sell

our Japanese personal loan business, Lake, upon determining

that, despite restructuring, Japanese regulatory limits for interest

charges on unsecured personal loans did not permit us to earn an

acceptable return. During the third quarter of 2008, we com-

pleted the sale of GE Money Japan, which included Lake, along

with our Japanese mortgage and card businesses, excluding our

investment in GE Nissen Credit Co., Ltd. In connection with the

sale, we reduced the proceeds from the sale for estimated inter-

est refund claims in excess of the statutory interest rate. Proceeds

from the sale were to be increased or decreased based on the

actual claims experienced in accordance with loss-sharing terms

specifi ed in the sale agreement, with all claims in excess of

258 billion Japanese yen (approximately $3,000 million) remaining

our responsibility. The underlying portfolio to which this obliga-

tion relates is in runoff and interest rates were capped for all

designated accounts by mid-2009. In the third quarter of 2010, we

began making reimbursements under this arrangement.

Our overall claims experience developed unfavorably through

2010. We believe that the level of excess interest refund claims

was impacted by the challenging global economic conditions,

in addition to Japanese legislative and regulatory changes. In

September 2010, a large independent personal loan company

in Japan fi led for bankruptcy, which precipitated a signifi cant

amount of publicity surrounding excess interest refund claims in

the Japanese marketplace, along with substantial legal advertis-

ing. We observed an increase in claims during September 2010

and higher average daily claims in the fourth quarter of 2010 and

the fi rst two months of 2011. Since February and through the end

of 2011, we have experienced substantial declines in the rate of

incoming claims, though the overall rate of reduction, including

fourth quarter experience, has been slower than we expected.

During the fourth quarter of 2011, we recorded an increase to

our reserve of $243 million to refl ect our revised estimates of the

assumed daily incoming claims reduction rate and severity. At

December 31, 2011, our reserve for reimbursement of claims in

excess of the statutory interest rate was $692 million.

The amount of these reserves is based on analyses of recent

and historical claims experience, pending and estimated future

excess interest refund requests, the estimated percentage of

customers who present valid requests, and our estimated pay-

ments related to those requests. Our estimated liability for excess

interest refund claims at December 31, 2011 assumes the pace

of incoming claims will continue to decelerate, average expo-

sure per claim remains consistent with recent experience, and

we continue to see the impact of our loss mitigation efforts.

Estimating the pace of decline in incoming claims can have a sig-

nifi cant effect on the total amount of our liability. Holding all other

assumptions constant, a 20% adverse change in assumed incom-

ing daily claim rate reduction would result in an increase to our

reserves of approximately $110 million.

Uncertainties around the likelihood of consumers to present

valid claims, the runoff status of the underlying book of business,

the fi nancial status of other personal lending companies in Japan,

challenging economic conditions and the impact of laws and reg-

ulations make it diffi cult to develop a meaningful estimate of the

aggregate possible claims exposure. Recent trends, including the

effect of consumer activity, market activity regarding other per-

sonal loan companies and higher claims severity, may continue to

have an adverse effect on claims development.

GE Money Japan losses from discontinued operations, net of

taxes, were $238 million, $1,671 million and $158 million in 2011,

2010 and 2009, respectively.

WMC

During the fourth quarter of 2007, we completed the sale of WMC,

our U.S. mortgage business. WMC substantially discontinued all

new loan originations by the second quarter of 2007, and is not a

loan servicer. In connection with the sale, WMC retained certain

representation and warranty obligations related to loans sold to

third parties prior to the disposal of the business and contractual

obligations to repurchase previously sold loans as to which there

was an early payment default. All claims received for early pay-

ment default have either been resolved or are no longer

being pursued.

Pending repurchase claims based upon representations and

warranties made in connection with loan sales were $705 mil-

lion at December 31, 2011, $347 million at December 31, 2010

and $783 million at December 31, 2009. Reserves related to these

contractual representations and warranties were $143 million

and $101 million at December 31, 2011 and December 31, 2010,

respectively. We recorded adjustments to our reserve of $42 mil-

lion in 2011 to refl ect the higher amount of pending claims and

an increase in our reserve for unidentifi ed claims. The amount

of these reserves is based upon pending and estimated future

loan repurchase requests, the estimated percentage of loans val-

idly tendered for repurchase, and our estimated losses on loans

repurchased. A ten percent adverse change in these key assump-

tions would result in an increase to our reserves of approximately

$35 million. Historically, a small percentage of the total loans

88 GE 2011 ANNUAL REPORT

notes to consolidated financial statements

WMC originated and sold has been tendered for repurchase,

and of those loans tendered, only a limited amount has quali-

fi ed as “validly tendered,” meaning the loans sold did not satisfy

contractual obligations. In the second half of 2011, a lawsuit was

fi led against WMC relating to representations and warranties on

$321 million of mortgages. Uncertainties surrounding economic

conditions, the ability and propensity of mortgage holders to

present valid claims, governmental actions, pending and threat-

ened litigation against WMC and other activity in the mortgage

industry make it diffi cult to develop a meaningful estimate of

aggregate possible claim exposure. Actual losses could exceed

the reserve amount if actual claim rates, investigative or litiga-

tion activity, valid tenders or losses WMC incurs on repurchased

loans are higher than we have historically observed with respect

to WMC.

WMC revenues (loss) from discontinued operations were

$(42) million, $(4) million and $2 million in 2011, 2010 and 2009,

respectively. In total, WMC’s losses from discontinued operations,

net of taxes, were $34 million, $7 million and $1 million in 2011,

2010 and 2009, respectively.

OTHER FINANCIAL SERVICES

In the second quarter of 2011, we entered into an agreement to

sell our Australian Home Lending operations and classifi ed it as

discontinued operations. As a result, we recognized an after-tax

loss of $148 million in 2011. We completed the sale in the third

quarter of 2011 for proceeds of approximately $4,577 million.

Australian Home Lending revenues from discontinued operations

were $250 million, $510 million and $727 million in 2011, 2010 and

2009, respectively. Australian Home Lending earnings (loss) from

discontinued operations, net of taxes, were $(65) million, $70 mil-

lion and $113 million in 2011, 2010 and 2009, respectively.

In the fi rst quarter of 2011, we entered into an agreement to

sell our Consumer Singapore business for $692 million. The sale

was completed in the second quarter of 2011 and resulted in the

recognition of a gain on disposal, net of taxes, of $319 million.

Consumer Singapore revenues from discontinued operations

were $30 million, $108 million and $113 million in 2011, 2010 and

2009, respectively. Consumer Singapore earnings from discon-

tinued operations, net of taxes, were $333 million, $36 million and

$25 million in 2011, 2010 and 2009, respectively.

In the fourth quarter of 2010, we entered into agreements

to sell our Consumer RV Marine portfolio and Consumer Mexico

business. The Consumer RV Marine and Consumer Mexico dispo-

sitions were completed during the fi rst quarter and the second

quarter of 2011, respectively, for proceeds of $2,365 million

and $1,943 million, respectively. Consumer RV Marine revenues

from discontinued operations were $11 million, $210 million and

$260 million in 2011, 2010 and 2009, respectively. Consumer RV

Marine earnings (loss) from discontinued operations, net of taxes,

were $2 million, $(99) million and $(83) million in 2011, 2010 and

2009, respectively. Consumer Mexico revenues from discontin-

ued operations were $67 million, $228 million and $303 million

in 2011, 2010 and 2009, respectively. Consumer Mexico earnings

(loss) from discontinued operations, net of taxes, were $30 million,

$(59) million and $66 million in 2011, 2010 and 2009, respectively.

GE INDUSTRIAL

GE industrial earnings (loss) from discontinued operations, net of

taxes, were $(1) million, $(5) million and $(19) million in 2011, 2010

and 2009, respectively. The sum of GE industrial earnings (loss)

from discontinued operations, net of taxes, and GECS earnings

(loss) from discontinued operations, net of taxes, is reported as GE

industrial earnings (loss) from discontinued operations, net of

taxes, on the Statement of Earnings.

Assets of GE industrial discontinued operations were $52 mil-

lion and $50 million at December 31, 2011 and December 31,

2010, respectively. Liabilities of GE industrial discontinued opera-

tions were $158 million and $164 million at December 31, 2011,

and December 31, 2010, respectively, and primarily represent

taxes payable and pension liabilities related to the sale of our

Plastics business in 2007.

GE 2011 ANNUAL REPORT 89

notes to consolidated financial statements

Note 3.

Investment Securities

Substantially all of our investment securities are classifi ed as available-for-sale. These comprise mainly investment grade debt securities

supporting obligations to annuitants, policyholders and holders of guaranteed investment contracts (GICs) in our run-off insurance operations

and Trinity, and investment securities at our treasury operations and investments held in our CLL business collateralized by senior secured

loans of high-quality, middle-market companies in a variety of industries. We do not have any securities classifi ed as held to maturity.

2011 2010

December 31 (In millions)

Amortized

cost

Gross

unrealized

gains

Gross

unrealized

losses

Estimated

fair value

Amortized

cost

Gross

unrealized

gains

Gross

unrealized

losses

Estimated

fair value

GE

Debt—U.S. corporate $ — $ — $ — $ — $ 1 $ — $ — $ 1

Equity—available-for-sale 18 — — 18 18 — — 18

18 — — 18 19 — — 19

GECS

Debt

U.S. corporate 20,748 3,432 (410) 23,770 20,815 1,576 (237) 22,154

State and municipal 3,027 350 (143) 3,234 2,961 45 (282) 2,724

Residential mortgage-backed (a) 2,711 184 (286) 2,609 3,092 95 (378) 2,809

Commercial mortgage-backed 2,913 162 (247) 2,828 3,009 145 (230) 2,924

Asset-backed 5,102 32 (164) 4,970 3,407 16 (193) 3,230

Corporate—non-U.S. 2,414 126 (207) 2,333 2,883 116 (132) 2,867

Government—non-U.S. 2,488 129 (86) 2,531 2,242 82 (58) 2,266

U.S. government and

federal agency 3,974 84 — 4,058 3,776 57 (47) 3,786

Retained interests 25 10 — 35 55 10 (26) 39

Equity

Available-for-sale 713 75 (38) 750 500 213 (8) 705

Trading 241 — — 241 417 — — 417

44,356 4,584 (1,581) 47,359 43,157 2,355 (1,591) 43,921

ELIMINATIONS (3) — — (3) (2) — — (2)

Total $44,371 $4,584 $(1,581) $47,374 $43,174 $2,355 $(1,591) $43,938

(a) Substantially collateralized by U.S. mortgages. Of our total residential mortgage-backed securities (RMBS) portfolio at December 31, 2011, $1,060 million relates to securities

issued by government-sponsored entities and $1,549 million relates to securities of private label issuers. Securities issued by private label issuers are collateralized

primarily by pools of individual direct mortgage loans of financial institutions.

The fair value of investment securities increased to $47,374 million at December 31, 2011, from $43,938 million at December 31, 2010,

primarily due to the impact of lower interest rates and funding in our CLL business of investments collateralized by senior secured loans

of high-quality, middle-market companies in a variety of industries.

The following tables present the estimated fair values and gross unrealized losses of our available-for-sale investment securities.

2011 2010

In loss position for

Less than 12 months 12 months or more Less than 12 months 12 months or more

December 31 (In millions)

Estimated

fair value

Gross

unrealized

losses (a) Estimated

fair value

Gross

unrealized

losses (a) Estimated

fair value

Gross

unrealized

losses

Estimated

fair value

Gross

unrealized

losses

Debt

U.S. corporate $1,435 $(241) $ 836 $ (169) $2,375 $ (81) $1,519 $ (156)

State and municipal 87 (1) 307 (142) 949 (43) 570 (239)

Residential mortgage-backed 219 (9) 825 (277) 188 (4) 1,024 (374)

Commercial mortgage-backed 244 (23) 1,320 (224) 831 (104) 817 (126)

Asset-backed 100 (7) 850 (157) 113 (5) 910 (188)

Corporate—non-U.S. 330 (28) 607 (179) 448 (12) 804 (120)

Government—non-U.S. 906 (5) 203 (81) 661 (6) 107 (52)

U.S. government and federal agency 502———1,822 (47) — —

Retained interests ————— — 34 (26)

Equity 440 (38) — — 49 (8) — —

Total $4,263 $(352) $4,948 $(1,229) $7,436 $(310) $5,785 $(1,281)

(a) Includes gross unrealized losses at December 31, 2011 of $(272) million related to securities that had other-than-temporary impairments recognized in a prior period.

90 GE 2011 ANNUAL REPORT

notes to consolidated financial statements

We regularly review investment securities for impairment using

both qualitative and quantitative criteria. We presently do not

intend to sell the vast majority of our debt securities and believe

that it is not more likely than not that we will be required to sell

these securities that are in an unrealized loss position before

recovery of our amortized cost. We believe that the unrealized

loss associated with our equity securities will be recovered within

the foreseeable future.

The vast majority of our U.S. corporate debt securities are

rated investment grade by the major rating agencies. We evaluate

U.S. corporate debt securities based on a variety of factors, such

as the fi nancial health of and specifi c prospects for the issuer,

including whether the issuer is in compliance with the terms and

covenants of the security. In the event a U.S. corporate debt secu-

rity is deemed to be other-than-temporarily impaired, we isolate

the credit portion of the impairment by comparing the present

value of our expectation of cash fl ows to the amortized cost of

the security. We discount the cash fl ows using the original effec-

tive interest rate of the security.

The vast majority of our RMBS have investment grade credit

ratings from the major rating agencies and are in a senior posi-

tion in the capital structure of the deal. Of our total RMBS at

December 31, 2011 and 2010, approximately $515 million and

$673 million, respectively, relate to residential subprime credit,

primarily supporting our guaranteed investment contracts. These

are collateralized primarily by pools of individual, direct mortgage

loans (a majority of which were originated in 2006 and 2005), not

other structured products such as collateralized debt obligations.

In addition, of the total residential subprime credit exposure at

December 31, 2011 and 2010, approximately $277 million and

$343 million, respectively, was insured by Monoline insurers

(Monolines) on which we continue to place reliance.

Our commercial mortgage-backed securities (CMBS) portfo-

lio is collateralized by both diversifi ed pools of mortgages that

were originated for securitization (conduit CMBS) and pools of

large loans backed by high-quality properties (large loan CMBS), a

majority of which were originated in 2006 and 2007. Substantially

all of the securities in our CMBS portfolio have investment grade

credit ratings and the vast majority of the securities are in a senior

position in the capital structure.

Our asset-backed securities (ABS) portfolio is collateralized by

senior secured loans of high-quality, middle-market companies

in a variety of industries, as well as a variety of diversifi ed pools of

assets such as student loans and credit cards. The vast majority

of our ABS are in a senior position in the capital structure of the

deals. In addition, substantially all of the securities that are below

investment grade are in an unrealized gain position.

For ABS and RMBS, we estimate the portion of loss attribut-

able to credit using a discounted cash fl ow model that considers

estimates of cash fl ows generated from the underlying collateral.

Estimates of cash fl ows consider credit risk, interest rate and

prepayment assumptions that incorporate management’s best

estimate of key assumptions of the underlying collateral, includ-

ing default rates, loss severity and prepayment rates. For CMBS,

we estimate the portion of loss attributable to credit by evalu-

ating potential losses on each of the underlying loans in the

security. Collateral cash fl ows are considered in the context of

our position in the capital structure of the deals. Assumptions can

vary widely depending upon the collateral type, geographic con-

centrations and vintage.

If there has been an adverse change in cash fl ows for RMBS,

management considers credit enhancements such as monoline

insurance (which are features of a specifi c security). In evaluating

the overall credit worthiness of the Monoline, we use an analy-

sis that is similar to the approach we use for corporate bonds,

including an evaluation of the suffi ciency of the Monoline’s cash

reserves and capital, ratings activity, whether the Monoline is in

default or default appears imminent, and the potential for inter-

vention by an insurance or other regulator.

During 2011, we recorded pre-tax, other-than-temporary

impairments of $467 million, of which $387 million was recorded

through earnings ($81 million relates to equity securities) and

$80 million was recorded in accumulated other comprehensive

income (AOCI). At January 1, 2011, cumulative impairments rec-

ognized in earnings associated with debt securities still held were

$500 million. During 2011, we recognized fi rst-time impairments

of $58 million and incremental charges on previously impaired

securities of $230 million. These amounts included $62 million

related to securities that were subsequently sold.

During 2010, we recorded pre-tax, other-than-temporary

impairments of $460 million, of which $253 million was recorded

through earnings ($35 million relates to equity securities) and

$207 million was recorded in AOCI. At January 1, 2010, cumulative

impairments recognized in earnings associated with debt securities

still held were $340 million. During 2010, we recognized fi rst-time

impairments of $164 million and incremental charges on previously

impaired securities of $38 million. These amounts included $41 mil-

lion related to securities that were subsequently sold.

During 2009, we recorded pre-tax, other-than-temporary

impairments of $1,078 million, of which $753 million was

recorded through earnings ($42 million relates to equity secu-

rities) and $325 million was recorded in AOCI. At April 1, 2009,

$33 million was reclassifi ed to retained earnings as a result of

the amendments to ASC 320. Subsequent to April 1, 2009, fi rst-

time and incremental credit impairments were $109 million and

$257 million, respectively. Previous credit impairments related to

securities sold were $124 million.

GE 2011 ANNUAL REPORT 91

notes to consolidated financial statements

CONTRACTUAL MATURITIES OF GECS INVESTMENT IN AVAILABLE-

FOR-SALE DEBT SECURITIES (EXCLUDING MORTGAGE-BACKED AND

ASSET-BACKED SECURITIES)

(In millions)

Amortized

cost

Estimated

fair value

Due in

2012 $ 2,641 $ 2,664

2013–2016 7,497 7,666

2017–2021 4,679 4,810

2022 and later 17,805 20,757

We expect actual maturities to differ from contractual maturi-

ties because borrowers have the right to call or prepay

certain obligations.

Supplemental information about gross realized gains and

losses on available-for-sale investment securities follows.

(In millions) 2011 2010 2009

GE

Gains $ — $ — $ 4

Losses, including impairments —— (173)

Net —— (169)

GECS

Gains 205 190 164

Losses, including impairments (402) (281) (637)

Net (197) (91) (473)

Total $(197) $ (91) $(642)

Although we generally do not have the intent to sell any specifi c

securities at the end of the period, in the ordinary course of man-

aging our investment securities portfolio, we may sell securities

prior to their maturities for a variety of reasons, including diversi-

fi cation, credit quality, yield and liquidity requirements and the

funding of claims and obligations to policyholders. In some of our

bank subsidiaries, we maintain a certain level of purchases and

sales volume principally of non-U.S. government debt securities.

In these situations, fair value approximates carrying value for

these securities.

Proceeds from investment securities sales and early redemp-

tions by issuers totaled $15,606 million, $16,238 million and

$7,823 million in 2011, 2010 and 2009, respectively, principally

from the sales of short-term securities in our bank subsidiaries

and treasury operations.

We recognized pre-tax gains (losses) on trading securities of

$22 million, $(7) million and $408 million in 2011, 2010 and 2009,

respectively.

Note 4.

Current Receivables

Consolidated (a) GE (b)

December 31 (In millions) 2011 2010 2011 2010

Energy Infrastructure $ 8,845 $ 7,377 $ 6,499 $ 5,349

Aviation 4,348 3,554 2,658 2,009

Healthcare 4,306 4,164 1,943 2,053

Transportation 441 440 347 440

Home & Business Solutions 1,493 1,426 243 240

Corporate items and

eliminations 550 2,088 563 713

19,983 19,049 12,253 10,804

Less allowance for losses (452) (428) (446) (421)

Total $19,531 $18,621 $11,807 $10,383

(a) Included GE industrial customer receivables factored through a GECS affiliate

and reported as financing receivables by GECS. See Note 27.

(b) GE current receivables balances at December 31, 2011 and 2010, before allowance

for losses, included $8,994 million and $8,134 million, respectively, from sales of

goods and services to customers, and $65 million and $24 million at December 31,

2011 and 2010, respectively, from transactions with associated companies.

GE current receivables of $112 million and $193 million at

December 31, 2011 and 2010, respectively, arose from sales,

principally of Healthcare and Aviation goods and services, on

open account to various agencies of the U.S. government. As a

percentage of GE revenues, approximately 4% of GE sales of

goods and services were to the U.S. government in 2011, com-

pared with 5% in both 2010 and 2009.

Note 5.

Inventories

December 31 (In millions) 2011 2010

GE

Raw materials and work in process $ 8,735 $ 6,973

Finished goods 4,971 4,435

Unbilled shipments 485 456

14,191 11,864

Less revaluation to LIFO (450) (404)

13,741 11,460

GECS

Finished goods 51 66

Total $13,792 $11,526

92 GE 2011 ANNUAL REPORT

notes to consolidated financial statements

Note 6.

GECS Financing Receivables and Allowance for Losses

on Financing Receivables

December 31 (In millions) 2011 2010

Loans, net of deferred income (a) $257,515 $275,877

Investment in financing leases, net of

deferred income 38,142 44,390

295,657 320,267

Less allowance for losses (6,350) (8,033)

Financing receivables—net (b) $289,307 $312,234

(a) Deferred income was $2,319 million and $2,351 million at December 31, 2011 and

December 31, 2010, respectively.

(b) Financing receivables at December 31, 2011 and December 31, 2010 included

$1,062 million and $1,503 million, respectively, relating to loans that had been

acquired in a transfer but have been subject to credit deterioration since

origination per ASC 310, Receivables.

GECS fi nancing receivables include both loans and fi nancing

leases. Loans represent transactions in a variety of forms, includ-

ing revolving charge and credit, mortgages, installment loans,

intermediate-term loans and revolving loans secured by business

assets. The portfolio includes loans carried at the principal

amount on which fi nance charges are billed periodically, and

loans carried at gross book value, which includes fi nance charges.

Investment in fi nancing leases consists of direct fi nancing and

leveraged leases of aircraft, railroad rolling stock, autos, other

transportation equipment, data processing equipment, medi-

cal equipment, commercial real estate and other manufacturing,

power generation, and commercial equipment and facilities.

For federal income tax purposes, the leveraged leases and the

majority of the direct fi nancing leases are leases in which GECS

depreciates the leased assets and is taxed upon the accrual of rental

income. Certain direct fi nancing leases are loans for federal income

tax purposes. For these transactions, GECS is taxed only on the por-

tion of each payment that constitutes interest, unless the interest is

tax-exempt (e.g., certain obligations of state governments).

Investment in direct fi nancing and leveraged leases represents

net unpaid rentals and estimated unguaranteed residual values

of leased equipment, less related deferred income. GECS has no

general obligation for principal and interest on notes and other

instruments representing third-party participation related to lev-

eraged leases; such notes and other instruments have not been

included in liabilities but have been offset against the related rent-

als receivable. The GECS share of rentals receivable on leveraged

leases is subordinate to the share of other participants who also

have security interests in the leased equipment. For federal income

tax purposes, GECS is entitled to deduct the interest expense

accruing on non-recourse fi nancing related to leveraged leases.

NET INVESTMENT IN FINANCING LEASES

Total financing leases Direct financing leases (a) Leveraged leases (b)

December 31 (In millions) 2011 2010 2011 2010 2011 2010

Total minimum lease payments receivable $44,157 $52,180 $33,667 $40,037 $10,490 $12,143

Less principal and interest on third-party non-recourse debt (6,812) (8,110) ——(6,812) (8,110)

Net rentals receivables 37,345 44,070 33,667 40,037 3,678 4,033

Estimated unguaranteed residual value of leased assets 7,592 8,495 5,140 5,991 2,452 2,504

Less deferred income (6,795) (8,175) (5,219) (6,438) (1,576) (1,737)

Investment in financing leases, net of deferred income 38,142 44,390 33,588 39,590 4,554 4,800

Less amounts to arrive at net investment

Allowance for losses (294) (396) (281) (378) (13) (18)

Deferred taxes (6,718) (6,168) (2,938) (2,266) (3,780) (3,902)

Net investment in financing leases $31,130 $37,826 $30,369 $36,946 $ 761 $ 880

(a) Included $413 million and $452 million of initial direct costs on direct financing leases at December 31, 2011 and 2010, respectively.

(b) Included pre-tax income of $116 million and $133 million and income tax of $35 million and $51 million during 2011 and 2010, respectively. Net investment credits

recognized on leveraged leases during 2011 and 2010 were insignificant.

GE 2011 ANNUAL REPORT 93

notes to consolidated financial statements

CONTRACTUAL MATURITIES

(In millions) Total loans

Net rentals

receivable

Due in

2012 $ 64,548 $10,353

2013 22,689 7,434

2014 22,829 5,500

2015 16,133 4,081

2016 16,869 2,402

2017 and later 60,436 7,575

203,504 37,345

Consumer revolving loans 54,011 —

Total $257,515 $37,345

We expect actual maturities to differ from contractual maturities.

The following tables provide additional information about our

fi nancing receivables and related activity in the allowance for

losses for our Commercial, Real Estate and Consumer portfolios.

FINANCING RECEIVABLES—NET

The following table displays our fi nancing receivables balances.

December 31 (In millions) 2011 2010

COMMERCIAL

CLL

Americas (a) $ 80,505 $ 88,558

Europe 36,899 37,498

Asia 11,635 11,943

Other (a) 436 664

Total CLL 129,475 138,663

Energy Financial Services 5,912 7,011

GE Capital Aviation Services (GECAS) 11,901 12,615

Other 1,282 1,788

Total Commercial financing receivables 148,570 160,077

REAL ESTATE

Debt 24,501 30,249

Business Properties 8,248 9,962

Total Real Estate financing receivables 32,749 40,211

CONSUMER

Non-U.S. residential mortgages 36,170 40,011

Non-U.S. installment and revolving credit 18,544 20,132

U.S. installment and revolving credit 46,689 43,974

Non-U.S. auto 5,691 7,558

Other 7,244 8,304

Total Consumer financing receivables 114,338 119,979

Total financing receivables 295,657 320,267

Less allowance for losses (6,350) (8,033)

Total financing receivables—net $289,307 $312,234

(a) During 2011, we transferred our Railcar lending and leasing portfolio from CLL

Other to CLL Americas. Prior-period amounts were reclassified to conform to the

current-period presentation.

94 GE 2011 ANNUAL REPORT

notes to consolidated financial statements

ALLOWANCE FOR LOSSES ON FINANCING RECEIVABLES

The following tables provide a roll-forward of our allowance for losses on fi nancing receivables.

(In millions)

Balance at

January 1,

2011

Provision

charged to

operations (a) Other (b) Gross

write-offs (c) Recoveries (c)

Balance at

December 31,

2011

COMMERCIAL

CLL

Americas $1,288 $ 281 $ (96) $ (700) $ 116 $ 889

Europe 429 195 (5) (286) 67 400

Asia 222 105 13 (214) 31 157

Other 6 3 (3) (2) — 4

Total CLL 1,945 584 (91) (1,202) 214 1,450

Energy Financial Services 22 — (1) (4) 9 26

GECAS 20 — — (3) — 17

Other 58 23 — (47) 3 37

Total Commercial 2,045 607 (92) (1,256) 226 1,530

REAL ESTATE

Debt 1,292 242 2 (603) 16 949

Business Properties 196 82 — (144) 6 140

Total Real Estate 1,488 324 2 (747) 22 1,089

CONSUMER

Non-U.S. residential mortgages 803 249 (20) (381) 55 706

Non-U.S. installment and revolving credit 937 490 (30) (1,257) 577 717

U.S. installment and revolving credit 2,333 2,241 1 (3,095) 528 2,008

Non-U.S. auto 168 30 (4) (216) 123 101

Other 259 142 (20) (272) 90 199

Total Consumer 4,500 3,152 (73) (5,221) 1,373 3,731

Total $8,033 $4,083 $(163) $(7,224) $1,621 $6,350

(a) Included a provision of $77 million at Consumer related to the July 1, 2011 adoption of ASU 2011-02. See Note 23.

(b) Other primarily included transfers to held for sale and the effects of currency exchange.

(c) Net write-offs (write-offs less recoveries) in certain portfolios may exceed the beginning allowance for losses as our revolving credit portfolios turn over more than once

per year or, in all portfolios, can reflect losses that are incurred subsequent to the beginning of the fiscal year due to information becoming available during the current

year, which may identify further deterioration on existing financing receivables.

(In millions)

Balance at

December 31,

2009

Adoption of

ASU 2009 16

& 17 (a)

Balance at

January 1,

2010

Provision

charged to

operations Other (b) Gross

write-offs (c) Recoveries (c)

Balance at

December 31,

2010

COMMERCIAL

CLL

Americas $1,180 $ 66 $1,246 $1,059 $ (11) $ (1,136) $ 130 $1,288

Europe 575 — 575 269 (37) (440) 62 429

Asia 244 (10) 234 153 (6) (181) 22 222

Other 10 — 10 (2) (1) (1) — 6

Total CLL 2,009 56 2,065 1,479 (55) (1,758) 214 1,945

Energy Financial Services 28 — 28 65 — (72) 1 22

GECAS 104 — 104 12 — (96) — 20

Other 34 — 34 33 — (9) — 58

Total Commercial 2,175 56 2,231 1,589 (55) (1,935) 215 2,045

REAL ESTATE

Debt 1,358 (3) 1,355 764 10 (838) 1 1,292

Business Properties 136 45 181 146 (8) (126) 3 196

Total Real Estate 1,494 42 1,536 910 2 (964) 4 1,488

CONSUMER

Non-U.S. residential mortgages 892 — 892 256 (41) (381) 77 803

Non-U.S. installment and

revolving credit 1,106 — 1,106 1,047 (68) (1,733) 585 937

U.S. installment and revolving credit 1,551 1,602 3,153 3,018 (6) (4,300) 468 2,333

Non-U.S. auto 292 — 292 91 (61) (313) 159 168

Other 292 — 292 265 5 (394) 91 259

Total Consumer 4,133 1,602 5,735 4,677 (171) (7,121) 1,380 4,500

Total $7,802 $1,700 $9,502 $7,176 $(224) $(10,020) $1,599 $8,033

(a) Reflects the effects of our adoption of ASU 2009-16 & 17 on January 1, 2010.

