ML031040509

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)

Text

Corporae Envrornenrfl Programs GeneralElectric 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 10CFR 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 Address of ($ in thousands)

License No. Name & Address of Licensee Licensed Activity Cost Estimate DPR-1 General Electric Company GE Nuclear Energy 8,500 GE Nuclear Energy Vallecitos Nuclear Center 175 Curtner Ave. 6705 Vallecitos Rd.

San Jose, CA 95125 Pleasanton, CA 94566 R-33 General Electric Company GE Nuclear Energy 4,400 GE Nuclear Energy Vallecitos Nuclear Center 175 Curtner Ave. 6705 Vallecitos Rd.

San Jose, CA 95125 Pleasanton, CA 94566 TR-1 General Electric Company GE Nuclear Energy 10,300 GE Nuclear Energy Vallecitos Nuclear Center 175 Curtner Ave. 6705 Vallecitos Rd.

San Jose, CA 95125 Pleasanton, CA 94566 DR-10 General Electric Company GE Nuclear Energy 7,400 GE Nuclear Energy Vallecitos Nuclear Center 175 Curtner Ave. 6705 Vallecitos Rd.

San Jose, CA 95125 Pleasanton, CA 94566 SNM-960 General Electric Company GE Nuclear Energy 18,800 GE Nuclear Energy Vallecitos Nuclear Center 175 Curtner Ave. 6705 Vallecitos Rd.

San Jose, CA 95125 Pleasanton, CA 94566 SNM-2500 General Electric Company GE Nuclear Energy 37,900 Morris Operation Morris Operation 7555 East Collins Rd. 7555 East Collins Rd.

Morris, IL 60450 Morris, IL 60450 Total Cost Estimate: $ 87,300 I-WA:1289857.1 tk-A MT55OI

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 1OK 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: (Dollars in Thousands)

a. Decommissioning amounts covered by this self-guarantee $ 87,300

b. All decommissioning amounts covered by other NRC or Agreement State parent company guarantees or self-guarantees $133.600

c. All amounts covered by parent company guarantees, self-guarantees, or financial tests of other Federal or State agencies (e.g., EPA) 131.546 TOTAL $ 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) $ 17.526.000

• 6. Total assets In United States (required only if less than 90 percent of firm's assets are located in the United States) $346,312,000 Yes No

7. Is line 5 at least 10 times line 1? x

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

9. Is line 6 at least 10 times line 1? x

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

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

• Denotes figures derived from financial statements.

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

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

-dtdA.

Keith . Sherin 3/20/03 Date Senior Vice President - Finance 3

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e '*, I , -i 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 iousands)

License No. Name & Address of Licensee Licensed Activity Cost EEstlmate DPR-1 General Electric ComDany GE Nuclear Energy 8,500 GE Nuclear Energy Vallecitos Nuclear Center 175 Curtner Ave. 6705 Vallecitos Rd.

San Jose, CA 95125 Pleasanton, CA 94566 R-33 General Electric Company GE Nuclear Energy 4,400 GE Nuclear Energy Vallecitos Nuclear Center 175 Curtner Ave. 6705 Vallecitos Rd.

San Jose, CA 95125 Pleasanton, CA 94566 4

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jA 1 TR-1 General Electric Company GE Nuclear Energy 10,300 GE Nuclear Energy Vallecitos Nuclear Center 175 Curtner Ave. 6705 Vallecitos Rd.

San Jose, CA 95125 Pleasanton, CA 94566 DR-10 General Electric Company GE Nuclear Energy 7,400 GE Nuclear Energy Vallecitos Nuclear Center 175 Curtner Ave. 6705 Vallecitos Rd.

San Jose, CA 95125 Pleasanton, CA 94566 SNM-960 General Electric Company GE Nuclear Energy 18,800 GE Nuclear Energy Vallecitos Nuclear Center 175 Curtner Ave. 6705 Vallecitos Rd.

San Jose, CA 95125 Pleasanton, CA 94566 SNM-2500 General Electric Company GE Nuclear Energy 37,900 Morris Operation Morms Operation 7555 East Collins Rd. 7555 East Collins Rd.

Morris, IL 60450 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.

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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.

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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 Inwriting 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.

'V. -

General Electric Company ,

Date 3/20/03 ( V:-- , '..1", I Keith S. Sherin Senior Vice President - Finance 7 ,-

ANDREAE.RAMOS NOTApRy PBLIC MY C0OmMSS1ON EXPIRES M.312004 8

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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 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. 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 (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 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 1440689340 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.)

3135 Easton Turnpike, Fairfield, CT 06828-0001 203/373-2211 (Address of principal executive offices) (Zip Code) (Telephone No.)

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

Name of each exchange Title of each class on which reeistered 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 ofthe 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 1. Business ....................................................................... 3 Item 2. Properties...................................................................................................................................... 20 Item 3. Legal Proceedings......................................................................................................................... 20 Item 4. Submission of M atters to a Vote of Security Holders .................................................................. 21 Part II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters........................... 22 Item 6. Selected Financial Data ................................................................................................................ 22 Item 7. Management's Discussion and Analysis ofResults of Operations............................................... 22 Item 7A Quantitative and Qualitative Disclosures About Market Risk...................................................... 22 Item 8. Financial Statements and Supplementary Data............................................................................. 22 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ....... 22 Part III Item 10. Directors and Executive Officers of the Registrant ...................................................................... 23 Item I 1. Executive Compensation .............................................................................................................. 24 Item 12. Security Ownership of Certain Beneficial Owners and Management .......................................... 24 Item 13. Certain Relationships and Related Transactions........................................................................... 24 Item 14. Controls and Procedures............................................................................................................... 24 Part IV Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K ........................................... 25 Signatures ..................................................................................................................................... 30 Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002................................. 32 (2)

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 ofproducts 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.

CommercialEquipmentFinancing 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.

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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.

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CommercialFinance 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 $5million 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.

StrctredFinanceGroup 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. InNovember 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.

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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 FinancialServices 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.

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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 ConsumerFinance 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.

CardServices 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 ofproduct 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.

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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 FinancialAssurance 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.

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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.

MortgageInsurance 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 GlobalInsurance 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.

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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.

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Power Systems Power Systems (17.4%o, 16.1% and 11.4% 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.

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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.

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

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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% 2% 4% 3% 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.

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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.

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

Date assumed Executive Name Position Age Officer Position Jeffrey R. Immelt Chairman of the Board and Chief Executive Officer 47 January 1997 Philip D. Ameen Vice President and Comptroller 54 April 1994 Charlene T. Begley Vice President, GE Transportation Systems 36 January 2003 David L. Calhoun Senior Vice President, GE Aircraft Engines 45 June 1995 James P. Campbell Senior Vice President, GE Consuner Products 45 April 2001 William H. Cary Vice President, Financial Planning and Analysis 43 March 2003 Kathryn A. Cassidy Vice President and GE Treasurer 48 March 2003 William J. Conaty Senior Vice President, Human Resources 57 October 1993 Dennis D. Dammerman Vice Chairman of the Board and Executive Officer 57 March 1984 Scott C. Donnelly Senior Vice President, Global Research 41 August 2000 Michael D. Fraizer Senior Vice President, GE Insurance and GE Financial 44 September 2002 Yoshiaki Fujimori Senior Vice President, GE Asia 51 June 2001 Arthur H. Harper Senior Vice President, GE Equipment Management 47 September 2002 Benjamin W. Heinernan, Jr. Senior Vice President, General Counsel and Secretary 59 September 1987 Joseph M. Hogan Senior Vice President, GE Medical Systems 45 November2000 Robert A. Jeffe Senior Vice President, Corporate Business Development 53 December2001 John Krenicki, Jr. Senior Vice President, GE Plastics 40 March 2000 Michael A. Neal Senior Vice President, GE Commercial Finance 49 September 2002 David R. Nissen Senior Vice President, GE Consumer Finance 51 September 2002 James A. Parke Senior Vice President, and Chief Financial Officer, 57 September 2002 GE Capital Ronald R. Pressman Senior Vice President, Employers Reinsurance Corporation 44 September 2002 Gary M. Reiner Senior Vice President, Chief Information Officer 48 January 1991 John G. Rice Senior Vice President, GE Power Systems 46 September 1997 Gary L. Rogers Vice Chairman of the Board and Executive Officer 58 December 1989 Keith S. Sherin Senior Vice President, Finance, and Chief Financial Officer 44 January 1999 Lloyd G. Trotter Senior Vice President, GE Industrial Systems 57 November 1992 Richard F. Wacker Vice President, Corporate Investor Relations 40 March 2003 William A. Woodbum Senior Vice President, GE Specialty Materials 52 June 2001 Robert C. Wright Vice Chairman of the Board and Executive Officer 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.

