Text

General Electric Co. Self-Guarantee of Funds for Decommissioning
	ML031040509
Person / Time
Site:	Vallecitos Nuclear Center, 07000754, 07200001, Vallecitos
Issue date:	03/20/2003
From:	Sherin K; General Electric Co
To:	; Office of Nuclear Material Safety and Safeguards
References
	-RFPFR
	Download: ML031040509 (190)
	v • d • e

Corporae Envrornenrfl Programs General Electric Company 3135 Eastori Turnpke, Fairfield CT /1431 March 20, 2003 Director, Office of Nuclear Material and Safeguards U. S. Nuclear Regulatory Commission Washington, D.C. 20555

SUBJECT:

GENERAL ELECTRIC COMPANY SELF-GUARANTEE OF FUNDS FOR DECOMMISSIONING I am the Chief Financial Officer of the General Electric Company (GE), 1 River Road, Schenectady, NY 12345, a corporation. This letter is in support of the firm's use of the financial test to demonstrate financial assurance, as specified in 10 CFR 70 AND 10 CFR 72. This firm has no parent company holding majority control of its voting stock.

This firm guarantees, through the Self-Guarantee, submitted to demonstrate compliance under 10 CFR 70 and 1 OCFR 72, the decommissioning of the following facilities owned and operated by this firm. The current cost estimates or certified amounts for decommissioning, so guaranteed, are shown for each facility:

NRC License No.

DPR-1 Name & Address of Licensee General Electric Company GE Nuclear Energy 175 Curtner Ave.

San Jose, CA 95125 Address of Licensed Activity GE Nuclear Energy Vallecitos Nuclear Center 6705 Vallecitos Rd.

Pleasanton, CA 94566

($ in thousands)

Cost Estimate 8,500 General Electric Company GE Nuclear Energy 175 Curtner Ave.

San Jose, CA 95125 General Electric Company GE Nuclear Energy 175 Curtner Ave.

San Jose, CA 95125 General Electric Company Morris Operation 7555 East Collins Rd.

Morris, IL 60450 GE Nuclear Energy Vallecitos Nuclear Center 6705 Vallecitos Rd.

Pleasanton, CA 94566 GE Nuclear Energy Vallecitos Nuclear Center 6705 Vallecitos Rd.

Pleasanton, CA 94566 GE Nuclear Energy Morris Operation 7555 East Collins Rd.

Morris, IL 60450 4,400 10,300 7,400 18,800 37,900

$ 87,300 tk-A MT55OI R-33 TR-1 DR-10 SNM-960 SNM-2500 Total Cost Estimate:

I-WA:1289857.1

I hereby certify that General Electric Company is currently a going concem, and that it possesses positive tangible net worth in the amount of $17,526,000.

The fiscal year of this firm ends on December 31. The figures for the following items marked vith an asterisk are derived from this firm's Independently audited, year-end financial statements for the latest completed fiscal year, ended December 31, 2002. A copy of the firm's most recent financial statements is enclosed.

This firm is required to file a Form 1 OK with the U.S. Securities and Exchange Commission (SEC) for the latest fiscal year. The firm has at least one class of equity securities registered under the Securities Exchange Act of 1934.

The firm satisfies the following self-guarantee test:

1.

Current decommissioning cost estimates or certified amounts:

a. Decommissioning amounts covered by this self-guarantee

b. All decommissioning amounts covered by other NRC or Agreement State parent company guarantees or self-guarantees

c. All amounts covered by parent company guarantees, self-guarantees, or financial tests of other Federal or State agencies (e.g., EPA)

TOTAL (Dollars in Thousands)

$ 87,300

$133.600 131.546

$ 352,446

2.

Current bond rating of most recent unsecured issuance of this firm Rating: Aaa Name of rating service: Moody's

3.

Date of issuance of bond: 01/28/03

4.

Date of maturity of bond: 02/01/13

5.

Tangible net worth* (if any portion of estimates for decommissioning is Included in total liabilities on your firm's financial statements, you may add the amount of that portion to this line)

6.

Total assets In United States (required only if less than 90 percent of firm's assets are located in the United States)

7.

Is line 5 at least 10 times line 1?

8.

Are at least 90 percent of firm's assets located in the United States? If not, complete line 9

9.

Is line 6 at least 10 times line 1?

10. Is the rating specified on line 2 A or better?

11. Does the licensee have at least one class of equity securities registered under the Securities Exchange Act of 1934?

Yes x

No

$ 17.526.000

$346,312,000 x

x x

x Denotes figures derived from financial statements.

Tangible net worth Is defined as net worth minus goodwill, patents, trademarks, and copyrights.

2 I-WA:1289857.1

I hereby certify that the contents of this letter is true and correct to the best of my knowledge.

-dtdA.

3/20/03 Keith

. Sherin Date Senior Vice President - Finance 3

I-WA: 1289857.1

GENERAL ELECTRIC COMPANY SELF GUARANTEE OF DECOMMISSIONING FUNDING Guarantee made this 20th day of March, 2003 by the General Electric Company, a corporation organized under the laws of the State of New York herein referred to as "guarantor," to the U.S. Nuclear Regulatory Commission (NRC), beneficiary, on behalf of ourselves as licensee.

Recitals

1.

The guarantor has full authority and capacity to enter into this guarantee under its bylaws, articles of incorporation, and the laws of the State of New York, its State of incorporation. Guarantor has approval from its Board of Directors to enter into this guarantee.

2.

This guarantee is being issued to comply with regulations issued by the NRC, an agency of the U.S. Govemment, pursuant to the Atomic Energy Act of 1954, as amended, and the Energy Reorganization Act of 1974. NRC has promulgated regulations in Title 10, Chapter I of the Code of Federal Regulations, Part 70 and Part 72 which require that a holder of, or an applicant for, a materials license issued pursuant to 10 CFR 70 and 10CFR 72 provide assurance that funds will be available when needed for required decommissioning activities.

3.

The guarantee is issued to provide financial assurance for decommissioning activities for the following licenses:

NRC Address of

($ n t License No.

Name & Address of Licensee Licensed Activity Cost E DPR-1 General Electric ComDany GE Nuclear Energy 8,500 iousands)

Estlmate GE Nuclear Energy 175 Curtner Ave.

San Jose, CA 95125 General Electric Company GE Nuclear Energy 175 Curtner Ave.

San Jose, CA 95125 Vallecitos Nuclear Center 6705 Vallecitos Rd.

Pleasanton, CA 94566 GE Nuclear Energy Vallecitos Nuclear Center 6705 Vallecitos Rd.

Pleasanton, CA 94566 4

I-WA:1289857.1 R-33 4,400 e '*, I

, -i

General Electric Company GE Nuclear Energy 175 Curtner Ave.

San Jose, CA 95125 General Electric Company GE Nuclear Energy 175 Curtner Ave.

San Jose, CA 95125 General Electric Company Morris Operation 7555 East Collins Rd.

Morris, IL 60450 GE Nuclear Energy Vallecitos Nuclear Center 6705 Vallecitos Rd.

Pleasanton, CA 94566 GE Nuclear Energy Vallecitos Nuclear Center 6705 Vallecitos Rd.

Pleasanton, CA 94566 GE Nuclear Energy Morms Operation 7555 East Collins Rd.

Morris, IL 60450 as required by 10 CFR 70 and 10 CFR 72. The decommissioning costs for these activities are as indicated above.

4.

The guarantor meets or exceeds the financial test criteria in Financial Test II (10 CFR Part 30 App. C Section II.A.2) and agrees to comply with all notification requirements as specified in 10 CFR Parts 50 and 72, as well as Part 70.

The guarantor meets the following financial test:

(a)

Tangible net worth at least 10 times the current decommissioning cost estimates for all decommissioning activities for which the company Is responsible as a self-guaranteeing licensee as and a parent-guarantor; and (b)

Assets located In the United States amounting to at least 90 percent of total assets or at least 10 times the current decommissioning cost estimates for all decommissioning activities for which the company Is responsible as a self-guaranteeing licensee a nd as a parent-guarantor, and (c)

At least one class of equity securities registered under the Security Exchange Act of 1934; and (d)

A current rating for its most recent bond issuance of AAA, AA, or A as issued by Standard & Poorso or Aaa, Aa, or A as issued by Moody's.

5 I.WA:1289857.1 jA 1 TR-1 DR-10 SNM-960 SNM-2500 10,300 7,400 18,800 37,900

5.

The guarantor does not have a parent company holding majority control of its voting stock.

6.

Decommissioning activities as used below refer to the activities required by 10 CFR 70 and 10 CFR 72 for decommissioning of the facilities idenbfied above.

7.

Pursuant to the guarantors authority to enter Into this guarantee, the guarantor guarantees to the NRC that the guarantor shall:

(a) carry out the required decommissioning activities, as required by License Numbers DPR-1, R-33, TR-1, DR-10, SNM-960 and SNM-2500. or (b) set up a trust fund In favor of the above idenified beneficiary in the amount of the current cost estimate for these activities.

8.

The guarantor agrees to submit revised financial statements, financial test data, and a special auditor's report and reconciling schedule annually within 90 days of the close of its fiscal year.

9.

The guarantor agrees that if, at the end of any fiscal year before termination of this self-guarantee, it fails to meet the self-guarantee test criteria, it shall send, by certified mail, immediate notice to the NRC that the licensee Intends to provide altemative financial assurance as specified in 10 CFR 70 and/or 10CFR 72. Within 120 days of such notce, the guarantor shall establish such financial assurance.

10.

The guarantor also agrees to notify the beneficiary promptly If the ownership of the licensed activity is transferred, and to maintain this guarantee until the new licensee provides altemative financial assurance acceptable to the beneficiary.

11.

The guarantor agrees that if it determines, at any time other than as described In Recital 9, that it no longer meets the self-guarantee test criteria or It Is disallowed from continuing as a self-guarantor, It shall establish altemative financial assurance as specified In 10 CFR Part 70 or 10 CFR 72, as applicable, within 30 days 6

I-WA:1289857.1

12.

The guarantor, as well as its successors and assigns, agree to remain bound jointly and severally under this guarantee notwithstanding any or all of the following: amendment or modification of license or NRC-approved decommissioning funding plan for that facility, the extension or reduction of the time of performance of required activities, or any other modification or alteration of an obligation of the licensee pursuant 10 CFR 70 or 10 CFR 72.

13.

The guarantor agrees that it shall be liable for all litigation costs incurred by the beneficiary, NRC, in any successful effort to enforce the agreement against the guarantor.

14.

The guarantor agrees to remain bound under this self-guarantee for as long as t, as licensee, must comply with the applicable financial assurance requirements of 10 CFR 70 and 10 CFR 72, for the previously listed facilities, except that the guarantor may cancel this self-guarantee by sending notice by certified mail to the NRC, such cancellatfon to become effective no earlier than 120 days after receipt of such notice by the NRC, as evidenced by the return receipt

15.

The guarantor agrees that f it, as licensee, fails to provide altemaffve financial assurance as specified in 10 CFR 70 and / or 10 CFR 72, as applicable, and obtain written approval of such assurance from the NRC within 90 days after a notice of cancellation by the guarantor is received by the NRC from the guarantor, the guarantor shall make full payment under the self-guarantee.

16.

The guarantor expressly waives notice of acceptance of this self-guarantee by the NRC. The guarantor also expressly waives notice of amendments or modification of the decommissioning requirements.

17.

If the guarantor files financial reports with the U.S. Securities and Exchange Commission, then it shall promptly submit them to its Independent auditor and to the NRC during each year in which this guarantee Is In effect.

7 I-WA:1289857.1

18.

The guarantor agrees that if, at any time before termination of this self-guarantee, its most recent bond issuance ceases to be rated in the category of A or above by either Standard & Poor's or Moody's, It shall provide notice In writing of such fact to the NRC with 20 days after publication of the change by the rating service.

I hereby certify that this guarantee is true and correct to the best of my knowledge.

General Electric Company,

3/20/03

(

Keith S. Sherin Date Senior Vice President - Finance ANDREAE.RAMOS NOTApRy PBLIC MY C0OmMSS1ON EXPIRES M.312004

'V.

.1 I V:--,

7 8

I-WA:1289857.1

Independent Accountants' Report on Applying Agreed-Upon Procedures The Board of Directors General Electric Company:

We have performed the procedures listed below, which were agreed to by the Board of Directors and Management of General Electric Company ("the Company"), solely to assist you in connection with the filing of selected financial information included in the "Self-Guarantee Test" section of your letter dated March 20, 2003 to the United States Nuclear Regulatory Commission. The Company's management is responsible for the selected financial information. This agreed-upon procedures engagement was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants.

The sufficiency of these procedures is solely the responsibility of the Board of Directors and Management of General Electric Company.

Consequently,- we make no representation regarding the sufficiency of the procedures described below either for the purpose for which this report has been requested or for any other purpose.

The procedures and associated findings are as follows:

Decommissioning Amount - We compared the dollar amount of decommissioning amounts covered by the self-guarantee, $87,300 thousand, in Item l.a to the amount of the Total Cost Estimate for decommissioning, so guaranteed, in the second paragraph of the letter dated March 20, 2003, from the Chief Financial Officer of the Company to United States Nuclear Regulatory Commission, and found such amounts to be in agreement.

Bond Rating - We compared the Aaa bond rating in Item 2 to the January 2003 Moody's long texm debt rating and we compared the date of issuance of bond in Item 3 and date of maturity of bond in Item 4 to the Company's bond prospectus supplement dated January 23, 2003, relating to the $5 billion 5% notes due 2013, and found them to be in agreement.

Tangible Net Worth - We compared the dollar amount of tangible net worth, $17,526,000 thousand, as shown in Item 5, to the difference between Total Share Owners' Equity,

$63,706,000 thousand, and Intangible Assets, $46,180,000 thousand, each reflected in the Statement of Financial Position on page 74 of the Company's 2002 Annual Report, and found such amounts to be in agreement.

Total Assets in the United States - We compared the Company's Total Assets in the United States, $346,312,000 thousand, as shown in Item 6, to a schedule prepared by the Company entitled "Geographic Segments," and found such amounts to be in agreement.

Is Line 5 at Least 10 Times Line 1? - We multiplied the total amount in line 1 by 10 and found that the amount in line 5 is at least 10 times the total amount in line 1. Accordingly, we agree with the Company's response of "Yes" in Item 7.

Page 2 Are at Least 90% of Firm's Assets Located in the United States? - We divided the Company's Total Assets in the United States, $346,312,000 thousand, as shown in Item 6, by the Company's Total Assets, $575,244,000 thousand, reflected in the Statement of Financial Position on page 74 of the Company's 2002 Annual Report, and found that the Company's Total Assets in the United States were less than 90% of the Company's Total Assets.

Accordingly, we agree with the Company's response of "No" in Item 8.

Is Line 6 at Least 10 Times Line 1? - We multiplied the total amount in line 1 by 10 and found that the amount in line 6 is at least 10 times the total amount in line 1. Accordingly, we agree with the Company's response of "Yes" in Item 9.

We were not engaged to, and did not, conduct an examination, the objective of which would be the expression of an opinion on the selected financial information. Accordingly, we do not express such an opinion. Had we performed additional procedures, other matters night have come to our attention that would have been reported to you.

This report is intended solely for the use of the Board of Directors and Management of General Electric Company, and is not intended to be and should not be used by anyone other than these specified parties.

March 20, 2003

BOARD OF DIRECTORS MEETiNG April 26, 1988 (Revised December 20, 1991) 10855 EXECUTION OF CONSJRACTS AND OTHER INSTRUMENTS The Chairman reminded the Board that the resolution dealinq with the execution of contracts and other instruments on behalf of the Company had last been reviewed and revised by the Board in June, 1985, at which time the resolution had been modified to reflect changes in the Company's organization and to change its form to make periodic organization updatings unnecessary under ordinary circumstances.

The Chairman noted that the principal purpose of this resolution is to indicate to persons outside the Company the individuals within the Company who have authority to sign various documents.

rn view of the Board's determination to limit the individuals elected as officers of tho Company (and authorize the Chairman of the Board to appoint and remove persons as non-corporate Operational Officers), he indicated that it would b advisable to consider revising and clarifyinq this resolution to take account of these clarifications and related matters.

The Chairman pointed out that, like the existing resolution.

the proposed resolution would not confer any authority to approve transactions underlying the documents to be signed over and above that which is possessed by the signer either by virtue of the April 26, 1988

powers inherent in that individual's position with the Company or by virtue of a delegation of authority to that individual by the Board of Directors or higher management.

Following discussion, it was RESOLVED, that (A) Any contract, lease, license, assignment, bond or other obligation, conveyance, power of attorney, guarantee,

proxy, court pleadinq, release, tax return and related documents, or other instruments may be executed on behalf of this Company by the Chairman of the Board, a Vice Chairman of the Board, an Executive Vice President, a Senior Vice President, a Vice President reporting directly to the Chairman or a Vice chairman of the Board, the Comptroller, the Treasurer, the Secretary or any Vice President who is a corporate staff officer of the Company, all of the above-named individuals being hereinafter called "Authorized Persons".

in addition to the foregoing, any Operational Officer may sign any instrument of the type described in this Paragraph (A) which relates to the component or function to whlch such operational Officer is assigned, and any Manager, or formally designated Acting Manager, of any Division or Department level organization component may sign any such instrument which relates to that component. Each Operational Officer and each such Hanager or Actinq Hanager is authorized to dlegate to others, authority to execute n behalf of the Company, the types of contracts or other instruments which relate to the function or component to which such Operational Officer, Manager or Acting Manaqer is assigned which are of the same types a the contracts and other instruments listed in Paragraph (C) below.

(B) The Chairman of the Board and each of the Vice Chairsen of the Board is authorized to delegate to others authority to xecute contracts and other nstruments on behalf of the Company as he considers necessary and in the best interest of the Company.

(C3 Each Authorized Person is hereby authorized to delegate to others authority to execute on behalf of the Company the following types of contracts and other instruments which relate to the function or component for which such Authorized Person is responsiblo:

1.

Sales, purchase and consignment contracts, bids therefor.

(including contracts providing for or relating to a April 26, 1988 2

franchise for the distributioi or resale of this Company's products) and documents in connection therewith, including bids to and contracts with any Municipal, County or State Government, or with the Government of the United States or a foreign country, or with any agency or department of any such Government and bonds to secure the performance of such bids and contracts.

2.

Installation, erection, and service contracts and bids therefor and documents in connection therewith (including but not limited to installation, erection, and servLce contracts and bids therefor with any Municipal, County or State Government, or with the Government of the United states or a foreign country, or with any agency or department of any such Government) and bonds to secure the performance of any such contract or bid.

3.

Assignments, waivers of lien, releases, guaranties, mortgages, indentures, credit areements and such other agreements, documents or other instruments as may be necessary or advisable, relating to either direct or indirect financing in connection with sales by the, Company, or the collection of debts, and proofs of claims and other instruments to be f iled or used in any bankruptcy or insolvency proceedinqs.

4.

Contracts, leases, deeds, or other instruments relating to real property or to any improvements thereon.

5.

Powers of Attorney authorizing agents and attorneys to acquire and dispose of motor vehicles on behalf of te Company and to file all necessary applications, execute all necessary documents, and take all other necessary actions in connection therewith.

6.

Powers of Attorney authorizing aents and attorneys t*

transact business of the Company with the U.S. Custoss Service and with customs authorities in othor countrLes.

(D) The Senior Vice President Finance and the vice President and Treasurer are each severally authorized tz delegate to others authority to execute on behalf of the Company the followinq types of instruments and in connectLon therewith to establish, as appropriate, Company-vlde procedures:

1.

Agreaments or other instruments relatinq to

)

investment of funds of the Company, includlnq but ?-Ot limited to, instruments pertaining to the purchase, sale.

exchanga, assignment, conversion, transfer, custody :r April 26, 1988 3 -

loan of any securities or properties, (b) establishment and operation of bank accounts, (c) authorizations to purchase or sell currencies (including contracts or future delivery),

(d) financial contracts (e) applications for letters of credit, (f) issuance of stock certificates and replacement of certificates that are lost, stolen or destroyed, and (g) share owner proxies, consents, waivers and releases.

2.

Checks, drafts, other payment authorizations and notes payable of the Company.

Except as provided below, any such authorization shall require countersignatures and stipulate that no one individual may both sign and countersign the same instrument.

Any delegation hereunder may provide that the individual authorized to sign or countersign may effect his or her signature by means of a facsimile signature. rt shall not, however, be mandatory for any authorization hereunder to require signatures and countersignatures with respect to (a) checks or drafts drawn on dividend, payroll, or working fund accounts, (b) depositary transfers or endorsements to the account or credit of tha Company or (c) transfers between Company bank accounts.

3.

Guarantees of indebtedness of foreign r domestic affiliates of the Company and quarantees of contingent obligations of such affiliates in connection with bank guarantees of commercial transactions.

(E) The Senior Vice President - Fnance and the Vice President and Comptroller are each severally authorized to delegate to others authority to execute on behalf of the

Company, the following types of contracts and other instruments:

L.

Federal, State or local tax returns and related documents, to be filed in the United States or foreign countries,

2.

Reports of collections from employees and taxes due from the Company under the Federal Insurance Contributions Act, Federal Unemployment Tax Act, and the unemployment compensation laws of each of the states, the District of Columbia and Puerto Rico, as well as any related claims for refunds and reports thereunder,

3.

Applications, claims, surrender and other forms Ln connection with the General Electric Supplemental Life Insurance Program.

April 26, 1988 4

4.

Annual, financial and other reports required of the Administrator under the Federal Employment Retirement rncome Security Act of 1974, and any comparable report required by similar State laws,

5.

Such certifications, invoices, reports, releases and other instruments as are necessary to conform to requirements of the United States Government or any department, agency or instrumentality therefor as may be necessary or advisable in order to comply with the terms of any agreement between the Company and the United States Government or any department, agency or instrumentality thereof.

(F)

The General Counsel is authorized to delegate to others authority to execute on behalf of the Company, the following types of instruments:

1.

Licenses, contracts, assignments,

releases, court pleadings and other instruments relating to inventions and technoloqy and to patent, trademark and copyright matters.

2.

Petitions, powers of attorney, authorizatLns, verifLca-tions, nominations of representatives, dclarations, and other instruments relatLng to proceedings in the Patent, Trademark Reqistration or Copyriqht Offices servicing any country or region of the world, or to related appeal proceedings, or relating to maLntenance and defense of the resultLng industrial property rights, assignments of rLghts to apply for and acquire patents and tradezark registrations, evidence of such asslgnments, requests for the registration of patents as avaLlable for licensing, reports of nventLons and petitions for waiver of patent rights to any departoent or agency of the United States Government and assignments, licenses and other instru-cents confLrmatory of Government rights n patents and inventions.

(G)

Any contract, lease, deed or other instrusent relatinq to real property or to any improvesents located or to be loeated thereon may be executed on behalf of this Company by the Manager-Real Estate and Construction 0pration or the manager-Final ecton ot said Real sat anlCnstruction Operation.

(H) Any delegations (including revocations and revisLons) as authorized by this Resolution shall be writing. Authority dlegatad pursuant to the last sentence of April 26, 1988 5 -

(Rev. 12/20/91)

Paragraph (A) or pursuant to Paragraphs (B), (C), (0), (E) or (F) above may be redelegated by the persons to whom such delegations are made who in turn may authorize further redelegation; provided, however, that no such initial or subsequent redeleqation shall be made except in conformity with the limitations imposed thereon by the initial delegation plus any restrictions contained in subsequent redelegations.

(r) The Secretary, the Associate Corporate Secretary and any Attestinq Secretary are each severally authorized to affix the Corporate Seal to and attest to contracts and other instruments executed by persons acting pursuant to the authority granted by Paragraphs (A) or (G) above or pursuant to authority deleqated in accordance with Paragraphs (A), (B),

(C), (D), (E),

(F) or (H) above. The Secretary, the Associate Corporate Secretary and any Attesting Secretary are also each severally authorized to certify as to the provisions of this Resolution, as to the incumbency of any person in any position within the Company and as to the terms of any delegation under this Resolution.

(J) Resolution 110502 dated June 28, 1985 is superseded effective as of April 26, 1988.

April 26, 1988

-6

Corporate Environmental Programs Generahl Eectric Company 3135faston Trnpike, F,rfield CT06431 March, 2003 Financial Assurance Please direct all inquiries and responses related to the attached submission to:

Christoher Alagno Corporate Environmental Programs General Electric Company 3135 Easton Tumpike Fairfield, CT 06431 (203) 373-3583 Phone (203) 373-3342 Fax Thank you.

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) 0 Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 2002 or OTransition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commilssion file number 1-35 General Electric Company (Exact nane of registrant as specified in charter)

New York (State or other jurisdiction of incorporation or organization) 3135 Easton Turnpike, Fairfield, CT (Address of principal executive offices) 1440689340 (I.R.S. Employer Identification No.)

06828-0001 (Zip Code) 203/373-2211 (Telephone No.)

Securities Registered Pursuant to Section 12(b) of the Act:

Name of each exchange on which reeistered Title of each class Common stock, par value 0.06 per share New York Stock Excbange Boston Stock Exchange Indicate by check nark whether the registrant (I) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes 0 No 0 Indicate by check mark if disclosure of delinquent filers pursuant to Iten 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III ofthis Form 10-K or any amendment to this Form 10-K. B Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes 0 No 0.

The aggregate market value of the outstanding comnon equity of the registrant as of the last business day of the registranmfs most recently completed second fiscal quarter was $294.9 billion. Affiliates of the Company beneficially own, in the aggregate, less than one-tenth of one percent of such shares. There were 9,993,192,236 shares of voting common stock with a par value of $0.06 outstanding at February 28, 2003.

DOCUMENTS INCORPORATED BY REFERENCE The Annual Report to Share Owners for the fiscal year ended December 31, 2002 is incorporated by reference in Parts I, H and III to the extent described therein. The definitive proxy statement relating to the registrant's Annual Meeting of Share Owners, to be held April 23, 2003, is incorporated by reference in Part III to the extent descnbed therein.

(1)

Table of Contents Page Part I Item 5.

Item 6.

Item 7.

Item 7A Item 8.

Item 9.

Business Properties......................................................................................................................................

Legal Proceedings.........................................................................................................................

Submission of M atters to a Vote of Security Holders..................................................................

3 20 20 21 Market for the Registrant's Common Equity and Related Stockholder Matters...........................

Selected Financial Data................................................................................................................

Management's Discussion and Analysis of Results of Operations...............................................

Quantitative and Qualitative Disclosures About Market Risk......................................................

Financial Statements and Supplementary Data.............................................................................

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.......

22 22 22 22 22 22 Part III Item 10.

Item I 1.

Item 12.

Item 13.

Item 14.

Directors and Executive Officers of the Registrant......................................................................

Executive Compensation..............................................................................................................

Security Ownership of Certain Beneficial Owners and Management..........................................

Certain Relationships and Related Transactions...........................................................................

Controls and Procedures...............................................................................................................

Part IV Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K...........................................

Signatures.....................................................................................................................................

Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.................................

(2)

Item 1.

Item 2.

Item 3.

Item 4.

Part II 23 24 24 24 24 25 30 32

Part I Item 1. Business General Unless otherwise indicated by the context, the terms "GE," "GECS" and "GE Capital " are used on the basis of consolidation described in note 1 to the consolidated financial statements on page 78 of the 2002 Annual Report to Share Owners of General Electric Company (the Company). The fnancial section of such Annual Report to Share Owners (pages 43 through 111 of that document) is set forth in Part IV Item 15(a)(1) of this 10-K Report and is an integral part hereof. References in Parts I and II of this 10-K Report are to the page numbers of the 2002 Annual Report to Share Owners included in Part IV of this 10-K Report. Also, unless otherwise indicated by the context, "General Electric" means the parent company, General Electric Company.

General Electric's address is I River Road, Schenectady, NY 12345-6999; the Company also maintains executive offices at 3135 Easton Turnpike, Fairfield, CT 06828-0001.

GE is one of the largest and most diversified industrial corporations in the world. GE has engaged in developing, manufacturing and marketing a wide variety of products for the generation, transmission, distribution, control and utilization of electricity since its incorporation in 1892. Over the years, GE has developed or acquired new technologies and services that have broadened considerably the scope of its activities.

GE's products include major appliances; lighting products; industrial automation products; medical diagnostic imaging equipment; motors; electrical distribution and control equipment; locomotives; power generation and delivery products; nuclear power support services and fuel assemblies; commercial and nilitary aircraft jet engines; and engineered materials, such as plastics, silicones and superabrasive industrial diamonds; and chemicals for treatment of water and process systems.

GE's services include product services; electrical product supply houses; electrical apparatus installation, engineering, repair and rebuilding services; and through the third quarter of 2002, computer-related information services. Through its affiliate, the National Broadcasting Company, Inc., GE delivers network television services, operates television stations, and provides cable, Intenet and multimedia programming and distnbution services.

Through another affiliate, General Electric Capital Services, Inc., GE offers a broad array of financial and other services including consumer financing, commercial and industrial financing, real estate financing, asset management and leasing, mortgage services, consumer savings and insurance services, and specialty insurance and reinsurance.

In virtually all of its global business activities, GE encounters aggressive and able competition. In many instances, the competitive climate is characterized by changing technology that requires continuing research and development, as well as customer commitments. With respect to manufacturing operations, management believes that, in general, GE is one of the leading firms in most of the major industries in which it participates. The NBC Television Network is one of four major U.S. commercial broadcast television networks. It also competes with syndicated broadcast television programming and cable and satellite television programming activities. The businesses in which GE Capital Services engages are subject to competition from various types of financial institutions, including commercial banks, thrifts, investment banks, broker-dealers, credit unions, leasing companies, (3)

consumer loan companies, independent finance companies, finance companies associated with manufacturers, and insurance and reinsurance companies.

This 10-K Report includes certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations due to changes in global politicaL economic, business, competitive, market and regulatory factors.

GE consolidated intemational revenues have remained relatively unchanged over the past several years.

Operating Segments Revenue and segment profit information about the Company's operating segments in accordance with Statement of Financial Accounting Standards (SFAS) No. 131, Disclosures About Segments of an Enterprise and Related Information, is presented on page 57 of the 2002 Annual Report to Share Owners. Additional financial data and commentary on recent financial results for operating segments are provided on pages 50-58 of that report and in note 27 (pages 101 and 102) to the consolidated financial statements.

Operating businesses that are reported as segments under SFAS No. 131 include Aircraft Engines, Commercial Finance, Consumer Finance, Consumer Products, Equipment Management, Insurance, NBC and Power Systems. The remaining key businesses do not meet the definition of a reportable segment and have been aggregated into three operating segments based on common characteristics of their activities (Industrial Products and Systems, Materials, and Technical Products and Services). There is appropriate elimination of the net earnings of GECS and the immaterial effect of transactions between segments to arrive at total consolidated data. A summary description of each of the Company's operating segments follows.

Aircraft Engines Aircraft Engines (8.5%, 9.0% and 8.3% of consolidated revenues in 2002, 2001 and 2000, respectively) produces, sells and services jet engines, turboprop and turboshaft engines, and related replacement parts for use in military and commercial aircraft. GE's military engines are used in a wide variety of aircraft that includes fighters, bombers, tankers, helicopters and surveillance aircraft The CFM5671, produced by CFM, a company jointly owned by GE and Snecma of France, and GE's CF6 and GE909 engines power aircaft in all categories of large commercial aircraft: short/medium, intermediate and long-range. Applications for the CFM56rm engine include:

Boeing's 737-300/-400/-500 series, the next generation 737-600/-700/-800/-900 series, and the 737 business jet; Airbus Industrie's A318, A319, A320, A321 and A340-200t-300 series; and military aircraft such as the KC-135R, E/KE-3 and E-6. The CF6 family of engines powers intermediate and long-range aircraft such as Boeing's 747, 767, DC-10 and MD-l series, as well as Airbus Industrie's A300, A310 and A330 series. The GE901D engine is used to power Boeing's 777 series twin-engine aircraft. The GP7000, being designed and marketed in a joint venture with the Pratt & Whitney division of United Technologies Corporation, is offered on Airbus Industrie's A380. The business produces jet engines, such as the CF34, for executive aircraft and regional commuter aircraft. The business also manufactures aircraft engine derivatives used for marine propulsion, mechanical drives and industrial power generation sources, the latter of which are reported as part of the Power Systems segmenL Maintenance, component repair and overhaul services (MRO), including sales of replacement parts, are provided for many models of engines, including engines manufactured by competitors, and represent a significant portion of this segment's (4)

profits. In the second quarter of 2002, Aircraft Engines completed the acquisition of Unison Industries Inc., a global leader in ignition systems for aerospace and industrial applications.

The worldwide competition in aircraft jet engines and MRO (including parts sales) is intense. Both U.S.

and export markets are important Product development cycles are long and product quality and efficiency are critical to success. Research and development expenditures, both customer-financed and internally funded, are important in this segment Focused intellectual property strategies and protection of key aircraft engine design, manufacture, repair and product upgrade technologies are also important Potential sales for any engine are limited by, among other things, its technological lifetime, which may vary considerably depending upon the rate of advance in the state of the art, by the small number of potential customers and by the limited number of relevant airframe applications. Aircraft engine orders tend to follow military and airline procurement cycles, although cycles for military and commercial engine procurement are different Procurements of military jet engines are affected by changes in global political and economic factors.

In line with industry practice, airfirame manufacturers support their sales of commercial jet aircraft from time to time with long-term financing commitments to customers, and engine manufacturers are often asked to participate in such fnancings. In making such commitments, it is GE's policy to establish a secured position in the aircraft being financed. Under such airline financing programs, GE had issued guarantees amounting to $0.7 bilion at year-end 2002, and had entered into commitments totaling $1.6 billion to provide financial assistance on future aircraft engine sales. At December 31, 2002, the total estimated fair value of aircraft securing these guarantees exceeded the guaranteed amounts, net of the associated allowance for losses. See page 50 of the 2002 Annual Report to Share Owners for information about orders and backlog.

Commercial Finance Commercial Finance (12.2%, 11.0%/e and 9.2% of consolidated revenues in 2002, 2001 and 2000, respectively) offers businesses of al sizes an amy of financial services and products worldwide. With a particular expertise in the mid-market segment, Commercial Finance provides loans, financing and operating leases, and other services for customers, including manufacturers, distnbutors and end-users, for a variety of equipment and major capital assets including industrial facilities and equipment, energy-related facilities, commercial real estate loans and investments, vehicles, aircraft, and equipment used in construction, manufacturing, data processing and office applications, electronics and telecommunications, and healthcare. A description of Commercial Finance's principal businesses follows.

Commercial Equipment Financing Commercial Equipment Financing (CEF) offers large and small companies a broad line of leases and loans.

Customers include manufacturers, distributors, dealers, end-users, and municipalities. Financial products include financing for construction equipment, corporate aircraft, medical equipment, trucks and trailers. CEF also furnishes customers with direct-source tax-exempt fnance programs, as well as lease and saleleaseback offerings. Products are either held for CEF's own account or brokered to third parties. Transactions range in size from $50 thousand to

$50 million, with financing terms from 36 to 180 months. CEF also maintains an asset management operation that redeploys off-lease and repossessed equipment and other assets. During 2002, CEF purchased certain assets and liabilities from Finova Corporation, Comdisco Corporation and Australian Guarantee Corporation.

(5)

The global commercial equipment fnancing industry continues to be highly fragmented and intensely competitive. Competitors in the U.S. domestic and international markets include independent financing companies, financing subsidiaries of equipment manufacturers, and banks (national, regional, and local). Industry participants compete not only on the basis of monthly payments, interest rates and fees charged customers but also on deal structures and credit terms. The profitability of CEF is affected not only by broad economic conditions that impact customer credit quality and the availability and cost of capital. but also by successful management of credit risk, operating risk and such market risks as interest rate and currency exchange risk. Important factors to continued success include maintaining strong risk management systems, diverse portfolios, service and distnbubon channels, strong collateral and asset management knowledge, deal structuring expertise and the reduction of costs through enhanced use of technology.

CEF operates from offices throughout the Americas, Europe, Asia and Australia and through joint ventures in Indonesia and China. CEF headquarters are in Danbury, ConnecticuL Real Estate Real Estate is one of the world's leading providers of debt and equity capital to the global commercial real estate market Real Estate provides funds for the acquisition, refinancing and renovation of real estate assets as well as making equity investments in real estate throughout the United States, Canada, Mexico, Europe and Asia.

Lending is a major portion of Real Estate's business in the form of intermediate-term senior and subordinated fixed and floating-rate loans secured by existing income-producing conmercial properties such as office buildings, apartment buildings, retail centers, warehouses and hotels. Loans range from single-property mortgages typically not less than SI million to multi-property portfolios of several hundred million dollars. Real Estate's business also includes the origination and subsequent securitization of low leverage real estate loans, which are intended to be held less than one year before sale. Additionally, Real Estate purchases and provides restructuring financing for portfolios of real estate, mortgage loans, limited partnerships, and tax-exempt bonds.

Real Estate holds equity positions in a diversified portfolio of real estate assets via direct real estate ownership and joint venture interests. Property types include apartment buildings, self-storage facilities, warehouses, parking facilities, retail centers and office properties. Real Estate's equity holdings increased in 2002 with the acquisition of Security Capital Group Incorporated, an international real estate operating company. This acquisition provided Real Estate with ownership positions in self-storage facilities, parling facilities, grocery-anchored neighborhood retail centers, warehouse facilities and distribution services, senior assisted living facilities, office properties and real estate investment advisory businesses. Also in 2002, Real Estate purchased the commercial real estate and asset-based lending portfolios of DaimlerChrysler Capital Services.

Competition is intense in each of Real Estate's areas and across all product lines. Competitors include local, regional and, increasingly, multi-national lenders and investors. Important competitive factors in Real Estate's lending activities include financing rates, loan proceeds, loan structure, the ability to fund transactions efficiently, and the outlook of local real estate markets. Where Real Estate provides equity capital, principal competitive factors include the valuation of underlying properties and investment structure as well as transaction cycle time.

Real Estate has offices roughout the United States, as well as in Canada, Mexico, Europe and Asia. Real Estate headquarters are in Stamford, Connecticut.

(6)

Commercial Finance Conmercial Finance (CF) is a leading global provider of revolving and term debt and equity to finance acquisitions, business expansion, bank refinancings, recapitalizations and other special situations. Products also include asset securitization facilities, capital expenditure lines and bankruptcy-related facilities, as well as factoring services. Loan transactions range in size from under $5 million to over $200 million. CF's clients are owners, managers and buyers of both public and private companies, principally manufacturers, distributors, retailers and diversified service providers. CF has industry specialists focused on the retail, and media and communications industries. CF also provides senior debt, subordinated debt and bridge financing to buyout and private equity firms.

The corporate financing business is charactedzed by intense competition from a variety of lenders and factoring services providers, including local, regional, national and international banks and non-bank financing institutions. Competition is based on interest rates, fees, credit terms, and transaction structures. In addition to these factors, successful management of credit risks within the existing customer loan portfolio also affects profitability.

Important factors to continued success include maintaining deal structuring expertise, strong risk management systems, and collateral management knowledge.

CF headquarters are in Stamford, Connecticut. CF has lending operations in 25 cities, including international offices in Canada, Mexico, Thailand, Korea, Singapore, The Netherlands, and the United Kingdom, and also has significant factoring operations in the U.S., France, Mexico, the United Kingdom and Italy serving U.S.

and European companies.

StrctredFinance Group Structured Finance Group (SFG) provides equity, debt and structured investments to clients throughout the world. SFG's clients are pdmarily in the global energy, telecommunications, industrial and transportation sectors and range from household names to early stage businesses. SFG combines industry and technical expertise to deliver a full range of sophisticated fnancial services and products. Services include corporate fnance, acquisition finance and project finance (construction and term). Products include a variety of debt and equity instruments, as well as structured transactions, including leases and partnerships. In November 2002, SF0 acquired part of the structured finance unit of Asea Brown Boveri (ABB). The acquired structured finance business includes global infrastructure financing, equipment leasing and financing businesses. This acquisition will increase SFG's presence in the project and trade finance markets.

SFG's competition is diverse and global, ranging from large financial institutions to small niche capital providers. Additionally, two of SFG's client industry segments, telecommunications and energy, are faced with extraordinary challenges fostered by deregulation, globalization and technical innovation. Both of these industries have been recently experiencing significant volatility in demand for their products and services. For SFG to remain competitive, SFG must provide capital to borrowers in innovative and unique ways based on industry knowledge and comspetitive pricing and properly assess credit risks and effectively manage portfolios.

SFG headquarters are in Stamford, Connecticut, and it has offices in Chicago, Illinois; Houston, Texas; New York, New York; Denver, Colorado; and San Francisco, Califomia. Internationally, SFG is represented in London, England, Zurich, Switzerland; Stockholm, Sweden; Oslo, Norway; and Tokyo, Japan.

(7)

Aviation Services Aviation Services, the world's foremost aircraft leasing company, is a global commercial aviation financial services business that offers a broad range of financial products to airlines, aircraft operators, owners, lenders and investors. Financial products include leases, aircraft purchasing and trading, loans, enginelspare parts financing, pilot training, fleet planning and financial advisory services.

Following the events of September 11, 2001, many of our airline customers have experienced financial difficulties. In face of declining traffic, they have responded by curtailing flight schedules and deferring and canceling deliveries of commercial aircraft. Deteriorating aircraft utilization and pricing affects Aviation Services, which owned 1,161 commercial aircraft at December 31, 2002, when, despite pressure on the industry, 1,149, or 99% were on lease. We believe, however, that the financial difficulties of our airline customers will continue to weigh on the airline industry in 2003.

Aviation Services headquarters are in Stamford, Connecticut, with regional offices in Shannon, Republic of Ireland; New York, New York; Miami, Florida; Chicago, Illinois; Vienna, Austria; Toulouse, France; Luxembourg; Beijing and Hong Kong, China; Tokyo, Japan; and Singapore.

Vendor Financial Services Vendor Financial Services (VFS) provides financial services to over 100 equipment manufacturers and more than 4,500 dealers/distributors in North America, Europe and Asia (including Japan). Customers include major U.S. and non-U.S. manufacturers in a variety of industries including information technology, office equipment, healthcare, telecommunications, energy and industrial equipment. VFS establishes sales financing in two ways - by forming captive partnerships with manufacturers that do not have them, and by outsourcing captive partnerships from manufacturers that do (captive partnerships provide sales financing solely for products of a given manufacturer). VFS offers industry-specific knowledge, leading edge technology, leasing and equipment expertise, and global capabilities. In addition, VFS provides an expanding array of related financial services to customers, including trade payables services. In November 2002, VFS acquired the stock of Deutsche Financial Services which became a VFS business line, Commercial Distribution Finance (CDF). CDF is a leading global provider of specialized distribution financing programs and services including inventory financing, accounts receivable financing, formula based lending, private label financing, rental finance, waranty and collateral management services.

A further economic slowdown could impact the equipment financing industry, intensifying a competitive pricing environment, pressure delinquencies and residual realizations, and pressure any recourse obligations from vendor relationships. For VFS to remain competitive VFS must, among other things, drive down costs through significant investment in productivity initiatives and continue to manage effectively its spread of risk in industry sectors and equipment categories in conjunction with vendor partners.

VFS has sales offices throughout the United States, Canada, Europe, Asia (including Japan), and Australia.

VFS headquarters are in Danbury, Connecticut.

(8)

Consumer Finance Consumer Finance (7.8%, 7.6% and 7.2% of consolidated revenues in 2002,2001 and 2000, respectively) is a leading provider of credit services to consumers, retailers and auto dealers in 35 countries around the world.

Consumer Finance provides private-label credit card loans, personal loans, time sales and revolving credit, residential mortgage financing, inventory financing for retail merchants, and auto leasing and inventory financing. A description of Consurner Finance's principal businesses follows.

Global Consumer Finance Global Consumer Finance (GCF) is a leading provider of credit and insurance products and services to non-U.S. retailers and consumers. GCF provides private-label credit cards and proprietary credit services to retailers in Europe, Asia and, to a lesser extent, Central and South America, including Tesco, Metro and Wal-Mart, as well as offering a variety of direct-to-consumer credit programs such as consuner loans, auto loans and finance leases, mortgages, debt consolidation, bankcards and the distribution of credit insurance. In May 2002, GCF acquired 100%

of the Australian Guarantee Corporation (AGC) from Westpac Banking Corporation Limited. AGC, based in Sydney, Australia, is a leading provider of consumer auto lending and retail sales finance in Australia and New Zealand. Also in 2002, GCF acquired 100% of Time Retal Finance.

GCF's operations are subject to a variety of bank and consumer protection regulations in their respective jurisdictions and a number of countries have ceilings on rates chargeable to consumers in financial service transactions. The consumer lending market is also subject to the risk of declining retail sales, changes in interest and currency exchange rates, increases in personal bankruptcy filings and payment delinquencies.

The businesses in which GCF engages are subject to competition from various types of financial institutions including commercial banks, leasing companies, consumer loan companies, independent finance companies, manufacturers' captive fnance companies, and insurance companies. Cross selling multiple products into its customer base is a critical success factor for GCF.

GCF provides financing to consumers through operations in countries including Argentina, Australia, Austria, Brazil, the Canbbean countries, the Czech Republic, Denmark, France, Germany, Hong Kong, Hungary, India, Indonesia, Italy, Japan, Korea, Mexico, New Zealand, Norway, Poland, Portugal, Republic of Ireland, Singapore, Slovakia, Slovenia, Spain, Sweden, Switzerland, Taiwan, Thailand, and the United Kingdom. GCF headquarters are in Stamford, Connecticut.

Card Services Card Services (CS) is a leading provider of sales fnancing services to North American retailers in a broad range of consumer industries. CS offers customized private-label credit card solutions designed to attract and retain customers for retailers such as JC Penney, ExxonMobil, Wal-Mar Sam's Club, Macy's and Lowe's. CS provides financing directly to customers of retailers or purchases the retailers' customer receivables. The terms for these financing plans differ according to the size of contract and credit standing of the customer. Financing is provided to consumers under contractual airangements, both with and without recourse to retailers. CS' wide range of financial services includes application processing, sales authorization, statement billings, customer services and collection services. Additionally, CS issues and services the GE Capital Corporate Card product, providing payment and information systems which help medium and large-sized companies reduce travel costs, and the GE Capital (9)

Purchasing Card product, which helps customers streamline their purchasing and accounts payable processes. In June 2002, CS acquired the remaining 50/o of the Monogram Credit Services, LLC (MCS) joint venture from Banc One, for S531 million.

CS' operations are subject to a variety of bank and consumer protection regulations. The unsecured consumer lending market's principal methods of competition are price, servicing capability including Internet value added e-services, promotional marketing, and risk management capability. The unsecured consumer lending market is subject to various risks including declining retail sales, increases in personal bankruptcy filings, increasing payment delinquencies and rising interest rates.

CS operates principally in the United States and Canada. CS headquarters are in Stamford, Connecticut Consumer Products Consumer Products (6A%, 6.7% and 6.7% of consolidated revenues in 2002,2001 and 2000, respectively) consists of Appliances and Lighting.

Appliances manufactures and/or markets a single class of product - major appliances - that includes refrigerators, electric and gas cooking products, microwave ovens, freezers, dishwashers, clothes washers and dryers, water-softening and filtering products, and room air conditoning equipment These are sold under GE, Hotpoint, Monogram, and Profile brands as wel as under private brands for retailers and others. GE microwave ovens, gas and electric ranges, room air conditioners, water-softening and filtering products, freezers and some refrigerators are sourced from suppliers while investment in Company-owned facilities is focused on refrigerators, dishwashers, electric ranges and home laundry equipment A large porton of appliance sales is for replacement of installed units. Such sales are effected through a variety of retail outlets. The other principal channel consists of residential building contractors who install appliances in new dwellings. GE has an extensive U.S. product services network that provides repair services, extended service plans, waranty administration and risk management services. Appliances has been headquartered in Louisville, Kentucky for more than 50 years and has operations in North America, Europe, Asia and South America.

Demand for appliances is influenced by economic trends such as increases or decreases in consumer disposable income, availability of credit and housing construction. Competition is very active in all products and comes from a number of principal manufacturers and suppliers. An important factor is the degree of product differentiation achieved through innovation and new product features. Other significant factors include product quality and cost, brand recognition, customer responsiveness and appliance service capability.

Lighting is a leader in lamp technology and manufacturing and marketing in the global lighting industry with significant operations in Cleveland, Ohio, and throughout North America, South America, Europe and Asia.

Today, the business manufactures approximately 6,000 various lamp products for commercial, industrial and consumer markets. Product families include incandescent, halogen, high intensity discharge, fluorescent, stage/studio, miniature/sealed beam, projection, automotive and merchandiser as well as portable lighting fixtures, lamp components and LEDs (light-emitting diodes). It also manufactures outdoor lighting fixtures, residential wiring devices and commercial lighting controls.

(10)

Equipment Management Equipment Management (3.2%, 3.5% and 3.8% of consolidated revenues in 2002, 2001 and 2000, respectively) helps customers manage, finance and operate a wide variety of business equipment worldwide. With assets of more than S26 billion, Equipment Management provides leases, loans, sales and asset management services for portfolios of commercial and transportation equipment, including tractors, trailers, auto fleets, railroad rolling stock, intermodal shipping containers and modular space units.

Equipment Management operates in highly competitive markets. Economic conditions, geographic location, pricing and equipment availability are important factors in this business. Future success will depend upon the ability to maintain a large and diverse customer portfolio, optimize asset mix, maxinize asset utilization and effectively manage credit risk. In addifion, Equipment Management seeks to understand and deliver unique product and service offerings to its customers in the most efficient and cost effective manner.

Industrial Products and Systems Industrial Products and Systems (7.4%, 7.2% and 6.8% of consolidated revenues in 2002,2001 and 2000, respectively) encompasses the following businesses: Transportation Systems, Industrial Systems, and GE Supply.

Products and services provided by each of the businesses in this segment are sold primarily to industrial customers, including original equipment manufacturers, industrial end users, utilities, electrical contractors, as well as to distnbutors. These businesses compete against a variety of both U.S. and non-U.S. manufacturers and service providers. Markets for industrial products and services are diverse, global and highly price competitive. The aggregate level of economic activity in markets for such products and services generally lag overall economic slowdowns as well as subsequent recoveries. In the United States, industrial markets are undergoing significant structural changes reflecting, among other factors, increased intemational competition and pressures to modemize productive capacity. A description of products and services provided by each of the businesses in this segment follows.

Transportation Systems is one of the world's leading suppliers to the railroad, transit, and mining industries, providing freight and passenger locomotives, motorized drive systems for mining trucks and drills, diesel engines for marine and stationary markets, electrical propulsion and control systems for rapid transit cars, railway signaling and communications systems, value added services, and information technology solutions. Product services include maintenance and repair of locomotives and communications and logistics systems for locomotive and train control. In 2000, to further enhance product services offerings, the business acquired Harmon Industries, a leading provider of wayside signaling and crossing warning systems as well as microprocessor-based signal and train control systems and services. In 2001, the business acquired locomotive service assets from the Wabtec Corporation - establishing the capability to provide aftermarket products and perform full maintenance services on General Motors EMD locomotives. GE locomotives currently operate in more than 50 countries worldwide.

Information about Transportation Systems orders and backlog is provided on page 52 of the 2002 Annual Report to Share Owners.

Industrial Systems includes electric motors and related products and services for the appliance, commercial, industrial, heating, air conditioning, automotive and utility markets; power delivery and control products such as circuit breakers, transformers, electricity meters, relays, capacitors, uninterruptible power supplies for critical processes, and arresters sold for installation in commercial, industrial and residential facilities; electrical and (11)

electronic industral automation products, including drive systems, for metal and paper processing, mining, utilities and marine applications. Product services include engineering, management and technical expertise for power plants and other large projects; maintenance, inspection, repair and rebuilding of electrical apparatus produced by GE and others; and on-site engineering and upgrading of already installed products sold by GE and others. Other product services include the integration of software with hardware (principaUy motors, drives and programmable controls) into customized systems solutions for customers in the semiconductor, water treatment, pulp and paper, and petroleum industries. In 2002, the business continued its expansion in new security growth platforms with the acquisition of Interlogix, Inc. The business also continued its expansion in the sensors and instiumentation growth platform by acquiring Druck Holdings plc, a world leader in the application of advanced silicon sensor technologies for pressure measurement and control.

Through a 50-SO joint venture (GE Fanuc Automation Corp ration), which has two opera;

-bsidiaries (one in North America and the other in Europe), the business offers a wide range of high-technolog -

.strial automation systems and equipment, including computer numerical controls and prograrmable logic; itrols.

GE Supply is a full-line, intemational distributor of electrical, aerospace parts, power generation products, voice and datacom equipment and supplies from GE and other leading manufacturers. It serves electrical contractors, industrial and commercial users, engineer constructors, original equipment manufacturers, utilities and the aerospace industry. Its operating units include GE Supply, GE Structured Services, GE Supply Logistics, and has more than 150 branch offices and five distnbution Hubs throughout the U.S., Mexico, South America, Ireland, the Middle East and Southeast Asia.

Insurance Insurance (17.7%, 19.0% and 19.1% of consolidated revenues in 2002, 2001 and 2000, respectively) offers a broad range of insurance and investment products. Insurance helps consumers create and preserve personal wealth, protect assets and enhance their life styles. For businesses, it provides reinsurance and primary commercial insurance products to insurance companies, Fortune 100 companies, self-insurers and healthcare providers. For state and local govemnments and other public entities, it offers financial guarantees for a variety of debt securities.

Insurance headquarters are in Richmond, Virginia. A description of Insurance's principal businesses follows.