(b) Other primarily included the effects of currency exchange.

(c) Net write-offs (write-offs less recoveries) in certain portfolios may exceed the beginning allowance for losses as our revolving credit portfolios turn over more than once

per year or, in all portfolios, can reflect losses that are incurred subsequent to the beginning of the fiscal year due to information becoming available during the current

year, which may identify further deterioration on existing financing receivables.

GE 2011 ANNUAL REPORT 95

notes to consolidated financial statements

(In millions)

Balance at

January 1,

2009

Provision

charged to

operations Other (a) Gross

write-offs (b) Recoveries (b)

Balance at

December 31,

2009

COMMERCIAL

CLL

Americas $ 846 $ 1,400 $ (42) $(1,117) $ 93 $1,180

Europe 311 625 (14) (431) 84 575

Asia 163 257 3 (203) 24 244

Other 1 8 5 (4) — 10

Total CLL 1,321 2,290 (48) (1,755) 201 2,009

Energy Financial Services 58 33 4 (67) — 28

GECAS 58 65 (3) (16) — 104

Other 28 29 — (24) 1 34

Total Commercial 1,465 2,417 (47) (1,862) 202 2,175

REAL ESTATE

Debt 282 1,295 13 (232) — 1,358

Business Properties 19 147 — (32) 2 136

Total Real Estate 301 1,442 13 (264) 2 1,494

CONSUMER

Non-U.S. residential mortgages 328 883 69 (469) 81 892

Non-U.S. installment and revolving credit 1,000 1,741 39 (2,235) 561 1,106

U.S. installment and revolving credit 1,616 3,367 (975) (2,612) 155 1,551

Non-U.S. auto 187 389 30 (510) 196 292

Other 225 346 45 (389) 65 292

Total Consumer 3,356 6,726 (792) (6,215) 1,058 4,133

Total $5,122 $10,585 $(826) $(8,341) $1,262 $7,802

(a) Other primarily included the effects of securitization activity and currency exchange.

(b) Net write-offs (write-offs less recoveries) in certain portfolios may exceed the beginning allowance for losses as our revolving credit portfolios turn over more than once

per year or, in all portfolios, can reflect losses that are incurred subsequent to the beginning of the fiscal year due to information becoming available during the current

year, which may identify further deterioration on existing financing receivables.

See Note 23 for supplemental information about the credit quality of fi nancing receivables and allowance for losses on

fi nancing receivables.

96 GE 2011 ANNUAL REPORT

notes to consolidated financial statements

Note 7.

Property, Plant and Equipment

December 31 (Dollars in millions)

Depreciable

lives—new

(in years) 2011 2010

ORIGINAL COST

GE

Land and improvements 8 (a) $ 611 $ 573

Buildings, structures and

related equipment 8–40 7,823 7,468

Machinery and equipment 4–20 22,071 20,833

Leasehold costs and

manufacturing plant

under construction 1–10 2,538 1,986

33,043 30,860

GECS (b)

Land and improvements,

buildings, structures and

related equipment 1–37 (a) 3,110 3,510

Equipment leased to others

Aircraft 19–21 46,240 45,674

Vehicles 1–28 15,278 17,216

Railroad rolling stock 4–50 4,324 4,331

Construction and manufacturing 1–30 2,644 2,586

All other (c) 3–30 3,438 5,855

75,034 79,172

ELIMINATIONS 40 —

Total $108,117 $110,032

NET CARRYING VALUE

GE

Land and improvements $ 584 $ 550

Buildings, structures and

related equipment 3,827 3,617

Machinery and equipment 7,648 6,551

Leasehold costs and manufacturing

plant under construction 2,224 1,726

14,283 12,444

GECS (b)

Land and improvements,

buildings, structures and

related equipment 1,499 1,665

Equipment leased to others

Aircraft (d) 34,271 34,665

Vehicles 8,772 9,077

Railroad rolling stock 2,853 2,960

Construction and manufacturing 1,670 1,454

All other (c) 2,354 3,947

51,419 53,768

ELIMINATIONS 37 —

Total $ 65,739 $ 66,212

(a) Depreciable lives exclude land.

(b) Included $1,570 million and $1,571 million of original cost of assets leased

to GE with accumulated amortization of $470 million and $531 million at

December 31, 2011 and 2010, respectively.

(c) Included $2,404 million of original cost and $1,670 million of carrying value at

December 31, 2010 related to our CLL marine container leasing business, which

was disposed during 2011.

(d) The GECAS business of GE Capital recognized impairment losses of $301 million

in 2011 and $438 million in 2010 recorded in the caption “Other costs and

expenses” in the Statement of Earnings to reflect adjustments to fair value based

on an evaluation of average current market values (obtained from third parties)

of similar type and age aircraft, which are adjusted for the attributes of the

specific aircraft under lease.

Consolidated depreciation and amortization related to property,

plant and equipment was $9,185 million, $9,786 million and

$10,617 million in 2011, 2010 and 2009, respectively.

Amortization of GECS equipment leased to others was

$6,253 million, $6,786 million and $7,179 million in 2011, 2010 and

2009, respectively. Noncancellable future rentals due from cus-

tomers for equipment on operating leases at December 31, 2011,

are as follows:

(In millions)

Due in

2012 $ 7,345

2013 5,995

2014 4,916

2015 3,772

2016 3,025

2017 and later 8,779

Total $33,832

Note 8.

Goodwill and Other Intangible Assets

December 31 (In millions) 2011 2010

GOODWILL

GE $45,395 $36,880

GECS 27,230 27,508

Total $72,625 $64,388

December 31 (In millions) 2011 2010

OTHER INTANGIBLE ASSETS

GE

Intangible assets subject to amortization $10,317 $ 7,984

Indefinite-lived intangible assets 205 104

10,522 8,088

GECS

Intangible assets subject to amortization 1,546 1,883

Total $12,068 $ 9,971

GE 2011 ANNUAL REPORT 97

notes to consolidated financial statements

Changes in goodwill balances follow.

2011 2010

(In millions)

Balance at

January 1 Acquisitions

Dispositions,

currency

exchange

and other

Balance at

December 31

Balance at

January 1 Acquisitions

Dispositions,

currency

exchange

and other

Balance at

December 31

Energy Infrastructure $12,893 $8,730 $(533) $21,090 $12,777 $ 53 $ 63 $12,893

Aviation 6,073 — (77) 5,996 6,099 — (26) 6,073

Healthcare 16,338 305 (12) 16,631 15,998 434 (94) 16,338

Transportation 554 — (3) 551 551 1 2 554

Home & Business Solutions 1,022 114 (9) 1,127 1,188 — (166) 1,022

GE Capital 27,508 6 (284) 27,230 28,382 19 (893) 27,508

Total $64,388 $9,155 $(918) $72,625 $64,995 $507 $(1,114) $64,388

Upon closing an acquisition, we estimate the fair values of assets

and liabilities acquired and consolidate the acquisition as quickly as

possible. Given the time it takes to obtain pertinent information to

fi nalize the acquired company’s balance sheet, then to adjust the

acquired company’s accounting policies, procedures, and books

and records to our standards, it is often several quarters before we

are able to fi nalize those initial fair value estimates. Accordingly, it is

not uncommon for our initial estimates to be subsequently revised.

Goodwill balances increased $8,237 million in 2011, primarily as

a result of the acquisitions of Converteam ($3,411 million), Dresser,

Inc. ($2,178 million), the Well Support division of John Wood Group

PLC ($2,036 million), Wellstream PLC ($810 million) and Lineage

Power Holdings, Inc. ($256 million) at Energy Infrastructure, partially

offset by the stronger U.S. dollar ($650 million).

Goodwill related to new acquisitions in 2010 was $507 mil-

lion and included the acquisition of Clarient, Inc. ($425 million) at

Healthcare. Goodwill balances decreased $603 million during 2010,

primarily as a result of the deconsolidation of Regency Energy

Partners L.P. (Regency) at GE Capital ($557 million) and the stronger

U.S. dollar ($260 million).

On September 2, 2011, we purchased a 90% interest in

Converteam for $3,586 million. In connection with the transaction,

we entered into an arrangement to purchase the remaining 10%

at the two-year anniversary of the acquisition date for 343 million

euros (approximately $470 million). This amount was recorded as a

liability at the date of acquisition.

On May 26, 2010, we sold our general partnership interest in

Regency, a midstream natural gas services provider, and retained

a 21% limited partnership interest. This resulted in the decon-

solidation of Regency and the remeasurement of our limited

partnership interest to fair value. We recorded a pre-tax gain of

$119 million, which is reported in GECS revenues from services.

On June 25, 2009, we increased our ownership in BAC from

49.99% to 75% for a purchase price of $623 million following

the terms of our 2006 investment agreement (BAC Investment

Agreement) with the then controlling shareholder. At that time,

we remeasured our previously held equity investment to fair

value, resulting in a pre-tax gain of $343 million. This transaction

required us to consolidate BAC, which was previously accounted

for under the equity method.

We test goodwill for impairment annually and more frequently

if circumstances warrant. We determine fair values for each of

the reporting units using an income approach. When available

and appropriate, we use comparative market multiples to cor-

roborate discounted cash fl ow results. For purposes of the income

approach, fair value is determined based on the present value of

estimated future cash fl ows, discounted at an appropriate risk-

adjusted rate. We use our internal forecasts to estimate future cash

fl ows and include an estimate of long-term future growth rates

based on our most recent views of the long-term outlook for each

business. Actual results may differ from those assumed in our fore-

casts. We derive our discount rates using a capital asset pricing

model and analyzing published rates for industries relevant to our

reporting units to estimate the cost of equity fi nancing. We use dis-

count rates that are commensurate with the risks and uncertainty

inherent in the respective businesses and in our internally devel-

oped forecasts. Discount rates used in our reporting unit valuations

ranged from 9.0% to 13.75%. Valuations using the market approach

refl ect prices and other relevant observable information generated

by market transactions involving comparable businesses.

Compared to the market approach, the income approach

more closely aligns each reporting unit valuation to our business

profi le, including geographic markets served and product offer-

ings. Required rates of return, along with uncertainty inherent

98 GE 2011 ANNUAL REPORT

notes to consolidated financial statements

in the forecasts of future cash fl ows, are refl ected in the selec-

tion of the discount rate. Equally important, under this approach,

reasonably likely scenarios and associated sensitivities can be

developed for alternative future states that may not be refl ected

in an observable market price. A market approach allows for

comparison to actual market transactions and multiples. It can

be somewhat more limited in its application because the popula-

tion of potential comparables is often limited to publicly-traded

companies where the characteristics of the comparative business

and ours can be signifi cantly different, market data is usually not

available for divisions within larger conglomerates or non-public

subsidiaries that could otherwise qualify as comparable, and the

specifi c circumstances surrounding a market transaction (e.g.,

synergies between the parties, terms and conditions of the trans-

action, etc.) may be different or irrelevant with respect to our

business. It can also be diffi cult, under certain market conditions,

to identify orderly transactions between market participants in

similar businesses. We assess the valuation methodology based

upon the relevance and availability of the data at the time we per-

form the valuation and weight the methodologies appropriately.

We performed our annual impairment test of goodwill for all

of our reporting units in the third quarter using data as of July 1,

2011. The impairment test consists of two steps: in step one, the

carrying value of the reporting unit is compared with its fair value;

in step two, which is applied when the carrying value is more

than its fair value, the amount of goodwill impairment, if any, is

derived by deducting the fair value of the reporting unit’s assets

and liabilities from the fair value of its equity, and comparing that

amount with the carrying amount of goodwill. In performing the

valuations, we used cash fl ows that refl ected management’s

forecasts and discount rates that included risk adjustments con-

sistent with the current market conditions. Based on the results

of our step one testing, the fair values of each of the GE industrial

reporting units and the CLL, Consumer, Energy Financial Services

and GECAS reporting units exceeded their carrying values; there-

fore, the second step of the impairment test was not required to

be performed and no goodwill impairment was recognized.

Our Real Estate reporting unit had a goodwill balance of

$1,001 million at December 31, 2011. As of July 1, 2011, the carry-

ing amount exceeded the estimated fair value of our Real Estate

reporting unit by approximately $0.7 billion. The estimated fair

value of the Real Estate reporting unit is based on a number of

assumptions about future business performance and investment,

including loss estimates for the existing fi nance receivable and

investment portfolio, new debt origination volume and margins,

and stabilization of the real estate market allowing for sales of real

estate investments at normalized margins. Our assumed discount

rate was 11.25% and was derived by applying a capital asset pric-

ing model and corroborated using equity analyst research reports

and implied cost of equity based on forecasted price to earnings

per share multiples for similar companies. Given the volatility and

uncertainty in the current commercial real estate environment,

there is uncertainty about a number of assumptions upon which

the estimated fair value is based. Different loss estimates for the

existing portfolio, changes in the new debt origination volume

and margin assumptions, changes in the expected pace of the

commercial real estate market recovery, or changes in the equity

return expectation of market participants may result in changes

in the estimated fair value of the Real Estate reporting unit.

Based on the results of the step one testing, we performed the

second step of the impairment test described above as of July 1,

2011. Based on the results of the second step analysis for the Real

Estate reporting unit, the estimated implied fair value of goodwill

exceeded the carrying value of goodwill by approximately $3.9 bil-

lion. Accordingly, no goodwill impairment was required. In the

second step, unrealized losses in an entity’s assets have the effect of

increasing the estimated implied fair value of goodwill. The results

of the second step analysis were attributable to several factors.

The primary driver was the excess of the carrying value over the

estimated fair value of our Real Estate Equity Investments, which

approximated $4.1 billion at that time. Other drivers for the favor-

able outcome include the unrealized losses in the Real Estate fi nance

receivable portfolio and the fair value premium on the Real Estate

reporting unit allocated debt. The results of the second step analy-

sis are highly sensitive to these measurements, as well as the key

assumptions used in determining the estimated fair value of the Real

Estate reporting unit.

Estimating the fair value of reporting units requires the use of

estimates and signifi cant judgments that are based on a number

of factors including actual operating results. If current conditions

persist longer or deteriorate further than expected, it is reason-

ably possible that the judgments and estimates described above

could change in future periods.

GE 2011 ANNUAL REPORT 99

notes to consolidated financial statements

INTANGIBLE ASSETS SUBJECT TO AMORTIZATION

December 31 (In millions)

Gross

carrying

amount

Accumulated

amortization Net

GE

2011

Customer-related $ 5,638 $(1,117) $ 4,521

Patents, licenses and trademarks 5,797 (2,104) 3,693

Capitalized software 4,743 (2,676) 2,067

All other 176 (140) 36

Total $16,354 $(6,037) $10,317

2010

Customer-related $ 4,386 $ (902) $ 3,484

Patents, licenses and trademarks 4,778 (2,063) 2,715

Capitalized software 4,230 (2,449) 1,781

All other 45 (41) 4

Total $13,439 $(5,455) $ 7,984

GECS

2011

Customer-related $ 1,186 $ (697) $ 489

Patents, licenses and trademarks 250 (208) 42

Capitalized software 2,048 (1,597) 451

Lease valuations 1,470 (944) 526

Present value of future profits (a) 491 (491) —

All other 327 (289) 38

Total $ 5,772 $(4,226) $ 1,546

2010

Customer-related $ 1,112 $ (588) $ 524

Patents, licenses and trademarks 599 (532) 67

Capitalized software 2,026 (1,528) 498

Lease valuations 1,646 (917) 729

Present value of future profits (a) 461 (461) —

All other 333 (268) 65

Total $ 6,177 $(4,294) $ 1,883

(a) Balance at December 31, 2011 and December 31, 2010 reflects an adjustment of

$391 million and $423 million, respectively, to the present value of future profits

in our run-off insurance operations to reflect the effects that would have been

recognized had the related unrealized investment securities holding gains and

losses actually been realized in accordance with ASC 320-10-S99-2.

During 2011, we recorded additions to intangible assets subject

to amortization of $3,609 million, primarily as a result of the acqui-

sition of Dresser, Inc. ($844 million), Converteam ($814 million), the

Well Support division of John Wood Group PLC ($571 million),

Wellstream PLC ($258 million) and Lineage Power Holdings, Inc.

($122 million). The components of fi nite-lived intangible assets

acquired during 2011 and their respective weighted-average

amortizable period are: $1,427 million—Customer-related

(20.0 years); $1,366 million—Patents, licenses and trademarks

(17.2 years); $785 million—Capitalized software (4.0 years); and

$31 million—All other (11.4 years).

Consolidated amortization related to intangible assets was

$1,732 million, $1,747 million and $2,083 million for 2011, 2010

and 2009, respectively. We estimate annual pre-tax amortiza-

tion for intangible assets over the next fi ve calendar years to be

as follows: 2012—$1,647 million; 2013—$1,491 million; 2014—

$1,326 million; 2015—$1,189 million; and 2016—$1,070 million.

Note 9.

All Other Assets

December 31 (In millions) 2011 2010

GE

Investments

Associated companies (a) $ 20,463 $ 2,092

Other 607 535

21,070 2,627

Contract costs and estimated earnings (b) 9,008 8,061

Long-term receivables, including notes (c) 1,316 1,098

Derivative instruments 370 412

Other 4,911 5,256

36,675 17,454

GECS

Investments

Real estate (d)(e) 28,255 31,555

Associated companies 23,589 25,662

Assets held for sale (f) 4,525 3,540

Cost method (e) 1,882 1,937

Other 1,722 2,251

59,973 64,945

Derivative instruments 9,671 5,034

Advances to suppliers 1,560 1,853

Deferred borrowing costs (g) 1,327 1,982

Deferred acquisition costs (h) 55 60

Other 3,032 3,323

75,618 77,197

ELIMINATIONS (586) (352)

Total $111,707 $94,299

(a) Included our investment in NBCU LLC of $17,955 million at December 31, 2011. At

December 31, 2011, we also had $4,880 million of deferred tax liabilities related

to this investment. See Note 14.

(b) Contract costs and estimated earnings reflect revenues earned in excess of

billings on our long-term contracts to construct technically complex equipment

(such as power generation, aircraft engines and aeroderivative units) and

long-term product maintenance or extended warranty arrangements.

(c) Included loans to GECS of $388 million and $856 million at December 31, 2011

and 2010, respectively.

(d) GECS investments in real estate consisted principally of two categories: real estate

held for investment and equity method investments. Both categories contained a

wide range of properties including the following at December 31, 2011: office

buildings (46%), apartment buildings (14%), industrial properties (10%), retail

facilities (8%), franchise properties (8%) and other (14%). At December 31, 2011,

investments were located in the Americas (48%), Europe (27%) and Asia (25%).

(e) The fair value of and unrealized loss on cost method investments in a continuous

loss position for less than 12 months at December 31, 2011, were $425 million

and $61 million, respectively. The fair value of and unrealized loss on cost

method investments in a continuous loss position for 12 months or more at

December 31, 2011, were $65 million and $3 million, respectively. The fair value

of and unrealized loss on cost method investments in a continuous loss position

for less than 12 months at December 31, 2010, were $396 million and $55 million,

respectively. The fair value of and unrealized loss on cost method investments in

a continuous loss position for 12 months or more at December 31, 2010, were

$16 million and $2 million, respectively.

(f) Assets were classified as held for sale on the date a decision was made to

dispose of them through sale or other means. At December 31, 2011 and 2010,

such assets consisted primarily of loans, aircraft, equipment and real estate

properties, and were accounted for at the lower of carrying amount or estimated

fair value less costs to sell. These amounts are net of valuation allowances of

$122 million and $115 million at December 31, 2011 and 2010, respectively.

(g) Included $329 million and $916 million at December 31, 2011 and 2010,

respectively, of unamortized fees related to our participation in the Temporary

Liquidity Guarantee Program.

(h) Balance at December 31, 2011 and December 31, 2010 reflects an adjustment of

$810 million and $860 million, respectively, to deferred acquisition costs in our

run-off insurance operations to reflect the effects that would have been

recognized had the related unrealized investment securities holding gains and

losses actually been realized in accordance with ASC 320-10-S99-2.

100 GE 2011 ANNUAL REPORT

notes to consolidated financial statements

Note 10.

Borrowings and Bank Deposits

SHORT-TERM BORROWINGS

2011 2010

December 31 (Dollars in millions) Amount Average rate (a) Amount Average rate (a)

GE

Commercial paper $ 1,801 0.13% $ — —%

Payable to banks 88 1.81 73 2.44

Current portion of long-term borrowings 41 4.89 21 8.35

Other 254 362

Total GE short-term borrowings 2,184 456

GECS

Commercial paper

U.S. 33,591 0.23 32,547 0.28

Non-U.S. 10,569 1.63 9,497 1.42

Current portion of long-term borrowings (b)(c)(d)(f) 82,650 2.72 65,612 3.24

GE Interest Plus notes (e) 8,474 1.32 9,058 1.59

Other (d) 1,049 2,083

Total GECS short-term borrowings 136,333 118,797

ELIMINATIONS (906) (1,294)

Total short-term borrowings $137,611 $117,959

LONG-TERM BORROWINGS

2011 2010

December 31 (Dollars in millions) Maturities Amount Average rate (a) Amount Average rate (a)

GE

Senior notes 2013–2017 $ 8,976 5.21% $ 8,971 5.21%

Payable to banks, principally U.S. 2013–2023 18 2.89 25 3.10

Other 411 660

Total GE long-term borrowings 9,405 9,656

GECS

Senior unsecured notes (b)(c) 2013–2055 210,154 3.49 262,789 3.29

Subordinated notes (f) 2014–2037 4,862 3.42 2,575 5.48

Subordinated debentures (g) 2066–2067 7,215 6.66 7,298 6.63

Other (d)(h) 12,160 11,745

Total GECS long-term borrowings 234,391 284,407

ELIMINATIONS (337) (740)

Total long-term borrowings $243,459 $293,323

NON-RECOURSE BORROWINGS OF CONSOLIDATED SECURITIZATION ENTITIES (i) 2012–2022 $ 29,258 1.40% $ 30,018 1.20%

BANK DEPOSITS

(j) $ 43,115 $ 37,298

TOTAL BORROWINGS AND BANK DEPOSITS $453,443 $478,598

(a) Based on year-end balances and year-end local currency effective interest rates, including the effects from hedging.

(b) GECC had issued and outstanding $35,040 million and $53,495 million of senior, unsecured debt that was guaranteed by the Federal Deposit Insurance Corporation (FDIC)

under the Temporary Liquidity Guarantee Program at December 31, 2011 and 2010, respectively. Of the above amounts, $35,040 million and $18,455 million are included in

current portion of long-term borrowings at December 31, 2011 and 2010, respectively.

(c) Included in total long-term borrowings were $1,845 million and $2,395 million of obligations to holders of GICs at December 31, 2011 and 2010, respectively. If the long-

term credit rating of GECC were to fall below AA-/Aa3 or its short-term credit rating were to fall below A-1+/P-1, GECC could be required to provide up to $1,718 million as of

December 31, 2011, to repay holders of GICs.

(d) Included $8,538 million and $11,135 million of funding secured by real estate, aircraft and other collateral at December 31, 2011 and 2010, respectively, of which

$2,983 million and $4,671 million is non-recourse to GECS at December 31, 2011 and 2010, respectively.

(e) Entirely variable denomination floating-rate demand notes.

(f) Included $417 million of subordinated notes guaranteed by GE at both December 31, 2011 and 2010, of which $117 million is included in current portion of long-term

borrowings at December 31, 2011.

(g) Subordinated debentures receive rating agency equity credit and were hedged at issuance to the U.S. dollar equivalent of $7,725 million.

(h) Included $1,955 million and $1,984 million of covered bonds at December 31, 2011 and 2010, respectively. If the short-term credit rating of GECC were reduced below

A-1/P-1, GECC would be required to partially cash collateralize these bonds in an amount up to $727 million at December 31, 2011.

(i) Included at December 31, 2011 and 2010 were $10,714 million and $10,499 million of current portion of non-recourse borrowings of CSEs, respectively, and $18,544 million

and $19,519 million of long-term non-recourse borrowings of CSEs, respectively. See Note 18.

(j) Included $16,281 million and $18,781 million of deposits in non-U.S. banks at December 31, 2011 and 2010, respectively, and $17,201 million and $11,606 million of

certificates of deposits with maturities greater than one year at December 31, 2011 and 2010, respectively.

Additional information about borrowings and associated swaps can be found in Note 22.

GE 2011 ANNUAL REPORT 101

notes to consolidated financial statements

LIQUIDITY is affected by debt maturities and our ability to repay or

refi nance such debt. Long-term debt maturities over the next fi ve

years follow.

(In millions) 2012 2013 2014 2015 2016

GE $ 41 $ 5,166 $ 35 $ 35 $ 28

GECS 82,650 (a) 38,334 36,542 23,450 21,199

(a) Fixed and floating rate notes of $444 million contain put options with exercise

dates in 2012, and which have final maturity beyond 2016.

Committed credit lines totaling $52.4 billion had been extended to

us by 58 banks at year-end 2011. Availability of these lines is

shared between GE and GECS with $12.4 billion and $52.4 billion

available to GE and GECS, respectively. The GECS lines include

$35.1 billion of revolving credit agreements under which we can

borrow funds for periods exceeding one year. Additionally,

$16.7 billion are 364-day lines that 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.

Note 11.

GECS Investment Contracts, Insurance Liabilities and

Insurance Annuity Benefits

GECS investment contracts, insurance liabilities and insurance

annuity benefi ts comprise mainly obligations to annuitants and

policyholders in our run-off insurance operations and holders of

guaranteed investment contracts.

December 31 (In millions) 2011 2010

Investment contracts $ 3,493 $ 3,726

Guaranteed investment contracts 4,226 5,502

Total investment contracts 7,719 9,228

Life insurance benefits (a) 19,257 17,640

Unpaid claims and claims adjustment expenses 2,597 2,437

Unearned premiums 370 426

Universal life benefits 255 262

Total $30,198 $29,993

(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 2011 and

2010.

When insurance affi liates cede insurance to third parties, such as

reinsurers, they are not relieved of their primary obligation to

policyholders. Losses on ceded risks give rise to claims for recov-

ery; we establish allowances for probable losses on such

receivables from reinsurers as required. Reinsurance recover-

ables are included in the caption “Other GECS receivables” on our

Statement of Financial Position, and amounted to $1,411 million

and $1,284 million at December 31, 2011 and 2010, respectively.

We recognize reinsurance recoveries as a reduction of the

Statement of Earnings caption “Investment contracts, insurance

losses and insurance annuity benefi ts.” Reinsurance recover-

ies were $224 million, $174 million and $219 million for the years

ended December 31, 2011, 2010 and 2009, respectively.

Note 12.

Postretirement Benefit Plans

Pension Benefits

We sponsor a number of pension plans. Principal pension plans,

together with affi liate 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 benefi ts to certain U.S. employ-

ees based on the greater of a formula recognizing career earnings

or a formula recognizing length of service and fi nal average

earnings. Certain benefi t provisions are subject to collective bar-

gaining. Salaried employees who commence service on or after

January 1, 2011 and any employee who commences service on

or after January 1, 2012 will not be eligible to participate in the

GE Pension Plan, but will participate in a defi ned contribution

retirement program.

The GE Supplementary Pension Plan is an unfunded plan

providing supplementary retirement benefi ts primarily to higher-

level, longer-service U.S. employees.

OTHER PENSION PLANS in 2011 included 36 U.S. and non-U.S.

pension plans with pension assets or obligations greater than

$50 million. These defi ned benefi t plans provide benefi ts to

employees based on formulas recognizing length of service

and earnings.

PENSION PLAN PARTICIPANTS

December 31, 2011 Total

Principal

pension

plans

Other

pension

plans

Active employees 139,000 105,000 34,000

Vested former employees 237,000 195,000 42,000

Retirees and beneficiaries 254,000 225,000 29,000

Total 630,000 525,000 105,000

102 GE 2011 ANNUAL REPORT

notes to consolidated financial statements

COST OF PENSION PLANS

Total Principal pension plans Other pension plans

(In millions) 2011 2010 2009 2011 2010 2009 2011 2010 2009

Service cost for benefits earned $ 1,498 $ 1,426 $ 1,906 $ 1,195 $ 1,149 $ 1,609 $ 303 $ 277 $ 297

Prior service cost amortization 207 252 437 194 238 426 (a) 13 14 11

Expected return on plan assets (4,543) (4,857) (4,943) (3,940) (4,344) (4,505) (603) (513) (438)

Interest cost on benefit obligations 3,176 3,179 3,129 2,662 2,693 2,669 514 486 460

Net actuarial loss amortization 2,486 1,546 482 2,335 1,336 348 151 210 134

Pension plans cost $ 2,824 $ 1,546 $ 1,011 $ 2,446 $ 1,072 $ 547 $ 378 $ 474 $ 464

(a) In 2009, included a $103 million loss as a result of our agreement with Comcast Corporation to transfer the NBCU business to a newly formed entity in which we own a

49% interest.

ACTUARIAL ASSUMPTIONS are described below. The actuarial assumptions at December 31 are used to measure the year-end benefi t

obligations and the pension costs for the subsequent year.