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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.

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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).

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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.)

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(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.)

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(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 Principal Financial Officer March 7,2003 Keith S. Sherin Senior Vice President, Finance, and Chief Financial Officer

/sl Philig D. Ameen Principal Accounting Officer March 7,2003 Philip D. Ameen Vice President and Conptroller Jeffrey R. Immelt* Chairman of the Board of Directors (Principal Executive Officer)

James I. Cash, Jr.* Director Dennis D. Dammerman* Director Ann M. Fudge Director Claudio X. Gonzalez* Director Andrea Jung* Director Alan G. Lafley* Director Kenneth G. Langone* Director Ralph S. Larsen* Director Rochelle B. Lazarus Director Sam Nunn Director Roger S. Penske Director Gary L. Rogers Director Andrew C. Sigler Director Robert J. Swieringa* Director Douglas A. Warner 111* Director Robert C. Wright 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 Is/ Jeffrev R. Immelt Jeffrey R. Immelt Chief Executive Officer (32)

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 lsl Keith S. Sherin Keith S. Sherin Chief Financial Officer (33)

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

Directors'CharitableGift Plan General Elecric General Compaiy Electric Company Dirwctors CharitableGift 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. December2002 Directors'CharitableG!fi Plan Electric Company GeneralElectric Directors CharitableGift 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 GeneralElectric Company Directors'CharitableGfi 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 ofthe 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: J.R. Immelt Date: -

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 ifan 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 ofShares 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 (Dolasin uiuios) 1998 1999 2000 2001 2002 GE except GECS Earnings(') $12,230 $14,103 $16,747 $18,506 $19,153 Less: Equity in undistributed earnings of General Electric Capital Services, Inc.P) (2,124) (2,776) (3,370) (3,625) (2,661)

Plus: Interest and other financial charges included in expense 883 810 811 817 569 One-third of rental expense(C) 189 202 216 231 258 Adjusted "earnings" $11,178 $12,339 $14,404 $15,929 $17.319 Fixed Charges:

Interest and other financial charges S 883 $ 810 $ 811 $ 817 $ 569 Interest capitalized 38 36 3 10 IS One-third of rental expense(C) 189 202 216 231 258 Total fixed charges $ 1,110 $ 1,048 $ 1,030 LI0 $ 842 Ratio of earnings to fixed charges 10.07 11.78 13.98 15.06 20.57 General Electric Company and consolidated affiates Earningss4l $13,742 $15,942 $18,873 $20,049 $19,217 Plus: Intcrest and other financial charges included in expcnse 9,821 10,174 11,903 11,212 10.321 One-third of rental expense(C) 486 558 608 566 584 Adjusted carnings" $24,049 $26,674 $31,384 $31,827 $30,122 Fixed Charges:

Interest and other financial charges $ 9,821 $10,174 $11,903 $11,212 $10,321 Interest capitalized 126 123 124 98 53 Onc-third of rental expense(c) 486 558 608 566 584 Total fixed charges $10,433 $10,855 S 12,635 $11,876 $10,958 Ratio of carnings to fixed charges 2.31 2.46 2.48 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 State or Country of owned by Incorporation or reeistrant (1) oreanization CARIBE GE INTERNATIONAL ELECTRIC METERS CORP. 100 Puerto Rico GE GAS TURBINES (GREENVILLE) LLC 100 Delaware GENERAL ELECTRIC INTERNATIONAL (BENELUX) BV 100 Netherlands GE INVESTMENTS, INC. 100 Nevada GE PLASTICS ESPANA SCPA 100 Spain & Canary Islands, Balearic Island GE ELECTRIC CANADA, INC. 100 Canada GE ENERGY EUROPE, BV 100 Netherlands GE CGR EUROPE 100 France NUCLEAR FUEL HOLDING CO, INC. 100 Delaware GE FANUC AUTOMATION CORPORATION 50 Delaware GE ENERGY PARTS INC. 100 Delaware GE ENERGY PRODUCTS, INC. 100 Delaware GE ENGINE SERVICES DISTRIBUTION, LLC 100 Delaware GE ENGINE SERVICES, INC. 100 Delaware GE HUNGARY CO., LTD 100 Hungary GE INFORMATION SERVICES INC. 100 Delaware GE PLASTICS PACIFIC PTE. LTD 100 Singapore GE POWER SYSTEMS LICENSING INC. 100 Delaware GE QUARTZ, INC. 100 Delaware GE SUPERABRASWES, INC. 100 Delaware GE MEDICAL TECHNOLOGY SERVICE, INC. 100 Delaware GE MEDICAL SYSTEMS INFORMATION 100 Wisconsin TECHNOLOGIES, INC.

NBC 100 Delaware NUOVO PIGNONE HOLDING S.P.A 100 Italy OEC MEDICAL SYSTEMS INC. 100 Delaware GE POLYMERLAND, INC. 100 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. Rochelle B. Lazarus Director Director Is/ Dennis D. Dammerman Dennis D. Dammerman Sam Nunn Director Director Isl Ann M. Fudge Ann M. Fudge Roger S. Penske Director Director Is/ Claudio X. Gonzal .__

Claudio X. Gonzalez Gary L. Rogers Director Director Is/ Andrea Juna Andrea Jung Andrew C. Sigler Director Director Is/ Alan G. Lafley Js/ Robert J. Swierinpa Alan G. Lafley Robert J. Swieringa Director Director

/s/ Kenneth G. Lanoi . . _

/s/ Douglas A. Wamer . ...

Kenneth G. Langone Douglas A. Wamer III Director Director is/ RalDh S. Larsen Ralph S. Larsen Robert C. Wright Director 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

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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 However, I am an optimist. In many ways, this was disappointing year for GE investors-including GE the best time to take over a company. That is because employees, who own almost 10% of our stock. We had the role of the CEO will, and should, change. And a targeted higher earnings growth, but as I will explain new CEO-especially an optimistic one-can embrace below, we had to increase reserves at ERC (Employers change with an open mind. Let me share a few thoughts Reinsurance Corporation), our reinsurance business. with you on how I am leading GE in this environment.

We had to work through the general swirl around busi- I believe that our reputation for integrity and honor-ness practices and, perhaps most important, address able dealings is our most important asset. GE has not concerns about our future growth. Our stock was down been immune to the fallout from recent bull and bubble 39% for the year, more than the S&P 500, and GE now markets. I hear from investors who are concerned trades near the same level it did at the end of 1997. about the quality of corporate earnings, the need for a As managers, it is our principal job to make and solid balance sheet and sustainable cash flow, and the sell great products and services that people need and importance of responsible executive compensation thereby increase earnings. Since 1997, our earnings and accounting standards. Let me assure you that GE have grown more than 80% ...far in excess of the S&P will lead on all of these fronts.

500's performance. If you have held GE stock for 10 As one example, a substantial portion of my com-years or more, the average total annual return on your pensation is linked to the performance of GE stock.

shares has been 15%-more than one and a half Nearly 70% of my net worth is in GE stock. I hold my times the 9% of the S&P 500. Through the cycles, your stock options to term (10 years), a practice I adopted GE management team has consistently grown earnings, when I became chairman and which I will continue. At and 1,along with our many managers, have no doubt the same time, I have asked our board's Compensation that we will be able to continue to do this. Committee to explore best practices on linking my pay This was not a great year to be a rookie CEO. With even more closely with investor interests.

a tough economy, a volatile political environment, and I strive for openness. I am committed to putting the impact of 9/11 and industry cycles, business chal- investors inside GE every day. It will take some time to lenges were plentiful. Add to that the presumption of. get this right, but I am committed to the process. I widespread corporate fraud and there were not too want investors to understand how GE grows, and that many normal days in 2002. our fundamentals are real and sustainable. When you GE 2002 ANNUAL REPORT 5

LETTER TO STAKEHOLDERS The GE business model have high-performing businesses run by talented man- It starts with understanding our business model, agers, it is enjoyable to let the world know how the our strategy for growth and our values.

job is getting done. For example, in July we divided GE Capital into four distinct financial services businesses, THE GE BUSINESS MODEL each with its own growth strategies, leverage and bal- CEOs don't make the best economists. We make ance sheet. This makes them easier to grow internally commitments, not forecasts. But it's safe to say and clarifies them externally. things are very different today than in the late 1990s.