GE Financial Assurance GE Financial Assurance (GEFA) provides a wide variety of insurance and protection products to help consumers achieve financial security at every stage of life. GEFA's strategy is to provide dependable products to address consumers' needs for wealth accumulation, retirement income, personal protection, and wealth transfer needs. These products are sold through a family of regulated insurance and annuity affiliates. GEFA's principal product lines in North America and Asia are annuities (deferred and immediate, fixed and variable), life insurance (universal, temi, ordinary and group), guaranteed investment contracts including funding agreements, long-term care insurance, supplementary accident and health insurance and consumer club memberships. GEFA's principal product lines and services in Europe are payment protection insurance (designed to protect customers' loan repayment obligations), personal investment products, and travel and personal accident insurance. GEFA's product distribution in North America, Europe and Asia is accomplished primarily through four channels: intermediaries (brokerage general agencies, banks and securities brokerage and financial planning firms), dedicated sales forces and financial advisors, worksite distribution, and direct and affinity marketing.

(12)

GEFA recognizes that consolidation in the financial services industry will create fewer but larger competitors. GEFA believes that the principal competitive factors in the sale of insurance and investment products are product features, distribution strength, commission structure, perceived stability of the insurer, claims paying ability ratings, service, name recognition, price and cost efficiency, and strong compliance practices. GEFA's ability to compete is affected by its ability to provide competitive products and quality service to the consumer, general agents, licensed insurance agents and brokers; to maintain operating scale; and to continually reduce its expenses through the elimination of duplicate functions and enhanced technology.

Many of GEFA's activities are regulated by a variety of insurance and other regulators. GEFA headquarters are in Richmond, Virginia.

Mortgage Insurance Mortgage Insurance protects lenders and investors against the risks of default on low-down-payment mortgages. More than a quarter million customers per year obtain low-down-payment mortgages and Mortgage Insurance now has a no-down-payment product as well. Mortgage Insurance is engaged principally in providing residential mortgage guaranty insurance in the United States, United Kingdom, Canada and Australia. At December 31, 2002, Mortgage Insurance was the mortgage insurance carrier for over 2.1 million residential homes, with total insurance in force aggregating approximately $212.6 billion and total risk in force aggregating approximately SIO1.5 billion. When a valid claim is received, Mortgage Insurance either pays up to a guaranteed percentage based on the specified coverage, or pays the mortgage and delinquent interest, taking title to the property and arranging for its sale.

The mortgage insurance industry is sensitive to the interest rate environment and housing market conditions. The mortgage insurance industry is intensely competitive as excess market capacity seeks to underwrite business being generated from a consolidating customer base. In addition, considerable influence is exerted on the industry by two government-sponsored enterprises, which buy the majority of the loans insured by mortgage insurers. Mortgage Insurance headquarters are in Raleigh, North Carolina.

GE Global Insurance Holding (Employers Reinrance Corporation)

Through its principal insurance and reinsurance company affiliates - Employers Reinsurance Corporation, GE Reinsurance Corporation and the Medical Protective Corporation - GE Global Insurance Holding writes substantially all lines of reinsurance (where the insured party is another insurance company) and select lines of direct property and casualty insurance (where the insured party is a non-insurance company or an individual).

The reinsurance operations include the reinsurance of property and casualty risks written by more than 1,000 insurers around the world. The direct insurance operations are focused on niche lines of business, principally medical malpractice coverage for physicians and dentists, medical professional liability for hospitals, errors and omissions coverage for insurance agents and brokers, professional liability insurance for attorneys, excess indemnity for self-insurers of medical benefits and excess workers' compensation for self-insurers. The life reinsurance affiliates are engaged in the reinsurance of life insurance products, including term, whole and universal life, annuities, certain health-related coverages and the provision of financial reinsurance to life insurers. Employers Reinsurance Corporation has recendy announced its intent to explore the sale of its life reinsurance operations.

(13)

Management believes it competes in the reinsurance marketplace principally on the basis of its expertise, relationships, financial strength, price and creativity in developing customized solutions to customer needs. Within the direct insurance marketplace, management believes it competes principally on the basis of its product offerings, established relationships with customers and key distribution partners, price and ease of doing business.

Employers Reinsurance Corporation is one of the largest competitors in its marketplace. Its property and casualty reinsurance operations are ranked fourth in the world in terms of net preniums written and it competes with the world's largest reinsurers as well as dozens of smaller niche competitors. Employers Reinsurance Corporation is the third largest life reinsurer in the world, and is ranked 12th among U.S. primary commercial insurers.

Maintaining strong financial strength ratings is an important factor in remaining competitive in both the reinsurance and direct insurance markets in which GE Global Insurance Holding competes. During 2002, certain external credit rating agencies announced the lowering of financial strength ratings with respect to GE Global Insurance Holding and subsidiaries. Those rating agencies made similar announcements with regard to other property and casualty insurance and reinsurance entities at about the same time. Debt ratings for GE Global Insurance Holding affect $1.7 billion of outstanding debt. These ratings were adjusted negatively in 2002, but remained investment grade. We do not believe these actions will materially affect GE Global Insurance Holding liquidity or capital resources or the ability to write future business.

Materials Materials (5.8%, 5.6% and 6.2% of consolidated revenues in 2002, 2001 and 2000, respectively) consists of the Plastics and Specialty Materials businesses.

Plastics includes high-performance plastics used by compounders, molders and major original equipment manufacturers for use in a variety of applications, including fabrication of automotive parts, computer enclosures, compact disks and optical-quality media, major appliance parts, telecommunications equipment and construction materials. Market opportunities for many of these products are created by substituting resins for other materials, which can provide customers with productivity through improved material perfornance at lower system costs. These materials are sold to a diverse worldwide customer base, mainly manufacturers. The business has a significant operating presence around the world and participates in numerous manufacturing and distribution joint ventures.

The materials business environment is characterized by technological innovation and heavy capital investment. Being competitive requires emphasis on efficient manufacturing process implementation and significant resources devoted to market and application development. Competitors include large, technologydriven suppliers of the same, as well as other functionally equivalent, materials. The business is cyclical and is subject to variations in price and in the availability of raw materials, such as cumene, benzene and methanol. Availability of manufacturing capacity from the business or its compettors and anticipation of new product or material performance requirements are key factors affecting competition. Application development and associated technology assistance create incremental market demand. In addition, product and manufacturing process patents establish barriers to entry in many product lines.

Specialty Materials was formed in June 2001 and has a broad product offering, servicing diverse industries, including automotive, cosmetics, semiconductors, oil drilling and telecommunications. The business manufactures and sells high performance specialty materials including silicones, polymer additives, high purity quartzware and (14)

industrial grade and gem quality diamonds. These products are used by compounders, molders and major original equipment manufacturers in a variety of applications, including fabrication of automotive parts, medical parts, electronics equipment, semi-conductor equipment and construction tools. Market opportunities for many of these products are created by substituting specialty materials for other materials, providing customers with productivity through improved material performance at lower system costs. These materials are sold to a diverse worldwide customer base, mainly manufacturers with smaller portfolios of consumer products. The business has a significant operating presence around the world and participates in numerous manufacturing and distribution joint ventures. In the second quarter of 2002, Specialty Materials completed the acquisition of Betz

Dearborn,

now GE Betz. GE Betz is a leader in the engineered chemical treatment of water and process systems in industrial, commercial and institutional applications.

The specialty materials business environment is characterized by technological innovation and heavy capital investment. Being competitive requires emphasis on efficient manufacturing process implementation and significant resources devoted to market and application development. Competitors include large, technology-driven suppliers of the same, as well as other functionally equivalent, materials.

NBC NBC (5A%, 4.6% and 5.2% of consolidated revenues in 2002,2001 and 2000, respectively) is principally engaged in the broadcast of network television services to affiliated television stations within the United States; the production of live and recorded television programs; the operation, under licenses from the Federal Communications Commission (FCC), of television broadcasting stations; the ownership of four cable/satellite networks around the world, and investment and programming activities in multimedia, the Intemet and cable television. The NBC Television Network is one of four major U.S. commercial broadcast television networks and serves more than 220 affiliated stations within the United States. At December 31,2002, NBC owned and/or operated 28 VHF and UHF television stations including those located in Birmingham, AL; Los Angeles, CA; San Diego, CA; Hartford, CT; Miami, FL; Chicago, IL; Columbus, OH; New York, NY; Raleigh-Durham, NC; Philadelphia, PA; Providence, RI; Dallas, TX; and Washington, DC. Broadcasting operations, including the NBC Television Network and owned stations, are subject to FCC regulation. NBC's operations include investment and programming activities in cable television, principally through CNBC, MSNBC, CNBC Europe, and CNBC Asia; equity investments in Arts and Entertaimnent, The History Channel, ValueVision, Inc., and a non-voting interest in Paxson Communications Corporation. In 2002 NBC acquired the cable network Bravo. NBC's strategic alliance with Dow Jones merged the European and Asian business news services of Dow Jones with those of CNBC to formn CNBC Europe and CNBC Asia, and in addition permits NBC to use Dow Jones editorial resources in the United States. In 2002, NBC acquired Spanish language broadcaster, Telemundo. NBC has entered into long-term arrangements with Triple Crown Productions and the National Association For Stock Car Auto Racing (NASCAR) that give NBC exclusive American broadcast rights to the Kentucky Derby, the Preakness Stakes and the Belmont Stakes beginning in 2001 through 2005 and, in conjunction with Turner Broadcasting System, Inc., to the exclusive television rights to 20 NASCAR races per network per year beginning in 2001 through 2006. The business has entered into a long-tern arrangement with the United States Golf Association (USGA) that gives NBC exclusive national over-the-air broadcast rights to the USGA's major golf championships through the year 2005. NBC also has secured United States television rights to the 2004,2006 and 2008 Olympic Games.

(15)

Power Systems Power Systems (17.4%o, 16.1% and 1 1.4% of consolidated revenues in 2002, 2001 and 2000, respectively) serves power generation, industrial, governnent and other customers worldwide with products and services related to energy production and distnbution. In 2002, the business made several acquisitions including Bendy Nevada, Enron Wind and PI. These acquisitions continue to improve the ability of the business to serve its global customers and further add to the portfolio of complete solutions for the energy industry. With the addition of GE Wind Energy, Power Systems now offers wind turbines as part of its renewable energy portfolio, which also includes hydropower and geothermal technology. The business also packages aircraft engine derivatives for use as industrial power sources. This activity is also reported in the Aircraft Engines segment Gas turbines are used principally in power plants for generation of electricity and for industrial cogeneration and mechanical drive applications. GE Power System's Oil & Gas business offers advanced technology turbomachinery products and services for production, LNG, transportation, storage, refineries, petrochemical and distribution systems. With the acquisition of PII, the business gained technology leadership in total pipeline integrity solutions including analysis and pipeline asset management. Steam turbine-generators are sold to the electric utility industry and to private industrial customers for cogeneration applications. Nuclear reactors, fuel and support services for both new and installed boiling water reactors are also a part of this segment. A complete portfolio of aftermarket services, including equipment upgrades, contractual services agreements, repairs, equipment installation, monitoring and diagnostics, remote performance testing and DLN tuning provides customers total solutions to meet their needs. The business continues to invest in advanced technology development that will provide more value to our customers and more efficient solutions that comply with today's strict environmental regulations.

Worldwide competition for power generation products and services is intense. Demand for most power generation products and services is global and as a result is sensitive to the economic and political environment of each country in which the business participates and to regional load growth requirements and demand side management. In addition, internationally, the influence of available fuels and related prices has a large impact on demand. For information about orders and backlog, see page 55 of the Annual Report to Share Owners.

Technical Products and Services Technical Products and Services (7.0/o, 7.2% and 6.1% of consolidated revenues in 2002,2001 and 2000, respectively) consists of technology operations providing products, systems and services to a variety of customers.

Principal businesses included in this segment are Medical Systems and through September 2002, Information Services.

Medical Systems includes magnetic resonance (MR) scanners, computed tomography (CT) scanners, Positron Emission Tomography (PET) scanners, x-ray, patient monitoring, diagnostic cardiology, nuclear imaging, ultrasound, bone densitometry and other diagnostic and therapy equipment, and product services sold to hospitals and medical facilities worldwide. Product services include remote diagnostic and repair services for medical equipment manufactured by GE and by others, as well as computerized data management and customer productivity services. In 2002, GE Medical Systems announced its intention to acquire Instrumentarium Corporation, a leader in anesthesiology and critical care technology. The transaction is expected to close in mid-2003. In 2001, GE Medical Systems acquired Imatron, Inc., a leading developer of Electron Beam Tomography (EBT) scanners. GE Medical Systems also strengthened geographic and product positions in its Global Ultrasound business by acquiring Kretztechnik AG, an Austrian company, and EchoTech 3D Imaging Systems, based in Germany. GE Medical (16)

Systems Information Technologies expanded its products offerings by acquiring ProAct Medical and Data Critical, the latter a leading innovator of wireless communication technologies for health care customers. GE Medical Systems enhanced its position in functional and molecular imaging by entering into numerous strategic agreements with companies such as GlaxoSmithKline and Amersham Health. The functional imaging business also acquired Coincidence Technologies SA, a leading developer of PET synthesis and handling units based in France. In 2000, the business entered the Bone Mineral Densitometry market through the acquisition of Lunar, a leading player in the segment, and also made a number of acquisitions to strengthen geographic and product positions in diagnostic cardiology and patient monitoring devices, including: NEC, Prucka, and Critikon. Other acquisitions in 2000 included Sopha Medical Vision, a France based global nuclear medicine company; Parallel Design, a leader in ultrasound imaging transducers; SEC, a provider of leading-technology clinical information systems; and MECON, a leader in healthcare data mining. See page 55 of the 2002 Annual Report to Share Owners for information about orders and backlog of GE Medical Systems.

GE sold 90% of GE Global eXchange Services (GXS) in September.2002. Prior to its disposition GXS operated one of the largest business-to-business e-commerce networks in the world. GXS provided an extensive range of software and services to optimize and digitize customer supply chain management From Integration Solutions, which enable information sharing across intenal applications and between business partners, to Interchange Solutions, which provide electronic machine-to-machine communications across trading communities and finally Marketplace Solutions, with internet-based offerings for cost effective public and private exchanges, GXS provided tools to add value and lower costs for global B2B e-commerce.

Serving a range of customers with special needs (which are rapidly changing in areas such as medical and information systems), businesses in this segment compete against a variety of both U.S. and non-U.S. manufacturers or services operations. Technological competence and innovation, excellence in design, high product performance, quality of services and competitive pricing are among the key factors affecting competifton for these products and services. Throughout the world, GE Medical Systems plays a critical role in delivering new technology to improve patient outcomes and productivity tools to help control healthcare costs.

All Other GECS All Other GECS (3.3%, 5.3% and 11.7% of consolidated revenues in 2002,2001 and 2000, respectively) includes activities and businesses that we do not measure within one of the other financial services segments. A description of All Other GECS principal businesses follows.

Information Technology Solutions Information Technology Solutions (IT Solutions) is a provider of a broad array of information technology products and services, including full life cycle services that provide customers with cost-effective control and management of their information systems. Products offered include desktop personal computers, client server systems, UNIX systems, local and wide area network hardware, and software. Services offered include remote network/server monitoring and management, client support covering asset management, help desk and desk side support and program management and professional services. IT Solutions serves comnercial, educational and governmental customers. During 2002, IT Solutions finalized sale agreements for its business units in Germany, Austria and Portugal. The transactions closed in January 2003.

(17)

The worldwide competition in information technology products and services is intense. Competition is very active in all solutions and services and comes from a number of principal manufacturers and other distributors and resellers of information technology solutions and services. Markets for solutions and services are highly price competitive. Additionally, many information technology product manufacturers are bypassing traditional information technology resellers in favor of direct manufacturer relationships with the ultimate end-users. IT Solutions' North American headquarters are in Newport, Kentucky; its European headquarters are in Munich, Germany.

GEEquity GE Equity manages equity investments in early-stage, early growth, pre-IPO companies. GE Equity's portfolio consists primarily of direct investments in convertible preferred and common stocks in both public and private companies; GE Equity also participates in certain investment limited partnerships. The portfolio includes investments in the technology and communications, media and entertainment, business services, financial services and healthcare sectors. The portfoliois geographically diversified with investments located throughout the United States, as well as in Latin America, Europe and Asia. Effective in the fourth quarter of 2002, GE Equity will no longer make new investments in private companies. GE Equity will continue to give financial support to companies within its existing portfolio. The existing portfolio will be managed for maximum value over time, eventually winding down. GE Equity headquarters are in Stamford, Connecticut.

American Communications American Communications (Americom) engaged primarily as a satellite service supplier to a diverse array of customers, including the broadcast and cable TV industries, as well as broadcast radio. It also supplied integrated communications services for govermnent and commercial customers. Americom also operated communications satellites and maintained a supporting network of earth stations, central terminal offices, and telemetry, tracking and control facilities. On November 9, 2001, we exchanged our satellite operations, comprising the stock of Americom and other related assets and liabilities, for a combination of cash and 31% of the publicly-traded stock of SES Global, a leading satellite company, in order to create the world's largest satellite services provider. Our investment in SES Global is accounted for on the equity method within Commercial Finance.

Wards We acquired control of Montgomery Ward, LLC (Wards) from August 2, 1999, upon Wards emergence from bankruptcy reorganization, to December 28, 2000, when Wards again filed for bankruptcy protection. Wards is substantially liquidated.

Geographic Segments, Exports from the U.S. and Total International Operations Financial data for geographic segments (based on the location of the Company operation supplying goods or services and including exports from the U.S. to unaffiliated customers) are reported in note 27 to consolidated financial statements on pages 101 and 102 of the 2002 Annual Report to Share Owners.

Additional financial data about GE's exports from the U.S. and total international operations are provided on pages 58-59 of the 2002 Annual Report to Share Owners.

(18)

Orders Backlog See pages 50,55 and 68 of the 2002 Annual Report to Share Owners for information about GE's backlog of unfilled orders.

Research and Development Total expenditures for research and developnent were $2,631 million in 2002. Total expenditures had been

$2,349 million in 2001 and $2,193 million in 2000. Of these amounts, $2,215 million in 2002 was GE-funded

($1,980 million in 2001 and S1,867 million in 2000); and $416 million in 2002 was funded by customers ($369 million in 2001 and $326 million in 2000), principally the U.S. govermnent Aircraft Engines accounts for the largest share of GE's research and development expenditures from both GE and customer funds. Medical Systems, Power Systems, Transportation Systems and Plastics made other significant expenditures of GE and customer research and development funds.

Approximately 10,500 person-years of scientist and engineering effort were devoted to research and development activities in 2002, with about 90% of the time involved primarily in GE-funded activities.

Environmental Matters See pages 59 and 96 of GE's 2002 Annual Report to Share Owners for a discussion of environmental matters.

Employee Relations At year-end 2002, General Electric Cornpany and consolidated affiliates employed 315,000 persons, of whom approximately 165,000 were in the United States. For further information about employees, see page 69 of the 2002 Annual Report to Share Owners.

Approximately 25,200 GE manufacturing and service employees in the United States are represented for collective bargaining purposes by a total of approximately 150 different local collective bargaining groups. A majority of such employees are represented by union locals that are affiliated with, and bargain in conjunction with, the Inlernational Union of Electronic, Electrical, Salaried, Machine and Furniture Workers (IUE/CWA-AFL-CIO).

During 2000. General Electric Company negotiated three-year contracts with unions representing a substantial majority of those United States employees who are rpresented by unions. Most of these contracts will terminate in Junc 2003. NBC is party to approximately 120 labor agreements covering about 2,100 staff enployees (and a large number of freclance employees) in the United States. These agreements are with various labor unions, expire at various daes and are generally for a term ranging from three to five years.

Executive Officers See Part Ill, Item 10 of this 10-K Report for information about Executive Officers of the Registrant Other Because of the diversity of the Company's products and services, as well as the wide geographic dispersion of its production facilities, the Company uses numerous sources for the wide variety of raw materials needed for its operations. The Company has not been adversely affected by the inability to obtain raw materials.

(19)

The Company owns, or holds licen

use, numerous patents. New patents are continuously being obtained through the Company's research ar

.velopment activities as existing patents expire. Patented inventions are used both within the Company and licensed to others, but no operating segment is substantially dependent on any single patent or group of related patents.

Agencies of the U.S. Government constitute GE's largest single customer. An analysis of sales of goods and services as a percentage of revenues follows:

% of Consolidated Revenues

% of GE Revenues 2002 2001 2000 2002 2001 2000 Total sales to U.S. Government Agencies 2%

2%

4%

3%

Aircraft Engines defense-related sales 2

2 1

3 3

2 GE is a trademark and service mark of General Electric Company; NBC is a trademark and service mark of National Broadcasting Company, Inc.; and MSNBC is a trademark and service mark of MSNBC Cable, LLC. GE90 and CF34 are trademarks of General Electric Company. CFM56 is a trademark of CFM Intemational, a 50/50 joint company between Snecma Moteurs of France and General Electric Company.

Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports are available, without charge, on our website, www.ge.com/en/company/investor/secfilings.htm, as soon as reasonably practicable after they are filed electronically with the SEC. Copies are also available, without charge, from GE Corporate Investor Communications, 3135 Easton Turnpike, Fairfield, CT 06828.

Item 2. Properties Manufacturing operations are carried out at approximately 188 manufacturing plants located in 38 states in the United States and Puerto Rico and at 191 manufacturing plants located in 33 other countries.

Item 3. Legal Proceedings We are not involved in any material pending legal proceedings.

As previously reported, in January 2002 the Company entered into discussions with the New York State Department of Environmental Conservation regarding noncompliance with the state's Clean Water Act at its Waterford, NY facility. The state alleges spills and discharges in excess of permitted limits as well as reporting violations. The state informed the Company that it would seek a penalty of $1.5 million. It has since reduced its demand to $I million. The Company has already commenced implementation of a multi-million dollar program to eliminate the source of the spills. Negotiations to resolve the final penalty are underway.

As previously reported, in April 2002, the Ohio Environmental Protection Agency informed the Company that it was seeking penalties of $4.3 million for violations of the state's Clean Air Act at its Newark, OH facility.

The state alleged that the site constructed air emission sources without undergoing adequate New Source Review.

The matter involves conditions identified by the Company and voluntarily disclosed to the state more than 5 years (20)

ago which the Company proactively sddressed with the concurrence of the state. The state has since reduced its demand to $1.4 million, which the Company still believes is inappropriate and unreasonable considering the history of the matter. Negotiations with the state are underway.

In September 2002, the Ohio Environmental Protection Agency informed the Company that it was seeking penalties of $220,000 for violations of the state's Clean Air Act at its Willoughby, OH facility. The state alleged that the site constructed air emission sources without undergoing permitting. Some of the facts in this matter are similar to those of the Newark, OH matter descnbed above, and the Company is conducting negotiations with the state to resolve both matters jointly.

For further information regarding environmental matters, see pages 59 and 96 of GE's 2002 Annual Report to Share Owners.

It is the view of management that the above described proceeding will not have a material effect on the Company's financial position, results of operations, liquidity or competitive position.

Item 4. Submission of Matters to a Vote of Security Holders Not applicable.

(21)

Part II Item S. Market for the Registrant's Common Equity and Related Stockholder Matters With respect to "Market Information", in the United States, GE comnon stock is listed on the New York Stock Exchange (its principal market) and on the Boston Stock Exchange. GE common stock also is listed on The Stock Exchange, London. Trading, as reported on the New York Stock Exchange, Inc., Composite Transactions Tape, and dividend information follows:

Common stock market price Dividends (n dollars)

High Low declared 2002 Fourth quarter

$27.98

$21.40

$.19 Third quarter 32.98 23.02

.18 Second quarter 37.80 27.42

.18 First quarter 41.84 34.49

.18 2001 Fourth quarter

$41.59

$35.88

$.18 Third quarter 49.59 28.25

.16 Second quarter 52.90 38.57

.16 First quarter 47.99 35.98

.16 As of December 31,2002, there were about 669,000 share owner accounts of record.

The remaining information called for by this item relating to "Securities Authorized for Issuance under Equity Compensation Plans" is reported in Note 25 on page 98 of the Annual Report to Share Owners for the fiscal year ended December 31, 2002.

Item 6. Selected Financial Data Reported as data for revenues; net earnings; net earnings per share (basic and diluted); dividends declared; dividends declared per share; long-term borrowings; and total assets appearing on page 69 of the 2002 Annual Report to Share Owners.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Reported on pages 46-56 and 58-71 (and graphs on pages 46,47,48,50,58, 59 and 63) of the Annual Report to Share Owners for the fiscal year ended December 31,2002.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk Reported on page 62 of the Annual Report to Share Owners for the fiscal year ended December 31,2002.

Item 8. Financial Statements and Supplementary Data See index under item 15.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable.

(22)

Part iI Item 10. Directors and Executive Officers of Registrant Executive Officers of the Registrant (As of March 7,2003)

Name Jeffrey R. Immelt Philip D. Ameen Charlene T. Begley David L. Calhoun James P. Campbell William H. Cary Kathryn A. Cassidy William J. Conaty Dennis D. Dammerman Scott C. Donnelly Michael D. Fraizer Yoshiaki Fujimori Arthur H. Harper Benjamin W. Heinernan, Jr.

Joseph M. Hogan Robert A. Jeffe John Krenicki, Jr.

Michael A. Neal David R. Nissen James A. Parke Ronald R. Pressman Gary M. Reiner John G. Rice Gary L. Rogers Keith S. Sherin Lloyd G. Trotter Richard F. Wacker William A. Woodbum Robert C. Wright Position Chairman of the Board and Chief Executive Officer Vice President and Comptroller Vice President, GE Transportation Systems Senior Vice President, GE Aircraft Engines Senior Vice President, GE Consuner Products Vice President, Financial Planning and Analysis Vice President and GE Treasurer Senior Vice President, Human Resources Vice Chairman of the Board and Executive Officer Senior Vice President, Global Research Senior Vice President, GE Insurance and GE Financial Senior Vice President, GE Asia Senior Vice President, GE Equipment Management Senior Vice President, General Counsel and Secretary Senior Vice President, GE Medical Systems Senior Vice President, Corporate Business Development Senior Vice President, GE Plastics Senior Vice President, GE Commercial Finance Senior Vice President, GE Consumer Finance Senior Vice President, and Chief Financial Officer, GE Capital Senior Vice President, Employers Reinsurance Corporation Senior Vice President, Chief Information Officer Senior Vice President, GE Power Systems Vice Chairman of the Board and Executive Officer Senior Vice President, Finance, and Chief Financial Officer Senior Vice President, GE Industrial Systems Vice President, Corporate Investor Relations Senior Vice President, GE Specialty Materials Vice Chairman of the Board and Executive Officer Date assumed Executive Age Officer Position 47 January 1997 54 April 1994 36 January 2003 45 June 1995 45 April 2001 43 March 2003 48 March 2003 57 October 1993 57 March 1984 41 August 2000 44 September 2002 51 June 2001 47 September 2002 59 September 1987 45 November2000 53 December2001 40 March 2000 49 September 2002 51 September 2002 57 September 2002 44 September 2002 48 January 1991 46 September 1997 58 December 1989 44 January 1999 57 November 1992 40 March 2003 52 June 2001 59 July 2000 All Executive Officers are elected by the Board of Directors for an initial term which continues until the Board meeting immediately preceding the next annual statutory meeting of share owners and thereafter are elected for one-year terms or until their successors have been elected. All Executive Officers have been executives of GE for the last five years except Robert A. Jeffe. Mr. Jeffe was a managing director of Credit Suisse First Boston prior to joining GE in 2001.

The remaining information called for by this item is incorporated by reference to "Election of Directors" in the definitive proxy statement relating to the registrant's Annual Meeting of Share Owners to be held April 23,2003.

(23)

Item 11. Executive Compensation Incorporated by reference to "Information Relating To Directors, Nominees and Executive Officers,"

"Stock Options Granted in 2002," "Aggregated SARs/Stock Options Exercised in 2002, and December 31, 2002, SAR/Option Value," "Contingent Long-Term Performance Incentive Awards," "Summary Compensation Table,"

"Stock Options and SARs" and "Retirement Benefits" in the definitive proxy statement relating to the registrant's Annual Meeting of Share Owners to be held April 23, 2003.

Item 12. Security Ownership of Certain Beneficial Owners and Management Incorporated by reference to "Information relating to Directors, Nominees and Executive Officers" in the registrant's definitive proxy statement relating to its Annual Meeting of Share Owners to be held April 23, 2003.

Item 13. Certain Relationships and Related Transactions Incorporated by reference to "Certain Relationships and Related Transactions" in the registrant's definitive proxy statement relating to its Annual Meeting of Share Owners to be held April 23, 2003.

Item 14. Controls and Procedures Within the 90-day period prior to the filing of this report, GE management, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of the company's disclosure controls and procedures as defined in Exchange Act Rule 13a-14(c). Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of the date of that evaluation. There have been no significant changes in internal controls, or in factors that could significantly affect internal controls, subsequent to the date the Chief Executive Officer and Chief Financial Officer completed their evaluation.

(24)

Part IV Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a)l. Financial statements applicable to General Electric Company and consolidated affiliates are contained on the page(s) indicated in the GE Annual Report to Share Owners for the fiscal year ended December 31, 2002.

Annual 10-K Report Report Pr Pave(s)

Statement of earnings for the years ended December 31, 2002, 2001 and 2000 72 F-30 Consolidated statement of changes in share owners' equity for the years ended December 31,2002,2001 and 2000 72 F-30 Statement of financial position at December 31,2002 and 2001 74 F-32 Statement of cash flows for the years ended December 31, 2002, 2001 and 2000 76 F-34 Independent Auditors' Report 45 F-3 Other financial information:

Notes to consolidated financial statements78-109 F-36 to F-67 Operating segment information 50-58 F-8 to F-16 101-102 F-S9 to F-60 108-109 F-66 to F-67 Geographic segment information 101 F-59 Operations by quarter (unaudited) 107 F-65 (a)2. The schedules listed in Reg. 210.5-04 have been omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto.

(a)3. Exhibit Index (3) The Certificate of Incorporation, as amended, and By-laws, as amended, of General Electric Company are incorporated by reference to Exhibit (3) of General Electric's Current Report on Form 8-K dated April 27,2000.

4(a) Amended and Restated General Electric Capital Corporation (GECC) Standard Global Multiple Series Indenture Provisions dated as of February 27, 1997 (Incorporated by reference to Exhibit 4(a) to GECC's Registration Statement on Form S-3 (No. 333-59707).

4(b) Third Anended and Restated Indenture dated as of February 27,1997 between GECC and JPMorgan Chase Bank (formerly known as The Chase Manhattan Bank), as successor trustee (Incorporated by reference to Exlibit 4(c) to GECC's Registration Statenent on Form S-3, File No. 333-59707).

(25)

4(c) First Supplenental Indenture dated as of May 3, 1999, supplemental to Third Amended and Restated Indenture dated as of February 27, 1997 (Incorporated by reference to Exhibit 4(dd) to GECC's Post-Effective Amendment No. I to Registration Statement on Form S-3, File No. 333-76479).

4(d) Second Supplemental Indenture dated as of July 2,2001, supplenental to Third Amended and Restated Indenture dated as of February 27, 1997 (Incorporated by reference to Exhibit 4 (f) to GECC's Post-Effective Amendment No. to Registration Statement on Form S-3 File No. 333-40880).

4(e) Third Supplemental Indenture dated as of November 22,2002, supplemnental to Third Amended and Restated Indenture dated as of February 27, 1997 (Incorporated by reference to Exhibit 4(cc) to GECC's Post-Effective Amendment No. I to the Registration Statement on Form S-3, File No.

333-100527).

4(f) Form of Global Medium-Term Note, Series A, Fixed Rate Registered Note (Incorporated by reference to Exhibit 4(m) to GECC's Registration Statement on Form S-3, File No. 333-100527).

4(g) Form of Global Medium-Term Note, Series A, Floating Rate Registered Note (Incorporated by reference Exhibit 4(n) to the GECC's Registration Statement on Form S-3, File No. 333-100527).

4(h) Agreement to furnish to the Securities and Exchange Commission upon request a copy of instruments defining the rights of holders of certain long-term debt of the registrant and consolidated subsidiaries.*

(10) All of the following exhibits consist of Executive Compensation Plans or Arrangements:

(a) General Electric Incentive Compensation Plan, as amended effective July 1, 1991.

(Incorporated by reference to Exhibit 10(a) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1991.)

(b) General Electric Insurance Plan for Directors. (Incorporated by reference to Exhibit 10(i) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1980.)

(c) General Electric Financial Planning Program, as amended through September 1993.

(Incorporated by reference to Exhibit 10(h) to General Electric Annual Report on Forn 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1993.)

(d) General Electric Supplemental Life Insurance Program, as amended February 8, 1991.

(Incorporated by reference to Exhibit 10(i) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1990.)

(e) General Electric Directors' Retirement and Optional Life Insurance Plan. (Incorporated by reference to Exhibit 10(1) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1986.)

(26)

(f) General Electric 1987 Executive Deferred Salary Plan. (Incorporated by reference to Exhibit 10(k) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December31, 1987.)

(g) General Electric 1991 Executive Deferred Salary Plan. (Incorporated by reference to Exhibit 10(n) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1990.)

(h) General Electric 1994 Executive Defened Salary Plan. (Incorporated by reference to Exhibit 10(o) to General Electric Annual Report on Form 10-K (Conmission file number 1-35) for the fiscal year ended December 31, 1993.)

(i) General Electric Directors' Charitable Gift Plan, as amended through December 2002.*

() General Electric Leadership Life Insurance Program, effective January, 1994.

(Incorporated by reference to Exhibit 10(r) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1993.)

(k) General Electric 1996 Stock Option Plan for Non-Employee Directors. (Incorporated by reference to Exhibit A to the General Electric Proxy Statement for its Annual Meeting of Share Owners held on April 24, 1996.)

(1) General Electric 1995 Executive Defened Salary Plan. (Incorporated by reference to Exhibit 10(t) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1995.)

(m) General Electric 1996 Executive Deferred Salary Plan. (Incorporated by reference to Exhibit 10(v) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1996.)

(n) General Electric 1997 Executive Deferred Salary Plan. (Incorporated by reference to Exhibit 10(t) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1997.)

(o) General Electric 1990 Long Term Incentive Plan as restated and amended effective August 1, 1997. (Incorporated by reference to Exhibit 10(u) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1997.)

(p) General Electric Deferred Compensation Plan for Directors, as amended December 19, 1997. (Incorporated by reference to Exhibit 10(v) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1997.)

(q) General Electric 1999 Executive Defened Salary Plan. (ncorporated by reference to Exhibit 10(v) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1998.)

(27)

(r) General Electric 1999 Executive Deferred Salary Plan. (Incorporated by reference to Exhibit 10(v) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1999.)

(s) General Electric 2000 Executive Deferred Salary Plan. (Incorporated by reference to Exhibit 10(u) to General Electric Annual Report on Form 10-K (Comnission file number 1-35) for the fiscal year ended December 31, 2000.)

(t) General Electric Supplementary Pension Plan, as amended effective July 1, 2000.

(Incorporated by reference to Exhibit 10(v) to General Electric Annual Report on Form 10-K (Comnission file number 1-35) for the fiscal year ended December 31, 2000.)

(u) Form of GE Executive Life Insurance Agreernent provided to GE officers, as revised September 2000. (Incorporated by reference to Exhibit 10(w) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 2000.)

(v) General Electric 2001 Executive Deferred Salary Plan. (Incorporated by reference to Exhibit 10(x) to General Electric Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 2001.)

(w) General Electric 2003 Non-Employee Director Compensation Plan.*

(x) General Electric 2003 Executive Deferred Salary Plan.*

(y) Amendment No. I to General Electric 1990 Long Tern Incentive Plan as restated and amended effective August 1, 1997.*

(11) Statement re Computation of Per Share Earnings.*"

(12) Computation of Ratio of Earnings to Fixed Charges.*

(21) Subsidiaries of Registrant.*

(23) Consent of independent auditors incorporated by reference in each Prospectus constituting part of the Registration Statements on Form S-3 (Registration Nos. 33-50639,33-39596, 33-39596-01, 33-29024, 333-59671, 333-96571, 333-72566 and 333-71778), on Fonn S-4 (Registration No. 33342442) and on Form S-8 (Registration Nos. 333-01953, 333-42695,333-74415, 333-83164, 333-98877, 333-94101, 333-65781, 333-88233, 333-57734, 333-99671 and 333-10211 1).*

(24) Power ofAttorney.*

(99)(a) Income Maintenance Agreement, dated March 28, 1991, between the registrant and General Electric Capital Corporation. (Incorporated by reference to Exhibit 28(a) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1990.)

(28)

(99)(b) Undertaking for Inclusion in Registration Statements on Form S-8 of General Electric Company. (Incorporated by reference to Exhibit 99(b) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1992.)

(99)(c) Letter, dated February 4,1999, from Dennis D. Dammerman of General Electric Company to Denis. Nayden of General Electric Capital Corporation pursuant to which General Electric Company agrees to provide additional equity to General Electric Capital Corporation in conjunction with certain redemptions by General Electric Capital Corporation of shares of its Variable Cumulative Preferred Stock.

(Incorporated by reference to Exhibit 99 (g) to General Electric Capital Corporation's Post-Effective Amendment No. I to Registration Statement on Form S-3, File No. 333-59707).

(99)(d) Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

(99Xe) Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

Filed electronically herewith.

- Information required to be presented in Exhibit 11 is now provided in note 8 to the 2002 Annual Report to Share Owners in accordance with the provisions of FASB Statement of Financial Accounting Standards (SFAS) No. 128, Earnings per Share.

(b) Reports on Form 8-K during the quarter ended December 31, 2002.

A Form 8-K was filed on November 21, 2002, announcing the issuance of a press release setting forth management's outlook regarding earnings for 2002 and 2003.

(29)

Signatures Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the registrant has duly caused this annual report on Form 10-K for the fiscal year ended December 31, 2002, to be signed on its behalf by the undersigned, and in the capacities indicated, thereunto duly authorized in the Town of Fairfield and State of Connecticut on the 7* day of March 2003.

General Electric Company (Registrant)

By

/s] Keith S. Sherin Keith S. Sherin Senior Vice President, Finance, and Chief Financial Officer (Principal Financial Officer)

(30)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signer Tide Date Is/ Keith S. Sherin Keith S. Sherin Senior Vice President, Finance, and Chief Financial Officer

/sl Philig D. Ameen Philip D. Ameen Vice President and Conptroller Principal Financial Officer Principal Accounting Officer March 7,2003 March 7,2003 Jeffrey R. Immelt*

James I. Cash, Jr.*

Dennis D. Dammerman*

Ann M. Fudge Claudio X. Gonzalez*

Andrea Jung*

Alan G. Lafley*

Kenneth G. Langone*

Ralph S. Larsen*

Rochelle B. Lazarus Sam Nunn Roger S. Penske Gary L. Rogers Andrew C. Sigler Robert J. Swieringa*

Douglas A. Warner 111*

Robert C. Wright Chairman of the Board of Directors (Principal Executive Officer)

Director Director Director Director Director Director Director Director Director Director Director Director Director Director Director Director A majority of the Board of Directors

By /s! Robert E. Healing Robert E. Healing Attorney-in-fact March 7, 2003 (31)

GENERAL ELECTRIC COMPANY CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 CERTIFICATION I, Jeffrey R. Immelt, certify that:

1. I have reviewed this annual report on Form 10-K of General Electric Company;

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other fnancial infonnation included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the 'Evaluation Date"); and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons perforning the equivalent functions):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: March 7, 2003 (32)

Is/ Jeffrev R. Immelt Jeffrey R. Immelt Chief Executive Officer

CERTIFICATION I, Keith S. Sherin, certify that:

1.1 have reviewed this annual report on Form 10-K of General Electric Company;

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other fnancial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons perforning the equivalent functions):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in intemal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's intemal controls; and

6. The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: March 7,2003 (33) lsl Keith S. Sherin Keith S. Sherin Chief Financial Officer

Financial Statements and Managements Discussion and Analysis filed electronically with the Form 10-K also appear in the 2002 General Electric Company Annual Report to Share Owners.

F-I through F-69

Exhibit 4(h)

General Electric Company 3135 Easton Turnpike Fairfield, CT 06828001 March 7, 2003 Securities and Exchange Commission 450 Fifth Street, N.W.

Washington, D.C. 20549

Subject:

General Electric Company Annual Report on Form 10-K for the fiscal year ended December 31, 2002 - File No. 1-35

Dear Sirs:

Neither General Electric Company (the "Company") nor any of its consolidated subsidiaries has outstanding any instrument with respect to its long-term debt, other than those filed as an exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2002, under which the total amount of securities authorized exceeds 10% of the total assets of the registrant and its subsidiaries on a consolidated basis. In accordance with paragraph (b)(4)(iii) of Item 601 of Regulation S-K (17 CFR Sec. 229.601), the Company hereby agrees to furnish to the Securities and Exchange Commission, upon request, a copy of each instrument that defnes the rights of holders of such long-term debt not filed or incorporated by reference as an exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2002.

Very truly yours, GENERAL ELECTRIC COMPANY By: s/ Kathn A. Cassidy Kathryn A. Cassidy Vice President and GE Treasurer

General Electric Compaiy Directors' Charitable Gift Plan Exhibit 10(i)

DIRECTORS' CHARITABLE GIFT PLAN PURPOSE The purpose of the General Electric Company Directors' Charitable Gift Plan is to provide the Company and its Board of Directors with an opportunity to provide substantial future contributions to charitable organizations selected by the Directors.

ELIGIBILITY All current Directors of General Electric are eligible to participate in the General Electric Company Directors' Charitable Gift Plan. Persons who are elected to the Company's Board of Directors after the effective date of the Plan will immediately be eligible to participate.

A Director's participation in the Plan will become effective when he or she completes all of the Plan enrollment procedures.

CHARITABLE CONTRIBUTION The Company will contribute a total of $1,000,000 to be allocated in accordance with each Director's recommendation among up to five charitable organizations.

The donation(s) will be made in the Director's name.

The donation(s) will be made at the earlier of the Director's termination of service from the GE Board, or death.

Rev. December 2002 General Elecric Company Dirwctors Charitable Gift Plan General Electric Company Directors' Charitable G!fi Plan RECOMENDATION OF CHARITABLE BENEFICLRY Each Director will complete a Charitable Beneficiary Recommendation Forn to recomrnend the organization(s) to receive donations from the Company after his or her retirement, or death if earlier.

The form will be acknowledged by the Company, and a copy will be retumed to the Director.

You will find your Charitable Beneficiary Recommendation Form under the Recommendation Form tab in this binder.

Each Director may recommend up to five charities to receive donations aggregating $1,000,000.

Each charity recommended by a Director must be a tax-exempt organization under Section 501 of the Internal Revenue Code. However, private foundations may not be recommended for a GE gift under the Plan.

A Director who is a citizen and/or resident of a country other than the United States may recommend a charitable organization located in that country, regardless of its US tax status, but any such organization must be approved by the Company in order to be eligible to receive a donation under the Plan.

The designation of a charitable beneficiary may be revoked or revised by a Director at any time before his or her retirement, unless a Director elects to make a designation irrevocable.

A Director can make the designation of a charitable beneficiary irrevocable as to any charity by completing Section II of the Charitable Beneficiary Recommendation Form.

The irrevocable designation can apply to all or a portion of the recommended donation amount for the charity. An irrevocable designation cannot be changed by the Director unless the designated charity ceases to qualify as a Plan beneficiary.

If any charity designated by a Director to receive a donation ceases to qualify as a Plan beneficiary, and a revised designation is not submitted by the Director before his or her death, the amount designated for that particular organization shall be divided among the Director's remaining designated qualified charities on a prorata basis. If all the charities selected by a Director cease to qualify, the Company will select a beneficiary to receive the donation on behalf of the Director.

Each charity recommended by a Director will receive a letter from the Company notifying it that it has been selected by the Director to receive a donation under the Plan. However, a Director can instruct the Company not to notify a charity by completing Section IV of the Charitable Beneficiary Recommendation Form.

A sample notification letter is included as Attachment A on page 4.

Rev. December 2002 General Electric Company Directors Charitable Gift Plan General Electric Company Directors' Charitable Gfi Plan MISCELLANEOUS PROVISIONS A Director's rights and interest under the Plan may not be assigned or transferred.

The expenses of the Plan will be bome by the Company. No contribution from a Director will be required to participate.

The Plan may be amended or terminated at any time by the Board as the Board may deem advisable.

Rev. December 2002 Exhibit 10(w) 2003 NON-EMPLOYEE DIRECTOR COMPENSATION PLAN (Effective January 1, 2003)

I. Non-Emplovee Director ComRensation A. Establishment of Annual Compensation Effective January 1, 2003, an annual compensation amount (the "Annual Base Compensation") payable to Non-Employee Directors (hereafter "Directors") of General Electric Company (the "Company") shall be established from time-to-time by the Board of Directors. Directors who are members of the Audit Committee or the Management Development and Compensation Committee shall also receive additional annual compensation equal to ten percent (10%) of the Annual Base Compensation for service on each such committee (such additional compensation together with the Annual Base Compensation are collectively referred to as the "Annual Compensation"). The amount of Annual Compensation will be reported annually in the Proxy Statement.

B. Pavment of Annual Compensation

1. The Annual Compensation shall be payable in quarterly installments, with each installment payable as promptly as practicable following the last business day of the calendar quarter to which it applies. Quarterly payments shall be pro rated if Board service commences or terminates during a calendar quarter.

2. The Annual Compensation shall be paid sixty percent (60%) in Deferred Stock Units

("DSUs") and forty percent (40/O) in cash. The number of DSUs to be paid and the terms of the DSUs shall be determined as provided in the following sections of this Plan.

3. Prior to their annual election to the Board, each Director may also elect to receive in DSUs all or part of that portion of his or her Annual Compensation otherwise payable in cash. Such an election shall be irrevocable for the period for which the director is elected.

4. All DSUs paid with respect to Annual Compensation will be credited to the Director's DSU account (the "DSU Account") when such Annual Compensation is payable (the "Payment Date").

5. The Directors DSU Account will be credited with the number of DSUs calculated to the nearest thousandths of a DSU, determined by dividing the dollar amount of compensation payable in DSUs on the Payment Date by the average of the closing market price of the Company's common stock as reported on the Consolidated Tape of the New York Stock Exchange listed shares for the 20 trading days immediately preceding such Payment Date.

II. Administration of DSU Accounts A. Consolidation of Prior Deferred Fee Accounts For Directors serving on the Board on January 1, 2003, the balances of deferred stock units in any deferred fee accounts maintained by the Company under the Company's Non-Employee Director Deferred Fee Plan in effect on December 31, 2002, or predecessors to that plan, shall be deemed to be transferred to the DSU Accounts established under this Plan, and, together with any other amounts specifically credited to a Director's DSU Account, shall be administered under the terms of this Plan. The balances of deferred stock units in any deferred fee accounts maintained by the Company under the Company's Non-Employee Director Deferred Fee Plan in effect on December 31, 2002, or predecessors to that plan, for former directors who were not serving on the Board on January 1, 2003 shall be administered under the applicable terms of such prior plan or plans.

B. Crediting With Dividend Equivalents

1. On each dividend payment date, a Director's DSU Account will be credited with regular quarterly dividend equivalents in additional DSUs determined by multiplying the number of DSUs in the Director's DSU Account on the related dividend record date by any per share cash dividends declared by the Company on its common stock and dividing the product by the closing market price of the Company's common stock as reported on the Consolidated Tape of the New York Stock Exchange listed shares on such dividend payment date.

2. The DSU Accounts will also be credited with DSUs by multiplying the number of DSUs in the Director's DSU Account by any stock dividends declared by the Company on its common stock.

C. Recapitalization If, as a result of a recapitalization of the Company (including stock splits), the Company's outstanding shares of common stock shall be changed into a greater or smaller number of shares, the number of DSUs credited to a Director's DSU Account shall be appropriately adjusted on the same basis.

D. Election To Switch DSUs Upon Termination of Board Service Prior to the end of the calendar year in which Board service terminates, a Director may irrevocably elect to switch up to 100% of the value of the DSUs in his or her DSU Account into cash, effective on the date one year following termination of Board service (hereafter "First Anniversary Date"). The cash value of the DSUs will be based on the number of DSUs in the Director's DSU Account on the First Anniversary Date multiplied by the average of the closing market price of the Company's common stock as reported on the Consolidated Tape for the New York Stock Exchange listed shares for the 20 trading days immediately preceding the First Anniversary Date. The cash in the DSU Account will thereafter be credited monthly with interest equivalents based upon the prior calendar month's average yield for U.S. Treasury notes and bonds with maturities of from ten to twenty years, as published by an official agency to be determined by the Senior Vice President - Finance and utilized on a consistent year to year basis.

E. Payment of DSU Accounts

1. Payouts Payment of a Director's DSU Account will be made beginning on the First Anniversary Date, except as provided below when Board service terminates as a result of death or disability.

2. Director and Survivor Pavout Elections (a) At any time before the end of the calendar year in which Board service terminates, a Director may elect to have the DSU Account paid: (i) in a lump sum on the First Anniversary Date (or as soon thereafter as practicable); or (ii) in up to ten (10) annual installments, beginning in the month of July following the First Anniversary Date.

(b) In the event that a Director's service on the Board terminates as a result of death or disability, the Director or, in the case of death, the beneficiary(s) designated by the Director (or failing such designation, the Director's estate), may elect to have the value of the Director's DSU Account on the date of the Director's death or disability: (i) paid out in a lump sum as soon as practicable following the Director's death or disability; or (ii) paid out in annual installments up to an aggregate of ten (10) annual installments, commencing in the month of July following the Director's death or disability. In the event of a Director's death subsequent to termination of Board service, but prior to receiving all entitled deferred payments, the beneficiary(s) designated by the Director (or failing such designation, the Director's estate), may elect to have the value of the Director's DSU Account on the date of the Director's death paid out in a lump sum as soon as practicable following the Director's death.

3. Determination of Amount of Cash Installment Payments.

(a) All payouts of a Director's DSU Account will be paid in cash.

(b) The amount of the first cash installment payment shall be a fraction of the cash or fraction of the value of the DSUs in the Director's DSU Account on the date of the initial installment payment, the numerator of which is one and the denominator of which is the total number of installments elected. Each subsequent instalhnent shall be calculated in the same manner as of the date of that installment payment, except that the denominator shall be reduced by the number of installments which have been previously paid.

(c) The value of DSUs in a Director's DSU Account will be determined for purposes of the preceding section by multiplying the number of DSUs in the Director's DSU Account on the payment date by the average of the closing market price of the Company's common stock as reported on the Consolidated Tape of New York Stock Exchange listed shares for the 20 trading days immediately preceding such date.

III. General Provisions A. Assignabilitv No right to receive payment of deferred compensation or retirement awards shall be transferable or assignable by a participant except by will or laws of descent and distribution.

B. Amendment of the Plan This Plan may be amended, suspended or terminated at any time by the Board of Directors of the Company. However, no amendment, suspension or termination of the Plan may, without the consent of a participant, alter or impair any of the rights previously granted under the Plan.

C. Effective Date This Plan is effective as of January 1, 2003.

Exhibit 10(x)

GENERAL ELECTRIC COMPANY 2003 EXECUTIVE DEFERRED SALARY PLAN

1.

Eligibility Each employee of General Electric Company or a participatng affiliate ("Company")

who, as of December 31, 2002, is in an Executive Band or higher position, or, in the discrefion of affiliate management, an equivalent posifion in such affiliate, and who is subject to U.S. tax laws, shall be eligible to participate in this Plan.

11.

Deferral of Salary

1.

Each employee eligible to participate in this Plan Participant") shall be given an opportunity to irrevocably elect (subject to any condifions set out in the election form) prior to any deferral hereunder.

(a) the portion of the Participant's annual base salary rate as of November 1, 2002 to be deferred. The minimum portion deferred shall be 10% and the maximum shall be 50%, and (b) the form of payout altemafive as set forth in Secton V.

2.

Commencing with base salary for January 2003, the Participant's total base salary elected to be deferred under this Plan will be deferred in ratable installments through the month of December 2003, and will be credited to the Participant's deferred salary cash account ("Deferred Account") as of the end of the month of deferral ("Deferral Date").

Ill.

Special One-Time Matching Credit As of December 31, 2003, a special one-time credit shall be made to the Deferred Account of each Participant who is actively employed by the Company on such date. The amount of such credit shall equal 3.5% of the total base salary deferred under this Plan by the Participant (excluding interest). Such credit shall not be provided for any Participant who has terminated employment with the Company for any reason prior to December 31, 2003, or is not actively employed on such date.

iV.

Manner of Accountina

1.

Each Deferred Account shall be unfunded, unsecured and nonassignable, and shall not be a trust for the benefit of any Participant.

2.

Except as may be otherwise provided in Section V or Vill, the Participant's Deferred Account will be credited with (a) the amount of base salary deferred on each Deferral Date as set forth In Section II, (b) the special one-time matching credit as set forth in Secton IlIl, and (c) interest at the annual rate of 9.5% compounded annually on each December 31.

V.

Payment of Deferred Account

1.

Payment of a Participanfs Deferred Account will be made only after termination of employment of the Participant.

2.

If no manner of payment election is made, the Deferred Account will be paid in 10 annual installments commencing on March 1 (or as soon thereafter as practical) following the year of termination of employment

3.

At the time of election to defer base salary, a Participant may irrevocably elect: (a) the number of annual payout installments (minimum of 10, maximum of 20) of the Deferred Account commencing on March 1 (or as soon thereafter as practical) following the year of terminaton of employment, unless (b) a lump sum payment of the Deferred Account is elected in which case the lump sum payment will be made on March 1 (or as soon thereafter as practical) following the year of terminaffon of employment.

4.

Participants,vho terminate their employment on or after December 31, 2003 because of retirement, death, disability, layoff, plant closing or transfer to a successor employer which is not controlled by the Company, or Participants who terminate their employment on or after December 31, 2007 for any reason, will receive payouts based on Deferred Account accumulations at the 9.5% interest rate. Payments will be made pursuant to Section V.2 or V.3 above beginning on March 1 (or as soon thereafter as practical) following the year of termination of employment.