Principal pension plans Other pension plans (weighted average)

December 31 2011 2010 2009 2008 2011 2010 2009 2008

Discount rate 4.21% 5.28% 5.78% 6.11% 4.42% 5.11% 5.31% 6.03%

Compensation increases 3.75 4.25 4.20 4.20 4.31 4.44 4.56 4.47

Expected return on assets 8.00 8.00 8.50 8.50 7.09 7.25 7.29 7.41

To determine the expected long-term rate of return on pension

plan assets, we consider current and expected asset allocations, as

well as historical and expected returns on various categories of

plan assets. In developing future return expectations for our prin-

cipal benefi t plans’ assets, we formulate views on the future

economic environment, both in the U.S. and abroad. We evaluate

general market trends and historical relationships among a num-

ber of key variables that impact asset class returns such as

expected earnings growth, infl ation, valuations, yields and spreads,

using both internal and external sources. We also take into account

expected volatility by asset class and diversifi cation across classes

to determine expected overall portfolio results given current and

expected allocations. Based on our analysis of future expectations

of asset performance, past return results, and our current and

expected asset allocations, we have assumed an 8.0% long-term

expected return on those assets for cost recognition in 2012. For

the principal pension plans, we apply our expected rate of return to

a market-related value of assets, which stabilizes variability in the

amounts 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 for the GE Pension Plan is to contribute amounts

suffi cient to meet minimum funding requirements as set forth in

employee benefi t and tax laws plus such additional amounts as we

may determine to be appropriate. We will contribute approximately

$1,040 million to the GE Pension Plan in 2012. In addition, we expect

to pay approximately $210 million for benefi t payments under our

GE Supplementary Pension Plan and administrative expenses of

our principal pension plans and expect to contribute approximately

$710 million to other pension plans in 2012. In 2011, comparative

amounts were $201 million and $713 million, respectively.

BENEFIT OBLIGATIONS are described in the following tables.

Accumulated and projected benefi t obligations (ABO and PBO)

represent the obligations of a pension plan for past service as of

the measurement date. ABO is the present value of benefi ts

earned to date with benefi ts computed based on current

compensation levels. PBO is ABO increased to refl ect expected

future compensation.

PROJECTED BENEFIT OBLIGATION

Principal pension plans Other pension plans

(In millions) 2011 2010 2011 2010

Balance at January 1 $51,999 $48,117 $ 9,907 $9,597

Service cost for benefits

earned 1,195 1,149 303 277

Interest cost on benefit

obligations 2,662 2,693 514 486

Participant contributions 167 166 37 33

Plan amendments 804 —(58) 23

Actuarial loss (gain) 6,803(a) 2,799 (a) 1,344 (a) (12)

Benefits paid (3,120) (2,925) (424) (421)

Acquisitions (dispositions)/

other—net ——122 50

Exchange rate adjustments ——(108) (126)

Balance at December 31 (b) $60,510 $51,999 $11,637 $9,907

(a) Principally associated with discount rate changes.

(b) The PBO for the GE Supplementary Pension Plan, which is an unfunded plan, was

$5,203 million and $4,430 million at year-end 2011 and 2010, respectively.

ACCUMULATED BENEFIT OBLIGATION

December 31 (In millions) 2011 2010

GE Pension Plan $53,040 $46,046

GE Supplementary Pension Plan 3,643 3,296

Other pension plans 10,722 9,134

PLANS WITH ASSETS LESS THAN ABO

December 31 (In millions) 2011 2010

Funded plans with assets less than ABO

Plan assets $49,284 $51,286

Accumulated benefit obligations 61,852 53,350

Projected benefit obligations 64,879 55,502

Unfunded plans (a)

Accumulated benefit obligations $ 4,563 $ 4,086

Projected benefit obligations 6,161 5,247

(a) Primarily related to the GE Supplementary Pension Plan.

GE 2011 ANNUAL REPORT 103

notes to consolidated financial statements

PLAN ASSETS

The fair value of the classes of the pension plans’ investments is

presented below. The inputs and valuation techniques used to

measure the fair value of the assets are consistently applied and

described in Note 1.

FAIR VALUE OF PLAN ASSETS

Principal pension plans Other pension plans

(In millions) 2011 2010 2011 2010

Balance at January 1 $44,801 $42,097 $7,803 $6,919

Actual gain on plan assets 88 5,280 227 749

Employer contributions 201 183 713 573

Participant contributions 167 166 37 33

Benefits paid (3,120) (2,925) (424) (421)

Acquisitions (dispositions)

and other—net ——101 41

Exchange rate adjustments ——(76) (91)

Balance at December 31 $42,137 $44,801 $8,381 $7,803

ASSET ALLOCATION

Principal pension plans

Other pension plans

(weighted average)

2011

Target

allocation

2011

Actual

allocation

2011

Target

allocation

2011

Actual

allocation

Equity securities 34–74% (a) 45% (b) 47% 56%

Debt securities

(including cash equivalents) 10–40 27 33 33

Private equities 5–15 16 2 2

Real estate 4–14 8 6 4

Other 1–14 4 12 5

(a) Target allocations were 17–37% for both U.S. equity securities and non-U.S.

equity securities.

(b) Actual allocations were 26% for U.S. equity securities and 19% for non-U.S.

equity securities.

Plan fi duciaries of the GE Pension Plan set investment policies and

strategies for the GE Pension Trust and oversee its investment

allocation, which includes selecting investment managers, com-

missioning periodic asset-liability studies and setting long-term

strategic targets. Long-term strategic investment objectives take

into consideration a number of factors, including the funded

status of the plan, a balance between risk and return and the

plan’s liquidity needs. Target allocation percentages are estab-

lished at an asset class level by plan fi duciaries. Target allocation

ranges are guidelines, not limitations, and occasionally plan

fi duciaries will approve allocations above or below a target range.

Plan fi duciaries monitor the GE Pension Plan’s liquidity position

in order to meet the near term benefi t payment and other cash

needs. The GE Pension Plan holds short-term debt securities to

meet its liquidity needs.

GE Pension Trust assets are invested subject to the following

additional guidelines:

• Short-term securities must generally be rated A-1/P-1 or

better, except for 15% of such securities that may be rated

A-2/P-2 and other short-term securities as may be approved

by the plan fi duciaries.

• Real estate investments may not exceed 25% of total assets.

• Investments in restricted securities (excluding real estate invest-

ments) that are not freely tradable may not exceed 30% of total

assets (actual was 21% of trust assets at December 31, 2011).

According to statute, the aggregate holdings of all qualifying

employer securities (e.g., GE common stock) and qualifying

employer real property may not exceed 10% of the fair value of trust

assets at the time of purchase. GE securities represented 3.8%

and 3.6% of trust assets at year-end 2011 and 2010, respectively.

The GE Pension Plan has a broadly diversifi ed portfolio of

investments in equities, fi xed income, private equities, real estate

and hedge funds; these investments are both U.S. and non-U.S. in

nature. As of December 31, 2011, no one sector concentration of

assets exceeded 15% of total GE Pension Plan assets.

The following tables present GE Pension Plan investments

measured at fair value.

December 31, 2011 (In millions) Level 1 Level 2 Level 3 Total

EQUITY SECURITIES

U.S. equity securities $10,645 $ 191 $ — $10,836

Non-U.S. equity

securities 7,360 644 — 8,004

DEBT SECURITIES

Fixed income and

cash investment funds — 2,057 62 2,119

U.S. corporate (a) — 2,126 3 2,129

Residential mortgage-

backed — 1,276 5 1,281

U.S. government and

federal agency — 3,872 — 3,872

Other debt securities (b) — 1,566 146 1,712

PRIVATE EQUITIES (c) — — 6,786 6,786

REAL ESTATE (c) — — 3,274 3,274

OTHER INVESTMENTS (d) — — 1,709 1,709

TOTAL INVESTMENTS $18,005 $11,732 $11,985 $41,722

CASH AND OTHER 415

TOTAL ASSETS $42,137

December 31, 2010 (In millions) Level 1 Level 2 Level 3 Total

EQUITY SECURITIES

U.S. equity securities $11,388 $ 195 $ — $11,583

Non-U.S. equity

securities 9,662 801 — 10,463

DEBT SECURITIES

Fixed income and cash

investment funds — 2,712 65 2,777

U.S. corporate (a) — 2,377 5 2,382

Residential mortgage-

backed — 1,225 21 1,246

U.S. government and

federal agency — 3,192 — 3,192

Other debt securities (b) — 1,578 283 1,861

PRIVATE EQUITIES

(c) — — 6,014 6,014

REAL ESTATE

(c) — — 3,373 3,373

OTHER INVESTMENTS

(d) — 53 1,687 1,740

TOTAL INVESTMENTS $21,050 $12,133 $11,448 $44,631

CASH AND OTHER 170

TOTAL ASSETS $44,801

(a) Primarily represented investment grade bonds of U.S. issuers from diverse

industries.

(b) Primarily represented investments in non-U.S. corporate bonds and commercial

mortgage-backed securities.

(c) Included direct investments and investment funds.

(d) Substantially all represented hedge fund investments.

104 GE 2011 ANNUAL REPORT

notes to consolidated financial statements

The following tables present the changes in Level 3 investments for the GE Pension Plan.

CHANGES IN LEVEL 3 INVESTMENTS FOR THE YEAR ENDED DECEMBER 31, 2011

(In millions)

January 1,

2011

Net realized

gains (losses)

Net unrealized

gains (losses)

Purchases,

issuances and

settlements

Transfers in

and/or out

of Level 3 (a) December 31,

2011

DEBT SECURITIES

Fixed income and cash investment funds $ 65 $ (1) $ (4) $ 2 $ — $ 62

U.S. corporate 5 — — (5) 3 3

Residential mortgage-backed 21 (1) (1) (4) (10) 5

Other debt securities 283 4 6 (145) (2) 146

PRIVATE EQUITIES 6,014 311 701 (240) — 6,786

REAL ESTATE 3,373 (70) 320 (217) (132) 3,274

OTHER INVESTMENTS 1,687 (41) (87) 150 — 1,709

$11,448 $202 $ 935 $(459) $(141) $11,985

(a) Transfers in and out of Level 3 are considered to occur at the beginning of the period.

CHANGES IN LEVEL 3 INVESTMENTS FOR THE YEAR ENDED DECEMBER 31, 2010

(In millions)

January 1,

2010

Net realized

gains (losses)

Net unrealized

gains (losses)

Purchases,

issuances and

settlements

Transfers in

and/or out of

Level 3 (a) December 31,

2010

DEBT SECURITIES

Fixed income and cash investment funds $ 46 $ 1 $ 15 $ 3 $ — $ 65

U.S. corporate 6 6 1 (9) 1 5

Residential mortgage-backed 220 5 1 (211) 6 21

Other debt securities 231 2 15 41 (6) 283

PRIVATE EQUITIES 5,339 54 694 (73) — 6,014

REAL ESTATE 2,775 130 251 217 — 3,373

OTHER INVESTMENTS 1,537 (24) 156 65 (47) 1,687

$10,154 $174 $1,133 $ 33 $ (46) $11,448

(a) Transfers in and out of Level 3 are considered to occur at the beginning of the period.

Other pension plans’ assets were $8,381 million and $7,803 million at December 31, 2011 and 2010, respectively. Equity and debt securities

amounting to $7,284 million and $6,938 million represented approximately 89% and 90% of total investments at December 31, 2011 and

2010, respectively. The plans’ investments were classifi ed as 13% Level 1, 76% Level 2 and 11% Level 3 at December 31, 2011. The plans’

investments were classifi ed as 15% Level 1, 75% Level 2 and 10% Level 3 at December 31, 2010. The changes in Level 3 investments were

insignifi cant for the years ended December 31, 2011 and 2010.

PENSION ASSET (LIABILITY)

Principal pension plans Other pension plans

December 31 (In millions) 2011 2010 2011 2010

Funded status (a)(b) $(18,373) $ (7,198) $(3,256) $(2,104)

Pension asset (liability)

recorded in the Statement

of Financial Position

Pension asset $ — $ — $ 158 $ 202

Pension liabilities

Due within one year (c) (148) (141) (52) (52)

Due after one year (18,225) (7,057) (3,362) (2,254)

Net amount recognized $(18,373) $ (7,198) $(3,256) $(2,104)

Amounts recorded in

shareowners’ equity

(unamortized)

Prior service cost $ 1,685 $ 1,075 $ 4 $ 72

Net actuarial loss 26,923 18,603 3,294 1,772

Total $ 28,608 $19,678 $ 3,298 $ 1,844

(a) Fair value of assets less PBO, as shown in the preceding tables.

(b) The GE Pension Plan was underfunded by $13.2 billion and $2.8 billion at

December 31, 2011 and 2010, respectively.

(c) For principal pension plans, represents the GE Supplementary Pension Plan liability.

In 2012, we estimate that we will amortize $280 million of prior

service cost and $3,435 million of net actuarial loss for the princi-

pal pension plans from shareowners’ equity into pension cost. For

other pension plans, the estimated prior service cost and net

actuarial loss to be amortized in 2012 will be $5 million and

$275 million, respectively. Comparable amortized amounts in

2011, respectively, were $194 million and $2,335 million for the

principal pension plans and $13 million and $151 million for other

pension plans.

ESTIMATED FUTURE BENEFIT PAYMENTS

(In millions) 2012 2013 2014 2015 2016

2017–

2021

Principal pension

plans $3,000 $3,025 $3,090 $3,160 $3,205 $17,225

Other pension

plans $ 415 $ 425 $ 435 $ 445 $ 455 $ 2,465

GE 2011 ANNUAL REPORT 105

notes to consolidated financial statements

Retiree Health and Life Benefits

We sponsor a number of retiree health and life insurance benefi t

plans (retiree benefi t plans). Principal retiree benefi t plans are

discussed below; other such plans are not signifi cant individually

or in the aggregate. We use a December 31 measurement date for

our plans.

PRINCIPAL RETIREE BENEFIT PLANS provide health and life insur-

ance benefi ts to certain eligible participants and these

participants share in the cost of healthcare benefi ts. These plans

cover approximately 210,000 retirees and dependents.

COST OF PRINCIPAL RETIREE BENEFIT PLANS

(In millions) 2011 2010 2009

Service cost for benefits earned $ 216 $ 241 $ 442

Prior service cost amortization (a) 647 631 836

Expected return on plan assets (97) (116) (129)

Interest cost on benefit obligations 604 699 709

Net actuarial gain amortization (a) (110) (22) (225)

Retiree benefit plans cost (a) $1,260 $1,433 $1,633

(a) In 2009, we recognized a $45 million loss as a result of our agreement with

Comcast Corporation to transfer the NBCU business to a newly formed entity in

which we own a 49% interest. Prior service cost amortization increased by

$164 million and net actuarial gain amortization increased by $119 million as a

result of this agreement.

ACTUARIAL ASSUMPTIONS are described below. The actuarial

assumptions at December 31 are used to measure the year-end

benefi t obligations and the retiree benefi t plan costs for the

subsequent year.

December 31 2011 2010 2009 2008

Discount rate 4.09% 5.15% 5.67% 6.15%

Compensation increases 3.75 4.25 4.20 4.20

Expected return on assets 7.00 8.00 8.50 8.50

Initial healthcare trend rate (a) 7.00 7.00 7.40 7.00

(a) For 2011, ultimately declining to 5% for 2030 and thereafter.

To determine the expected long-term rate of return on retiree life

plan assets, we consider current and expected asset allocations,

historical and expected returns on various categories of plan assets,

as well as expected benefi t payments and resulting asset levels. In

developing future return expectations for retiree benefi t plan

assets, we formulate views on the future economic environment,

both in the U.S. and abroad. We evaluate general market trends and

historical relationships among a number of key variables that

impact asset class returns such as expected earnings growth,

infl ation, valuations, yields and spreads, using both internal and

external sources. We also take into account expected volatility by

asset class and diversifi cation across classes to determine expected

overall portfolio results given current and expected allocations.

Based on our analysis of future expectations of asset performance,

past return results, anticipated changes in our asset allocations

and shorter time horizon for retiree life plan assets, we have

assumed a 7.0% long-term expected return on those assets for

cost recognition in 2012. This is a reduction from the 8.0% we

had assumed in 2011 and the 8.5% we had assumed in both 2010

and 2009. We apply our expected rate of return to a market-

related value of assets, which stabilizes variability in the amounts

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 benefi ts on a pay-as-

you-go basis. We expect to contribute approximately $615 million

in 2012 to fund such benefi ts. We fund retiree life insurance

benefi ts at our discretion.

Changes in the accumulated postretirement benefi t obligation

for retiree benefi t plans follow.

ACCUMULATED POSTRETIREMENT BENEFIT OBLIGATION (APBO)

(In millions) 2011 2010

Balance at January 1 $12,010 $12,775

Service cost for benefits earned 216 241

Interest cost on benefit obligations 604 699

Participant contributions 55 55

Plan amendments 25 —

Actuarial loss (gain) 911 (a) (942) (b)

Benefits paid (765) (818)

Balance at December 31 (c) $13,056 $12,010

(a) Primarily associated with discount rate change.

(b) For 2010, included the effects of healthcare reform provisions on our Medicare-

approved prescription drug plan.

(c) The APBO for the retiree health plans was $10,286 million and $9,566 million at

year-end 2011 and 2010, respectively.

A one percentage point change in the assumed healthcare cost

trend rate would have the following effects.

(In millions) 1% increase 1% decrease

APBO at December 31, 2011 $1,135 $(958)

Service and interest cost in 2011 82 (68)

PLAN ASSETS

The fair value of the classes of retiree benefi t plans’ investments

is presented below. The inputs and valuation techniques used to

measure the fair value of assets are consistently applied and

described in Note 1.

FAIR VALUE OF PLAN ASSETS

(In millions) 2011 2010

Balance at January 1 $1,125 $1,138

Actual gain on plan assets 15 139

Employer contributions 574 611

Participant contributions 55 55

Benefits paid (765) (818)

Balance at December 31 $1,004 $1,125

ASSET ALLOCATION

December 31

2011 Target

allocation

2011 Actual

allocation

Equity securities 37–77% (a) 35% (b)

Debt securities (including cash equivalents) 11–41 39

Private equities 3–13 16

Real estate 2–12 7

Other 0–10 3

(a) Target allocations were 19–39% for U.S. equity securities and 18–38% for

non-U.S. equity securities.

(b) Actual allocations were 20% for U.S. equity securities and 15% for non-U.S.

equity securities.

106 GE 2011 ANNUAL REPORT

notes to consolidated financial statements

Plan fi duciaries set investment policies and strategies for the trust

and oversee its investment allocation, which includes selecting

investment managers and setting long-term strategic targets.

The primary strategic investment objectives are balancing invest-

ment risk and return and monitoring the plan’s liquidity position in

order to meet the near term benefi t payment and other cash

needs. Target allocation percentages are established at an asset

class level by plan fi duciaries. Target allocation ranges are guide-

lines, not limitations, and occasionally plan fi duciaries will approve

allocations above or below a target range.

Trust assets invested in short-term securities must generally

be invested in securities rated A-1/P-1 or better, except for 15%

of such securities that may be rated A-2/P-2 and other short-term

securities as may be approved by the plan fi duciaries. According

to statute, the aggregate holdings of all qualifying employer

securities (e.g., GE common stock) and qualifying employer real

property may not exceed 10% of the fair value of trust assets at

the time of purchase. GE securities represented 4.7% and 4.5% of

trust assets at year-end 2011 and 2010, respectively.

Retiree life plan assets were $1,004 million and $1,125 mil-

lion at December 31, 2011 and 2010, respectively. Equity and

debt securities amounting to $760 million and $942 million

represented approximately 74% and 78% of total investments

at December 31, 2011 and 2010, respectively. The plans’ invest-

ments were classifi ed as 32% Level 1, 42% Level 2 and 26% Level

3 at December 31, 2011. The plans’ investments were classifi ed as

39% Level 1, 39% Level 2 and 22% Level 3 at December 31, 2010.

The changes in Level 3 investments were insignifi cant for the

years ended December 31, 2011 and 2010.

RETIREE BENEFIT ASSET (LIABILITY)

December 31 (In millions) 2011 2010

Funded status (a) $(12,052) $(10,885)

Liability recorded in the Statement

of Financial Position

Retiree health plans

Due within one year $ (602) $ (644)

Due after one year (9,684) (8,922)

Retiree life plans (1,766) (1,319)

Net liability recognized $(12,052) $(10,885)

Amounts recorded in shareowners’

equity (unamortized)

Prior service cost $ 2,901 $ 3,523

Net actuarial loss (gain) 401 (671)

Total $ 3,302 $ 2,852

(a) Fair value of assets less APBO, as shown in the preceding tables.

In 2012, we estimate that we will amortize $575 million of prior

service cost from shareowners’ equity into retiree benefi t plans

cost. Estimated 2012 retiree health plan gain amortization offsets

the expected amortization of retiree life plans losses. As such, the

amount of actuarial loss (gain) to be recycled from shareowners’

equity into retiree benefi t plans cost is expected to be insignifi -

cant. Comparable amortized amounts in 2011 were $647 million

of prior service cost and $110 million of net actuarial gains.

ESTIMATED FUTURE BENEFIT PAYMENTS

(a)

(In millions) 2012 2013 2014 2015 2016

2017–

2021

$800 $815 $830 $840 $840 $4,180

(a) Net of expected Medicare Part D subsidy of about $5 million annually.

Postretirement Benefit Plans

2011 COST OF POSTRETIREMENT BENEFIT PLANS AND CHANGES IN

OTHER COMPREHENSIVE INCOME

Total

postretirement

(In millions) benefit plans

Principal

pension

plans

Other

pension

plans

Retiree

benefit

plans

Cost of postretirement

benefit plans $ 4,084 $ 2,446 $ 378 $1,260

Changes in other

comprehensive income

Net actuarial loss (gain)—

current year 13,293 10,655 1,676 962

Prior service cost (credit)—

current year 771 804 (58) 25

Prior service cost

amortization (854) (194) (13) (647)

Net actuarial gain (loss)

amortization (2,376) (2,335) (151) 110

Total changes in other

comprehensive income 10,834 8,930 1,454 450

Cost of postretirement

benefit plans and

changes in other

comprehensive income $14,918 $11,376 $1,832 $1,710

Note 13.

All Other Liabilities

This caption includes liabilities for various items including non-

current compensation and benefi ts, deferred income, interest on

tax liabilities, unrecognized tax benefi ts, environmental remedia-

tion, asset retirement obligations, derivative instruments, product

warranties and a variety of sundry items.

Accruals for non-current compensation and benefi ts amounted

to $39,430 million and $25,356 million at December 31, 2011 and

2010, respectively. These amounts include postretirement benefi ts,

pension accruals, and other compensation and benefi t accruals

such as deferred incentive compensation. See Note 12.

We are involved in numerous remediation actions to clean up

hazardous wastes as required by federal and state laws. Liabilities

for remediation costs exclude possible insurance recoveries and,

when dates and amounts of such costs are not known, are not

discounted. When there appears to be a range of possible costs

with equal likelihood, liabilities are based on the low end of such

range. It is reasonably possible that our environmental remedia-

tion exposure will exceed amounts accrued. However, due to

uncertainties about the status of laws, regulations, technology

and information related to individual sites, such amounts are not

reasonably estimable. Total reserves related to environmental

remediation, including asbestos claims, were $3,361 million at

December 31, 2011.

GE 2011 ANNUAL REPORT 107

notes to consolidated financial statements

In 2006, we entered into a consent decree with the

Environmental Protection Agency (EPA) to dredge PCB-containing

sediment from the upper Hudson River. The consent decree pro-

vided that the dredging would be performed in two phases. Phase

1 was completed in May through November of 2009. Between

Phase 1 and Phase 2 there was an intervening peer review by

an independent panel of national experts. The panel evaluated

the performance of Phase 1 dredging operations with respect to

Phase 1 Engineering Performance Standards and recommended

proposed changes to the standards. On December 17, 2010, EPA

issued its decision setting forth the fi nal performance standards

for Phase 2 of the Hudson River dredging project, incorporat-

ing aspects of the recommendations from the independent

peer review panel and from GE. In December 2010, we agreed

to perform Phase 2 of the project in accordance with the fi nal

performance standards set by EPA and increased our reserve

by $845 million in the fourth quarter of 2010 to account for the

probable and estimable costs of completing Phase 2. In 2011, we

completed the fi rst year of Phase 2 dredging and commenced

work on planned upgrades to the Hudson River wastewater pro-

cessing facility. Based on the results from 2011 dredging and

our best professional engineering judgment, we believe that our

current reserve continues to refl ect our probable and estimable

costs for the remainder of Phase 2 of the dredging project.

Note 14.

Income Taxes

PROVISION FOR INCOME TAXES

(In millions) 2011 2010 2009

GE

Current tax expense $ 5,166 $ 2,401 $ 3,199

Deferred tax expense (benefit) from

temporary differences (327) (377) (460)

4,839 2,024 2,739

GECS

Current tax expense (benefit) 769 (2,298) (1,563)

Deferred tax expense (benefit) from

temporary differences 124 1,307 (2,318)

893 (991) (3,881)

CONSOLIDATED

Current tax expense 5,935 103 1,636

Deferred tax expense (benefit) from

temporary differences (203) 930 (2,778)

Total $ 5,732 $ 1,033 $(1,142)

GE and GECS fi le a consolidated U.S. federal income tax return. This

enables GE to use GECS tax deductions and credits to reduce the

tax that otherwise would have been payable by GE. The GECS

effective tax rate for each period refl ects the benefi t of these tax

reductions in the consolidated return. GE makes cash payments to

GECS for these tax reductions at the time GE’s tax payments are

due. The effect of GECS on the amount of the consolidated tax

liability from the formation of the NBCU joint venture will be settled

in cash when GECS tax deductions and credits otherwise would

have reduced the liability of the group absent the tax on formation.

Consolidated U.S. earnings (loss) from continuing operations

before income taxes were $10,244 million in 2011, $5,444 million

in 2010 and $286 million in 2009. The corresponding amounts

for non-U.S. based operations were $9,854 million in 2011,

$8,641 million in 2010 and $9,578 million in 2009.

Consolidated current tax expense includes amounts appli-

cable to U.S. federal income taxes of an expense of $1,032 million

in 2011, and a benefi t of $3,027 million and $649 million in 2010

and 2009, respectively, including the benefi t from GECS deduc-

tions and credits applied against GE’s current U.S. tax expense.

Consolidated current tax expense amounts applicable to non-U.S.

jurisdictions were $4,657 million, $3,132 million and $2,192 mil-

lion in 2011, 2010 and 2009, respectively. Consolidated deferred

taxes related to U.S. federal income taxes were an expense of

$1,529 million and $1,993 million in 2011 and 2010, respectively,

and a benefi t of $2,489 million in 2009, and amounts applicable to

non-U.S. jurisdictions of a benefi t of $2,076 million, $1,178 million

and $261 million in 2011, 2010 and 2009, respectively.

Deferred income tax balances refl ect the effects of temporary

differences between the carrying amounts of assets and liabilities

and their tax bases, as well as from net operating loss and tax credit

carryforwards, and are stated at enacted tax rates expected to be in

effect when taxes are actually paid or recovered. Deferred income

tax assets represent amounts available to reduce income taxes

payable on taxable income in future years. We evaluate the recov-

erability of these future tax deductions and credits by assessing

the adequacy of future expected taxable income from all sources,

including reversal of taxable temporary differences, forecasted

operating earnings and available tax planning strategies. To the

extent we do not consider it more likely than not that a deferred tax

asset will be recovered, a valuation allowance is established.

Our businesses are subject to regulation under a wide variety

of U.S. federal, state and foreign tax laws, regulations and policies.

Changes to these laws or regulations may affect our tax liability,

return on investments and business operations. For example,

GE’s effective tax rate is reduced because active business income

earned and indefi nitely reinvested outside the United States is

taxed at less than the U.S. rate. A signifi cant portion of this reduc-

tion depends upon a provision of U.S. tax law that defers the

imposition of U.S. tax on certain active fi nancial services income

until that income is repatriated to the United States as a divi-

dend. This provision is consistent with international tax norms

and permits U.S. fi nancial services companies to compete more

effectively with foreign banks and other foreign fi nancial institu-

tions in global markets. This provision, which expired at the end

of 2011, had been scheduled to expire and had been extended

by Congress on six previous occasions, including in December

of 2010, but there can be no assurance that it will be extended,

including retroactively. In the event the provision is not extended

after 2011, the current U.S. tax imposed on active fi nancial ser-

vices income earned outside the United States would increase,

making it more diffi cult for U.S. fi nancial services companies to

compete in global markets. If this provision is not extended, we

expect our effective tax rate to increase signifi cantly after 2012.

108 GE 2011 ANNUAL REPORT

notes to consolidated financial statements

We have not provided U.S. deferred taxes on cumulative earn-

ings of non-U.S. affi liates and associated companies that have been

reinvested indefi nitely. These earnings relate to ongoing operations

and, at December 31, 2011 and December 31, 2010, were approxi-

mately $102 billion and $94 billion, respectively. Most of these

earnings have been reinvested in active non-U.S. business opera-

tions and we do not intend to repatriate these earnings to fund U.S.

operations. Because of the availability of U.S. foreign tax credits, it

is not practicable to determine the U.S. federal income tax liability

that would be payable if such earnings were not reinvested indefi -

nitely. Deferred taxes are provided for earnings of non-U.S. affi liates

and associated companies when we plan to remit those earnings.

During 2009, following the change in our external credit rat-

ings, funding actions taken and review of our operations, liquidity

and funding, we determined that undistributed prior-year earnings

of non-U.S. subsidiaries of GECS, on which we had previously pro-

vided deferred U.S. taxes, would be indefi nitely reinvested outside

the U.S. This change increased the amount of prior-year earnings

indefi nitely reinvested outside the U.S. by approximately $2 billion,

resulting in an income tax benefi t of $700 million in 2009.

Annually, we fi le over 6,500 income tax returns in over

250 global taxing jurisdictions. We are under examination or

engaged in tax litigation in many of these jurisdictions. During

2011, the Internal Revenue Service (IRS) completed the audit of our

consolidated U.S. income tax returns for 2006–2007, except for

certain issues that remain under examination. During 2010, the IRS

completed the audit of our consolidated U.S. income tax returns for

2003–2005. At December 31, 2011, the IRS was auditing our consol-

idated U.S. income tax returns for 2008–2009. In addition, certain

other U.S. tax defi ciency issues and refund claims for previous

years were unresolved. The IRS has disallowed the tax loss on our

2003 disposition of ERC Life Reinsurance Corporation. We expect

to contest the disallowance of this loss. In January 2012, the U.S.