I believe in the GE team. I see every day just how We seem to be in the third year of a "post-bubble" special your GE team is. Its members are diverse and cycle, made worse by the 9/11 tragedy. This period is talented. They have unceasing curiosity and relentless characterized by slow economic growth-not a dou-drive. They understand the magic of GE ... that what we ble dip, but without a spark-with tough pricing, imagine, we can make happen. Leading this group is the volatile capital markets, difficult industry cycles, the honor of my life. We are committed to work together, threat of war and low corporate trust.

to deliver and always to put the company first. We don't see this environment as a negative.

Your GE team believes in high standards, and Rather, we believe this is an environment in which believes that strong integrity is the foundation of great companies make their own success. This is the time performance. I hold myself to a high standard, and I for us to create our own growth through bold ideas know you will do the same. and rigorous execution. And we have a business Here is how we performed in 2002: model that will enable us to grow in this economy.

• Earnings before required accounting changes grew 7% Our Goal:To grow earnings 10%-plus annually to a record $15.1 billion. Earnings were on track to grow with 20%-plus return on total capital ... reliably, 17% to $16.5 billion, but we recorded a $1.4 billion charge for increasing ERC's reserves. sustainably, through the cycles. Getting there

• Revenues grew 5%to $132 billion. Industrial sales grew depends on our solid business model:

8%, more than twice the GDP and exceeding our 2001

• A diverse set of leading businesses driving performance growth rate. Financial services revenues were flat, reflecting lower interest rates. However, net revenues

• Operating rigor with a focus on cash generation (revenues less interest costs) of Commercial Finance,

• Great people in a culture of learning and accountability Consumer Finance and Equipment Management grew a more robust 15%.

• Cash flow from operating activities (excluding progress A DIVERSE SET OF LEADING BUSINESSES collections) reached $15.2 billion, up 10%. Operating mar- GE has great businesses, most of which we've been in gin and return on average total capital remained near historic highs at 19% and 24%, respectively. for decades, some for 80 years or more. In addition to

• We raised our dividend 6%in December, our 27"h leading in their markets, these businesses have many consecutive annual increase. Our yield is a very strong traits in common: an unparalleled technical foundation; 3.1%, the highest at GE in nearly a decade. Overall, we returned $9billion to our investors in 2002 through direct customer interfaces; multiple ways to make dividends and stock buybacks. money through products, services and financing; global There is a job that belongs to you and your fellow scale; and low capital intensity. The characteristics of our investors, and not to me. That is setting a value on businesses allow us to outperform our competitors in our future prospects in the form of a stock price. Last each cycle; the combination of our businesses allows year, despite what we saw as a lot of progress in the GE to perform through the cycles.

face of headwinds, the market revised downward its Power Systems is a great example. In 2002, its perception of our future. Maybe the market had too earnings grew nearly 30% as shipments of gas turbines rosy a view of many companies, and not just GE. in the U.S. peaked. This business has generated an But that is certainly not the case now. This is a great incremental $7 billion of net income for investors during company with great prospects. When investors fully the four-year gas turbine bubble. We know.that Power's understand that fact-and I intend to make sure they 2003 earnings will be down as the demand for gas do-valuation must change. 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

A DIVERSE SET OF OPERATING RIGOR GREAT PEOPLE IN A LEADING BUSINESSES WITH A FOCUS ON CULTURE OF LEARNING DRIVING PERFORMANCE CASH GENERATION AND ACCOUNTABILITY Great businesses we have Triple A-worthy discipline for Individuals who imagine, lead and been in for decades investment in growth perform for the team and the company hangover from excess capacity or risky financing, so we higher than the next network's, allowing GE to com-can give our investors a soft landing. With an installed mand a 50% share of the growth in the "upfront" (pre-base of turbines and a multi-year services backlog season) advertising market. In 2002, we added the that both have grown tenfold, and investment in new Telemundo and Bravo networks to NBC. Telemundo is platforms including Oil & Gas and Wind Energy, Power well positioned to capture the growth in Hispanic is positioned for long-term growth and high returns. advertising. Bravo's upscale audience parallels NBC's Our performance in a difficult commercial aviation and creates new opportunities for content. Because of market has been excellent. Our earnings in Aircraft NBC's great performance, I was delighted to present Engines and GECAS (our leasing unit) were down only Bob Wright and his team with our annual Chairman's 5% in 2002, despite a near 20% decline in commercial Leadership Award for "best overall performance.'

engine shipments and the bankruptcies of two major Our other short cycle industrial businesses-Plastics, U.S. airlines. Our businesses are extremely well man- Consumer Products, Industrial Systems and Specialty aged, and their leaders have been through these Materials-are well positioned for the future. They cycles before. We took cost out of the Engines busi- have been affected by the global economy and earned ness while investing $700 million in R&D to develop less in 2002 than they did in 1999. To combat this they eight new engines. We have a successful family of have lowered costs, invested in new products, built engines for regional jets, the only growth segment in global distribution and added new growth segments.

commercial aviation. Our service and military busi- These businesses have transformed themselves during nesses should grow more than 15%, providing earnings a tough cycle, and they can achieve double-digit earnings momentum. Meanwhile, GECAS has kept a 1,100-plus growth with only moderate economic expansion in2003.

fleet productive, with only 12 planes on the ground at Commercial Finance and Consumer Finance grew the end of the year. Our in-depth knowledge of these earnings by more than 15% last year, with attractive assets and our global marketing skills have allowed returns on equity. These businesses represent more GECAS to grow through the turmoil. We are managing than 80% of the earnings of the old GE Capital. We through bankruptcies at major customers and have grew their assets by 16% in 2002, while losses and remarketed more than 140 aircraft. We will emerge delinquencies remained stable. We acquired new plat-from this cycle with strengthened customer relation- forms that are producing exceptional returns: Deutsche ships, ahead of our competition. These businesses Bank's inventory financing business, ABB's structured should have double-digit earnings growth in 2003. finance business and Security Capital's real estate Medical Systems should also have an excellent operations. Commercial and Consumer Finance have 2003. Medical introduced 30 new products in 2002, the broad and deep leadership teams-people who know most in its history. The backlog of orders for these how to get the most from each cycle. These businesses high-margin products is at an all-time high, and service have solid competitive advantages in low funding growth continues at 11% annually. Medical's healthcare costs, strong risk management and global origination, information technology business grew orders 30% and should deliver double-digit earnings growth in 2002 and is well positioned for 2003. Our Medical in 2003 and beyond.

business is the global leader in diagnostic imaging and clinical information technology, two of the fastest- LEARNING THE HARD WAY growing segments in healthcare. Medical has a vibrant ERC stands in sharp contrast to GE's expectations for leadership team with deep healthcare expertise, and the business performance. We pride ourselves on having business is positioned for sustained double-digit growth. sound strategy with strong operating accountability. A NBC continues to outpace its competition in GE business can briefly get out of balance strategically financial performance and ratings. Earnings grew 18% or operationally, but rarely do we get both wrong at in 2002, a tegrific performance that we expect will the same time. We did with ERC.

continue through 2003. Our prime-time ratings in key viewing demographics (adults ages 18-49) were 29%

GE 2002 ANNUAL REPORT 7

LETTERTO STAKEHOLDERS Our strategy for growth ERC experienced more than a decade of strong per- Increasingly, the focus of our operating rigor is on formance from 1984 to 1996. However, we allowed our- growing cash flow. Cash is a priority for our leadership selves to go into more volatile, commodity insurance team and represents 60% of the measurement used lines and new geographies, and we did not manage this for their incentive compensation. Six Sigma is creat-expansion well. Our poor underwriting in the late 1990s ing repeatable and reliable processes that allow us to resulted in ERC's losses in 2002. Although it offers little reduce cash tied up in inventory and receivables.

solace, our experience reflects that of the insurance Through digitization we are getting more from our industry, which has increased reserves by $25 billion to fixed assets. We plan to generate nearly $30 billion in address poor underwriting during those years. operating cash flow ex-progress in 2002-2003.