5.

Unless waived by the Chairman, if the Participant terminates employment prior to December 31, 2003 for any reason, or prior to December 31, 2007 for any reason other than retirement, death, disability, layoff, plant closing or transfer to a successor employer which is not controlled by the Company,Section IV.2.(c) shall not apply and the Participant's Deferred Account, will be paid in a lump sum, without any interest, as soon as practical following the date of termination.

V].

Death Benefits In the event of a Participant's death prior to receiving any or all payments to which the Participant is entitled, the remaining Deferred Account shall be paid at the time and in the manner provided in Section V to the beneficiary or beneficiaries designated by the Participant on a beneficiary designation form properiy filed by the Participant with the Company in accordance with established administrative procedures.

If no such designated beneficiary survives the Participant, such remaining benefits shall be paid as set forth above to the Participant's estate.

VIl.

Administration and Interpretation This Plan shall be administered by a Committee" consisting of not less than two persons appointed from time to time by the Chairman. The Committee shall have full power and authority on behalf of the Company to administer and interpret the Plan in ts sole discretion.

All Commitee decisions with respect to the administration and interpretation of the Plan shall be final and binding upon all persons.

2

Vil.

Amendment of the Plan This Plan may be amended, suspended or terminated at any time by the Management Development and Compensation Committee of the Board of Directors

("MDCC"). In addition, the MDCC may alter or amend the payout schedule of any or all of the accrued benefits of a Participant at any time.

IX.

Effective Date The effective date of this Plan shall be January 1, 2003.

3

2003 EXECUTIVE DEFERRED SALARY PLAN As provided pursuant to the terms of the above-mentioned Plan, Messrs. Norman C.

LaFlamme and Jerry Wald are hereby appointed to serve on the administrative committee for said Plan.

Approved:

Date:

J.R. Immelt 4

Exhibit 10(y)

AMENDMENT NO. 1 TO GE 1990 LONG-TERM INCENTIVE PLAN The GE 1990 Long-Term Incentive Plan, as Amended and Restated as of August 1, 1997 (the "1990 Plan") is hereby amended as follows.

1.

Section 4(a)(i) is hereby deleted in its entirety and replaced with the following:

(a)

SHARES AVAILABLE. Subject to adjustment as provided in Section 4(b):

(i) CALCULATION OF NUMBER OF SHARES AVAILABLE. The number of Shares available for granting Awards under the Plan in each calendar year or, in the case of the years 1990 and 2007, part thereof shall be ninety-five one-hundredths of one percent (0.95%) of the issued Shares (including, without limitation, treasury Shares) as of the first day of such year. If, after the effective date of the Plan, any Shares covered by an Award granted under the Plan or by an award granted under the 1983 Plan, or to which such an Award or award relates, are forfeited, or if an Award or award otherwise terminates without the delivery of Shares or of other consideration, then the Shares covered by such Award or award, or to which such Award or award relates, or the number of Shares otherwise counted against the aggregate number of Shares available under the Plan with respect to such Award or award, to the extent of any such forfeiture or termination, shall again be, or shall become, available for granting Awards under the Plan. Notwithstanding the foregoing, but subject to adjustment as provided in Section 4(b), no more than one hundred million (100,000,000) Shares shall be cumulatively available for delivery pursuant to the exercise of Incentive Stock Options

2.

The cumulative number of Shares that were carried forward in prior years and made available for Awards pursuant to Section 4(aXi) of the Plan as it was in effect prior to this amendment shall be eliminated from the pool of Shares available for granting Awards as of December 31, 2002.

3.

Except as otherwise specifically provided in this Amendment No. 1, the provisions of the 1990 Plan shall continue to be in full force and effect.

4.

This Amendment No. 1 will remain in full force and effect so long as the 1990 Plan remains in effect. Capitalized terms not otherwise defined herein have the meaning given in the Plan.

Dated: December 31, 2002 Note: The numbers of shares of stock set forth herein have been adjusted to give effect to stock splits effective before the restatement of the Pan effective August 1, 1997, but have not been adjusted to give effect to the 3-for-I stock split effective April 27, 2000.

Exhibit 12 Genel Electric Company Ratio of Eanings to Fixed Charges Years ended December 31 (Dolas in uiuios)

GE except GECS Earnings(')

Less: Equity in undistributed earnings of General Electric Capital Services, Inc.P)

Plus: Interest and other financial charges included in expense One-third of rental expense(C)

Adjusted "earnings" Fixed Charges:

Interest and other financial charges Interest capitalized One-third of rental expense(C)

Total fixed charges Ratio of earnings to fixed charges General Electric Company and consolidated affiates Earningss4l Plus: Intcrest and other financial charges included in expcnse One-third of rental expense(C)

Adjusted carnings" Fixed Charges:

Interest and other financial charges Interest capitalized Onc-third of rental expense(c)

Total fixed charges Ratio of carnings to fixed charges 1998 1999 2000

$12,230

$14,103

$16,747 (2,124)

(2,776)

(3,370) 883 810 811 189 202 216

$11,178

$12,339

$14,404 S

883 810 811 38 36 3

189 202 216

$ 1,110

$ 1,048

$ 1,030 10.07 11.78 13.98

$13,742

$15,942

$18,873 9,821 10,174 11,903 486 558 608

$24,049

$26,674

$31,384

$ 9,821

$10,174

$11,903 126 123 124 486 558 608

$10,433

$10,855 S 12,635 2.31 2.46 2.48 2001 2002

$18,506

$19,153 (3,625)

(2,661) 817 569 231 258

$15,929

$17.319 817 569 10 IS 231 258 LI0

$ 842 15.06 20.57

$20,049

$19,217 11,212 10.321 566 584

$31,827

$30,122

$11,212

$10,321 98 53 566 584

$11,876

$10,958 2.68 2.75 (a) Earnings before income taxes, minority interest and cumulative effect of changes in accounting principle.

(b) Earnings after income taxes, net of dividends, and before cumulative effect of changes in accounting principle.

(c) Considered to be representative of interest factor in rental expense.

Exhibit 21 SUBSIDIARIES OF REGISTRANT General Electric's principal affiliates as of December 31, 2002, are listed below. All other affiliates, if considered in the aggregate as a single affiliate, would not constitute a significant affiliate.

AFFMLIATES OF REGISTRANT INCLUDED IN REGISTRANT'S FINANCLAL STATEMENTS Percentage of voting securities directly or indirectly owned by reeistrant (1)

CARIBE GE INTERNATIONAL ELECTRIC METERS CORP.

GE GAS TURBINES (GREENVILLE) LLC GENERAL ELECTRIC INTERNATIONAL (BENELUX) BV GE INVESTMENTS, INC.

GE PLASTICS ESPANA SCPA GE ELECTRIC CANADA, INC.

GE ENERGY EUROPE, BV GE CGR EUROPE NUCLEAR FUEL HOLDING CO, INC.

GE FANUC AUTOMATION CORPORATION GE ENERGY PARTS INC.

GE ENERGY PRODUCTS, INC.

GE ENGINE SERVICES DISTRIBUTION, LLC GE ENGINE SERVICES, INC.

GE HUNGARY CO., LTD GE INFORMATION SERVICES INC.

GE PLASTICS PACIFIC PTE. LTD GE POWER SYSTEMS LICENSING INC.

GE QUARTZ, INC.

GE SUPERABRASWES, INC.

GE MEDICAL TECHNOLOGY SERVICE, INC.

GE MEDICAL SYSTEMS INFORMATION TECHNOLOGIES, INC.

NBC NUOVO PIGNONE HOLDING S.P.A OEC MEDICAL SYSTEMS INC.

GE POLYMERLAND, INC.

100 100 100 100 100 100 100 100 100 50 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 State or Country of Incorporation or oreanization Puerto Rico Delaware Netherlands Nevada Spain & Canary Islands, Balearic Island Canada Netherlands France Delaware Delaware Delaware Delaware Delaware Delaware Hungary Delaware Singapore Delaware Delaware Delaware Delaware Wisconsin Delaware Italy Delaware Delaware (1)

AFFILIATES OF REGISTRANT INCLUDED IN REGISTRANT'S FINANCIAL STATEMENTS (continued)

Percentage of voting securities directly or indirectly State or Country of owned by incorporation or re2istrant (1) ortanization GENERAL ELECTRIC CAPITAL SERVICES, INC.

100 Delaware GENERAL ELECTRIC CAPITAL CORPORATION 100 New York GE GLOBAL INSURANCE HOLDING CORPORATION 100 Missouri GEAE TECHNOLOGY, INC.

100 Delaware GE ENERGY SERVICES-DALLAS, LP 100 Delaware ELANO CORPORATION 100 Ohio GE INTERLOGIX, INC.

100 Delaware GE DRIVES AND CONTROLS, INC.

100 Delaware SENSrNG SOLUTIONS, INC.

100 Delaware GE DRUCK HOLDINGS LIMITED 100 Delaware GE MEDICAL GLOBAL TECHNOLOGY CO., LLC 100 Delaware GE PETROCHEMICALS, INC.

100 Delaware GE PLASTIC FINISHING, INC.

100 Delaware GENERAL ELECTRIC INTERNATIONAL, INC.

100 Delaware GE TRANSPORTATION PARTS, LLC 100 Delaware GE TRANSPORTATION SERVICES, LLC 100 Delaware GE TRANSPORTATION SYSTEMS GLOBAL SIGNALING, LLC 100 Delaware GE PACKAGED POWER LP 100 Delaware GRANITE SERVICES, INC.

100 Delaware BENTLY NEVADA, LLC 100 Delaware REUTER-STOKES, INC.

100 Delaware GE ENERGY SERVICES, INC.

100 Delaware VICEROY. INC.

100 Delaware GE KEPPEL ENERGY SERVICES PTE, INC.

100 Singapore CARDINAL COGEN, INC.

100 Delaware AMERICAN SILICONES, INC.

100 Indiana (1) With respect to certain companies, shares in names of nominees and qualifying shares in names of directors are included in above percentages.

(2)

Exhibit 23 Consent of Independent Auditors The Board of Directors General Electric Company We consent to the incorporation by reference in the registration statements on Form S-3 (Registration Nos. 33-50639, 33-39596, 33-39596-01, 33-29024,333-59671, 333-96571, 333-72566 and 333-71778), on Forn S-4 (Registration No. 333-42442) and on Form S-8 (Registration Nos. 333-01953, 333-42695, 333-74415, 333-83164, 333-98877, 333-94101, 333-65781, 333-88233, 333-57734, 333-99671 and 333-102111) of General Electric Company of our report dated February 7, 2003, relating to the consolidated financial position of General Electric Company and consolidated affiliates as of December 31, 2002 and 2001, and the related consolidated statements of earnings, changes in share owners' equity and cash flows for each of the years in the three-year period ended December 31, 2002, which report appears in the December 31, 2002 annual report on Form 10-K of General Electric Company. Our report refers to changes in the methods of accounting in 2002 for goodwill and other intangible assets and for stock-based compensation, and changes in the methods of accounting in 2001 for derivative instruments and hedging activities and impairment of certain beneficial interests in securitized assets.

KPMG LLP Stamford, Connecticut March 7, 2003

Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned, being a director or officer of General Electric Company, a New York corporation (the Company"),

hereby constitutes and appoints Jeffrey R. Immelt, Benjamin W. Heineman, Jr., Keith S.

Sherin, Philip D. Ameen, Michael R. McAlevey and Robert E. Healing, and each of them, his or her true and lawful attomey-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead in any and all capacites, to sign one or more Annual Reports for the Company's fiscal year ended December 31, 2002, on Form 10-K under the Securities Exchange Act of 1934, as amended, or such other form as any such attomey-in-fact may deem necessary or desirable, any amendments thereto, and all additional amendments thereto, each in such form as they or any one of them may approve, and to file the same with all exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, granting unto said attomeys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done so that such Annual Report shall comply with the Securities Exchange Act of 1934, as amended, and the applicable Rules and Regulations adopted or issued pursuant thereto, as fully and to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said atomeys-in-fact and agents, or any of them or their substitute or resubstitute, may lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, each of the undersigned has hereunto set his or her hand this 5th day of March, 2003.

IslJeffrev R. Immelt Jeffrey R. Immelt Chairman of the Board (Principal Executive Officer and Director)

Isl Keith S. Sherin

/st Philip D. Ameen KeiM S. Sherin Philip D. Ameen Senior Vice President-Finance Vice President and Comptroller (Principal Financial Officer)

(Principal Accounting Officer)

(Page 1 of 2)

Isl James 1. Cash, Jr.

James 1. Cash, Jr.

Director Rochelle B. Lazarus Director Is/ Dennis D. Dammerman Dennis D. Dammerman Director Isl Ann M. Fudge Ann M. Fudge Director Is/ Claudio X. Gonzal Claudio X. Gonzalez Director Is/ Andrea Juna Andrea Jung Director Sam Nunn Director Roger S. Penske Director Gary L. Rogers Director Andrew C. Sigler Director Is/ Alan G. Lafley Alan G. Lafley Director Js/ Robert J. Swierinpa Robert J. Swieringa Director

/s/ Douglas A. Wamer Douglas A. Wamer III Director

/s/ Kenneth G. Lanoi Kenneth G. Langone Director is/ RalDh S. Larsen Ralph S. Larsen Director Robert C. Wright Director A MAJORITY OF THE BOARD OF DIRECTORS (Page 2 of 2)

Exhibit 99(d)

CERTIICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of General Electric Company (the "Company") on Form 10-K for the period ending December 31, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"),

1, Jeffrey R Immelt, Chief Executive Officer of the Company, cerify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

March 7,2003

/s! Jeffrey R. Immelt Jeffrey R. Immelt Chief Executive Officer

Exhibit 99(e)

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of General Electric Company (the 'Company") on Form 10-K for the period ending December, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Keith S. Sherin, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

March 7, 2002 s/ Keith S. Sherin Keith S. Sherin Chief Financial Officer

General Electric Annual Report 2002 ONLYS

,III: 11N: F.11" 1.

I I

I 0

I

. I

I.

I~*

a aa a

I~~~~

11, a

I~

a o5 a

a t ~

~

55' Ah~ ~~~*a g

I~

~

a a

e

AICMN

AL,

i NOW IS THE BEST TIME TO BE AT GE.

N;

/ic

'C

I

\\

I

\\3/411

DEAR STAKEHOLDERS:

GE is strong. In 2002, we grew earnings 7% and cash 10% in a tough economy, and our businesses improved their global positions with investments in technology and customer focus. We maintained our financial strength, remaining one of only seven Triple A-rated industrial companies, and GE's terrific people prepared your company for success in the 21st century. There is much to be proud of.

However, as measured by the stock price, this was a disappointing year for GE investors-including GE employees, who own almost 10% of our stock. We had targeted higher earnings growth, but as I will explain below, we had to increase reserves at ERC (Employers Reinsurance Corporation), our reinsurance business.

We had to work through the general swirl around busi-ness practices and, perhaps most important, address concerns about our future growth. Our stock was down 39% for the year, more than the S&P 500, and GE now trades near the same level it did at the end of 1997.

As managers, it is our principal job to make and sell great products and services that people need and thereby increase earnings. Since 1997, our earnings have grown more than 80%...far in excess of the S&P 500's performance. If you have held GE stock for 10 years or more, the average total annual return on your shares has been 15%-more than one and a half times the 9% of the S&P 500. Through the cycles, your GE management team has consistently grown earnings, and 1, along with our many managers, have no doubt that we will be able to continue to do this.

This was not a great year to be a rookie CEO. With a tough economy, a volatile political environment, and the impact of 9/11 and industry cycles, business chal-lenges were plentiful. Add to that the presumption of.

widespread corporate fraud and there were not too many normal days in 2002.

However, I am an optimist. In many ways, this was the best time to take over a company. That is because the role of the CEO will, and should, change. And a new CEO-especially an optimistic one-can embrace change with an open mind. Let me share a few thoughts with you on how I am leading GE in this environment.

I believe that our reputation for integrity and honor-able dealings is our most important asset. GE has not been immune to the fallout from recent bull and bubble markets. I hear from investors who are concerned about the quality of corporate earnings, the need for a solid balance sheet and sustainable cash flow, and the importance of responsible executive compensation and accounting standards. Let me assure you that GE will lead on all of these fronts.

As one example, a substantial portion of my com-pensation is linked to the performance of GE stock.

Nearly 70% of my net worth is in GE stock. I hold my stock options to term (10 years), a practice I adopted when I became chairman and which I will continue. At the same time, I have asked our board's Compensation Committee to explore best practices on linking my pay even more closely with investor interests.

I strive for openness. I am committed to putting investors inside GE every day. It will take some time to get this right, but I am committed to the process. I want investors to understand how GE grows, and that our fundamentals are real and sustainable. When you GE 2002 ANNUAL REPORT 5

The GE business model have high-performing businesses run by talented man-agers, it is enjoyable to let the world know how the job is getting done. For example, in July we divided GE Capital into four distinct financial services businesses, each with its own growth strategies, leverage and bal-ance sheet. This makes them easier to grow internally and clarifies them externally.

I believe in the GE team. I see every day just how special your GE team is. Its members are diverse and talented. They have unceasing curiosity and relentless drive. They understand the magic of GE... that what we imagine, we can make happen. Leading this group is the honor of my life. We are committed to work together, to deliver and always to put the company first.

Your GE team believes in high standards, and believes that strong integrity is the foundation of great performance. I hold myself to a high standard, and I know you will do the same.

Here is how we performed in 2002:

Earnings before required accounting changes grew 7%

to a record $15.1 billion. Earnings were on track to grow 17% to $16.5 billion, but we recorded a $1.4 billion charge for increasing ERC's reserves.

Revenues grew 5% to $132 billion. Industrial sales grew 8%, more than twice the GDP and exceeding our 2001 growth rate. Financial services revenues were flat, reflecting lower interest rates. However, net revenues (revenues less interest costs) of Commercial Finance, Consumer Finance and Equipment Management grew a more robust 15%.

Cash flow from operating activities (excluding progress collections) reached $15.2 billion, up 10%. Operating mar-gin and return on average total capital remained near historic highs at 19% and 24%, respectively.

We raised our dividend 6% in December, our 27"h consecutive annual increase. Our yield is a very strong 3.1%, the highest at GE in nearly a decade. Overall, we returned $9 billion to our investors in 2002 through dividends and stock buybacks.

There is a job that belongs to you and your fellow investors, and not to me. That is setting a value on our future prospects in the form of a stock price. Last year, despite what we saw as a lot of progress in the face of headwinds, the market revised downward its perception of our future. Maybe the market had too rosy a view of many companies, and not just GE.

But that is certainly not the case now. This is a great company with great prospects. When investors fully understand that fact-and I intend to make sure they do-valuation must change.

It starts with understanding our business model, our strategy for growth and our values.

THE GE BUSINESS MODEL CEOs don't make the best economists. We make commitments, not forecasts. But it's safe to say things are very different today than in the late 1990s.

We seem to be in the third year of a "post-bubble" cycle, made worse by the 9/11 tragedy. This period is characterized by slow economic growth-not a dou-ble dip, but without a spark-with tough pricing, volatile capital markets, difficult industry cycles, the threat of war and low corporate trust.

We don't see this environment as a negative.

Rather, we believe this is an environment in which companies make their own success. This is the time for us to create our own growth through bold ideas and rigorous execution. And we have a business model that will enable us to grow in this economy.

Our Goal:To grow earnings 10%-plus annually with 20%-plus return on total capital... reliably, sustainably, through the cycles. Getting there depends on our solid business model:

A diverse set of leading businesses driving performance

Operating rigor with a focus on cash generation

Great people in a culture of learning and accountability A DIVERSE SET OF LEADING BUSINESSES GE has great businesses, most of which we've been in for decades, some for 80 years or more. In addition to leading in their markets, these businesses have many traits in common: an unparalleled technical foundation; direct customer interfaces; multiple ways to make money through products, services and financing; global scale; and low capital intensity. The characteristics of our businesses allow us to outperform our competitors in each cycle; the combination of our businesses allows GE to perform through the cycles.

Power Systems is a great example. In 2002, its earnings grew nearly 30% as shipments of gas turbines in the U.S. peaked. This business has generated an incremental $7 billion of net income for investors during the four-year gas turbine bubble. We know.that Power's 2003 earnings will be down as the demand for gas turbines declines. But Power is led by one of our most experienced teams. As a result, Power has no financial 6

GE 2002 ANNUAL REPORT LETTER TO STAKEHOLDERS

A DIVERSE SET OF LEADING BUSINESSES DRIVING PERFORMANCE Great businesses we have been in for decades OPERATING RIGOR WITH A FOCUS ON CASH GENERATION Triple A-worthy discipline for investment in growth GREAT PEOPLE IN A CULTURE OF LEARNING AND ACCOUNTABILITY Individuals who imagine, lead and perform for the team and the company hangover from excess capacity or risky financing, so we can give our investors a soft landing. With an installed base of turbines and a multi-year services backlog that both have grown tenfold, and investment in new platforms including Oil & Gas and Wind Energy, Power is positioned for long-term growth and high returns.

Our performance in a difficult commercial aviation market has been excellent. Our earnings in Aircraft Engines and GECAS (our leasing unit) were down only 5% in 2002, despite a near 20% decline in commercial engine shipments and the bankruptcies of two major U.S. airlines. Our businesses are extremely well man-aged, and their leaders have been through these cycles before. We took cost out of the Engines busi-ness while investing $700 million in R&D to develop eight new engines. We have a successful family of engines for regional jets, the only growth segment in commercial aviation. Our service and military busi-nesses should grow more than 15%, providing earnings momentum. Meanwhile, GECAS has kept a 1,100-plus fleet productive, with only 12 planes on the ground at the end of the year. Our in-depth knowledge of these assets and our global marketing skills have allowed GECAS to grow through the turmoil. We are managing through bankruptcies at major customers and have remarketed more than 140 aircraft. We will emerge from this cycle with strengthened customer relation-ships, ahead of our competition. These businesses should have double-digit earnings growth in 2003.

Medical Systems should also have an excellent 2003. Medical introduced 30 new products in 2002, the most in its history. The backlog of orders for these high-margin products is at an all-time high, and service growth continues at 11% annually. Medical's healthcare information technology business grew orders 30%

in 2002 and is well positioned for 2003. Our Medical business is the global leader in diagnostic imaging and clinical information technology, two of the fastest-growing segments in healthcare. Medical has a vibrant leadership team with deep healthcare expertise, and the business is positioned for sustained double-digit growth.

NBC continues to outpace its competition in financial performance and ratings. Earnings grew 18%

in 2002, a tegrific performance that we expect will continue through 2003. Our prime-time ratings in key viewing demographics (adults ages 18-49) were 29%

higher than the next network's, allowing GE to com-mand a 50% share of the growth in the "upfront" (pre-season) advertising market. In 2002, we added the Telemundo and Bravo networks to NBC. Telemundo is well positioned to capture the growth in Hispanic advertising. Bravo's upscale audience parallels NBC's and creates new opportunities for content. Because of NBC's great performance, I was delighted to present Bob Wright and his team with our annual Chairman's Leadership Award for "best overall performance.'

Our other short cycle industrial businesses-Plastics, Consumer Products, Industrial Systems and Specialty Materials-are well positioned for the future. They have been affected by the global economy and earned less in 2002 than they did in 1999. To combat this they have lowered costs, invested in new products, built global distribution and added new growth segments.

These businesses have transformed themselves during a tough cycle, and they can achieve double-digit earnings growth with only moderate economic expansion in 2003.

Commercial Finance and Consumer Finance grew earnings by more than 15% last year, with attractive returns on equity. These businesses represent more than 80% of the earnings of the old GE Capital. We grew their assets by 16% in 2002, while losses and delinquencies remained stable. We acquired new plat-forms that are producing exceptional returns: Deutsche Bank's inventory financing business, ABB's structured finance business and Security Capital's real estate operations. Commercial and Consumer Finance have broad and deep leadership teams-people who know how to get the most from each cycle. These businesses have solid competitive advantages in low funding costs, strong risk management and global origination, and should deliver double-digit earnings growth in 2003 and beyond.

LEARNING THE HARD WAY ERC stands in sharp contrast to GE's expectations for business performance. We pride ourselves on having sound strategy with strong operating accountability. A GE business can briefly get out of balance strategically or operationally, but rarely do we get both wrong at the same time. We did with ERC.

GE 2002 ANNUAL REPORT 7

Our strategy for growth ERC experienced more than a decade of strong per-formance from 1984 to 1996. However, we allowed our-selves to go into more volatile, commodity insurance lines and new geographies, and we did not manage this expansion well. Our poor underwriting in the late 1990s resulted in ERC's losses in 2002. Although it offers little solace, our experience reflects that of the insurance industry, which has increased reserves by $25 billion to address poor underwriting during those years.

When businesses underperform, we owe investors four things: state the financial results with compiete clarity; correct the issues with our best people and intense management; maximize returns for investors; and share the lessons to avoid repeating the mistakes.

We are doing these things with ERC.

We have had a leadership team in place for the last two years that is fixing this business. ERC has exited its lower-return product lines, made a host of changes in operations and achieved $1 billion in price improvements in 2002-and expects to maintain this momentum in 2003. ERC is improving every day, in an industry that is heading toward stronger returns for the next few years.

As you can see, GE will post solid growth in 2003 because of our business diversity. Power Systems will be down, as expected; however, the rest of the com-pany is positioned for double-digit growth.

OPERATING RIGOR Strong processes are the foundation of our operating rigor. We are in the ninth year of Six Sigma at GE, and it has become a permanent initiative-Six Sigma is the way we work. During the last year we completed more than 50,000 projects, focused primarily in three areas: working with our customers on their issues; improving our internal processes to improve our cus-tomer interfaces and generate cash: and improving the flow of high-technology products and services to the marketplace.

We are in the fifth year of building a digital capability to make GE leaner and faster. Digitization is now gen-erating $2 billion in annual productivity savings through sourcing and infrastructure. At the same time, we have used digitization to link with our customers' workflow and improve service.

Increasingly, the focus of our operating rigor is on growing cash flow. Cash is a priority for our leadership team and represents 60% of the measurement used for their incentive compensation. Six Sigma is creat-ing repeatable and reliable processes that allow us to reduce cash tied up in inventory and receivables.

Through digitization we are getting more from our fixed assets. We plan to generate nearly $30 billion in operating cash flow ex-progress in 2002-2003.

We took several actions to strengthen our balance sheet in 2002. We improved our liquidity by reducing the commercial paper of our financial services busi-nesses to 31 % of their total debt outstanding. We also infused more than $6 billion into those businesses to increase capital and reduce leverage. GE's Triple A rating was affirmed by the rating agencies, and our rigorous approach was recognized. We received four awards, including "Borrower of the Year" and "Best Corporate Issuer:' from bond investors and underwriters sur-veyed by International Finance Review.

Financial strength gives us the ability to invest in growth, and we have viewed this economic cycle as a time to invest. We have increased the number of engi-neers, salespeople and service resources. We will invest more than $3 billion in technology, including major investments in our global research centers. We've strengthened our commitment to China, increasing resources there 25% in 2002, and we've increased our presence in Europe, where GE should exceed $30 billion in revenues in 2003.

Acquisitions are a key form of investment for us.

We have invested nearly $35 billion in acquisitions over the past two years. Acquisitions are a way to redeploy cash flow for future growth. The key is discipline: we buy the right businesses at the right price and grow them. Our acquisitions tenci to be between $100 million and $2 billion in value, in industries we know. Our industrial acquisitions are companies with high margin rates and low capital requirements where GE can boost growth and cash flow. Our financial services busi-nesses consolidate portfolios when GE can improve funding cost, risk management and growth. Our invest-ment screen is simple: we expect a 15% cash-on-cash return by year five, or we don't do the deal.

8 GE 2002 ANNUALt REPORT LETTERTO STAKEHOLDERS

TECHNICAL LEADERSHIP that expands margins and grows the installed base SERVICES ACCELERATION that improves returns, competitiveness and customer satisfaction ENDURING CUSTOMER RELATIONSHIPS that are unbreakable because we win together over the long term GLOBALIZATION as a way to grow faster and be more competitive RESOURCE REALLOCATION to build positions in new markets where we can achieve superior growth and returns In 2002, we saw just how this strategy can work.

We acquired Betz

Dearborn,

an industry leader in water services. This business has a powerful asset:

2,000 sales engineers who are so committed to their customers that they practically live on site, creating powerful relationships and new cross-selling opportu-nities. Another acquisition, Interlogix, is a medium-sized player in security systems. It has excellent tech-nology that, when combined with our services capa-bility, will create new opportunities. At year-end, we announced the acquisition of Instrumentarium, a lead-ing provider of medical equipment and services for the operating room. We view this as a new platform in the operating room, where GE can add services and integrate technology.

Throughout our history, making smart bets at the right point in the cycle has improved share owner returns. This is an excellent time to invest for long-term growth. Assets are fairly priced, and with our financial strength we can move ahead of the competition.

PEOPLE AND CULTURE My job is to attract and keep talented and loyal people who work together as a team. During a volatile year, our voluntary attrition among the top 600 leaders was less than 3%. We named 22 new officers, 41% of whom are global and diverse. We continued our

$1 billion investment in training, and our Welch Learning Center at Crotonville remains a vital part of the GE culture. As some companies stopped hiring, we increased on-campus recruiting and launched a Commercial Leadership Program aimed at growing a new generation of customer-focused leaders.

At the same time, we continue to build a culture based on performance, compliance and teamwork.

The GE people appearing throughout this report repre-sent the best of this culture.They imagine, they lead and they perform.

They exemplify our new slogan, Imagination at Work. GE has a rich century-old tradition of great brand campaigns, and Imagination at Work upholds the stan-dard. But the best thing about it is that it tells the world about the spirit and passion of GE employees-their curiosity, drive, hard work, warmth and humor. For GE employees, Imagination at Work is a daily rallying cry to say: "what we imagine, we can make happen."

We strive to make GE a meritocracy, where the best-performing people get the best rewards. But everyone must operate in a system where the company comes first. We all serve under the same integrity policy and compliance program, our compensation plans are broad-based, our businesses work together, and we have one human resources system. When the company wins, we all win.

OUR STRATEGY FOR GROWTH The best strategies create value for customers and investors. For customers, we can improve their prof-

'itability in tough environments. For investors, we can create sustainable and valuable growth through the cycles. We believe that GE can do both. We are taking the company to a place where few can follow... big, fundamental, high-technology infrastructure industries in which GE can have enormous competitive advantage.

We are creating a better company-a global Technology, Services and Financial enterprise capable of expanding growth, cash, and returns on capital through the cycles. Our strategy for growth is based on five key elements:

Technical leadership that expands margins and grows the installed base

Services acceleration that improves returns, competitiveness and customer satisfaction

Enduring customer relationships that are unbreakable because we win together over the long term

Globalization as a way to grow faster and be more competitive Resource reallocation to build positions in new markets where we can achieve superior growth and returns TECHNICAL LEADERSHIP Technology is the heart of the strategy, because it drives valuable growth. Great products are the antidote to deflation-customers will pay a premium to GE for them because they make customers more profitable.

The GE Evolution'" Series locomotive we announced in December offers customers 40% lower emissions and improved fuel efficiency and reliability-all of which lowers the cost of ownership.

Technology is a total company capability. New product introductions grew by 25% in 2002 and came from all 13 businesses. Some create demand in high-tech markets, like Medical's Innovag 4100. This is the GE 2002 ANNUAL REPORT 9

LETTERTO STAKEHOLDERS THE GE LEADERSHIPTEAM Representatives of GE's operating and corporate management... united by curiosity, drive and imagination industry's only digital flat-panel interventional cardiac imaging system; it is expected to generate $150 million of revenue in year one, and it has no competitors.

Other products create demand in old industries. In 2003, our Consumer Products business will introduce high-end cooktops and ovens, refrigerators, dishwashers, washers and dryers that can lead their categories.

GE leverages technology in unique ways through our Global Research organization. Our first Global Research Center, opened more than 100 years ago in Schenectady, N.Y, was the birthplace of corporate research and development. Today we're extending our reach with centers in India, Germany and China. Global Research has become a hub for change because it allows us to invent new technologies and discover new applications across our businesses.

Renewable energy is a great example. In March 2002, we acquired Enron's wind power assets for $180 million. We knew their customers, but not their expert-ise. But through Global Research, in nine months we infused technology from around GE, from materials to controls to generators. As a result, we have improved the performance of the existing fleet, given the busi-ness the means to produce more efficient and power-ful new turbines, and added a business that should generate revenues in excess of $1 billion in 2003 with solid profitability. We have become a global leader in wind energy in less than a year because of our diverse businesses and Global Research. In two years, GE Wind will pay for itself. Only GE can do this.

Technology leadership expands the capability of every GE business. But its most important benefit is the creation of a huge installed base of long-lived, propri-etary technology, and opportunities to provide that base with services for years to come.

SERVICES ACCELERATION Services leadership accelerates high-margin growth and creates competitive advantage. When you own the technology, there is never excess capacity. Our advantage lies in a high-tech installed base of jet engines, power turbines, locomotives and medical devices. This base has grown fourfold since the mid-1990s, and it remains one of our most valuable assets.

Our multi-year services backlog is $75 billion today, nearly as big as all of GE in 1996. In 2003, we expect services revenues of $23 billion, growing at double digits, with margins of more than 25%.

Many people assume that high margins mean that the customer is getting a bad deal. The opposite is true. Services put GE on the same side as the customer and bring us closer. We win together. Customers like Southwest and KLM have found that we make them more profitable by delivering more fuel efficiency, more time on wing and better service.

In the railroad industry, the key customer metric is asset utilization-the time a train is working. We have a set of information technology services that can increase asset utilization by two percentage points.

This represents a substantial potential savings for the industry and approximately $350 million in revenues for ourTransportation business.

Services by definition keep you focused on your customers. And when you are solving customers' problems, your potential for growth is endless.

ENDURING RELATIONSHIPS We want GE to have enduring relationships with customers. This has been my passion for many years.

I admit that when I discuss it inside the company or among investors, eyes can glaze over. Talking about customers seems too soft.

Let me put it as simply as I can. Customers win when we provide better products; they win when we provide better service; they win when we can generate productivity through information management; they win when we can provide needed capital.

GE operates in huge, global, fundamental industries:

airlines, railroads, hospitals, utilities, retailers and mid-market businesses. A company that provides products and services and information and financing in markets it's been in for decades can have enduring relationships.

The challenge I have set out for GE is to be innovative, productive and competitive so that we can do this again and again and again.

Healthcare is a great example of what I mean. This is a $4 trillion global industry, growing more than 10%

each year. It's also filled with challenges. Healthcare affordability is a social issue, with costs heading toward 20% of the U.S. GDP by the end of the decade. Only 50% of our customers are profitable. GE can help.

10 GE 2002 ANNUAL REPORT

I

Milk-

We have broad technical expertise and a huge installed base in important parts of a hospital-radiol-ogy, cardiology, and surgery. Our technology can improve patient treatment, which makes hospitals more prof-itable. Through our healthcare services agreements, we are the hospital's productivity partner. We completed more than 4,000 Six Sigma projects with healthcare providers in 2002, and these projects are improving the quality of patient care and lowering costs. We have clinical information technology that addresses our hos-pital customers' digital needs. We created a Healthcare Financial Services business in 2002 to solve customers' financing problems across a variety of platforms.

Because of this depth and diversity, we can sit in a CEO's office or with a radiology technician and help a hospital create a better future.

The phrase "solutions provider" is so overused, it makes us all snore. I want GE to be essential to those whom we serve... a critical part of the profit equation...

a long-term partner... a friend.

GLOBALIZATION Globalization multiplies growth by taking our capabilities everywhere. Global strategies also create faster growth and reduce costs by distributing market and engineering resources. We believe that the two most important mar-kets for GE in the next few years are China and Europe.

5 X 5 IN CHINA People talk about China as either an opportunity or a threat. The most successful China strategy is to capital-ize on its market growth while exporting its deflationary power. We have a vision for China: $5 billion in revenue and $5 billion in sourcing-"5 x 5"-by 2005.

Four of our businesses have built service and production capabilities in China. Plastics has as many salespeople in China as it does in the U.S. We are playing there as one GE, meaning that our business diversity makes us a perfect partner for a large country like China and its complex infrastructure needs.

Our CF340 engine was selected as the sole choice for China's regional jet program, which ensures that GE will have a lead position in the Chinese aviation market when the jet (the ARJ21) is ready to fly in 2007. We i

accomplished this by partnering with key constituents across China and the U.S. to develop our solution. We worked with the aviation industry to expand the design and the range of our capabilities, and we worked with local technology groups to brand our engines. And we brought local leaders to Crotonville to participate in our leadership training programs. By acting as one GE-not just as an aircraft engine supplier-we secured an important point of leverage in a growing market. As a result, Plastics, Medical, Engines and Power are each heading toward $1 billion in revenue in China.

At the same time, we are building our sourcing capability. We will open the Shanghai Global Research Center in May, which will speed our sourcing qualifica-tion process. Our Consumer Products business will have 25% of its sourcing based in China by 2005, which will transform its cost base. And we are designing and manufacturing technical products like magnetic res-onance (MR) and computed tomography (CT) devices in China. Keep in mind, $5 billion in sourcing from China generates $1 billion in cost savings for GE.

EUROPE: SMALL WHERE WE SHOULD BE BIG We also believe it is a good time for GE in Europe.

Europe is a big market going through significant changes of enlargement and conversion. The market is growing slowly, but GE has a massive opportunity there because we are small where we should be big.

We have half the market share in Europe that we have in the U.S. We believe that the combination of market enlargement and regulatory convergence will help us drive a more profitable future in Europe.

Our European Consumer Finance business is a great example of what is possible. This business oper-ates in 17 countries, with 11,500 people. In five years, we have gone from nothing to $700 million in earnings in Europe, through great marketing and business development. We are a local company with global strength and limitless growth opportunity.

RESOURCE REALLOCATION We are allocating capital to new businesses that will increase growth with high returns. We like global mar-kets where we can build technical leadership, interface directly with customers and develop multiple ways to make money. We favor businesses that require "human capital" (engineers, salespeople, risk managers) as opposed to "physical capital" (factories).

GE 2002 ANNUAL REPORT 13

LETTER TO STAKEHOLDERS We are building a large presence in industries where we can lead. We have identified six new platforms that we believe can be big, each having $1 billion of operating profit within the next few years: healthcare information technology, water technology and services, oil and gas technology, security and sensors, Hispanic broadcasting, and U.S. consumer finance. I view these as our "chil-dren:' Someday each one can grow to be a full-scale GE business. Today they represent $9 billion in revenue and $2 billion in operating profit. They are generating 15% annual organic growth, with even more available through business development. All can have returns on capital in excess of 20%. With GE's people, technology and experience, we can quickly lead in these markets.

Our entry into water technology is a good example.

It is a $35 billion global industrial market, growing 8%

each year with high margins. It's a fragmented industry whose customers are outsourcing more and more of their water requirements. We acquired Betz Dearborn and agreed to acquire Osmonics, which together have a run rate of $1.5 billion in revenues going into 2003, with operating margins near 20%. Our technical, service and globalization skills go right to the core of this busi-ness, and additional acquisitions will help round out our offerings. We aim to grow it 15% annually and, by 2005, have a $4 billion global business leader.

At the same time, we have businesses that cannot generate the long-term earnings growth or returns our investors expect. In 2002, we sold GE Global eXchange Services for a gain of nearly $500 million. This was not a bad business; however, we did not believe we could grow it effectively. We also decided to wind down and exit our Equity portfolio. This is not an operating busi-ness, we lack competitive advantage, and it no longer makes sense for our investors. We will be aggressive in redeploying capital within the company in 2003.

GE VALUES Values. Where the culture starts and stops. Where peo-ple are committed to the greater good of the company, to our customers' success and to each other.

We feel great about GE today, and about what it means for our future. In 2002, for the fifth consecutive year, we were named "The World's Most Respected Company" in a Financial Times survey of 1,000 global CEOs. They placed GE first for integrity.

Awards are great, but ultimately, integrity is proven by the actions and decisions-millions each day-of hundreds of thousands of people across this company.

Meeting our commitments. Performing with integrity.

This is the foundation from which we govern GE.

I want your company to take a leadership role in governance. So much attention has been paid in the past year to corporate trust-who has it, who doesn't.

We believe it's about action, not about words. That's why, in November, we outlined a set of principles and actions that strengthen GE for the future.

Our Audit Committee oversees a rigorous process that starts at the top. As CEO, I review these busi-nesses constantly. Our business leaders report their results quarterly using standards that conform to SEC requirements. We have a 450-person internal audit staff constantly reviewing and improving our financial rigor. One-third of our business leaders has served on our audit staff. Led by our CFO, we have very strong accounting oversight and principles. We have all grown up in a culture where compliance and integrity come first. I've been signing letters attesting to the validity of results for years.

GE has always had a strong and independent board, and we are updating our practices for the current environment. We will go beyond the letter of the Sarbanes-Oxley Act and the New York Stock Exchange listing requirements to enforce the spirit as well.

We want directors to probe with hard questions that stretch management and deal in depth with core issues confronting GE. We expect directors to have even greater involvement and participation both in understanding the company and in advising the lead-ership team. Directors must be our most constructive critics and our wisest counselors.

Our board has created the position of presiding director to guide its independent activities. My own role on the GE board is clear. I have two functions: lead the company as CEO with integrity, clarity and purpose, as measured by financial performance and reputation; lead the board as Chairman with vision and openness, at meetings where we energetically debate the proper strategic direction for the long-term interest of GE investors. GE is a very large, multi-business company, and the board and I believe that you are best served by having one person fill both roles.

14 GE 2002 ANNUAL REPORT Our Goal

To grow earnings 10%-plus annually with 20%-plus return on total capital...

reliably, sustainably, through the cycles That I have two functions means the board must trust my judgment and character. I am more than willing to be judged on the quality of my ideas and the impact of my decisions. Just to make sure I never lose my way, I work without a contract, serving meeting to meeting at the will of the board.

We have visibly aligned executive compensation with investors. We implemented a stock ownership requirement for the top 24 GE executives, which will be measured as a multiple of their salaries. We will hold this stock as long as we work for GE.

On top of this, we have instituted a one-year holding period for GE shares that top executives acquire through option exercises. We want to eliminate any concern that our leaders would cause a short-term increase in the stock price for personal gain.

And we are voluntarily expensing stock options to improve the spirit of transparency. We will continue to distribute stock options because they align managers with investors and retain our best talent.

We have increased communication with investors.

We have significantly increased the quantity and quality of our financial disclosures and investor interfaces, including webcasts on quarterly results, 25% more investor meetings, and much fuller SEC-required reports.

We reorganized GE Capital and gave greater clarity to our financial services businesses.

Despite all the good work done by the New York Stock Exchange and Sarbanes-Oxley, there are no sets of laws or rules that can stop a bad culture. All the public failures have one thing in common: phony heroes in weak cultures who were allowed to operate outside the system.

One concern that keeps me up at night is that among the 300,000-plus GE employees worldwide, there are a handful who choose to ignore our code of ethics. I would be naYve to assume that a few bad apples don't exist in our midst. We spend billions each year on improving our training, enforcing our compli-ance with ethical norms and reinforcing our values, all to preserve our culture and protect one of our most valuable assets-our reputation.

The one truth I know-and know absolutely-is that the right people are in GE's boardroom and on our leadership team.

I want you to know that this company has world-class standards for governance and compliance. GE will take a leadership position at any time to restore public trust in corporations. The strength of this company is deeply ingrained in our culture and values.

NOW ISTHE BESTTIME FOR GE Your company enters 2003 with momentum and the confidence that performing in a tough environment can bring.

We are prepared to win in a slow-growth, volatile, global economy. With our proven operating model, we get the most from each of our businesses and offer investors safe growth and reliable returns.

Our strategy is in place. We are making GE a better company. We are creating a global Technology, Services and Financial enterprise capable of expanding growth, cash and returns on capital throughout cycles.

We are crafting new platforms for growth in new mar-kets. We are forging tighter, more enduring bonds with our customers so that we both win. And we are committed to meaningful governance.

We are a company that does what few others can do and goes where very few can follow. We are a company you can believe in.

I thank you on behalf of the GE team for your continuing support. I hope you believe, as I do, that our best days are ahead.

Jeffrey R. Immelt Chairman of the Board and Chief Executive Officer Gary L. Rogers Vice Chairman of the Board and Executive Officer Dennis D. Dammerman Vice Chairman of the Board and Executive Officer Robert C. Wright Vice Chairman of the Board and Executive Officer February 14, 2003 GE 2002 ANNUAL REPORT 15

)

-~~~~~~~~l

-ir I

Cl

~~

4trn _

(2 IJ a

I rIi A%

X

.1

-it t

The GE90-115B is the most powerful jet engine ever flown As early as April 2004, 350 pass6ngers wil balettrvel

-non-stop from New York to Hong Kn,or Seattle to Singapore,d on a 115B-pweredLBoeing 777-300ER.

GEAircrM Engines is develpingeightnew ngine miodels, including th:

I 18

-GE 2002 ANUAL F1EPOIi II

U'~~~~~~~~~~o 127900 POUNDS 'OF THRUST.

TWO WINGS A SUD-DENLY: SMALLER WORLD.-

GE 2002 ANNUAL REPORT 19

V

To the left is a patient. Below is a hospital.

BEFORE YOU IS THE FUTURE OF HEALTHCARE.

GE is helping healthcare providers save lives and maintain their own financial health. GE imaging technologies scan the body with unprecedented speed and precision. GE-programmed tablets enable hospitals to put information at the doctor's fingertips. And GE services and financing help healthcare administrators manage costs and focus on patients. For global spending on healthcare of

$4 trillion a year, GE offers a powerful prescription.

I

'1..

A

-

3/4 I1

.

.1 h

"I i.

p.

I 1 1' "",

A a!. I.

iN~

u Money doesn't make the world go round.

Access to it does.

Nearly half a billion individuals and businesses worldwide benefit from dozens of forms of financing-and advice on how to use it effectively-from GE Commercial Finance and GE Consumer Finance.

THIS IS A MODEL TRAIN.

A model for the industry.

GE Transportation Systems' new Evolution Series locomotives meet 2005 United States environmental emissions regulations two years ahead of schedule, cutting emissions 40% and improving fuel efficiency.

24 GE 2002 ANNUAL REPORT

p

,1

jj;.

l-l t:

t s

l Llsis v-Sc 7

z DVod--Xx; fP

_r j

D: ::

s t:

GE 2002 ANNUAL REPORT 25 E AIM L

r I I

-F I

w-m -.

1-

V N

owlw

MADE IN GREENVILLE.

Could power South Carolina.

1~ u r

N

Lots of South Carolina. GE Power Systems' new H System can produce 480 megawatts, enough to power more than half a million Palmetto State homes. The H System is designed to achieve 600% thermal efficiency-the power generation equivalent of the four-minute mile.

\\~

14i

Water might seek its own level, but we're taking it to another one entirely.

GE Betz has helped its industrial customers conserve more than 30 billion gallons of water in their manufacturing processes over the past decade, saving them more than

$1 billion in costs as well. GE Betz, part of GE Specialty Materials, competes in a $35 billion industrial water market growing 8% a year.

It's a doorway to another place-a safer world.

GE Industrial Systems is transforming itself into a major provider of advanced security technology, such as the GE Ion Track EntryScan'" portal, which uses a patented ion-trapping collection process to detect traces of illegal drugs and explosives simultaneously. The market for electronic security products totals $19 billion and is growing 8% a year.

j

/

eli S

sr_~l"Ye s

L_n I

r:-

l

~-

M104

' J R~

~ '

L

-t Xj L

Vl III I.

rii Em-mom M~~~~~~~~~~~~~~~~

-Amm 1-1 N%=

1 1

F1T f;

. L i"-

A

.........~~~~~~~~~~~~~~~~~~~~~~~~~~~-

I -

a f 14

..--, -

A

'pw D

Wow is the endgame, and it's not easy getting there.

It takes people with unceasing curiosity and a relentless drive to perform. It takes a culture that creates the space to imagine and the focus to deliver.

And, at the end of the day, it takes a lot of hard work A

4 from exceptional people.

We are a company with a great set of businesses that are led by people with a love of ideas. Every day, these people work with the unique knowledge that at GE, what you imagine, we can make happen.

I

OUR BUSINESSES GE's 13 businesses will focus in 2003 on cleepening their relationships with customers by providing them with advanced GE technology and cost-saving services that will enable them to grow. By doing so, GE's businesses will continue their own evolution into customer-focused, high-technology, service-oriented and capital-efficient enterprises.

Aircraft Engines PRESIDENT AND CEO: David L. Calhoun 2002 REVENUES: $11.1 billion In the midst of a prolonged commercial aviation slump, Aircraft Engines is extending its technology leadership through the biggest R&D effort in its history.

Aircraft Engines is developing eight new engine models, ranging from the next GE90, the world's most powerful commercial engine, to new CF34s, the engine of choice for regional jets-the fastest-growing seg-ment in commercial aviation. Aircraft Engines and CFMI (jointly owned by GE and Snecma) anticipate that cus-tomers will reward their commitment to technology by growing the fleet of GE and CFMI commercial engines from 16,000 today to more than 24,000 by 2010.

Aircraft Engines also expects several years of dou-ble-digit military growth as it develops new technology for military engines, including an engine for the U.S.

Armed Forces' Joint Strike Fighter.

Aircraft Engines' new technologies will deliver economical performance with reduced noise and emissions for years to come. Aircraft Engines will also provide years of services to its installed base of com-mercial engines, generating steady revenues while enabling customers to reduce their operating costs.

The airline industry goes through multi-year cycles, and Aircraft Engines has been here before. By staying the course with a steadfast commitment to technology, Aircraft Engines will support the eventual recovery of its customers while laying the foundation for outstanding growth opportunities of its own.

www.geaircraftengines.com Commercial Finance PRESIDENT AND CEO: Michael A. Neal 2002TOTAL ASSETS: $195.8 billion With lending products, growth capital, revolving lines of credit, equipment leasing of every kind, cash flow programs, asset financing and more, Commercial Finance is playing a key role in the growth, expansion and stability of 35 countries' major industries, including healthcare, manufacturing, communications, construc-tion, energy, aviation, infrastructure and equipment.

In 2002, Commercial Finance used its 3,500-person sales force, a diverse portfolio and rigorous risk man-agement to produce double-digit asset and earnings growth despite the difficult business climate. In 2003, Commercial Finance will continue to use Six Sigma to improve its own processes and productivity as well as offer solutions to customers. In particular, its "At the Customer, For the Customer" projects will continue to help clients improve their operations and accelerate their revenues.

34 GE 2002 ANNUAL REPORT

Opportunities for growth are global in nature for all of Commercial Finance's businesses. For example, its Real Estate unit has developed a pan-European presence as well as significant reach throughout Asia and Mexico.The result: 40% of Commercial Finance's net earnings are generated outside the United States.

Although Commercial Finance is already large (among the top commercial lenders worldwide), finan-cial markets are enormous, and Commercial Finance has plenty of room for continued growth.

www.gecommercialfinance.com Consumer Finance PRESIDENT AND CEO: David R. Nissen 2002TOTAL ASSETS: $770 billion With 100 million customers spread throughout 35 countries, Consumer Finance is diverse in terms of both geography and services. This diversity, combined with stringent risk management practices, has helped Consumer Finance generate earnings growth five years in a row while maintaining the high quality of its portfolio.

In 2003, Consumer Finance plans to continue its growth by introducing new products and services, such as personal loans in the United States. With these products and services, Consumer Finance will offer comprehensive financing solutions for consumers, including credit cards, auto loans and mortgages.

Consumer Finance also expects to grow the number of private-label credit card accounts that it manages in partnership with many of the world's leading retailers, including Harrod's, Lowe's Home Improvement Warehouses Tesco Lotus and Wal*Mart. Consumer Finance also plans to enter several new countries, including China, and to expand in others, including the U.S., where its retail sales finance unit is exploring opportunities to offer complementary products and services through the 60,000 locations where it serves merchants and dealers. Consumer Finance is confident about delivering another year of growth in 2003.

www.geconsumerfinance.com [as of April 20031 Consumer Products PRESIDENT AND CEO: James P Campbell 2002 REVENUES: $8.5 billion In 2002, GE created one of its newest businesses-Consumer Products-by combining two of its oldest, Lighting and Appliances. With nearly two centuries of brand leadership and product innovation between them, the combined $8.5 billion enterprise is accelerat-ing its industry leadership by becoming more efficient and competitive across all product lines.

Integration savings that are projected to total nearly

$50 million are being reinvested in technology devel-opment. Funding for new products is increasing by nearly 25% across both operations, with 100 product launches planned for 2003. They include speed-cooking ovens, washers that talk to dryers, and energy-efficient lighting products.

The new Consumer Products-rich with a legacy of product and service innovation, and resonant with the combined strengths of its operations-faces the future more focused than ever on extending its com-petitive leadership and improving profitability.

www.geconsumerproducts.com Equipment Management PRESIDENT AND CEO: Arthur H. Harper 2002TOTALASSETS: $26.1 billion Equipment Management provides full-service equip-ment financing and operating leases to customers around the world. With more than $26 billion of assets in 26 countries, Equipment Management helps cus-tomers finance and manage their fleets of autos, trucks, trailers, railcars and modular space units. In a weak 2002 economy, Equipment Management partially offset the impact of lower asset demand through cost reductions, trimming under-utilized assets and contin-uing process improvements, with contributions from acquisitions as well. In 2003, Equipment Management will continue to drive these strategies to build a high-return portfolio. Key to this effort is world-class asset GE 2002 ANNUAL REPORT 35

OUR BUSINESSES management and the continued pursuit of operational excellence through Six Sigma. In addition, Equipment Management is expanding its service offerings and launching several new high-technology products as part of its core growth strategy. These actions, and its commitment to partner with customers to solve their productivity, financial and fleet-management chal-lenges, will position Equipment Management for strong performance in 2003.

www.geem.com las of April 20031 Industrial Systems PRESIDENTANDCEO:

Lloyd G.Trotter 2002 REVENUES: $5.0 billion Industrial Systems is continuing the transformation it began in 2002 into a high-tech, faster-growth business by expanding its new platforms in sensors and security.