Court of Appeals for the Second Circuit reversed the district court

decision which allowed GE’s $62 million refund claim with the IRS

regarding the taxation of the Castle Harbour aircraft leasing part-

nership from 1993–1998. Because a liability had been provided for

this matter, this decision has no effect on our results of operations

for 2011 or 2012. It is reasonably possible that the unresolved items

could be resolved during the next 12 months, which could result

in a decrease in our balance of “unrecognized tax benefi ts”—that

is, the aggregate tax effect of differences between tax return posi-

tions and the benefi ts recognized in our fi nancial statements. We

believe that there are no other jurisdictions in which the outcome

of unresolved issues or claims is likely to be material to our results

of operations, fi nancial position or cash fl ows. We further believe

that we have made adequate provision for all income tax uncer-

tainties. Resolution of audit matters, including the IRS audit of

our consolidated U.S. income tax returns for 2006–2007, reduced

our 2011 consolidated income tax rate by 2.4 percentage points.

Resolution of audit matters, including the IRS audit of our consoli-

dated U.S. income tax returns for 2003–2005, reduced our 2010

consolidated effective tax rate by 5.9 percentage points.

The balance of unrecognized tax benefi ts, the amount of

related interest and penalties we have provided and what we

believe to be the range of reasonably possible changes in the next

12 months, were:

December 31 (In millions) 2011 2010

Unrecognized tax benefits $5,230 $6,139

Portion that, if recognized, would reduce

tax expense and effective tax rate (a) 3,938 4,114

Accrued interest on unrecognized tax benefits 1,033 1,200

Accrued penalties on unrecognized tax benefits 121 109

Reasonably possible reduction to the balance

of unrecognized tax benefits in succeeding

12 months 0–900 0–1,600

Portion that, if recognized, would reduce

tax expense and effective tax rate (a) 0–500 0–650

(a) Some portion of such reduction might be reported as discontinued operations.

A reconciliation of the beginning and ending amounts of unrecog-

nized tax benefi ts is as follows:

(In millions) 2011 2010

Balance at January 1 $ 6,139 $ 7,251

Additions for tax positions of the current year 305 316

Additions for tax positions of prior years 817 596

Reductions for tax positions of prior years (1,828) (1,788)

Settlements with tax authorities (127) (152)

Expiration of the statute of limitations (76) (84)

Balance at December 31 $ 5,230 $ 6,139

We classify interest on tax defi ciencies as interest expense; we

classify income tax penalties as provision for income taxes. For

the years ended December 31, 2011, 2010 and 2009, $197 million

and $75 million of interest income and $172 million of interest

expense, respectively, and $10 million, $5 million and $14 million

of tax expenses related to penalties, respectively, were recog-

nized in the Statement of Earnings.

GE 2011 ANNUAL REPORT 109

notes to consolidated financial statements

A reconciliation of the U.S. federal statutory income tax rate to the actual income tax rate is provided below.

RECONCILIATION OF U.S. FEDERAL STATUTORY INCOME TAX RATE TO ACTUAL INCOME TAX RATE

Consolidated GE GECS

2011 2010 2009 2011 2010 2009 2011 2010 2009

U.S. federal statutory income tax rate 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0%

Increase (reduction) in rate resulting

from inclusion of after-tax earnings

of GECS in before-tax earnings of GE ———(11.8) (7.0) (3.0) ———

Tax on global activities including exports (a) (10.4) (19.7) (39.7) (5.2) (10.8) (11.0) (14.7) (56.1) 89.4

NBCU gain 9.4 ——9.9 —————

U.S. business credits (b) (3.2) (4.4) (4.6) (1.5) (2.2) (1.0) (4.8) (14.2) 11.8

All other—net (2.3) (3.6) (2.3) (1.0) (1.6) (0.1) (3.5) (13.1) 8.1

(6.5) (27.7) (46.6) (9.6) (21.6) (15.1) (23.0) (83.4) 109.3

Actual income tax rate 28.5% 7.3% (11.6)% 25.4% 13.4% 19.9% 12.0% (48.4)% 144.3%

(a) 2009 included (7.1)% and 26.0% from indefinite reinvestment of prior-year earnings for consolidated and GECS, respectively.

(b) U.S. general business credits, primarily the credit for manufacture of energy efficient appliances, the credit for energy produced from renewable sources, the non-

conventional fuel tax credit, the low-income housing credit and the credit for research performed in the U.S.

DEFERRED INCOME TAXES

Aggregate deferred income tax amounts are summarized below.

December 31 (In millions) 2011 2010

ASSETS

GE $(19,769) $(14,843)

GECS (10,919) (12,867)

(30,688) (27,710)

LIABILITIES

GE 12,586 10,606

GECS 17,971 19,857

30,557 30,463

Net deferred income tax liability (asset) $ (131) $ 2,753

Principal components of our net liability (asset) representing

deferred income tax balances are as follows:

December 31 (In millions) 2011 2010

GE

Investment in NBCU LLC $ 4,880 $ —

Contract costs and estimated earnings 2,834 2,671

Intangible assets 1,701 2,772

Investment in global subsidiaries 780 1,934

Depreciation 574 951

Provision for expenses (a) (6,745) (5,991)

Principal pension plans (6,431) (2,519)

Retiree insurance plans (4,218) (3,814)

Non-U.S. loss carryforwards (b) (1,039) (1,115)

Other—net 481 874

(7,183) (4,237)

GECS

Financing leases 6,718 6,168

Operating leases 5,030 4,812

Intangible assets 1,689 1,567

Investment in global subsidiaries 85 1,321

Allowance for losses (2,949) (2,807)

Non-U.S. loss carryforwards (b) (2,861) (2,320)

Cash flow hedges (104) (612)

Net unrealized losses on securities (64) (276)

Other—net (492) (863)

7,052 6,990

Net deferred income tax liability (asset) $ (131) $ 2,753

(a) Represented the tax effects of temporary differences related to expense

accruals for a wide variety of items, such as employee compensation and

benefits, other pension plan liabilities, interest on tax liabilities, product

warranties and other sundry items that are not currently deductible.

(b) Net of valuation allowances of $1,183 million and $902 million for GE and

$613 million and $419 million for GECS, for 2011 and 2010, respectively. Of the

net deferred tax asset as of December 31, 2011, of $3,900 million, $45 million

relates to net operating loss carryforwards that expire in various years ending

from December 31, 2012, through December 31, 2014; $173 million relates to net

operating losses that expire in various years ending from December 31, 2015,

through December 31, 2026 and $3,682 million relates to net operating loss

carryforwards that may be carried forward indefinitely.

110 GE 2011 ANNUAL REPORT

notes to consolidated financial statements

Note 15.

Shareowners’ Equity

(In millions) 2011 2010 2009

PREFERRED STOCK ISSUED (a)(b) $ — $ — $ —

COMMON STOCK ISSUED

(a) $ 702 $ 702 $ 702

ACCUMULATED OTHER COMPREHENSIVE INCOME

Balance at January 1 (c) $ (17,855) $ (15,530) $ (21,853)

Investment securities—net of deferred taxes of $341, $72 and $1,001 (d) 575 (43) 2,678

Currency translation adjustments—net of deferred taxes of $(717), $3,208 and $(560) (162) (3,937) 4,202

Cash flow hedges—net of deferred taxes of $238, $(515) and $933 (874) (603) 986

Benefit plans—net of deferred taxes of $(5,022), $(260) and $(538) (e) (9,140) (490) (2,802)

Reclassification adjustments

Investment securities—net of deferred taxes of $1, $32 and $494 31 59 (19)

Currency translation adjustments—net of deferred taxes of $357, $22 and $(51) 381 63 (67)

Cash flow hedges—net of deferred taxes of $202, $706 and $428 978 1,057 612

Benefit plans—net of deferred taxes of $1,152, $832 and $533 (f) 2,092 1,569 998

Balance at December 31 $ (23,974) $ (17,855) $ (15,265)

OTHER CAPITAL

Balance at January 1 $ 36,890 $ 37,729 $ 40,390

Gains (losses) on treasury stock dispositions and other (a) (703) (839) (2,661)

Preferred stock redemption (2,494) ——

Balance at December 31 $ 33,693 $ 36,890 $ 37,729

RETAINED EARNINGS

Balance at January 1 (g) $131,137 $124,655 $122,185

Net earnings attributable to the Company 14,151 11,644 11,025

Dividends (a)(h) (7,498) (5,212) (6,785)

Other (a)(i) (4) 50 (62)

Balance at December 31 $137,786 $131,137 $126,363

COMMON STOCK HELD IN TREASURY

Balance at January 1 $ (31,938) $ (32,238) $ (36,697)

Purchases (a) (2,067) (1,890) (214)

Dispositions (a) 2,236 2,190 4,673

Balance at December 31 $ (31,769) $ (31,938) $ (32,238)

TOTAL EQUITY

GE shareowners’ equity balance at December 31 $116,438 $118,936 $117,291

Noncontrolling interests balance at December 31 1,696 5,262 7,845

Total equity balance at December 31 $118,134 $124,198 $125,136

(a) Total dividends and other transactions with shareowners decreased equity by $10,530 million in 2011, $5,701 million in 2010 and $5,049 million in 2009.

(b) GE has 50 million authorized shares of preferred stock ($1.00 par value). No such shares were issued as of December 31, 2011. 30,000 shares were issued at December 31,

2010 and December 31, 2009.

(c) The 2010 opening balance was adjusted as of January 1, 2010, for the cumulative effect of changes in accounting principles of $265 million related to the adoption of

ASU 2009-16 & 17.

(d) Includes adjustments of $786 million and $1,171 million in 2011 and 2010, respectively, to deferred acquisition costs, present value of future profits, and investment

contracts, insurance liabilities and insurance annuity benefits in our run-off insurance operations to reflect the effects that would have been recognized had the related

unrealized investment securities holding gains and losses actually been realized in accordance with ASC 320-10-S99-2.

(e) For 2011, included $(495) million of prior service costs for plan amendments and $(8,645) million of gains (losses) arising during the year—net of deferred taxes of

$(276) million and $(4,746) million, respectively. For 2010, included $(3) million of prior service costs for plan amendments, $(487) million of actuarial gains (losses) arising

during the year—net of deferred taxes of $1 million and $(261) million, respectively. For 2009, included $(9) million of prior service costs for plan amendments and

$(2,793) million of actuarial gains (losses) arising during the year—net of deferred taxes of $(10) million and $(528) million, respectively.

(f) For 2011, included $514 million of amortization of prior costs and $1,578 million of amortization of actuarial gains and losses—net of deferred taxes of $341 million and

$811 million, respectively. For 2010, included $513 million of amortization of prior service costs and $1,056 million of amortization of actuarial gains and losses—net of

deferred taxes of $346 million and $486 million, respectively. For 2009, included $814 million of amortization of prior service costs and $184 million of amortization of

actuarial gains and losses—net of deferred taxes of $434 million and $99 million, respectively.

(g) The 2010 opening balance was adjusted as of January 1, 2010, for the cumulative effect of changes in accounting principles of $1,708 million related to the adoption of

ASU 2009-16 & 17. The 2009 opening balance was adjusted as of April 1, 2009, for the cumulative effect of changes in accounting principles of $62 million related to

adopting amendments on impairment guidance in ASC 320, Investments—Debt and Equity Securities.

(h) Included $1,031 million ($806 million related to our preferred stock redemption), $300 million and $300 million of dividends on preferred stock in 2011, 2010 and

2009, respectively.

(i) Included the effects of accretion of redeemable securities to their redemption value of $38 million and $(62) million in 2010 and 2009, respectively.

GE 2011 ANNUAL REPORT 111

notes to consolidated financial statements

SHARES OF GE PREFERRED STOCK

On October 16, 2008, we issued 30,000 shares of 10% cumulative

perpetual preferred stock (par value $1.00 per share) having an

aggregate liquidation value of $3,000 million, and warrants to

purchase 134,831,460 shares of common stock (par value $0.06

per share) to Berkshire Hathaway Inc. (Berkshire Hathaway) for

net proceeds of $2,965 million in cash. The proceeds were allo-

cated to the preferred shares ($2,494 million) and the warrants

($471 million) on a relative fair value basis and recorded in other

capital. The warrants are exercisable for fi ve years at an exercise

price of $22.25 per share of common stock and settled through

physical share issuance.

The preferred stock was redeemable at our option three years

after issuance at a price of 110% of liquidation value plus accrued

and unpaid dividends. On September 13, 2011, we provided notice

to Berkshire Hathaway that we would redeem the shares for the

stated redemption price of $3,300 million, plus accrued and unpaid

dividends. In connection with this notice, we recognized a preferred

dividend of $806 million (calculated as the difference between the

carrying value and redemption value of the preferred stock), which

was recorded as a reduction to our third quarter earnings attribut-

able to common shareowners and common shareowners’ equity.

The preferred shares were redeemed on October 17, 2011.

SHARES OF GE COMMON STOCK

On July 23, 2010, we extended our $15 billion share repurchase

program (which would have otherwise expired on December 31,

2010) through 2013 and we resumed purchases under the program

in the third quarter of 2010. Under this program, on a book basis, we

repurchased 111.3 million shares for a total of $1,968 million during

2011 and 111.2 million shares for a total of $1,814 million during 2010.

GE has 13.2 billion authorized shares of common stock ($0.06

par value).

Common shares issued and outstanding are summarized in

the following table.

December 31 (In thousands) 2011 2010 2009

Issued 11,693,841 11,693,841 11,693,833

In treasury (1,120,824) (1,078,465) (1,030,758)

Outstanding 10,573,017 10,615,376 10,663,075

NONCONTROLLING INTERESTS

Noncontrolling interests in equity of consolidated affi liates

includes common shares in consolidated affi liates and preferred

stock issued by affi liates of GECC. Preferred shares that we are

required to redeem at a specifi ed or determinable date are classi-

fi ed as liabilities. The balance is summarized as follows:

December 31 (In millions) 2011 2010

Noncontrolling interests in consolidated affiliates

NBC Universal $ — $3,040

Others (a) 1,696 1,947

Preferred stock (b)

GECC affiliates —275

Total $1,696 $5,262

(a) Consisted of a number of individually insignificant noncontrolling interests in

partnerships and consolidated affiliates.

(b) The preferred stock paid cumulative dividends at an average rate of 6.81% in

2010 and was retired in 2011.

Changes to noncontrolling interests are as follows.

Years ended December 31

(In millions) 2011 2010 2009

Beginning balance $5,262 $7,845 $8,947

Net earnings 292 535 200

Repurchase of NBCU shares (a) (3,070) (1,878) —

Dispositions (b) (609) (979) (707)

Dividends (34) (317) (548)

AOCI and other (c) (145) 56 (47)

Ending balance $1,696 $5,262 $7,845

(a) In January 2011 and prior to the transaction with Comcast, we acquired 12.3% of

NBCU’s outstanding shares from Vivendi for $3,673 million and made an

additional payment of $222 million related to previously purchased shares. Of

these amounts, $3,070 million reflects a reduction in carrying value of

noncontrolling interests. The remaining amount of $825 million represents the

amount paid in excess of our carrying value, which was recorded as an increase

in our basis in NBCU.

(b) Includes noncontrolling interests related to the sale of GE SeaCo of $(311) million

and the redemption of Heller Financial preferred stock of $(275) million in 2011,

as well as the deconsolidation of Regency of $(979) million in 2010 and Penske

Truck Leasing Co., L.P. (PTL) of $(331) million in 2009.

(c) Changes to the individual components of AOCI attributable to noncontrolling

interests were insignificant.

Note 16.

Other Stock-Related Information

We grant stock options, restricted stock units (RSUs) and perfor-

mance share units (PSUs) to employees under the 2007

Long-Term Incentive Plan. This plan replaced the 1990 Long-Term

Incentive Plan. In addition, we grant options and RSUs in limited

circumstances to consultants, advisors and independent contrac-

tors under a plan approved by our Board of Directors in 1997 (the

Consultants’ Plan). There are outstanding grants under one share-

owner-approved option plan for non-employee directors. Share

requirements for all plans may be met from either unissued or

treasury shares. Stock options expire 10 years from the date they

are granted and vest over service periods that range from one to

fi ve years. RSUs give the recipients the right to receive shares of

our stock upon the vesting of their related restrictions.

Restrictions on RSUs vest in various increments and at various

dates, beginning after one year from date of grant through

grantee retirement. Although the plan permits us to issue RSUs

settleable in cash, we have only issued RSUs settleable in shares

of our stock. PSUs give recipients the right to receive shares of

our stock upon the achievement of certain performance targets.

All grants of GE options under all plans must be approved by

the Management Development and Compensation Committee,

which consists entirely of independent directors.

112 GE 2011 ANNUAL REPORT

notes to consolidated financial statements

STOCK COMPENSATION PLANS

December 31, 2011 (Shares in thousands)

Securities

to be

issued

upon

exercise

Weighted

average

exercise

price

Securities

available

for future

issuance

APPROVED BY SHAREOWNERS

Options 449,517 $18.86 (a)

RSUs 15,412 (b) (a)

PSUs 700 (b) (a)

NOT APPROVED BY SHAREOWNERS

(CONSULTANTS’ PLAN)

Options 344 26.94 (c)

RSUs 132 (b) (c)

Total 466,105 $18.87 113,963

(a) In 2007, the Board of Directors approved the 2007 Long-Term Incentive Plan (the

Plan). The Plan replaced the 1990 Long-Term Incentive Plan. The maximum

number of shares that may be granted under the Plan is 500 million shares, of

which no more than 250 million may be available for awards granted in any form

provided under the Plan other than options or stock appreciation rights. The

approximate 105.9 million shares available for grant under the 1990 Plan were

retired upon approval of the 2007 Plan. Total shares available for future issuance

under the 2007 Plan amounted to 85.6 million shares at December 31, 2011.

(b) Not applicable.

(c) Total shares available for future issuance under the Consultants’ Plan amount to

28.3 million shares.

Outstanding options expire on various dates through

December 9, 2021.

The following table summarizes information about stock

options outstanding at December 31, 2011.

STOCK OPTIONS OUTSTANDING

(Shares in thousands) Outstanding Exercisable

Exercise price range Shares

Average

life (a)

Average

exercise

price Shares

Average

exercise

price

Under $10.00 59,344 6.8 $ 9.57 28,440 $ 9.57

10.01–15.00 78,001 7.1 11.98 37,521 11.97

15.01–20.00 202,808 8.9 17.42 24,366 16.20

20.01–25.00 1,270 8.9 20.57 49 22.49

25.01–30.00 45,788 3.3 27.62 38,748 27.51

30.01–35.00 47,396 3.1 33.22 47,291 33.22

Over $35.00 15,254 5.1 38.67 12,934 38.66

Total 449,861 7.0 $18.87 189,349 $22.47

At year-end 2010, options with a weighted average exercise price of $29.76 were

exercisable on 158 million shares.

(a) Average contractual life remaining in years.

STOCK OPTION ACTIVITY

Shares

(In thousands)

Weighted

average

exercise price

Weighted

average

remaining

contractual

term (In years)

Aggregate

intrinsic value

(In millions)

Outstanding at

January 1, 2011 400,439 $20.82

Granted 105,944 18.59

Exercised (7,994) 11.13

Forfeited (8,739) 15.73

Expired (39,789) 39.98

Outstanding at

December 31, 2011 449,861 $18.87 7.0 $1,140

Exercisable at

December 31, 2011 189,349 $22.47 5.0 $ 505

Options expected

to vest 230,694 $16.23 8.4 $ 576

We measure the fair value of each stock option grant at the date of

grant using a Black-Scholes option pricing model. The weighted

average grant-date fair value of options granted during 2011, 2010

and 2009 was $4.00, $4.11 and $3.81, respectively. The following

assumptions were used in arriving at the fair value of options

granted during 2011, 2010 and 2009, respectively: risk-free inter-

est rates of 2.6%, 2.9% and 3.2%; dividend yields of 3.9%, 3.9% and

3.9%; expected volatility of 30%, 35% and 49%; and expected lives

of seven years and eight months, six years and eleven months, and

six years and ten months. Risk-free interest rates refl ect the yield

on zero-coupon U.S. Treasury securities. Expected dividend yields

presume a set dividend rate and we used a historical fi ve-year

average for the dividend yield. Expected volatilities are based on

implied volatilities from traded options and historical volatility of

our stock. The expected option lives are based on our historical

experience of employee exercise behavior.

The total intrinsic value of options exercised during 2011, 2010

and 2009 amounted to $65 million, $23 million and an insignifi -

cant amount, respectively. As of December 31, 2011, there was

$765 million of total unrecognized compensation cost related to

nonvested options. That cost is expected to be recognized over

a weighted average period of two years, of which approximately

$189 million after tax is expected to be recognized in 2012.

Stock option expense recognized in net earnings during

2011, 2010 and 2009 amounted to $230 million, $178 million and

$120 million, respectively. Cash received from option exercises

during 2011, 2010 and 2009 was $89 million, $37 million and an

insignifi cant amount, respectively. The tax benefi t realized from

stock options exercised during 2011, 2010 and 2009 was $21 mil-

lion, $7 million and an insignifi cant amount, respectively.

OTHER STOCK-BASED COMPENSATION

Shares

(In thousands)

Weighted

average

grant date

fair value

Weighted

average

remaining

contractual

term (In years)

Aggregate

intrinsic

value

(In millions)

RSUs outstanding at

January 1, 2011 21,571 $29.16

Granted 3,145 16.74

Vested (8,559) 31.92

Forfeited (613) 27.78

RSUs outstanding at

December 31, 2011 15,544 $25.18 2.7 $278

RSUs expected to vest 14,223 $25.22 2.6 $255

GE 2011 ANNUAL REPORT 113

notes to consolidated financial statements

The fair value of each restricted stock unit is the market price of

our stock on the date of grant. The weighted average grant date

fair value of RSUs granted during 2011, 2010 and 2009 was $16.74,

$15.89 and $13.63, respectively. The total intrinsic value of RSUs

vested during 2011, 2010 and 2009 amounted to $154 million,

$111 million and $139 million, respectively. As of December 31,

2011, there was $210 million of total unrecognized compensation

cost related to nonvested RSUs. That cost is expected to be rec-

ognized over a weighted average period of two years, of which

approximately $72 million after tax is expected to be recognized

in 2012. As of December 31, 2011, 0.7 million PSUs with a

weighted average remaining contractual term of three years, an

aggregate intrinsic value of $13 million and $2 million of unrecog-

nized compensation cost were outstanding. Other share-based

compensation expense for RSUs and PSUs recognized in net

earnings amounted to $84 million, $116 million and $127 million in

2011, 2010 and 2009, respectively.

The income tax benefi t recognized in earnings based on the

compensation expense recognized for all share-based compen-

sation arrangements amounted to $163 million, $143 million and

$118 million in 2011, 2010 and 2009, respectively. The excess of

actual tax deductions over amounts assumed, which are recognized

in shareowners’ equity, were insignifi cant in 2011, 2010 and 2009.

When stock options are exercised and restricted stock vests,

the difference between the assumed tax benefi t and the actual

tax benefi t must be recognized in our fi nancial statements. In

circumstances in which the actual tax benefi t is lower than the

estimated tax benefi t, that difference is recorded in equity, to

the extent there are suffi cient accumulated excess tax benefi ts.

At December 31, 2011, our accumulated excess tax benefi ts

are suffi cient to absorb any future differences between actual

and estimated tax benefi ts for all of our outstanding option and

restricted stock grants.

Note 17.

Other Income

(In millions) 2011 2010 2009

GE

Purchases and sales of business

interests (a) $3,804 $ 319 $ 363

Associated companies (b) 894 413 667

Licensing and royalty income 304 364 217

Interest income from GECS 206 133 173

Marketable securities and bank deposits 52 40 54

Other items 916 (295)

5,269 1,285 1,179

ELIMINATIONS (206) (134) (173)

Total $5,063 $1,151 $1,006

(a) Included a pre-tax gain of $3,705 million ($526 million after tax) related to our

transfer of the assets of our NBCU business to a newly formed entity, NBCU

LLC, in 2011. See Note 2.

(b) Included income of $789 million from our equity method investment in NBCU

LLC in 2011 and a gain of $552 million related to dilution of our interest in A&E

Television Network from 25% to 15.8% in 2009.

Note 18.

GECS Revenues from Services

(In millions) 2011 2010 2009

Interest on loans (a) $20,069 $20,835 $18,518

Equipment leased to others 11,343 11,116 12,231

Fees (a) 4,698 4,734 4,432

Investment income (a)(b) 2,500 2,185 3,379

Financing leases (a) 2,378 2,749 3,255

Associated companies (c) 2,337 2,035 1,006

Premiums earned by insurance

activities 1,905 2,014 2,065

Real estate investments 1,625 1,240 1,543

Net securitization gains (a) —— 1,589

Other items (d) 2,078 2,440 2,830

Total $48,933 $49,348 $50,848

(a) On January 1, 2010, we adopted ASU 2009-16 & 17, which required us to

consolidate substantially all of our former QSPEs. As a result, 2011 and 2010

GECS revenues from services include interest, investment and fee income from

these entities, which were not presented on a consolidated basis in 2009. During

2011 and 2010, we did not recognize gains from securitization transactions, as

they were recorded as on-book financings. See Note 24.

(b) Included net other-than-temporary impairments on investment securities of

$387 million, $253 million and $581 million in 2011, 2010 and 2009, respectively.

See Note 3.

(c) During 2011, we sold an 18.6% equity interest in Garanti Bank and recorded a

pre-tax gain of $690 million. Following the sale, we hold a 2.25% equity interest,

which is classified as an available-for-sale security.

(d) Included a gain on the sale of a limited partnership interest in PTL and a related

gain on the remeasurement of the retained investment to fair value totaling

$296 million in the first quarter of 2009. See Note 24.

Note 19.

Supplemental Cost Information

We funded research and development expenditures of

$4,601 million in 2011, $3,939 million in 2010 and $3,288 million in

2009. Research and development costs are classifi ed in cost of

goods sold in the Statement of Earnings. In addition, research and

development funding from customers, principally the U.S. gov-

ernment, totaled $788 million, $979 million and $1,050 million in

2011, 2010 and 2009, respectively.

Rental expense under operating leases is shown below.

(In millions) 2011 2010 2009

GE $968 $1,073 $1,012

GECS 615 637 801

At December 31, 2011, minimum rental commitments under

noncancellable operating leases aggregated $2,387 million and

$2,119 million for GE and GECS, respectively. Amounts payable

over the next fi ve years follow.

(In millions) 2012 2013 2014 2015 2016

GE $519 $450 $381 $307 $263

GECS 505 332 253 197 167

114 GE 2011 ANNUAL REPORT

notes to consolidated financial statements

GE’s selling, general and administrative expenses totaled

$17,556 million in 2011, $16,340 million in 2010 and $14,841 million

in 2009. The increase in 2011 is primarily due to higher pension

costs, increased acquisition-related costs, higher research and

development spending and increased costs to support global

growth, partially offset by the disposition of NBCU and lower

restructuring and other charges. The increase in 2010 is primarily

due to higher research and development spending, increased

selling expenses to support global growth and higher pension

costs, partially offset by lower restructuring and other charges.

Our Aviation segment enters into collaborative arrangements

with manufacturers and suppliers of components used to build and

maintain certain engines, under which GE and these participants

share in risks and rewards of these product programs. Under these

arrangements, participation fees earned and recorded as other

income totaled $12 million, $4 million and $1 million for the years

2011, 2010 and 2009, respectively. Payments to participants are

recorded as costs of services sold ($612 million, $563 million and

$504 million for the years 2011, 2010 and 2009, respectively) or as

cost of goods sold ($1,996 million, $1,751 million and $1,731 million

for the years 2011, 2010 and 2009, respectively).

Note 20.

Earnings Per Share Information

2011 2010 2009

(In millions; per-share amounts in dollars) Diluted Basic Diluted Basic Diluted Basic

AMOUNTS ATTRIBUTABLE TO THE COMPANY:

CONSOLIDATED

Earnings from continuing operations for per-share calculation (a)(b) $14,053 $14,053 $12,492 $12,492 $10,777 $10,776

Preferred stock dividends declared (c) (1,031) (1,031) (300) (300) (300) (300)

Earnings from continuing operations attributable to common

shareowners for per-share calculation (a)(b) 13,022 13,021 12,192 12,192 10,477 10,476

Earnings (loss) from discontinued operations for per-share calculation (a)(b) 78 78 (868) (869) 220 219

Net earnings attributable to common shareowners for

per-share calculation (a)(b) $13,098 $13,098 $11,322 $11,322 $10,695 $10,694

AVERAGE EQUIVALENT SHARES

Shares of GE common stock outstanding 10,591 10,591 10,661 10,661 10,614 10,614

Employee compensation-related shares, including stock options 29 — 17— 1—

Total average equivalent shares 10,620 10,591 10,678 10,661 10,615 10,614

PER-SHARE AMOUNTS

Earnings from continuing operations $ 1.23 $ 1.23 $ 1.14 $ 1.14 $ 0.99 $ 0.99

Earnings (loss) from discontinued operations 0.01 0.01 (0.08) (0.08) 0.02 0.02

Net earnings 1.23 1.24 1.06 1.06 1.01 1.01

Our unvested restricted stock unit awards that contain non-forfeitable rights to dividends or dividend equivalents are considered participating securities and, therefore, are

included in the computation of earnings per share pursuant to the two-class method. Application of this treatment has an insignificant effect.

(a) Included an insignificant amount of dividend equivalents in each of the three years presented.

(b) Included an insignificant amount related to accretion of redeemable securities in 2010 and 2009.

(c) Included $806 million related to the redemption of our 10% cumulative preferred stock in 2011. See Note 15.

For the years ended December 31, 2011, 2010 and 2009, there were approximately 321 million, 325 million and 328 million, respectively, of

outstanding stock awards that were not included in the computation of diluted earnings per share because their effect was antidilutive.

Earnings-per-share amounts are computed independently for earnings from continuing operations, earnings (loss) from discontinued

operations and net earnings. As a result, the sum of per-share amounts from continuing operations and discontinued operations may not

equal the total per-share amounts for net earnings.