When businesses underperform, we owe investors We took several actions to strengthen our balance four things: state the financial results with compiete sheet in 2002. We improved our liquidity by reducing clarity; correct the issues with our best people and the commercial paper of our financial services busi-intense management; maximize returns for investors; nesses to 31 % of their total debt outstanding. We also and share the lessons to avoid repeating the mistakes. infused more than $6 billion into those businesses to We are doing these things with ERC. increase capital and reduce leverage. GE's Triple A rating We have had a leadership team in place for the last was affirmed by the rating agencies, and our rigorous two years that is fixing this business. ERC has exited its approach was recognized. We received four awards, lower-return product lines, made a host of changes in including "Borrower of the Year" and "Best Corporate operations and achieved $1billion in price improvements Issuer:' from bond investors and underwriters sur-in 2002-and expects to maintain this momentum in veyed by InternationalFinance Review.

2003. ERC is improving every day, in an industry that is Financial strength gives us the ability to invest in heading toward stronger returns for the next few years. growth, and we have viewed this economic cycle as a As you can see, GE will post solid growth in 2003 time to invest. We have increased the number of engi-because of our business diversity. Power Systems will neers, salespeople and service resources. We will be down, as expected; however, the rest of the com- invest more than $3 billion in technology, including major pany is positioned for double-digit growth. investments in our global research centers. We've strengthened our commitment to China, increasing OPERATING RIGOR resources there 25% in 2002, and we've increased Strong processes are the foundation of our operating our presence in Europe, where GE should exceed $30 rigor. We are in the ninth year of Six Sigma at GE, and billion in revenues in 2003.

it has become a permanent initiative-Six Sigma is Acquisitions are a key form of investment for us.

the way we work. During the last year we completed We have invested nearly $35 billion in acquisitions over more than 50,000 projects, focused primarily in three the past two years. Acquisitions are a way to redeploy areas: working with our customers on their issues; cash flow for future growth. The key is discipline: we improving our internal processes to improve our cus- buy the right businesses at the right price and grow tomer interfaces and generate cash: and improving them. Our acquisitions tenci to be between $100 million the flow of high-technology products and services to and $2billion in value, in industries we know. Our the marketplace. industrial acquisitions are companies with high margin We are in the fifth year of building a digital capability rates and low capital requirements where GE can to make GE leaner and faster. Digitization is now gen- boost growth and cash flow. Our financial services busi-erating $2 billion in annual productivity savings nesses consolidate portfolios when GE can improve through sourcing and infrastructure. At the same time, funding cost, risk management and growth. Our invest-we have used digitization to link with our customers' ment screen is simple: we expect a 15% cash-on-cash workflow and improve service. return by year five, or we don't do the deal.

8 GE 2002 ANNUALt REPORT

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

Dearborn,

an industry leader in performing people get the best rewards. But everyone water services. This business has a powerful asset: must operate in a system where the company comes 2,000 sales engineers who are so committed to their first. We all serve under the same integrity policy customers that they practically live on site, creating and compliance program, our compensation plans are powerful relationships and new cross-selling opportu- broad-based, our businesses work together, and we nities. Another acquisition, Interlogix, is a medium- have one human resources system. When the company sized player in security systems. It has excellent tech- wins, we all win.

nology that, when combined with our services capa-bility, will create new opportunities. At year-end, we OUR STRATEGY FOR GROWTH announced the acquisition of Instrumentarium, a lead- The best strategies create value for customers and ing provider of medical equipment and services for investors. For customers, we can improve their prof-the operating room. We view this as a new platform in 'itability in tough environments. For investors, we can the operating room, where GE can add services and create sustainable and valuable growth through the integrate technology. cycles. We believe that GE can do both. We are taking Throughout our history, making smart bets at the company to a place where few can follow... big, the right point in the cycle has improved share owner fundamental, high-technology infrastructure industries returns. This is an excellent time to invest for long-term in which GE can have enormous competitive advantage.

growth. Assets are fairly priced, and with our financial We are creating a better company-a global strength we can move ahead of the competition. Technology, Services and Financial enterprise capable of expanding growth, cash, and returns on capital PEOPLE AND CULTURE through the cycles. Our strategy for growth is based My job is to attract and keep talented and loyal people on five key elements:

who work together as a team. During a volatile year,

• Technical leadership that expands margins and our voluntary attrition among the top 600 leaders was grows the installed base less than 3%. We named 22 new officers, 41% of

• Services acceleration that improves returns, competitiveness and customer satisfaction whom are global and diverse. We continued our

• Enduring customer relationships that are unbreakable

$1 billion investment in training, and our Welch because we win together over the long term Learning Center at Crotonville remains a vital part of

• Globalization as a way to grow faster the GE culture. As some companies stopped hiring, and be more competitive we increased on-campus recruiting and launched a

• Resource reallocation to build positions in new markets Commercial Leadership Program aimed at growing a where we can achieve superior growth and returns new generation of customer-focused leaders.

At the same time, we continue to build a culture TECHNICAL LEADERSHIP based on performance, compliance and teamwork. Technology is the heart of the strategy, because it The GE people appearing throughout this report repre- drives valuable growth. Great products are the antidote sent the best of this culture.They imagine, they lead to deflation-customers will pay a premium to GE for and they perform. them because they make customers more profitable.

They exemplify our new slogan, Imagination at The GE Evolution'" Series locomotive we announced in Work. GE has a rich century-old tradition of great brand December offers customers 40% lower emissions and campaigns, and Imagination at Work upholds the stan- improved fuel efficiency and reliability-all of which dard. But the best thing about it is that it tells the world lowers the cost of ownership.

about the spirit and passion of GE employees-their Technology is a total company capability. New curiosity, drive, hard work, warmth and humor. For GE product introductions grew by 25% in 2002 and came employees, Imagination at Work is a daily rallying cry from all 13 businesses. Some create demand in high-to say: "what we imagine, we can make happen." 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 services revenues of $23 billion, growing at double imaging system; it is expected to generate $150 million digits, with margins of more than 25%.

of revenue in year one, and it has no competitors. Many people assume that high margins mean that Other products create demand in old industries. In2003, the customer is getting a bad deal. The opposite is our Consumer Products business will introduce high- true. Services put GE on the same side as the customer end cooktops and ovens, refrigerators, dishwashers, and bring us closer. We win together. Customers like washers and dryers that can lead their categories. Southwest and KLM have found that we make them GE leverages technology in unique ways through more profitable by delivering more fuel efficiency, more our Global Research organization. Our first Global time on wing and better service.

Research Center, opened more than 100 years ago in In the railroad industry, the key customer metric is Schenectady, N.Y, was the birthplace of corporate asset utilization-the time a train is working. We have research and development. Today we're extending our a set of information technology services that can reach with centers in India, Germany and China. Global increase asset utilization by two percentage points.

Research has become a hub for change because it This represents a substantial potential savings for the allows us to invent new technologies and discover industry and approximately $350 million in revenues new applications across our businesses. for ourTransportation business.

Renewable energy is a great example. In March Services by definition keep you focused on your 2002, we acquired Enron's wind power assets for $180 customers. And when you are solving customers' million. We knew their customers, but not their expert- problems, your potential for growth is endless.

ise. But through Global Research, in nine months we infused technology from around GE, from materials to ENDURING RELATIONSHIPS controls to generators. As a result, we have improved We want GE to have enduring relationships with the performance of the existing fleet, given the busi- customers. This has been my passion for many years.

ness the means to produce more efficient and power- I admit that when I discuss it inside the company or ful new turbines, and added a business that should among investors, eyes can glaze over. Talking about generate revenues in excess of $1 billion in 2003 with customers seems too soft.

solid profitability. We have become a global leader in Let me put it as simply as I can. Customers win wind energy in less than a year because of our when we provide better products; they win when we diverse businesses and Global Research. In two years, provide better service; they win when we can generate GE Wind will pay for itself. Only GE can do this. productivity through information management; they Technology leadership expands the capability of win when we can provide needed capital.

every GE business. But its most important benefit is the GE operates inhuge, global, fundamental industries:

creation of a huge installed base of long-lived, propri- airlines, railroads, hospitals, utilities, retailers and mid-etary technology, and opportunities to provide that base market businesses. A company that provides products with services for years to come. and services and information and financing in markets it's been infor decades can have enduring relationships.