The sensor and security markets, which are growing at two to three times GDP, do what Industrial Systems has done since the 1880s: provide peace of mind by protecting people, property and productivity.

Sensors from Industrial Systems provide monitoring, protection and control in a variety of extreme environ-ments, from the stratosphere to the ocean floor-even inside the heart, where GE sensors are placed via catheters to help predict conditions for heart attacks and strokes.

Industrial Systems is also helping to protect the traveling public in airports with ion-based detection sys-tems, families in their homes with award-winning wireless alert systems, and companies' employees and assets with state-of-the-art access controls and surveil-lance systems. Industrial Systems is also exploring the use of advanced technologies in new fields such as healthcare and elder care, and in combination with heritage products, such as transformers and switchgear, to enhance their protective capabilities.

www.geindustrialsystems.com Insurance PRESIDENT AND CEO: Michael D. Fraizer 2002TOTAL ASSETS: $182.3 billion Insurance took bold actions in 2002 to position itself for improved returns and perfornance in 2003 and beyond.

Employers Reinsurance Corporation is expected to improve its performance substantially through restruc-turing, product line exits (including the potential sale of its life reinsurance business) and continued strong gains in pricing. In the Life and Retirement segment, GE Financial will accelerate its penetration of key retire-ment and income protection markets-gaining strength from growing distribution alliances, introducing innova-tive products like the "GE Retirement Answer" and streamlining operations.

In the Credit segment, GE Mortgage Insurance continues to expand its services to lenders by leveraging smart underwriting and processing technologies and growing in international markets. FGIC (Financial Guaranty Insurance Company), which provides bond insurance, is coming off a year of double-digit volume growth in serving municipalities, which issued debt at record levels in 2002. This increased volume is expected to translate into future revenue growth. FGIC is poised to expand selectively in other credit enhancement markets as well.

Looking ahead, the focus of Insurance is on disci-plined growth, strong risk management with reduced volatility, and stringent capital and return management.

www.gefinancial.com and www.ercgroup.com Medical Systems PRESIDENT AND CEO: Joseph M. Hogan 2002 REVENUES: $9.0 billion With breakthrough innovations in medical diagnostics, information and services, Medical Systems is pushing the limits of medical science and affecting the lives of millions of people. Revolutionary new diagnostic imag-ing technologies such as Medical Systems' LightSpeed"'

multi-slice CT (computed tomography) scanner are 36 GE 2002 ANNUAL REPORT

providing doctors with more critical information-faster than ever-to aid in the care of their patients.

GE advances in healthcare information technology are fundamentally changing the way medicine is prac-ticed, enabling unprecedented integration among the devices and clinical systems in hospitals and other medical care facilities that will usher in a new era in clinical workflow, physician confidence and patient outcomes. Service offerings are vital to hospital com-petitiveness, and Medical Systems provides a unique portfolio of services to help hospitals improve their productivity, asset utilization and efficiency. With the combination of technology and service offerings, Medical Systems continues to grow as a total solu-tions provider to the healthcare industry.

www.gemedical.com NBC CHAIRMAN AND CEO: Robert C. Wright 2002 REVENUES: $7.1 billion NBC plans to continue the double-digit growth trajectory it achieved in 2002, the best year in its history, through organic growth, continued ratings leadership and the expansion of new programming platforms, including Telemundo and entertainment cable network Bravo, both of which NBC acquired in 2002. NBC expects to maintain its significant competitive advantage in the key demographic for advertisers (adults 18-49) through quality entertainment programming such as ER, Friends, Law & Order, The West Wing and Will & Grace, and leading morning and late-night shows such as Today and The Tonight Show with Jay Leno. NBC's cable prop-erties should see significant growth largely through sales and programming initiatives at CNBC and MSNBC.

NBC's 28 television stations see great opportunities to outpace the growth in local markets by continuing to find new sources of business, centralizing and digitizing functions, and maximizing the synergies created in the six major markets in which the network owns both NBC and Telemundo stations.

www.nbc.com Plastics m PRESIDENTAND CEO: John Krenicki, Jr.

2002 REVENUES: $5.2 billion In 2003, GE Plastics will celebrate the 50th anniversary of the invention of its LEXAN" polycarbonate resin by completing the introduction of more new products in a three-year span than at any other point in its history.

This unprecedented focus on new technology acceler-ated in 2002 with the development of LEXAN° EXL and NORYL PPX" resins for a variety of applications.

In 2002, Plastics' breakthroughs excited the consumer goods industry, where XYLEX' resin was chosen for a new line of stain-resistant food containers and new LEXAN resin technology was used in a limited-play DVD being evaluated for introduction in 2003. In the computer industry, new plastic film technology will soon bring increased screen brightness and better viewing to laptop users worldwide. Consumers will also see Plastics' LEXANe SLX resin in paint-free, high-gloss automotive exteriors and its new GELOY' XTW resin in highly weatherable, colorful exterior home siding this year.

www.geplastics.com r,

Power Systems PRESIDENT AND CEO: John G. Rice 2002 REVENUES: $22.9 billion Power Systems will face exciting challenges in 2003.

Shipments of large gas turbines in the U.S. will decline after four years of record demand, but Power Systems has positioned itself and investors for a soft landing by expanding other businesses-services, oil and gas, distributed generation and wind energy-that will generate new growth in current and previously untapped markets.

Today, Power Systems has an enormous installed base of more than 1,500 advanced gas turbines, and multi-year service agreements that should deliver almost $2 billion in revenues in 2003 alone. Oil & Gas will introduce new upgrade technologies to increase GE 2002 ANNUAL REPORT 37

OUR BUSINESSES the performance and efficiency of its installed base, and it will expand further into inspection and services.

Power Systems' enhanced distributed power offerings will provide low-cost energy alternatives that underscore GE's commitment to a cleaner environment.

In addition, Power Systems is tapping the power of wind. The fastest-growing segment of the energy industry, wind is receiving strong public and regulatory support worldwide. In 2003, GE Wind is targeting $1 bil-lion in revenue in an industry growing 15-20% annually.

Common to these businesses is Power Systems' focus on long-term growth through technological lead-ership. Power Systems continues to invest aggressively in new turbine technology. In addition to launching three new turbine models in 2002, Power Systems also began test operations of its next-generation H System, which, when it goes into commercial use, will be the largest and most efficient power generating system ever.

www.gepowersystems.com r~F1 Specialty Materials fKlI PRESIDENT AND CEO: William A. Woodburn LT21.

k 2002 REVENUES: $2.4 billion Water-more than 70% of the earth is covered with it, and 65% of what we use is wasted. Specialty Materials' newest unit, GE Betz, has the conservation of this fundamental material at its core. Using new chemistries, and drawing upon GE technologies rang-ing from ultrasound to remote digital sensors to advanced polymer materials, GE Specialty Materials is working to improve water quality and its efficient use while preventing corrosion and helping customers meet environmental goals.

Specialty Materials is living up to its name with a vari-ety of other innovations as well. GE Silicones is focused on expanding the reach of Velvesil a copolymer that helps lotion make skin feel softer and makes hair easier to comb. Pharmaceutical and medical researchers are using "labs on a chip" made of GE silicone to do rapid DNA and drug testing. GE Quartz is supporting the semiconductor industry in its quest for smaller, faster chips by supplying larger-diameter, higher-purity quartz materials. The opportunity to discover new materials, new uses and new benefits continues to motivate Specialty Materials' 9,000-plus employees.

www.gespecialtymaterials.com Transportation Systems PRESIDENTAND CEO: CharleneT Begley 2002 REVENUES: $2.3 billion In 2003, Transportation Systems will begin delivering to its customers the cleanest diesel electric locomo-tives ever made.

GE Evolution Series locomotives meet 2005 U.S.

environmental regulations two years ahead of schedule, cutting emissions by 40% while significantly increasing fuel efficiency. Transportation Systems' six years of locomotive research and investment in new emissions technology has already yielded 25 U.S. patents, 13 patents pending and 18 invention disclosures. In 2003, the first 35 pre-production units will begin two years of rigorous trials with North American railroads to ensure the highest reliability when they enter active service.

Transportation Systems will also accelerate invest-ments in advanced rail technologies such as information networks, signaling electronics, remote control locomo-tives and hybrid energy storage devices, all of which will enable its global customers to manage their operations with maximum efficiency.

www.getransportationsystems.com 38 GE 2002 ANNUAL REPORT

A 0

0 0000 0

0.

.0

0 00 0

0.

.0

0 0

0

0 0

S

000

0.

S

S S

S

SS*.

S S

.S S S

S S

S

.5 S.

S S

S

S S S S.

S S S

S

- S C *.

S S

S

*

S S.

C*

S S

55 S

S S

SS

S

-g C

5 55

55.

555

55 C

S S*

ee S

S S

S 5

5

5.

5.55 S

SC.

S.

S S.

S.

S

5.

S SS C

S

.6.

C S

5.5*

S S

5 5

55.

S

5.

5 C

5 C.

SSC.

C 5

5 C

S 5

55 C.

C C

U S

.S S

S.

C S

S.

C

S S

5C4

.5.

5

GOVERNANCE Sound principles of corporate governance are critical to obtaining and retaining the trust of investors-and to achieving GE's overarching goal of performance with integrity. They are also vital in securing respect from employees, recruits, customers, suppliers, GE communities, government officials and the public at large.

In 2002, our Board of Directors made changes in corporate governance designed to strengthen its oversight of management and to serve the long-term interests of share owners, employees and other stakeholders.

Some basic ideas helped shape these changes:

we should communicate externally the way we run GE internally; we should satisfy the spirit, not just the letter, of the new requirements; we should act promptly to implement changes without waiting for formal effec-tive dates that may be many months in the future.

At the core of corporate governance, of course, is the role of the board in overseeing how manage-ment serves the long-term interests of share owners and other stakeholders. An active, informed, inde-pendent and involved board is essential for ensuring GE's integrity, transparency and long-term strength.

As a result of the 2002 changes, 11 of GE's 17 directors are "independent' under a strict definition, with a goal of two-thirds.

EMPLOYEE DIRECTORS (pictured page 4)

SAM NUNN 4 Partner, King & Spalding, law firm, Atlanta, Ga.

Director since 1997.

RALPH S. LARSEN 3 Former Chairman and CEO, Johnson & Johnson, pharmaceutical, medical and consumer products, New Brunswick, N.J. Director since 2002.

ANDREA JUNG 2.3 Chairman of the Board and Chief Executive Officer, Avon Products, Inc., cosmetics, NewYork, N.Y Director since 1998.

ROGER S. PENSKE 4 Chairman of the Board, Penske Corporation, PenskeTruck Leasing Corporation and United Auto Group, Inc., transportation and automotive services, Detroit, Mich. Director since 1994.

CLAUDIO X. GONZALEZ 1 2,3 Chairman of the Board and Chief Executive Officer, Kimberly-Clark de Mexico, S.A. de C.V., Mexico City, and Director, Kimberly-Clark Corporation, consumer and paper products. Director since 1993.

JAMES I. CASH, JR.t 4 James E. Robison Professor of Business Administration, Harvard Graduate School of Business, Boston, Mass. Director since 1997.

ROBERT J. SWIERINGA 1 Dean and Professor of Accounting, Johnson Graduate School of Management, Cornell University, Ithaca, N.Y.

Director since 2002.

ANDREW C. SIGLER 1. 2,3, Retired Chairman of the Board and Chief Executive Officer, Champion International Corporation, paper and forest products, Stamford, Conn.

Director since 1984.

DOUGLAS A. WARNER 1111 2,3 Former Chairman of the Board, J.R Morgan Chase & Co.The Chase Manhattan Bank, and Morgan GuarantyTrust Company of NewYork, NewYork, N.Y.

Director since 1992.

ROCHELLE B. LAZARUS 34 Chairman and Chief Executive Officer, Ogilvy &

MatherWorldwide, advertising, NewYork, N.Y.

Director since 2000.

ALAN G. (A.G.) LAFLEY 3 Chairman, President and Chief Executive,The Procter & Gamble Company, personal and house-hold products, Cincinnati, Ohio. Director since 2002.

ANN M. FUDGE 1 4 Former President, Krafts Beverages, Desserts &

Post Divisions and former Group Vice President, Kraft Foods, Inc., packaged foods,Tarrytown, N.Y.

Director since 1999.

KENNETH G. LANGONE 1, 2,3 Chairman, President and Chief Executive Officer, Invemed Associates, LLC, investment banking and brokerage, NewYork, N.Y. Director since 1999.

JEFFREY R. IMMELT 4 Chairman of the Board and Chief Executive Officer, General Electric Company. Director since 2000.

DENNIS D. DAMMERMAN 4 Vice Chairman of the Board and Executive Officer, General Electric Company, and Chairman, General Electric Capital Services, Inc. Director since 1994.

GARY L. ROGERS 4 Vice Chairman of the Board and Executive Officer, General Electric Company. Director since 2001.

ROBERT C. WRIGHT 4 Vice Chairman of the Board and Executive Officer, General Electric Company, and Chairman and Chief Executive Officer, National Broadcasting Company, Inc. Director since 2000.

1 Audit Committee 2 Management Development and Compensation Committee 3 Nominating and Corporate Governance Committee 4 Public Responsibilities Committee S Presiding Director DIRECTORS from left)

GOVERNANCE KEY GOVERNANCE ACTIONS TAKEN BY GE IN 2002 INCLUDE:

GE's test of 'independence' for members of the Management Development and Compensation Committee and the Nominating and Corporate Governance Committee is stricter than required by new regulations.

GE has appointed a presiding director who will lead independent meetings of non-employee directors at least three times a year.

Each non-employee director will visit two of GE's businesses each year without the presence of corpo-rate management so that directors can have direct exchanges with operating leadership.

The responsibilities of the Audit Committee will increase, and it will meet at least seven times per year.

To help further align directors' interests with those of share owners, the equity portion of directors' pay will be in Deferred Stock Units (DSUs), replacing stock options.

DSUs will be 60% of the annual director compensation and will not pay out until one year after a director leaves the board. When directors exercise existing stock options, they will be subject to the same one-year holding period that applies to GE senior management.

MEETINGS The GE board held 13 meetings in 2002. In December, the board voted to increase GE's quarterly dividend for the 27h consecutive year. The Audit Committee, composed of outside directors, held seven meetings to review the activities and independence of GE's external auditors and the activities of GE's internal audit staff. It also reviewed GE's financial reporting process, financial and disclosure controls, and compliance with key GE policies and applicable laws. The Management Development and Compensation Committee, composed of outside directors, reviewed in nine meetings all execu-tive compensation plans, policies and practices, changes in executive assignments and responsibilities, and key succession plans. The Nominating and Corporate Governance Committee, in three meetings, developed and recommended for approval by the full board the governance principles that the board adopted, effective January 1, 2003. These principles, and related materials, are published in the Governance section of the GE website at www.ge.com. The committee also reviewed board candidates and recommended the structure and membership of board committees.

Three new independent directors-A.G. Lafley, Ralph S. Larsen and Robert J. Swieringa-joined the board in 2002. The Public Responsibilities Committee, in one meeting, evaluated environmental compliance. The board determined that the functions of its Finance, Operations, and Technology and Science committees would be most effectively performed by the full board, and therefore dissolved the committees.

PAOLO FRESCO AND SCOTT MCNEALY Paolo Fresco retired from the GE board in 2002 after more than 30 years with the company, including 12 years as director. Paolo's vision and decisions, both as vice chairman and member of the board, were critical to GE's growth as a global company. He has a true international view and is at home in cultures and with diverse people everywhere. His broad perspective, great judgment and worldly wisdom will be deeply missed by GE.

Scott McNealy also retired from the board in 2002. As a pioneer in information technology, Scott has helped guide the digital transformation of GE, bringing a fresh and passionate voice from his industry to our board and our business leaders. We will all miss Scott's bluntness, irreverence, insight-and most of all, his vision.

42 GE 2002 ANNUAL REPORT

N r,0.

1.0f f,

tfi IXfll

'I

-l X- -

ui1'$iI

-W

'j L-

_ '0.E'.

-.;: -'.............................-f t l H 6,- -§-

.f i

MW-5. i-:-

0

-k '"' '

@ks

' ' ':'-dt-.

ia wt, X,.

' R '@

9 T h'.

'w :

-i-1i D-'0a:

ilt

,Emw.

=.

-Q

- Mi!til l w

~~~AU~

ii-W

};

71g9';~awWIIM M-fwllaj-i-thmwa AZWIjI

"NUI%jxint

O iD

: - Mk1kt{3-g'@tbW>bli$li 1,:

OW:WttA-jh f

:- 1-"3M1X$Eu6aNititEXi-~~~a; WM ay tBiwj.

0

' Xi<gi!i,,, if.,,~~~~~~~:Or

.;-i3 iblt kt 4: @

ta alK{

l 0

m t

R 4

4 a

E~~~-vulm

-aitt tt-k:

W-0'-,

tN b

,,-flMIe XliMU,7

'tesR Q

ijtit4Xtf

{t

'~~~~f WIRY f,>e@

j@

I c

7 2

I c0 I : ",, - 7

. 2 1,, -

I iI

MANAGEMENT'S DISCUSSION OF FINANCIAL RESPONSIBILITY One of our most crucial management objectives is to ensure that our investors are well informed. We take full responsibility for meeting this objective, adopting appro-priate accounting policies and devoting our full, unyielding commitment to ensuring that those policies are applied properly and consistently. We make every effort to report in a manner that is relevant, complete and clear, and we welcome and evaluate each suggestion from those who use our reports.

Rigorous Management Oversight Members of our corporate leadership team review each of our businesses constantly, on matters that range from overall strategy and financial performance, to staffing and compliance. Our business leaders constantly monitor real-time financial and operating systems, enabling us to identify potential opportunities and concerns at an early stage, and positioning us to develop and execute rapid responses. Our Board of Directors oversees manage-ment's business conduct, and our Audit Committee, which consists entirely of independent directors, oversees our system of intemal financial controls and disclosure controls.

We have taken a number of recent governance actions intended to enhance investor trust and improve the board's overall effectiveness. These actions include increasing to a majority the number of independent direc-tors, naming a Presiding Director who will conduct at least three meetings per year with non-employee direc-tors, requiring each non-employee director to visit two of GE's businesses annually to meet directly with operating leadership and voluntarily expensing our stock options.

Dedication to Controllership We maintain a dynamic system of disclosure controls and procedures-including internal controls over financial reporting-designed to ensure reliable financial record-keeping, transparent financial reporting and disclosure, protection of physical and intellectual property, and effi-cient use of resources. We recruit and retain a world-class financial team, including 450 internal auditors who conduct thousands of audits each year, in every geo-graphic area, at every GE business. Senior management and the Audit Committee oversee the scope and results of these reviews. We also maintain a set of integrity poli-cies-our "Spirit & Letter"-which require compliance with law and policy, and which pertain to such vital issues as upholding financial integrity and avoiding conflicts of interest. We have published these integrity policies in 27 languages, and we have provided them to every one of GE's more than 300,000 global employees, holding each of these individuals-from our top management on down-personally accountable for compliance with them. Our integrity policies serve to reinforce key employee responsibilities around the world, and we inquire extensively about compliance. Our strong compliance culture reinforces these efforts by requiring employees to raise any compliance concerns and by prohibiting retribution for doing so.

Visibility to Investors We are keenly aware of the importance of full and open presentation of our financial position and operating results. To facilitate this, we maintain a Disclosure Committee, which includes senior executives who pos-sess exceptional knowledge of our businesses and our investors. We have asked this committee to evaluate the fairness of our financial disclosures, and to report their findings to us and to the Audit Committee. We further ensure strong disclosure by holding more than 250 analyst and investor meetings every year, and by communicating all material information covered in those meetings to the public. In testament to the effectiveness of our stringent disclosure policies, investors surveyed annually by Investor Relations magazine have awarded GE Best Overall Investor Relations Program by a mega-cap company for six consecutive years, and 15 awards in other categories in the past seven years. We are in regular contact with representatives of the major rating agencies, and our debt continues to receive their highest ratings. We welcome the strong oversight of our financial reporting activities by our independent audit firm, KPMG LLF who are engaged by and report directly to the Audit Committee. Their report for 2002 appears on page 45.

Great companies are built on the foundation of reliable financial information and compliance with the law. For GE, the financial disclosures made in this report are a vital part of that foundation. We present this information proudly, with the expectation that those who use it will understand our company, recognize our commitment to performance with integrity, and share our confidence in GE's future.

Jeffrey R. Immelt Chairman of the Board and Chief Executive Officer Keith S. Sherin SeniorVice President, Finance, and Chief Financial Officer February 7, 2003 44 GE 2002 ANNUAL REPORT

INDEPENDENT AUDITORS' REPORT To Share Owners and Board of Directors of General Electric Company We have audited the accompanying statement of financial position of General Electric Company and consolidated affiliates ("GE") as of December 31, 2002 and 2001, and the related statements of earnings, changes in share owners' equity and cash flows for each of the years in the three-year period ended December 31, 2002. These consolidated financial statements are the responsibility of GE management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assess-ing the accounting principles used and significant esti-mates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the aforementioned financial statements appearing on pages 72, 74, 76, 57, and 78-109 present fairly, in all material respects, the financial position of General Electric Company and consolidated affiliates at December 31, 2002 and 2001, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America.

As discussed in note 1 to the consolidated financial statements, GE in 2002 changed its methods of account-ing for goodwill and other intangible assets and for stock-based compensation, and in 2001 changed its methods of accounting for derivative instruments and hedging activities and impairment of certain beneficial interests in securitized assets.

Our audits were made for the purpose of forming an opinion on the consolidated financial statements taken as a whole. The accompanying consolidating information appearing on pages 73, 75 and 77 is presented for pur-poses of additional analysis of the consolidated financial statements rather than to present the financial position, results of operations and cash flows of the individual entities. The consolidating information has been sub-jected to the auditing procedures applied in the audits of the consolidated financial statements and, in our opinion, is fairly stated in all material respects in relation to the consolidated financial statements taken as a whole.

K<PMPci LLS KPMG LLP Stamford, Connecticut February 7, 2003 a

GE 2002 ANNUAL REPORT 45

MANAGEMENT'S DISCUSSION AND ANALYSIS Overview General Electric Company's consolidated financial state-ments represent the combination of the industrial manufacturing and product services businesses of General Electric Company (GE) and the financial services businesses of General Electric Capital Services, Inc.

(GECS or financial services).

We present Management's Discussion of Operations in three parts: Consolidated Operations, Segment Operations and International Operations.

Consolidated Operations We achieved record earnings in 2002, demonstrating the benefits of our diverse business portfolio and continuing emphasis on globalization, technology, growth in services, digitization and the Six Sigma Quality initiative.

Our consolidated revenues were $131.7 billion in 2002, an increase of 5% over revenues of $125.9 billion in 2001, reflecting a 7% increase in our industrial businesses and a slight decrease in financial services. Our consolidated revenues of $125.9 billion in 2001 decreased 3% from

$129.9 billion in 2000, reflecting a 6% increase in industrial business revenues partially offsetting a 12% decrease in financial services-the result of significant strategic repositioning activities.

Our earnings before accounting changes increased to a record $15.1 billion in 2002, a 7% increase from

$14.1 billion in 2001. Per-share earnings before accounting changes increased to $1.51 during 2002, up 7% from the prior year's $1.41. (Except as otherwise noted, when we refer to "per-share earnings" or "earnings per share:' we mean earnings per share on a diluted basis.)

Contributions from acquisitions affect earnings com-parisons. Our consolidated net earnings in 2002, 2001 and 2000 include approximately $636 million, $225 mil-lion and $345 million, respectively, from acquired busi-nesses. We integrate acquisitions as quickly as possible and only earnings during the first 12 months following the quarter in which we complete the acquisition are considered to be related to acquired businesses.

1 O

i s-PN SHAW.'. )

,.:N l's -CU Y

'f(excluding the effect of accounting changes) was 25.8% in 2002, compared with 271 % in 2001, which was about the same as in 2000.

D`!'

i M-Et

.'Arl:/~.'.

t;lii.iia

.19,'dVPer-share div-idends of $0.73 were up 11 % from 2001, following a 16% increase from the preceding year. We have rewarded our share owners with 27 consecutive years of dividend growth. Our dividend growth for the past five years has significantly outpaced dividend growth of companies in the Standard & Poor's 500 stock index.

Except as otherwise noted, the analysis in the remain-der of this section presents the results of GE (with GECS included on a one-line basis) and GECS. See the Segment Operations section on page 50 for a more detailed dis-cussion of the businesses within GE and GECS.

G5 o;.! i WFv-ii',s were $79.0 billion in 2002, compared with $74.0 billion in 2001 and $69.5 billion in 2000.

GE sales of goods and services were $73.3 billion in 2002, an increase of 8% from 2001, which in turn was 7% higher than in 2000. Volume was about 9% higher in 2002, reflecting double-digit increases at Power Systems, NBC, Medical Systems, Specialty Materials and Industrial Systems, partially offset by decreases at Aircraft Engines and Transportation Systems. Selling prices were lower across most segments other than NBC and Power Systems. The net effect in 2002 of exchange rates on sales denominated in currencies other than the U.S. dol-lar was slightly positive. Volume in 2001 was about 7%

higher than in 2000, with selling price and currency effects both slightly negative.

GE/S&P CUMULATIVE DIVIDEND GROWTH SINCE 1997 114% ----- ---------- ----- --

95 76 57 38 19 98 99 00 01 51 GE O S&P 500 02 For purposes of the financial statement display of sales and costs of sales on pages 72 and 73, "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 broad-casting and information services activities. We refer to sales of both spare parts (goods) and repair services as sales of "product services;' which is an important part of our operations. Sales of product services were $20.8 bil-lion in 2002, an 11% increase over 2001. Increases in product services in 2002 and 2001 were widespread, led by continued strong growth at Power Systems, Medical Systems andTransportation Systems. Operating margin from product services was approximately $5.2 billion, up 11% from 2001. The increase reflected improvements in most product services businesses and was led by Power Systems and Medical Systems.

C 46 GE 2002 ANNUAL REPORT or

-,r-

,R,corrE, earned from a wide variety of sources, was $1.1 billion, $0.4 billion and $0.5 billion in 2002, 2001 and 2000, respectively. Other income in 2002 included a $0.6 billion pre-tax gain resulting from NBC's exchange of certain assets for the cable network Bravo and a

$0.5 billion pre-tax gain on the sale of 90% of Global eXchange Services.

c f. iorAo,W iirIvi+Mtws decreased slightly to $58.2 billion in 2002, following a 12% decrease to $58.4 billion in 2001.

The largest single factor affecting 2002 revenues was growth from increases in acquisitions and originations-primarily at Commercial Finance. This growth was more than offset by the absence of revenues from Americom after its sale in late 2001 ($1.7 billion), increased esti-mates of prior-year loss events and lower investment gains at Insurance ($0.9 billion), lower securitization activity in all segments ($0.6 billion), and lower market interest rates.

CONSOLIDATED REVENUES (In billions)

$138 115...........

92 98 99 00 01 02

i. GE GECS The three principal reasons for the decrease in revenues in 2001 compared with 2000 were: the deconsolidation of Montgomery Ward LLC (Wards) and resulting absence of sales in 2001 ($3.2 billion); the effects of rationalization of operations and market conditions at IT Solutions

($2.9 billion); and reduced surrender fees ($1.2 billion) associated with the planned run-off of restructured insurance policies of Toho Mutual Life Insurance Company (Toho) at GE Financial Assurance. Additional information about other revenue items is provided in the Segment Operations section on page 50.

Despite good growth in underlying operations, GECS earnings before accounting changes of $4.6 billion in 2002 were down 17% from 2001. The Insurance segment more than accounted for the decline, with $2.3 billion after tax of adverse development and adjustments to estimates of prior-year loss events. Realized investment gains and gains on asset securitization declined by $0.8 billion after tax. Partial offsets were goodwill amortization that ceased at the beginning of 2002 ($0.6 billion in 2001) and lower taxes ($0.6 billion).

GECS earnings before accounting changes in 2001 increased 8% from 2000. Principal factors in the 2001 increase were strong productivity ($0.7 billion) and lower taxes ($0.5 billion) partially offset by reduced earnings at GE Global Insurance Holding Corporation (GE Global Insurance Holding), the parent of Employers Reinsurance Corporation ($0.5 billion) reflecting the events of September 11, 2001, losses and lower realized gains on financial instruments. Excluding effects of Paine Webber Group, Inc. (PaineWebber) in 2000 and Americom in 2001, such pre-tax gains were lower in 2001 by $0.5 billion ($0.3 billion after tax). Pre-tax gains on sales of investment securities declined in 2001 by $0.5 billion, of which $0.4 billion related to GE Equity; other GE Equity gains were $0.8 billion lower; while gains on securitizations were up $0.8 billion from 2000.

-RiN(:IP,AI COS I S AND XPrSFS FOR c are those classified as costs of goods and services sold, and selling, general and administrative expenses. Several of our ongoing ini-tiatives had significant effects on costs:

The Six Sigma Quality initiative continues to reduce rework, simplify processes and reduce direct material costs.

Globalization continues to reduce costs through sourcing of products and services in lower-cost countries.

Digitization has also enabled us to simplify and streamline processes while investing in internal infrastructure hard-ware and software. We conduct a growing portion of our business over the Internet. Benefits from this initiative include improved customer service, expanded product and service offerings and increased operating efficiency for us and our customers.

Our principal U.S. postretirement benefit plans (plans) contributed $806 million to pre-tax earnings in 2002, or 3.5% of earnings before accounting changes, compared with $1,480 million (6.8%) and $1,266 million (6.5%) in 2001 and 2000, respectively. Considering current and expected asset allocations, as well as historical and expected returns on various categories of assets in which our plans are invested, we assumed that long-term returns on our pension plan assets would be 8.5% in 2002 and 9.5% in 2001 and 2000. Reducing the assumed return by 100 basis points in 2002 increased annual pension costs by about $480 million pretax. Of course, actual annual investment returns can be extremely volatile. Because this short-term market volatility occurs in context of the long-term nature of pension plans, U.S. accounting principles provide that differences between assumed and actual returns are recognized over the average future service of employees.

GE 2002 ANNUAL REPORT 47

MANAGEMENT'S DISCUSSION AND ANALYSIS Two other significant factors affecting postretirement benefit costs are the discount rate used to measure the present value of plan obligations and changes in postre-tirement healthcare costs. We reduced our discount rate from 7% to 71X% for 2002, a reduction that increased our costs by about $90 million pretax. Postretirement healthcare costs also increased substantially in 2002.

See notes 5 and 6 for additional information about fund-ing status, components of earnings effects and actuarial assumptions of the plans. See pages 70-71 for discus-sion of pension assumptions.

Our postretirement benefit costs will likely increase in 2003 for a number of reasons, including a reduction in the discount rate from 7% to 6%, amortization of investment losses and sustained increases in healthcare costs. We continue to expect that our plan assets will earn 8%, on average, over the long term. Our labor agreements with various unions expire in June 2003, and results of union negotiations, which are uncertain, could affect postretirement benefit costs in 2003 and beyond.

We will not make any contributions to the GE Pension Plan in 2003. To the best of our ability to forecast the next five years, we do not anticipate making contributions to that Plan so long as expected investment returns are achieved. The present funding status provides assurance of benefits for our participants, but future effects on oper-ating results and funding depend on economic conditions and investment performance.

1 i, ls sales of goods and services less the costs of goods and services sold, as well as selling, gen-eral and administrative expenses. GE operating margin was 19.1% of sales in 2002, down from 19.6% in 2001 and about the same as the comparable 18.9% in 2000.

The decline in 2002 was attributable to the Materials seg-ment and the Lighting business in Consumer Products and also reflected restructuring and other charges of

$0.6 billion, partiaily offset by improvements in operating margins at Power Systems and NBC. Restructuring and other charges included $0.4 billion for rationalizing certain operations and facilities of GE's worldwide industrial busi-nesses. The improvement in operating margin in 2001 was led by Power Systems and Aircraft Engines, reflecting increasing benefits from the digitization, product services and Six Sigma Quality initiatives. Reported operating margin was 18.6% in 2000, including the costs of a one-time retirement benefit provision associated with the labor agreement concluded in that year.

J..

(sales in relation to costs, both on a constant dollar basis) for GE in 2002 and 2001 was about 2%. Variable cost productivity improvements (led by Industrial Systems and Plastics) and base cost produc-tivity improvements at Plastics were more than offset by lower base cost productivity primarily at Power Systems, Industrial Systems and Specialty Materials. In 2001, total cost productivity was 2.2% as productivity in Power Systems and Medical Systems was partially offset by negative productivity across several businesses, particu-larly Plastics, reflecting volume declines.

( E I I

E.T a it jNrCi.

R C!

'S in 2002 amounted to $569 million, down 30% from $817 million in 2001, which was about the same as 2000. The decrease in 2002 was primarily the result of lower interest on tax liabilities (see page 49). During 2001, the benefits of lower average interest rates and lower average borrowing levels were partially offset by increased provisions for interest on tax liabilities.

L-'-Cv 1 N RE rST

-NT ON Oi.RtROWN; sin 2002 was

$9.9 billion, compared with $10.6 billion in 2001 and

$11.1 billion in 2000. Changes in both years reflected the effects of lower interest rates, partially offset by the effects of higher average borrowings used to finance GECS BORROWINGS (In billions)

$276 230 184 138 92 46 0

O

° 0

0 98 99 00 01 02 Senior notes Commercial paper O Commited credit ines e Other acquisitions and asset growth. The average composite effective interest rate was 4.07% in 2002, compared with 5.11% in 2001 and 5.89% in 2000. In 2002, average assets of $455.2 billion were 18% higher than in 2001, which in turn were 7% higher than in 2000. See page 62 for a discussion of interest rate risk management.

FINAN.NG.,I'iADDS. Over the last three years, market interest rates have been more volatile than GECS average composite effective interest rates, principally because of the mix of effectively fixed-rate borrowings in the GECS financing structure. Yields on our portfolio of fixed and floating-rate financial products have behaved similarly; consequently, financing spreads have remained relatively flat over the three-year period.

48 GF 2002 A.NNUAI REPORT C03-11-..... -....

INCOME TAXES on consolidated earnings before accounting changes were 19.9%, compared with 28.3% in 2001 and 31.0% in 2000. A more detailed analysis of differences between the U.S. federal statutory rate and the consoli-dated rate, as well as other information about our income tax provisions, is provided in note 7 The effective tax rate of GE decreased to 20.2% in 2002 from 22.9% in 2001 and 23.0% in 2000. During 2002, GE entered into settlements with the U.S. Internal Revenue Service (IRS) concerning certain export tax benefits. The result of those settlements, included in the line "Tax on international activities including exports" in note 7, was a decrease in the GE effective tax rate of approximately two percentage points. Also during 2002, GE entered into a tax advantaged transaction to exchange certain assets for the cable network Bravo. The effect of this transaction on the GE effective tax rate is included in the line "All other-net" in note 7 GECS effective tax rate decreased to negative 1.7% in 2002 from 19.8% in 2001 and 26.9% in 2000. The 2002 effective tax rate reflects effects of pre-tax losses at GE Global Insurance Holding (ERC) and GE Equity, the effects of lower taxed earnings from international operations and favorable tax settlements with the IRS dis-cussed below. Pre-tax losses of $2.9 billion at ERC and

$0.6 billion at GE Equity reduced the effective tax rate of GECS by approximately 17 percentage points.

During 2002, as a result of revised IRS regulations, GECS reached a settlement with the IRS allowing the deduction of previously realized losses associated with the prior disposition of Kidder Peabody. Also during 2002, a settlement was reached with the IRS regarding the treat-ment of certain reserves for obligations to policyholders on life insurance contracts in the GE Financial Assurance busi-ness. The benefits of these settlements, which reduced the GECS rate approximately four percentage points (excluding the ERC and GE Equity losses), are included in the line "All other-net" in note 7 The 2001 effective tax rate of GECS reflected the effects of lower taxed earnings from international opera-tions and certain other transactions (see note 7). That rate also included effects of a $0.6 billion pre-tax charge related to the events of September 11, 2001, principally at ERC, which reduced the GECS effective tax rate by one percentage point.

NEW ACCOUNTING STANDARDS. The Financial Accounting Standards Board's (FASB) Statement of Financial Accounting Standards (SFAS) 142, Goodwill and Other Intangible Assets, generally became effective for us on January 1, 2002. Under SFAS 142, goodwill is no longer amortized but is tested for impairment using a fair value methodology. We stopped amortizing goodwill effective January 1, 2002.

The result of our applying the new rules as of January 1, 2002, was a non-cash charge of $1.2 billion

($1.0 billion after tax, or $0.10 per share), which we reported in the caption "Cumulative effect of accounting changes" Substantially all of the charge elates to the GECS IT Solutions business and the GECS GE Auto and Home business. Factors contributing to the impairment charge were the difficult economic environment in the information technology sector and heightened price com-petition in the auto insurance industry. After the required accounting changes, our 2002 earnings and earnings per share were $14.1 billion and $1.41, respectively, com-pared with $13.7 billion and $1.37, respectively, in 2001.

In 2002, we adopted the stock option expense provisions of SFAS 123, Accounting for Stock-Based Compensation. This accounting change did not result in a cumulative effect charge, but increased 2002 costs by $45 million and reduced net earnings by $27 million.

See note 1 on page 81 for additional information.

The cumulative effect of accounting changes in 2001 related to the adoption, as of January 1, 2001, of SFAS 133, Accounting for Derivative Instruments and Hedging Activities, as amended, and the consensus of the FASB's Emerging Issues Task Force on Issue 99-20, Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets. Adoption of these standards resulted in a one-time, non-cash charge that reduced our 2001 earnings by $444 million ($0.04 per share). After these required accounting changes, our 2001 eamings and earnings per share were $13.7 billion and $1.37, respectively, compared with $12.7 billion and $1.27, respectively, in 2000.

MAJOR PROVISIONS OF NEW ACCOUNTING STANDARDS that will affect us follow.

SFAS 143, Accounting for Asset Retirement Obligations, requires recognition of the fair value of obligations associ-ated with the retirement of long-lived assets when there is a legal obligation to incur such costs. This amount is accounted for like an additional element of cost, and, like other cost elements, is depreciated over the correspon-ding asset's useful life. SFAS 143 primarily affects our accounting for costs associated with the future retire-ment of facilities used for storage and production of nuclear fuel. On January 1, 2003, we recorded a liability for the expected present value of future retirement costs of $363 million, increased net property, plant and equipment by $24 million and recognized a one-time, cumulative effect charge of $215 million (net of tax).

This accounting change will not involve cash and will have only a modest effect on future earnings.

GE 2002 ANNUAL REPORT 49

MANAGEMENT'S DISCUSSION AND ANALYSIS In November 2002, the FASB issued Interpretation No. (FIN) 45. Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guaran-tees of Indebtedness of Others. Among other things, the Interpretation requires guarantors to recognize, at fair value, their obligations to stand ready to perform under certain guarantees. FIN 45 is effective for guarantees issued or modified on or after January 1, 2003. It will have an inconsequential effect on our financial position and future results of operations.

In January 2003, the FASB issued FIN 46, Consolidation of Variable Interest Entities, which we intend to adopt on July 1, 2003. FIN 46's consolidation criteria are based on analysis of risks and rewards, not control, and repre-sent a significant and complex modification of previous accounting principles. FIN 46 represents an accounting change, not a change in the underlying economics of asset sales. Under its provisions, certain assets previ-ously sold to our special purpose entities (SPEs) could be consolidated on our books, and, if consolidated, any assets and liabilities now on our books related to those SPEs would be removed. In the event we consolidated these assets, we would not reacquire their legal owner-ship, nor would our legal rights and obligations change.

Any consolidated assets would earn returns substantially like the returns we would have earned had we never sold them. Even assuming the legal provisions controlling these SPEs are not changed between now and the July 1 effective date of FIN 46, the very complexity of the new consolidation rules and their evolving clarification make forecasting that July 1 effect impracticable. It is also clear that many alternative structures for sales of financial assets would continue to be reported as sales under FIN 46 with the assets qualifying for sale not consoli-dated. We are evaluating whether characteristics of those structures can cost-beneficially be applied to our arrange-ments before the July 1 effective date. Further informa-tion about entities that potentially fall within the scope of FIN 46 is provided in note 29.

Segment Operations REVENUES AND SEGMENT PROFIT FOR OPERATING SEGMENTS are shown on page 57 For additional information, includ-ing a description of the products and services included in each segment, see pages 108 and 109.

Segment profit is determined based on internal per-formance measures used by the Chief Executive Officer to assess performance of each business. Generally, the results of decisions made by the Chief Executive Officer regarding unusual matters are excluded from internal business measurements. Historically, such matters have included charges for restructuring; rationalization or other similar expenses; and litigation settlements or other losses, responsibility for which precedes the current busi-ness management team. Segment profit excludes any goodwill amortization, the effects of pensions and other retiree benefit plans and accounting changes. Segment profit excludes or includes interest and other financial charges and segment income taxes according to how segment management is measured-excluded in deter-mining operating profit for Aircraft Engines, Consumer Products, Industrial Products and Systems, Materials, NBC, Power Systems and Technical Products and Services, but included in determining net earnings for Commercial Finance, Consumer Finance, Equipment Management, Insurance and All Other GECS.

AIRCRAFT ENGINES reported a 2% decrease in revenues in 2002 as commercial engine pricing pressures and reduced commercial product services revenues combined with lower industrial units were substantially offset by increased military sales. Operating profit was 4% lower, primarily as a result of lower pricing for commercial OPERATING PROFIT OF GE SEGMENTS lin billions)

$15.0 12.5 ------------.....

7.5 5.0----

2.5 f 1 9S 99 00 01 02 engines, lower product services volume from reduced flight hours and higher labor costs, partially offset by lower material costs and productivity. Revenues and operating profit increased 6% and 7%, respectively, in 2001, reflecting higher volume in product services and higher volume of commercial engines and aero-derivative products. The improvement in operating profit was also attributable to productivity.

In 2002, revenues from sales to the U.S. government were $2.2 billion, compared with $1.9 billion in 2001.

Aircraft Engines received orders of $11.6 billion in 2002, compared with $12.1 billion in 2001. The $11.6 bil-lion total backlog at year-end 2002 comprised unfilled product orders of $9.8 billion (of which 43% was sched-uled for delivery in 2003) and product services orders of

$1.8 billion scheduled for 2003 delivery. Comparable December 31, 2001, total backlog was $11.2 billion.

50 GE 2002 ANNUAL REPORT

COMMERCIAL FINANCE (In millions) 2002 2001 2000

~~~~~~~~~~~.. _.................

REVENUES Commercial Equipment Financing

$ 5,005

$ 4,535

$ 3,634 Real Estate 2,160 1,919 1,977 Commercial Finance (CF) 2,350 1,786 1,617 Structured Finance Group 1,243 1,093 999 Aviation Services 2,694 2,173 1,962 Vendor Financial Services 2,342 2,095 1,792 Other Commercial Finance 246 279 1

Total revenues

$16,040

$13,880

$11,982 NET EARNINGS Commercial Equipment Financing

$ 786

$ 642

$ 537 Real Estate 618 489 374 Commercial Finance (CF) 587 368 290 Structured Finance Group 479 386 344 Aviation Services 439 475 479 Vendor Financial Services 369 320 274 Other Commercial Finance (93) 44 (4)

Total net earnings S 3,185

$ 2,724 S 2,294 Charges of $85 million in 2001 were not allocated to this segment because we did not Include these costs in measuring the performance of businesses in this segment for internal purposes. Such charges, included in All Other GECS, related to restructuring various global operations and to provisions for disposition of assets.

December 31 (n millions)

TOTAL ASSETS Commercial Equipment Financing Real Estate Commercial Finance ICF)

Structured Finance Group Aviation Services Vendor Financial Services Other Commercial Finance Total assets Financing receivables -net acquisitions and origination growth, productivity across all businesses and growth in lower taxed earnings from international operations, partially offset by increased credit losses and lower securitization activity at CF and Commercial Equipment Financing. The 2001 increase reflected securitization gains, asset growth from acquisi-tions at Commercial Equipment Financing, CF and Vendor Financial Services, origination growth at Structured Finance Group, and higher asset gains and productivity at Real Estate. Other Commercial Finance principally includes 2002 revenues of $246 million and net earnings of $62 million of the Healthcare Financial Services busi-ness that we acquired in October 2001, offset by certain costs related to our acquisition of Heller Financial, Inc.

CONSUMER FINANCE (In millions) 2002 2001 2000 REVENUES Global Consumer Finance

$ 6,489

$5,561

$5,429 Card Services 3,777 3,947 3,891 Total revenues

$10,266

$9,508

$9,320 NET EARNINGS Global Consumer Finance

$ 1,255

$1,033

$ 856 Card Services 675 669 520 T. _

earning....

............... $.1,702.

. $1,3_

Total net earnings S 1,930

$1,702 S1,376 Charges of $57 million in 2001 were not allocated to this segment 2002 2001 because we did not include these costs in measuring the performance of businesses in this segment for internal purposes. Such charges, included in All Other GECS, related to unprofitable financing product lines that have been exited.

$ 57,764 30,041 26,897 19,293 30,512 23,761 7,498

$195,766

$128,277

$ 53,386 23,861 25,668 17,130 24,546 20,941 5,723

$171,255

$117,540 Commercial Finance revenues increased 16% in both 2002 and 2001. The 2002 increase principally reflected acquisitions and increased originations across substan-tially all businesses, partially offset by reduced market interest rates and lower securitization activity at CF and Commercial Equipment Financing. The 2001 increase resulted from acquisition and volume growth at Commercial Equipment Financing, Vendor Financial Services, Aviation Services and CF, including the acquisi-tion of Heller Financial, Inc. in October, volume growth at Structured Finance Group and increased securitization activity. Net earnings increased 17% in 2002 and 19%

in 2001. The 2002 increase in net earnings resulted from December 31 (In millions)

TOTAL ASSETS Global Consumer Finance Card Services

..T tal a Total assets 2002 2001

$58,310 18,655

$76,965

$63,254 Financing receivables -net

$43,893 19,085

$62,978

$47,891 Consumer Finance revenues increased 8% following a 2%

increase in 2001. Revenues increased in 2002 primarily as a result of acquisitions and increased international origina-tions, partially offset by lower securitization activity at Card Services. The revenue performance in 2001 reflected the post-acquisition revenues from acquired businesses and volume growth. Net earnings increased 13% following a 24% increase in 2001, as a result of origination growth, acquisitions, growth in lower taxed earnings from international operations and productivity benefits, partially offset by lower securitization activity at Card Services. The 2001 increase reflected produc-tivity at Global Consumer Finance and volume growth at Card Services.

GE 2002 ANNUAL REPORT 51

MANAGEMENT'S DISCUSSION AND ANALYSIS CONSUMER PRODUCTS (in millions) 2002 2001 2000 REVENUES Appliances

$6,072

$5,810

$5,887 Lighting 2,384 2,625 2,830 Total revenues

$8,458

$8,435

$8,717 OPERATING PROFIT Appliances

$ 451

$ 406

$ 439 Lighting 44 242 440 Total operating profit

$ 495

$ 648

$ 879 Consumer Products revenues were flat in 2002 as 5%

higher Appliances revenues, reflecting success of new products, were offset by a 9% decline in Lighting rev-enues. Consumer Products pricing was down during the year. Operating profit decreased 24%, reflecting adverse results in Lighting, particularly from lower prices, higher base costs and higher charges resulting from customer credit issues. Consumer Products revenues in 2001 were 3% lower than in 2000 as price erosion at Appli-ances and Lighting offset modest market share gains at Appliances. Operating profit decreased by 26% in 2001, largely as a result of lower selling prices at Appliances and Lighting and increased program spending on new products at Appliances.

EQUIPMENT MANAGEMENT (in millionsl 2002 2001 2000 REVENUES

$4,254

$4,401

$4,969 NET EARNINGS

$ 311

$ 359

$ 465 Charges of $17 million in 2001 were not allocated to this segment because we did not include these costs in measuring the performance of busi-nesses in this segment for internal purposes. Such charges, included in All Other GECS, related to the restructuring of various global operations.

December 31 in millionsl 2002 2001 Total assets

$26,117

$25,410 Equipment leased to others

$ 9,416

$ 9,749 Equipment Management businesses experienced busi-ness-wide declining utilization rates throughout the period, resulting in both lower revenues and lower earn-ings. Equipment Management realized productivity bene-fits in 2002, partially offsetting the utilization's effect on earnings. In 2001, Equipment Management realized tax benefits frorn a restructuring of the Penske joint venture, and recognized asset impairments atTransport International PoolModular Space and GE European Equipment Management.

INDUSTRIAL PRODUCTS AND SYSTEMS (in millionsl 2002 2001 2000 REVENUES Industrial Systems

$4,968

$4,440

$4,469 Transportation Systems 2,314 2,355 2,263 GE Supply 2,473 2,302 2,159 Total revenues

$9,755

$9,097

$8,891 OPERATING PROFIT Industrial Systems S 488

$ 527

$ 596 Transportation Systems 402 400 436 GE Supply 109 99 80 Total operatig p t

0......2.

......$...1..........................

Total operating profit S 999 S1.026 S1.112 Industrial Products and Systems reported a 7% increase in revenues and 3% lower operating profit as volume increased and selling prices declined across the segment.

Industrial Systems revenues rose 12% compared with 2001, but operating profit declined 7%, reflecting the negative effects of lower selling prices, partially offset by the positive effects of acquisitions and productivity.

Transportation Systems revenues were 2% lower and operating profit was about the same as in 2001, as prod-uct services revenues, strong variable cost productivity and lower materials costs offset the effects of lower vol-ume and pricing pressures. Industrial Products and Systems revenues in 2001 were 2% higher than in 2000, as higher product services revenues atTransportation Systems, including acquisitions, more than offset selling price decreases across the segment and lower volume at Industrial Systems. Operating profit decreased 8% in 2001 primarily as a result of the decline in selling prices and cost inflation.

Transportation Systems received orders of $2.8 billion in 2002, compared with $2.6 billion in 2001. The $2.1 bil-lion total backlog at year-end 2002 comprised unfilled product orders of $1.6 billion (of which 53% was sched-uled for delivery in 2003) and product services orders of $0.6 billion scheduled for 2003 delivery. Comparable December 31, 2001, total backlog was $1.7 billion.