GE 2011 ANNUAL REPORT 115

notes to consolidated financial statements

Note 21.

Fair Value Measurements

For a description of how we estimate fair value, see Note 1.

The following tables present our assets and liabilities measured at fair value on a recurring basis. Included in the tables are investment

securities primarily supporting obligations to annuitants and policyholders in our run-off insurance operations, supporting obligations

to holders of GICs in Trinity (which ceased issuing new investment contracts beginning in the fi rst quarter of 2010) and investment secu-

rities held at our treasury operations and investments held in our CLL business collateralized by senior secured loans of high-quality,

middle-market companies in a variety of industries. Such securities are mainly investment grade.

(In millions) Level 1 (a) Level 2 (a) Level 3 (b) Netting

adjustment (c) Net balance

DECEMBER 31, 2011

ASSETS

Investment securities

Debt

U.S. corporate $ — $20,535 $ 3,235 $ — $23,770

State and municipal — 3,157 77 — 3,234

Residential mortgage-backed — 2,568 41 — 2,609

Commercial mortgage-backed — 2,824 4 — 2,828

Asset-backed (d) — 930 4,040 — 4,970

Corporate—non-U.S. 71 1,058 1,204 — 2,333

Government—non-U.S. 1,003 1,444 84 — 2,531

U.S. government and federal agency — 3,805 253 — 4,058

Retained interests — — 35 — 35

Equity

Available-for-sale 730 18 17 — 765

Trading 241 — — — 241

Derivatives (e) — 15,252 393 (5,604) 10,041

Other (f) — — 817 — 817

Total $2,045 $51,591 $10,200 $(5,604) $58,232

LIABILITIES

Derivatives $ — $ 5,010 $ 27 $(4,308) $ 729

Other (g) — 863 — — 863

Total $ — $ 5,873 $ 27 $(4,308) $ 1,592

DECEMBER 31, 2010

ASSETS

Investment securities

Debt

U.S. corporate $ — $18,956 $ 3,199 $ — $22,155

State and municipal — 2,499 225 — 2,724

Residential mortgage-backed 47 2,696 66 — 2,809

Commercial mortgage-backed — 2,875 49 — 2,924

Asset-backed — 690 2,540 — 3,230

Corporate—non-U.S. 89 1,292 1,486 — 2,867

Government—non-U.S. 777 1,333 156 — 2,266

U.S. government and federal agency — 3,576 210 — 3,786

Retained interests — — 39 — 39

Equity

Available-for-sale 677 20 24 — 721

Trading 417 — — — 417

Derivatives (e) — 10,997 359 (5,910) 5,446

Other (f) — — 906 — 906

Total $2,007 $44,934 $ 9,259 $(5,910) $50,290

LIABILITIES

Derivatives $ — $ 6,553 $ 103 $(5,242) $ 1,414

Other (g) — 920 — — 920

Total $ — $ 7,473 $ 103 $(5,242) $ 2,334

(a) The fair value of securities transferred between Level 1 and Level 2 was $67 million in 2011.

(b) Level 3 investment securities valued using non-binding broker quotes and other third parties totaled $2,386 million and $1,054 million at December 31, 2011 and 2010,

respectively, and were classified as available-for-sale securities.

(c) The netting of derivative receivables and payables is permitted when a legally enforceable master netting agreement exists and when collateral is posted to us.

(d) Includes investments in our CLL business in asset-backed securities collateralized by senior secured loans of high-quality, middle-market companies in a variety of industries.

(e) The fair value of derivatives included an adjustment for non-performance risk. The cumulative adjustment was a loss of $13 million at December 31, 2011 and $10 million at

December 31, 2010. See Note 22 for additional information on the composition of our derivative portfolio.

(f) Included private equity investments and loans designated under the fair value option.

(g) Primarily represented the liability associated with certain of our deferred incentive compensation plans.

116 GE 2011 ANNUAL REPORT

notes to consolidated financial statements

The following tables present the changes in Level 3 instruments measured on a recurring basis for the years ended December 31, 2011

and 2010, respectively. The majority of our Level 3 balances consist of investment securities classifi ed as available-for-sale with changes

in fair value recorded in shareowners’ equity.

CHANGES IN LEVEL 3 INSTRUMENTS FOR THE YEAR ENDED DECEMBER 31, 2011

(In millions)

Balance at

January 1,

2011

Net realized/

unrealized

gains (losses)

included in

earnings (a)

Net realized/

unrealized

gains (losses)

included in

accumulated

other

compre hensive

income Purchases Sales Settlements

Transfers

into Level 3 (b)

Transfers

out of

Level 3 (b)

Balance at

December 31,

2011

Net change in

unrealized

gains (losses)

relating to

instruments

still held at

December 31,

2011 (c)

Investment securities

Debt

U.S. corporate $3,199 $ 78 $(157) $ 235 $(183) $(112) $182 $ (7) $ 3,235 $ —

State and municipal 225 — — 12 — (8) — (152) 77 —

Residential

mortgage-backed 66 (3) 1 2 (5) (1) 71 (90) 41 —

Commercial

mortgage-backed 49 — — 6 — (4) 3 (50) 4 —

Asset-backed 2,540 (10) 61 2,157 (185) (11) 1 (513) 4,040 —

Corporate—non-U.S. 1,486 (47) (91) 25 (55) (118) 85 (81) 1,204 —

Government—non-U.S. 156 (100) 48 41 (1) (27) 107 (140) 84 —

U.S. government and

federal agency 210 — 43 500 — — — (500) 253 —

Retained interests 39 (28) 26 8 (5) (5) — — 35 —

Equity

Available-for-sale 24 — — — — — 4 (11) 17 —

Trading — — ——— — —— — —

Derivatives (d)(e) 265 151 2 (2) — (207) 150 10 369 130

Other 906 95 (9) 152 (266) (6) — (55) 817 34

Total $9,165 $136 $ (76) $3,136 $(700) $(499) $603 $(1,589) $10,176 $164

(a) Earnings effects are primarily included in the “GECS revenues from services” and “Interest and other financial charges” captions in the Statement of Earnings.

(b) Transfers in and out of Level 3 are considered to occur at the beginning of the period. Transfers out of Level 3 were a result of increased use of quotes from independent

pricing vendors based on recent trading activity.

(c) Represented the amount of unrealized gains or losses for the period included in earnings.

(d) Represented derivative assets net of derivative liabilities and included cash accruals of $3 million not reflected in the fair value hierarchy table.

(e) Gains (losses) included in net realized/unrealized gains (losses) included in earnings were offset by the earnings effects from the underlying items that were economically

hedged. See Note 22.

GE 2011 ANNUAL REPORT 117

notes to consolidated financial statements

CHANGES IN LEVEL 3 INSTRUMENTS FOR THE YEAR ENDED DECEMBER 31, 2010

(In millions)

Balance at

January 1,

2010 (a)

Net realized/

unrealized

gains (losses)

included in

earnings (b)

Net realized/

unrealized

gains (losses)

included in

accumulated

other

comprehensive

income

Purchases,

Issuances and

Settlements

Transfers in

and/or out

of Level 3 (c)

Balance at

December 31,

2010

Net change in

unrealized

gains (losses)

relating to

instruments

still held at

December 31,

2010 (d)

Investment securities

Debt

U.S. corporate $3,068 $ 79 $276 $ (215) $ (9) $3,199 $ —

State and municipal 205 — 25 (5) — 225 —

Residential mortgage-backed 123 (1) 13 2 (71) 66 —

Commercial mortgage-backed 1,041 30 (2) (1,017) (3) 49 —

Asset-backed 1,872 25 14 733 (104) 2,540 —

Corporate—non-U.S. 1,331 (38) (39) 250 (18) 1,486 —

Government—non-U.S. 163 — (8) — 1 156 —

U.S. government and federal agency 256 — (44) (2) — 210 —

Retained interests 45 (1) 3 (8) — 39 —

Equity

Available-for-sale 19 — 3 — 2 24 1

Trading ———————

Derivatives (e)(f) 236 220 15 (79) (127) 265 41

Other 891 5 (30) 40 — 906 3

Total $9,250 $319 $226 $ (301) $(329) $9,165 $45

(a) Included $1,015 million in debt securities, a reduction in retained interests of $8,782 million and a reduction in derivatives of $365 million related to adoption of ASU 2009-16 & 17.

(b) Earnings effects are primarily included in the “GECS revenues from services” and “Interest and other financial charges” captions in the Statement of Earnings.

(c) Transfers in and out of Level 3 are considered to occur at the beginning of the period. Transfers out of Level 3 were a result of increased use of quotes from independent

pricing vendors based on recent trading activity.

(d) Represented the amount of unrealized gains or losses for the period included in earnings.

(e) Represented derivative assets net of derivative liabilities and included cash accruals of $9 million not reflected in the fair value hierarchy table.

(f) Gains (losses) included in net realized/unrealized gains (losses) included in earnings were offset by the earnings effects from the underlying items that were

economically hedged. See Note 22.

Non-Recurring Fair Value Measurements

The following table represents non-recurring fair value amounts

(as measured at the time of the adjustment) for those assets

remeasured to fair value on a non-recurring basis during the fi scal

year and still held at December 31, 2011 and 2010. These assets

can include loans and long-lived assets that have been reduced to

fair value when they are held for sale, impaired loans that have

been reduced based on the fair value of the underlying collateral,

cost and equity method investments and long-lived assets that

are written down to fair value when they are impaired and the

remeasurement of retained investments in formerly consolidated

subsidiaries upon a change in control that results in deconsolida-

tion of a subsidiary, if we sell a controlling interest and retain a

noncontrolling stake in the entity. Assets that are written down to

fair value when impaired and retained investments are not subse-

quently adjusted to fair value unless further impairment occurs.

Remeasured during the year ended December 31

2011 2010

(In millions) Level 2 Level 3 Level 2 Level 3

Financing receivables

and loans held for sale $ 158 $5,348 $ 54 $ 6,833

Cost and equity method

investments (a) — 403 — 510

Long-lived assets,

including real estate 1,343 3,288 1,025 5,811

Retained investments in

formerly consolidated

subsidiaries (b) ——— 113

Total $1,501 $9,039 $1,079 $13,267

(a) Includes the fair value of private equity and real estate funds included in Level 3

of $123 million and $296 million at December 31, 2011 and 2010, respectively.

(b) Excluded our retained investment in Regency, a formerly consolidated subsidiary,

that was remeasured to a Level 1 fair value of $549 million in 2010.

The following table represents the fair value adjustments to

assets measured at fair value on a non-recurring basis and still

held at December 31, 2011 and 2010.

Year ended December 31

(In millions) 2011 2010

Financing receivables

and loans held for sale $ (925) $(1,745)

Cost and equity method

investments (a) (274) (274)

Long-lived assets,

including real estate (b) (1,431) (2,958)

Retained investments in

formerly consolidated subsidiaries —184

Total $(2,630) $(4,793)

(a) Includes fair value adjustments associated with private equity and real estate

funds of $(24) million and $(198) million during 2011 and 2010, respectively.

(b) Includes impairments related to real estate equity properties and investments

recorded in other costs and expenses of $976 million and $2,089 million during

2011 and 2010, respectively.

118 GE 2011 ANNUAL REPORT

notes to consolidated financial statements

Note 22.

Financial Instruments

The following table provides information about the assets and liabilities not carried at fair value in our Statement of Financial Position.

Consistent with ASC 825, Financial Instruments, the table excludes fi nance leases and non-fi nancial assets and liabilities. Apart from

certain of our borrowings and certain marketable securities, few of the instruments discussed below are actively traded and their fair

values must often be determined using fi nancial models. Realization of the fair value of these instruments depends upon market forces

beyond our control, including marketplace liquidity.

2011 2010

Assets (liabilities) Assets (liabilities)

December 31 (In millions)

Notional

amount

Carrying

amount (net)

Estimated fair

value

Notional

amount

Carrying

amount (net)

Estimated fair

value

GE

Assets

Investments and notes receivable $ (a) $ 285 $ 285 $ (a) $ 414 $ 414

Liabilities

Borrowings (b) (a) (11,589) (12,535) (a) (10,112) (10,953)

GECS

Assets

Loans (a) 251,459 251,587 (a) 268,239 264,550

Other commercial mortgages (a) 1,494 1,537 (a) 1,041 1,103

Loans held for sale (a) 496 497 (a) 287 287

Other financial instruments (c) (a) 2,071 2,534 (a) 2,103 2,511

Liabilities

Borrowings and bank deposits (b)(d) (a) (443,097) (449,403) (a) (470,520) (482,724)

Investment contract benefits (a) (3,493) (4,240) (a) (3,726) (4,264)

Guaranteed investment contracts (a) (4,226) (4,266) (a) (5,502) (5,524)

Insurance—credit life (e) 1,944 (106) (88) 1,825 (103) (69)

(a) These financial instruments do not have notional amounts.

(b) See Note 10.

(c) Principally cost method investments.

(d) Fair values exclude interest rate and currency derivatives designated as hedges of borrowings. Had they been included, the fair value of borrowings at December 31, 2011

and 2010 would have been reduced by $9,051 million and $4,298 million, respectively.

(e) Net of reinsurance of $2,000 million and $2,800 million at December 31, 2011 and 2010, respectively.

A description of how we estimate fair values follows.

Loans

Based on a discounted future cash fl ows methodology, using

current market interest rate data adjusted for inherent credit risk

or quoted market prices and recent transactions, if available.

Borrowings and bank deposits

Based on valuation methodologies using current market interest

rate data which are comparable to market quotes adjusted for our

non-performance risk.

Investment contract benefits

Based on expected future cash fl ows, discounted at currently

offered rates for immediate annuity contracts or the income

approach for single premium deferred annuities.

Guaranteed investment contracts

Based on valuation methodologies using current market interest

rate data, adjusted for our non-performance risk.

All other instruments

Based on observable market transactions and/or valuation meth-

odologies using current market interest rate data adjusted for

inherent credit risk.

Assets and liabilities that are refl ected in the accompanying

fi nancial statements at fair value are not included in the above

disclosures; such items include cash and equivalents, investment

securities and derivative fi nancial instruments.

Additional information about certain categories in the table

above follows.

INSURANCE—CREDIT LIFE

Certain insurance affi liates, primarily in Consumer, issue credit life

insurance designed to pay the balance due on a loan if the bor-

rower dies before the loan is repaid. As part of our overall risk

management process, we cede to third parties a portion of this

associated risk, but are not relieved of our primary obligation

to policyholders.

GE 2011 ANNUAL REPORT 119

notes to consolidated financial statements

LOAN COMMITMENTS

Notional amount

December 31 (In millions) 2011 2010

Ordinary course of business

lending commitments (a) $ 3,756 $ 3,853

Unused revolving credit lines (b)

Commercial (c) 18,757 21,314

Consumer—principally credit cards 257,646 227,006

(a) Excluded investment commitments of $2,064 million and $1,990 million as of

December 31, 2011 and 2010, respectively.

(b) Excluded inventory financing arrangements, which may be withdrawn at our

option, of $12,354 million and $12,303 million as of December 31, 2011 and 2010,

respectively.

(c) Included commitments of $14,057 million and $16,243 million as of December 31,

2011 and 2010, respectively, associated with secured financing arrangements

that could have increased to a maximum of $17,344 million and $20,268 million

at December 31, 2011 and 2010, respectively, based on asset volume under the

arrangement.

DERIVATIVES AND HEDGING

As a matter of policy, we use derivatives for risk management

purposes, and we do not use derivatives for speculative pur-

poses. A key risk management objective for our fi nancial services

businesses is to mitigate interest rate and currency risk by seek-

ing to ensure that the characteristics of the debt match the

assets they are funding. If the form (fi xed versus fl oating) and

currency denomination of the debt we issue do not match the

related assets, we typically execute derivatives to adjust the

nature and tenor of funding to meet this objective. The determi-

nation of whether we enter into a derivative transaction or issue

debt directly to achieve this objective depends on a number of

factors, including market related factors that affect the type of

debt we can issue.

The notional amounts of derivative contracts represent the

basis upon which interest and other payments are calculated

and are reported gross, except for offsetting foreign currency

forward contracts that are executed in order to manage our

currency risk of net investment in foreign subsidiaries. Of the

outstanding notional amount of $328,000 million, approximately

89% or $292,000 million, is associated with reducing or eliminat-

ing the interest rate, currency or market risk between fi nancial

assets and liabilities in our fi nancial services businesses. The

remaining derivative activities primarily relate to hedging against

adverse changes in currency exchange rates and commodity

prices related to anticipated sales and purchases and contracts

containing certain clauses which meet the accounting defi ni-

tion of a derivative. The instruments used in these activities are

designated as hedges when practicable. When we are not able to

apply hedge accounting, or when the derivative and the hedged

item are both recorded in earnings currently, the derivatives are

deemed economic hedges and hedge accounting is not applied.

This most frequently occurs when we hedge a recognized foreign

currency transaction (e.g., a receivable or payable) with a deriva-

tive. Since the effects of changes in exchange rates are refl ected

currently in earnings for both the derivative and the transaction,

the economic hedge does not require hedge accounting.

The following table provides information about the fair value

of our derivatives by contract type, separating those accounted

for as hedges and those that are not.

2011 2010

Fair value Fair value

December 31 (In millions) Assets Liabilities Assets Liabilities

DERIVATIVES ACCOUNTED

FOR AS HEDGES

Interest rate contracts $ 9,446 $ 1,049 $ 5,959 $ 2,675

Currency exchange

contracts 4,189 3,174 2,965 2,533

Other contracts 1 11 5—

13,636 4,234 8,929 5,208

DERIVATIVES NOT

ACCOUNTED FOR

AS HEDGES

Interest rate contracts 319 241 294 552

Currency exchange

contracts 1,309 425 1,602 846

Other contracts 381 137 531 50

2,009 803 2,427 1,448

NETTING ADJUSTMENTS (a) (3,294) (3,281) (3,867) (3,857)

CASH COLLATERAL (b)(c) (2,310) (1,027) (2,043) (1,385)

Total $10,041 $ 729 $ 5,446 $ 1,414

Derivatives are classified in the captions “All other assets” and “All other liabilities”

in our financial statements.

(a) The netting of derivative receivables and payables is permitted when a legally

enforceable master netting agreement exists. Amounts included fair value

adjustments related to our own and counterparty non-performance risk. At

December 31, 2011 and 2010, the cumulative adjustment for non-performance

risk was a loss of $13 million and $10 million, respectively.

(b) Excludes excess collateralization of $579 million at December 31, 2011 and an

insignificant amount at December 31, 2010.

(c) Excludes securities pledged to us as collateral of $10,574 million and

$5,577 million at December 31, 2011 and 2010, respectively.

Fair Value Hedges

We use interest rate and currency exchange derivatives to hedge

the fair value effects of interest rate and currency exchange rate

changes on local and non-functional currency denominated

fi xed-rate debt. For relationships designated as fair value hedges,

changes in fair value of the derivatives are recorded in earnings

within interest and other fi nancial charges, along with offsetting

adjustments to the carrying amount of the hedged debt. The

following table provides information about the earnings effects of

our fair value hedging relationships for the years ended

December 31, 2011 and 2010.

2011 2010

(In millions)

Gain (loss)

on hedging

derivatives

Gain (loss)

on hedged

items

Gain (loss)

on hedging

derivatives

Gain (loss)

on hedged

items

Interest rate contracts $5,888 $(6,322) $2,387 $(2,924)

Currency exchange

contracts 119 (144) 47 (60)

Fair value hedges resulted in $(459) million and $(550) million of ineffectiveness

in 2011 and 2010, respectively. In both 2011 and 2010, there were insignificant

amounts excluded from the assessment of effectiveness.

120 GE 2011 ANNUAL REPORT

notes to consolidated financial statements

Cash Flow Hedges

We use interest rate, currency exchange and commodity derivatives

to reduce the variability of expected future cash fl ows associated

with variable rate borrowings and commercial purchase and sale

transactions, including commodities. For derivatives that are desig-

nated in a cash fl ow hedging relationship, the effective portion of the

change in fair value of the derivative is reported as a component of

AOCI and reclassifi ed into earnings contemporaneously and in the

same caption with the earnings effects of the hedged transaction.

The following table provides information about the amounts

recorded in AOCI, as well as the gain (loss) recorded in earnings,

primarily in interest and other fi nancial charges, when reclassifi ed

out of AOCI, for the years ended December 31, 2011 and 2010.

Gain (loss)

recognized in AOCI

Gain (loss) reclassified

from AOCI into earnings

(In millions) 2011 2010 2011 2010

Interest rate contracts $(302) $ (571) $ (820) $(1,356)

Currency exchange

contracts (292) (550) (370) (445)

Commodity contracts (13) 10 10 2

Total $(607) $(1,111) $(1,180) $(1,799)

The total pre-tax amount in AOCI related to cash flow hedges of forecasted

transactions was a $1,400 million loss at December 31, 2011. We expect to transfer

$693 million to earnings as an expense in the next 12 months contemporaneously

with the earnings effects of the related forecasted transactions. In 2011, we

recognized insignificant gains and losses related to hedged forecasted transactions

and firm commitments that did not occur by the end of the originally specified

period. At December 31, 2011 and 2010, the maximum term of derivative instruments

that hedge forecasted transactions was 21 years and 22 years, respectively.

For cash fl ow hedges, the amount of ineffectiveness in the hedging

relationship and amount of the changes in fair value of the deriva-

tives that are not included in the measurement of ineffectiveness

are both refl ected in earnings each reporting period. These amounts

are primarily reported in GECS revenues from services and totaled

$29 million and $19 million for the years ended December 31, 2011

and 2010, respectively.

Net Investment Hedges in Foreign Operations

We use currency exchange derivatives to protect our net invest-

ments in global operations conducted in non-U.S. dollar

currencies. For derivatives that are designated as hedges of net

investment in a foreign operation, we assess effectiveness based

on changes in spot currency exchange rates. Changes in spot

rates on the derivative are recorded as a component of AOCI until

such time as the foreign entity is substantially liquidated or sold.

The change in fair value of the forward points, which refl ects the

interest rate differential between the two countries on the deriva-

tive, is excluded from the effectiveness assessment.

The following table provides information about the amounts

recorded in AOCI for the years ended December 31, 2011 and

2010, as well as the gain (loss) recorded in GECS revenues from

services when reclassifi ed out of AOCI.

Gain (loss)

recognized in CTA

Gain (loss)

reclassified from CTA

(In millions) 2011 2010 2011 2010

Currency exchange contracts $1,232 $(2,023) $(716) $56

The amounts related to the change in the fair value of the forward

points that are excluded from the measure of effectiveness were

$(1,345) million and $(906) million for the years ended December 31,

2011 and 2010, respectively, and are recorded in interest and other

fi nancial charges.

Free-Standing Derivatives

Changes in the fair value of derivatives that are not designated

as hedges are recorded in earnings each period. As discussed

above, these derivatives are typically entered into as economic

hedges of changes in interest rates, currency exchange rates,

commodity prices and other risks. Gains or losses related to the

derivative are typically recorded in GECS revenues from services

or other income, based on our accounting policy. In general, the

earnings effects of the item that represent the economic risk

exposure are recorded in the same caption as the derivative.

Losses for the year ended December 31, 2011 on derivatives not

designated as hedges were $(876) million composed of amounts

related to interest rate contracts of $(5) million, currency

exchange contracts of $(817) million, and other derivatives of

$(54) million. These losses were more than offset by the earnings

effects from the underlying items that were economically

hedged. Losses for the year ended December 31, 2010 on deriva-

tives not designated as hedges, without considering the offsetting

earnings effects from the item representing the economic risk

exposure, were $(302) million composed of amounts related to

interest rate contracts of $185 million, currency exchange contracts

of $(666) million, and other derivatives of $179 million.

Counterparty Credit Risk

Fair values of our derivatives can change signifi cantly from period

to period based on, among other factors, market movements and

changes in our positions. We manage counterparty credit risk (the

risk that counterparties will default and not make payments to us

according to the terms of our agreements) on an individual coun-

terparty basis. Where we have agreed to netting of derivative

exposures with a counterparty, we net our exposures with that

counterparty and apply the value of collateral posted to us to

determine the exposure. We actively monitor these net exposures

against defi ned limits and take appropriate actions in response,

including requiring additional collateral.

GE 2011 ANNUAL REPORT 121

notes to consolidated financial statements

As discussed above, we have provisions in certain of our mas-

ter agreements that require counterparties to post collateral

(typically, cash or U.S. Treasuries) when our receivable due from

the counterparty, measured at current market value, exceeds

a specifi ed limit. At December 31, 2011, our exposure to coun-

terparties, including interest due, net of collateral we hold, was

$900 million. The fair value of such collateral was $12,907 mil-

lion, of which $2,333 million was cash and $10,574 million was in

the form of securities held by a custodian for our benefi t. Under

certain of these same agreements, we post collateral to our coun-

terparties for our derivative obligations, the fair value of which

was $1,111 million at December 31, 2011.

Additionally, our master agreements typically contain mutual

downgrade provisions that provide the ability of each party to

require termination if the long-term credit rating of the coun-

terparty were to fall below A-/A3. In certain of these master

agreements, each party also has the ability to require termina-

tion if the short-term rating of the counterparty were to fall below

A-1/P-1. The net amount relating to our derivative liability sub-

ject to these provisions, after consideration of collateral posted

by us, and outstanding interest payments, was $1,199 million at

December 31, 2011.

Note 23.

Supplemental Information about the Credit Quality

of Financing Receivables and Allowance for Losses on

Financing Receivables

We provide further detailed information about the credit quality

of our Commercial, Real Estate and Consumer fi nancing receiv-

ables portfolios. For each portfolio, we describe the

characteristics of the fi nancing receivables and provide informa-

tion about collateral, payment performance, credit quality

indicators, and impairment. We manage these portfolios using

delinquency and nonearning data as key performance indicators.

The categories used within this section such as impaired loans,

TDR and nonaccrual fi nancing receivables are defi ned by the

authoritative guidance and we base our categorization on the

related scope and defi nitions contained in the related standards.

The categories of nonearning and delinquent are defi ned by us

and are used in our process for managing our fi nancing receiv-

ables. Defi nitions of these categories are provided in Note 1.

Commercial

FINANCING RECEIVABLES AND ALLOWANCE FOR LOSSES

The following table provides further information about general

and specifi c reserves related to Commercial fi nancing receivables.

COMMERCIAL

Financing receivables

December 31 (In millions) 2011 2010

CLL

Americas (a) $ 80,505 $ 88,558

Europe 36,899 37,498

Asia 11,635 11,943

Other (a) 436 664

Total CLL 129,475 138,663

Energy Financial Services 5,912 7,011

GECAS 11,901 12,615

Other 1,282 1,788

Total Commercial financing receivables,

before allowance for losses $148,570 $160,077

Non-impaired financing receivables $142,908 $154,257

General reserves 718 1,014

Impaired loans 5,662 5,820

Specific reserves 812 1,031

(a) During 2011, we transferred our Railcar lending and leasing portfolio from CLL

Other to CLL Americas. Prior-period amounts were reclassified to conform to the

current-period presentation.

PAST DUE FINANCING RECEIVABLES

The following table displays payment performance of Commercial

fi nancing receivables.

COMMERCIAL

2011 2010

December 31

Over 30 days

past due

Over 90 days

past due

Over 30 days

past due

Over 90 days

past due

CLL

Americas 1.3% 0.8% 1.2% 0.8%

Europe 3.8 2.1 4.2 2.3

Asia 1.3 1.0 2.2 1.4

Other 2.0 0.1 2.4 1.2

Total CLL 2.0 1.2 2.1 1.3

Energy Financial

Services 0.3 0.3 0.9 0.8

GECAS ————

Other 3.7 3.5 5.8 5.5

Total 2.0 1.1 2.0 1.2

122 GE 2011 ANNUAL REPORT

notes to consolidated financial statements

NONACCRUAL FINANCING RECEIVABLES

The following table provides further information about Commercial fi nancing receivables that are classifi ed as non accrual. Of our

$4,718 million and $5,463 million of nonaccrual fi nancing receivables at December 31, 2011 and December 31, 2010, respectively,

$1,227 million and $1,016 million are currently paying in accordance with their contractual terms, respectively.

COMMERCIAL

Nonaccrual financing

receivables

Nonearning financing

receivables

December 31 (Dollars in millions) 2011 2010 2011 2010

CLL

Americas $2,417 $3,208 $1,862 $2,573

Europe 1,599 1,415 1,167 1,241

Asia 428 616 269 406

Other 68 711 6

Total CLL 4,512 5,246 3,309 4,226

Energy Financial Services 22 78 22 62

GECAS 69 —55 —

Other 115 139 65 102

Total $4,718 $5,463 $3,451 $4,390

Allowance for losses percentage 32.4% 37.4% 44.3% 46.6%

IMPAIRED LOANS

The following table provides information about loans classifi ed as impaired and specifi c reserves related to Commercial.

COMMERCIAL(a)

With no specific allowance With a specific allowance

December 31 (In millions)

Recorded

investment

in loans

Unpaid

principal

balance

Average

investment

in loans

Recorded

investment

in loans

Unpaid

principal

balance

Associated

allowance

Average

investment

in loans

2011

CLL

Americas $2,136 $2,219 $2,128 $1,367 $1,415 $ 425 $1,468

Europe 936 1,060 1,001 730 717 263 602

Asia 85 83 94 156 128 84 214

Other 54 58 13 11 11 2 5

Total CLL 3,211 3,420 3,236 2,264 2,271 774 2,289

Energy Financial Services 4 4 20 18 18 9 87

GECAS 28 28 59 — — — 11

Other 62 63 67 75 75 29 97

Total $3,305 $3,515 $3,382 $2,357 $2,364 $ 812 $2,484

2010

CLL

Americas $2,030 $2,127 $1,547 $1,699 $1,744 $ 589 $1,754

Europe 802 674 629 566 566 267 563

Asia 119 117 117 338 303 132 334

Other —— 9————

Total CLL 2,951 2,918 2,302 2,603 2,613 988 2,651

Energy Financial Services 54 61 76 24 24 6 70

GECAS 24 24 50 — — — 31

Other 58 57 30 106 99 37 82

Total $3,087 $3,060 $2,458 $2,733 $2,736 $1,031 $2,834

(a) We recognized $193 million and $88 million of interest income, including $59 million and $39 million on a cash basis, for the years ended December 31, 2011 and 2010,

respectively, principally in our CLL Americas business. The total average investment in impaired loans for the years ended December 31, 2011 and 2010 was $5,866 million

and $5,292 million, respectively.