SERVICES ACCELERATION The challenge I have set out for GE is to be innovative, Services leadership accelerates high-margin growth productive and competitive so that we can do this and creates competitive advantage. When you own again and again and again.

the technology, there is never excess capacity. Our Healthcare is a great example of what I mean. This advantage lies in a high-tech installed base of jet is a $4 trillion global industry, growing more than 10%

engines, power turbines, locomotives and medical each year. It's also filled with challenges. Healthcare devices. This base has grown fourfold since the mid- affordability is a social issue, with costs heading toward 1990s, and it remains one of our most valuable assets. 20% of the U.S. GDP by the end of the decade. Only Our multi-year services backlog is $75 billion today, 50% of our customers are profitable. GE can help.

nearly as big as all of GE in 1996. In 2003, we expect 10 GE 2002 ANNUAL REPORT

I Milk-We have broad technical expertise and a huge worked with the aviation industry to expand the design installed base in important parts of a hospital-radiol- and the range of our capabilities, and we worked with ogy, cardiology, and surgery. Our technology can improve local technology groups to brand our engines. And we patient treatment, which makes hospitals more prof- brought local leaders to Crotonville to participate in our itable. Through our healthcare services agreements, leadership training programs. By acting as one GE-we are the hospital's productivity partner. We completed not just as an aircraft engine supplier-we secured an more than 4,000 Six Sigma projects with healthcare important point of leverage in a growing market. As a providers in 2002, and these projects are improving result, Plastics, Medical, Engines and Power are each the quality of patient care and lowering costs. We have heading toward $1 billion in revenue in China.

clinical information technology that addresses our hos- At the same time, we are building our sourcing pital customers' digital needs. We created a Healthcare capability. We will open the Shanghai Global Research Financial Services business in 2002 to solve customers' Center in May, which will speed our sourcing qualifica-financing problems across a variety of platforms. tion process. Our Consumer Products business will Because of this depth and diversity, we can sit in a have 25% of its sourcing based in China by 2005, which CEO's office or with a radiology technician and help will transform its cost base. And we are designing a hospital create a better future. and manufacturing technical products like magnetic res-The phrase "solutions provider" is so overused, it onance (MR) and computed tomography (CT) devices makes us all snore. I want GE to be essential to those in China. Keep in mind, $5 billion in sourcing from whom we serve ... a critical part of the profit equation ... China generates $1 billion in cost savings for GE.

a long-term partner... a friend.

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

Globalization multiplies growth by taking our capabilities Europe is a big market going through significant everywhere. Global strategies also create faster growth changes of enlargement and conversion. The market and reduce costs by distributing market and engineering is growing slowly, but GE has a massive opportunity resources. We believe that the two most important mar- there because we are small where we should be big.

kets for GE in the next few years are China and Europe. We have half the market share in Europe that we have in the U.S. We believe that the combination of market 5 X 5 IN CHINA enlargement and regulatory convergence will help us People talk about China as either an opportunity or a drive a more profitable future in Europe.

threat. The most successful China strategy is to capital- Our European Consumer Finance business is a ize on its market growth while exporting its deflationary great example of what is possible. This business oper-power. We have a vision for China: $5 billion in revenue ates in 17 countries, with 11,500 people. In five years, and $5 billion in sourcing-"5 x 5"-by 2005. we have gone from nothing to $700 million in earnings Four of our businesses have built service and in Europe, through great marketing and business production capabilities in China. Plastics has as many development. We are a local company with global salespeople in China as it does in the U.S. We are strength and limitless growth opportunity.

playing there as one GE, meaning that our business diversity makes us a perfect partner for a large country RESOURCE REALLOCATION like China and its complex infrastructure needs. We are allocating capital to new businesses that will Our CF340 engine was selected as the sole choice increase growth with high returns. We like global mar-for China's regional jet program, which ensures that GE kets where we can build technical leadership, interface will have a lead position inthe Chinese aviation market directly with customers and develop multiple ways to when the jet (the ARJ21) is ready to fly in 2007. We make money. We favor businesses that require "human i accomplished this by partnering with key constituents capital" (engineers, salespeople, risk managers) as across China and the U.S. to develop our solution. We opposed to "physical capital" (factories).

GE 2002 ANNUAL REPORT 13

LETTER TO STAKEHOLDERS Our Goal We are building a large presence in industries where Awards are great, but ultimately, integrity is proven we can lead. We have identified six new platforms that by the actions and decisions-millions each day-of we believe can be big, each having $1 billion of operating hundreds of thousands of people across this company.

profit within the next few years: healthcare information Meeting our commitments. Performing with integrity.

technology, water technology and services, oil and gas This is the foundation from which we govern GE.

technology, security and sensors, Hispanic broadcasting, I want your company to take a leadership role in and U.S. consumer finance. I view these as our "chil- governance. So much attention has been paid in the dren:' Someday each one can grow to be a full-scale GE past year to corporate trust-who has it, who doesn't.

business. Today they represent $9 billion in revenue We believe it's about action, not about words. That's and $2 billion in operating profit. They are generating why, in November, we outlined a set of principles and 15% annual organic growth, with even more available actions that strengthen GE for the future.

through business development. All can have returns on Our Audit Committee oversees a rigorous process capital in excess of 20%. With GE's people, technology that starts at the top. As CEO, I review these busi-and experience, we can quickly lead in these markets. nesses constantly. Our business leaders report their Our entry into water technology is a good example. results quarterly using standards that conform to SEC It is a $35 billion global industrial market, growing 8% requirements. We have a 450-person internal audit each year with high margins. It's a fragmented industry staff constantly reviewing and improving our financial whose customers are outsourcing more and more of rigor. One-third of our business leaders has served on their water requirements. We acquired Betz

Dearborn our audit staff. Led by our CFO,

we have very strong and agreed to acquire Osmonics, which together have accounting oversight and principles. We have all grown a run rate of $1.5 billion in revenues going into 2003, up in a culture where compliance and integrity come with operating margins near 20%. Our technical, service first. I've been signing letters attesting to the validity and globalization skills go right to the core of this busi- of results for years.

ness, and additional acquisitions will help round out GE has always had a strong and independent board, our offerings. We aim to grow it 15% annually and, by and we are updating our practices for the current 2005, have a $4 billion global business leader. environment. We will go beyond the letter of the At the same time, we have businesses that cannot Sarbanes-Oxley Act and the New York Stock Exchange generate the long-term earnings growth or returns our listing requirements to enforce the spirit as well.

investors expect. In 2002, we sold GE Global eXchange We want directors to probe with hard questions that Services for a gain of nearly $500 million. This was not stretch management and deal in depth with core a bad business; however, we did not believe we could issues confronting GE. We expect directors to have grow it effectively. We also decided to wind down and even greater involvement and participation both in exit our Equity portfolio. This is not an operating busi- understanding the company and in advising the lead-ness, we lack competitive advantage, and it no longer ership team. Directors must be our most constructive makes sense for our investors. We will be aggressive critics and our wisest counselors.

in redeploying capital within the company in 2003. Our board has created the position of presiding director to guide its independent activities. My own role GE VALUES on the GE board is clear. I have two functions: lead Values. Where the culture starts and stops. Where peo- the company as CEO with integrity, clarity and purpose, ple are committed to the greater good of the company, as measured by financial performance and reputation; to our customers' success and to each other. lead the board as Chairman with vision and openness, We feel great about GE today, and about what it at meetings where we energetically debate the proper means for our future. In 2002, for the fifth consecutive strategic direction for the long-term interest of GE year, we were named "The World's Most Respected investors. GE is a very large, multi-business company, Company" in a Financial Times survey of 1,000 global and the board and I believe that you are best served CEOs. They placed GE first for integrity. by having one person fill both roles.