52 GE 2002 ANNUAL REPORT

INSURANCE (in millions) 2002 2001 2000

~~~~~~~~~~................

REVENUES GE Financial Assurance

$12,311

$12,826

$12,888 Mortgage Insurance 1,090 1,075 973 GE Global Insurance Holding (ERC) 9,432 9,453 10,223 Other Insurance 457 536 682 Total revenues

$23,296

$23,890

$24,766 NET EARNINGS GE Financial Assurance

$ 844

$ 726

$ 672 Mortgage Insurance 460 407 356 GE Global Insurance Holding (ERC)

(1,827) 32 505 Other Insurance 214 169 109 Total net earnings

$ (509)

$ 1,334

$ 1,642 Charges of $306 million in 2001 were not allocated to this segment because we did not include these costs in measuring the performance of businesses in this segment for internal purposes. Such charges, included in All Other GECS. related to unprofitable insurance products and lines that have been exited and to provisions for disposition of nonstrategic investments.

Insurance revenues decreased 2% in 2002, because of the ongoing planned run-off of acquired policies atToho and lower realized investment gains. Segment revenues declined 4% in 2001 on reduced net premiums earned at ERC, reflecting the events of September 11, 2001, decreased investment income, and the planned run-off of restructured insurance policies at Toho. These factors were partially offset by increased premium income associated with origination volume at ERC and by post-acquisition revenues from acquired businesses and volume growth at GE Financial Assurance.

Net pre-tax realized investment gains in the equity and debt securities portfolios amounted to $413 million,

$972 million and $818 million in 2002, 2001 and 2000, respectively.

Net earnings decreased $1.8 billion in 2002, following a $0.3 billion decrease in 2001. The 2002 decrease was primarily attributable to the recognition of adverse devel-opment related to prior-year loss events at ERC, discussed below. With retrocession coverages previously purchased by ERC, the recording of this adverse development both increased policyholder losses and, to a lesser extent, decreased premium revenues (principally because of higher levels of contingent ceded premiums following these reserve adjustments). Also contributing to the reduction in 2002 net earnings were lower investment gains across all businesses, including a $110 million after-tax impairment on WorldCom, Inc. bonds at GE Financial Assurance. These decreases were partially offset by core premium growth, including higher premium pricing at ERC and the $152 million benefit from recognition of a favor-able tax settlement with the IRS related to the treatment of certain reserves for obligations to policyholders on life insurance contracts at GE Financial Assurance.

The level of reported claims activity at ERC related to prior-year loss events, particularly for liability-related expo-sures underwritten in 1997 through 2001, accelerated at a rate higher than we had anticipated. In 2002, considering the continued acceleration in reported claims activity, we concluded that our best estimate of ultimate losses was higher in the range of reasonably possible loss scenarios than previously estimated. Accordingly, we recognized a fourth quarter pre-tax charge of $2.5 billion to increase recorded reserves to reflect the revised indications of remaining liability. The more significant adverse develop-ment was in hospital medical malpractice ($300 million),

product liability 1$300 million), professional liability

($250 million), umbrella liability 1$200 million), workers compensation $200 million), individual liability ($150 mil-lion) and asbestos ($150 million). With amounts recognized in previous quarters of 2002, our overall 2002 pre-tax charge for adverse development amounted to $3.5 billion.

Insurance loss provisions are based on the best available estimates at a given time. As described on page 70 under the caption "Insurance Liabilities and Reserves, these estimates will be adjusted in the future as required.

We have continued our rigorous commitment to improved underwriting initiatives at ERC aimed at ensur-ing that consistent and diligent underwriting standards are applied to all risks. Throughout 2002, we have been disciplined in rejecting risks that either fail to meet the established standards of price or terms and conditions, or that involve areas for which sufficient historical data do not exist to evaluate the risk adequately. For risks that pass our criteria, we have sought to retain or even judi-ciously expand our business. On the other hand, we have curtailed or exited business in particular property and casualty business channels when expected returns do not appear to justify the risks.

Net earnings decreased $0.3 billion in 2001, reflecting underwriting results at ERC, which were partially offset by productivity benefits at GE Financial Assurance. Net earnings in 2001 at ERC were adversely affected by approximately $575 million ($386 million after tax) related to the insurance losses arising from the events of September 11, 2001. This amount primarily resulted from contingent premium payment provisions contained in certain retrocession agreements. After these particular losses, total losses exceeded retrocession policy limits in place at ERC. Substantially all of the September 11, 2001, losses are recoverable under reinsurance policies that require additional premiums to those retrocessionaires.

Therefore, the 2001 Statement of Earnings reflects a

$698 million reduction in net premiums earned and GE 2002 ANNUAL REPORT 53

MANAGEMENT'S DISCUSSION AND ANALYSIS

$78 million of increased losses, partially offset by $201 mil-lion in lower insurance acquisition costs. Historical experi-ence related to large catastrophic events has shown that a broad range of total insurance industry loss estimates often exists following such an event, and it is not unusual for there to be significant subsequent revisions to such estimates. Our best estimate of the existing liability, net of estimated recoveries under retrocession arrangements, has not changed significantly from our initial estimate.

Excluding events of September 11, 2001, net earnings in 2001 and 2000 were also adversely affected by the continued general deterioration of underwriting results at ERC, reflecting higher property and casualty-related losses (principally as a result of adverse development relating to prior-year loss events) and the continued effects of low premiums in the property and casualty insurance/reinsurance industry. ERC underwriting results in 2001 tracked performance in the global property and casualty industry.

The majority of the adverse development at ERC in 2001, and to a lesser extent in 2000, related to higher projected ultimate losses for liability coverages, especially in the hospital liability, nonstandard automobile (automobile insurance extended to higher-risk drivers) and commercial and public entity general liability lines of business. Results in 2000 also reflected an increase in industry-wide loss estimates related to certain large property loss events, with the largest effect resulting from the European windstorms occurring in late 1999.

Our Mortgage Insurance business had favorable loss experience throughout the three years ended Decem-ber 31, 2002, reflecting continued strength in certain real estate markets and the success of our loss contain-ment initiatives.

MATERIALS (In millions) 2002 2001 2000 REVENUES Plastics

$5,245

$5,252

$6,013 Specialty Materials 2,406 1,817 2,007 Total revenues

$7,651

$7,069

$8,020 OPERATING PROFIT Plastics

$ 843

$1,166

$1,518 Specialty Materials 282 267 347 Total operatn prof1,1...

...$,43......

5........

,5...

Total operating profit S1,125 S1.433 S1,865 Materials revenues increased 8% in 2002 and operating profit declined 21%. Plastics revenues were relatively unchanged from 2001 levels, as continued weakness in pricing offset increased volume. Operating profit at Plastics declined 28% as productivity and increased vol-ume were not sufficient to offset substantially lower selling prices and increased raw material costs. Specialty Materials revenues increased 32%, reflecting the contri-butions of recent acquisitions, partially offset by lower selling prices. Operating profit at Specialty Materials rose 6%, reflecting higher acquisition volume and lower mate-rial costs, partially offset by lower pricing and higher base costs. In 2001, Materials revenues were 12% lower than the prior year, reflecting increased pricing pressures and lower volume at both Plastics and Specialty Materials.

Plastics experienced continued softness in the automotive, optical media, telecommunications and business equip-ment markets, while Specialty Materials was adversely affected by lower sales in the semiconductor market.

Operating profit in 2001 was 23% lower than in 2000, primarily as a result of lower pricing and volume, which more than offset base cost reductions at both Plastics and Specialty Materials.

NBC reported record revenues of $71 billion in 2002, a 24% increase compared with 2001, and operating profit of $1.7 billion, up 18%. Primary factors contributing to this performance included our improved performance in the advertising market, our broadcast of the 2002 Winter Olympics and contributions from the Telemundo acquisi-tion. NBC's 2002 results also included $0.2 billion of the

$0.6 billion total gain from the exchange of certain assets for the cable network Bravo and $0.2 billion of other charges for various asset impairments. Revenues declined 15% in 2001, mostly from an industry-wide decline in advertising volume and pricing, as well as lost revenue related to covering the events of September 11, 2001.

Operating profit decreased 12% in 2001, reflecting adverse advertising market conditions, the events of September 11, 2001, and charges resulting from dissolving the XFL, which more than offset savings from cost reduction actions.

POWER SYSTEMS revenues increased 13% to $22.9 billion in 2002, following an increase of 36% in 2001. Operating profit rose 29% to $6.3 billion in 2002, following a 93%

increase in 2001. Operating profit improvements at Power Systems reflect the $0.9 billion positive effect of cus-tomer contract termination fees, net of associated costs.

Results in 2002 also include restructuring and other charges of $0.2 billion as Power Systems adjusted its cost structure.

These results reflected the changing conditions in the power generation business as demand for new power generation equipment declined in 2002 and orders were delayed or cancelled. When orders are cancelled, 54 GE 2002 ANNUAL REPORT

contractual terms require customers to pay termination fees. In all cases, we expect such fees to cover our invest-ment in the contracts. At least a portion of this investment has generally been received as progress collections. We also expect to recover at least part of lost profits.

Power Systems orders were $14.2 billion in 2002, compared with $24.5 billion in 2001, reflecting the sharp decline in demand for new power generation equipment in the United States. The $16.7 billion total backlog at year-end 2002 comprised unfilled product orders of $13.1 bil-lion (of which 73% was scheduled for delivery in 2003) and product services orders of $3.6 billion scheduled for 2003 delivery. Comparable December 31, 2001, total backlog was $28.9 billion. As a result of current market conditions, we are in discussions with certain customers regarding their equipment requirements. These discus-sions may result in changes to contractual agreements, iicluding delays or cancellations, and may also result in further termination fees.

TECHNICAL PRODUCTS AND SERVICES (In millions) 20 2001 2000 REVENUES Medical Systems

$8,955

$8,409

$7,275 Global eXchange Services 311 602 640

.. ~~~~........

Total revenues

$9,266

$9,011

$7,915 OPERATING PROFIT Medical Systems

$1,546

$1,498

$1,321 Global eXchange Services 16 125 114 Total operating profit

$1,562

$1,623

$ 1,43.........

Total operating profit S1.562 S1,623 S1.435 Technical Products and Services revenues increased 3%

in 2002, primarily as a result of 6% revenue growth at Medical Systems, which reported higher equipment and product services volume, partially offset by weak market conditions in Latin America and Japan. Operating profit for the segment declined 4% with sharply lower earnings from Global eXchange Services, 90% of which was sold in September 2002. Productivity and increased volume were partially offset by lower pricing at Medical Systems.

Technical Products and Services revenues rose 14% in 2001, primarily as a result of sharply higher volume at Medical Systems. Operating profit grew 13% in 2001, largely as a result of productivity and volume growth.

Orders received by Medical Systems in 2002 were

$9.6 billion, an 8% increase over 2001. The $4.0 billion total backlog at year-end 2002 comprised unfilled product orders of $2.6 billion (of which 95% was scheduled for delivery in 2003) and product services orders of $1.4 billion scheduled for 2003 delivery. Comparable December 31, 2001, total backlog was $4.1 billion.

ALL OTHER GECS lIn millions) 2002 2001 2000

_~~~~~~~~

?..

REVENUES IT Solutions

$3,733

$4,180

$ 7,072 GE Equity (384)

(126) 1,079 Americom gain 1,158 Americom 540 594 Asset impairments (383)

(238)

Product line exits (53)

PaineWebber gain 1,366 Wards 3,234 Other -All Other GECS 982 1,358 2,033 Total revenues

$4,331

$6,674

$15,140 NET EARNINGS IT Solutions

$ (24)

$ 47

$ (152)

GE Equity (377)

(270) 525 Americom gain 642 Americom 256 197 Asset impairments (310)

(49)

Product line exits (180)

Restructuring (144) 1298)

PaineWebber gain 848 Wards (22)

(782)

Other-All Other GECS 110 (254) t..g

(.......

13 Total net earnings S 291)

S 19 S

35 All Other GECS includes GECS activities and businesses that we do not measure within one of the other financial services segments.

In addition to comments on All Other GECS else-where in this report, the following comments relate to the table above:

IT Solutions (ITS)-Revenues and net earnings in 2002 decreased primarily as a result of market conditions and 2001 product line and geographic market exits. During 2001 and 2000, in response to intense competition and transition of the computer equipment market to a direct distribution model, ITS exited its underperforming opera-tions in the United Kingdom, France, Brazil and Mexico and significantly reduced its reseller role in the United States. Costs for involuntary termination benefits, asset impairments, facilities exit costs and losses on sales of portions of the business amounted to $45 million ($43 million after tax) and $246 million ($191 million after tax) in 2001 and 2000, respectively, and are included in restructuring in the table above. The number of employ-ees was reduced from a 2000 peak of 11,000 to 6,600 at the end of 2002.

GE Equity-GE Equity manages equity investments in early-stage, early growth, pre-IPO companies. GE Equity revenues include income, gains and losses on such investments. Revenues and net earnings during 2002 reflected increased losses on investments, including losses GE 2002 ANNUAL REPORT 55

MANAGEMENT'S DISCUSSION AND ANALYSIS in the telecommunications and software industries, and lower gains. Effective in the fourth quarter of 2002, GE Equity will no longer make new investments in private companies. GE Equity will continue to give financial support to companies within its existing portfolio. The existing portfolio will be managed for maximum value over time, eventually winding down. During 2001, losses on GE Equity's investments exceeded gains and other investment income, resulting in negative revenues and a $270 million net loss, which increased over the prior year principally from reduced asset gains.

Americom-On November 9, 2001, GECS exchanged its satellite operations, comprising the stock of Americom and other related assets and liabilities, for a combination of cash and 31% of the publicly-traded stock of SES Global, a leading satellite company, in order to create the world's largest satellite services provider. The transaction resulted in a gain of $1,158 million ($642 million after tax),

representing the difference between the carrying value of the 69% investment in Americom and the amount of cash plus the market value of SES Global shares received at the closing date. No gain was recorded on the 31%

interest in Americom that was indirectly retained by GECS. GECS investment in SES Global is accounted for on the equity method in Commercial Finance.

2001 Asset impairments and product line exits-Operations included $656 million of after-tax charges related to disposing of and providing for disposition of several nonstrategic investments and other assets, to cer-tain unprofitable insurance and financing product lines that were exited, and to restructuring various global oper-ations. These costs, not allocated to the related busi-nesses as we did not include these costs in measuring the performance of those businesses for internal pur-poses, included $478 million ($310 million after tax) for other-than-temporary impairments of investments, the largest of which were held by GE Financial Assurance, GE Equity and ERC. These losses, $383 million of which were charged to revenues, included $130 million ($84 million after tax) of losses on Enron bonds; such bonds were written down to a cost basis of $32 million at December 31, 2001. Such losses also included investment impairment charges of $199 million ($130 million after tax) on non-U.S. mutual funds and the technology sector.

In response to escalating losses, GECS in 2001 decided to cease further underwriting and exit certain insurance and financing product lines. Charges associated with such loss events and the resulting exits totaled

$180 million after tax, of which $149 million related to the loss events in ERC product lines, primarily non-standard automobile and higher limit industrial property insurance coverages.

Restructuring of several GECS global businesses included consolidation of several European Equipment Management businesses and rationalization of European Equipment Finance businesses. Costs related to the exit of these activities amounted to $144 million after tax and consisted of involuntary termination benefits, facilities exit costs, and asset impairments.

Other-All Other GECS includes GECS corporate function expenses, liquidating businesses and other non-segment aligned operations, the most significant of which were Auto Financial Services (AFS) and GE Auto and Home.

The decrease in revenues in 2002 and 2001 resulted from AFS, which stopped accepting new business in 2000. Net earnings increased in 2002 primarily because of a favor-able tax settlement with the IRS allowing the deduction of previously realized losses associated with the prior disposition of Kidder Peabody and tax benefits from growth in lower taxed earnings from international operations.

56 GE 2002 ANNUAL REPORT

SUMMARY

OF OPERATING SEGMENTS General Electric Company and consolidated ffiliates

.Fo.........

y e e Forth years ended December 31(in mllions) 2002 2001_

20D 199

_1_8 REVENUES Aircraft Engines Commercial Finance Consumer Finance Consumer Products Equipment Management Industrial Products and Systems Insurance Materials NBC Power Systems Technical Products and Services All Other GECS Corporate items and eliminations

........CONSO ITE.

REV E S..

CONSOLIOATED REVENUES

$ 11,141

$ 11,389

$ 10,779

$ 10,730

$ 10,294 16,040 13,880 11,982 9,822 8,072 10,266 9,508 9,320 7,562 6,750 8,456 8,435 8,717 8,525 8,520 4,254 4,401 4,969 4,789 4,234 9,755 9,097 8,891 8,642 8,305 23,296 23,890 24,766 19,433 16,841 7,651 7,069 8,020 7,118 6,796 7,149 5,769 6,797 5,790 5,269 22,926 20,211 14,861 10,099 8,500 9,266 9,011 7,915 6,863 5,323 4,331 6,674 15,140 14,143 12,797 (2,833)

(3,421)

(2,304)

(1,886)

(1,232)

$131,698

$125,913

$129,853

$111,630

$100,469 SEGMENT PROFIT (See description below)

Aircraft Engines

$ 2,060

$ 2,147

$ 2,000

$ 1,739

$ 1,478 Commercial Financee) 3,185 2,724 2,294 1,758 1,492 Consumer FinanceWl 1,930 1,702 1,376 920 631 Consumer Products 495 648 879 971 1,103 Equipment Management"i 311 359 465 422 476 Industrial Products and Systems 999 1,026 1,112 1,048 874 Insurancelel (509) 1,334 1,642 1,730 1,459 Materials 1,125 1,433 1,865 1,590 1,536 NBC 1,658 1,408 1,609 1,427 1,225 Power Systems 6,255 4,860 2,523 1,537 1,118 Technical Products and Services 1,562 1,623 1,435 1,232 957 All Other GECSIaI (291) 19 35 125 146 Total segment profit 18,780 19,283 17,235 14,499 12,495 GECS goodwill amortization (552)

(620) 1512)

(408)

GE corporate items and eliminations(b 759 407 730 747 909 GE interest and other financial charges (569)

(817)

(811) 1810)

(883)

GE provision for income taxes 03,837)

(4,193)

(3,799)

(3,207)

(2,817)

Earnings before accounting changes 15,133 14,128 12,735 10,717 9,296 Cumulative effect of accounting changes (1,015)

(444)

CONSOLIDATED NET EARNINGS

$ 14,118

$ 13,684

$ 12,735

$ 10,717

$ 9,296 (a) Segment profit measured as net earnings.

Ib) Corporate items include the effect of pension and other benefit plans that are not allocated to segment results as well as income, principally from licensing activities, of $97 million, $88 million, $79 million, $62 million and $271 million In 2002, 2001, 2000,1999 and 1998, respectively. In 2002, corporate items include $341 million of the total gain of $571 million resulting from NBCs exchange of certain assets for the cable network Bravo and a $488 million gain from the sale of 90% of Global eXchange Services. Also Included in 2002 are $175 million of the total restructuring and other charges of $556 million, which related to segment activities as follows: Aircraft Engines-$55 million, Industrial Products and Systems-$33 million, Materials-S51 million,Technical Products and Services-S i0 million and other-S6 million. In 1999, corporate items Include $176 million of the total restructuring and other charges of $265 million, which related to segment activities as follows: Aircraft Engines - $42 million, Consumer Products -

$00 million,Technical Products and Services -$34 million and other-$20 million.

SEGMENT PROFIT is defined in this paragraph. The notes to consolidated financial statements on pages78-109 are an integral part of this statement. Segment profit excludes goodwill amortization, the effects of pensions and other retiree benefit plans and accounting changes. The segment profit measure for GE industrial businesses-Aircraft Engines, Consumer Products, Industrial Products and Systems, Materials, NBC, Power Systems and Technical Products and Services-is operating profit (earnings before interest and other financial charges, income taxes and accounting changes). The segment profit measure for Commercial Finance, Consumer Finance, Equipment Management, Insurance and All Other GECS is after-tax earnings before accounting changes, reflecting the importance of financing and tax con-siderations to their operating activities.

GE 2002 ANNUAL REPORT 57

MANAGEMENT'S DISCUSSION AND ANALYSIS JAENUARY' O.!003 Ru::CLA,11 0s' i:

MN;.)

'Af CiSA SRVICE'S 6 OM" f GE Capital historically has issued about

$8 of debt for each $1 of equity-a "leverage ratio" of 8:1. For purposes of measuring segment profit, each of our financial services businesses was also assigned debt and interest costs on the basis of that consolidated 8:1 leverage ratio. In eva uating expected returns on potential investments, however, we also used business-specific, market-based leverage ratios. As of January 1, 2003, we extended the business-specific, market-based leverage to the performance measurement of each of our financial services businesses, and consequently to the definition of segment profit. As a result, at January 1, 2003, debt of $12.5 billion previously allocated to the segments was allocated to the All Other GECS segment. At the same time, we revised our historical techniques for allocating shared costs and unusual items to financial services busi-nesses. In this report, the results of our financial services segments are presented on the historic 8:1 leverage ratio basis. Beginning in 2003, the new leverage ratios and recast comparative historical results will be as follows:

IDollars in millionsl 2002 2001 2000 1999 COMMERCIAL FINANCE Leverage ratio 7.4:1 7.5:1 7.4:1 75:1 Adjusted net earnings

$3,189

$ 2,788

$2,416

$1,834 CONSUMER FINANCE Leverage ratio 12.4:1 12.3:1 12.3:1 12.4:1 Adjusted net earnings

$1,799

$ 1,602

$1,295

$ 848 EQUIPMENT MANAGEMENT Leverage ratio 5.0:1 5.1:1 5.1:1 4.9:1 Adjusted net earnings

$ 313

$ 377

$ 484

$ 416 INSURANCE Leverage ratio 0.4:1 0.4:1 0.4:1 0.4:1 Adjusted net earnings

$ (95) $ 1,879

$2,201

$2,142 ALL OTHER GECS Adjusted net earnings

$ (580) $ (508)

$ (584)

$ (285)

International Operations Estimated results of international activities include the results of our operations located outside the United States plus all U.S. exports. We classify certain GECS operations that cannot meaningfully be associated with specific geographic areas as "Other international" for this purpose.

International revenues of $52.9 billion, $51.4 billion and $53.0 billion in 2002, 2001 and 2000, respectively, represented about 40% of consolidated revenues in each year.

(In millions}

2002 2001 2000 Europe

$24,301

$23,878

$24,144 Pacific Basin 12,026 11,447 12,921 Americas 5,165 5,507 5,912 Other international 3,911 3,456 2,842 45,403 44,288 45,819 Exports from the U.S. to external customers 7,481 7,149 7,138

$52,884

$51,437

$52,957 GE international revenues were $29.0 billion, $28.3 billion and $26.7 billion in 2002, 2001 and 2000, respectively.

GE international revenues of $29.0 billion in 2002 were

$0.7 billion higher than in 2001. Revenues in 2001 of

$28.3 billion increased $1.6 billion over 2000. The increase in 2002 related to both an increase in operations outside the U.S. and higher U.S. exports. Revenue increases 2002 CONSOLIDATED INTERNATIONAL REVENUES BY REGION IINCLUDING EXPORTS FROMTHE U.S.)

Americas 140/

Other 10%

Europe 50%

Pacif c Basin 26%

m-........

in Europe were led by Medical Systems and Industrial Systems. Growth in Specialty Materials revenues across all geographic areas was partially offset by lower sales in all areas by Aircraft Engines. Increases in U.S. export sales in 2002 were primarily in Plastics and Power Systems, partially offset by lower exports by Medical Systems and Transportation Systems.

GECS international revenues were $23.9 billion in 2002, an increase of 3% from $23.1 billion in 2001. GECS revenues in the Pacific Basin increased 9% in 2002, as a result of acquisitions and origination growth, primarily at Consumer Finance and Commercial Finance. Revenues in "Other international" increased 11% in 2002, primarily as a result of origination growth at Aviation Services.

Revenues in Europe decreased 2% as a result of lower investment gains and adjustments to estimates of prior year loss events at Insurance, the 2001 divestiture of 58 GE 2002 ANNUAL REPORT t

I 2

3 t

j

.............I

Americom, and market conditions and geographic market exits at IT Solutions, partially offset by acquisitions at Consumer Finance and Commercial Finance.

Consolidated international operating profit was $6.5 bil-lion in 2002, an increase of 7% over 2001, which was 11% lower than in 2000. Operating profit rose 24% to

$1.2 billion in the Americas and 28% to $0.9 billion in "Other international" and was relatively unchanged in Europe ($2.1 billion) and the Pacific Basin ($2.3 billion).

Total assets of international operations were $229.0 billion in 2002 (40% of consolidated assets), an increase of $49.0 billion, or 27%, over 2001. GECS international assets grew 28% from $161.6 billion at year-end 2001 to

$2075 billion at the end of 2002. GECS assets increased 41 % and 26% in the Pacific Basin and Europe, respec-tively, resulting from acquisitions and origination growth.

Our international activities span all global regions and primarily encompass manufacturing for local and export 2002 TOTAL ASSETS OF INTERNATIONAL OPERATIONS Americas 8%

Other 15%

Europe 52%

Pacific Basin 25%

markets, import and sale of products produced in other regions, leasing of aircraft, sourcing for our plants domi-ciled in other global regions and provision of financial services within these regional economies. Thus, when countries or regions experience currency and/or eco-nomic stress, we may have increased exposure to certain risks, but also may have new profit opportunities.

Potential increased risks include, among other things, higher receivables delinquencies and bad debts, delays or cancellation of sales and orders principally related to Power and aircraft equipment, higher local currency financing costs and a slowdown in established financial services activities. New profit opportunities include, among other things, lower costs of goods sourced from countries with weakened currencies, more opportunities for lower cost outsourcing, expansion of industrial and financial services activities through purchases of compa-nies or assets at reduced prices and lower U.S. debt financing costs.

Financial results of our international activities reported in U.S. dollars are affected by currency exchange. We use a number of techniques to manage the effects of cur-rency exchange, including selective borrowings in local currencies and selective hedging of significant cross-cur-rency transactions. Principal currencies are the euro, the Japanese yen and the Canadian dollar Environmental Matters Our operations, like operations of other companies engaged in similar businesses, involve the use, disposal and cleanup of substances regulated under environmen-tal protection laws.

In 2002, we expended about $43 million for capital projects related to the environment. The comparable amount in 2001 was $52 million. These amounts exclude expenditures for remediation actions, which are principally expensed and are discussed below. Capital expenditures for environmental purposes have included pollution control devices-such as wastewater treatment plants, ground-water monitoring devices, air strippers or separators, and incinerators-at new and existing facilities constructed or upgraded in the normal course of business. Consistent Nith policies stressing environmental responsibility, aver-age annual capital expenditures other than for remediation projects are presently expected to be about $65 million over each of the next two years for new or expanded pro-rams to build facilities or modify manufacturing rocesses to minimize waste and reduce emissions.

his is about the same level as recent experience.

We are also involved in a sizable number of remedia-in actions to clean up hazardous wastes as required by deral and state laws. Such statutes require that respon-

)le parties fund remediation actions regardless of fault, gality of original disposal or ownership of a disposal

e. Expenditures for site remediation actions amounted approximately $113 million in 2002, compared with 19 million in 2001. We presently expect that such reme-tion actions will require average annual expenditures in range of $120 million to $170 million over the next years.

The U.S. Environmental Protection Agency (EPA) ruled ebruary 2002 that approximately 150,000 pounds of

,chlorinated biphenyls (PCBs) must be dredged from

-mile stretch of the upper Hudson River in New York

e. We have submitted what is known as a "Good Offer" under the Superfund law and have begun

)tiations with EPA to undertake the design and

'neering of the remedy. Our Statement of Financiai ion as of December 31, 2002 and 2001, includes a ty for the estimated costs of this remediation.

GE 2002 ANNUAL REPORT 59

MANAGEMENT'S DISCUSSION AND ANALYSIS MANAGEMENT'S DISCUSSION OF FINANCIAL RESOURCES AND LIQUIDITY Overview This discussion of financial resources and liquidity addresses the Statement of Financial Position (pages 74-75), Statement of Changes in Share Owners' Equity (page 72) and the Statement of Cash Flows (pages 76-77).

Only a small portion of GECS business is directly related to other GE operations. The fundamental differ-ences between GE and GECS are reflected in the meas-urements commonly used by investors, rating agencies and financial analysts. These differences will become clearer in the discussion that follows with respect to the more significant items in the financial statements.

including $348 million from the telecommunications and cable industries, of which $167 million was recognized in the second quarter of 2002 following the events relating toWorldCom, Inc.

WORKING CAPITAL, representing GE cash invested in inventories and receivables from customers less trade payables and progress collections, increased to $3.8 bil-lion at the end of 2002. Working capital declined from an investment of $3.9 billion at the beginning of 2000 to a negative $2.4 billion at the end of 2001 on much higher progress collections from Power Systems customers.

Working capital balances are significantly affected by progress collections, primarily from Power Systems customers, as shown below.

Statement of Financial Position (pages 74-75)

Because GE and GECS share certain significant elements of their Statements of Financial Position-property, plant and equipment, and borrowings, for example-the fol-lowing discussion addresses significant captions in the "consolidated" statement. Within the following discus-sions, however, we distinguish between GE and GECS activities in order to permit meaningful analysis of each individual statement.

INVESTMENT SECURITIES for each of the past two years comprised mainly investment-grade debt securities held by Insurance in support of obligations to annuitants and policyholders. Investment securities were $116.9 billion in 2002, compared with $101.0 billion in 2001. The increase of $15.9 billion resulted from investment of premiums received, reinvestment of investment income, the addition of investment securities from acquired companies and increases in fair value, primarily debt securities, partially offset by sales and maturities as well as impairments and losses related to certain debt and equity securities.

Gross unrealized gains and losses were $4.4 billion and $2.5 billion, respectively, at December 31, 2002 (gross unrealized gains and losses of $2.2 billion and

$2.7 billion, respectively, as of December 31, 20011.

Market value for these purposes is defined by relevant accounting standards and should not be viewed as a forecast of futUre gains or losses. We estimate that available gains, net of hedging positions and estimated impairment of insurance intangible assets, could be as much as $1.4 billion.

We regularly review investment securities for impair-ment based on criteria that include the extent to which cost exceeds market value, the duration of that market decline and the financial health and specific prospects for the issuer. Of securities with unrealized losses at December 31, 2002, approximately $800 million of portfo-lio value is at risk of being charged to earnings in 2003.

Impairment losses recognized for 2002 were $759 million, December 31 lin millions)

Working capital Less progress collections

_2002.

2001

$ 3,821

$ (2,398) 8,603 11,638 Working capital, excluding progress collections

$10,424

$ 9,240 We expect Power Systems progress collections to decline about $3 billion in 2003, and that working capital turnover otherwise will show improvement as a result of our Six Sigma and digitization initiatives. We discuss current receivables and inventories, two important ele-ments of working capital, in the following paragraphs.

CURRENT RECEIVABLES for GE were $11.0 billion at the end of 2002, an increase of $1.2 billion from year-end 2001, and included $6.3 billion due from customers at the end of 2002, compared with $5.9 billion at the end of 2001.

Turnover of customer receivables from sales of goods and services was 10.9 in 2002, compared with 10.1 in 2001.

Other current receivables are primarily amounts that did not originate from sales of GE goods or services, such as advances to suppliers in connection with large contracts.

INVENTORIES for GE were $9.0 billion at December 31, 2002, up $0.7 billion from the end of 2001. GE inventory turnover was 77 in 2002, a decrease from 79 in 2001, as a result of higher inventories at Power Systems, Plastics and Medical Systems.

GECS inventories were $208 million and $270 million at December 31, 2002 and 2001, respectively. The decrease in 2002 primarily reflected reduced sales volume and improved inventory management at IT Solutions.

FINANCING RECEIVABLES is the largest category of assets for GECS and represents one of its primary sources of revenues. The portfolio of financing receivables, before allowance for losses, increased to $205.4 billion at December 31, 2002, from $178.9 billion at the end of 2001, as discussed in the following paragraphs. The related allowance for losses at the end of 2002 60 GE 2002 ANNUAL REPORT

amounted to $5.5 billion I$4.8 billion at the end of 2001),

representing our best estimate of probable losses inher-ent in the portfolio.

A discussion of the quality of certain elements of the financing receivables portfolio follows. "Nonearning" receivables are those that are 90 days or more delinquent (or for which collection has otherwise become doubtful) and "reduced-earning" receivables are commercial receivables whose terms have been restructured to a below-market yield.

Commercial Finance financing receivables before allowance for losses totaled $130.9 billion at December 31, 2002, ($120.1 billion at December 31, 2001) and con-sisted of loans and leases to the equipment, commercial and industrial, real estate and commercial aircraft indus-tries. This portfolio of receivables increased primarily from increased acquisitions and originations growth, partially offset by sales and securitizations. Related nonearning and reduced-earning receivables were $2.2 billion at December 31, 2002, about 1.7% of outstandings, com-pared with $2.0 billion, about 1.7% of outstandings at year-end 2001. Commercial Finance receivables are gen-erally backed by assets and there is a broad spread of geographic and credit risk in the portfolio.

Consumer Finance financing receivables before allowance for losses, primarily installment loans, auto loans and leases, and residential mortgages, were

$66.0 billion at December 31, 2002, an increase of

$16.0 billion from year-end 2001. This portfolio of receiv-ables increased primarily from increased originations, acquisition growth and the net effects of foreign currency translation, partially offset by sales and securitizations.

Nonearning consumer receivables at December 31, 2002, were $1.6 billion, about 2.4% of outstandings, compared with $1.3 billion, about 2.7% of outstandings at year-end 2001.

"Other, principally Equipment Management' financing receivables before allowance for losses amounted to $8.5 billion at December 31, 2002, a decrease of $0.3 billion from year-end 2001, primarily as a result of the run-off of the liquidating Auto Financial Services portfolio. Non-earning receivables at December 31, 2002, were $0.1 bil-lion, about 1.0% of outstandings, compared with $0.2 billion, about 1.8% of outstandings at year-end 2001.

Delinquency rates on consumer financing receivables at December 31, 2002, were 5.34%; at year-end 2001 were 5.21 %; and at year-end 2000 were 4.53% on a managed basis. Increased 2002 and 2001 delinquencies reflected our secured financing business acquired in 2001 and volume growth in that business in 2002. When delin-quent, these loans have relatively lower losses than the rest of our consumer portfolio. Delinquencies on Com-mercial Finance equipment loans and leases were 1.72%,

2.16% and 1.68% at year-end 2002, 2001 and 2000, respectively, on a managed basis. The decline at December 31, 2002, primarily reflected a higher con-centration of Vendor Financial Services receivables coupled with improved collection results at Commercial Equipment Finance. The increase at December 31, 2001, reflected the acquisition of Heller Financial, Inc. Future provisions for losses will depend primarily on the size of the portfolio, which is expected to continue to grow, and on associated business and economic conditions.

INSURANCE RECEIVABLES of GECS were $31.6 billion at year-end 2002, an increase of $3.3 billion that was primarily attributable to acquisitions and core growth at GE Financial Assurance, increased recoveries under existing retrocession agreements at ERC and an increase in mort-gages held for investment at Mortgage Insurance.

OTHER RECEIVABLES of GECS totaled $13.0 billion at December 31, 2002, and $13.3 billion at December 31, 2001, and consist primarily of nonfinancing customer receivables, accrued investment income, amounts due from GE (generally related to certain trade payable pro-grams), amounts due under operating leases, receivables due on sales of securities and various sundry items.

PROPERTY PLANT AND EQUIPMENT (including equipment leased to others) was $47.2 billion at December 31, 2002, up $5.1 billion from 2001, primarily reflecting acquisitions of commercial aircraft at Commercial Finance. GE property, plant and equipment consists of investments for its own productive use, whereas the largest element for GECS is equipment provided to third parties on operating leases.

Details by category of investment are presented in note 15.

GE expenditures for plant and equipment during 2002 totaled $2.4 billion, compared with $2.9 billion in 2001.

Total expenditures for the past five years were $12.4 bil-lion, of which 38% was investment for growth through new capacity and product development; 35% was invest-ment in productivity through new equipment and process improvements; and 27% was investment for other pur-poses such as improvement of research and develop-ment facilities and safety and environmental protection.

GECS additions to property, plant and equipment (including equipment leased to others) were $11.0 billion and $12.6 billion during 2002 and 2001, respectively, primarily reflecting acquisitions of commercial aircraft at Commercial Finance.

INTANGIBLE ASSETS were $46.2 billion at year-end 2002, up from $35.1 billion at year-end 2001. GE intangibles increased to $23.1 billion from $14.4 billion at the end of 2001, principally as a result of goodwill and other intan-gibles related to acquisitions by NBC, Specialty Materials and Industrial Systems. GECS intangibles increased $2.4 GE 2002 ANNUAL REPORT 61

MANAGEMENT'S DISCUSSION AND ANALYSIS billion to $23.1 billion, reflecting goodwill and other intan-gibles associated with acquisitions and purchase account-ing adjustments primarily related to the 2001 acquisition of Heller Financial, Inc., partially offset by the impairment of goodwill from adopting SFAS 142 (see notes 1 and 16).

ALL OTHER ASSETS totaled $93.2 billion at year-end 2002, an increase of $16.6 billion from the end of 2001. GE other assets increased $5.0 billion, principally reflecting increases in the prepaid pension asset and acquisitions.

GECS other assets increased $12.1 billion, principally the result of acquisitions affecting real estate and separate accounts (investments coritrolled by policyholders); the transfer of Home Depot private label credit card receiv-ables (assets held for sale) in preparation for their sale when that contract is terminated in 2003; and increasing deferred acquisition costs in connection with ongoing insurance operations, partially offset by a reduction in our investment in associated companies reflecting the con-solidation of the Banc One joint venture (see note 17).

CONSOLIDATED BORROWINGS aggregated $279.4 billion at December 31, 2002, compared with $232.9 billion at the end of 2001. The major debt-rating agencies evaluate the financial condition of GE and of GE Capital Corporation (GE Capital), the major public borrowing entity of GECS, differently because of their distinct business characteris-tics. Using criteria appropriate to each and considering their combined strength, those major rating agencies continue to give the highest ratings to debt of both GE and GE Capital.

GE total borrowings were $9.8 billion at year-end 2002

($8.8 billion short term, $1.0 billion long term), an increase of $73 billion from year-end 2001. GE total debt at the end of 2002 equaled 13.1% of total capital, up from 4.3%

at the end of 2001.

GECS total borrowings were $270.9 billion at December 31, 2002, of which $130.1 billion is due in 2003 and $140.8 billion is due in subsequent years. Com-parable amounts at the end of 2001 were $239.9 billion in total, $160.8 billion due within one year and $79.1 billion due thereafter. A large portion of GECS borrowings ($84.2 billion and $1175 billion at the end of 2002 and 2001, respectively) was issued in active commercial paper mar-kets that we believe will continue to be a reliable source of short-term financing. Most of this commercial paper was issued by GE Capital. The average remaining terms and interest rates of GE Capital commercial paper were 47 days and 1.95% at the end of 2002, compared with 46 days and 2.37% at the end of 2001. The GE Capital ratio of debt to equity was 6.58 to 1 at the end of 2002 and 731 to 1 at the end of 2001.

INSURANCE LIABILITIES, RESERVES AND ANNUITY BENEFITS of

$135.9 billion at December 31, 2002, were $21.6 billion higher than in 2001. The increase was primarily attributable to acquisitions, growth in deferred annuities and guaran-teed investment contracts at GE Financial Assurance and adverse development at ERC. For additional information on these liabilities, see note 19.

INTEREST RATE AND CURRENCY RISK MANAGEMENT is important in our normal business activities. We use derivative finan-cial instruments to mitigate or eliminate certain financial and market risks, including those related to changes in interest rates and currency exchange rates. As a matter of policy, we do not engage in derivatives trading, deriva-tives market-making or other speculative activities.

The U.S. Securities and Exchange Commission requires that registrants provide information about poten-tial effects of changes in interest and currency exchange rates. The following discussion is based on so-called

.shock tests:' which model effects of interest rate and currency shifts on the reporting company. While the fol-lowing results of shock tests for changes in interest rates and currency exchange rates may have some limited use as benchmarks, they should not be viewed as forecasts.

One means of assessing exposure to interest rate changes is a duration-based analysis that measures the potential loss in net eamings resulting from a hypothetical increase in interest rates of 100 basis points across all maturities (sometimes referred to as a "parallel shift in the yield curve"). Under this model, with all else held constant, we estimate that such an increase, including repricing in the securities portfolio, would reduce the 2003 net earnings of GECS based on year-end 2002 positions by approximately

$184 million; the pro-forma effect for GE was $61 million.

Based on positions at year-end 2001, the pro-forma effect on 2002 net eamings of such an increase in interest rates was estimated to be a decrease of approximately $189 mil-lion for GECS and was insignificant for GE.

Our geographic distribution of operations is diverse. One means of assessing exposure to changes in currency exchange rates is to model effects on reported earnings using a sensitivity analysis. We analyzed year-end 2002 consolidated currency exposures, including financial instruments designated and effective as hedges, to iden-tify assets and liabilities denominated in other than their relevant functional currencies. Net unhedged exposures in each currency were then remeasured, generally assum-ing a 10% decrease (substantially greater decreases for hyperinflationary currencies) in currency exchange rates compared with the U.S. dollar. Under this model, we estimated at year-end 2002 that such a decrease would have an insignificant effect on 2003 earnings.

62 GE 2002 ANNUAL REPORT

Statement of Changes in Share Owners' Equity (page 72)

Share owners' equity increased $8.9 billion, $4.3 billion and $7.9 billion in 2002, 2001 and 2000, respectively.

The increases were largely attributable to net earnings of

$14.1 billion, $13.7 billion and $12.7 billion, partially offset by dividends declared of $7.3 billion, $6.6 billion and $5.6 billion in 2002, 2001 and 2000, respectively.

Currency translation adjustments increased equity by

$1.0 billion in 2002, compared with reductions of $0.6 bil-lion and $1.2 billion in 2001 and 2000, respectively.

Changes in the currency translation adjustment reflect 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. In 2002, strengthen-ing in the euro and, to a lesser extent, Asian currencies versus the U.S. dollar reversed trends in those exchange relationships over the prior two years. The euro strength-ened significantly versus the U.S. dollar in 2002, and was relatively unchanged in 2001 after weakening in 2000.

Asian currencies also strengthened against the dollar in 2002, and had weakened in 2001 and 2000. Accumulated currency translation adjustments affect net earnings only when all or a portion of an affiliate is disposed of or sub-stantially liquidated.

Adoption of SFAS 133 in 2001 reduced equity by

$955 million, including $827 million at the date of adop-tion. Further information about this accounting change is provided in note 1.

Statement of Cash Flows (pages 76-77)

Because cash management activities of GE and GECS are separate and distinct, it is more useful to review their cash flows separately.

CASH AD l

0ULI~

.T

',aggregated $1.1 billion at the end of 2002, down from $9.8 billion at year-end 2001.

GE periodically invests available cash in GECS short-term borrowings. Such amounts are classified as cash equiva-lents in the GE Statement of Financial Position. No such investments were made as of December 31, 2002, com-pared with $8.7 billion at December 31, 2001.

During 2002, GE generated $10.1 billion in cash from operating activities, a $71 billion decrease from 2001 as orders for new Power Systems equipment and the asso-ciated progress collections declined sharply. Excluding effects of progress collections, cash from operating activ-ities increased 10% in 2002 and 13% in 2001, including effects of receivables monetization programs in both years. In addition to the $10.1 billion of cash from operat-ing activities, GE began 2002 with $9.8 billion of cash and increased net cash from borrowings by $6.8 billion, for a total of $26.7 billion. We used the cash to invest in strategic acquisitions ($9.0 billion) and property, plant and equipment ($2.4 billion); to reward our share owners with increased dividends (totaling $72 billion) and to buy shares under our share repurchase program ($2.0 billion); and to contribute capital to our financial services businesses

($6.3 billion, including $1.8 billion contributed to ERC).

During 2001 and 2000, GE generated $32.6 billion of cash from operating activities, including $6.7 billion cumulative additional cash from progress collections.

This cash provided resources for dividends to share own-ers ($11.8 billion); continuation of the share repurchase program ($5.4 billion); investment in property, plant and equipment ($5.4 billion); and completion of strategic acquisitions ($2.6 billion).

GE CUMULATIVE CASH FLOWS SINCE 1994 (In bi lions)

$96.

80--.......

46-32

16.

98 99 00 01 02 P Cash flows from operating act vities Dividends paid Shares repurchased Under the share repurchase program initiated in December 1994, we have purchased 1.1 billion shares of GE stock. In December 2001, the GE Board of Directors increased the amount authorized from $22 billion to $30 billion. Funds used for the share repurchase are expected to be generated largely from operating cash flow.

Based on past performance and current expectations, in combination with the financial flexibility that comes with a strong balance sheet and the highest credit ratings, we believe we are in a sound position to continue the share repurchase program, to grow dividends and to con-tinue making selective investments for long-term growth.

We expect expenditures for plant and equipment to be about $2.2 billion in 2003, principally for productivity and growth.

Co&

GE 2002 ANNUAL REPORT 63

MANAGEMENTS DISCUSSION AND ANALYSIS GECS CASH AND EQUIVALENTS aggregated $79 billion at the end of 2002, up from $73 billion at year-end 2001. Over the past three years, GECS borrowings with maturities of 90 days or less have decreased by $13.2 billion. New borrowings of $173.7 billion having maturities longer than 90 days were added during those years, while $1072 bil-lion of such longer-term borrowings were retired. GECS also generated $48.1 billion from operating activities over the last three years, which benefited in 2002 and 2001 from increases in insurance liabilities and reserves.

The principal use of cash by GECS has been investing in assets to grow our businesses. Of the $122.9 billion that GECS invested over the past three years, $48.0 bil-lion was used for additions to financing receivables; $35.0 billion was used to invest in new equipment, principally for lease to others; and $24.8 billion was used for acquisi-tions of new businesses, the largest of which were Australian Guarantee Corporation, Security Capital and Deutsche Financial Services in 2002 and Heller Financial, Inc. and Mellon Leasing in 2001.

With the financial flexibility that comes with excellent credit ratings, we believe that GECS should be well positioned to meet the global needs of its customers for capital and to continue providing our share owners with good returns.

Additional Considerations COMMERCIAL AIRLINES. Following the events of September 11, 2001, many of our airline customers have experienced financial difficulties. In the face of declining traffic, they have responded by curtailing flight schedules and deferring and canceling deliveries of commercial aircraft. Deteriorating aircraft utilization and pricing affects Commercial Finance, which owned 1,161 commercial aircraft at December 31, 2002, when, despite pressure on the industry, 1,149, or 99% were on lease. We believe, however, that the financial difficulties of our airline customers will continue to weigh on the airline industry in 2003.

Aircraft Engines sales of new equipment often include long-term customer financing commitments. Under these commitments, it is our policy to establish a secured position in the aircraft being financed. At year-end 2002, guarantees of $0.7 billion were in place. Further, we had committed $1.6 billion to provide financial assistance on future aircraft sales see note 30). Our guarantees and commitments are secured by individual aircraft or pools of aircraft engines related to the specific financing arrangement. At December 31, 2002, the total estimated fair value of aircraft securing these guarantees exceeded the guaranteed amounts, net of the associated allowance for losses.

At year-end 2002, Commercial Finance had provided loans and leases of $26.6 billion, and combined with our insurance business, had $1.9 billion of investment securi-ties related to the airline industry. In addition, Commercial Finance had funding commitments of $0.5 billion and had placed multi-year orders for various Boeing, Airbus and other aircraft with list prices approximating $15.4 billion at year-end 2002. Commercial Finance held placement agreements with commercial airlines for 40 of the 42 air-craft scheduled for delivery in 2003.

Two of our major airline customers, US Airways Group Inc. and UAL Corp, the parent companies of US Airways and United Airlines, respectively, are experiencing signifi-cant financial difficulties and both filed for reorganization in bankruptcy in 2002. At December 31, 2002, our expo-sure related to these airlines amounted to $3.7 billion, including loans, leases, investment securities, guarantees and commitments as discussed above. Various Boeing and Airbus aircraft secure these financial exposures. We have provided for our best estimate of probable losses under these particular arrangements in light of estimated amounts recoverable under recourse provisions.

In December 2002, Commercial Finance and US Airways Group Inc. agreed on a global restructuring plan that was approved by the cognizant Bankruptcy Court in January 2003. The plan will provide the airline with up to

$120 million debtor-in-possession financing, which will be subsequently refinanced as part of a $360 million facility being provided by us upon US Airways Group Inc.'s exit-ing from Chapter 11, and $350 million of future lease financing for regional jet aircraft. Upon US Airways Group Inc.'s emergence from bankruptcy we would receive war-rants to buy five percent of the Class A shares of the reorganized US Airways Group Inc. along with 3.8 million shares of its Class A preferred stock.

Commercial aviation is important to us, as it is to the global economy, and we are pleased that our technol-ogy, our proactive partnering and our financial strength have earned us the loyalty of our customer base in that industry. At the same time, we are pleased to have served the needs of our global investors with prudent management of our exposure to the industry's risks.

Our underwriting establishes positions that are secured by tangible assets; our risk management protects our investments; and we record losses in accordance with the applicable requirements.

TELECOMMUNICATIONS. Financial services investments in and contractual commitments to customers in the tele-communications and cable industries amounted to $9.2 billion and $2.9 billion, respectively, as of December 31, 2002, and primarily comprised financing receivables and investment securities. Included in the telecommunica-tions amount is Commercial Finance's equity method investment in SES Global of $1.7 billion. Like all financial services positions, these receivables and investments 64 GE 2002 ANNUAL REPORT

have been entered into subject to strict risk and under-writing criteria, are diversified, and financing receivables are generally secured. During recent declines in the val-ues of these portfolios, the positions have been routinely reviewed for credit and impairment losses, and actions have been taken to mitigate exposures. We have made provision for probable losses. Future losses, if any, will depend upon business and economic developments as well as the success of risk mitigation actions.

Liquidity The major debt-rating agencies evaluate the financial con-dition of GE and of GE Capital Corporation (GE Capital),

the major public borrowing entity of GECS, differently because of their distinct business characteristics. Factors that are important to the ratings of both include the fol-lowing: cash generating ability-including cash generated from operating activities; earnings quality-including rev-enue growth and the breadth and diversity of sources of income; leverage ratios-such as debt to total capital and interest coverage; and asset utilization, including return on assets and asset turnover ratios. Considering those factors, those major rating agencies continue to give the highest ratings to debt of both GE and GE Capital (long-term credit rating AAANAaa; short-term credit rating A-1 +/P-1).

One of our strategic objectives is to maintain these ratings on debt issued by GE and GE Capital. Our Triple-A rating lowers our cost of borrowings and facilitates access to a variety of lenders. We manage our businesses in a manner consistent with maintaining these Triple-A ratings.

To support the GE Capital rating, at the end of 2002, GE was contractually committed to maintain the ratios of earnings to fixed charges at GE Capital at a specified level. To build equity, the GECS Board of Directors intends to reduce GECS dividend payments to GE to 10% of operating earnings. GE contributed $6.3 billion of cash in 2002, of which $1.8 billion funded certain loss develop-ment at ERC. See also "January 1, 2003, Reclassification of Financial Services Segment Profit" on page 58. Our plans are to reduce the level of debt and increase equity in financial services; targeting 2005 for elimination of the

$12.5 billion of debt allocated to All Other GECS as of January 1, 2003. Proceeds from any strategic dispositions will be evaluated when and if they are received, but we anticipate using at least some of those proceeds to reduce financial services debt.

During 2002, certain external credit rating agencies announced the lowering of financial strength ratings with respect to GE Global Insurance Holding and subsidiaries.

Those rating agencies made similar announcements with regard to other property and casualty insurance and rein-surance entities at about the same time. Debt ratings for GE Global Insurance Holding affect $1.7 billion of out-standing debt. These ratings were adjusted negatively in 2002, but remained investment grade. We do not believe these actions will materially affect GE Global Insurance Holding liquidity or capital resources or the ability to write future business.

GLOBAL COMMERCIAL PAPER MARKETS are also a primary source of liquidity for GE and financial services. GE Capital is the most widely-held name in those markets and is the principal issuer of financial services debt.

Financial services debt composition as of December 31, 2002 and 2001, follows.

December 31 Senior notes Commercial paper Other-principally current portion of long-term debt Total 2002 2001 52%

33%

31 49 17 18 100%

100%

During 2002, GE Capital issued approximately $88 billion of long-term debt in U.S. and international markets. These funds were used primarily to reduce the amount of com-mercial paper outstanding by $33 billion and to fund acquisitions and new asset growth. We target a ratio for commercial paper of 25% to 35% of outstanding debt based on the anticipated composition of our assets. GE Capital anticipates issuing approximately $60 billion of long-term debt using both U.S. and international markets during 2003. The proceeds from such issuances will be used to fund maturing long-term debt, additional acquisi-tions and asset growth. The ultimate amount of debt issuances will depend on the growth in assets, acquisi-tion activity, availability of markets and movements in interest rates.

We believe that alternative sources of liquidity are sufficient to permit an orderly transition from commercial paper in the unlikely event of impaired access to those markets. Funding sources on which we would rely would depend on the nature of such a hypothetical event, but include $54 billion of contractually committed lending agreements with highly-rated global banks and invest-ment banks, an increase of $21 billion since December 31, 2001, as well as other sources of liquidity, including medium and long-term funding, monetization, asset securitization, cash receipts from lending and leasing activities, short-term secured funding on global assets, and potential asset sales.

GE 2002 ANNUAL REPORT 65

MANAGEMENrS DISCUSSION AND ANALYSIS OFF BALANCE SHEET ARRANGEMENTS are used in the ordinary course of business to achieve improved share owner returns. One of the most common forms of off balance sheet arrangements is asset securitization. The securitiza-tion transactions we engage in are similar to those used by many financial institutions and are part of a $700 bil-lion annual market for asset-backed commercial paper.

We use sponsored and third-party entities to execute securitization transactions funded in the commercial paper and term markets. As part of this program, we consider the relative risks and returns of each alternative and predominantly use sponsored entities. We believe that these transactions could be readily executed through non-sponsored entities or term securitization at modest incremental cost. Beyond improved returns, these securi-tization transactions serve as funding sources for a variety of diversified lending and securities transactions, transfer selected credit risk and improve cash flows while enhancing the ability to provide a full range of competi-tive products for customers.

Simply stated, in a typical securitization transaction, we sell high-quality financial assets to entities that have financed those purchases using low-cost, highly-rated commercial paper. In the following paragraphs, we describe in more detail how these transactions with such entities typically work.

The first step in the securitization process uses entities that meet the accounting criteria for Qualifying Special Purpose Entities (qualifying entities). Among other criteria, a qualifying entity's activities must be restricted to passive investment in financial assets and issuance of retained interests in those assets. Under generally accepted accounting principles, entities meeting these criteria are not consolidated in the sponsor's financial statements.

We sell selected financial assets to qualifying entities.

Examples include financing and credit card receivables and trade receivables. On the whole, the credit quality of such assets is equal to or higher than the credit quality of similar assets we own.

Qualifying entities raise cash by issuing retained inter-ests-rights to cash flows from the assets-to other SPEs we sponsor that issue highly-rated commercial paper to third-party institutional investors. These SPEs use commercial paper proceeds to obtain retained interests in the financial assets of qualifying entities, as well as financial assets originated by multiple third parties. We provide credit support for certain of these assets, as well as liquidity support for the commercial paper. In accordance with our contractual commitments to the qualifying entities, we rigorously underwrite and service the associated assets, both those we originate and those originated by other participants. All of the qualifying entities' assets serve as collateral for the commercial paper. Support activities include credit reviews at acquisi-tion and ongoing review, billing and collection activities-the same support activities that GECS employs for its own financing receivables. These entities are not consoli-dated in the accompanying financial statements.

Our sponsored SPEs are routinely evaluated by the major credit rating agencies, including monthly reviews of key performance indicators and annual reviews of asset quality. Commercial paper issued by these entities has always received the highest available ratings from the major credit rating agencies and at year-end 2002 was rated A-1 +/P-1.

Assets held by SPEs include: receivables secured by equipment, commercial real estate and other assets; credit card receivables; and trade receivables. In addition to being of high credit quality, these assets are diversified to avoid concentrations of risk. Examples of these assets include loans and leases on manufacturing and trans-portation equipment, loans on commercial property, commercial loans, and balances of high credit quality accounts from sales of a broad range of products and services to a diversified customer base. Such assets totaled $42.2 billion and $43.0 billion at December 31, 2002 and 2001, respectively.

Sales of securitized assets to SPEs result in a gain or loss amounting to the net of sales proceeds, the carrying amount of net assets sold, the fair value of retained inter-ests and servicing rights and an allowance for losses.

Total securitization sales resulted in gains of $0.8 billion and $1.3 billion in 2002 and 2001, respectively, and are included in revenues net of any effects of replenishing securitized credit card balances.

In addition to the securitization activities discussed previously, Financial Guaranty Insurance Company IFGICi, an affiliate that is a leader in the municipal bond insurance market, uses SPEs that offer municipalities guaranteed investment contracts with interests in high-quality, fixed maturity, investment grade assets. FGIC actively man-ages these assets under strict investment criteria and GE Capital also provides certain performance guarantees.

Total assets in sponsored FGIC entities amounted to

$13.7 billion and $13.4 billion at December 31, 2002 and 2001, respectively.

We provide financial support related to assets held by certain SPEs through liquidity agreements, credit support, performance guarantees and guarantee and reimburse-ment contracts. Net credit and liquidity support amounted to $272 billion after consideration of participated liquidity and arrangements that defer liquidity draws beyond 2003, a reduction of $15.9 billion from 2001. This amount includes credit support, in which we provide recourse for a maximum of $16.9 billion of credit losses in SPEs.

66 GE 2002 ANNUAL REPORT

Potential credit losses are provided for in our financial statements. Based on management's best estimate of probable losses inherent in the portfolio, we provided an allowance of $233 million for recourse obligations at year-end 2002. Performance guarantees relate to letters of credit and liquidity support for guaranteed investment contracts and are subject to a maximum of $3.8 billion at December 31, 2002.

None of the GE sponsored SPEs is permitted to hold GE stock, and there are no commitments or guarantees that provide for the potential issuance of GE stock. These entities do not engage in speculative activities of any description, are not used to hedge our asset positions, and under GE integrity policies, no GE employee, officer or director is permitted to invest in any sponsored SPE.

We have extensive experience in evaluating eco-nomic, liquidity and credit risk. In view of this experience, the high quality of assets in these entities, the historically robust quality of commercial paper markets, and the his-torical reliability of controls applied to both asset servic-ing and to activities in the credit markets, we believe that, under any reasonable future economic develop-ments, the likelihood is remote that any such arrange-ments could have an adverse economic effect on us.

Under FIN 46, Consolidation of Variable Interest Entities, new consolidation criteria will be applied to cer-tain SPEs, which it defines as Variable Interest Entities' Additional information about entities that fall within the scope of FIN 46 is provided in note 29.

PRINCIPAL DEBT CONDITIONS that could automatically result in remedies, such as acceleration of GE or financial serv-ices debt, are described below.

If the short-term credit rating of GE Capital or certain SPEs discussed further in note 29 were to fall below A-1/P-1, GE Capital would be required to provide substitute liquidity for those entities or provide funds to retire the outstanding commercial paper. The maximum amount (net of participated liquidity and arrangements that defer liquidity to 2004) that GE Capital would be required to provide in the event of such a downgrade is determined by contract, and amounted to $22.6 billion at December 31, 2002.

If the long-term credit rating of GE Capital were to fall below AA/Aa2, GE Capital would be required to provide substitute credit support or liquidate the SPEs. The maximum amount that GE Capital would be required to substitute in the event of such a downgrade is deter-mined by contract, and amounted to $2.7 billion at December 31, 2002.

If the long-term credit rating of GE Capital were to fall below AA-/Aa3 or its short-term credit rating were to fall below A-1 +/P-1, GE Capital could be required to provide up to $1.1 billion to the FGIC SPEs and could be required to repay an amount of FGIC's guaranteed invest-ment contracts as specified by contract; at December 31, 2002, that maximum repayment was $3.6 billion.

If the long-term credit rating of either GE or GECS under certain swap, forward and option contracts falls below A-A3, certain remedies are required as discussed in note 28.

If GE Capital's ratio of earnings to fixed charges, which was 1.65:1 at the end of 2002, were to deteriorate to 1.10:1 or, upon redemption of certain preferred stock, its ratio of debt to equity, which was 6.58:1 at the end of 2002, were to exceed 8:1, GE has committed to contribute capital to GE Capital. GE also has guaranteed subordinated debt of GECS with a face amount of

$1.0 billion at December 31, 2002 and 2001.

None of these conditions has been met in GE or GECS history, and we believe that under any reasonable future economic developments, the likelihood is remote that any such arrangements could have a significant effect on our operations, cash flows or financial position.

TIMING OF CONTRACTUAL COMMITMENTS at GE and GECS dur-ing the next five years, related to leases and debt, follows.

lIn billions)

GE GECS 2003 2004 2005 2006 2007

$ 0.6

$ 0.8

$ 0.4

$ 0.3 Commercial paper 84.2 Other 46.6 475 (a) 22.3 10.3 14.8 Id Extendible notes amounting to $12 billion are floating rate securities with an initial maturity of 13 months, which can be extended on a rolling basis, at the investor's option to a final maturity of five years ending in 2007. We expect substantially all of the notes will remain outstanding until final maturity, but have Included their face amount In 2004 commitments.

GE 2002 ANNUAL REPORT 67

.............................................s..

MANAGEMENT'S DISCUSSION AND ANALYSIS MANAGEMENT'S DISCUSSION OF SELECTED FINANCIAL DATA SELECTED FINANCIAL DATA, summarized on the following page, are divided into three sections: upper portion-consolidated data; middle portion-GE data that reflect various conventional measurements for such enterprises; and lower portion-GECS data that reflect key informa-tion pertinent to financial services businesses.

GE'S TOTAL RESEARCH AND DEVELOPMENT expenditures were

$2.6 billion in 2002, compared with $2.3 billion and $2.2 billion in 2001 and 2000, respectively. In 2002, expendi-tures from GE's own funds were $2.2 billion, an increase of 12% from 2001, reflecting continuing research and development work related to new product, service, infor-mation and process technologies. Product technology efforts in 2002 included continuing development work on the next generation of gas turbines, further advances in state-of-the-art diagnostic imaging technologies, develop-ing reduced emissions and more fuel-efficient locomo-tives, improving the performance and efficiency of wind energy turbines and continuing development of more fuel-efficient, cost-effective aircraft engine designs.

Services technologies include further advances in diagnos-tic applications, including remote diagnostic capabilities related to repair and maintenance of medical equipment, aircraft engines, power generation equipment and locomo-tives. Information technology advances in the healthcare field are helping our customers integrate their various devices and critical systems. Process technologies pro-vided improved product quality and performance and increased capacity for manufacturing engineered materi-als. Expenditures funded by customers (mainly the U.S.

government) were $416 million in 2002, compared with

$369 million in 2001.

GE'S TOTAL BACKLOG of firm unfilled orders at the end of 2002 was $36.1 billion, a decrease of 24% from year-end 2001, reflecting softening demand for new equipment in the power generation business at Power Systems, par-tially offset by higher backlog at Transportation Systems and Aircraft Engines. Of the total backlog, $28.6 billion related to products, of which 65% was scheduled for delivery in 2003. Product services orders, included in this reported backlog for only the succeeding 12 months, were $7.5 billion at the end of 2002. Orders constituting this backlog may be canceled or deferred by customers, subject in certain cases to penalties. See Segment Operations beginning on page 50 for further information.

MANAGEMENT'S DISCUSSION OFTHE APPLICATION OF CRITICAL ACCOUNTING POLICIES Accounting policies discussed in this section are those that we consider to be critical to an understanding of our financial statements because their application places the most significant demands on our ability to judge the effect of inherently uncertain matters on our financial results. For all of these policies, we caution that future events rarely develop exactly as forecast, and the best estimates routinely require adjustment.

LOSSES ON FINANCING RECEIVABLES are recognized when they are incurred. Measurement of such losses requires consideration of historical loss experience, including the need to adjust for current conditions, and judgments about the probable effects of relevant observable data, including present economic conditions such as delin-quency rates, financial health of specific customers and market sectors, collateral values, and the present and expected future levels of interest rates. Exposure to losses on financing receivables at year-end 2002 was

$222.3 billion, including credit support for special purpose entities, against which an allowance for losses of $5.8 bil-lion was provided. Further information is provided on pages 60 and 61, and in notes 1, 12, 13 and, for special purpose entities, in note 29. While losses depend to a large degree on future economic conditions, we do not anticipate significant adverse credit development in 2003.

IMPAIRMENT OF INVESTMENT SECURITIES results in a charge to operations when a market decline below cost is other than temporary. We regularly review each investment security for impairment based on criteria that include the extent to which cost exceeds market value, the duration of that market decline and the financial health of and specific prospects for the issuer. GECS investment secu-rities amounted to $116.5 billion at year-end 2002. Gross unrealized gains and losses included in that carrying amount related to debt securities were $4.2 billion and

$1.9 billion, respectively. Gross unrealized gains and losses on equity securities were $0.2 billion and $0.5 bil-lion, respectively. Of securities with unrealized losses at year-end 2002, and based on application of our account-ing policy for impairment, approximately $800 million of portfolio value, including approximately $200 million from the telecommunications and cable industries, is at risk of being charged to earnings in 2003. GECS actively performs comprehensive market research, monitors market condi-tions and segments its investments by credit risk in order to minimize impairment risks. Further information is pro-vided in notes 1 and 9 and on page 60, which discusses the investment securities portfolio.

68 GE 2002 ANNUAL REPORT

SELECTED FINANCIAL DATA (0la.r amounts In millions: oar-share amounts In dollarsl 2002 2001 GENERAL ELECTRIC COMPANYAND CONSOUDATED AFFLIATES Revenues Earnings before accounting changes Cumulative effect of accounting changes Net earnings Dividends declared Earned on average share owners' equity excluding effect of accounting changes Per share Earnings before accounting changes -diluted Cumulative effect of accounting changes -diluted Earnings - diluted Earnings before accounting changes-basic Cumulative effect of accounting changes -basic Earnings - basic Dividends declared Stock price range Year-end closing stock price Total assets Long-term borrowings Shares outstanding-average (in thousands)

Share owner accounts - average

$131,698

$125,913

$129,853

$111,630

$100,469 15,133 14,128 12,735 10,717 9,296 (1,015)

(444) 14,118 13,684 12,735 10,717 9,296 7,266 6,555 5,647 4,786 4,081 25.8%

27.1%

27.5%

26.8%

25.7%

1.51 1.41 1.27 1.07 0.93 (0.10)

(0.04) 1.41 1.37 1.27 1.07 0.93 1.52 1.42 1.29 1.09 0.95 (0.10)

(0.04) 1.42 1.38 1.29 1.09 0.95 0.73 0.66 0.57 0.48Yj 0.41S 41.84-21.40 52.90-28.25 60.50-41.67 53.17-31.42 34.65-23.00 24.35 40.08 47.94 51.58 34.00 575,244 495,023 437,006 405,200 355,935 140,632 79,806 82,132 71,427 59,663 9,947,113 9,932,245 9,897,110 9,833,478 9,806,995 655,000 625,000 597,000 549,000 534,000 GE DATA Short-term borrowings

$ 8,786

$ 1,722 S

940

$ 2,245

$ 3,466 Long-term borrowings 970 787 841 722 681 Minority interest 1,028 948 968 823 816 Share owners' equity 63.706 54,824 50,492 42,557 38,880

.... Total capi v

7 53...4 4

.6......... -7.......

...........7......................

....I....

Total capitai invested S 74,490 S 58,281 S 53,241 S 46,347 S 43.843 Return on average total capital invested excluding effect of accounting changes Borrowings as a percentage of total capital invested Working capitallb)

Additions to property, plant and equipment Employees at year end United States Other countries Total employees GECS DATA Revenues Earnings before accounting changes Cumulative effect of accounting changes Net earnings Share owner's equity Minority interest Total borrowings Ratio of debt to equitV at GE Capital Total assets Insurance premiums written Employees at year end United States 24.5%

27.0%

27.4%

25.8%

23.9%

13.1%

4.3%

3.3%

6.4%

9.5%

$ 3,821

$ (2,398) 799

$ 3,922

$ 5,038 2,386 2,876 2,536 2,036 2,047 125,000 94,000 219,000 125,000 94,000 219,000 131,000 92,000 223,000 124,000 86,000 210,000 125,000 82,000

.2.. _

207,000

$ 58,187

$ 58,353 S 66,177 S 55,749

$ 48,694 4,626 5,586 5,192 4,443 3,796 (1,0151 (169) 3,611 5,417 5,192 4,443 3,796 36,929 28,590 23,022 20,321 19,727 4,445 4,267 3,968 4,391 3,459 270,982 239,935 205,371 200,025 172,200 6.58:1 7.31:1 7.53:1 8.44:1 7.86:1

$489,828

$425,484

$370,636

$345,018

$303,297 16,999 15,843 16,461 13,624 11,865 40,000 33,000 37,000 43,000 Ibl 38,000 Other countries 56,000 58,000 53,000 57,000 48,000 Total employees 96,000 91,000 90,000 100,000 86,000 Transactions between GE and GECS have been eliminated from the consolidated information.

(a3 Working capital is defined as the sum of receivables from the sales of goods and services, plus inventories, less trade accounts payable and progress collections.

tbl Excludes employees of Montgomery Ward in 1999.

GE 2002 ANNUAL REPORT 69 2000 1999 1998

..........._._.r-

MANAGEMENT'S DISCUSSION AND ANALYSIS REVENUE RECOGNITION ON LONG-TERM AGREEMENTS to provide product services (product services agreements) requires estimates of profits over the multi-year terms of such agreements, considering factors such as the frequency and extent of future monitoring, maintenance and over-haul events; cost of personnel; spare parts and other resources required to perform the services; and future cost changes. We routinely review estimates under prod-uct services agreements and regularly revise them to adjust for changes in outlook. Revisions that affect a product services agreement's total estimated profitability will also result in an immediate adjustment of earnings.

We also regularly assess customer credit risk inherent in the carrying amounts of contract costs and estimated earnings and provide for losses when they are incurred.

Carrying amounts for product services agreements in progress at December 31, 2002 and 2001, were $2.9 bil-lion and $2.3 billion, respectively, and are included in "contract costs and estimated earnings" in note 17.

Adjustments to earnings resulting from revisions to estimates on product services agreements have been insignificant for each of the years in the three-year period ended December 31, 2002.

INSURANCE LIABILITIES AND RESERVES differ for short and long-duration insurance contracts. Short-duration contracts such as property and casualty policies are accounted for based on actuarial estimates of losses inherent in that period's claims, including losses for which claims have not yet been reported. Short-duration contract loss esti-mates rely on actuarial observations of ultimate loss experience for similar historical events. Measurement of long-duration insurance liabilities (such as term and whole life insurance policies) is also based on approved actuarial techniques that include assumptions about mortality, lapse rates and future yield on related investments.

Historical insurance industry experience indicates that a greater degree of inherent variability exists in assessing the ultimate amount of losses under short-duration prop-erty and casualty contracts than exists for long-duration mortality exposures. This inherent variability is particularly significant for liability-related exposures, including latent claims issues (such as asbestos and environmental related coverage disputes), because of the extended period of time-often many years-that transpires between when a given claim event occurs and the ultimate full settlement of such claim. This situation is then further exacerbated for reinsurance entities (as opposed to primary insurers) due to coverage often being provided on an "excess-of-loss" basis and the resulting lags in receiving current claims data. GECS insurance liabilities, reserves and annuity benefits within the Insurance segment totaled

$135.9 billion at year-end 2002. Of that total, $30.6 billion

($20.9 billion net of reinsurance recoverables) related to unpaid claims and claims adjustment expenses under short-duration insurance contracts of which ERC's share approximated $26.6 billion ($174 billion net of reinsurance recoverables).

We continually evaluate the potential for changes in loss estimates with the support of qualified reserving actuaries and use the results of these evaluations both to adjust recorded reserves and to proactively modify underwriting criteria and product offerings. For actuarial analysis purposes, reported and paid claims activity is segregated into several hundred reserving segments, each having differing historical settlement trends. A variety of actuarial methodologies are then applied to the underlying data for each of these reserving segments in arriving at an estimated range of "reasonably possible" loss scenarios. Factors such as line of business, length of historical settlement pattern, recent changes in under-writing standards and unusual trends in reported claims activity will generally affect which actuarial methodologies are given more weight for purposes of determining the "best estimate" of ultimate losses in a particular reserv-ing segment. As discussed on pages 53-54, in recent periods and continuing throughout 2002, the level of reported claims activity related to prior year loss events, particularly for liability-related exposures underwritten in 1997 through 2001 at ERC, has been significantly higher than anticipated. Full consideration of these trends was incorporated into a comprehensive reserve study com-pleted in the fourth quarter of 2002.

PENSION ASSUMPTIONS. Pension benefit obligations and the related effects on operations are calculated using actuar-ial models. Two critical assumptions, discount rate and expected return on assets, are important elements of plan expense and/or liability measurement. We evaluate these critical assumptions at least annually. Other assumptions involve demographic factors such as retire-ment, mortality and turnover. These assumptions are eval-uated periodically and are updated to reflect our experience. Of course, actual results in any given year 70 GE 2002 ANNUAL REPORT

will often differ from actuarial assumptions because of economic and other factors.

The discount rate enables us to state expected future cash flows at a present value on the measurement date.

We have little latitude in selecting this rate, as it is required to represent the market rate for high-quality fixed income investments. A lower discount rate increases the present value of benefit obligations and increases pension expense. For our principal plans, a 50 basis point decrease in the discount rate would increase pension expense by approximately $180 million. We reduced our discount rate from 7Y4% to 64% for 2003 to reflect market interest rate conditions.

To determine the expected long-term rate of return on pension plan assets, we consider the current and expected asset allocations, as well as historical and expected returns on various categories of plan assets.

A 50 basis point decrease in the expected return on assets of principal plans would increase pension expense on our principal plans by approximately $240 million per year. We assumed that long-term returns on our pension plans were 8X% in 2002 and 9X% in 2001 and 2000.

Further information on our principal pension plans is pro-vided on pages 47-48 of Management's Discussion and Analysis under the caption Principal Costs and Expenses for GE. Note 6 to the consolidated financial statements includes disclosure of these assumptions.

OTHER LOSS CONTINGENCIES are recorded as liabilities when it is probable that a liability has been incurred and the amount of the loss is reasonably estimable. Disclosure is required when there is a reasonable possibility that the ultimate loss will exceed the recorded provision.

Contingent liabilities are often resolved over long time periods. Estimating probable losses requires analysis of multiple forecasts that often depend on judgments about potential actions by third parties such as regulators.

OTHER SIGNIFICANT ACCOUNTING POLICIES, not involving the same level of measurement uncertainties as those discussed above, are nevertheless important to an under-standing of the financial statements. Policies related to revenue recognition, financial instruments and business combinations require difficult judgments on complex matters that are often subject to multiple sources of authoritative guidance. Certain of these matters are among topics currently under re-examination by account-ing standard setters and regulators. Although no specific conclusions reached by these standard setters appear likely to cause a material change in our accounting policies, outcomes cannot be predicted with confidence. Also see note 1, Summary of Significant Accounting Policies, which discusses accounting policies that we have selected from acceptable alternatives.

GE 2002 ANNUAL REPORT 71

STATEMENT OF EARNINGS GeneraI Electric Company and consottdated affillat For the years ended December 31 (n millions; per-share amounts in dollars) 2002 2001 2000 REVENUES Sales of goods

$ 55,098

$ 52,677

$ 54,828 Sales of services 21,138 18,722 18,128 Other income (note 2) 1,013 234 436 Earnings of GECS before accounting changes GECS revenues from services (note 3) 54,451 54,280 56,463 Total revenues 131,698 125,913 129,853

... ~~~~~~~~~~~~~~~~...........

COSTS AND EXPENSES (note 4)

Cost of goods sold 38,833 35,678 39,312 Cost of services sold 14,023 13,419 12,511 Interest and other financial charges 10,216 11,062 11,720 Insurance losses and policyholder and annuity benefits 17,608 15,062 14,399 Provision for losses on financing receivables (note 13) 3,087 2,481 2,045 Other costs and expenses 28,714 28,162 30,993 Minority interest in net earnings of consolidated affiliates 326 348 427

_ ~~~~~~~~~~~~~~......

Total costs and expenses 112,807 106,212 111,407 EARNINGS BEFORE INCOMETAXES AND ACCOUNTING CHANGES 18,891 19,701 18,446 Provision for income taxes (note 7)

(3,758)

(5,573)

(5,711)

EARNINGS BEFORE ACCOUNTING CHANGES 15,133 14,128 12,735 Cumulative effect of accounting changes (note 1)

(11015)

(444)

NET EARNINGS

$ 14,118

$ 13,684

$ 12,735 PER-SHARE AMOUNTS (note 8)

Per-share amounts before accounting changes Diluted earnings per share 1.51 1.41 1.27 Basic earnings per share 1.52 1.42 1.29 Per-share amounts after accounting changes Diluted earnings per share 1.41 1.37 1.27 Basic earnings per share S

1.42 1.38 1.29 DIVIDENDS DECLARED PER SHARE S

0.73 0.66 0.57 CONSOLIDATED STATEMENT OF CHANGES IN SHARE OWNERS' EQUITY (In millions) 2002 2001 2000 CHANGES IN SHARE OWNERS' EQUITY (note 24)

Balance at January 1

$ 54,824

$ 50,492

$ 42,557 Dividends and other transactions with share owners (6,382)

(7,529)

(3,044)

Changes other than transactions with share owners Increase attributable to net earnings 14,118 13,684 12,735 Investment securities - net 1,303 (306)

(552)

Currency translation adjustments 1,000 (562)

(1,204)

Derivatives qualifying as hedges (1,157)

(955)

Total changes other than transactions with share owners 15,264 11,861 10,979 Balance at December 31 S 63,706

$ 54,824

$ 50,492 The notes to consolidated financial statements on pages78-109 are an Integral part of these ststements.

72 GE 2002 ANNUAL REPORT

2002 2001 2000 2002 2001 2000

$51,957

$49,057

$45,427

$ 3,296

$ 3,627

$ 9,408 21,360 18,961 18,380 1,106 433 498 4,626 5,586 5,192

=

54,891 54,726 56,769 79,049 74,037 69,497 58,187 58,353 66,177 35,951 32,419 30,782 3,039 3,266 8,537 14,245 13,658 12,765 569 817 811 9,935 10,598 11,111 17,608 15,062 14,399 3,087 2,481 2,045 9,131 8,637 8,392 19,828 19,817 22,767 183 185 213 143 163 214 60,079 55,716 52,963 53,640 51,387 59,073 18,970 18,321 16,534 4,547 6,966 7,104 (3,837)

(4,193)

(3,799) 79 (1,380)

(1,912) 15,133 14,128 12,735 4,626 5,586 5,192 (1,015) 1444)

(1,015)

'(169)

$14,118

$13,684

$12,735 S 3,611

$ 5,417

$ 5,192 In the consolidating data on this page, 'GE' means the basis of consolidation as described In note to the consoli-dated financial statements; 'GECS' means General Electric Capital Services, Inc. and all of its ffiliates and associated companies. Transactions between GE and GECS have been eliminated from the 'General Electric Company and consolidated sffiliates columns on page 72.

GE 2002 ANNUAL REPORT 73 GE GECS

STATEMENT OF FINANCIAL POSITION General Electric Company nd consolidated affiliates 2002 2001 At December 31 (in millionsl ASSETS Cash and equivalents Investment securities (note 9)

Current receivables (note 10)

Inventories note 11)

Financing receivables (investments in time sales, loans and financing leases) -

net (notes 12 and 13)

Insurance receivables (note 14)

Other GECS receivables Property, plant and equipment (including equipment leased to others) -

net (note 15)

Investment in GECS Intangible assets-net (note 16)

All other assets (note 17)

4. 5.... 2 TOTAL ASSETS

$575,244

$495,023 LIABILITIES AND EQUITY Short-term borrowings (note 18)

Accounts payable, principally trade accounts Progress collections and price adjustments accrued Dividends payable All other current costs and expenses accrued Long-term borrowings (note 18)

Insurance liabilities, reserves and annuity benefits (note 19)

All other liabilities (note 20)

Deferred income taxes (note 21)

Total liabilities Minority interest in equity of consolidated affiliates (note 22)

Common stock (9,969,894,000 and 9,925,938,000 shares outstanding at year-end 2002 and 2001, respectively)

Accumulated gainst(losses) -net Investment securities Currency translation adjustments Derivatives qualifying as hedges Other capital Retained earnings Less common stock held in treasury Total share owners' equity (notes 24 and 25)

TOTAL LIABILITIES AND EQUITY

$138,775 18,874 6,706 1,895 15,577 140,632 135,853 35,236 12,517 506,065 5,473

$153,076 18,158 11,751 1,787 14,132 79,806 114,223 32,921 9,130 434,984 5,215 669 669 1,071 (232)

(2,136)

(3,136)

(2,112)

(955) 17,288 16,693 75,553 68,701 (26,627)

(26,916) 63,706 54,824

$575,244

$495,023 74 GE 2002 ANNUAL REPORT

$ 8,910 116,862 10,681 9,247 199,917 31,585 11,444 S 8,433 101,017 9,590 8,565 174,140 28,312 11,105 47,204 46,180 93,214 42,140 35,124 76,597 The sum of accumulated gainsl(losses) on investment securities, currency translation adjustments, and derivatives qualifying as hedges constitutes 'Accumulated nonowner changes other than eamings, as shown In note 24, and was S13,177) million and S14.323) million at year-end 2002 and 2001, respectively.

The notes to consolidated financial statements on pages78-109 are an integral part of this statement

.r... _

..... I................

GECS 2002 S

1,079 332 10,973 9,039 2001

$ 9,798 879 9,805 8,295 2002

$ 7,918 116,530 208 199,917 31,585 12,996 13,743 36,929 23,049 30,167

$125,311 12,799 28,590 14,367 25,200

$109,733 33,461 23,131 64,082

$489,828 2001

$ 7,314 100,138 270 174,140 28,312 13,267 29,341 20,757 51,945

$425,484

$ 8,786

$ 1,722

$130,126

$160,844 8,095 6,680 12,608 13,705 6,706 11,751 1,895 1,787 15,577 14,132 970 787 140,836 79,091 135,853 114,223 16,621 16,089 18,441 16,647 1,927 1,013 10,590 8,117 60,577 53,961 448,454 392,627 1,028 948 4,445 4,267 669 669 1

1 1,071 (232) 1,191 (348)

(2,136)

(3,136)

(782)

(840)

(2,112)

(955)

(2,076)

(890) 17,288 16,693 12,271 5,989 75,553 68,701 26,324 24,678 (26,627)

(26,916)