GE 2011 ANNUAL REPORT 123

notes to consolidated financial statements

Impaired loans classifi ed as TDRs in our CLL business were

$3,642 million and $2,911 million at December 31, 2011 and 2010,

respectively, and were primarily attributable to CLL Americas

($2,746 million and $2,347 million, respectively). For the year

ended December 31, 2011, we modifi ed $1,856 million of loans

classifi ed as TDRs, primarily in CLL Americas ($1,105 million) and

CLL EMEA ($646 million). Changes to these loans primarily

included debt to equity exchange, extensions, interest only pay-

ment periods and forbearance or other actions, which are in

addition to, or sometimes in lieu of, fees and rate increases. Of our

modifi cations classifi ed as TDRs in the last year, $101 million have

subsequently experienced a payment default.

CREDIT QUALITY INDICATORS

Substantially all of our Commercial fi nancing receivables portfolio

is secured lending and we assess the overall quality of the portfo-

lio based on the potential risk of loss measure. The metric

incorporates both the borrower’s credit quality along with any

related collateral protection.

Our internal risk ratings process is an important source of

information in determining our allowance for losses and rep-

resents a comprehensive, statistically validated approach to

evaluate risk in our fi nancing receivables portfolios. In deriving

our internal risk ratings, we stratify our Commercial portfolios

into twenty-one categories of default risk and/or six categories

of loss given default to group into three categories: A, B and

C. Our process starts by developing an internal risk rating for

our borrowers, which are based upon our proprietary models

using data derived from borrower fi nancial statements, agency

ratings, payment history information, equity prices and other

commercial borrower characteristics. We then evaluate the

potential risk of loss for the specifi c lending transaction in the

event of borrower default, which takes into account such fac-

tors as applicable collateral value, historical loss and recovery

rates for similar transactions, and our collection capabilities. Our

internal risk ratings process and the models we use are subject to

regular monitoring and validation controls. The frequency of rat-

ing updates is set by our credit risk policy, which requires annual

Audit Committee approval. The models are updated on a regular

basis and statistically validated annually, or more frequently as

circumstances warrant.

The table below summarizes our Commercial fi nancing receiv-

ables by risk category. As described above, fi nancing receivables

are assigned one of twenty-one risk ratings based on our process

and then these are grouped by similar characteristics into three

categories in the table below. Category A is characterized by

either high credit quality borrowers or transactions with signifi -

cant collateral coverage which substantially reduces or eliminates

the risk of loss in the event of borrower default. Category B is

characterized by borrowers with weaker credit quality than those

in Category A, or transactions with moderately strong collateral

coverage which minimizes but may not fully mitigate the risk of

loss in the event of default. Category C is characterized by bor-

rowers with higher levels of default risk relative to our overall

portfolio or transactions where collateral coverage may not fully

mitigate a loss in the event of default.

COMMERCIAL

Secured

December 31 (In millions) A B C Total

2011

CLL

Americas (a) $ 73,103 $2,816 $4,586 $ 80,505

Europe 33,481 1,080 1,002 35,563

Asia 10,644 116 685 11,445

Other (a) 345 — 91 436

Total CLL 117,573 4,012 6,364 127,949

Energy Financial

Services 5,727 24 18 5,769

GECAS 10,881 970 50 11,901

Other 1,282 — — 1,282

Total $135,463 $5,006 $6,432 $146,901

2010

CLL

Americas (a) $ 78,939 $4,103 $5,516 $ 88,558

Europe 33,642 840 1,262 35,744

Asia 10,777 199 766 11,742

Other (a) 544 66 54 664

Total CLL 123,902 5,208 7,598 136,708

Energy Financial

Services 6,775 183 53 7,011

GECAS 11,034 1,193 388 12,615

Other 1,788 — — 1,788

Total $143,499 $6,584 $8,039 $158,122

(a) During 2011, we transferred our Railcar lending and leasing portfolio from CLL

Other to CLL Americas. Prior-period amounts were reclassified to conform to the

current-period presentation.

For our secured fi nancing receivables portfolio, our collateral

position and ability to work out problem accounts mitigates our

losses. Our asset managers have deep industry expertise that

enables us to identify the optimum approach to default situations.

We price risk premiums for weaker credits at origination, closely

monitor changes in creditworthiness through our risk ratings and

watch list process, and are engaged early with deteriorating

credits to minimize economic loss. Secured fi nancing receivables

within risk Category C are predominantly in our CLL businesses

and are primarily composed of senior term lending facilities and

factoring programs secured by various asset types including

inventory, accounts receivable, cash, equipment and related

business facilities as well as franchise fi nance activities secured

by underlying equipment.

Loans within Category C are reviewed and monitored regu-

larly, and classifi ed as impaired when it is probable that they will

not pay in accordance with contractual terms. Our internal risk

rating process identifi es credits warranting closer monitoring;

and as such, these loans are not necessarily classifi ed as non-

earning or impaired.

Substantially all of our unsecured Commercial fi nancing

receivables portfolio is attributable to our Interbanca S.p.A. and

GE Sanyo Credit acquisitions in Europe and Asia, respectively.

At December 31, 2011 and December 31, 2010, these fi nanc-

ing receivables included $325 million and $208 million rated

A, $748 million and $964 million rated B, and $596 million and

$783 million rated C, respectively.

124 GE 2011 ANNUAL REPORT

notes to consolidated financial statements

Real Estate

FINANCING RECEIVABLES AND ALLOWANCE FOR LOSSES

The following table provides further information about general

and specifi c reserves related to Real Estate fi nancing receivables.

REAL ESTATE

Financing receivables

December 31 (In millions) 2011 2010

Debt $24,501 $30,249

Business Properties 8,248 9,962

Total Real Estate financing receivables,

before allowance for losses $32,749 $40,211

Non-impaired financing receivables $24,002 $30,394

General reserves 267 338

Impaired loans 8,747 9,817

Specific reserves 822 1,150

PAST DUE FINANCING RECEIVABLES

The following table displays payment performance of Real Estate

fi nancing receivables.

REAL ESTATE

2011 2010

December 31

Over 30 days

past due

Over 90 days

past due

Over 30 days

past due

Over 90 days

past due

Debt 2.4% 2.3% 4.3% 4.1%

Business Properties 3.9 3.0 4.6 3.9

Total 2.8 2.5 4.4 4.0

NONACCRUAL FINANCING RECEIVABLES

The following table provides further information about Real Estate fi nancing receivables that are classifi ed as nonaccrual. Of our

$6,949 million and $9,719 million of nonaccrual fi nancing receivables at December 31, 2011 and December 31, 2010, respectively,

$6,061 million and $7,888 million are currently paying in accordance with their contractual terms, respectively.

REAL ESTATE

Nonaccrual financing

receivables

Nonearning financing

receivables

December 31 (Dollars in millions) 2011 2010 2011 2010

Debt $6,351 $9,039 $541 $ 961

Business Properties 598 680 249 386

Total $6,949 $9,719 $790 $1,347

Allowance for losses percentage 15.7% 15.3% 137.8% 110.5%

IMPAIRED LOANS

The following table provides information about loans classifi ed as impaired and specifi c reserves related to Real Estate.

REAL ESTATE

(a)

With no specific allowance With a specific allowance

December 31 (In millions)

Recorded

investment

in loans

Unpaid

principal

balance

Average

investment

in loans

Recorded

investment

in loans

Unpaid

principal

balance

Associated

allowance

Average

investment

in loans

2011

Debt $3,558 $3,614 $3,568 $4,560 $4,652 $ 717 $5,435

Business Properties 232 232 215 397 397 105 460

Total $3,790 $3,846 $3,783 $4,957 $5,049 $ 822 $5,895

2010

Debt $2,814 $2,873 $1,598 $6,323 $6,498 $1,007 $6,116

Business Properties 191 213 141 489 476 143 382

Total $3,005 $3,086 $1,739 $6,812 $6,974 $1,150 $6,498

(a) We recognized $399 million and $189 million of interest income, including $339 million and $189 million on a cash basis, for the years ended December 31, 2011 and 2010,

respectively, principally in our Real Estate-Debt portfolio. The total average investment in impaired loans for the years ended December 31, 2011 and 2010 was

$9,678 million and $8,237 million, respectively.

GE 2011 ANNUAL REPORT 125

notes to consolidated financial statements

Real Estate TDRs increased from $4,866 million at December 31,

2010 to $7,006 million at December 31, 2011, primarily driven by

loans scheduled to mature during 2011, some of which were

modifi ed during 2011 and classifi ed as TDRs upon modifi cation.

We deem loan modifi cations to be TDRs when we have granted a

concession to a borrower experiencing fi nancial diffi culty and we

do not receive adequate compensation in the form of an effective

interest rate that is at current market rates of interest given the

risk characteristics of the loan or other consideration that com-

pensates us for the value of the concession. The limited liquidity

and higher return requirements in the real estate market for loans

with higher loan-to-value (LTV) ratios has typically resulted in the

conclusion that the modifi ed terms are not at current market

rates of interest, even if the modifi ed loans are expected to be

fully recoverable. For the year ended December 31, 2011, we

modifi ed $3,965 million of loans classifi ed as TDRs, substantially

all in our Debt portfolio. Changes to these loans primarily included

maturity extensions, principal payment acceleration, changes to

collateral or covenant terms and cash sweeps, which are in addi-

tion to, or sometimes in lieu of, fees and rate increases. Of our

modifi cations classifi ed as TDRs in the last year, $140 million have

subsequently experienced a payment default.

CREDIT QUALITY INDICATORS

Due to the primarily non-recourse nature of our Debt portfolio,

loan-to-value ratios provide the best indicators of the credit qual-

ity of the portfolio. By contrast, the credit quality of the Business

Properties portfolio is primarily infl uenced by the strength of the

borrower’s general credit quality, which is refl ected in our internal

risk rating process, consistent with the process we use for our

Commercial portfolio.

Loan-to-value ratio

December 31 (In millions)

Less

than 80% 80% to 95%

Greater

than 95%

2011

Debt $14,454 $4,593 $5,454

2010

Debt $12,362 $9,392 $8,495

Internal Risk Rating

December 31 (In millions) A B C

2011

Business Properties $ 7,628 $ 110 $ 510

2010

Business Properties $ 8,746 $ 437 $ 779

Within Real Estate-Debt, these fi nancing receivables are primarily

concentrated in our North American and European Lending plat-

forms and are secured by various property types. A substantial

majority of the Real Estate-Debt fi nancing receivables with loan-

to-value ratios greater than 95% are paying in accordance with

contractual terms. Substantially all of these loans and substantially

all of the Real Estate-Business Properties fi nancing receivables

included in Category C are impaired loans which are subject to the

specifi c reserve evaluation process described in Note 1. The ulti-

mate recoverability of impaired loans is driven by collection

strategies that do not necessarily depend on the sale of the under-

lying collateral and include full or partial repayments through

third-party refi nancing and restructurings.

Consumer

At December 31, 2011, our U.S. consumer fi nancing receivables

included private-label credit card and sales fi nancing for approxi-

mately 56 million customers across the U.S. with no metropolitan

area accounting for more than 5% of the portfolio. Of the total U.S.

consumer fi nancing receivables, approximately 65% relate to

credit card loans, which are often subject to profi t and loss-sharing

arrangements with the retailer (which are recorded in revenues),

and the remaining 35% are sales fi nance receivables, which pro-

vide fi nancing to customers in areas such as electronics,

recreation, medical and home improvement.

FINANCING RECEIVABLES AND ALLOWANCE FOR LOSSES

The following table provides further information about general

and specifi c reserves related to Consumer fi nancing receivables.

CONSUMER

Financing receivables

December 31 (In millions) 2011 2010

Non-U.S. residential mortgages $ 36,170 $ 40,011

Non-U.S. installment and revolving credit 18,544 20,132

U.S. installment and revolving credit 46,689 43,974

Non-U.S. auto 5,691 7,558

Other 7,244 8,304

Total Consumer financing receivables, before

allowance for losses $114,338 $119,979

Non-impaired financing receivables $111,233 $117,431

General reserves 3,014 3,945

Impaired loans 3,105 2,548

Specific reserves 717 555

PAST DUE FINANCING RECEIVABLES

The following table displays payment performance of Consumer

fi nancing receivables.

CONSUMER

2011 2010

December 31

Over 30 days

past due

Over 90 days

past due (a) Over 30 days

past due

Over 90 days

past due (a)

Non-U.S. residential

mortgages 13.4% 8.8% 13.7% 8.8%

Non-U.S. installment

and revolving credit 4.1 1.2 4.5 1.3

U.S. installment and

revolving credit 5.0 2.2 6.2 2.8

Non-U.S. auto 3.1 0.5 3.3 0.6

Other 3.5 2.0 4.2 2.3

Total 7.3 4.0 8.1 4.4

(a) Included $45 million and $65 million of loans at December 31, 2011 and

December 31, 2010, respectively, which are over 90 days past due and accruing

interest, mainly representing accretion on loans acquired at a discount.

126 GE 2011 ANNUAL REPORT

notes to consolidated financial statements

NONACCRUAL FINANCING RECEIVABLES

The following table provides further information about Consumer fi nancing receivables that are classifi ed as nonaccrual.

CONSUMER

Nonaccrual financing receivables Nonearning financing receivables

December 31 (Dollars in millions) 2011 2010 2011 2010

Non-U.S. residential mortgages $3,475 $3,986 $3,349 $3,738

Non-U.S. installment and revolving credit 321 302 263 289

U.S. installment and revolving credit 990 1,201 990 1,201

Non-U.S. auto 43 46 43 46

Other 487 600 419 478

Total $5,316 $6,135 $5,064 $5,752

Allowance for losses percentage 70.2% 73.3% 73.7% 78.2%

IMPAIRED LOANS

The vast majority of our Consumer nonaccrual fi nancing receiv-

ables are smaller balance homogeneous loans evaluated

collectively, by portfolio, for impairment and therefore are outside

the scope of the disclosure requirement for impaired loans.

Accordingly, impaired loans in our Consumer business represent

restructured smaller balance homogeneous loans meeting the

defi nition of a TDR, and are therefore subject to the disclosure

requirement for impaired loans, and commercial loans in our

Consumer–Other portfolio. The recorded investment of these

impaired loans totaled $3,105 million (with an unpaid principal

balance of $2,679 million) and comprised $69 million with no

specifi c allowance, primarily all in our Consumer–Other portfolio,

and $3,036 million with a specifi c allowance of $717 million at

December 31, 2011. The impaired loans with a specifi c allowance

included $369 million with a specifi c allowance of $102 million in

our Consumer–Other portfolio and $2,667 million with a specifi c

allowance of $615 million across the remaining Consumer busi-

ness and had an unpaid principal balance and average investment

of $2,244 million and $2,343 million, respectively, at December 31,

2011. We recognized $141 million and $114 million of interest

income, including $15 million and $30 million on a cash basis, for

the years ended December 31, 2011 and 2010, respectively, prin-

cipally in our Consumer—Non-U.S. and U.S. installment and

revolving credit portfolios. The total average investment in

impaired loans for the years ended December 31, 2011 and 2010

was $2,840 million and $2,009 million, respectively.

Impaired loans classifi ed as TDRs in our Consumer busi-

ness were $2,935 million and $2,256 million at December 31,

2011 and 2010, respectively. We utilize certain loan modifi cation

programs for borrowers experiencing fi nancial diffi culties in our

Consumer loan portfolio. These loan modifi cation programs pri-

marily include interest rate reductions and payment deferrals

in excess of three months, which were not part of the terms of

the original contract, and are primarily concentrated in our Non-

U.S. residential mortgage and U.S. credit card portfolios. For the

year ended December 31, 2011, we modifi ed $1,970 million of

consumer loans for borrowers experiencing fi nancial diffi culties,

which are classifi ed as TDRs, and included $1,020 million of non-

U.S. consumer loans, primarily residential mortgages, credit cards

and personal loans and approximately $950 million of credit card

loans in the U.S. We expect borrowers whose loans have been

modifi ed under these programs to continue to be able to meet

their contractual obligations upon the conclusion of the modifi ca-

tion. For loans modifi ed as TDRs in the last year, $251 million have

subsequently experienced a payment default, primarily in our U.S.

credit card and Non-U.S. residential mortgage portfolios.

CREDIT QUALITY INDICATORS

Our Consumer fi nancing receivables portfolio comprises both

secured and unsecured lending. Secured fi nancing receivables

comprise residential loans and lending to small and medium-

sized enterprises predominantly secured by auto and equipment,

inventory fi nance and cash fl ow loans. Unsecured fi nancing

receivables include private-label credit card fi nancing. A substan-

tial majority of these cards are not for general use and are limited

to the products and services sold by the retailer. The private label

portfolio is diverse with no metropolitan area accounting for more

than 5% of the related portfolio.

GE 2011 ANNUAL REPORT 127

notes to consolidated financial statements

NON-U.S. RESIDENTIAL MORTGAGES

For our secured non-U.S. residential mortgage book, we assess

the overall credit quality of the portfolio through loan-to-value

ratios (the ratio of the outstanding debt on a property to the value

of that property at origination). In the event of default and repos-

session of the underlying collateral, we have the ability to

remarket and sell the properties to eliminate or mitigate the

potential risk of loss. The table below provides additional informa-

tion about our non-U.S. residential mortgages based on

loan-to-value ratios.

Loan-to-value ratio

December 31 (In millions) 80% or less

Greater than

80% to 90%

Greater

than 90%

2011

Non-U.S. residential

mortgages $20,379 $6,145 $ 9,646

2010

Non-U.S. residential

mortgages $22,403 $7,023 $10,585

The majority of these fi nancing receivables are in our U.K. and

France portfolios and have re-indexed loan-to-value ratios of 84%

and 56%, respectively. We have third-party mortgage insurance

for approximately 68% of the balance of Consumer non-U.S.

residential mortgage loans with loan-to-value ratios greater than

90% at December 31, 2011. Such loans were primarily originated in

the U.K. and France.

INSTALLMENT AND REVOLVING CREDIT

For our unsecured lending products, including the non-U.S. and

U.S. installment and revolving credit and non-U.S. auto portfolios,

we assess overall credit quality using internal and external credit

scores. Our internal credit scores imply a probability of default

which we consistently translate into three approximate credit

bureau equivalent credit score categories, including (a) 681 or

higher, which are considered the strongest credits; (b) 615 to 680,

considered moderate credit risk; and (c) 614 or less, which are

considered weaker credits.

Internal ratings translated to approximate

credit bureau equivalent score

December 31 (In millions) 681 or higher 615 to 680 614 or less

2011

Non-U.S. installment and

revolving credit $ 9,913 $4,838 $3,793

U.S. installment and revolving

credit 28,918 9,398 8,373

Non-U.S. auto 3,927 1,092 672

2010

Non-U.S. installment and

revolving credit $10,192 $5,749 $4,191

U.S. installment and revolving

credit 25,940 8,846 9,188

Non-U.S. auto 5,379 1,330 849

Of those fi nancing receivable accounts with credit bureau equiva-

lent scores of 614 or less at December 31, 2011, 95% relate to

installment and revolving credit accounts. These smaller balance

accounts have an average outstanding balance less than one

thousand U.S. dollars and are primarily concentrated in our retail

card and sales fi nance receivables in the U.S. (which are often

subject to profi t and loss-sharing arrangements), and closed-end

loans outside the U.S., which minimizes the potential for loss in

the event of default. For lower credit scores, we adequately price

for the incremental risk at origination and monitor credit migra-

tion through our risk ratings process. We continuously adjust our

credit line underwriting management and collection strategies

based on customer behavior and risk profi le changes.

CONSUMER—OTHER

Secured lending in Consumer—Other comprises loans to small and

medium-sized enterprises predominantly secured by auto and

equipment, inventory fi nance and cash fl ow loans. We develop our

internal risk ratings for this portfolio in a manner consistent with

the process used to develop our Commercial credit quality indica-

tors, described above. We use the borrower’s credit quality and

underlying collateral strength to determine the potential risk of

loss from these activities.

At December 31, 2011, Consumer—Other fi nancing receiv-

ables of $5,580 million, $757 million and $907 million were rated

A, B, and C, respectively. At December 31, 2010, Consumer—

Other fi nancing receivables of $6,415 million, $822 million and

$1,067 million were rated A, B, and C, respectively.

128 GE 2011 ANNUAL REPORT

notes to consolidated financial statements

Note 24.

Variable Interest Entities

We securitize fi nancial assets and arrange other forms of asset-

backed fi nancing in the ordinary course of business. The

securitization transactions we engage in are similar to those used

by many fi nancial institutions. These securitization transactions

serve as alternative funding sources for a variety of diversifi ed

lending and securities transactions. Historically, we have used

both GE-supported and third-party VIEs to execute off-balance

sheet securitization transactions funded in the commercial paper

and term markets. The largest group of VIEs that we are involved

with are former QSPEs, which under guidance in effect through

December 31, 2009 were excluded from the scope of consolida-

tion standards based on their characteristics. Except as noted

below, investors in these entities only have recourse to the assets

owned by the entity and not to our general credit. We do not have

implicit support arrangements with any VIE. We did not provide

non-contractual support for previously transferred fi nancing

receivables to any VIE in 2011 or 2010.

In evaluating whether we have the power to direct the

activities of a VIE that most signifi cantly impact its economic

performance, we consider the purpose for which the VIE was

created, the importance of each of the activities in which it is

engaged and our decision-making role, if any, in those activities

that signifi cantly determine the entity’s economic performance

as compared to other economic interest holders. This evaluation

requires consideration of all facts and circumstances relevant to

decision-making that affects the entity’s future performance and

the exercise of professional judgment in deciding which decision-

making rights are most important.

In determining whether we have the right to receive benefi ts

or the obligation to absorb losses that could potentially be signifi -

cant to the VIE, we evaluate all of our economic interests in the

entity, regardless of form (debt, equity, management and servic-

ing fees, and other contractual arrangements). This evaluation

considers all relevant factors of the entity’s design, including: the

entity’s capital structure, contractual rights to earnings (losses),

subordination of our interests relative to those of other investors,

contingent payments, as well as other contractual arrangements

that have potential to be economically signifi cant. The evalua-

tion of each of these factors in reaching a conclusion about the

potential signifi cance of our economic interests is a matter that

requires the exercise of professional judgment.

Consolidated Variable Interest Entities

We consolidate VIEs because we have the power to direct the

activities that signifi cantly affect the VIEs economic performance,

typically because of our role as either servicer or manager for the

VIE. Our consolidated VIEs fall into three main groups, which are

further described below:

• Trinity comprises two consolidated entities that hold invest-

ment securities, the majority of which are investment grade,

and are funded by the issuance of GICs. These entities were

consolidated in 2003. Since 2004, GECC has fully guaranteed

repayment of these entities’ GIC obligations. If the long-term

credit rating of GECC were to fall below AA-/Aa3 or its short-

term credit rating were to fall below A-1+/P-1, certain GIC

holders could require immediate repayment of their invest-

ment. To the extent that amounts due exceed the ultimate

value of proceeds realized from Trinity assets, GECC would be

required to provide such excess amount. The entities ceased

issuing new investment contracts beginning in the fi rst quarter

of 2010. In 2011, we determined that the letters of credit were

no longer required and were terminated on December 6, 2011.

• Consolidated Securitization Entities (CSEs) comprise primar-

ily our former off-book QSPEs that were consolidated on

January 1, 2010 in connection with our adoption of ASU 2009-

16 & 17. These entities were created to facilitate securitization

of fi nancial assets and other forms of asset-backed fi nancing

which serve as an alternative funding source by providing

access to the commercial paper and term markets. The secu-

ritization transactions executed with these entities are similar

to those used by many fi nancial institutions and substantially

all are non-recourse. We provide servicing for substantially all

of the assets in these entities.

• The fi nancing receivables in these entities have similar risks

and characteristics to our other fi nancing receivables and

were underwritten to the same standard. Accordingly, the

performance of these assets has been similar to our other

fi nancing receivables; however, the blended performance of

the pools of receivables in these entities refl ects the eligibil-

ity criteria that we apply to determine which receivables are

selected for transfer. Contractually the cash fl ows from these

fi nancing receivables must fi rst be used to pay third-party

debt holders as well as other expenses of the entity. Excess

cash fl ows are available to GE. The creditors of these entities

have no claim on other assets of GE.

• Other remaining assets and liabilities of consolidated VIEs

relate primarily to four categories of entities: (1) enterprises we

acquired that had previously created asset-backed fi nancing

entities to fund commercial, middle-market and equipment

loans; we are the collateral manager for these entities; (2) joint

ventures that lease light industrial equipment; (3) insurance

entities that, among other lines of business, provide property

and casualty and workers’ compensation coverage for GE; and

(4) other entities that are involved in power generating and

leasing activities.

GE 2011 ANNUAL REPORT 129

notes to consolidated financial statements

The table below summarizes the assets and liabilities of consolidated VIEs described above.

Consolidated Securitization Entities(a)

(In millions) Trinity

Credit

Cards (b)(c) Equipment (c)(d) Real Estate

Trade

Receivables Other (d) Total

DECEMBER 31, 2011

ASSETS (e)

Financing receivables, net $ — $19,229 $10,523 $3,521 $1,614 $2,973 $37,860

Investment securities 4,289 ————1,031 5,320

Other assets 389 17 283 210 — 2,636 3,535

Total $4,678 $19,246 $10,806 $3,731 $1,614 $6,640 $46,715

LIABILITIES (e)

Borrowings $ — $ — $ 2 $ 25 $ — $ 821 $ 848

Non-recourse borrowings — 14,184 8,166 3,659 1,769 980 28,758

Other liabilities 4,456 37 — 19 23 1,071 5,606

Total $4,456 $14,221 $ 8,168 $3,703 $1,792 $2,872 $35,212

DECEMBER 31, 2010

ASSETS (e)

Financing receivables, net $ — $20,570 $ 9,431 $4,233 $1,882 $3,356 $39,472

Investment securities 5,706 ————9646,670

Other assets 283 17 234 209 99 3,672 4,514

Total $5,989 $20,587 $ 9,665 $4,442 $1,981 $7,992 $50,656

LIABILITIES (e)

Borrowings $ — $ — $ 184 $ 25 $ — $ 949 $ 1,158

Non-recourse borrowings — 12,824 8,091 4,294 2,970 1,265 29,444

Other liabilities 5,690 132 8 4 — 1,861 7,695

Total $5,690 $12,956 $ 8,283 $4,323 $2,970 $4,075 $38,297

(a) Includes entities consolidated on January 1, 2010 by the initial application of ASU 2009-16 & 17. On January 1, 2010, we consolidated financing receivables of

$39,463 million and investment securities of $1,015 million and non-recourse borrowings of $36,112 million. At December 31, 2011, financing receivables of $30,730 million

and non-recourse borrowings of $24,502 million remained outstanding in respect of those entities.

(b) In February 2011, the capital structure of one of our consolidated credit card securitization entities changed and it is now consolidated under the voting interest model and

accordingly is no longer reported in the table above. The entity’s assets and liabilities at December 31, 2010 were $2,875 million and $525 million, respectively.

(c) We provide servicing to the CSEs and are contractually permitted to commingle cash collected from customers on financing receivables sold to investors with our own cash

prior to payment to a CSE provided our short-term credit rating does not fall below levels specified in our securitization agreements. We are also owed amounts from the

CSEs related to purchased financial assets which have yet to be funded or available excess cash flows due to GE. At December 31, 2011, the amounts owed to the CSEs and

receivable from the CSEs were $5,655 million and $5,165 million, respectively.

(d) In certain transactions entered into prior to December 31, 2004, we provided contractual credit and liquidity support to third parties who funded the purchase of

securitized or participated interests in assets. In December 2011, a third party required that we pay $816 million under these arrangements to purchase an asset. At

December 31, 2011, we have no remaining credit or liquidity support obligations to these entities.

(e) Asset amounts exclude intercompany receivables for cash collected on behalf of the entities by GE as servicer, which are eliminated in consolidation. Such receivables

provide the cash to repay the entities’ liabilities. If these intercompany receivables were included in the table above, assets would be higher. In addition, other assets,

borrowings and other liabilities exclude intercompany balances that are eliminated in consolidation.

Total revenues from our consolidated VIEs were $6,326 million and

$7,122 million in 2011 and 2010, respectively. Related expenses

consisted primarily of provisions for losses of $1,146 million

and $1,596 million in 2011 and 2010, respectively, and interest

and other fi nancial charges of $594 million and $767 million

in 2011 and 2010, respectively. These amounts do not include

intercompany revenues and costs, principally fees and interest

between GE and the VIEs, which are eliminated in consolidation.

130 GE 2011 ANNUAL REPORT

notes to consolidated financial statements

Investments in Unconsolidated Variable Interest Entities

Our involvement with unconsolidated VIEs consists of the following

activities: assisting in the formation and fi nancing of the entity,

providing recourse and/or liquidity support, servicing the assets

and receiving variable fees for services provided. We are not

required to consolidate these entities because the nature of our

involvement with the activities of the VIEs does not give us power

over decisions that signifi cantly affect their economic performance.