14 GE 2002 ANNUAL REPORT

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 I want you to know that this company has world-trust my judgment and character. I am more than willing class standards for governance and compliance. GE will to be judged on the quality of my ideas and the impact take a leadership position at any time to restore public of my decisions. Just to make sure I never lose my trust in corporations. The strength of this company is way, I work without a contract, serving meeting to deeply ingrained in our culture and values.

meeting at the will of the board.

We have visibly aligned executive compensation NOW ISTHE BESTTIME FOR GE with investors. We implemented a stock ownership Your company enters 2003 with momentum and the requirement for the top 24 GE executives, which will confidence that performing in a tough environment be measured as a multiple of their salaries. We will can bring.

hold this stock as long as we work for GE. We are prepared to win in a slow-growth, volatile, On top of this, we have instituted a one-year holding global economy. With our proven operating model, we period for GE shares that top executives acquire through get the most from each of our businesses and offer option exercises. We want to eliminate any concern investors safe growth and reliable returns.

that our leaders would cause a short-term increase in Our strategy is in place. We are making GE a better the stock price for personal gain. company. We are creating a global Technology, And we are voluntarily expensing stock options to Services and Financial enterprise capable of expanding improve the spirit of transparency. We will continue growth, cash and returns on capital throughout cycles.

to distribute stock options because they align managers We are crafting new platforms for growth in new mar-with investors and retain our best talent. kets. We are forging tighter, more enduring bonds We have increased communication with investors. with our customers so that we both win. And we are We have significantly increased the quantity and quality committed to meaningful governance.

of our financial disclosures and investor interfaces, We are a company that does what few others can including webcasts on quarterly results, 25% more do and goes where very few can follow. We are a investor meetings, and much fuller SEC-required reports. company you can believe in.

We reorganized GE Capital and gave greater clarity I thank you on behalf of the GE team for your to our financial services businesses. continuing support. I hope you believe, as I do, that Despite all the good work done by the New York our best days are ahead.

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 Jeffrey R. Immelt Dennis D. Dammerman outside the system. Chairman of the Board Vice Chairman of the Board and Chief Executive Officer and Executive Officer 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 Gary L. Rogers Robert C.Wright apples don't exist in our midst. We spend billions each Vice Chairman of the Board Vice Chairman of the Board year on improving our training, enforcing our compli- and Executive Officer and Executive Officer ance with ethical norms and reinforcing our values, all to preserve our culture and protect one of our most February 14, 2003 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.

GE 2002 ANNUAL REPORT 15

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GE 2002 ANNUAL REPORT 19

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

BEFORE YOU ISTHE 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.

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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

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MADE IN GREENVILLE.

Could power South Carolina.

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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.

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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

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

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

eli 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 S

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.

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'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 the course with a steadfast commitment to technology, Aircraft Engines will support the eventual recovery of its PRESIDENT AND CEO: David L. Calhoun customers while laying the foundation for outstanding 2002 REVENUES: $11.1 billion growth opportunities of its own.

www.geaircraftengines.com 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. Commercial Finance Aircraft Engines is developing eight new engine models, ranging from the next GE90, the world's most

• PRESIDENT AND CEO: Michael A. Neal powerful commercial engine, to new CF34s, the engine 2002TOTAL ASSETS: $195.8 billion of choice for regional jets-the fastest-growing seg-ment in commercial aviation. Aircraft Engines and CFMI With lending products, growth capital, revolving lines (jointly owned by GE and Snecma) anticipate that cus- of credit, equipment leasing of every kind, cash flow tomers will reward their commitment to technology by programs, asset financing and more, Commercial growing the fleet of GE and CFMI commercial engines Finance is playing a key role in the growth, expansion from 16,000 today to more than 24,000 by 2010. and stability of 35 countries' major industries, including Aircraft Engines also expects several years of dou- healthcare, manufacturing, communications, construc-ble-digit military growth as it develops new technology tion, energy, aviation, infrastructure and equipment.

for military engines, including an engine for the U.S. In 2002, Commercial Finance used its 3,500-person Armed Forces' Joint Strike Fighter. sales force, a diverse portfolio and rigorous risk man-Aircraft Engines' new technologies will deliver agement to produce double-digit asset and earnings economical performance with reduced noise and growth despite the difficult business climate. In 2003, emissions for years to come. Aircraft Engines will also Commercial Finance will continue to use Six Sigma provide years of services to its installed base of com- to improve its own processes and productivity as well mercial engines, generating steady revenues while as offer solutions to customers. In particular, its "At enabling customers to reduce their operating costs. the Customer, For the Customer" projects will continue The airline industry goes through multi-year cycles, to help clients improve their operations and accelerate and Aircraft Engines has been here before. By staying their revenues.

34 GE 2002 ANNUAL REPORT

Opportunities for growth are global in nature for Consumer Products all of Commercial Finance's businesses. For example, its Real Estate unit has developed a pan-European PRESIDENT AND CEO: James P Campbell presence as well as significant reach throughout Asia 2002 REVENUES: $8.5 billion and Mexico.The result: 40% of Commercial Finance's net earnings are generated outside the United States. In 2002, GE created one of its newest businesses-Although Commercial Finance is already large Consumer Products-by combining two of its oldest, (among the top commercial lenders worldwide), finan- Lighting and Appliances. With nearly two centuries cial markets are enormous, and Commercial Finance of brand leadership and product innovation between has plenty of room for continued growth. them, the combined $8.5 billion enterprise is accelerat-www.gecommercialfinance.com ing its industry leadership by becoming more efficient and competitive across all product lines.

Integration savings that are projected to total nearly Consumer Finance $50 million are being reinvested in technology devel-opment. Funding for new products is increasing by PRESIDENT AND CEO: David R. Nissen nearly 25% across both operations, with 100 product 2002TOTAL ASSETS: $770 billion launches planned for 2003. They include speed-cooking ovens, washers that talk to dryers, and energy-efficient With 100 million customers spread throughout 35 lighting products.

countries, Consumer Finance is diverse in terms of both The new Consumer Products-rich with a legacy geography and services. This diversity, combined of product and service innovation, and resonant with with stringent risk management practices, has helped the combined strengths of its operations-faces the Consumer Finance generate earnings growth five years future more focused than ever on extending its com-in a row while maintaining the high quality of its portfolio. petitive leadership and improving profitability.

In 2003, Consumer Finance plans to continue its www.geconsumerproducts.com growth by introducing new products and services, such as personal loans inthe United States. With these products and services, Consumer Finance will offer Equipment Management comprehensive financing solutions for consumers, including credit cards, auto loans and mortgages. PRESIDENT AND CEO: Arthur H. Harper Consumer Finance also expects to grow the number 2002TOTALASSETS: $26.1 billion of private-label credit card accounts that it manages in partnership with many of the world's leading retailers, Equipment Management provides full-service equip-including Harrod's, Lowe's Home Improvement ment financing and operating leases to customers Warehouses Tesco Lotus and Wal*Mart. Consumer around the world. With more than $26 billion of assets Finance also plans to enter several new countries, in 26 countries, Equipment Management helps cus-including China, and to expand in others, including the tomers finance and manage their fleets of autos, U.S., where its retail sales finance unit is exploring trucks, trailers, railcars and modular space units. In a opportunities to offer complementary products and weak 2002 economy, Equipment Management partially services through the 60,000 locations where it serves offset the impact of lower asset demand through cost merchants and dealers. Consumer Finance is confident reductions, trimming under-utilized assets and contin-about delivering another year of growth in 2003. uing process improvements, with contributions from www.geconsumerfinance.com [as of April 20031 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 Insurance excellence through Six Sigma. In addition, Equipment Management is expanding its service offerings and PRESIDENT AND CEO: Michael D. Fraizer launching several new high-technology products as 2002TOTAL ASSETS: $182.3 billion part of its core growth strategy. These actions, and its commitment to partner with customers to solve their Insurance took bold actions in 2002 to position itself for productivity, financial and fleet-management chal- improved returns and perfornance in 2003 and beyond.

lenges, will position Equipment Management for Employers Reinsurance Corporation is expected to strong performance in 2003. improve its performance substantially through restruc-www.geem.com las of April 20031 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, Industrial Systems GE Financial will accelerate its penetration of key retire-ment and income protection markets-gaining strength PRESIDENTANDCEO: Lloyd G.Trotter from growing distribution alliances, introducing innova-2002 REVENUES: $5.0 billion tive products like the "GE Retirement Answer" and streamlining operations.