~~~~~~~~~~~~~~~~.......

.~...... _.. _..,.........,..............

63,706 54,824 36,929 28,590

$125,311

$109,733

$489,828

$425,484 In the consolidating data on this page. 'GE' means the basis of consolidation as described in note to the consolidated financial statements; 'GECS' means General Electric Capital Services, Inc and all of ts affiliates and associated companies.

Transactions between GE and GECS have been eliminated from the 'General Electric Company and conaolidated affiliates' columns on page 74.

GE 2002 ANNUAL REPORT 75 GE

STATEMENT OF CASH FLOWS General ElectrIc Company and consolidated affiliates For the years ended December 31 (n millions) 2002 2001 2000 CASH FLOWS -OPERATING ACTIVITIES Net earnings

$ 14,118

$ 13,684

$ 12,735 Adjustments to reconcile net earnings to cash provided from operating activities Cumulative effect of accounting changes 1,015 444 Depreciation and amortization of property, plant and equipment 5,998 5,370 5,039 Amortization of goodwill 1,252 1,346 Earnings (before accounting changes) retained by GECS Deferred income taxes 2414 1,426 1,153 Decrease (increase) in GE current receivables (409) 197 (537)

Decrease (increase) in inventories (87)

(485)

(924)

Increase (decrease) in accounts payable 227 4,676 3,297 Increase (decrease) in GE progress collections (5,062) 3,446 3,255 Increase (decrease) in insurance liabilities and reserves 9,454 8,194 (1,009)

Provision for losses on financing receivables 3,087 2,481 2,045 All other operating activities (1,267)

(8,296)

(3,710)

CASH FROM OPERATING ACTIVITIES 29,488 32,389 22,690 CASH FLOWS -INVESTING ACTIVITIES Additions to property, plant and equipment (13,351)

(15,520)

(13,967)

Dispositions of property, plant and equipment 6,007 7,345 6,767 Net increase in GECS financing receivables (17,945)

(13,952)

(16,076)

Payments for principal businesses purchased (21,570)

(12,429)

(2,332)

Investment in GECS All other investing activities (15,090)

(5,752)

(12,091)

CASH USED FOR INVESTING ACTIVITIES (61,949)

(40,308)

(37,699)

CASH FLOWS - FINANCING ACTIVITIES Net increase (decrease) in borrowings (maturities of 90 days or less)

(17,347) 20,482 (8,243)

Newly issued debt (maturities longer than 90 days) 95,008 32,071 47,645 Repayments and other reductions (maturities longer than 90 days)

(40,454)

(37,001)

(32,762)

Net dispositions (purchases) of GE shares for treasury (985)

(2,435) 469 Dividends paid to share owners (7,157)

(6,358)

(5,401)

All other financing activities 3,873 2,047 12,942 CASH FROM (USED FOR) FINANCING ACTIVITIES 32,938 8,806 14,650 INCREASE (DECREASE) IN CASH AND EQUIVALENTS DURING YEAR 477 887 (359)

Cash and equivalents at beginning of year 8,433 7,546 7,905 Cash and equivalents at end of year

$ 8,910

$ 8,433

$ 7,546 SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION Cash paid during the year for interest

$ (9,654)

$411,125)

$(11,617)

Cash recovered (paid) during the year for income taxes (948)

(1,487)

(2,604)

The notes to consolidated financial statements on pages78-109 are an integral part of this statement.

76 GE 2002 ANNUAL REPORT

GE 2002

$14,118 1,015 2,199 (2,661) 1,005 (486)

(149) 708 (5,062)

(590) 2001

$13,684 444 1,919 545 (3,625) 564 207 (881) 364 3,U6 530 2000

$12,735 1,725 486 (3,370) 470 (550)

(663) 845 3,255 483 2002

$ 3,611 1,015 3,799 1,409 62 (880) 9,454 3,087 (559)

GECS 2001

$ 5,417 169 3,451 707 862 396 4,804 8,194 2,481 (8,688) 2000

$ 5,192 3,314 860 683 (261) 3,047 (1,009) 2,045 (4,587) 10,097 17,197 15,416 20,998 17,793 9,284 (2,386)

(2,876)

(2,536)

(10,965)

(12,644)

(11,431) 53 6,007 7,345 6,714 (17,945)

(13,952)

(16,076)

(8,952)

(1,436)

(1,156)

(12,618)

(10,993)

(1,176)

(6,300)

(3,043) 203 1,508 (234)

(15,213)

(7,751)

(12,173)

(17,435)

(5,847)

(3,873)

(50,734)

(37,995)

(34,142) 7,924 327 (1,331)

(34,687) 23,634 (2,121) 66 1,303 785 96,044 30,752 46,887 (1,229)

(950)

(855)

(39,225)

(36,051)

(31,907)

(985)

(2,435) 469 (7,157)

(6,358)

(5,401)

(1,965)

(1,961)

(1,822) 10,173 5,090 12,942 (1,381)

(8,113)

(6,333) 30,340 21,464 23,979 (8,719) 3,237 5,210 604 1,262 (879) 9,798 6,561 1,351 7,314 6,052 6,931 S 1,079

$ 9,798

$ 6,561

$ 7,918

$ 7,314

$ 6,052

$ (155)

S (358)

$ (388)

$ (9,499) 510,767)

$(11,229)

(2,331)

(1,616)

(1,804) 1,383 129 (800)

In the consolidating data on this page, 'GE' means the basis of consolidation as described In note to the consoli-dated financial statements; GECS' means General Electric Capital Services, Inc. and all of its affiliates and associated companies.Transactions between GE and GECS have been eliminated from the General Electric Company and consolidated affiliates' columns on page 76.

GE 2002 ANNUAL REPORT 77

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES Consolidation Our consolidated financial statements represent the adding together of all affiliates-companies that General Electric Company directly or indirectly controls. Results of associated companies-generally companies in which we own 20%

to 50% and over which we, directly or indirectly, have sig-nificant influence-are included in the financial statements on a "one-line" basis.

Financial statement presentation We have reclassified certain prior-year amounts to conform to this year's presentation.

Financial data and related measurements are presented in the following categories:

GE This represents the adding together of all affiliates other than General Electric Capital Services, Inc. IGECS),

whose operations are presented on a one-line basis.

GECS This affiliate owns all of the common stock of General Electric Capital Corporation GE Capital) and GE Global Insurance Holding Corporation (GE Global Insurance Holding), the parent of Employers Reinsurance Corporation. GE Capital, GE Global Insurance Holding and their respective affiliates are consolidated in the GECS columns and constitute its business.

CONSOLIDATEDThis represents the adding together of GE and GECS.

The effects of transactions among related companies within and between each of the above-mentioned groups are eliminated. Transactions between GE and GECS are immaterial and consist primarily of GECS services for material procurement and trade payables and receivables management, aircraft engines and medical equipment manufactured by GE that are leased to others, buildings and equipment leased by GE from GECS, and GE invest-ments of cash in GECS commercial paper.

Preparing financial statements in conformity with gen-erally accepted accounting principles requires us to make estimates and assumptions that affect reported amounts and related disclosures. Actual results could differ from those estimates.

Sales of goods and services We record sales of goods when a firm sales agreement is in place, delivery has occurred and collectibility of the fixed or determinable sales price is reasonably assured.

If customer acceptance of products is not assured, sales are recorded only upon formal customer acceptance.

Sales of goods in the Appliances, Industrial Systems, IT Solutions, Lighting, Plastics, Specialty Materials and GE Supply businesses typically do not include multiple product and/or service elements, as compared with sales in certain of the businesses referred to below. Consumer lighting products and computer hardware and software are often sold with a right of return. Accumulated experi-ence is used to estimate and provide for such returns.

Sales of goods in the Aircraft Engines, Medical Systems, Power Systems, Transportation Systems and certain Industrial Systems businesses sometimes include multiple components and sometimes include services such as installation. In such contracts, amounts assigned to each component are based on that component's objectively determined fair value, such as the sales price for the component when it is sold separately or competitor prices for similar components. In general, sales are recognized individually for delivered components only when undeliv-ered components are not essential to their functionality.

However, when undelivered components are inconsequen-tial or perfunctory, such as certain training commitments, sales are recognized on the total contract with provision made for the cost of the incomplete elements.

We record sales of product services and certain power generation equipment in accordance with contracts. For long-term product services agreements, we use estimated contract profit rates to record sales as work is performed.

For certain power generation equipment, we use esti-mated contract profit rates to record sales as major components are completed and delivered to customers.

Estimates are subject to change; revisions that affect an agreement's total estimated profitability result in an immediate adjustment of earnings. Losses, if any, are provided for when probable.

Sales by NBC are recorded when advertisements are broadcast, with provision made for any shortfalls from viewer commitments "make goods") based on specific contracts and independent viewer census information.

GECS revenues from services (eamed ncome)

We use the interest method to recognize income on all loans. We stop accruing interest income at the earlier of the time at which collection of an account becomes doubtful or the account becomes 90 days delinquent.

We recognize interest income on impaired loans either as cash is collected or on a cost-recovery basis as con-ditions warrant.

We record financing lease income on the interest method to produce a level yield on funds not yet recovered.

Estimated unguaranteed residual values of leased assets are based primarily on periodic independent appraisals of the values of leased assets remaining at expiration of the lease terms. Significant assumptions we use in estimating residual values include estimated net cash flows over the remaining lease term, results of future remarketing and future component part and scrap metal prices, discounted at an appropriate rate.

78 GE 2002 ANNUAL REPORT

We recognize operating lease income on a straight-line basis over the terms of underlying leases.

We defer origination, commitment and other non-refundable fees related to fundings and record them in earned income on the interest method. We defer commitment fees related to loans that we do not expect to fund and on line-of-credit fees and record them in earned income on a straight-line basis over the period to which the fees relate. We record syndication fees in earned income at the time related services are performed unless significant contingencies exist.

See below and page 80 for our discussion of income from investment and insurance activities.

Depreciation and amortization The cost of most of GE's manufacturing plant and equip-ment is depreciated over its estimated economic life using an accelerated method based primarily on a sum-of-the-years digits formula.

The cost of GECS equipment leased to others on operating leases is amortized, principally on a straight-line basis, to estimated residual value over the lease term or over the estimated economic life of the equipment.

Depreciation of property and equipment used by GECS is recorded on either a sum-of-the-years digits formula or a straight-line basis over the lives of the assets.

Losses on financing receivables The allowance for losses on small-balance receivables reflects our best estimate of probable losses inherent in the portfolio determined principally on the basis of histori-cal experience. For other receivables, principally the larger loans and leases, the allowance for losses is deter-mined primarily on the basis of our best estimate of prob-able losses, including specific allowances for known troubled accounts. Small balance receivables consist of consumer loans, primarily credit card receivables, and certain homogeneous leases and secured loans. Large balance receivables comprise all other commercial loans and leases.

Losses on financing receivables are recognized when they are incurred. Measurement of such losses requires consideration of historical loss experience, including the need to adjust for current conditions and judgments about the probable effects of relevant observable data, including present economic conditions such as delinquency rates, financial health of specific customers and market sectors, collateral value, and the present and expected levels of interest rates. For large balance, non-homogeneous loans, the following sources of value are used to determine recoverability, as appropriate under the circumstances:

present value of expected future cash flows discounted at the loan's effective interest rate, the loan's observable market price, or the fair value of the collateral.

All accounts or portions thereof that are deemed to be uncollectible or to require an excessive collection cost are written off to the allowance for losses. Small-balance accounts generally are written off when six to 12 months delinquent, although any such balance judged to be uncollectible, such as an account in bankruptcy, is written down immediately to estimated realizable value. Large-balance accounts are reviewed at least quarterly, and those accounts with amounts that are judged to be uncollectible are written down to estimated realizable value.

When collateral is repossessed in satisfaction of a loan, the receivable is written down against the allowance for losses to estimated fair value of the asset less costs to sell, transferred to other assets and subsequently carried at the lower of cost or estimated fair value less costs to sell. This accounting method has been employed principally for commercial lending transactions.

Cash and equivalents Debt securiies with original maturities of three months or less are included in cash equivalents unless designated as available for sale and classified as investment securities.

Investment securities We report investments in debt and marketable equity securities, and equity securities at our insurance affili-ates, at fair value based primarily on quoted market prices or, if quoted prices are not available, discounted expected cash flows using market rates commensurate with credit quality and maturity of the investment.

Substantially all investment securities are designated as available for sale, with unrealized gains and losses included in share owners' equity, net of applicable taxes and other adjustments. We regularly review investment securities for impairment based on criteria that include the extent to which cost exceeds market value, the dura-tion of the market decline, and the financial health of and specific prospects for the issuer. Unrealized losses that are other than temporary are recognized in earnings.

Realized gains and losses are accounted for on the specific identification method.

Inventories All inventories are stated at the lower of cost or realizable values. Cost for substantially all of GE's U.S. inventories is determined on a last-in, first-out (LIFO) basis. Cost of other GE inventories is primarily determined on a first-in, first-out (FIFO) basis. GECS inventories consist primarily of finished products held for sale. Cost is primarily deter-mined on a FIFO basis.

Intangible assets As of January 1, 2002, we completed adoption of Statement of Financial Accounting Standards SFAS) 142, Goodwill and Other Intangible Assets. Under SFAS 142, GE 2002 ANNUAL REPORT 79

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS goodwill is no longer amortized but is tested for impairment using a fair value approach, 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 financial information is prepared and reg-ularly reviewed by management at the component level.

We recognize an impairment charge for any amount by which the carrying amount of a reporting unit's goodwill exceeds its fair value. We use discounted cash flows to establish fair values. When available and as appropriate, we use comparative market multiples to corroborate discounted cash flow results. When a business within a reporting unit is disposed of, goodwill is allocated to the gain or loss on disposition using the relative fair value methodology.

We amortize the cost of other intangibles over their estimated useful lives unless such lives are deemed indefinite. Amortizable intangible assets are tested for impairment based on undiscounted cash flows and, if impaired, written down to fair value based on either discounted cash flows or appraised values. Intangible assets with indefinite lives are tested for impairment and written down to fair value as required.

Before January 1, 2002, we amortized goodwill over its estimated period of benefit on a straight-line basis; we amortized other intangible assets on appropriate bases over their estimated lives. No amortization period exceeded 40 years. When an intangible asset's carrying value exceeded associated expected operating cash flows, we considered it to be impaired and wrote it down to fair value, which we determined based on either discounted future cash flows or appraised values.

GECS insurance accounting policies Accounting policies for GECS insurance businesses follow.

PREMIUM INCOME. We report insurance premiums as earned income as follows:

For short-duration insurance contracts (including property and casualty, accident and health, and financial guaranty insurance), we report premiums as earned income, gen-erally on a pro-rata basis, over the terms of the related agreements. For retrospectively rated reinsurance con-tracts, we record premium adjustments based on esti-mated losses and loss expenses, taking into consideration both case and incurred-but-not-reported (IBNR) reserves.

For traditional long-duration insurance contracts (including term and whole life contracts and annuities payable for the life of the annuitant), we report premiums as earned income when due.

For investment contracts and universal life contracts, we report premiums received as liabilities, not as revenues.

Universal life contracts are long-duration insurance con-tracts with terms that are neither fixed nor guaranteed; for these contracts, we recognize revenues for assess-ments against the policyholder's account, mostly for mor-tality, contract initiation, administration and surrender.

Investment contracts are contracts that have neither sig-nificant mortality nor significant morbidity risk, including annuities payable for a determined period; for these con-tracts, we recognize revenues on the associated invest-ments and amounts credited to policyholder accounts are charged to expense.

LIABILITIES FOR UNPAID CLAIMS AND CLAIMS ADJUSTMENT EXPENSES represent our best estimate of the ultimate obligations for reported claims plus those IBNR and the related estimated claim settlement expenses for all claims incurred through December 31 of each year.

Specific reserves-also referred to as case reserves-are established for reported claims using case-basis eva uations of the underlying claim data and are updated as further information becomes known. IBNR reserves are determined using generally accepted actuarial reserving techniques that take into account historical loss experi-ence data and, as appropriate, certain qualitative factors.

IBNR reserves are adjusted to take into account certain additional factors that can be expected to affect the liabil-ity for claims over time, such as changes in the volume and mix of business written, revisions to contract terms and conditions, changes in legal precedence or developed case law, trends in healthcare and medical costs, and general inflation levels. Settlement of complex claims rou-tinely involves threatened or pending litigation to resolve disputes as to coverage, interpretation of contract terms and conditions or fair compensation for damages suf-fered. These disputes are settled through negotiation, arbitration or actual litigation. Recorded reserves incorpo-rate our best estimate of the effect that ultimate resolu-tion of such disputes have on both claims payments and related settlement expenses. Liabilities for unpaid claims and claims adjustment expenses are continually reviewed and adjusted; such adjustments are included in current operations and accounted for as changes in estimates.

DEFERRED POLICY ACQUISITION COSTS. Costs that vary with and are primarily related to the acquisition of new and renewal insurance and investment contracts are deferred and amortized over the respective policy terms. For-short-duration insurance contracts, acquisition costs consist primarily of commissions, brokerage expenses and pre-mium taxes. For long-duration insurance contracts, these costs consist primarily of first-year commissions in excess of recurring renewal commissions, certain variable sales expenses and certain support costs such as underwriting and policy issue expenses.

80 GE 2002 ANNUAL REPORT

For short-duration insurance contracts, we amortize these costs on a pro-rata basis over the contract periods in which the related premiums are earned.

For traditional long-duration insurance contracts, we amor-tize these costs over the respective contract periods in proportion to either anticipated premium income or, in the case of limited-payment contracts, estimated benefit payments.

For investment contracts and universal life contracts, we amortize these costs on the basis of anticipated gross profits.

We review deferred policy acquisition costs periodically for recoverability considering anticipated investment income.

PRESENT VALUE OF FUTURE PROFITS. The actuarially deter-mined present value of anticipated net cash flows to be realized from insurance, annuity and investment contracts in force at the date of acquisition of life insurance enter-prises is recorded as the present value of future profits and is amortized over the respective policy terms in a manner similar to deferred policy acquisition costs. We adjust unamortized balances to reflect experience and impairment, if any.

Accounting changes Under SFAS 142, goodwill is no longer amortized but is tested for impairment using a fair value methodology. We stopped amortizing goodwill effective January 1, 2002.

Under SFAS 142, we were required to test all existing goodwill for impairment as of January 1, 2002, on a report-ing unit basis, and recorded a non-cash charge of $1.204 billion ($1.015 billion after tax, or $0.10 per share), which we reported in the caption "Cumulative effect of account-ing changes.' Substantially all of the charge relates to the GECS iT Solutions business and the GECS GE Auto and Home business. Factors contributing to the impairment charge were the difficult economic environment in the information technology sector and heightened price compe-tition in the auto insurance industry. No impairment charge had been required under our previous goodwill impairment policy, which was based on undiscounted cash flows.

In 2002, we adopted the stock option expense provisions of SFAS 123, Accounting for Stock-Based Compensation, resulting in a $27 million charge to net eamings. We first measure the total cost of each option grant at the grant date, using market-based option trading models. We then recognize each grant's total cost over the period that the options vest. Under this approach, our 2002 option grants had a total value of approximatelv $200 million, after tax; we charged $27 million to net earnings in 2002, and after-tax expense from this grant for the next three years will be about $80 million, $50 million and $30 million. A com-parison of reported and pro-forma net earnings, including effects of expensing stock options, follows.

lin millions; per-share amounts in dollarsl Net earnings, as reported Earnings per share, as reported Diluted Basic Stock option expense included in net earnings Total stock option expense(')

PRO-FORMA EFFECTS Net earnings, on pro-forma basis Earnings per share, on pro-forma basis Diluted Basic 2002 2001 2000

$14,118

$13,684

$12,735 1.41 1.42 1.37 1.38 1.27 1.29 27 330 296 233 13,815 13,388 12,502 1.38 1.39 1.33 1.24 1.35 1.26 2002 and 2001 net earnings and earnings per share amounts Include effects of accounting changes.

<a) As if we had applied SFAS 123 to expense stock options in all periods.

Includes $27 million actually recognized in 2002 earnings.

In November 2002, the Financial Accounting Standards Board (FASB) issued Interpretation No. (FIN) 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.

The resulting disclosure provisions are effective for year-end 2002 and such disclosures are provided in notes 29 and 30. Recognition and measurement provisions of FIN 45 become effective for guarantees issued or modified on or after January 1, 2003.

In January 2003, the FASB issued FIN 46, Consolidation of Variable Interest Entities, an Interpretation of Accounting Research Bulletin No. 51. FIN 46's disclosure requirements are effective for year-end 2002 and such disclosures are provided in note 29. We plan to adopt FIN 46's account-ing provisions on July 1, 2003.

At January 1, 2001, we adopted SFAS 133, Accounting for Derivative Instruments and Hedging Activities, as amended. Under SFAS 133, all derivative instruments are recognized in the balance sheet at their fair values.

Further information about derivatives and hedging is provided in note 28.

The cumulative effect of adopting this accounting change at January 1, 2001, follows.

Share owners' (In millions)

Earnings()

equity

.~~............

Adjustment to fair value of derivatives S(502)

$1,340)

Income tax effects 178 513 Total S(324)

S (827)

The earnings per share effect was $0.03.

(0) For eamings effect, amount shown is net of adjustment to hedged items.

GE 2002 ANNUAL REPORT 81 r-..:....__...

NOTESTO CONSOLIDATED FINANCIAL STATEMENTS The cumulative effect on earnings of adopting SFAS 133 comprised two significant elements. One element repre-sented the fair value of equity options embedded in loans that provided both us and the borrower the right, but not the obligation, to convert the loans into shares of the borrower's stock. The second element of the transition effect was a portion of the effect of marking to market options and currency contracts used for hedging. The cumulative effect on share owners' equity was primarily attributable to marking to market forward and swap con-tracts used to hedge variable-rate borrowings. Decreases in the fair values of these instruments were attributable to declines in interest rates since inception of the hedg-ing arrangements. As a matter of policy, we ensure that, including the effect of derivatives, lending and financing asset positions are substantially matched in character (e.g., fixed vs. floating) and duration. As a result, declines in the fair values of these effective derivatives are offset by unrecognized gains on the related financing assets and hedged items, and future earnings will not be subject to volatility from interest rate changes.

In November 2000, the Emerging IssuesTask Force (EITF) of the FASB reached a consensus on accounting for impairment of retained beneficial interests (EITF 99-20).

Under this consensus, impairment of certain retained interests in securitized assets must be recognized when (1) the asset's fair value is below its carrying value, and (21 it is probable that there has been an adverse change in estimated cash flows. The cumulative effect of adopt-ing EITF 99-20 at January 1, 2001, was a one-time reduc-tion of net earnings of $120 million ($0.01 per share).

These 2001 accounting changes did not involve cash, and we expect that they will have no more than a mod-est effect on future results.

NOTE 2 GE OTHER INCOME

!In millions) 2002 2001 2000 Bravo exchange(a)

$ 571 Global eXchange Services gain(b) 488 Licensing and royalty income 103 75 65 Associated companies (170)

(106)

(1111)

Marketable securities and bank deposits 31 184 55 Other items 83 280 489 Total

$1,106

$ 433

$ 498 (a) Relates to NBC's exchange of certain assets for the cable network Bravo.

(b) Relates to our sale of 90% of Global eXchange Services.

NOTE 3 GECS REVENUES FROM SERVICES (In millions) 2002 2001 2000 Time sales, loan and other income(s)

$22,030

$21,894

$22,002 Operating lease rentals 6,191 6,088 6,183 Financing leases 4,616 4,517 4,012 Investment income 5,570 6,593 8,479 Premiums earned by insurance businesses 16,484 15,634 16,093 Total

$54,891

$54,726

$56,769

() Indudes gains on sales of financial assets through securitizations of $767 million in 2002, compared with S1,327 million in 2001 and $489 million in 2000, net of any effects of replenishing securitized credit card balances.

For insurance businesses, the effects of reinsurance on premiums written and premiums earned were as follows:

(In millionsl 2002 2001 2000 PREMIUMS WRITTEN Direct

$11,659

$ 9,958

$ 9,390 Assumed 9,409 9,603 9,552 Ceded (4,069)

(3,718)

(2,481)

Total

$16,999

$15,843

$16,461 PREMIUMS EARNED Direct

$10,922 S 9,912

$ 9,026 Assumed 9,569 9,471 9,643 Ceded (4,007)

(3,749)

(2,576)

Total

$16,484

$15,634

$16,093 NOTE 4 SUPPLEMENTAL COST INFORMATION Total expenditures for research and development were

$2,631 million, $2,349 million and $2,193 million in 2002, 2001 and 2000, respectively. The portion we funded was

$2,215 million in 2002, $1,980 million in 2001 and $1,867 million in 2000.

Rental expense under operating leases is shown below.

(In millions) 2002 2001 2000 GE

$773

$ 694

$ 648 GECS 977 1,006 1,176 At December 31, 2002, minimum rental commitments under noncancelable operating leases aggregated $2,635 million and $4,449 million for GE and GECS, respectively.

Amounts payable over the next five years follow.

lIn millions) 2003 2004 2005 2006 2007 GE

$511

$412

$367

$287

$252 GECS 738 674 533 457 556 82 GE 2002 ANNUAL REPORT

GE's selling, general and administrative expense totaled

$9,131 million in 2002, $8,637 million in 2001 and $8,392 million in 2000. Capitalized interest is insignificant in 2002, 2001 and 2000.

We recorded restructuring charges of $270 million

($354 million including other related charges) in 2002 to rationalize certain operations and facilities of GE's world-wide industrial businesses. Major elements of these pro-grams included costs for employee severance, lease termination, dismantlement, and other exit costs. An analysis of changes in the restructuring liability follows.

Termination Exit fin millions) benefits coat Total 2002 provision

$195

$75

$270 Usage (93)

14)

(97)

Balance at December 31, 2002

$102

$71

$173 Substantially all of the 2002 balance is expected to be used by year-end 2003.

NOTE 6 RETIREE HEALTH AND LIFE BENEFITS We sponsor a number of retiree health and life insurance benefit plans (retiree benefit plans). Principal retiree ben-efit plans are discussed below; other such plans are not significant individually or in the aggregate.

PRINCIPAL RETIREE BENEFIT PLANS generally provide health and life insurance benefits to employees who retire under the GE Pension Plan (see note 6) with 10 or more years of service. Retirees share in the cost of healthcare bene-fits. Benefit provisions are subject to collective bargain-ing. These plans cover approximately 250,000 retirees and dependents.

The effect on operations of principal retiree benefit plans is shown in the following table.

EFFECT ON OPERATIONS (in milionI_

2002 2001 2000 Expected retum on plan assets 6(170) 6(185)

$0178)

Service cost for benefits earned 277 191 165 Interest cost on benefit obligation 469 459 402 Prior service cost 96 90 49 Net actuarial loss recognized 78 60 40 Retiree benefit plans cost

$ 750

$615 S 478 FUNDING POLICY for retiree health benefits is generally to pay covered expenses as they are incurred. We fund retiree life insurance benefits at our discretion.

Changes in the accumulated postretirement benefit obligation for retiree benefit plans follow.

ACCUMULATED POSTRETIREMENT BENEFIT OBLIGATION IAPBO) fIn millions) 2002 2001 Balance at January 1 S6,796

$6,422 Service cost for benefits eamed 277 191 Interest cost on benefit obligation 469 459 Participant contributions 32 30 Plan amendments (60)

Actuarial loss 567 287 Benefits paid (687)

(593)

Other 41 Balance at December 31 1.

$7,435

$6,796 lIThe APBO for the retiree health plans was SS,458 million and $4,965 million at year-end 2002 and 2001, respmectively.

Changes in the fair value of assets for retiree benefit plans follow.