The largest unconsolidated VIE with which we are involved is

Penske Truck Leasing (PTL), a joint venture and limited partnership

formed in 1988 between Penske Truck Leasing Corporation (PTLC)

and GE. PTLC is the sole general partner of PTL and an indirect

wholly-owned subsidiary of Penske Corporation. PTL is engaged

in truck leasing and support services, including full-service

leasing, dedicated logistics support and contract maintenance

programs, as well as rental operations serving commercial and

consumer customers. At December 31, 2011, our investment of

$7,038 million primarily comprised a 49.9% partnership interest

of $889 million and loans and advances of $6,113 million. GECC

continues to provide loans under long-term revolving credit and

letter of credit facilities to PTL.

Other signifi cant exposures to unconsolidated VIEs at

December 31, 2011 include an investment in asset-backed

securities issued by a senior secured loan fund ($4,009 million);

investments in real estate entities ($2,515 million), which generally

consist of passive limited partnership investments in tax-

advantaged, multi-family real estate and investments in various

European real estate entities; and exposures to joint ventures that

purchase factored receivables ($1,823 million). The vast majority

of our other unconsolidated entities consist of passive invest-

ments in various asset-backed fi nancing entities.

The classifi cation of our variable interests in these entities in

our fi nancial statements is based on the nature of the entity and

the type of investment we hold. Variable interests in partnerships

and corporate entities are classifi ed as either equity method or

cost method investments. In the ordinary course of business,

we also make investments in entities in which we are not the pri-

mary benefi ciary but may hold a variable interest such as limited

partner interests or mezzanine debt investments. These invest-

ments are classifi ed in two captions in our fi nancial statements:

“All other assets” for investments accounted for under the equity

method, and “Financing receivables—net” for debt fi nancing pro-

vided to these entities. Our investments in unconsolidated VIEs at

December 31, 2011 and December 31, 2010 follow.

December 31 (In millions) PTL All other Total

2011

Other assets and investment

securities $7,038 $ 6,954 $13,992

Financing receivables—net — 2,507 2,507

Total investments 7,038 9,461 16,499

Contractual obligations to

fund investments or

guarantees 600 2,253 2,853

Revolving lines of credit 1,356 92 1,448

Total $8,994 $11,806 $20,800

2010

Other assets and investment

securities $5,790 $ 4,585 $10,375

Financing receivables—net — 2,240 2,240

Total investments 5,790 6,825 12,615

Contractual obligations to

fund investments or

guarantees 600 1,990 2,590

Revolving lines of credit 2,431 — 2,431

Total $8,821 $ 8,815 $17,636

In addition to the entities included in the table above, we also hold

passive investments in RMBS, CMBS and ABS issued by VIEs. Such

investments were, by design, investment grade at issuance and

held by a diverse group of investors. Further information about

such investments is provided in Note 3.

Note 25.

Commitments and Guarantees

Commitments

In our Aviation segment, we had committed to provide fi nancing

assistance on $2,059 million of future customer acquisitions of

aircraft equipped with our engines, including commitments made

to airlines in 2011 for future sales under our GE90 and GEnx

engine campaigns. The GECAS business of GE Capital had placed

multiple-year orders for various Boeing, Airbus and other aircraft

with list prices approximating $20,577 million and secondary

orders with airlines for used aircraft of approximately $1,621 mil-

lion at December 31, 2011.

Product Warranties

We provide for estimated product warranty expenses when we

sell the related products. Because warranty estimates are fore-

casts that are based on the best available information—mostly

historical claims experience—claims costs may differ from

amounts provided. An analysis of changes in the liability for prod-

uct warranties follows.

(In millions) 2011 2010 2009

Balance at January 1 $1,451 $1,641 $1,675

Current-year provisions 935 537 780

Expenditures (881) (710) (794)

Other changes 117 (17) (20)

Balance at December 31 $1,622 $1,451 $1,641

GE 2011 ANNUAL REPORT 131

notes to consolidated financial statements

Guarantees

At December 31, 2011, we were committed under the following

guarantee arrangements beyond those provided on behalf of

VIEs. See Note 24.

• CREDIT SUPPORT. We have provided $5,184 million of credit sup-

port on behalf of certain customers or associated companies,

predominantly joint ventures and partnerships, using arrange-

ments such as standby letters of credit and performance

guarantees. These arrangements enable these customers

and associated companies to execute transactions or obtain

desired fi nancing arrangements with third parties. Should the

customer or associated company fail to perform under the

terms of the transaction or fi nancing arrangement, we would

be required to perform on their behalf. Under most such

arrangements, our guarantee is secured, usually by the asset

being purchased or fi nanced, or possibly by certain other

assets of the customer or associated company. The length of

these credit support arrangements parallels the length of the

related fi nancing arrangements or transactions. The liability

for such credit support was $51 million at December 31, 2011.

• INDEMNIFICATION AGREEMENTS. We have agreements that

require us to fund up to $165 million at December 31, 2011

under residual value guarantees on a variety of leased

equipment. Under most of our residual value guarantees,

our commitment is secured by the leased asset. The liabil-

ity for these indemnifi cation agreements was $27 million at

December 31, 2011.

In connection with the transfer of the NBCU business to

Comcast, we have provided guarantees, on behalf of NBCU

LLC, for the acquisition of sports programming that are trig-

gered only in the event NBCU LLC fails to meet its payment

commitments. At December 31, 2011, our indemnifi cation

under these arrangements was $9,290 million. This amount

was determined based on our current ownership share of

NBCU LLC and will change proportionately based on any

future changes to our ownership share. Comcast has agreed

to indemnify us for their proportionate ownership share of

NBCU LLC relating to our guarantees that existed prior to the

transfer of the NBCU business to Comcast of $1,311 million.

The liability for our NBCU LLC indemnifi cation agreements was

$181 million at December 31, 2011.

At December 31, 2011, we also had $2,185 million of other

indemnifi cation commitments, substantially all of which relate

to standard representations and warranties in sales of other

businesses or assets.

• CONTINGENT CONSIDERATION. These are agreements to provide

additional consideration to a buyer or seller in a business

combination if contractually specifi ed conditions related to

the acquisition or disposition are achieved. Adjustments to

the proceeds from our sale of GE Money Japan are further

discussed in Note 2. All other potential payments related to

contingent consideration are insignifi cant.

Our guarantees are provided in the ordinary course of business.

We underwrite these guarantees considering economic, liquidity

and credit risk of the counterparty. We believe that the likelihood

is remote that any such arrangements could have a signifi cant

adverse effect on our fi nancial position, results of operations or

liquidity. We record liabilities for guarantees at estimated fair

value, generally the amount of the premium received, or if we do

not receive a premium, the amount based on appraisal, observed

market values or discounted cash fl ows. Any associated expected

recoveries from third parties are recorded as other receivables,

not netted against the liabilities.

Note 26.

Supplemental Cash Flows Information

Changes in operating assets and liabilities are net of acquisitions

and dispositions of principal businesses.

Amounts reported in the “Proceeds from sales of discontinued

operations” and “Proceeds from principal business dispositions”

lines in the Statement of Cash Flows are net of cash disposed.

Amounts reported in the “Payments for principal businesses pur-

chased” line is net of cash acquired and included debt assumed

and immediately repaid in acquisitions.

Amounts reported in the “All other operating activities” line in the

Statement of Cash Flows consists primarily of adjustments to cur-

rent and noncurrent accruals and deferrals of costs and expenses,

adjustments for gains and losses on assets and adjustments to

assets. GECS had non-cash transactions related to foreclosed prop-

erties and repossessed assets totaling $865 million, $1,915 million

and $1,364 million in 2011, 2010 and 2009, respectively.

132 GE 2011 ANNUAL REPORT

notes to consolidated financial statements

Certain supplemental information related to GE and GECS cash fl ows is shown below.

(In millions) 2011 2010 2009

GE

NET DISPOSITIONS (PURCHASES) OF GE SHARES FOR TREASURY

Open market purchases under share repurchase program $ (2,065) $ (1,715) $ (85)

Other purchases (100) (77) (129)

Dispositions 709 529 837

$ (1,456) $ (1,263) $ 623

GECS

ALL OTHER OPERATING ACTIVITIES

Net change in other assets $ 215 $ 28 $ (344)

Amortization of intangible assets 566 653 905

Net realized losses on investment securities 197 91 473

Cash collateral on derivative contracts 1,247 — (6,858)

Change in other liabilities (1,229) (2,705) (4,818)

Other 2,285 4,420 (916)

$ 3,281 $ 2,487 $ (11,558)

NET DECREASE (INCREASE) IN GECS FINANCING RECEIVABLES

Increase in loans to customers $(322,870) $(309,590) $(276,140)

Principal collections from customers—loans 332,587 327,196 275,320

Investment in equipment for financing leases (9,610) (10,065) (9,403)

Principal collections from customers—financing leases 12,431 14,743 17,130

Net change in credit card receivables (6,263) (4,554) (28,535)

Sales of financing receivables 8,117 5,331 58,555

$ 14,392 $ 23,061 $ 36,927

ALL OTHER INVESTING ACTIVITIES

Purchases of securities by insurance activities $ (1,786) $ (1,712) $ (3,106)

Dispositions and maturities of securities by insurance activities 2,856 3,136 3,962

Other assets—investments 4,242 2,686 (286)

Change in other receivables (128) 524 722

Other 2,116 5,313 3,300

$ 7,300 $ 9,947 $ 4,592

NEWLY ISSUED DEBT (MATURITIES LONGER THAN 90 DAYS)

Short-term (91 to 365 days) $ 10 $ 2,496 $ 5,801

Long-term (longer than one year) 43,257 35,475 75,224

Proceeds—non-recourse, leveraged leases —— 48

$ 43,267 $ 37,971 $ 81,073

REPAYMENTS AND OTHER REDUCTIONS (MATURITIES LONGER THAN 90 DAYS)

Short-term (91 to 365 days) $ (81,918) $ (95,170) $ (77,444)

Long-term (longer than one year) (2,786) (1,571) (3,491)

Principal payments—non-recourse, leveraged leases (732) (638) (680)

$ (85,436) $ (97,379) $ (81,615)

ALL OTHER FINANCING ACTIVITIES

Proceeds from sales of investment contracts $ 4,396 $ 5,337 $ 7,840

Redemption of investment contracts (6,230) (8,647) (10,713)

Other 42 (8) 182

$ (1,792) $ (3,318) $ (2,691)

GE 2011 ANNUAL REPORT 133

notes to consolidated financial statements

Note 27.

Intercompany Transactions

Effects of transactions between related companies are made on

an arms-length basis, are eliminated and consist primarily of

GECS dividends to GE or capital contributions from GE to GECS; GE

customer receivables sold to GECS; GECS services for trade

receivables management and material procurement; buildings

and equipment (including automobiles) leased between GE and

GECS; information technology (IT) and other services sold to GECS

by GE; aircraft engines manufactured by GE that are installed on

aircraft purchased by GECS from third-party producers for lease

to others; and various investments, loans and allocations of GE

corporate overhead costs.

These intercompany transactions are reported in the GE and

GECS columns of our fi nancial statements, but are eliminated

in deriving our consolidated fi nancial statements. Effects of

these eliminations on our consolidated cash fl ows from operat-

ing, investing and fi nancing activities include the following. Net

decrease (increase) in activity related to GE customer receivables

sold to GECS of $(353) million, $81 million and $(157) million have

been eliminated from consolidated cash from operating and

investing activities at December 31, 2011, 2010 and 2009, respec-

tively. Capital contributions from GE to GECS of $9,500 million

have been eliminated from consolidated cash from investing and

fi nancing activities at December 31, 2009. There were no such

capital contributions at December 31, 2011 or December 31, 2010.

Eliminations of intercompany borrowings (includes GE investment

in GECS short-term borrowings, such as commercial paper) of

$903 million, $293 million and $715 million have been eliminated

from fi nancing activities at December 31, 2011, 2010 and 2009,

respectively. Other reclassifi cations and eliminations of $(205) mil-

lion, $(205) million and $741 million have been eliminated from

consolidated cash from operating activities and $(726) million,

$107 million and $(817) million have been eliminated from consoli-

dated cash from investing activities at December 31, 2011, 2010

and 2009, respectively.

Note 28.

Operating Segments

Basis for presentation

Our operating businesses are organized based on the nature of

markets and customers. Segment accounting policies are the

same as described in Note 1. Segment results for our fi nancial

services businesses refl ect the discrete tax effect of transactions.

Effective January 1, 2011, we reorganized the former

Technology Infrastructure segment into three segments—

Aviation, Healthcare and Transportation. The prior-period results

of the Aviation, Healthcare and Transportation businesses are

unaffected by this reorganization. Also, beginning January 1,

2011, we allocate service costs related to our principal pension

plans and we no longer allocate the retiree costs of our post-

retirement healthcare benefi ts to our segments. This revised

allocation methodology better aligns segment operating costs to

active employee costs that are managed by the segments. This

change did not signifi cantly affect our reported segment results.

On January 28, 2011, we sold the assets of our NBCU business

in exchange for cash and a 49% interest in a new entity, NBCU LLC

(see Note 2). Results of our formerly consolidated subsidiary,

NBCU, and our current equity method investment in NBCU LLC

are reported in the Corporate items and eliminations line on the

Summary of Operating Segments.

On February 22, 2012, we merged our wholly-owned subsid-

iary, GECS, with and into GECS’ wholly-owned subsidiary, GECC.

Our fi nancial services segment, GE Capital, will continue to com-

prise the continuing operations of GECC, which now includes the

run-off insurance operations previously held and managed in

GECS. References to the GE Capital segment in these consolidated

fi nancial statements relate to the segment as it existed during

2011 and do not refl ect the February 22, 2012 merger.

A description of our operating segments as of December 31,

2011, can be found below, and details of segment profi t by

operating segment can be found in the Summary of Operating

Segments table in Management’s Discussion and Analysis of

Financial Condition and Results of Operations.

Energy Infrastructure

Power plant products and services, including design, installation,

operation and maintenance services are sold into global markets.

Gas, steam and aeroderivative turbines, generators, combined

cycle systems, controls and related services, including total asset

optimization solutions, equipment upgrades and long-term

maintenance service agreements are sold to power generation

and other industrial customers. Renewable energy solutions

include wind turbines and solar technology. Water treatment

services and equipment include specialty chemical treatment

programs, water purifi cation equipment, mobile treatment sys-

tems and desalination processes. In addition, it provides

protection and control, communications, power sensing and

power quality products and services that increase the reliability of

electrical power networks and critical equipment and offering

wireless data transmission. Electrical equipment and control

products include power panels, switchgear and circuit breakers.

The GE Oil & Gas business sells advanced technology equip-

ment and services for all segments of the offshore and onshore

oil and gas industry, from subsea, drilling and production, LNG,

pipelines and storage to industrial power generation, refi ning

and petrochemicals. We also provide pipeline integrity solutions,

sensor-based measurement, inspection, asset condition moni-

toring, controls, and radiation measurement solutions. Oil & Gas

also offers integrated solutions using sensors for temperature,

pressure, moisture, gas and fl ow rate as well as non-destructive

testing inspection equipment, including radiographic, ultrasonic,

remote visual and eddy current.

134 GE 2011 ANNUAL REPORT

notes to consolidated financial statements

Aviation

Aviation products and services include jet engines, aerospace

systems and equipment, replacement parts and repair and main-

tenance services for all categories of commercial aircraft; for a

wide variety of military aircraft, includ ing fi ghters, bombers,

tankers and helicopters; for marine appli cations; and for executive

and regional aircraft. Products and services are sold worldwide to

airframe manufacturers, airlines and government agencies.

Healthcare

Healthcare products include diagnostic imaging systems such as

Magnetic Resonance (MR), Computed Tomography (CT) and

Positron Emission Tomography (PET) scanners, X-ray, nuclear

imaging, digital mammography, and Molecular Imaging technolo-

gies. Healthcare-manufactured technologies include patient and

resident monitoring, diagnostic cardiology, ultrasound, bone

densitometry, anesthesiology and oxygen therapy, and neonatal

and critical care devices. Related services include equipment

monitoring and repair, information technologies and customer

productivity services. Products also include diagnostic imaging

agents used in medical scanning procedures, drug discovery,

biopharmaceutical manufacturing and purifi cation, and tools for

pro tein and cellular analysis for pharmaceutical and academic

research, including a pipeline of precision molecular diagnostics

in development for neurology, cardiology and oncology applica-

tions. Products and services are sold worldwide to hospitals,

medical facilities, pharmaceutical and biotechnology companies,

and to the life science research market.

Transportation

Transportation products and maintenance services include diesel

electric locomotives, transit propulsion equipment, motorized

wheels for off-highway vehicles, drill motors, marine and station-

ary power generation, railway signaling and offi ce systems.

Home & Business Solutions

Products include major appliances and related services for prod-

ucts such as refrigerators, freezers, electric and gas ranges,

cooktops, dishwashers, clothes washers and dryers, microwave

ovens, room air conditioners, residential water systems for fi ltra-

tion, softening and heating, and hybrid water heaters. These

products are distributed both to retail outlets and direct to con-

sumers, mainly for the replacement market, and to building

contractors and distributors for new installations. Lighting prod-

ucts include a wide variety of lamps and lighting fi xtures,

including light-emitting diodes. Plant automation hardware,

software and embedded computing systems including control-

lers, embedded systems, advanced software, motion control,

operator interfaces and industrial computers are also provided

by Home & Business Solutions. Products and services are sold in

North America and in global markets under various GE and pri-

vate-label brands.

GE Capital

CLL has particular mid-market expertise, and primarily offers

collateralized loans, leases and other fi nancial services to custom-

ers, includ ing manufacturers, distributors and end-users for a

variety of equipment and major capital assets. These assets

include: indus trial-related facilities and equipment; vehicles;

corporate aircraft; and equipment used in many industries, includ-

ing the construction, manufacturing, transportation, media,

communications, entertainment and healthcare industries.

Consumer offers a full range of fi nancial products including:

private-label credit cards; personal loans; bank cards; auto loans

and leases; mortgages; debt consolidation; home equity loans;

deposits and other savings products; and small and medium

enterprise lending on a global basis.

Real Estate offers a comprehensive range of capital and

investment solutions and fi nances, with both equity and loan

structures, the acquisition, refi nancing and renovation of offi ce

buildings, apartment buildings, retail facilities, hotels, parking

facilities and industrial properties.

Energy Financial Services offers fi nancial products to the

global energy industry including structured equity, debt, leas-

ing, partnership fi nancing, product fi nance and broad-based

commercial fi nance.

GECAS provides fi nancial products to: airlines, aircraft opera-

tors, owners, lend ers and investors, including leases, and secured

loans on commercial passenger aircraft, freighters and regional

jets; engine leasing and fi nancing services; aircraft parts solu-

tions; and airport equity and debt fi nancing.

GE 2011 ANNUAL REPORT 135

notes to consolidated financial statements

Total revenues (a) Intersegment revenues (b) External revenues

(In millions) 2011 2010 2009 2011 2010 2009 2011 2010 2009

Energy Infrastructure $ 43,694 $ 37,514 $ 40,648 $ 325 $ 316 $ 633 $ 43,369 $ 37,198 $ 40,015

Aviation 18,859 17,619 18,728 417 155 234 18,442 17,464 18,494

Healthcare 18,083 16,897 16,015 65 30 40 18,018 16,867 15,975

Transportation 4,885 3,370 3,827 33 77 72 4,852 3,293 3,755

Home & Business Solutions 8,465 8,648 8,443 58 49 33 8,407 8,599 8,410

Total industrial 93,986 84,048 87,661 898 627 1,012 93,088 83,421 86,649

GE Capital 45,730 46,422 48,906 1,072 1,208 1,469 44,658 45,214 47,437

Corporate items and eliminations (c) 7,584 19,123 17,871 (1,970) (1,835) (2,481) 9,554 20,958 20,352

Total $147,300 $149,593 $154,438 $ — $ — $ — $147,300 $149,593 $154,438

(a) Revenues of GE businesses include income from sales of goods and services to customers and other income.

(b) Sales from one component to another generally are priced at equivalent commercial selling prices.

(c) Includes the results of NBCU (our formerly consolidated subsidiary) and our current equity method investment in NBCUniversal LLC.

Revenues from customers located in the United States were $69,820 million, $75,104 million and $75,782 million in 2011, 2010 and 2009,

respectively. Revenues from customers located outside the United States were $77,480 million, $74,489 million and $78,656 million in

2011, 2010 and 2009, respectively.

Assets (a)(b) Property, plant and equipment additions

(c) Depreciation and amortization

At December 31 For the years ended December 31 For the years ended December 31

(In millions) 2011 2010 2009 2011 2010 2009 2011 2010 2009

Energy Infrastructure $ 54,389 $ 38,606 $ 36,663 $ 2,078 $ 954 $1,012 $ 1,235 $ 911 $ 994

Aviation 23,567 21,175 20,377 699 471 442 569 565 539

Healthcare 27,981 27,784 27,163 378 249 302 869 994 876

Transportation 2,633 2,515 2,714 193 69 68 88 85 82

Home & Business Solutions 4,645 4,280 4,955 278 229 201 287 354 366

GE Capital 552,514 565,337 597,877 9,882 7,674 6,442 7,636 8,367 9,175

Corporate items and eliminations 51,513 88,096 92,200 56 175 203 233 257 668

Total $717,242 $747,793 $781,949 $13,564 $9,821 $8,670 $10,917 $11,533 $12,700

(a) Assets of discontinued operations, NBCU (our formerly consolidated subsidiary) and our current equity method investment in NBCUniversal LLC are included in Corporate

items and eliminations for all periods presented.

(b) Total assets of the Energy Infrastructure, Aviation, Healthcare, Transportation, Home & Business Solutions and GE Capital operating segments at December 31, 2011, include

investment in and advances to associated companies of $907 million, $420 million, $532 million, $11 million, $439 million and $23,589 million, respectively. Investments in

and advances to associated companies contributed approximately $46 million, $70 million, $(38) million, $1 million, $23 million and $2,337 million to segment pre-tax

income of Energy Infrastructure, Aviation, Healthcare, Transportation, Home & Business Solutions and GE Capital operating segments, respectively, for the year ended

December 31, 2011. Aggregate summarized financial information for significant associated companies assuming a 100% ownership interest included: total assets of

$161,913 million, primarily financing receivables of $57,617 million; total liabilities of $102,066 million, primarily debt of $56,596 million; revenues totaling $42,323 million;

and net earnings totaling $3,963 million.

(c) Additions to property, plant and equipment include amounts relating to principal businesses purchased.

Interest and other financial charges Provision (benefit) for income taxes

(In millions) 2011 2010 2009 2011 2010 2009

GE Capital $13,845 $14,494 $16,878 $ 984 $ (949) $(3,807)

Corporate items and eliminations (a) 700 1,059 819 4,748 1,982 2,665

Total $14,545 $15,553 $17,697 $5,732 $1,033 $(1,142)

(a) Included amounts for Energy Infrastructure, Aviation, Healthcare, Transportation, Home & Business Solutions and NBCU (prior to its deconsolidation in 2011), for which our

measure of segment profit excludes interest and other financial charges and income taxes.

Property, plant and equipment—net associated with operations based in the United States were $19,672 million, $17,596 million and

$19,798 million at year-end 2011, 2010 and 2009, respectively. Property, plant and equipment—net associated with operations based

outside the United States were $46,067 million, $48,616 million and $49,169 million at year-end 2011, 2010 and 2009, respectively.

136 GE 2011 ANNUAL REPORT

notes to consolidated financial statements

Note 29.

Quarterly Information (Unaudited)

First quarter Second quarter Third quarter Fourth quarter

(In millions; per-share amounts in dollars) 2011 2010 2011 2010 2011 2010 2011 2010

CONSOLIDATED OPERATIONS

Earnings from continuing operations $ 3,471 $ 2,351 $ 3,621 $ 3,306 $ 3,264 $ 3,264 $ 4,010 $ 4,131

Earnings (loss) from discontinued operations 56 (353) 217 (101) 1(1,052) (197) 633

Net earnings 3,527 1,998 3,838 3,205 3,265 2,212 3,813 4,764

Less net earnings attributable to

noncontrolling interests (94) (53) (74) (96) (41) (157) (83) (229)

Net earnings attributable to the Company 3,433 1,945 3,764 3,109 3,224 2,055 3,730 4,535

Preferred stock dividends declared (75) (75) (75) (75) (881) (75) —(75)

Net earnings attributable to GE

common shareowners $ 3,358 $ 1,870 $ 3,689 $ 3,034 $ 2,343 $ 1,980 $ 3,730 $ 4,460

Per-share amounts—earnings

from continuing operations

Diluted earnings per share $ 0.31 $ 0.21 $ 0.33 $ 0.29 $ 0.22 $ 0.28 $ 0.37 $ 0.36

Basic earnings per share 0.31 0.21 0.33 0.29 0.22 0.28 0.37 0.36

Per-share amounts—earnings (loss)

from discontinued operations

Diluted earnings per share 0.01 (0.03) 0.02 (0.01) —(0.10) (0.02) 0.06

Basic earnings per share 0.01 (0.03) 0.02 (0.01) —(0.10) (0.02) 0.06

Per-share amounts—net earnings

Diluted earnings per share 0.32 0.17 0.35 0.28 0.22 0.18 0.35 0.42

Basic earnings per share 0.32 0.17 0.35 0.28 0.22 0.18 0.35 0.42

SELECTED DATA

GE

Sales of goods and services $22,102 $23,509 $22,961 $24,403 $23,230 $23,593 $26,743 $28,715

Gross profit from sales 5,290 6,146 5,404 7,295 6,520 6,973 9,018 8,278

GECS

Total revenues 13,041 12,633 12,443 12,632 12,018 11,954 11,579 12,662

Earnings from continuing operations

attributable to the Company 1,768 502 1,593 734 1,453 780 1,618 1,007

For GE, gross profi t from sales is sales of goods and services less costs of goods and services sold.

Earnings-per-share amounts are computed independently each quarter for earnings from continuing operations, earnings (loss) from

discontinued operations and net earnings. As a result, the sum of each quarter’s per-share amount may not equal the total per-share

amount for the respective year; and the sum of per-share amounts from continuing operations and discontinued operations may not

equal the total per-share amounts for net earnings for the respective quarters.

GE 2011 ANNUAL REPORT 137

supplemental information

Financial Measures that Supplement Generally

Accepted Accounting Principles

We sometimes use information derived from consolidated fi nan-

cial information but not presented in our fi nancial statements

prepared in accordance with U.S. generally accepted accounting

principles (GAAP). Certain of these data are considered “non-

GAAP fi nancial measures” under U.S. Securities and Exchange

Commission rules. Specifi cally, we have referred, in various sec-

tions of this Annual Report, to:

• Industrial cash fl ow from operating activities (Industrial CFOA)

• Operating earnings, Operating EPS and Operating EPS exclud-

ing the effects of the preferred stock redemption

• Operating and non-operating pension costs (income)

• Average GE shareowners’ equity, excluding effects of

discontinued operations

• Ratio of debt to equity at GECS, net of cash and equivalents

and with classifi cation of hybrid debt as equity

• GE Capital ending net investment (ENI), excluding cash

and equivalents

• GE pre-tax earnings from continuing operations, excluding

GECS earnings from continuing operations, the correspond-

ing effective tax rates and the reconciliation of the U.S. federal

statutory rate to those effective tax rates

The reasons we use these non-GAAP fi nancial measures and the

reconciliations to their most directly comparable GAAP fi nancial

measures follow.

Industrial Cash Flow from Operating Activities

(Industrial CFOA)

(In millions) 2011 2010 2009 2008 2007

Cash from GE’s

operating activities,

as reported $12,057 $14,746 $16,405 $19,138 $23,301

Less dividends

from GECS —— — 2,351 7,291

Cash from GE’s

operating activities,

excluding dividends

from GECS

(Industrial CFOA) $12,057 $14,746 $16,405 $16,787 $16,010

We refer to cash generated by our industrial businesses as

“Industrial CFOA,” which we defi ne as GE’s cash from operating

activities less the amount of dividends received by GE from

GECS. This includes the effects of intercompany transactions,

including GE customer receivables sold to GECS; GECS services for

trade receivables management and material procurement; build-

ings and equipment (including automobiles) leased between GE and

GECS; information technology (IT) and other services sold to GECS by

GE; aircraft engines manufactured by GE that are installed on air-

craft purchased by GECS from third-party producers for lease to

others; and various investments, loans and allocations of GE corpo-

rate overhead costs. We believe that investors may fi nd it useful to

compare GE’s operating cash fl ows without the effect of GECS

dividends, since these dividends are not representative of the oper-

ating cash fl ows of our industrial businesses and can vary from

period to period based upon the results of the fi nancial services

businesses. Management recognizes that this measure may not be

comparable to cash fl ow results of companies which contain both

industrial and fi nancial services businesses, but believes that this

comparison is aided by the provision of additional information about

the amounts of dividends paid by our fi nancial services business

and the separate presentation in our fi nancial statements of the

Financial Services (GECS) cash fl ows. We believe that our measure of

Industrial CFOA provides management and investors with a useful

measure to compare the capacity of our industrial operations to

generate operating cash fl ow with the operating cash fl ow of other

non-fi nancial businesses and companies and as such provides a

useful measure to supplement the reported GAAP CFOA measure.

Operating Earnings, Operating EPS and Operating EPS

Excluding the Effects of the Preferred Stock Redemption

(In millions; except earnings per share) 2011 2010 V%

Earnings from continuing

operations attributable to GE $14,074 $12,517 12%

Less: Non-operating pension costs

(income), net of tax 688 (204)

Operating earnings $14,762 $12,313 20%

Earnings per share—diluted (a)

Continuing earnings per share $ 1.23 $ 1.14 8%

Less: Non-operating pension costs

(income), net of tax 0.06 (0.02)

Operating earnings per share 1.29 1.12 15%

Less: Effects of the preferred stock

redemption 0.08 —

Operating EPS excluding the

effects of the preferred stock

redemption $ 1.37 $ 1.12 22%

(a) Earnings-per-share amounts are computed independently. As a result, the sum

of per-share amounts may not equal the total.