Industrial Systems is continuing the transformation it In the Credit segment, GE Mortgage Insurance began in 2002 into a high-tech, faster-growth business continues to expand its services to lenders by leveraging by expanding its new platforms in sensors and security. smart underwriting and processing technologies The sensor and security markets, which are growing and growing in international markets. FGIC (Financial at two to three times GDP, do what Industrial Systems Guaranty Insurance Company), which provides bond has done since the 1880s: provide peace of mind by insurance, is coming off a year of double-digit volume protecting people, property and productivity. growth in serving municipalities, which issued debt at Sensors from Industrial Systems provide monitoring, record levels in 2002. This increased volume is expected protection and control in a variety of extreme environ- to translate into future revenue growth. FGIC is poised ments, from the stratosphere to the ocean floor-even to expand selectively in other credit enhancement inside the heart, where GE sensors are placed via markets as well.

catheters to help predict conditions for heart attacks Looking ahead, the focus of Insurance is on disci-and strokes. plined growth, strong risk management with reduced Industrial Systems is also helping to protect the volatility, and stringent capital and return management.

traveling public in airports with ion-based detection sys- www.gefinancial.com and www.ercgroup.com 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- Medical Systems lance systems. Industrial Systems is also exploring the use of advanced technologies in new fields such as PRESIDENT AND CEO: Joseph M. Hogan healthcare and elder care, and in combination with 2002 REVENUES: $9.0 billion heritage products, such as transformers and switchgear, to enhance their protective capabilities. With breakthrough innovations in medical diagnostics, www.geindustrialsystems.com 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- Plastics 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-m PRESIDENTAND CEO: John Krenicki, Jr.

2002 REVENUES: $5.2 billion ticed, enabling unprecedented integration among the devices and clinical systems in hospitals and other In 2003, GE Plastics will celebrate the 50th anniversary medical care facilities that will usher in a new era in of the invention of its LEXAN" polycarbonate resin by clinical workflow, physician confidence and patient completing the introduction of more new products outcomes. Service offerings are vital to hospital com- in a three-year span than at any other point in its history.

petitiveness, and Medical Systems provides a unique This unprecedented focus on new technology acceler-portfolio of services to help hospitals improve their ated in 2002 with the development of LEXAN° EXL productivity, asset utilization and efficiency. With the and NORYL PPX" resins for a variety of applications.

combination of technology and service offerings, In 2002, Plastics' breakthroughs excited the consumer Medical Systems continues to grow as a total solu- goods industry, where XYLEX' resin was chosen for tions provider to the healthcare industry. a new line of stain-resistant food containers and new www.gemedical.com 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 NBC soon bring increased screen brightness and better viewing to laptop users worldwide. Consumers will CHAIRMAN AND CEO: Robert C. Wright also see Plastics' LEXANe SLX resin in paint-free, high-2002 REVENUES: $7.1billion gloss automotive exteriors and its new GELOY' XTW resin in highly weatherable, colorful exterior home NBC plans to continue the double-digit growth trajectory siding this year.

it achieved in 2002, the best year in its history, through www.geplastics.com organic growth, continued ratings leadership and the expansion of new programming platforms, including Telemundo and entertainment cable network Bravo, r, Power Systems both of which NBC acquired in 2002. NBC expects to maintain its significant competitive advantage in the PRESIDENT AND CEO: John G. Rice key demographic for advertisers (adults 18-49) through 2002 REVENUES: $22.9 billion quality entertainment programming such as ER, Friends, Law & Order, The West Wing and Will & Grace, and Power Systems will face exciting challenges in 2003.

leading morning and late-night shows such as Today Shipments of large gas turbines in the U.S. will decline and The Tonight Show with Jay Leno. NBC's cable prop- after four years of record demand, but Power Systems erties should see significant growth largely through has positioned itself and investors for a soft landing sales and programming initiatives at CNBC and MSNBC. by expanding other businesses-services, oil and NBC's 28 television stations see great opportunities gas, distributed generation and wind energy-that to outpace the growth in local markets by continuing to will generate new growth in current and previously find new sources of business, centralizing and digitizing untapped markets.

functions, and maximizing the synergies created in Today, Power Systems has an enormous installed the six major markets in which the network owns both base of more than 1,500 advanced gas turbines, NBC and Telemundo stations. and multi-year service agreements that should deliver www.nbc.com 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, semiconductor industry in its quest for smaller, faster and it will expand further into inspection and services. chips by supplying larger-diameter, higher-purity quartz Power Systems' enhanced distributed power offerings materials. The opportunity to discover new materials, will provide low-cost energy alternatives that underscore new uses and new benefits continues to motivate GE's commitment to a cleaner environment. Specialty Materials' 9,000-plus employees.

In addition, Power Systems is tapping the power www.gespecialtymaterials.com 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- Transportation Systems lion in revenue in an industry growing 15-20% annually.

Common to these businesses is Power Systems' PRESIDENTAND CEO: CharleneT Begley focus on long-term growth through technological lead- 2002 REVENUES: $2.3 billion ership. Power Systems continues to invest aggressively in new turbine technology. In addition to launching three In 2003, Transportation Systems will begin delivering new turbine models in 2002, Power Systems also began to its customers the cleanest diesel electric locomo-test operations of its next-generation H System, which, tives ever made.

when it goes into commercial use, will be the largest GE Evolution Series locomotives meet 2005 U.S.

and most efficient power generating system ever. environmental regulations two years ahead of schedule, www.gepowersystems.com cutting emissions by 40% while significantly increasing fuel efficiency. Transportation Systems' six years of r~F1 Specialty Materials locomotive research and investment in new emissions technology has already yielded 25 U.S. patents, 13 patents pending and 18 invention disclosures. In 2003, fKlI LT21. k PRESIDENT AND CEO: William 2002 REVENUES: $2.4 billion A. Woodburn 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.

Water-more than 70% of the earth is covered Transportation Systems will also accelerate invest-with it, and 65% of what we use is wasted. Specialty ments inadvanced rail technologies such as information Materials' newest unit, GE Betz, has the conservation networks, signaling electronics, remote control locomo-of this fundamental material at its core. Using new tives and hybrid energy storage devices, all of which chemistries, and drawing upon GE technologies rang- will enable its global customers to manage their ing from ultrasound to remote digital sensors to operations with maximum efficiency.

advanced polymer materials, GE Specialty Materials is www.getransportationsystems.com 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 38 GE 2002 ANNUAL REPORT

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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 At the core of corporate governance, of course, corporate governance designed to strengthen its is the role of the board in overseeing how manage-oversight of management and to serve the long-term ment serves the long-term interests of share owners interests of share owners, employees and other and other stakeholders. An active, informed, inde-stakeholders. pendent and involved board is essential for ensuring Some basic ideas helped shape these changes: GE's integrity, transparency and long-term strength.

we should communicate externally the way we run GE As a result of the 2002 changes, 11 of GE's 17 directors internally; we should satisfy the spirit, not just the are "independent' under a strict definition, with a letter, of the new requirements; we should act promptly goal of two-thirds.

to implement changes without waiting for formal effec-tive dates that may be many months in the future.

DIRECTORS from left) EMPLOYEE DIRECTORS (pictured page 4) 4 SAM NUNN 4 ANDREW C. SIGLER 1.2,3, JEFFREY R. IMMELT Partner, King & Spalding, law firm, Atlanta, Ga. Retired Chairman of the Board and Chief Executive Chairman of the Board and Chief Executive Officer, Director since 1997. Officer, Champion International Corporation, paper General Electric Company. Director since 2000.

and forest products, Stamford, Conn. 4 RALPH S. LARSEN 3 DENNIS D. DAMMERMAN Director since 1984.