FAIR VALUE OF ASSETS (in millions) 2002 2001 Balance at January 1

$1,771

$2,031 Actual lss on plan assets (225)

(163)

Employer contributions 535 466 Participant contributions 32 30 Benefits paid (687)

(593)

Balance at December 31 S1,426

$1,771 Plan assets are held in trust and consist mainly of com-mon stock and fixed-income securities. GE common stock represented 4.8% and 6.4% of trust assets at year-end 2002 and 2001, respectively.

Our recorded assets and liabilities for retiree benefit plans are as follows:

RETIREE BENEFIT ASSET/(LIABILITY)

December 31 in millions) 2002 2001 Funded status f1

$16,009) 6(5,025)

Unrecognized prior service cost 753 909 Unrecognized net actuarial loss 2,277 1,393 Net liability recognized

$12,979)

S(2.723)

Amounts recorded In the Statement of Financial Position:

Prepaid retiree life plans asset 87 68 Retiree health plans liability (3,066)

(2,789)

Net liability recognized

$(2,979)

$12,723) 1l Fel value of assets lss APBO, as shown in the preceding tabLes.

GE 2002 ANNUAL REPORT 83

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ACTUARIAL ASSUMPTIONS used to determine costs and benefit obligations for principal retiree benefit plans follow.

ACTUARIAL ASSUMPTIONS December 31 Discount rate Compensation increases Healthcare cost trend a)

Expected return on assets 2002 2001 2000 6V4%

5 13 8%

714%

5 12 9Y2 71/2%

5 10 9_%

151 For 2002, gradually declining to 5% after 2mo.

Increasing or decreasing the healthcare cost trend rates by one percentage point would have had an insignificant effect on the December 31, 2002, accumulated postre-tirement benefit obligation and the annual cost of retiree health plans. Our principal retiree benefit plans are collec-tively bargained and have provisions that limit our per capita costs.

We apply our expected rate of return to a market-related value of assets. The market-related value of assets recognizes the performance of our retiree life plans portfolio over five years and reduces the effects of short-term market fluctuations.

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.

EFFECT ON OPERATIONS (In millions) 2002 2001 2000

_ ~...._.

Expected return on plan assets

$ 4,054

$ 4,327

$ 3,754 Service cost for benefits eamed(s)

(1,107)

(884) 1780)

Interest cost on benefit obligation (2,116) 12,065)

(1,966)

Prior service cost (217)

(244)

(237)

SFAS 87 transition gain 154 Net actuarial gain recognized 912 961 819 Income from pensions 1,556 2,095 1,744 Retiree benefit plans cost (note 5)

(750)

(615)

(478)

Net cost reductions from principal postretirement benefit plans

$ 80S

$ 1,480

$ 1,266 (a) Net of participaant contributions.

FUNDING POLICY for the GE Pension Plan is to contribute amounts sufficient to meet minimum funding require-ments as set forth in employee benefit and tax laws plus such additional amounts as we may determine to be appropriate. We have not made contributions to the GE Pension Plan since 1987 because any GE contribution would require payment of excise taxes and would not be deductible for income tax purposes.

Changes in the projected benefit obligation for princi-pal pension plans follow.

NOTE S PENSION BENEFITS We sponsor a number of pension plans. Principal pension plans are discussed below. Other pension plans are not significant individually or in the aggregate with total assets and obligations amounting to less than 10% of those of the principal plans.

PRINCIPAL PENSION PLANS are the GE Pension Plan and the GE Supplementary Pension Plan.

The GE Pension Plan provides benefits to certain U.S.

employees based on the greater of a formula recognizing career earnings or a formula recognizing length of service and final average earnings. Benefit provisions are subject to collective bargaining. The GE Pension Plan covers approximately 508,000 participants, including 136,000 employees, 171,000 former employees with vested rights to future benefits, and 201,000 retirees and beneficiaries receiving benefits.

The GE Supplementary Pension Plan is a pay-as-you-go plan providing supplementary retirement benefits primarily to higher-level, longer-service U.S. employees.

Details of the effect on operations of principal pension plans, and the total effect on cost of principal postretire-ment benefit plans, follow.

PROJECTED BENEFIT OBLIGATIOJ PBO)

(In millionsl 2002 2001 Balance at January 1

$30,423

$28,535 Service cost for benefits earnedl) 1,107 884 Interest cost on benefit obligation 2,116 2,065 Participant contributions 158 141 Plan amendments 9

Actuarial o55 (b 1,650 889 Benefits paid (2,197)

(2091)

Balance at December31

$33,266

$30,423 (I) Net of participant contributions.

(bl Principally associated with discount rate changes.

Changes in the fair value of assets for principal pension plans follow.

FAIR VALUE OF ASSETS (in millions) 2002 2001 Balance at January 1

$45,008

$49,757 Actual loss on plan assets (5,251)

(2876)

Employer contributions 96 75 Participant contributions 158 141 Benefits paid (2,197)

(2,091)

Balance at December 31

$37,811

$45,006 84 GE 2002 ANNUAL REPORT

The GE Pension Plan's assets are held in trust. At December 31, 2002, investments in publicly traded equity securities, fixed-income securities, and other investments were 56%, 26% and 18%, respectively, of trust assets.

Trust assets are invested subject to the following policy restrictions: short-term securities must be rated Al/P or better; investments in real estate-6% of trust assets at year end-may not exceed 25%; other investments in securities that are not freely tradable-11 % of trust assets at year end-may not exceed 20%. GE common stock represented 6.0% and 8.6% of trust assets at year-end 2002 and 2001, respectively, and is subject to a statutory limit when it reaches 10% of total trust assets.

Our recorded assets and liabilities for principal pen-sion plans are as follows:

PREPAID PENSION ASSET/ILIABILITY)

December 31 In millions)

Funded statusll Unrecognized prior service cost Unrecognized net actuarial loss 1 Net asset recognized Amounts recorded in the Statemi of Financial Position:

Prepaid pension asset Supplementary Pension Plan liability Net asset recognized Is) Fair value of assets less PB0, as shc ACTUARIAL ASSUMPTIONS used 1 efit obligations for principal pe ACTUARIAL ASSUMPTIONS December 31 Discount rate Compensation increases Expected retum on assets We apply our expected rate ol value of assets. The market-re nizes the performance of our I five years and reduces the effi fluctuations.

We amortize experience ge the effects of changes in actui provisions, over a period no lo future service of employees.

2002 2001

$ 4,545

$14,583 NOTE 7 PROVISION FOR INCOME TAXES (In million.002 2001 2

x,o GE Current tax expense

$2,833

$3,632

$3,331 Deferred tax expense from temporary differences 1,004 561 468 3,037 4,193 3,799 GECS Current tax expense (benefit)

(1,488) 517 1,229 Deferred tax expense from temporary differences 1,409 863 683 (79) 1,380 1,912 CONSOUDATED Current tax expense 1,345 4,149 4,560 Deferred tax expense from temporary differences 2,413 1,424 1,151 Total

$3,758

$5,573

$5,711 1,165 1,373 GE and GECS file a consolidated U.S. federal income gain) 8,36.

(3,541) tax retum. The GECS provision for current tax expense

$14,066

$12,415 includes its effect on the consolidated retum.

ent Consolidated current tax expense includes amounts applicable to U.S. federal income taxes of $137 million,

$15,611

$13,740

$2,514 million and $3,005 million in 2002, 2001 and 2000, (1,545)

(1,325) respectively, and amounts applicable to non-U.S. jurisdic-tions of $1,061 million, $1,225 million and $1,246 million in 2002, 2001 and 2000, respectively. Consolidated own In the preceding tables.

deferred tax expense related to U.S. federal income taxes was $2,112 million, $1,455 million and $1,095 million in to determine costs and ben-2002, 2001 and 2000, respectively.

nsion plans follow.

Deferred income tax balances reflect the effect of temporary differences between the carrying amounts of assets and liabilities and their tax bases and are stated 2002 200 2000....

-i- ---

at enacted tax rates expected to be in effect when taxes 64%

74%

7%2o are actually paid or recovered. See note 21 for details.

5 5

5 We have not provided U.S. deferred taxes on cumula-8%

9%

tive eamings of non-U.S. affiliates and associated compa-nies that have been reinvested indefinitely. Such amount lreturn to a market-related relates to ongoing operations and, at December 31, lated value of assets recog-2002, was approximately $15 billion. Because of the avail-pension plan portfolio over ability of U.S. foreign tax credits, it is not practicable to acts of short-term market determine the U.S. federal income tax liability that would be payable if such earnings were not reinvested indefi-iins and losses, as well as nitely. Deferred taxes are provided for earnings of non-arial assumptions and plan U.S. affiliates and associated companies when we plan to nger than the average remit those earnings.

Consolidated U.S. income before taxes and the cumulative effect of accounting changes was $12.0 billion in 2002, $13.9 billion in 2001 and $12.9 billion in 2000.

The corresponding amounts for non-U.S.-based opera-tions were $6.9 billion in 2002, $5.8 billion in 2001 and

$5.5 billion in 2000.

GE 2002 ANNUAL REPORT 85

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A reconciliation of the U.S. federal statutory tax rate to the actual tax rate is provided below.

RECONCILIATION OF U.S. FEDERAL STATUTORY TAX RATETO ACTUAL RATE

-Con oltd

_CE_

.ECS 2002 2001 2000 2002 2001 2000 2002 2001 2000 Statutory U.S. federal income tax rate Increase (reduction) in rate resulting from:

Inclusion of after-tax earnings of GECS in before-tax earnings of GE Amortization of goodwill Tax-exempt income Tax on international activities including exports Americom(Rollins goodwill All other-net 35.0%

35.0%

1.0 1.1 (1.

(1.3)

(1.5)

(10.0)

(5.4)

(4.9)

(1.1)

(3.3) 0.1 1.3 (1 )

(

4.......

(..0)

(15.1) 116.7)

( 4.0) 35.0%

35.0%

85)

(10.7)

(11.0) 0.8 0.7 (5.2)

(3.2)

(3.0)

(1.1) 1.0 1.3

._4J)

(12.1)..

(12,,_

......0)

(14.8) 1112.1)

(12.0) 35.0%

35.0%

0.9 1.1 (5.1)

(3.8) 4.0)

(22.5)

(6.7)

(5.8)

(3.2)

(9.1)

(2.4) 0.6 (3.71) 15.2)

(8.1)

Actual income tax rate 19.9%

28.3%

31.0%

20.2%

22.9%

23.0%

11.7)%

19.8%

26.9e NOTE a EARNINGS PER SHARE INFORMATION 2002 200 2000 (Inmillionsphar amounts in dollars)

Diluted Basic Diluted Basic Diluted Basic CONSOLIDATED OPERATIONS Earnings before accounting changes

$15,133

$14,128

$12,735

$12,735 Dividend equivalents-net of tax 13 12 11 Earnings before accounting changes for per-share calculation 15,146 15,133 14,140 14,128 12,746 12,735 Cumulative effect of accounting changes (1,015)

(1,015)

(444)

(44)

Net earnings available for per-share calculation

$14,131

$14,118

$13.696

$13,684

$12,748

$12,735 AVERAGE EQUIVALENT SHARES Shares of GE common stock outstanding 9,947 9,947 9,932 9,932 9,897 9,897 Employee compensation-related shares, including stock options 81 120 160 Total average equivalent shares 10,028 9,947 10,052 9,932 10,057 9,897 PER-SHARE AMOUNTS Earnings before accounting changes

$ 1.51

$ 1.52

$ 1.41

$ 1.42 S 1.27

$ 1.29 Cumulative effect of accounting changes (0.10)

(0.10) 0.04) 10.04)

Net eamings per share S

1.41 S II42 S 1.37 S 1.38 S 1.27 S 1.29 86 GE 2002 ANNUAL REPORT Ye

...... I..........

NOTE 9 INVESTMENT SECURITIES December31 (In millionsl 2002 2001

...........................................................I...................

Gross Gross Gross Gross AmorTized unrealized unrealized Estimated Amortized unrealized unrealized Estimated i

gco gins losses fair value cost gains losses fair value GE Debt-U.S. corporate 350

$ (86) $

264 350

$ 99 S

449 Equity 86 10 (28) 68 412 47 (29) 430 436 10 (114) 332 762 146 (29) 879

...............I-----------------------------------------

GECS Debt U.S. corporate 55,489 2,416 11,490) 56,415 47,391 880 (1,626) 46,645 State and municipal 12,147 358 (45) 12,460 12,518 180 (136) 12,562 Mortgage-backed 12,285 438 (46) 12,677 10,024 210 (57) 10,177 Asset-backed 7,081 126 (32) 7,175 6,418 214 133) 6,599 Corporate - non-U.S.

13,396 529 (230) 13,695 13,088 232 (277) 13,043 Government-non-U.S.

8,147 291 162) 8,376 6,104 183 (124) 6,163 U.S. government and federal agency 1,678 67 118) 1,727 1,233 25 (32) 1,226 Equity 4,333 165 (493) 4,005 3,926 178 (381) 3,723 114,556 4,390 (2,416) 116,530 10,702 2,102 12,666) 100,138 Total consolidated

$114,992

$4,400

$(2.530) $116,862

$101,464

$2,248

$2,695) 101,017 A substantial portion of mortgage-backed securities shown in the table above are collateralized by U.S.

residential mortgages.

Supplemental information about gross realized gains and losses on investment securities follows.

lin millions) 2002 2001 2000 CONTRACTUAL MATURITIES OF GECS INVESTMENT IN DEBT SECURITIES EXCLUDING MORTGAGE-BACKED AND ASSET-BACKED SECURITIES)

GE Gains Losses, including

$ 236 8

Amontized Estimated impairments cost fair value Net....

$ 7,795

$ 7,833 GECS 19,648 19,947 Gainslal 23,260 23,821 Losses, including 23,260 23,821 impairments 40,154 41,072 Net We expect actual maturities to differ from contractual maturities because borrowers have the right to call or prepay certain obligations.

Proceeds from securities sales amounted to $46,406 million in 2002, $39,950 million in 2001 and $24,748 mil-lion in 2000.

Total (76)

(100) 136 (76) 136 (76)

(68) 1,578 1,800 3,581 (1,277)

(8381 (714) 301 962 2,867

$ 225

$1,098

$2,799

{a) Includes $1,366 million, in 2000, from the sale of GECS investment in common stock of PaineWebber Group, Inc.

GE 2002 ANNUAL REPORT 87 lIn millions)

Due in 2003 2004-2007 2008-2012 2013 and later

{In..

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 10 GE CURRENT RECEIVABLES DJecember 31 {In millionh) 2002 2001 L _.T.

+P

........... v.......

Aircraft Engines

$ 1,841

$ 1,976 Consumer Products 734 605 Industrial Products and Systems 1,206 876 Materials 1,242 1,008 NBC 891 335 Power Systems 3,754 3,587 Technical Products and Services 1,411 1,341 Corporate items and eliminations 347 439 11,428 10.167 Less allowance for losses (453)

(362)

$10,973

$ 9,805 Receivables balances at December 31, 2002 and 2001, before allowance for losses, included $6,269 million and

$5,893 million, respectively, from sales of goods and services to customers, and $304 million and $447 million, respectively, from transactions with associated companies.

Current receivables of $344 million at year-end 2002 and $270 million at year-end 2001 arose from sales, prin-cipally of aircraft engine goods and services, on open account to various agencies of the U.S. government, which is our largest single customer. About 4%, 4% and 3% of our sales of goods and services were to the U.S.

government in 2002, 2001 and 2000, respectively.

NOTE 11 INVENTORIES December31 (in milI.ns) 2002 2001 GE Raw materials and work in process

$4,894

$4,708 Finished goods 4,379 3,951 Unbilled shipments 372 312 9,645 8,971 Less revaluation to LIFO (606)

(676) 9,039 8,295 GECS Finished goods 208 270 S9.247 S8,565 LIFO revaluations decreased $70 million in 2002, com-pared with decreases of $169 million in 2001 and $82 mil lion in 2000. Included in these changes were decreases of $21 million, $8 million and $6 million in 2002, 2001 and 2000, respectively, that resulted from lower LIFO inven-tory levels. There were net cost decreases in each of the last three years. As of December 31, 2002, we are obli-gated to acquire certain raw materials at market prices through the year 2019 under various take-or-pay or similar arrangements. Annual minimum commitments under these arrangements are insignificant.

NOTE 12 GECS FINANCING RECEIVABLES (INVESTMENTS IN TIME SALES, LOANS AND FINANCING LEASES)

December 31 (In milijonsl 2002 2001 COMMERCIAL FINANCE Equipment

$ 61,961 S 54,842 Commercial and industrial 36,512 35,239 Real estate 21,041 20,891 Commercial aircraft 11,397 9,081 130,911 120,053 CONSUMER FINANCE Non U.S. installment, revolving credit and other 23,655 18,371 Non U.S.-Auto 15,113 11,938 U.S. -installment, revolving credit and other 14,312 11,465 Non U.S. residential 9,731 5,820 Other 3,225 2,470 68,038 50,064 Other, principally Equipment Management 8,482 8,824 205,429 178,941 Less allowance for losses (note 13)

(5,512)

(4,801)

.9.....1.....

S199,917 S174.140 GECS financing receivables include both time sales and loans and financing leases. Time sales and loans repre-sents transactions in a variety of forms, including time sales, revolving charge and credit, mortgages, installment loans, intermediate-term loans and revolving loans secured by business assets. The portfolio includes time sales and loans carried at the principal amount on which finance charges are billed periodically, and time sales and loans carried at gross book value, which includes finance charges.

Investment in financing leases consists of direct financing and leveraged leases of aircraft, railroad rolling stock, autos, other transportation equipment, data pro-cessing equipment and medical equipment, as well as other manufacturing, power generation, commercial real estate, and commercial equipment and facilities.

As the sole owner of assets under direct financing leases and as the equity participant in leveraged leases, GECS is taxed on total lease payments received and is entitled to tax deductions based on the cost of leased assets and tax deductions for interest paid to third-party participants. GECS is generally entitled to any residual value of leased assets.

Investment in direct financing and leveraged leases represents net unpaid rentals and estimated unguaran-teed 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 leveraged leases; such notes and other instruments have not been 88 GE 2002 ANNUAL REPORT

included in liabilities but have been offset against the ments that are nonrecourse to GECS and are secured by related rentals receivable. The GECS share of rentals both the assets underlying the leases and the amounts receivable on leveraged leases is subordinate to the of future lease payments receivable. Since this third-party share of other participants who also have security inter-debt is nonrecourse to GECS, the related principal and ests in the leased equipment.

interest is deducted from the lease receivables in deter-Third-party debt financing provided in leveraged lease mining GECS net investment in leveraged leases.

transactions takes the form of various lending arrange-NET INVESTMENT IN FINANCING LEASES Total financing leases Direct financing leases Leveraged lses December 31 (In millionsl 2002 2001 2002 2001 2002 2001

__ ~......

Total minimum lease payments receivable

$ 90,452

$ 86,689 S 58,591

$ 57,243 S 31,861

$ 29,446 Less principal and interest on third-party nonrecourse debt 124,249) 122,588)

(24.249) 122,588)

Net rentals receivable 66,203 64,101 58,591 57,243 7,612 6,858 Estimated unguaranteed residual value of leased assets 10,067 8,996 6,292 5,544 3,775 3,452 Less deferred income (14,150)

(13,953)

(10,201)

(10,378)

(3,949) 13,575)

Investment in financing leases 62,120 59,144 54,682 52,409 7,438 6,735 Less amounts to arrive at net Investment Allowance for losses (873)

(757)

(771)

(684)

(102)

(73)

Deferred taxes (9,763)

(9,168)

(5,559)

(4,643)

(4,204)

(4,525)

Net investment in financing leases S 51,484

$49,219

$48,352

$ 47,082

$ 3,132

$ 2,137 CONTRACTUAL MATURITIES fin millions)

Due in 2003 2004 2005 2006 2007 2008 and later Impaired' loans are defined by generally accepted Total time sales Not rentals accounting principles as large balance loans for which it and lna

r.ceivable"I) is probable that the lender will be unable to collect all amounts due according to original contractual terms of

$ 47,887

$16,705 the loan agreement. An analysis of impaired loans follows.

25,120 14,479 21,225 10,314 D ember 31 (In mIllon) 2002 2001 11,686 9,30 28,083 6,741 Loans requiring allowance for losses 3,888 Loans expected to be fully recoverable 14,076-----.

Total

$143,309

$68,203 Allowance for losses (al Experience has shown that a substantial portion of receivables will Average investment during year be paid prior to contractual maturity, and these amounts should not Interest Income earned while impairedla be regarded as forecasts of future cash flows.

1.1 Recognized principally on cash basis.

$1,140

$1,041 845 574

$1,985

$1,615

$ 397

$ 422 1,747 1,121 16 17 GE 2002 ANNUAL REPORT 89

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 13 GECS ALLOWANCE FOR LOSSES ON FINANCING RECEIVABLES (In millions) 2002 2001 2000 BALANCE AT JANUARY 1 Commercial Finance Consumer Finance Other PROVISION CHARGED TO OPERATIONS Commercial Finance Consumer Finance Other

$2,513 2,173 115 4,801 1,092 1,950 45 3,087

$1,682 2,149 203 4,034 756 1,646 79 2,481 NOTE 14 GECS INSURANCE RECEIVABLES December 31 (In millions) 2002 2001

......I-------------------------

Reinsurance recoverables Commercial mortgage loans

$1,435 Premiums receivable 2,025 Residential mortgage loans 248 Corporate and individual loans 3.708 Policy loans Funds on deposit with reinsurers Other 453 Allowance for losses 1,471 Total 121 2,045

$13,551

$12,606 5,358 4,634 5,314 5,113 1,919 1,364 1,801 1,244 1,539 1,290 830 749 1,552 1,602 (279) 1290)

$31,585

$28,312 OTHER ADDmONS -

PRINCIPALLY ACIUISITIONS 704 564 22 NET WRITE-OFFS Commercial Finance (1,152) 1485)

(369)

Consumer Finance (1,849)

(1,659) 11,245)

Other (79)

(134)

(127) 13,080) 12,278)

(1,741)

BALANCE AT DECEMBER 31 Commercial Finance 2,634 2,513 1,682 Consumer Finance 2,782 2,173 2,149 Other 96 115 203 Balance at December 31

$5,512 S4.801

$4,034 SELECTED FINANCING RECEIVABLES RATIOS December31 2002 2001 ALLOWANCE FOR LOSSES ON FINANCING RECEIVABLES AS A PERCENTAGE OF TOTAL FINANCING RECEIVABLES Commercial Finance Consumer Finance Total 2.01%

4.21 2.68 2.09%

4.34 2.68 NONEARNING AND REDUCED EARNING FINANCING RECEIVABLES AS A PERCENTAGE OFTOTAL FINANCING RECEIVABLES Commercial Finance Consumer Finance Total 1.7%

1.7%

2.4 2.7 1.9 2.0 90 GE 2002 ANNUAL REPORT

NOTE 15 PROPERTY, PLANT AND EQUIPMENT (INCLUDING EQUIPMENT LEASEDTO OTHERS)

December 31 (in millionsi 2002 2001 ORIGINAL COST GE Land and improvements

$ 623

$ 577 Buildings, structures and related equipment 8,398 7,281 Machinery and equipment 22,264 21,414 Leasehold costs and manufacturing plant under construction 1,964 1,960 33,249 31,232 GECS (8 1

Buildings and equipment 4,731 3,600 Equipment leased to others Aircraft 20,053 16,173 Vehicles 10,859 10,779 Railroad rolling stock 3,376 3,439 Marine shipping containers 1,611 1,618 Mobile and modular structures 1,383 1,325 Information technology equipment 1,033 1,321 Construction and manufacturing equipment 1,239 799 Scientific, medical and other equipment 2,058 1,001 46,343 40,055

$79,592

$71,287 ACCUMULATED DEPRECIATION AND AMORTIZATION GE

$19,506

$18,433 GECS Buildings and equipment 1,838 1,579 Equipment leased to others 11,044 9,135

,...........1........................

$32,388

$29,147 Is) Includes $1.4 billion and $0.2 billion of assets leased to GE as of December 31,2002 and 2001, respectively.

Amortization of GECS equipment leased to others was

$3,406 million, $2,958 million and $2,620 million in 2002, 2001 and 2000, respectively. Noncancelable future rentals due from customers for equipment on operating leases at year-end 2002 are due as follows:

(in millions)

.ilo Due in 2003

$ 4,553 2004 3,716 2005 2,802 2006 2,074 2007 1,549 After 2007 5,030 Total

$19,724 NOTE 16 INTANGIBLE ASSETS December 31 (In millions) 2002 2001 GE Goodwill

$20,044

$12,354 Capitalized software 1,559 1,435 Other intangibles 1,446 578

.......................I.

23,049 14,367 GECS Goodwill 19,094 15,933 Present value of future profits (PVFP) 2,457 2,198 Capitalized software 894 901 Other intangibles 686 1,725 23,131 20,757 Total

$46,180

$35,124 GE intangible assets are net of accumulated amortization of $5,203 mil-licn in 2002 and $4,772 million in 2001. GECS intangible assets are net of accumulated amortization of $10,603 million in 2002 and $9,963 million in 2001.

INTANGIBLE ASSETS SUBJECT TO AMORTIZATION December 31 In millions) 2002 2001 Gross Gross carrying Accumulated carrying Accumulated amount amortization amount amorization

.....................,,....................... _2 2

-r~

L -...

Present value of future profits 4PVFP) 5,261

$12,804) $ 4,744

$(2,546)

Capitalized software 4,269 (1,816) 3,660 (1,324)

Servicing assets(s) 3,582 (3,240) 3,768 (2,629)

Patents, licenses and other 2,250 (675) 1,344 (5501 All other 556 (341) 708 (338)

Total

$15,918

$18,876) $14,224

$17,387) lal Servicing assets, net of accumulated amortization, are associated primarily with serviced residential mongage loans amounting to

$33 billion and $59 billion at December 31, 2002 and 2001, respectively.

Consolidated amortization expense related to intangible assets, excluding goodwill, for 2002 and 2001 was

$1,999 million and $1,386 million, respectively. The estimated percentage of the December 31, 2002, net PVFP balance to be amortized over each of the next five years follows.

2003 2004 2005 2006 2007 11.2%

9.7%

8.7%

7.6%

6.7%

GE 2002 ANNUAL REPORT 91

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Amortization expense for PVFP in future periods will be affected by acquisitions, realized capital gains/losses or other factors affecting the ultimate amount of gross prof-its realized from certain lines of business. Similarly, future amortization expense for other intangibles will depend on acquisition activity and other business transactions.

The amount of goodwill amortization included in net earnings (net of income taxes) in 2001 and 2000 was

$499 million and $439 million for GE and $552 million and

$620 million for GECS, respectively.

The effects on earnings and earnings per share of excluding such goodwill amortization from 2001 and 2000 follow.

Consolidated GE GECS (In millions; pe.share amounts in dollars) 2002 2001 2000 2002 2001 2000 2002 2001 2000 Net earnings, as reported

$14,118 $13,684 $12,735

$3,611

$5,417

$5,192 Net earnings, excluding goodwill amortization

$14,118 $14,735 $13,794

$3,611

$5,969

$5,812 Diluted Basic 2002 2001 2000 2002 2001 2000 Eamings per share, as reported

$1.41

$1.37

$1.27

$1.42

$1.38

$1.29 Earnings per share, excluding goodwill amortization

$1.41

$1.47

$1.37

$1.42

$1.48

$1.39 Goodwill balances, net of accumulated amortization, follow.

_.........I..._.....

2 2

Foreign Balance Transition exdhange Balance (in millions)

January 1 impairment Acquired and other December 31 Aircraft Engines

$ 1,916

$ 345

$ 25

$ 2,285 Commercial Finance 6,235 1,684 68 7,987 Consumer Finance 3,828 1,288 450 5,562 Consumer Products 393 3

396 Equipment Management 1,160 31 51 1,242 Industrial Products and Systems 1,198 1,712 18 2,928 Insurance 3,372 542 262 4,176 Materials 1,923 1,575 2

3,500 NBC 2,568 2,373 4,941 Power Systems 1,948 942 205 3,095 Technical Products and Services 2,408 430 60 2,898 All Other GECS 1,340 11,204)

(9) 127 Total

$28,287

$11,204)

$10,920

$1,135

$39,138 92 GE 2002 ANNUAL REPORT

NOm 17 At year-end 2002, the National Broadcasting Company ALL OTHER ASSETS (NBC) had $5,735 million of commitments to acquire broadcast material and the rights to broadcast television December 31 (In millions) 200 2001

.r.

(In programs, including U.S. television rights to future GE Olympic Games, and commitments under long-term Investments television station affiliation agreements that require Associated companies()

$ 3640 S 2,539 payments through 2010.

Other 1,016 1,336 pyet hog 00 Separate accounts represent investments controlled 4,e56 3,875 by policyholders and are associated with identical Prepaid pension ast15,611 13,740 Corac enio adsestimatedearnings 3,61 23,561 amounts reported as insurance liabilities in note 19.

Contract costs and estimated earnings 3,466 2,581 Prepaid broadcasting rights 1,053 1,108 Long-term receivables, including notes 1,824 909 Derivative instruments (b) 364 254 Other 3,193 2,753 30,167 25,200 GECS Investments Associated companies(l 11,635 14,415 Real estate Ic) 14,395 8,141 Assets held for sale 2,998 730 Other 5,164 5,222 34,192 28,508 Separate accounts 14,978 10,403 Deferred insurance acquisition costs 8,086 6,768 Derivative instrumentslb) 2,071 2,066 Other 4,755 4,200 64,082 51,945 ELIMINATIONS (1,035)

(548) 693,214

$76,597

'I Includes advances to associated companies wtich are non-controlled, non-consolidated equity nvestments.

(b) Amounts ore stated at fair value in accordance with SFAS 133. We discuss types of derivative Instruments and how we use them In note 28.

' GECS investment in real estate consists principally of two categories:

reat ete held for Investment and equity nethod investmerts. Both categories contain a wide range of properties Including the following at December 31, 2002: offices 125%). self storage facilities 17%) apart-ment buildings 15%), retail fadlities (12%), franchlse properties 8%),

industrial properties (8%), parking facilities (8%) and other (9%). At December 31, 2002. Investments were cated in North America (71%),

Europe 019%) and Asia I0%).

GE 2002 ANNUAL REPORT 93

NOTESTO CONSOLIDATED FINANCIAL STATEMENTS NOTE 18 BORROWINGS SHORT-TERM BORROWINGS 2002 2001 Our borrowings are addressed below from two perspec-tives-liquidity and interest rate risk management.

Additional information about borrowings and associated swaps can be found in note 28.

December31 in millions)

Amount GE Commercial paper U.S.

Non-U.S.

Payable to banks, principally non-U.S.

Current portion of long-term debt Other

$ 668 296 Average ratela)

Arnount 1.69% $

2.89 266 Average LIOuIDIry requirements are principally met through the

.....rate IcC credit markets. Maturities of long-term borrowings (includ-ing the current portion) during the next five years follow.

3.87 660 4.88 1,160 5.58 57 1,205 8,788 9.61 80 216 1,722 GECS Commercial paper U.S.

68,629 1.51 100,170 2.21 Non-U.S.

17,611 3.41 17,289 3.36 Current portion of long-term debt 35,617 4.19 30,952 5.08 Other 10,280 12,590 130,137 161,001 Foreign currency loss(b)

(11)

(157) 130,128 160,844 ELIMINATIONS (137)

(9,490)

$138,775

$153,076 LONG-TERM BORROWINGS 2002 Average December 31 (in millions) rate(a Maturities 2002 2001 GE Industrial development/

pollution control bonds 1.84% 2004-2027 346 $ 336 Payable to banks, principally non-U.S.

6.44 2004-2007 246 241 Other(cl 378 210 970 787 GECS Senior notes 3.79 2004-2055 126,947 78,347 Extendible notes 1.46 2007 12,000 Subordinated notesid) 7.53 2004-2035 1,263 1,171

.....H..----------------- -----------

7 - -

140,210 79,518 Foreign currency gain (loss)Ibl 626 140,836 (1,174)

$140,632 ELUMINATIONS (427) 79,091 (72)

$79,806 18l Based on year-end balances and year-end local currency interest rates including the effects of interest rate and currency swaps, if any, directly associated with the original debt issuance.

IbiTotal GECS borrowings exclude the foreign exchange effects of related currency swaps in accordance with the provisions of SFAS 133.

1l A variety of obligations having various interest rates and maturities, in-cluding certain borrowings by parent operating components and affiliates.

(dl At year-end 2002 and 2001 $996 million of subordinated notes were guaranteed by GE.

(in millions) 2003 2004 2005 2006 2007 GE 57 351 30

$ 132 41 GECS 35,606 46,855s)8 21,723 9,840 14,244 a) Extendible notes amounting to $12 billion are floating rate securities with an initial maturity of 13 months, which can be extended on a rolling basis at the investor's option to a final maturity of five years ending in 2007.

Committed credit lines totaling $54.1 billion had been extended to us by 90 banks at year-end 2002. Included in this amount was $47.0 billion provided directly to GECS and $7.1 billion provided by 21 banks to GE to which GECS also has access. The GECS lines include $19.2 bil-lion of revolving credit agreements under which we can borrow funds for periods exceeding one year. We pay banks for credit facilities, but compensation amounts were insignificant in each of the past three years.

INIERESI RATE RISK iS managed in light of the anticipated behavior, including prepayment behavior, of assets in which debt proceeds are invested. A variety of instruments, including interest rate and currency swaps and currency forwards, are employed to achieve our interest rate objectives. Effective interest rates are lower under these "synthetic" positions than could have been achieved by issuing debt directly.

The following table shows GECS borrowing positions considering the effects of currency and interest rate swaps.

GECS El`FEClIVt BORROWINGS INCLUDING SWAPS) 2002 Average 2001 December 31 (In millions)

Amount rate Amount Short-term Cal

$ 60,151 2.12%

$101,101 Long-term (including current portion)

Fixed rateb)

$121,147 5.29%

$105,387 Floating rate 89,049 2.30 34,031 Total long-term

$210,198

$139,418 (a) Includes commercial paper and other short-term debt.

b Includes fixed-rate borrowings and $34.4 billion ($28.9 billion in 20011 notional long-term interest rate swaps that effectively convert the floating-rate nature of short-term borrowings to fixed rates of interest.

At December 31, 2002, swap maturities ranged from 2003 to 2048.

94 GE 2002 ANNUAL REPORT

NOTE 19 GECS INSURANCE LIABILITIES, RESERVES AND ANNUITY BENEFITS December31 in millions) 2002 2001 Investment contracts and universal life benefits

$ 44,677

$ 39,052 Life insurance beneftsis) 38,191 31,198 Unpaid claims and daims adjustment expenseslbl 30,571 27,233 Unearned premiums 7,436 6,337 Separate accounts (see note 17) 14,978 10,403

$135,853

$114,223 is) Life insurance benefits ore accounted for mainly by a net-level-premium method using estimated yields generally ranging from 1.6% to 8.5% In 2002 and 2% to 9% In 2001.

tb) Principally property and casualty reserves amounting to $26.1 billion and $23.4 billion at December 31, 2002 and 2001, respectively. Includes amounts for both reported and ncurred-but-not-reported claims, reduced by anticipated selvage and subrogation recoveries. Estimates of liabilities are reviewed and updated continually with changes In estimated losses reflected In operations.

When insurance affiliates cede insurance to third parties, they are not relieved of their primary obligation to policy-holders. Losses on ceded risks give rise to claims for recovery; we establish allowances for probable losses on such receivables from reinsurers as required.

We recognize reinsurance recoveries as a reduction of insurance losses and policyholder and annuity bene-fits. Insurance recoveries were $2,234 million, $5,863 million and $3,232 million for the years ended December 31, 2002, 2001 and 2000, respectively.

The insurance liability for unpaid claims and claims adjustment expenses related to policies that may cover environmental and asbestos exposures is based on known facts and an assessment of applicable law and coverage litigation. Liabilities are recognized for both known and unasserted claims (including the cost of related litigation) when sufficient information has been developed to indicate that a claim-has been incurred and a range of potential losses can be reasonably estimated.

Developed case law and adequate claim history do not exist for certain claims principally due to significant uncer-tainties as to both the level of ultimate losses that will occur and what portion, if any, will be deemed to be insured amounts.

A summary of activity affecting unpaid claims and claims adjustment expenses, principally in property and casualty lines, follows.

(In millions) 2002 2001 2000

~.

Balance at January 1 -gross

$27,233

$22,886

$21,473 Less reinsurance recoverables (9,400) 15,477)

(4,832)

BalanceatJanuary1-net 17,833 17,409 16,641 Claims and expenses incurred Current year 9,505 9,199 9,718 Prior years 3,188 682 607 Claims and expenses paid Current year (3,173)

(3,021)

(3,704)

Prior years (6,918)

(6,694)

(6,572)

Claims reserves related to acquired companies 81 488 Other 409 258 231

~~~~~~~~~....

Balance at December 31-net 20,925 17,833 17,409 Add reinsurance recoverables 9,646 9,400 5,477 Balance at December31 -

gross S30,571

$27,233

$22,886

'Claims and expenses incurred-prior years" represents additional losses (adverse development) recognized in any year for loss events that occurred before the beginning of that year. Adverse development, which amounted to 18%, 4% and 4% of beginning of year net loss reserves in 2002, 2001 and 2000, respectively, was primarily encountered at GE Global Insurance Holding ERC),

where we experienced a shift from property to liability insurance losses. In 2000, ERC experienced its share of an increase in industry-wide loss estimates related to certain large property loss events, the largest of which resulted from the European windstorms of December 1999. In 2001, we began to identify an acceleration of reported claims activity in certain liability-related cover-ages-specifically, hospital liability, non-standard auto (automobile insurance extended to higher-risk drivers) and commercial and public entity general liability lines of busi-ness-and recognized the increase in projected ultimate losses. During 2002, reported claims activity accelerated dramatically, affecting much of our liability-related insur-ance written in 1997 through 2001. In connection with our normal actuarial updates, we adjusted our best estimate of ultimate losses to reflect our experience, increasing recorded reserves by $2.5 billion in the fourth quarter of 2002, for a total of $3.5 billion adverse development in ERC for the year. Our Mortgage Insurance business expe-rienced favorable development during this period, reflect-ing continued strength in certain real estate markets and the success of our loss containment initiatives.

GE 2002 ANNUAL REPORT 95

NOTESTO CONSOLIDATED FINANCIAL STATEMENTS Financial guarantees and credit life risk of insurance affiliates are summarized below.

December3111rn millbonsl

)_

___2002 2001 Guarantees, principally on municipal bonds and asset-backed securities

$225,559

$215,874 Mortgage insurance risk in force 101,530 79,892 Credit life insurance risk in force 23,283 24,323 Less reinsurance (38,883)

(41,148)

$312,489

$278,941 Certain insurance affiliates offer insurance guaranteeing the timely payment of scheduled principal and interest on municipal bonds and certain asset-backed securities.

These insurance affiliates also provide insurance to pro-tect residential mortgage lenders from severe financial loss caused by the non-payment of loans and issue credit life insurance designed to pay the balance due on a loan if the borrower dies before the loan is repaid. As part of their overall risk management process, insurance affili-ates cede to third parties a portion of their risk associated with these guarantees. In doing so, they are not relieved of their primary obligation to policyholders.

NOTE 20 ALL OTHER LIABILITIES This caption includes noncurrent compensation and bene-fit accruals at year-end 2002 and 2001 of $8,826 million and $8,745 million, respectively. Also included are amounts for deferred income, interest on tax liabilities, product warranties and a variety of sundry items.

We are involved in numerous remediation actions to clean up hazardous wastes as required by federal and state laws. Liabilities for remediation costs at each site are based on our best estimate of undiscounted future costs, excluding possible insurance recoveries. When there appears to be a range of possible costs with equal likelihood, liabilities are based on the lower end of such range. Uncertainties about the status of laws, regula-tions, technology and information related to individual sites make it difficult to develop a meaningful estimate of the reasonably possible aggregate environmental remedi-ation exposure. However, even in the unlikely event that remediation costs amounted to the high end of the range of costs for each site, the resulting additional liability would not be material to our financial position, results of operations or liquidity.

NOTE 21 DEFERRED INCOMETAXES Aggregate deferred income tax amounts are summarized below.

December31 in millions) 2002 2001 ASSETS GE

$,817

$ 6,416 GECS 7,584 8,585 14,401 15,001 UABILITIES GE 8,744 7,429 GECS 18,174 16,702 28,918 24,131 NET DEFERRED INCOMETAX UABILTY

$12,517

$ 9,130 Principal components of our net liability/(asset) represent-ing deferred income tax balances are as follows:

December31 0In millionsl 2002 2001

...... I.....,..

GE Provisions for expenses lal

$ (4,693)

$(4,432)

Retiree insurance plans (1,043) 1953)

Prepaid pension asset 5,464 4,809 Depreciation 1,536 932 Other - net 663 657 1,927_

1,013 GECS Financing leases 9,783 9,168 Operating leases 3,627 3,399 Deferred insurance acquisition costs 1,494 1,360 Allowance for losses (1,569)

(2,139)

Derivatives qualifying as hedges (1,252)

(480)

Insurance reserves (1,218)

(1,397)

AMT credit carryforward (597)

(695)

Other - net 342 (1,099) 10,590 8,117 NET DEFERRED INCOME TAX UABILITY

$12,517

$ 9,130

'a' Represents the tax effects of temporary differences related to expense accruals for a wide variety of Items, suCi as employee compensation and benefits, interest on tax liabilities, product warranties and other sundry items that are not currently deductible.

96 GE 2002 ANNUAL REPORT

NOTE 22 GECS MINORITY INTEREST IN EQUITY OF CONSOLIDATED AFFILIATES Minority interest in equity of consolidated GECS affiliates includes preferred stock issued by GE Capital and by affili-ates of GE Capital. The preferred stock primarily pays cumulative dividends at variable rates. Value of the pre-ferred shares is summarized below.

December 31 (in millions) 2002 2001

_ ~~~~~~.....

GE Capital

$2,600

$2,600 GE Capital affiliates 1,588 1,446 Dividend rates in local currency on the preferred stock ranged from 1.44% to 6.20% during 2002 and from 1.62% to 6.40% during 2001.

NOTE 23 RESTRICTED NET ASSETS OF GECS AFFILIATES Certain GECS consolidated affiliates are restricted from remitting funds to GECS in the form of dividends or loans by a variety of regulations, the purpose of which is to pro-tect affected insurance policyholders, depositors or investors. At year-end 2002, net assets of regulated GECS affiliates amounted to $43.7 billion, of which

$378 billion was restricted.

At December 31, 2002 and 2001, the aggregate statutory capital and surplus of the insurance businesses totaled $179 billion and $177 billion, respectively. Account-ing practices prescribed by statutory authorities are used in preparing statutory statements.

NOTE 24 SHARE OWNERS' EQUITY (in millions) 2002 2001 2000 COMMON STOCK ISSUED S

669 669 669 ACCUMULATED NONOWNER CHANGES OTHER THAN EARNINGS Balance at January 1

$(4,3231 (2,5001 S

(7441 Cumulative effect of adopting SFAS 133 -net of deferred taxes of $4513)

(827)

Investment securities - net of deferred taxes of $805,

$111 and $68618) 1,555 203 1,363 Currency translation adjustments - net of deferred taxes of $20, $48 and $(312) 1,000 (562)

(1,204)

Derivatives qualifying as hedges - net of deferred taxes of $4822) and $(505) 12,070) 1690)

Reclassification adjustments -

Investment securities -net of deferred taxes of $4135),

$4274) and $11,031)

(252)

(509)

(1,915)

Derivatives qualifying as hedges - net of deferred taxes of $207 and $397 913 662 Balance at December 31 Sf3,177)

$(4,323)

S(2,500)

OTHER CAPITAL Balance at January 1

$16,693

$15,195

$10,790 Gains on treasury stock dispositionslb) 595 1,498 4,480 Adjustment for stock split (75)

Balance at December 31

$17,288

$16,693

$15,195 RETAINED EARNINGS Balance at January 1

$68,701

$61,572

$54,484 Net earnings 14,118 13,684 12,735 Dividends b)

(7,266)

(6,555)

(5,647)

Balance at December 31

$75,553

$68,701

$61,572 COMMON STOCK HELD IN TREASURY Balance at January 1

$26,916

$24,444

$22,567 Purchases(b) 2,851 4,708 5,342 Dispositions b' (3,140)

(2,236 (3,465)

Balance at December 31

$26,627

$26,916

$24,444

b. For 2002, this category indudes $751 million, net of deferred taxes of

$#42) million, for minimum pension liability on certain pension plans other than the principal plans.

(blTotal dividends and other transactions with share owners reduced equity by S6,382 million, $7529 million and $3,044 million In 2002, 2001 and 2000 respectively.

GE 2002 ANNUAL REPORT 97

NOTESTO CONSOLIDATED FINANCIAL STATEMENTS In December 2001, our Board of Directors increased the authorization to repurchase GE common stock to $30 billion. Funds used for the share repurchase will be generated largely from free cash flow. Through year-end 2002. 1,091 million shares having an aggregate cost of approximately $22.7 billion had been repurchased under this program and placed in treasury.

Common shares issued and outstanding are summa-rized in the following table.

SHARES OF GE COMMON STOCK December31 (In thousands) 2002 2001 2000

,_,~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~..

Issued 11,145,212 11,145,212 11,145,212 In treasury (1,175,318) 11,219,274)

(1,213,206)

Outstanding 9,969,894 9,925,938 9,932,006 GE has 50 million authorized shares of preferred stock

($1.00 par value), but had not issued any such shares as of December 31, 2002.

The effects of translating to U.S. dollars the financial statements of non-U.S. affiliates whose functional cur-rency is the local currency are included in share owners' equity. Asset and liability accounts are translated at year-end exchange rates, while revenues and expenses are translated at average rates for the period.

NOTE 25 OTHER STOCK-RELATED INFORMATION We grant stock options, stock appreciation rights SARs) and restricted stock units RSUs) to employees under the 1990 Long-Term Incentive Plan as described in our cur-rent Proxy Statement. In addition, we grant options and RSUs in limited circumstances to consultants, advisors and independent contractors (primarily non-employee talent at NBC) under a plan approved by our Board of Directors in 1997 the consultants' plan). Through the end of 2002, we also granted options to non-employee directors under two separate option plans. With certain restrictions, requirements for stock option shares may be met from either unissued or treasury shares. RSUs give the recipients the right to receive shares of our stock upon the lapse of their related restrictions. In the past, restrictions on most RSUs lapsed for 25% of the total shares awarded after three years, 25% after seven years, and 50% at retirement. We changed the vesting schedule for RSUs granted in 2002 so that 25% of the restrictions lapse after three, five and ten years, with the final 25%

lapsing at retirement. Although the plan permits us to issue RSUs settleable in cash, we have only issued RSUs settleable in shares of our stock.

All grants of GE options under all plans must be approved by the Management Development and Compensation Committee, which comprises entirely outside directors.

Stock options expire 10 years from the date they are granted; options vest over service periods that range from one to five years.

STOCK OPTION ACTIVITY Shares Average per shar subject ExercIse Market (Shares In thousands) to option price price

~~~~~~~~~~~........

Balance at December 31, 1999 341,374

$16.01

$51.58 Options granted 46,278 47.84 47.84 Options exercised (u,758) 8.82 53.00 Options terminated (9,715) 2&47 Balance at December 31, 2000 333,179 21.03 47.94 Options granted 60,946 41.15 41.15 Options exercised (31,801) 10.04 43.95 Options terminated (7,8711 39.02 Balance at December 31, 2001 354,453 25.08 40.08 Options granted 46,928 27.37 27.30 Options exercised (29,146) 9.45 31.88 Options terminated (10,177) 38.14 Balance at December 31, 2002 362,058

$26.26

$24.35 STOCK COMPENSATION PLANS Weighted Securities Securities aerage available for December 31 to be issued exerci" future (Shares n thousanids)

__upon_exercise pri co issuance APPROVED BY SHARE OWNERS Options 360,884

$26.27 (a)

RSUs 28,488 (bl lal NOT APPROVED BY SHARE OWNERS Options 1,194 24.35 kl RSUs 3,761 Ib) 1c Totalidi 394,307

$26.26 130,803 1.1 Under the 1990 Long-Term Incentive Plan, 0.95% of GE issued common stock (including treasury shares) as of the first day of each calendar year during which the plan is In effect becomes available for awards In that calendar year. Total shares available for future issuance under the 1990 Long-Term Incentive Plan amounted to 106.9 million shares.

Ib) Not applicable.

(cITotal shares available for future issuance under the consutants' plan amounted to 24.9 million shares.

(d) In connection with various acquisitlons, there are an additlonal 2.0 million options outstanding, with a weighted average exercise price of $21.3.

98 GE 2002 ANNUAL REPORT

Outstanding options and SARs expire on various dates through December 12, 2012. Restricted stock grants vest on various dates up to retirement of arantees.

The following table summa stock options outstanding at C STOCK OPTIONS OUTSTANDING (Shares In thousands)

Outstand Average Exercise price range Shares life

$ 6.39-8.51 61,926 1.1 8.58 -14.73 70,357 3.0 15.83-27.05 88,577 7.4 27.20 -41.35 63,136 7.3 42.33-57.31 78,062 8.0 Total 362,058 5.6 At year-end 2001, options with an ever exercisable on 209 million shares; at y average exercise price of $11.35 were a Ia) Average contractual life remaining OPTION VALUE INFORMATION c'I (in dollars)

Fair value per option Ibl Valuation assumptions Expected option term Cyrs)

Expected volatility Expected dividend yield Risk-free interest rate NOTE 26 SUPPLEMENTAL CASH FLOWS INFORMATION arizes information about Changes in operating assets and liabilities are net of December 31, 2002.

acquisitions and dispositions of principal businesses.

"Payments for principal businesses purchased" in the Statement of Cash Flows is net of cash acquired ling Exercisable and includes debt assumed and immediately repaid Average Average in acquisitions.

exercse exercise

'Al other operating activities" in the Statement of a) price Shares price Al op

$ 815 61926

$ 815 Cash Flows consists primarily of adjustments to current D

11.70 70,352 11.70 and noncurrent accruals and deferrals of costs and 25.58 38,240 23.77 expenses, adjustments for gains and losses on assets, 3

36.89 24,876 37.55 increases and decreases in assets held for sale, and I

45.95 18,980 44.76 adjustments to assets.

$26.26 214,374

$18.75 Noncash transactions include the following: in 2002, the acquisitions of Interlogix, Inc. for GE common stock age exercise price of $14.73 were valued at $395 million and the acquisition of Bravo for ear-end 2000, options with an xercisable on 205 million shares.

GE common stock and other investment securities valued i years.

at $335 million and $886 million, respectively; in 2001, the acquisition of Imatron Inc. for GE common stock val-ued at $205 million; and in 2000, the acquisition of 2002 _

2001___

_ 2000 Harmon Industries for shares of GE common stock S7.73

$12.15

$15.76 valued at $346 million.

6.0 33.7%

2.7%

3.5%

6.0 30.5%

1.6%

4.9%

6.4 27.1%

1.2%

6.4%

(0) Weighted averages of option grants during each period.

(b) Estimated using lack-Scholes option pricing model.

GE 2002 ANNUAL REPORT 99

NOTESTO CONSOLIDATED FINANCIAL STATEMENTS Certain supplemental information related to GE and GECS cash flows is shown below.

For the years ended December31 (In millions) 2002 2001 2000 GE PURCHASES AND SALES OF GE SHARES FOR TREASURY Open market purchases under share repurchase program

$ (1,981)

S 13,137)

$ (2,226)

Other purchases (870)

(1,571)

(3,116)

Dispositions (mainly to employee and dividend reinvestment plans) 1,868 2,273 5,811 (985)

$ (2,435) 469 GECS FINANCING RECEIVABLES Increase in loans to customers S(209,431)

S(139,7931

$(100,938)

Principal collections from customers-loans 185,329 120,334 87,432 Investment in equipment for financing leases (20,588)

(21,280)

(15,454)

Principal collections from customers-financing leases 18,202 12,311 7,873 Net change in credit card receivables (19,108)

(14,815)

(9,394)

Sales of financing receivables 29,651 29,291 14,405

$(17,945)

$ (13,952)

$ 116,076)

ALL OTHER INVESTING ACTIVITIES Purchases of securities by insurance and annuity businesses

$ (64,721)

S (53,452)

$ (35,911)

Dispositions and maturities of securities by insurance and annuity businesses 54,423 45,403 25,960 Proceeds from principal business dispositions 2,572 (605)

Other (4,915)

(2,274\\

(1,617)

$ (15,213)

$ (7.751)

$ (12,173)

NEWLY ISSUED DEBT HAVING MATURITIES LONGER THAN 90 DAYS Short-term (91 to 365 days)

S 1,796

$ 12,622

$ 12,782 Long-term (longer than one year) 93,026 16.118 32,297 Proceeds - nonrecourse, leveraged lease debt 1,222 2,012 1,808

$ 96,044

$ 30.752

$ 46,887 REPAYMENTS AND OTHER REDUCTIONS OF DEBT HAVING MATURITIES LONGER THAN 90 DAYS Short-term (91 to 365 days)

$ (32,950)

$ (29,195)

$ (27,777)

Long-term (longer than one year)

(5,938)

(6,582)

(3,953)

Principal payments-nonrecourse, leveraged lease debt (339)

(274)

(177)

$ (39,225)

$ (36,051)

$ (31,907)

ALL OTHER FINANCING ACTIVITIES Proceeds from sales of investment contracts

$ 7,894 S

9,080

$ 8,826 Redemption of investment contracts (6,834)

(7,033)

(9,061)

Capital contributions from GE 6,300 3,043 Cash received upon assumption of insurance liabilities 2,813 13,177

$ 10,173 S

5,090

$ 12,942 100 GE 2002 ANNUAL REPORT

NOTE 27 OPERATING SEGMENTS REVENUES Total revenues Interegment revenues External revenues For the years ended December 31 (In millionel 2002 2001 2000 2002 2001 2000 2002 2001 2000 Aircraft Engines

$ 11,141 S 11,389 $ 10,779

$ 1,018

$ 1,282

$ 687

$ 10,123 $ 10,107 $ 10,092 Commercial Finance 16,040 13,880 11,982 65 37 77 15,985 13,843 11,905 Consumer Finance 10,266 9,508 9,320 12 12 4

10,254 9,496 9,316 Consumer Products 8,456 8,435 8,717 89 89 103 8,367 8,346 8,614 Equipment Management 4,254 4,401 4,969 83 90 24 4,171 4,311 4,945 Industrial Products and Systems 9,755 9,097 8,891 879 838 627 8,876 8,259 8,264 Insurance 23,296 23,890 24,766 2

13 2

23,294 23,877 24,764 Materials 7,651 7,069 8,020 25 21 46 7,626 7,048 7,974 NBC 7,149 5,769 6,797 7,149 5,769 6,797 Power Systems 22,926 20,211 14,861 192 152 14 22,734 20,059 14,717 Technical Products and Services 9,266 9,011 7,915 18 21 19 9,248 8,990 7,896 All Other GECS 4,331 6,674 15,140 (152)

(152)

(107) 4,483 6,826 15,247 Corporate items and eliminations (2,833)

(3,421)

(2,304)

(2,221)

(2,403)

(1,626)

(612)

(1,018)

(678)

CONSOLIDATED REVENUES

$131,698 $125,913 $129,853 S

$131,698 $125,913 $129,853 Revenues of GE businesses include income from sales of goods and services to customers and other income. Sales from one company component to another generally are priced at equivalent commercial selling prices.