138 GE 2011 ANNUAL REPORT

supplemental information

Operating earnings excludes non-service related pension costs

of our principal pension plans comprising interest cost,

expected return on plan assets and amortization of actuarial

gains/losses. The service cost and prior service cost compo-

nents of our principal pension plans are included in operating

earnings. We believe that these components of pension cost

better refl ect the ongoing service-related costs of providing

pension benefi ts to our employees. As such, we believe that our

measure of Operating earnings provides management and

investors with a useful measure of the operational results of our

business. Other components of GAAP pension cost are mainly

driven by market performance, and we manage these separately

from the operational performance of our businesses. Neither

GAAP nor operating pension costs are necessarily indicative of

the current or future cash fl ow requirements related to our

pension plan. We also believe that this measure, considered

along with the corresponding GAAP measure, provides manage-

ment and investors with additional information for comparison

of our operating results to the operating results of other compa-

nies. We also believe that Operating EPS excluding the effects of

the $0.8 billion preferred dividend related to the redemption of

our preferred stock (calculated as the difference between the

carrying value and the redemption value of the preferred stock)

is a meaningful measure because it increases the comparability

of period-to-period results.

Operating and Non-Operating Pension Costs (Income)

(In millions) 2011 2010 2009

Service cost for benefits earned $ 1,195 $ 1,149 $ 1,609

Prior service cost amortization 194 238 426

Operating pension costs 1,389 1,387 2,035

Expected return on plan assets (3,940) (4,344) (4,505)

Interest cost on benefit obligations 2,662 2,693 2,669

Net actuarial loss amortization 2,335 1,336 348

Non-operating pension costs

(income) 1,057 (315) (1,488)

Total principal pension plans costs $ 2,446 $ 1,072 $ 547

We have provided the operating and non-operating components

of cost for our principal pension plans. Operating pension costs

comprise the service cost of benefi ts earned and prior service

cost amortization for our principal pension plans. Non-operating

pension costs (income) comprise the expected return on plan

assets, interest cost on benefi t obligations and net actuarial loss

amortization for our principal pension plans. We believe that the

operating components of pension costs better refl ects the ongo-

ing service-related costs of providing pension benefi ts to our

employees. We believe that the operating and non-operating

components of cost for our principal pension plans, considered

along with the corresponding GAAP measure, provide manage-

ment and investors with additional information for comparison of

our pension plan costs and operating results with the pension

plan costs and operating results of other companies.

Average GE Shareowners’ Equity, Excluding Effects of Discontinued Operations(a)

December 31 (In millions) 2011 2010 2009 2008 2007

Average GE shareowners’ equity (b) $122,289 $116,179 $110,535 $113,387 $113,842

Less the effects of the average net investment in

discontinued operations 4,340 13,137 17,092 8,859 12,830

Average GE shareowners’ equity, excluding effects of

discontinued operations (a) $117,949 $103,042 $ 93,443 $104,528 $101,012

(a) Used for computing return on average GE shareowners’ equity and return on average total capital invested (ROTC).

(b) On an annual basis, calculated using a five-point average.

Our ROTC calculation excludes earnings (losses) of discontinued

operations from the numerator because U.S. GAAP requires us to

display those earnings (losses) in the Statement of Earnings. Our

calculation of average GE shareowners’ equity may not be directly

comparable to similarly titled measures reported by other compa-

nies. We believe that it is a clearer way to measure the ongoing

trend in return on total capital for the continuing operations of

our businesses given the extent that discontinued operations

have affected our reported results. We believe that this results in

a more relevant measure for management and investors to evalu-

ate performance of our continuing operations, on a consistent

basis, and to evaluate and compare the performance of our con-

tinuing operations with the ongoing operations of other

businesses and companies.

Defi nitions indicating how the above-named ratios are calcu-

lated using average GE shareowners’ equity, excluding effects of

discontinued operations, can be found in the Glossary.

Ratio of Debt to Equity at GECS, Net of Cash and Equivalents

and with Classification of Hybrid Debt as Equity

December 31 (Dollars in millions) 2011 2010 2009

GECS debt $443,097 $470,520 $493,324

Less cash and equivalents 76,702 60,257 62,575

Less hybrid debt 7,725 7,725 7,725

$358,670 $402,538 $423,024

GECS equity $ 77,110 $ 68,984 $ 70,833

Plus hybrid debt 7,725 7,725 7,725

$ 84,835 $ 76,709 $ 78,558

Ratio 4.23:1 5.25:1 5.39:1

We have provided the GECS ratio of debt to equity on a basis that

refl ects the use of cash and equivalents to reduce debt, and with

long-term debt due in 2066 and 2067 classifi ed as equity. We

believe that this is a useful comparison to a GAAP-based ratio of

debt to equity because cash balances may be used to reduce

debt and because this long-term debt has equity-like characteris-

tics. The usefulness of this supplemental measure may be limited,

GE 2011 ANNUAL REPORT 139

supplemental information

however, as the total amount of cash and equivalents at any point

in time may be different than the amount that could practically be

applied to reduce outstanding debt, and it may not be advanta-

geous or practical to replace certain long-term debt with equity.

In the fi rst quarter of 2009, GE made a $9.5 billion payment to

GECS (of which $8.8 billion was further contributed to GECC

through capital contribution and share issuance). Despite these

potential limitations, we believe that this measure, considered

along with the corresponding GAAP measure, provides investors

with additional information that may be more comparable to

other fi nancial institutions and businesses.

GE Capital Ending Net Investment (ENI), Excluding Cash and

Equivalents

December 31,

(In billions) 2011

January 1,

2010 (a)

GECC total assets $553.7 $653.6

Less assets of discontinued operations 1.1 15.1

Less non-interest bearing liabilities 32.3 50.3

GE Capital ENI 520.3 588.2

Less cash and equivalents 75.7 61.9

GE Capital ENI, excluding cash and equivalents $444.6 $526.3

(a) As originally reported.

We use ENI to measure the size of our GE Capital segment. We

believe that this measure is a useful indicator of the capital (debt

or equity) required to fund a business as it adjusts for non-interest

bearing current liabilities generated in the normal course of

business that do not require a capital outlay. We also believe that

by excluding cash and equivalents, we provide a meaningful

measure of assets requiring capital to fund our GE Capital seg-

ment, as a substantial amount of this cash and equivalents

resulted from debt issuances to pre-fund future debt maturities

and will not be used to fund additional assets. Providing this

measure will help investors measure how we are performing

against our previously communicated goal to reduce the size of

our fi nancial services segment.

GE Pre-Tax Earnings from Continuing Operations, Excluding

GECS Earnings from Continuing Operations and the

Corresponding Effective Tax Rates

(Dollars in millions) 2011 2010 2009

GE earnings from continuing

operations before income taxes $19,078 $15,060 $13,730

Less GECS earnings from

continuing operations 6,432 3,023 1,177

Total $12,646 $12,037 $12,553

GE provision for income taxes $ 4,839 $ 2,024 $ 2,739

GE effective tax rate, excluding

GECS earnings 38.3% 16.8% 21.8%

Reconciliation of U.S. Federal Statutory Income Tax Rate to

GE Effective Tax Rate, Excluding GECS Earnings

2011 2010 2009

U.S. federal statutory

income tax rate 35.0% 35.0% 35.0%

Reduction in rate resulting from

Tax on global activities

including exports (7.9) (13.5) (12.0)

U.S. business credits (2.3) (2.8) (1.1)

NBCU gain 14.9 ——

All other—net (1.4) (1.9) (0.1)

3.3 (18.2) (13.2)

GE effective tax rate, excluding

GECS earnings 38.3% 16.8% 21.8%

We believe that the GE effective tax rate is best analyzed in relation

to GE earnings before income taxes excluding the GECS net earn-

ings from continuing operations, as GE tax expense does not include

taxes on GECS earnings. Management believes that in addition to

the Consolidated and GECS tax rates shown in Note 14, this supple-

mental measure provides investors with useful information as it

presents the GE effective tax rate that can be used in comparing the

GE results to other non-fi nancial services businesses.

Five-year Financial Performance Graph: 2007–2011

COMPARISON OF FIVE-YEAR CUMULATIVE RETURN AMONG GE,

S&P 500 AND DOW JONES INDUSTRIAL AVERAGE

The annual changes for the fi ve-year period shown in the graph on

this page are based on the assumption that $100 had been

invested in GE stock, the Standard & Poor’s 500 Stock Index (S&P

500) and the Dow Jones Industrial Average (DJIA) on December 31,

2006, and that all quarterly dividends were reinvested. The total

cumulative dollar returns shown on the graph represent the value

that such investments would have had on December 31, 2011.

FIVE-YEAR FINANCIAL

PERFORMANCE

(In dollars)

GE

S&P 500

DJIA

57

46

47

103

100

58

2006 2007 2008 2009 2010 2011

GE $100 $103 $47 $46 $ 57 $ 58

S&P 500 100 105 66 84 97 99

DJIA 100 109 74 91 104 112

2006 2007 2008 2009 2010 2011

140 GE 2011 ANNUAL REPORT

BACKLOG Unfi lled customer orders for products and product ser-

vices (12 months for product services).

BORROWING Financial liability (short or long-term) that obligates us

to repay cash or another fi nancial asset to another entity.

BORROWINGS AS A PERCENTAGE OF TOTAL CAPITAL INVESTED For GE,

the sum of borrowings and mandatorily redeemable preferred stock,

divided by the sum of borrowings, mandatorily redeemable preferred

stock, noncontrolling interests and total shareowners’ equity.

CASH EQUIVALENTS Highly liquid debt instruments with original

maturities of three months or less, such as commercial paper.

Typically included with cash for reporting purposes, unless desig-

nated as available-for-sale and included with investment securities.

CASH FLOW HEDGES Qualifying derivative instruments that we use

to protect ourselves against exposure to variability in future cash

fl ows. The exposure may be associated with an existing asset or

liability, or with a forecasted transaction. See “Hedge.”

COMMERCIAL PAPER Unsecured, unregistered promise to repay

borrowed funds in a specifi ed period ranging from overnight to

270 days.

COMPREHENSIVE INCOME The sum of Net Income and Other

Comprehensive Income. See “Other Comprehensive Income.”

DERIVATIVE INSTRUMENT A fi nancial instrument or contract with

another party (counterparty) that is designed to meet any of a

variety of risk management objectives, including those related to

fl uctuations in interest rates, currency exchange rates or commod-

ity prices. Options, forwards and swaps are the most common

derivative instruments we employ. See “Hedge.”

DISCONTINUED OPERATIONS Certain businesses we have sold or

committed to sell within the next year and therefore will no longer

be part of our ongoing operations. The net earnings, assets and

liabilities, and cash fl ows of such businesses are separately classi-

fi ed on our Statement of Earnings, Statement of Financial Position

and Statement of Cash Flows, respectively, for all periods presented.

EFFECTIVE TAX RATE Provision for income taxes as a percentage of

earnings from continuing operations before income taxes and

accounting changes. Does not represent cash paid for income

taxes in the current accounting period. Also referred to as “actual

tax rate” or “tax rate.”

ENDING NET INVESTMENT (ENI) is the total capital we have invested

in the fi nancial services business. It is the sum of short-term bor-

rowings, long-term borrowings and equity (excluding non control ling

interests) adjusted for unrealized gains and losses on investment

securities and hedging instruments. Alternatively, it is the amount

of assets of continuing operations less the amount of non-interest

bearing liabilities.

EQUIPMENT LEASED TO OTHERS Rental equipment we own that is

available to rent and is stated at cost less accumulated depreciation.

FAIR VALUE HEDGE Qualifying derivative instruments that we use to

reduce the risk of changes in the fair value of assets, liabilities or

certain types of fi rm commitments. Changes in the fair values of

derivative instruments that are designated and effective as fair value

hedges are recorded in earnings, but are offset by corresponding

changes in the fair values of the hedged items. See “Hedge.”

FINANCING RECEIVABLES Investment in contractual loans and

leases due from customers (not investment securities).

FORWARD CONTRACT Fixed price contract for purchase or sale of a

specifi ed quantity of a commodity, security, currency or other

fi nancial instrument with delivery and settlement at a specifi ed

future date. Commonly used as a hedging tool. See “Hedge.”

GOODWILL The premium paid for acquisition of a business.

Calculated as the purchase price less the fair value of net assets

acquired (net assets are identifi ed tangible and intangible

assets, less liabilities assumed).

GUARANTEED INVESTMENT CONTRACTS (GICS) Deposit-type prod-

ucts that guarantee a minimum rate of return, which may be fi xed

or fl oating.

HEDGE A technique designed to eliminate risk. Often refers to the

use of derivative fi nancial instruments to offset changes in interest

rates, currency exchange rates or commodity prices, although

many business positions are “naturally hedged”—for example,

funding a U.S. fi xed-rate investment with U.S. fi xed-rate borrowings

is a natural interest rate hedge.

INTANGIBLE ASSET A non-fi nancial asset lacking physical sub-

stance, such as goodwill, patents, licenses, trademarks and

customer relationships.

INTEREST RATE SWAP Agreement under which two counterparties

agree to exchange one type of interest rate cash fl ow for another.

In a typical arrangement, one party periodically will pay a fi xed

amount of interest, in exchange for which that party will receive

variable payments computed using a published index. See “Hedge.”

INVESTMENT SECURITIES Generally, an instrument that provides an

ownership position in a corporation (a stock), a creditor relationship

with a corporation or governmental body (a bond), rights to con-

tractual cash fl ows backed by pools of fi nancial assets or rights to

ownership such as those represented by options, subscription

rights and subscription warrants.

MATCH FUNDING A risk control policy that provides funding for a

particular fi nancial asset having the same currency, maturity and

interest rate characteristics as that asset. Match funding is exe-

cuted directly, by issuing debt, or synthetically, through a

combination of debt and derivative fi nancial instruments. For

example, when we lend at a fi xed interest rate in the U.S., we can

borrow those U.S. dollars either at a fi xed rate of interest or at a

fl oating rate executed concurrently with a pay-fi xed interest rate

swap. See “Hedge.”

MONETIZATION Sale of fi nancial assets to a third party for cash.

For example, we sell certain loans, credit card receivables and

trade receivables to third-party fi nancial buyers, typically provid-

ing at least some credit protection and often agreeing to provide

collection and processing services for a fee. Monetization nor-

mally results in gains on interest-bearing assets and losses on

non-interest bearing assets. See “Securitization” and “Variable

Interest Entity.”

NONCONTROLLING INTEREST Portion of shareowner’s equity in a

subsidiary that is not attributable to GE.

OPERATING PROFIT GE earnings from continuing operations before

interest and other fi nancial charges, income taxes and effects of

accounting changes.

glossary

GE 2011 ANNUAL REPORT 141

OPTION The right, not the obligation, to execute a transaction at a

designated price, generally involving equity interests, interest rates,

currencies or commodities. See “Hedge.”

OTHER COMPREHENSIVE INCOME Changes in assets and liabilities

that do not result from transactions with shareowners and are not

included in net income but are recognized in a separate component

of shareowners’ equity. Other Comprehensive Income includes the

following components:

• INVESTMENT SECURITIES—Unrealized gains and losses on securi-

ties classifi ed as available-for-sale

• CURRENCY TRANSLATION ADJUSTMENTS—The result of translating

into U.S. dollars those amounts denominated or measured in a

different currency

• CASH FLOW HEDGES—The effective portion of the fair value of

cash fl ow hedges. Such hedges relate to an exposure to vari-

ability in the cash fl ows of recognized assets, liabilities or

forecasted transactions that are attributable to a specifi c risk

• BENEFIT PLANS—Unamortized prior service costs and net actu-

arial losses (gains) related to pension and retiree health and

life benefi ts

• RECLASSIFICATION ADJUSTMENTS—Amounts previously recog-

nized in Other Comprehensive Income that are included in net

income in the current period

PRODUCT SERVICES For purposes of the fi nancial statement display

of sales and costs of sales in our Statement of Earnings, “goods” is

required by U.S. Securities and Exchange Commission regulations to

include all sales of tangible products, and “services” must include all

other sales, including broadcasting and other services activities. In

our Management’s Discussion and Analysis of Operations we refer

to sales under product service agreements and sales of both goods

(such as spare parts and equipment upgrades) and related services

(such as monitoring, maintenance and repairs) as sales of “product

services,” which is an important part of our operations.

PRODUCT SERVICES AGREEMENTS Contractual commitments, with

multiple-year terms, to provide specifi ed services for products in

our Energy Infrastructure, Aviation and Transportation installed

base—for example, monitoring, maintenance, service and spare

parts for a gas turbine/generator set installed in a customer’s

power plant.

PRODUCTIVITY The rate of increased output for a given level of

input, with both output and input measured in constant currency.

PROGRESS COLLECTIONS Payments received from customers as

deposits before the associated work is performed or product

is delivered.

QUALIFIED SPECIAL PURPOSE ENTITIES (QSPEs) A type of variable

interest entity whose activities are signifi cantly limited and entirely

specifi ed in the legal documents that established it. There also are

signifi cant limitations on the types of assets and derivative instru-

ments such entities may hold and the types and extent of activities

and decision-making they may engage in.

RETAINED INTEREST A portion of a transferred fi nancial asset

retained by the transferor that provides rights to receive portions

of the cash infl ows from that asset.

RETURN ON AVERAGE GE SHAREOWNERS’ EQUITY Earnings from

continuing operations before accounting changes divided by

average GE shareowners’ equity, excluding effects of discontinued

operations (on an annual basis, calculated using a fi ve-point aver-

age). Average GE shareowners’ equity, excluding effects of

discontinued operations, as of the end of each of the years in the

fi ve-year period ended December 31, 2011, is described in the

Supplemental Information section.

RETURN ON AVERAGE TOTAL CAPITAL INVESTED For GE, earnings

from continuing operations before accounting changes plus the

sum of after-tax interest and other fi nancial charges and noncon-

trolling interests, divided by the sum of the averages of total

shareowners’ equity (excluding effects of discontinued operations),

borrowings, mandatorily redeemable preferred stock and noncon-

trolling interests (on an annual basis, calculated using a fi ve-point

average). Average total shareowners’ equity, excluding effects of

discontinued operations as of the end of each of the years in the

fi ve-year period ended December 31, 2011, is described in the

Supplemental Information section.

SECURITIZATION A process whereby loans or other receivables are

packaged, underwritten and sold to investors. In a typical trans-

action, assets are sold to a special purpose entity, which

purchases the assets with cash raised through issuance of ben-

efi cial interests (usually debt instruments) to third-party investors.

Whether or not credit risk associated with the securitized assets

is retained by the seller depends on the structure of the securiti-

zation. See “Monetization” and “Variable Interest Entity.”

SUBPRIME For purposes of Consumer related discussion, sub-

prime includes consumer fi nance products like mortgage, auto,

cards, sales fi nance and personal loans to U.S. and global borrow-

ers whose credit score implies a higher probability of default

based upon GECC’s proprietary scoring models and defi nitions,

which add various qualitative and quantitative factors to a base

credit score such as a FICO score or global bureau score. Although

FICO and global bureau credit scores are a widely accepted rating

of individual consumer creditworthiness, the internally modeled

scores are more refl ective of the behavior and default risks in the

portfolio compared to stand-alone generic bureau scores.

TURNOVER Broadly based on the number of times that working

capital is replaced during a year. Current receivables turnover is

total sales divided by the fi ve-point average balance of GE current

receivables. Inventory turnover is total sales divided by a fi ve-

point average balance of inventories. See “Working Capital.”

VARIABLE INTEREST ENTITY An entity that must be consolidated by

its primary benefi ciary, the party that holds a controlling fi nancial

interest. A variable interest entity has one or both of the following

characteristics: (1) its equity at risk is not suffi cient to permit the

entity to fi nance its activities without additional subordinated

fi nancial support from other parties, or (2) as a group, the equity

investors lack one or more of the following characteristics: (a) the

power to direct the activities that most signifi cantly affect the

economic performance of the entity, (b) obligation to absorb

expected losses, or (c) right to receive expected residual returns.

WORKING CAPITAL Represents GE current receivables and inven-

tories, less GE accounts payable and progress collections.

glossary

142 GE 2011 ANNUAL REPORT

corporate information

CORPORATE HEADQUARTERS

General Electric Company

3135 Easton Turnpike, Fairfi eld, CT 06828

(203) 373-2211

ANNUAL MEETING

GE’s 2012 Annual Meeting of Shareowners will be held on Wednesday,

April 25, 2012, at the Detroit Marriott at the Renaissance Center in

Detroit, Michigan.

SHAREOWNER INFORMATION

To transfer securities, write to GE Share Owner Services, c/o

Computershare, P.O. Box 358010, Pittsburgh, PA 15252-8010.

For shareowner inquiries, including enrollment information and a

prospectus for the Direct Purchase and Reinvestment Plan, “GE Stock

Direct,” write to GE Share Owner Services, c/o Computershare,

P.O. Box 358016, Pittsburgh, PA 15252-8016; or call (800) 786-2543

(800-STOCK-GE) or (201) 680-6848; or send an e-mail to

shrrelations@bnymellon.com.

For Internet access to general shareowner information and certain

forms, including transfer instructions or stock power, visit the Web site

at www.bnymellon.com/shareowner.

STOCK EXCHANGE INFORMATION

In the United States, GE common stock is listed on the New York Stock

Exchange (NYSE), its principal market. It also is listed on certain non-U.S.

exchanges, including the London Stock Exchange and Euronext Paris.

TRADING AND DIVIDEND INFORMATION

(In dollars)

Common Stock

Market Price Dividends

declaredHigh Low

2011

Fourth quarter $18.28 $14.02 $0.17

Third quarter 19.53 14.72 0.15

Second quarter 20.85 17.97 0.15

First quarter 21.65 18.12 0.14

2010

Fourth quarter $18.49 $15.63 $0.14

Third quarter 16.70 13.75 0.12

Second quarter 19.70 14.27 0.10

First quarter 18.94 15.15 0.10

As of January 31, 2012, there were approximately 561,000 shareowner

accounts of record.

FORM 10-K AND OTHER REPORTS; CERTIFICATIONS

The fi nancial information in this report, in the opinion of management,

substantially conforms with information required in the “Form 10-K

Report” fi led with the U.S. Securities and Exchange Commission (SEC)

in February 2012. However, the Form 10-K Report also contains addi-

tional information, and it can be viewed at www.ge.com/secreports.

Copies also are available, without charge, from GE Corporate

Investor Communications, 3135 Easton Turnpike, Fairfi eld, CT 06828.

General Electric Capital Corporation fi led a Form 10-K Report with

the SEC, and this can also be viewed at www.ge.com/secreports.

GE has included as exhibits to its Annual Report on Form 10-K for

fi scal year 2011 fi led with the SEC, certifi cations of GE’s Chief Executive

Offi cer and Chief Financial Offi cer certifying the quality of the Company’s

public disclosure. GE’s Chief Executive Offi cer has also submitted to the

NYSE a certifi cation certifying that he is not aware of any violations by

GE of the NYSE corporate governance listing standards.

INTERNET ADDRESS INFORMATION

Visit us online at www.ge.com for more information about GE and its

products and services. For information about GE’s consumer products

and services, visit us at www.geconsumerandindustrial.com.

Information on the GE Foundation, GE’s philanthropic organization,

can be viewed at www.gefoundation.com.

The 2011 GE Annual Report is available online at www.ge.com/

annualreport. For detailed news and information regarding our

strategy and our businesses, please visit our Press Room online at

www.genewscenter.com, our Investor Information site at

www.ge.com/investor or our corporate blog at www.gereports.com.

CORPORATE OMBUDSPERSON

To report concerns related to compliance with the law, GE policies or

government contracting requirements, write to GE Corporate

Ombudsperson, P.O. Box 911, Fairfi eld, CT 06825; or call (800) 227-5003 or

(203) 373-2603; or send an e-mail to ombudsperson@corporate. ge.com.

CONTACT THE GE BOARD OF DIRECTORS

The Audit Committee and the non-management directors have estab-

lished procedures to enable anyone who has a concern about GE’s conduct,

or any employee who has a concern about the Company’s accounting,

internal accounting controls or auditing matters, to communicate that

concern directly to the presiding director or to the Audit Committee.

Such communications may be confi dential or anonymous, and may be

submitted in writing to: GE Board of Directors, General Electric Company

(W2E), 3135 Easton Turnpike, Fairfi eld, CT 06828; or call (800) 417-0575 or

(203) 373-2652; or send an e-mail to Directors@corporate.ge.com.

©2012 General Electric Company. Printed in U.S.A.

GE, , ecomagination, healthymagination and Imagination at Work are trade-

marks and service marks of the General Electric Company. Other marks used

throughout are trademarks and service marks of their respective owners.

Patent applications fi led in 2011 by GE include U.S. original and other

applications.

Caution Concerning Forward-Looking Statements: This document contains “for-

ward-looking statements”—that is, statements related to future, not past, events.

In this context, forward-looking statements often address our expected future

business and fi nancial performance and fi nancial condition, and often contain

words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “see,” or

“will.” Forward-looking statements by their nature address matters that are, to dif-

ferent degrees, uncertain. For us, particular uncertainties that could cause our

actual results to be materially different than those expressed in our forward-look-

ing statements include: current economic and fi nancial conditions, including

volatility in interest and exchange rates, commodity and equity prices and the

value of fi nancial assets; potential market disruptions or other impacts arising in

the United States or Europe from developments in the European sovereign debt

situation; the impact of conditions in the fi nancial and credit markets on the avail-

ability and cost of General Electric Capital Corporation’s (GECC) funding and on our

ability to reduce GECC’s asset levels as planned; the impact of conditions in the

housing market and unemployment rates on the level of commercial and con-

sumer credit defaults; changes in Japanese consumer behavior that may affect

our estimates of liability for excess interest refund claims (Grey Zone); our ability to

maintain our current credit rating and the impact on our funding costs and com-

petitive position if we do not do so; the adequacy of our cash fl ow and earnings

and other conditions which may affect our ability to pay our quarterly dividend at

the planned level; the level of demand and fi nancial performance of the major

industries we serve, including, without limitation, air and rail transportation, energy

generation, real estate and healthcare; the impact of regulation and regulatory,

investigative and legal proceedings and legal compliance risks, including the

impact of fi nancial services regulation; strategic actions, including acquisitions,

joint ventures and dispositions and our success in completing announced transac-

tions and integrating acquired businesses; the impact of potential information

technology or data security breaches; and numerous other matters of national,

regional and global scale, including those of a political, economic, business and

competitive nature. These uncertainties may cause our actual future results to be

materially different than those expressed in our forward-looking statements. We

do not undertake to update our forward-looking statements.

2011 Annual Report

GE Works

2011 Annual Report

GE Works

2011 Annual Report

GE Works

2011 Annual Report

GE Works

The paper used in this report was supplied

by participants of the Sustainable Initiative

Programs. The majority of the power utilized

to manufacture this paper was renewable

energy, produced with GE’s wind and biogas

technologies, and powered by GE steam

engines and turbine engines.

GE is consistently ranked as one of the world’s leading corporations:

Visit our interactive online annual report

at www.ge.com/annualreport

Thanks to the customers, partners and GE employees

who appear in this annual report for contributing their time

and support.

FORTUNE is a registered trademark

of Time Inc. and is used under

license. From FORTUNE Magazine,

March 21, 2011 © 2011 Time Inc.

FORTUNE and Time Inc. are not

affi liated with, and do not endorse

products or services of, Licensee.

BARRON’S

Most Respected

Companies

FAST COMPANY

50 Most Innovative

Companies

FORTUNE

World’s Most

Admired Companies®

BLOOMBERG

BUSINESSWEEK

Best Companies

for Leaders

ETHISPHERE

World’s Most

Ethical Companies

10.8

17.8

22.3

12.5 14.1

9.5

15.9

20.4

11.3 13.0

20082007 2009 2010 2011

EARNINGS ATTRIBUTABLE TO GE

(In $ billions)

NBCU

GE

ex NBCU

GE’s 2011 Annual Report was printed with four

different cover designs. The covers represent

the many ways GE works to build, power, move

and cure the world.

150

154

180

170

147

133

139

163

155 142

20082007 2009 2010 2011

CONSOLIDATED REVENUES

(In $ billions)

NBCU

GE

ex NBCU

16.8

16.0

20082007

GECS

Dividend

Industrial

CFOA

2009 2010 2011

19.1

23.3

16.4 14.7

12.1

CASH FLOW FROM OPERATING

ACTIVITIES (CFOA)

(In $ billions)

22%

GROWTH CONTINUES

22% increase in Operating

EPS excluding impact

of the preferred stock

redemption, and 20% rise

in Operating earnings.

$200B

RECORD INDUSTRIAL

BACKLOG

Record equipment and service

orders drove the backlog to a

record of $200 billion.

$85B

FINANCIAL FLEXIBILITY

GE had $85 billion of cash and

equivalents at year-end 2011.

70%

DIVIDEND INCREASES

GE announced two dividend

increases in 2011 following

two increases in 2010: a total

70% increase over the two years.

18%

INTERNATIONAL GROWTH

GE’s global growth initiative

helped drive 18% growth in

industrial international revenue.

$18B

U.S. EXPORTS

International sales of American-

made products totaled $18 billion

in 2011, a $1 billion increase

from 2010.

6%

R&D SPEND

GE continued its strong research

and development investment

with total spending at 6% of

industrial revenue.

13,000

U.S. JOBS

GE has announced the creation

of 13,000 jobs in the United States

since 2009.

2011 SUMMARY fi nancial and strategic highlights

Note: Financial results from continuing operations unless otherwise noted.

CONTENTS

2 Letter to Shareowners

10 Business Overview

29 Board of Directors

31 Financial Section

142 Corporate Information

ON THE COVER

Fabio Dominguez de Freitas

Mechanic Inspector

GE Aviation’s Celma facility in Petrópolis,

Brazil, provides engine services to

aircraft customers in Latin America,

the U.S. and Europe.

Design by Addison www.addison.com Printing by Cenveo

General Electric Company

Fairfi eld, Connecticut 06828

www.ge.com

3.EPC055148101A.102

2011 Annual Report

GE 2011 Annual Report

GE Works