Revenues originating from operations based in the Revenues originating from operations based outside the United States were $90,954 million, $85,999 million United States were $40,744 million, $39,914 million and and $87,463 million in 2002, 2001 and 2000, respectively.

$42,390 million in 2002, 2001 and 2000, respectively.

Property, plant and equipment additions (Including equipment leased to othereiial Depreciation and amortization At December 31 For te years ended December 31 For the years ended December 31 (in millions) 2002 2001 2000 2002 2001 2000 2002 2001 2000 Aircraft Engines

$ 10,326 $ 9,972 $ 10,006

$ 304

$ 402

$ 416

$ 310

$ 313

$ 286 Commercial Finance 195,766 171,255 123,662 7,452 8,829 5,720 2,040 1,452 1,160 Consumer Finance 76,965 62,978 57,018 221 195 184 232 178 289 Consumer Products 5,165 5,366 4,963 266 390 351 364 332 304 Equipment Management 26,117 25,410 23,531 1,902 4,282 4,800 1,391 1,473 1,394 Industrial Products and Systems 8,993 6,545 5,647 405 238 357 323 245 228 Insurance 182.297 155.500 144.716 71 37 103 432 502 1.208 Materials NBC Power Systems Technical Products and Services All Other GECS Corporate items and eliminations Ibh 13,414 10,517 10,065 927 10,401 5,572 5,136 252

15,835 13,237 11,759 731 7,575 6,984 6,229 170 8,683 10,341 21,709 1,358 13,707 11,346 12,565 110 814 573 658 64 99 109 774 657 505 557 507 94 77 328 265 213 211 249 210 143 401 627 223 392 579 94 55 158 1,375 1,452 CONSOUDATED TOTALS M $575,244 $495,023 $437,006

$14,169

$16,733

$14,153

$6,994

$7,451

$7,892

'aI Additions to property, plant and equipment include amounts relating to principal businesses purchased.

'I Depreciation and amortization Includes $1,252 million and $1,346 million of goodwill amortization in 2001 and 2000, respectively, and $64 million of unallocated RCA goodwill amortization In 2001 and 2000 that relates to NBC.

Property, plant and equipment associated with operations ated with operations based outside the United States based in the United States were $19,778 million, $18,557 were $27,426 million, $23,583 million and $20,882 million and $19,133 million at year-end 2002, 2001 and million at year-end 2002, 2001 and 2000, respectively.

2000, respectively. Property, plant and equipment associ-GE 2002 ANNUAL REPORT 101 Assets

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Basis for presentation Our operating businesses are organized based on the nature of products and services provided. Certain businesses do not meet the definition of a reportable operating segment and have been aggregated. The Industrial Products and Systems segment consists of Industrial Systems, Transportation Systems and GE Supply. The Materials segment consists of Plastics and Specialty Materials. TheTechnical Products and Services segment consists of Medical Systems and Global eXchange Services, 90% of which was sold in 2002. Segment accounting policies are the same as described in note 1.

A description of our operating segments can be found on pages 108-109 and details of segment profit by operating segment can be found on page 57 of this report.

NOTE 28 DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS Derivatives and Hedging Our global business activities routinely deal with fluctua-tions in interest rates, currency exchange rates and com-modity and other asset prices. We apply strict policies to managing each of these risks, including prohibitions on derivatives trading, derivatives market-making or other speculative activities. These policies require the use of derivative instruments in concert with other techniques to reduce or eliminate these risks.

Cash flow hedges Under SFAS 133, cash flow hedges are hedges that use simple derivatives to offset the variability of expected future cash flows. Variability can appear in floating rate assets, floating rate liabilities or from certain types of forecasted transactions, and can arise from changes in interest rates or currency exchange rates. For example, GECS often borrows at a variable rate of interest to fund our financial services businesses. If Commercial Finance needs the funds to make a floating rate loan, there is no exposure to interest rate changes, and no hedge is necessary. However, if a fixed rate loan is made, we will contractually commit to pay a fixed rate of interest to a counterparty who will pay us a variable rate of interest (an "interest rate swap"). This swap will then be desig-nated as a cash flow hedge of the associated variable rate borrowing. If, as would be expected, the derivative is perfectly effective in offsetting variable interest in the borrowing, changes in its fair value are recorded in a separate component in equity and released to earnings contemporaneously with the earnings effects of the hedged item. Further information about hedge effective-ness is provided on page 103.

We use currency forwards and options to manage exposures to changes in currency exchange rates associ-ated with commercial purchase and sale transactions.

These instruments permit us to eliminate the cash flow variability, in local currency, of costs or selling prices denominated in currencies other than the functional cur-rency. In addition, we use these instruments, along with interest rate and currency swaps, to optimize borrowing costs and investment returns. For example, currency swaps and non-functional currency borrowings together provide lower funding costs than could be achieved by issuing debt directly in a given currency.

At December 31, 2002, amounts related to derivatives qualifying as cash flow hedges amounted to a reduction of equity of $2,112 million, of which $519 million was expected to be transferred to earnings in 2003 along with the earnings effects of the related forecasted trans-actions. In 2002, there were no forecasted transactions that failed to occur. At December 31, 2002, the maximum term of derivative instruments that hedge forecasted transactions was 24 months.

Fair value hedges Under SFAS 133, fair value hedges are hedges that eliminate the risk of changes in the fair values of assets, liabilities and certain types of firm commitments. For example, we will use an interest rate swap in which we receive a fixed rate of interest and pay a variable rate of interest to change the cash flow profile of a fixed rate borrowing to match the variable rate financial asset that it is funding. Changes in fair value of derivatives designated and effective as fair value hedges are recorded in earn-ings and are offset by corresponding changes in the fair value of the hedged item.

We use interest rate swaps, currency swaps and inter-est rate and currency forwards to hedge the effect of inter-est rate and currency exchange rate changes on local and nonfunctional currency denominated fixed rate borrowings and certain types of fixed rate assets. Equity options are used to hedge price changes in investment securities and equity-indexed annuity liabilities at Insurance.

Net Investment hedges The net investment hedge designation under SFAS 133 refers to the use of derivative contracts or cash instru-ments to hedge the foreign currency exposure of a net investment in a foreign operation. We manage currency exposures that result from net investments in affiliates principally by funding assets denominated in local cur-rency with debt denominated in that same currency. In certain circumstances, we manage such exposures with currency forwards and currency swaps.

102 GE 2002 ANNUAL REPORT

Derivatives not designated as hedges SFAS 133 specifies criteria that must be met in order to apply any of the three forms of hedge accounting. For example, hedge accounting is not permitted for hedged items that are marked to market through earnings. We use derivatives to hedge exposures when it makes eco-nomic sense to do so, including circumstances in which the hedging relationship does not qualify for hedge accounting as described below. We also will occasionally receive derivatives, such as equity warrants, in the ordi-nary course of business. Under SFAS 133, derivatives that do not qualify for hedge accounting are marked to market through eamings.

We use option contracts, including caps, floors and collars, as an economic hedge of changes in interest rates, currency exchange rates and equity prices on cer-tain types of assets and liabilities. For example, Insurance uses equity options to hedge the risk of changes in equity prices embedded in liabilities associated with annuity contracts it writes. We also use interest rate swaps, pur-chased options and futures as an economic hedge of the fair value of mortgage servicing rights. We occasionally obtain equity warrants as part of sourcing or financing transactions. Although these instruments are considered to be derivatives under SFAS 133, their economic risk is similar to, and managed on the same basis as, other equity instruments we hold.

Eamings effects of derivatives The table that follows provides additional information about the eamings effects of derivatives. In the context of hedging relationships, effectiveness' refers to the degree to which fair value changes in the hedging instru-ment offset the corresponding expected earnings effects of the hedged item. Certain elements of hedge positions cannot qualify for hedge accounting under SFAS 133 whether effective or not, and must therefore be marked to market through earnings. Time value of purchased options is the most common example of such elements in instruments we use. Pre-tax earnings effects of such items are shown in the following table as "amounts excluded from the measure of effectiveness!'

December 31 fIn millions) 2002 2001 CASH FLOW HEDGES Ineffectiveness

$124)

$ 1 Amounts excluded from the measure of effectiveness (1i FAIR VALUE HEDGES Ineffectiveness 3

26 Amounts excluded from the measure of effectiveness 3

(16)

Counterparty credit risk The risk that counterparties to derivative contracts will be financially unable to make payments to us according to the terms of the agreements is counterparty credit risk.

We manage counterparty credit risk on an individual counterparty basis, which means that we net gains and losses for each counterparty to determine the amount at risk. When a counterparty exceeds credit exposure limits in terms of amounts they owe us see table below), typi-cally as a result of changes in market conditions, no addi-tional transactions are permitted to be executed until the exposure with that counterparty is reduced to an amount that is within the established limit. All swaps are required to be executed under master swap agreements contain-ing mutual credit downgrade provisions that provide the ability to require assignment or termination in the event either party is downgraded below A3 or A-. If the down-grade provisions had been triggered at December 31, 2002, we could have been required to disburse up to

$4.0 billion and could have claimed $1.9 billion from coun-terparties-the net fair value losses and gains. At December 31, 2002 and 2001, gross fair value gains amounted to $5.0 billion and $3.3 billion, respectively.

At December 31, 2002 and 2001, gross fair value losses amounted to $7.1 billion and $5.4 billion, respectively.

As part of its ongoing activities, our financial services businesses enter into swaps that are integrated into investments in or loans to particular customers. Such integrated swaps not involving assumption of third-party credit risk are evaluated and monitored like their associ-ated investments or loans and are therefore not subject to the same credit criteria that would apply to a stand-alone position. Except for such positions, all other swaps, purchased options and forwards with contractual maturi-ties longer than one year are conducted within the credit policy constraints provided in the table below. Foreign exchange forwards with contractual maturities shorter than one year must be executed with counterparties having an A-1/ P-1 credit rating and the credit limit for exposures on these transactions is $150 million.

COUNTERPARTY CREDIT CRITERIA Credit rating Moody's S&P Term of transaction Between one and five years Aa3 AA-Greater than five years Aaa AAA Credit exposure limits Up to $50 million Aa3 AA-Up to $75 million Aaa AAA GE 2002 ANNUAL REPORT 103

NOTESTO CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL INSTRUMENTS r)l.b.r 21 In millions Canying Notional amount amount

/nt)

Estimated fair value Hiah L,1w Canying Notional amount amount Inetl GEIO)

Investments and notes receivable Borrowings(IcHd GECSIel Assets Time sales and loans Other commercial and residential mortgages Other financial instruments Liabilities Borrowings l(ci d)(i)

Investment contract benefits Insurance-financial guarantees and credit life'1' Other financial instruments Other firm commitments Ordinary course of business lending commitments Unused revolving credit lines Commercial Consumer-principally credit cards Ib) S 567 567 567 Ib)

(9,756)

(9,816)

(9,816) fbI 138,695 141,784 138,834 tbs 8,093 8,504 8,417 ib 6,702 6,772 8,834 IbI (270,347) (286,824 (273,717 Ibl 137,814)

(37,731)

(37,312) 312,489 (3,814)

(3,475) 13,564)

Ib)

(369)

Ib $

570 568 S 568 (bi (2,509)

(2,509)

(2,509) ibN 115,773 117,159 115,135 ib) 6,505 6,671 6,638 Ib) 4,742 4,806 4,734 Ibl (240,519) (249,516) (240,519)

Ibl (32,427)

(32,192)

(31,815) 278,941 (2,941)

(2,983)

(3,091)

Ibl (629)

(590)

(590) 11,958 10,279 28,525 259,085 27,770 222,929 Iii As a result of the adoption of FIN 45. guarantees within its scope are disclosed within notes 29 and 30.

lb'lThese financial nstruments do not have notional amounts.

Icd Includes effects of Interest rate and currency swaps.

id) See note 18.

let See note 19.

mf) Estimated fair values In 2001 have been re-evaluated consistent with our current methodology.

Assets and liabilities that are reflected in the accompany-ing financial statements at fair value are not included in the following disclosures; such items include cash and equivalents, investment securities, separate accounts and derivative financial instruments. Other assets and liabilities-those not carried at fair value-are discussed below. 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 models. Although we have made every effort to develop the fairest representation of fair value for this section, it would be unusual if the esti-mates could actually have been realized at December 31, 2002 or 2001.

A description of how we estimate fair values follows.

Time sales and loans Based on quoted market prices, recent transactions and/or discounted future cash flows, using rates at which similar loans would have been made to similar borrowers.

Borrowings Based on market quotes or comparables.

Investment contract benefits Based on expected future cash flows, discounted at currently offered discount rates for immediate annuity contracts or cash surrender values for single premium deferred annuities.

Financial guarantees and credit life Based on expected future cash flows, considering expected renewal premiums, claims, refunds and servicing costs, discounted at a current market rate.

All other instruments Based on comparable market transactions, discounted future cash flows, quoted market prices, and/or estimates of the cost to terminate or otherwise settle obligations.

Unused credit lines and lending commitments at December 31, 2002, were as follows:

Fixed Variable i

.n millions) rate rate Total Ordinary course of business lending commitments 842

$ 11,114 S 11,956 Unused revolving credit lines Commercial 8,879 19,648 28,525 Consumer-principally credit cards 136,249 12Z,836 259,085 104 GE 2002 ANNUAL REPORT 2002 Asset (liabilities) 2001 Aast (labilities)

Estimated fair value Hiah Low

NOTE 29 NON-CONTROLLED ENTITIES SPECIAL PURPOSE ENTITIES SPEsI are sponsored and used by GE in the ordinary course of business, most com-monly for asset securitization. The typical transaction involves our sale of high-quality, financial assets to highly-rated entities financed with commercial paper. Often, we provide credit support for certain of these assets as well as liquidity support for the commercial paper.

The following table summarizes receivables held by SPEs that are sponsored or supported by us.

December 31 in milion) 2002 2001 Receivables - secured by Equipment

$12,215

$12,781 Commercial real estate 11,079 9,971 Other assets 7,769 7,761 Credit card receivables 10,46 9,470 Trade receivables 693 3,028 Total receivables

$42.222

$43,011 GE assets Included in the categories above at year-end 2001 were as follows: Equipment- $31 million; Other assets-$757 million;Trade receivables -

2,39 million. In 2002, we transferred the trade receivables program to a non-sponsored entity and acquired the entire amount classi-fied as equipment receivables and all but $416 million of other assets.

In addition to the activities discussed above, Financial Guaranty Insurance Company (FGIC), a consolidated affiliate in the Insurance segment, uses SPEs that offer municipalities guaranteed investment contracts with interests in high-quality, fixed maturity, investment grade assets. FGIC actively manages these assets under strict investment criteria and we also provide certain perform-ance guarantees. Total assets in sponsored FGIC entities amounted to $13.7 billion and $13.4 billion at December 31, 2002 and 2001, respectively.

A summary of financial support provided to SPEs for the subsequent 12 months follows.

Decmber 31 (in millions) 2002 2001

_ ~~~~~~~~~~~~~~....

Credit and liquiditysb)

$27247

$43,176 Credit and liquiditV-unusedI) 6,034 9,404 Performance guarantees 3,836 3,759 Performance guarantees -unused ic 364 441 Guarantee and reimbursement contracts 2,673 2,456 tat Includes credit support of $16.0 billion and $16.8 billion at December 31, 2002 and 2001, respectively.

lb) Net of participated liquidity of $11.7 billion and arrangements that defer

$1.9 billion of liquidity support to 2004.

Ic Available support conditioned on an Increase of qualified assets In SPEs.

Credit and liquidity support agreements. We have agreed to lend to these entities on a secured basis if (a) certain market conditions render the entities unable to issue new debt instruments, or (b) the credit ratings of debt issued by such entities were reduced below speci-fied levels, Timing of such liquidity support depends on the associated maturities of supported debt. We reduce our exposure to liquidity support agreements by obtaining offsetting support from third-party banks. Such offsetting support amounted to $11.7 billion at December 31, 2002.

We also provide credit support for credit losses on certain assets: full recourse for $97 billion and the remaining

$72 billion based on loss-sharing formulae at December 31, 2002 This support is available for the life of the assets but generally amortizes in proportion to the assets outstanding. Assets with credit support are primarily funded by commercial paper that is subject to the liquid-ity support.

Performance guarantees. We provide both letters of credit and lines of credit for guaranteed investment contracts. The letters of credit may be drawn upon occur-rence of a credit event or a program event of default, which includes a downgrade of the SPE or failure to pay the SPE's secured obligations. The lines of credit enable the SPEs to pay all amounts owed under investment agreements, hedge contracts and distributions on pre-ferred securities.

Guarantee and reimbursement contracts. We provide protection to certain counterparties of interest rate swaps entered into by SPEs related to changes in the relation-ship between commercial paper interest rates and the timing and amount of the payment streams. These arrangements provide protection for the life of the assets held by the SPE but generally amortize in proportion to the assets outstanding. The fair value of the related liability is $26 million at year-end 2002.

We evaluate the economic, liquidity and credit risk related to the above SPEs and support arrangements and believe that the likelihood is remote that any such arrangements could have a significant adverse effect on our financial position, results of operations or liquidity. We record liabilities, as disclosed above, for such guarantees based on our best estimate of probable losses.

Sales of securitized assets to SPEs result in a gain or loss amounting to the net of sales proceeds, the carrying amount of net assets sold, the fair value of servicing rights and retained interests and an allowance for losses.

Amounts recognized in our financial statements related to sales to sponsored or supported SPEs are as follows:

December31 n millions) 2002 2001 Retained interests-assets

$2,195

$2,183 Servicing assets 54 202 Recourse liability (233)

(757)

Total

$2,016

$1,628 GE 2002 ANNUAL REPORT 105

NOTESTO CONSOLIDATED FINANCIAL STATEMENTS

Retained interests. When we securitize receivables, we are required to recognize our retained interests, which represent our rights to expected net future cash flows, at their fair value. Retained interests generally approximate the gain recognized, and are sometimes subject to credit, prepayment and interest rate risks.

Servicing assets. Following a securitization transaction, we retain the responsibility for servicing the receivables, and, as such, are entitled to receive an ongoing fee based on the outstanding principal balances of the receivables.

Servicing assets are primarily associated with residential mortgage loans. Their value is subject to credit, prepay-ment and interest rate risk.

Recourse liability. As described previously, under credit support agreements we provide recourse for credit losses in SPEs. We provide for expected credit losses under these agreements and such amounts approximate fair value.

Amounts in the table on page 105 relate to SPEs that are sponsored or supported by us; amounts related to other securitizations totaled $1,346 million and $1,345 million at December 31, 2002 and 2001, respectively.

OTHER NON-CONTROLLED ENTITIES. We also have certain investments in associated companies for which we pro-vide varying degrees of financial support and are entitled to a share in the results of the entities' activities. While all of these entities are substantive operating companies, some may need to be evaluated for potential consolida-tion under FIN 46. The types of support we typically provide to these entities consist of credit enhancement, such as debt guarantees, take-or-pay contracts that provide for minimum purchase commitments, and other contractual arrangements.

NOTE 30 COMMITMENTS AND PRODUCT WARRANTIES Commitments In our Aircraft Engines business, we have committed to provide financial assistance on future sales of aircraft equipped with our engines, totaling $1.6 billion at year-end 2002. In addition, our Commercial Finance business had placed multi-year orders for various Boeing, Airbus and other aircraft with list prices approximating $15.4 billion at year-end 2002.

At year-end 2002, we were committed under the fol-lowing guarantee arrangements beyond those provided on behalf of SPEs (see note 29):

Liquidity support. Liquidity support provided to holders of certain variable rate bonds issued by municipalities amounted to $4.8 billion at December 31, 2002. If holders elect to sell supported bonds that cannot be remarketed, we are obligated to repurchase them at par. If called upon, our position would be secured by the repurchased bonds. While we hold any such bonds, we would receive interest payments from the municipalities at a rate that is in excess of the stated rate on the bond. To date, we have not been required to perform under such arrangements.

Credit support. We have provided $4.2 billion of credit support on behalf of certain customers or associated companies, predominantly joint ventures and partnerships, using arrangements such as standby letters of credit and performance guarantees. These arrangements enable our customers and associated companies to execute transac-tions or obtain desired financing arrangements with third parties. Should the customer or associated company fail to perform under the terms of the transaction or financing 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 financed but possibly by total assets of the customer or associated company. The length of these credit support arrangements parallels the length of the related financing arrangements or transactions. The liability for such credit support was $51 million at December 31, 2002.

Indemnification agreements. These are agreements that require us to fund up to $1.3 billion under residual value guarantees on a variety of leased equipment and $0.2 billion of other indemnification commitments arising from sales of businesses or assets. Under most of our residual value guarantees, our commitment is secured by the leased asset at termination of the lease. The liability for indemnification agreements was $64 million at December 31, 2002.

Contingent consideration. These are agreements to pro-vide additional consideration in a business combination to the seller if contractually specified conditions related to the acquired entity are achieved. At December 31, 2002, we had recognized liabilities for estimated payments amounting to $72 million of our exposure of $0.3 billion.

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 significant adverse effect on our financial position, results of operations or liquidity.

We record liabilities, as disclosed above, for such guaran-tees based on our best estimate of probable losses, which considers amounts recoverable under recourse provisions. For example, at year-end 2002, the total fair value of aircraft securing our airline industry guaran-tees exceeded the guaranteed amounts, net of the associated allowance for losses.

106 GE 2002 ANNUAL REPORT

Product warranties We provide for estimated product warranty expenses when we sell the related products. Because warranty estimates are forecasts that are based on the best available information-mostly historical claims experi-ence-claims costs may differ from amounts provided.

An analysis of changes in the liability for product war-ranties follows.

(in millions) 2002 200n 2000 Balance at January 1

$ 968

$ 767

$ 719 Current year provisions S18 841 564 Expenditures(')

(694)

(658)

{557)

Other changesib) 112-18 41 Balance at December 31

$1,304

$ 968

$ 767 is) Primarily related to Power SVstems.

Ib) Primarily related to acquisitions at Power Systems.

NOTE 31 QUARTERLY INFORMATION (UNAUDITED)

(Dollar amounts in millions; FIrst quarter Second quarter Third quarter Fourth quarter paehare anounts in dollars) 2002 2001 2002 2001 2002 2001 2002 2001

~~~~~~~~....

CONSOUDATED OPERATIONS Eamings before accounting changes S 3,518

$ 3,017

$ 4,426

$ 3,897

$ 4,087

$ 3,281

$ 3,102

$ 3,933 Cumulative effect of accounting changes (1,015)

(444)

Net earnings 2,503 2,573 4,426 3,897 4,087 3,281 3,102 3,933 Per-share amounts before accounting changes Diluted earnings per share

$ 0.35

$ 0.30

$ 0.44 S 0.39

$ 0.41

$ 0.33

$ 0.31

$ 0.39 Basic eamings per share 0.35 0.30 0.45 0.39 0.41 0.33 0.31 0.40 Per-share amounts after accounting changes Diluted eamings per share 0.25 0.26 0.44 0.39 0.41 0.33 0.31 0.39 Basic earnings per share 0.25 0.26 0.45 0.39 0.41 0.33 0.31 0.40 SELECTED DATA GE Sales of goods and services 16,748 15,850 19,459 17,588 17,386 16,359 19,724 18,221 Gross profit from sales 6,067 4,960 6,319 5,677 5,702 5,245 6,033 6,069 GECS Total revenues 13,899 14,723 13,852 14,399 14,981 13,298 15,455 15,933 Earnings before accounting changes 1,657 1,401 1,327 1,477 1,651 1,301 91 1,407 For GE. gross profit from sales is sales of goods and services less costs of goods and services sold.

Fourth quarter earnings in 2002 included an after-tax charge of $1,386 million ($0.14 per share) to record adverse development in the Insurance segment.

GE 2002 ANNUAL REPORT 107

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OUR BUSINESSES A description of operating segments for General Electric Company and consolidated affiliates follows.

Aircraft Engines Jet engines and replacement parts and repair and mainte-nance services for all categories of commercial aircraft (short/medium, intermediate and long-range); for a wide variety of military aircraft, including fighters, bombers, tankers and helicopters; and for executive and commuter aircraft. Products and services are sold worldwide to air-frame manufacturers, airlines and government agencies.

Also includes aircraft engine derivatives, used as marine propulsion and industrial power sources; the latter is also reported in Power Systems.

Commercial Finance Loans, financing and operating leases, and other services for customers, including manufacturers, distributors and end-users, for a variety of equipment and major capital assets including industrial facilities and equipment, energy-related facilities, commercial and residential real estate loans and investments, vehicles, aircraft, and equipment used in construction, manufacturing, data processing and office applications, electronics and telecommunications, and healthcare.

Consumer Finance Private-label credit card loans, personal loans, time sales and revolving credit, residential mortgage financing and inventory financing for retail merchants, and auto leasing and inventory financing.

Consumer Products Major appliances and related services for products such as refrigerators, freezers, electric and gas ranges, cooktops, dishwashers, clothes washers and dryers, microwave ovens, room air conditioners and residential water system products. Products and services are sold in North America and in global markets under various GE and private-label brands. Distributed to both retail outlets and direct to consumers, mainly for the replacement market, and to building contractors and distributors for new installations. Lighting products include a wide variety of lamps, lighting fixtures and wiring devices.

Equipment Management Leases, loans, sales and asset management services for portfolios of commercial and transportation equipment, including tractors, trailers, auto fleets, railroad rolling stock, intermodal shipping containers and modular space units.

Industrial Products and Systems Electrical distribution and control equipment (including power delivery and control products such as transformers, meters, relays, capacitors and arresters); measurement and sensing equipment (products and subsystems for sensing temperatures, humidity and pressure); security equipment and systems (including card access systems, video and sensor monitoring equipment and integrated facility monitoring systems); transportation systems products and maintenance services (including diesel and electric locomotives, transit propulsion equipment motorized wheels for off-highway vehicles, and railway signaling communications systems); electric motors and related products; a broad range of electrical and electronic industrial automation products (including drive systems); installation, engineering and repair services, which includes management and technical expertise for large projects such as process control systems; and GE Supply, a network of electrical supply houses. Markets are extremely diverse. Products and services are sold to commercial and industrial end users, including utilities, to original equipment manufacturers, to electrical distributors, to retail outlets, to railways and to transit authorities. Increasingly, products and services are developed for and sold in global markets.

Insurance U.S. and intemational multiple-line property and casualty reinsurance, certain directly written specialty insurance and life reinsurance, consumer investment, insurance and retirement services, financial guaranty insurance, princi-pally on municipal bonds and asset-backed securities, and private mortgage insurance.

Materials High-performance engineered plastics used in applica-tions such as automobiles and housings for computers and other business equipment; ABS resins; silicones; superabrasive industrial diamonds; quartz products; and laminates. Also includes engineered specialty chemical treatment programs for water and process systems in industrial, commercial and institutional facilities worldwide. Products and services are sold worldwide to a diverse customer base consisting mainly of manufacturers.

NBC Principal businesses are the furnishing of U.S. network television services to more than 220 affiliated stations, production of television programs, operation of 28 VHF and UHF television broadcasting stations, operation of four cable/satellite networks around the world, and investment and programming activities in the Internet, multimedia and cable television.

108 GE 2002 ANNUAL REPORT

Power Systems Power plant products and services, including design, installation, operation and maintenance services sold into global markets. Gas turbines, steam turbines, generators and related services including total asset optimization solutions and equipment upgrades are sold to power gen-eration and other industrial customers. Renewable energy solutions including wind turbines and hydro.

Advanced turbomachinery products and related services for the oil and gas market, also including total pipeline integrity solutions. Substation automation and network solutions sold to power transmission and distribution customers. Also includes portable and rental power plants, nuclear reactors, fuel and nuclear support services.

Technical Products and Services Medical imaging systems such as magnetic resonance (MR) and computed tomography (CT) scanners, x-ray, nuclear imaging and ultrasound, as well as diagnostic car-diology and patient monitoring devices; related services, including equipment monitoring and repair, computerized data management and customer productivity services.

Products and services are sold worldwide to hospitals and medical facilities. A full range of computer-based information and data interchange services for both internal and external use to commercial and industrial customers was included through September 2002, when we sold this business.

All Other GECS GECS activities and businesses that we have chosen not to allocate to one of the four GECS segments, including IT Solutions, GE Auto & Home, GE Equity, AFS, Americom, Wards and other asset impairments and product line exits.

GE 2002 ANNUAL REPORT 109

BACKLOG Unfilled customer orders for products and services.

BORROWING Financial liability (short or long-term) that obliges us to repay cash or another financial asset to another entity.

CASH EQUIVALENTS Highly liquid debt instruments with matu-rities of less than three months, such as commercial paper.

Typically included with cash for reporting purposes, unless designated as available for sale and included with investment securities.

CASH FLOW HEDGES Qualifying derivative instruments that we use to protect ourselves against exposure to volatility in future cash flows. 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 specified period ranging from overnight to 270 days.

CUSTOMER SERVICE AGREEMENTS (also referred to as 'product services agreements") Contractual commitments to provide specified services for products in our industrial installed base-for example, monitoring, maintenance, overhaul and spare parts for a gas turbine/generator set installed in a cus-tomer's power plant.

DERIVATIVE INSTRUMENT A financial instrument or contract with another party ("counterparty") that is structured to meet any of a variety of financial objectives, including those related to fluctuations in interest rates, currency exchange rates and commodity prices. Options, forwards and swaps are the most common derivative instruments we employ.

See "Hedge!'

DIRECT WRITTEN PREMIUMS Amounts charged to insureds in exchange for coverages provided in accordance with the terms of an insurance/reinsurance contract.

EARNED PREMIUMS Prtion of the premium pertaining to the segment of the policy period for which insurance coverage has been provided.

EFFECTIVE TAX RATE Provision for income taxes as a percent-age of earnings before income taxes and accounting changes. Does not represent cash paid for income taxes in the current accounting period.

EQUIPMENT LEASED TO OTHERS ELTO) 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 protect ourselves against exposure to volatility in values of hedged assets, liabilities or certain types of firm commitments. Changes in the fair values of derivative instru-ments 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.'

FINANCIAL LEVERAGE The relationship of debt to equity.

Expressed for financial services businesses as borrowings divided by equity. Expressed for industrial businesses as borrowings divided by total capital.

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 specified quantity of a commodity, security, currency or other financial instrument with delivery and settlement at a specified 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 identified tangible and intangible assets, less liabilities assumed).

GUARANTEED INVESTMENT CONT'RACTS GICS) (including funding agreements) Deposit-type products that provide a stated interest rate on funds deposited with the insurer for a stated period. These products are generally purchased by Employee Retirement Income Security Act of 1974 (ERISA) qualified defined contribution plans and institutional accredited investors.

HEDGE A technique designed to reduce or eliminate risk.

Often refers to the use of derivative financial 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. fixed rate investment with U.S. fixed rate borrowings is a natural interest rate hedge.

INSURANCE RECEIVABLES Receivables of our insurance busi-nesses associated with (1) reinsurance agreements in which those businesses legally transferred (ceded) insurance losses (and related premiums) to reinsurers and are entitled to recovery of those insurance losses; (2) premiums on insur-ance and reinsurance contracts; (3) policy loans to policyhold-ers of certain life insurance contracts; and (4) premium funds on deposit with reinsurance customers as collateral for our obligations as a reinsurer.

INTANGIBLE ASSET A non-financial asset lacking physical sub-stance, such as goodwill, patents, trademarks and licenses.

Also includes present value of future profits, which are antici-pated net discounted cash flows to be realized from certain in-force insurance, annuity and investment contracts at the date we acquire a life insurance business.

INTEREST RATE SWAP Agreement under which two counterpar-ties agree to exchange one type of interest rate cash flows for another type of cash flows on specified dates in the future. In a typical arrangement, one party periodically will pay a fixed amount of interest, in exchange for which that party will receive variable payments computed using a pub-lished index. See "Hedge' 110 GE 2002 ANNUAL REPORT GLOSSARY

INVESTMENT SECURITIES Generally, an instrument that pro-vides an ownership position in a corporation (a stock), a credi-tor relationship with a corporation or governmental body (a bond), or rights to ownership such as those represented by options, subscription rights and subscription warrants.

MONETIZATION Sale of financial assets to a third party for cash. For example, we sell certain loans, credit card receiv-ables and trade receivables to third-party financial buyers, typically providing at least some credit protection and often agreeing to provide collection and processing services for a fee. Monetization of interest-bearing assets such as loans normally results in gains; monetization of non-interest bear-ing assets such as trade receivables normally results in losses.

NET REVENUES For our lending and leasing businesses, rev-enues from services less interest and other financial charges.

OPERATING MARGIN Sales of goods and services less the sum of cost of goods and services sold plus selling, general and administrative expenses. Operating margin is often expressed as a percentage of sales-the operating margin rate.

OPERATING PROFIT Earnings before interest and other financial charges, income taxes and effects of accounting changes.

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' PREMIUM Rate that is charged under insurance/reinsurance contracts.

PRESENT VALUE OF FUTURE PROFITS See Intangible Asset' PRODUCT SERVICES AGREEMENTS See Customer Service Agreements.'

PRODUCTIVITY The rate of increased output for a given level of input, with both output and input measured in constant cur-rency. A decline in output for a given level of input is "nega-tive" productivity.

PROGRESS COLLECTIONS Payments received from customers as deposits before the associated work is performed or prod-uct is delivered.

REINSURANCE A form of insurance that insurance companies buy for their own protection.

RETROCESSION AGREEMENT Contract to acquire third-party insurance protection for reinsurance policies written.

Retrocession is a risk mitigation technique.

RETURN ON AVERAGE SHARE OWNERS' EQUITY Eamings before accounting changes divided by average total equity (on an annual basis, calculated using a five-point average).

RETURN ON AVERAGE TOTAL CAPITAL INVESTED Eamings before accounting changes plus the sum of after-tax interest and other financial charges and minority interest, divided by the sum of total equity, borrowings and minority interest (on an annual basis, calculated using a five-point average).

SECURITIZATION A process whereby loans or other receivables are packaged, underwritten and sold to investors. In some instances, the assets sold are first transferred to an uncon-solidated SPE. These entities are structured to be bankruptcy remote in order to isolate the credit risk of the assets from the overall credit risk of the selling entity. Outside investors, usually institutions, typically purchase a debt instrument issued by the SPE. Whether or not credit risk associated with the securitized assets is retained by the seller depends on the structure of the securitization. See "Monetization.'

SEPARATE ACCOUNT Investments controlled by policyholders and associated with identical amounts reported as insurance liabilities.

TURNOVER Broadly based on the number of times that working capital is replaced during a year. Accounts receivable turnover is total sales divided by the five-point average balance of customer receivables from sales of goods and services (trade receivables). Inventory turnover is total sales divided by a five-point average balance of inventories. See "Working Capital.'

UNEARNED PREMIUMS Portion of the premium received that relates to future coverage periods.

UNPAID CLAIMS AND CLAIMS ADJUSTMENT EXPENSES Claims reserves for events that have occurred, including both reported and incurred-but-not-reported (IBNR) reserves, and the expenses of settling such claims.

VARIABLE INTEREST ENTITY Entity defined by Financial Accounting Standards Board Interpretation No. 46, and that must be consolidated by its primary beneficiary. A variable interest entity has one or both of the following characteris-tics: 1) its equity at risk is not sufficient to permit the entity to finance its activities without additional subordinated finan-cial support from other parties, or 12) as a group, the equity investors lack one or more of the following characteristics:

(a) direct/indirect ability to make decisions, (b) obligation to absorb expected losses, or c) right to receive expected residual returns.

WORKING CAPITAL Sum of receivables from the sales of goods and services, plus inventories, less trade accounts payable and progress collections.

GE 2002 ANNUAL REPORT 111

CORPORATE MANAGEMENT (As of February 14, 20031 SENIOR EXECUTIVE OFFICERS Jeffrey R. Immeit Chairman of the Board &

Chief Executive Officer Dennis D. Dammerman Vice Chairman of the Board &

Executive Officer, General Electric Company; and Chairman, General Electrc Capital Services, Inc.

Gary L Roger Vice Chairman of the Board &

Executive Officer Roben C. Wright Vice Chairman of the Board &

Executive Officer.

General Electric Company; and Chairman & Chief Executive Officer, National Broadcasting Company, Inc.

SENIOR CORPORATE OFFICERS WiliIam J. Conaty Senior Vice President Human Resources Scott C. Donnelly Senior Vice President, Global Research Yoshiaki Fujimori President &

Chief Executive Officer, GE Asia Benjamin W. Hilneman, Jr.

SeniorVice President.

General Counsel & Secretary RobertA. Jeffe Senior Vice President Corporate Business Development JamesA. Parks Senior Vice President &

Chief Financial Officer. GE Capital Gary M. Renr Senior Vice President &

Chief Information Officer Keith S. Sherin SeniorVice President, Finance & Chief Financial Officer CORPORATE STAFF OFFICERS Charles E. Alexander President, GE Capital. Europe Philip D. Ameen Vice President & Comptroller Scott R. Bayman President & Chief Executive Officer, GE India Fardinando Beccalli President & Chief Executive Officer, GE Europe Lynn A. Calpeter Vice President, Audit Staff Willm H. Cary Vice President, Financial Planning & Analysis KathrynA. Casidy Vice President & GETreasurer James A. Colie Vice President, Global Risk Management. GE Capital Elizabeth J. Comstock Vice President.

Corporate Communications Robert L Corcoran Vice President &

Chief Learning Officer Pamela Dey Vice President &

Senior Counsel. Transactions Rlchard D'Avino Vice President &

SeniorTax Counsel, GE Capital Bracket B. Dennlston III Vice President & Senior Counsel, Litigation & Legal Policy Herbert D. Depp Vice President GE Aviation Operations R. Michael Gadbaw Vice President & Senior Counsel.

International Law & Policy Joyce Hergenhan Vice President & President, GE Fund Michael S. Ideichik Vice President, Global Research Center.

GE China Steven F Kiugr President & Chief Executive Officer, Capital Markets Services Mark J. Krrkowhsk Vice President Corporate Risk & Financing William L Meddaugh President &

Chief Executive Officer, GE Supply John R. Myr Chairman & President, GE Asset Management Mark Norbom President &

Chief Executive Officer, GE Japan MarcA. Onetto Vice President, European Operations Stephen MW Parks Vice President Taxes, Europe Susan P Pater Vice President Executive Development Stephen D. Ramsey Vice President, Environmental Programs John M. Samuels Vice President &

Senior Counsel, Taxes Marc J. Saperstain Vice President, Corporate Citizenship J. Jeffrey Schaper Chief Commercial Officer Steven J. Schneidr President &

Chief Executive Officer, GE China Ronald A. Stem Vice President &

Senior Counsel, Antitrust Plot C. van Abeeldn Vice President Six Sigma Quality Richard.Wacker Vce President Corporate Investor Relations OPERATING MANAGEMENT (As of February 14. 2003)

GE AIRCRAFT ENGINES David L Calhoun President &

Chief Executive Officer, GE Aircraft Engines LorraineA. Bolsinger Vice President &

General Manager, Commercial Marketing Corbett D. Caudl Vice President &

General Manager Engineering MarcA ChinI Vice President.

Human Resources Thomas E. Cooper Vice President Washington Operations John J. Falconi Vice President, Finance & Information Technology Russel R Mayr Vice President Information/Technology Daniel C. Heintzalman Vice President &

General Manager, Engine Services ScottA. Emest Vice President &

General Manager, Engine Services Global Services Overhaul David L Joyce Vice President & General Manager, Commercial Engines David L Uoyd, Jr.

Vice President &

General Counsel Kenneth V. Meyer Vice President Business Practices &

Processes Roger N. Seager Vice President.

Commercial Sales Russell R Sparks Vice President &

General Manager, Military Engines Theodore H.Torbeck Vice President &

General Manager, Supply Chain GE COMMERCIAL FINANCE MichaeA. Neal President &

Chief Executive Officer, GE Commercial Finance Carol S. Anderon Vice President, Human Resources Jeffrey S. Somstein Vice President. Finance Paull Bocaidy President &

Chief Executive Officer, Commercial Equipment Financing Michael A. Gaudino President &

Chief Executive Officer, Commercial Finance Daniel S. Hanson President &

Chief Executive Officer, Vendor Financial Services Henry A. Hubschman President &

Chief Executive Officer, Aviation Services Norman Liu Vice President, Commercial Operations Robed L Lewis President &

Chief Executive Officer, Structured Finance Group J. Kelth Morgan Vice President &

General Counsel Michael E. Prall President &

Chief Executive Officer, Real Estate Jeffrey Malehom Chief Executive Officer, Global Financial Restructuring Joseph E. Parsons President, North America Equity Frederick E Wolfert President &

Chief Execubve Officer Healthcare Financial Services GE CONSUMER FINANCE David R. Nissen President & Chief Executive Officer, GE Consumer Finance Ann N. Abays Vice President Human Resources MarkW. Bogor President & CEO, Americas Charies M. Crabtra Vice President &

Chief Operations Officer Dan N. O'Connor President &

Chief Executive Officer, Europe Maive R Scully Vice President Finance TaketoYamakawa President &

Chief Executive Officer, Japan 112 GE 2002 ANNUAL REPORT

OPERATING MANAGEMENT (continued)

GE CONSUMER PRODUCTS James P Campbell President &

Chief Executive Officer, GE Consumer Products John D. Fish Chief Operating Officer, Lighting & Area Executive Gregory L Levinsky Vice President Information Technology Golnar Motaheripour Vice President, Europe Lynn S. Pendergrass Vice President, Sales & Marketing Paul A. Raymont Vice President, Technology Stephen J. Sedita Vice President, Finance Richard F. SegalinI Vice President.

Appliances Supply Chain John M. Sollazzo Vice President, Human Resources GE EQUIPMENT MANAGEMENT Arthur H. Harper President &

Chief Executive Officer, GE Equipment Management Premod Shasin President &

Chief Executive Officer, India Joseph J. DeAngelo President &

Chief Executive Officer, TlP/Modular Space Kathryn V. Marinello President &

Chief Executive Officer, Fleet Services &

Auto Financial Services Glen A. Messina Vice President, Finance John L Oliver President &

Chief Executive Officer, European Equipment Management RobertW Speetzen Vice President, Strategic Initiatives GE INDUSTRIAL SYSTEMS Lloyd G.Tiroter President &

Chief Executive Officer, GE Industrial Systems Ruben C. Berumen President &

Chief Executive Officer, GE Power Controls BYU Jeff R. Garwood President &

Chief Executive Officer, GE Fanuc Automation North America, Inc.

M. Roger Gasaway Vice President Manufacturing MarkT Jamieson Vice President Finance Richard L Poase Vice President Power Control Technologies Lawrence K. Blystone Vice President, Power Equipment Business Michael J. Pilot Vice President, Sales Joseph B. Ruocco Vice President Human Resources Stuart Scott Vice President, Information Technology James S. Shepherd Vice President, GE Sensing Solutions Robert D. Sloan Vice President &

General Counsel GE INSURANCE Michael D. Fralzer President & Chief Executive Officer, GE Insurance K Rone Baldwin Vice President, Strategic Development Thomas H. Mann President &

Chief Executive Officer, Mortgage Insurance Ronald R. Pressman Chairman, President &

Chief Executive Officer, Employers Reinsurance Corporation Marc A. Melches Vice President. Finance A. Louis Parker President &

Chief Executive Officer, Commercial Insurance Richard F. Smith President &

Chief Executive Officer, Property & Casualty Reinsurance Afred J. Stanley Vice President &

General Manager, Global Operations Deborah M. Reif President &

Chief Executive Officer, Financial Guaranty Insurance Company Leon E. Roday Vice President &

General Counsel Pamela S. Schutz President &

Chief Executive Officer, Wealth & Income Management George R. Zippal President &

Chief Executive Officer, Independent Brokerage Group GE MEDICAL SYSTEMS Joseph M. Hogan President &

Chief Executive Officer.

GE Medical Systems Patrick LA. Dupuis Vice President Finance RelnaldoA. Garc President &

Chief Executive Officer, Intemational Chlh Chen President, China Operations S. Omar shrak President &

Chief Executive Officer, Global Ultrasound Mary Elizabeth Klein Vice President, Healthcare Industry Sales GregoryT Lucelr President &

Chief Executive Officer, GE Medical Systems InformationTechnologies John R Lynch Vice President Human Resources Diane P Mellor Vice President, Global Supply Chain Paul J. Mireblila President &

Chief Executive Officer, Americas & Healthcare Services John R Chiminski Vice President, Americas Service Eugene L Saregnese Vice President, Global Technology PeterY Solmssen Vice President &

General Counsel NBC Robert C. Wright Vice Chairman of the Board &

Executive Officer, General Electric Company; and Chairman & Chief Executive Officer, National Broadcasting Company, Inc.

William L Bolster Chairman, CNBC Intemational Richard Cotton President &

Managing Director, CNBC - Europe Dick Ebereol Chairman, NBC Sports &

NBC Olympics Randel A. Falco President, NBC Television Network Brandon Burgess Executive \\Mce President.

Business Development John W. Eck President, NBC Broadcast &

Network Operations H. David Overbeeke Executive Vice President &

Chief Information Officer David M. Zeslov President, NBC Cable JamesW. Ireland III President NBCTelevision Stations Neal B. Shapiro President NBC News Patricia A. Steele Executive Vice President, Communications Pamela A. Thomas-Graham President CNBC Lwence PTu Executive Vice President &

General Counsel Mark LVchon Executive Vice President &

Chief Financial Officer Eileen G. Whelley Executive Vce President Human Resources Jeffrey A. Zucker President, NBC Entertainment James McNanar President & CEO, Telemundo GE PLASTICS John Krenickl, Jr.

President & Chief Executive Officer, GE Plastics WillIam Banholzer Vice President, Global Technology Chades E. Crew President & CEO, LNP Engineering Plastics John M. Dineen Vice President, Global Lexan Brient.Gladden Vice President, Finance Wayne M. Hewett President, GE Plastics Pacific Andre Horbach President, GE Plastics Europe Robert E. Muir Vice President, Human Resources Gerard P Podesta Vice President GE Plastics Americas GaryW. Pritchard Vice President Global Manufacturing GE POWER SYSTEMS John GRice President &

Chief Executive Officer, GE Power Systems Ricardo Artigas Vice President GE Energy Services Candace Creon Vice President. Finance James N. Suclu Vice President, Sales Stephen B. Bransfleld Vice President, Global Supply Chain Management Jon A. Ebacher Vice President Power Systems Technology Mark M. Uttlo President, Energy Products John C. Loomis Vice President Human Resources Happy R. Perkins Vice President &

General Counsel Thomas P Saddlemire Vice President Finance Claudi Santigo President &

Chief Executive Officer, GE Oil & Gas Ranieri DeMarchis Vice President, Finance John M. Sel Vice President Information Technology Richard R. Stewart President, GE Aero Energy Products Andrw C. White President GE Nuclear Delbert LWilliamson President Global Sales JohnT McCrter Vice President, Energy Industry Sales GE SPECIALTY MATERIALS WillmA. Woodbum President &

Chief Executive Officer, GE Specialty Materials William P Driscoli, Jr.

Vice President, GE Silicones Tenye D. Fratto Vice President, GE Superabrasives George R. Oliver Vice President, GE Betz Salvatore R. Piazzolls Vice President, Human Resources MaryroseT Sylester Vice President, GE Quartz, Inc.

GE TRANSPORTATION SYSTEMS CharleneT Begley President &

Chief Executive Officer, GE Transportation Systems GE 2002 ANNUAL REPORT 113

CORPORATE INFORMATION Corporate Headquarters General Electric Company 3135 Easton Tumpike, Fairfield, CT 06828 (203) 373-2211 Annual Meeting General Electric Company's 2003 Annual Meeting of Share Owners will be held on Wednesday, April 23, at the Charlotte Convention Center in Charlotte, North Carolina.

Share Owner Services To transfer securities, write to GE Share Owner Services, c/o The Bank of New York, PO. Box 11002, NewYork, NY 10286-1002.

For share owner inquiries, including enrollment information and a prospectus for the Direct Purchase and Reinvestment Plan, "GE Stock Direct,' write to GE Share Owner Services, c/oThe Bank of NewYork, PO. Box 11402, NewYork, NY 10286-1402; or call (800) 786-2543 (800-STOCK-GE) or (610) 312-5317; or send an e-mail to GE-Shareholders-svcs@bankofny.com.

For Internet access to general share owner information and certain forms, including transfer instructions or stock power, visit the website at wvvw.stockbny.com/ge Stock Exchange Information In the United States, GE common stock is listed on the New York Stock Exchange (its principal market) and the Boston Stock Exchange. It also is listed on certain non-U.S.

exchanges, includingThe Stock Exchange, London.

Trading and Dividend Information Common Stock Market Price Dividends fIn dollars)

High Low DOeclared 2002 Fourth quarter

$27.98

$21.40

$.19 Third quarter 32.98 23.02

.18 Second quarter 37.80 27.42

.18 First quarter 41.84 34.49

.18 2001 Fourth quarter

$41.59

$35.88

$.18 Third quarter 49.59 28.25

.16 Second quarter 52.90 38.57

.16 First quarter 47.99 35.98

.16 As of December 31, 2002, there were about 669,000 share owner accounts of record.

Form 10-K and Other Reports The financial information in this report, in the opinion of management, substantially conforms with information required in the 10-K Report" to be submitted to the Securities and Exchange Commission (SEC} by the end of March 2003. However, the 10-K Report also contains certain supplemental information and it can be viewed on the ntemet at www gecom/en/companyrlnvestor/secfilings.htm. Our annual report on Form 10-K, quarterly reports on Form 10-0, current reports on Form 8-K, and amendments to those reports are available, without charge, on that website as soon as reason-ably practicable after they are filed electronically with the SEC.

Copies also are available, without charge, from GE Corporate Investor Communications, 3135 Easton Turnpike, Fairfield, CT 06828.

GE Capital Services and GE Capital Corporation file Form 10-K Reports with the SEC, and these can also be viewed at www.ge.com/en/company[investor/secfilings.htm Information on the GE Fund, GE's philanthropic foundation, can be viewed at www.gefund.org Intemot Address Information Visit us online at www.ge.com for more information about GE and its products and services.

The 2002 GE Annual Report is available online at www.ge.com/annual02 For detailed news and information regarding our strategy and our businesses, please visit our Press Room online at www.ge.com/news and our Investor Information site at www.ge.co-n/investor Product Information For information about GE's consumer products and services, visit us at www.geconsumerproducts.com Cassette Recordings For an audiocassette version of this report, write to Target Mail, 705 Corporations Park, Scotia, NY 12302; or call (518) 381-3824; or send an e-mail to target.mail@corporate.ge.com.

Corporate Ombudsperson To report concerns related to compliance with the law, GE policies or government contracting requirements, contact the GE Corporate Ombudsperson, PO. Box 911, Fairfield, CT 06824. Telephone: (800) 227-5003 or (203) 373-2603.

Contact the GE Board of Directors For reporting complaints about GE's accounting, internal accounting controls or auditing matters or other concerns to the Board of Directors or the Audit Committee, write to GE Board of Directors, General Electric Company (V2E),

3135 Easton Turnpike, Fairfield, CT 06828; or call (800) 417-0575 or 203) 373-2652; or send an e-mail to Directors0corporate.ge.com.

C 2003 General Electric Company Printed in U.S.A.

Nota: Unless otherwise indicated by the context, the term "GE,

'General Electric and 'Company' are used on the basis of consolidation described on page 78.

GE and D are trademarks and service marks of General Electric Company; NBC and A are trademarks and service marks of National Broadcastng Company, Inc., and MSNBC is a trademark and service mark of MSNBC Cable, LLC. GE90 and CF34 are trademarks of General Electric Company. CFM56 is a trademark of CFM Intemational, a 50/50 joint company between Snecma Moteurs of France and General Electric Company.

Caution Conceming Forward-Looking Statements. This document includes certain 'forward-looking statements' within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations due to changes in global political, eco-nomic, business, competitive, market and regulatory factors. More infor-mation about those factors is contained in GE's filings with the Securities and Exchange Commission.

114 GE 2002 ANNUAL REPORT

General Electric Company Fairfield, Connecticut 06828 www.ge.com

ML031040509

Text

SUBJECT:

Dearborn,

Subject:

Dear Sirs:

Dearborn,

SUMMARY

SUMMARY

Navigation menu

Search