Former Chairman and CEO, Johnson & Johnson, Vice Chairman of the Board and Executive Officer, pharmaceutical, medical and consumer products, DOUGLAS A. WARNER 11112,3 General Electric Company, and Chairman, General New Brunswick, N.J. Director since 2002. Former Chairman of the Board, J.R Morgan Electric Capital Services, Inc. Director since 1994.

Chase & Co.The Chase Manhattan Bank, and ANDREA JUNG 2.3 GARY L. ROGERS 4 Morgan GuarantyTrust Company of NewYork, Chairman of the Board and Chief Executive Officer, Vice Chairman of the Board and Executive Officer, NewYork, N.Y.

Avon Products, Inc., cosmetics, NewYork, N.Y General Electric Company. Director since 2001.

Director since 1992.

Director since 1998.

4 ROCHELLE B. LAZARUS 3 4 ROBERT C.WRIGHT 4 ROGER S. PENSKE Vice Chairman of the Board and Executive Officer, Chairman and Chief Executive Officer, Ogilvy &

Chairman of the Board, Penske Corporation, General Electric Company, and Chairman and Chief MatherWorldwide, advertising, NewYork, N.Y.

PenskeTruck Leasing Corporation and United Auto Executive Officer, National Broadcasting Company, Director since 2000.

Group, Inc., transportation and automotive services, Inc. Director since 2000.

Detroit, Mich. Director since 1994. ALAN G. (A.G.) LAFLEY 3 3 Chairman, President and Chief Executive,The CLAUDIO X. GONZALEZ 1 2, Procter & Gamble Company, personal and house-Chairman of the Board and Chief Executive Officer, 1 Audit Committee hold products, Cincinnati, Ohio. Director since 2002.

Kimberly-Clark de Mexico, S.A. de C.V., Mexico City, 2 Management Development and and Director, Kimberly-Clark Corporation, consumer ANN M. FUDGE 1 4 Compensation Committee and paper products. Director since 1993. Former President, Krafts Beverages, Desserts & 3 Nominating and t Post Divisions and former Group Vice President, Corporate Governance Committee JAMES I. CASH, JR. 4 Kraft Foods, Inc., packaged foods,Tarrytown, N.Y. 4 Public Responsibilities Committee James E. Robison Professor of Business Director since 1999.

Administration, Harvard Graduate School of S Presiding Director Business, Boston, Mass. Director since 1997. KENNETH G. LANGONE 1,2,3 Chairman, President and Chief Executive Officer, ROBERT J. SWIERINGA 1 Invemed Associates, LLC, investment banking and Dean and Professor of Accounting, brokerage, NewYork, N.Y. Director since 1999.

Johnson Graduate School of Management, Cornell University, Ithaca, N.Y.

Director since 2002.

GOVERNANCE KEY GOVERNANCE ACTIONS TAKEN BY GE IN 2002 INCLUDE:

• GE's test of 'independence' for members of

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

Committee and the Nominating and Corporate Governance Committee is stricter than required by

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

• GE has appointed a presiding director who will lead DSUs will be 60% of the annual director compensation independent meetings of non-employee directors at and will not pay out until one year after a director leaves least three times a year. the board. When directors exercise existing stock options, they will be subject to the same one-year holding period

• Each non-employee director will visit two of GE's that applies to GE senior management.

businesses each year without the presence of corpo-rate management so that directors can have direct exchanges with operating leadership.

MEETINGS The GE board held 13 meetings in 2002. In December, developed and recommended for approval by the full the board voted to increase GE's quarterly dividend board the governance principles that the board adopted, for the 2 7h consecutive year. The Audit Committee, effective January 1, 2003. These principles, and related composed of outside directors, held seven meetings materials, are published in the Governance section to review the activities and independence of GE's of the GE website at www.ge.com. The committee external auditors and the activities of GE's internal audit also reviewed board candidates and recommended staff. It also reviewed GE's financial reporting process, the structure and membership of board committees.

financial and disclosure controls, and compliance with Three new independent directors-A.G. Lafley, Ralph key GE policies and applicable laws. The Management S. Larsen and Robert J. Swieringa-joined the board Development and Compensation Committee, composed in 2002. The Public Responsibilities Committee, in one of outside directors, reviewed in nine meetings all execu- meeting, evaluated environmental compliance. The tive compensation plans, policies and practices, board determined that the functions of its Finance, changes in executive assignments and responsibilities, Operations, and Technology and Science committees and key succession plans. The Nominating and would be most effectively performed by the full board, Corporate Governance Committee, in three meetings, 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

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MANAGEMENT'S DISCUSSION OF FINANCIAL RESPONSIBILITY One of our most crucial management objectives is to inquire extensively about compliance. Our strong ensure that our investors are well informed. We take full compliance culture reinforces these efforts by requiring responsibility for meeting this objective, adopting appro- employees to raise any compliance concerns and by priate accounting policies and devoting our full, unyielding prohibiting retribution for doing so.

commitment to ensuring that those policies are applied Visibility to Investors properly and consistently. We make every effort to report in a manner that is relevant, complete and clear, and we We are keenly aware of the importance of full and open welcome and evaluate each suggestion from those who presentation of our financial position and operating use our reports. results. To facilitate this, we maintain a Disclosure Committee, which includes senior executives who pos-Rigorous Management Oversight sess exceptional knowledge of our businesses and our Members of our corporate leadership team review each investors. We have asked this committee to evaluate the of our businesses constantly, on matters that range from fairness of our financial disclosures, and to report their overall strategy and financial performance, to staffing findings to us and to the Audit Committee. We further and compliance. Our business leaders constantly monitor ensure strong disclosure by holding more than 250 analyst real-time financial and operating systems, enabling us to and investor meetings every year, and by communicating identify potential opportunities and concerns at an early all material information covered in those meetings to the stage, and positioning us to develop and execute rapid public. In testament to the effectiveness of our stringent responses. Our Board of Directors oversees manage- disclosure policies, investors surveyed annually by Investor ment's business conduct, and our Audit Committee, which Relations magazine have awarded GE Best Overall consists entirely of independent directors, oversees our Investor Relations Program by a mega-cap company for system of intemal financial controls and disclosure controls. six consecutive years, and 15 awards in other categories We have taken a number of recent governance actions in the past seven years. We are in regular contact with intended to enhance investor trust and improve the representatives of the major rating agencies, and our debt board's overall effectiveness. These actions include continues to receive their highest ratings. We welcome increasing to a majority the number of independent direc- the strong oversight of our financial reporting activities by tors, naming a Presiding Director who will conduct at our independent audit firm, KPMG LLF who are engaged least three meetings per year with non-employee direc- by and report directly to the Audit Committee. Their tors, requiring each non-employee director to visit two of report for 2002 appears on page 45.

GE's businesses annually to meet directly with operating Great companies are built on the foundation of reliable leadership and voluntarily expensing our stock options. financial information and compliance with the law. For GE, the financial disclosures made in this report are a vital part Dedication to Controllership of that foundation. We present this information proudly, We maintain a dynamic system of disclosure controls with the expectation that those who use it will understand and procedures-including internal controls over financial our company, recognize our commitment to performance reporting-designed to ensure reliable financial record- with integrity, and share our confidence in GE's future.

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 Jeffrey R.Immelt and the Audit Committee oversee the scope and results Chairman of the Board and of these reviews. We also maintain a set of integrity poli- Chief Executive Officer 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 Keith S. Sherin of GE's more than 300,000 global employees, holding SeniorVice President, Finance, and each of these individuals-from our top management Chief Financial Officer on down-personally accountable for compliance with them. Our integrity policies serve to reinforce key February 7, 2003 employee responsibilities around the world, and we 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 As discussed in note 1 to the consolidated financial position of General Electric Company and consolidated statements, GE in 2002 changed its methods of account-affiliates ("GE") as of December 31, 2002 and 2001, and ing for goodwill and other intangible assets and for stock-the related statements of earnings, changes in share based compensation, and in 2001 changed its methods owners' equity and cash flows for each of the years in of accounting for derivative instruments and hedging the three-year period ended December 31, 2002. These activities and impairment of certain beneficial interests consolidated financial statements are the responsibility in securitized assets.

of GE management. Our responsibility is to express an Our audits were made for the purpose of forming opinion on these consolidated financial statements based an opinion on the consolidated financial statements taken on our audits. as a whole. The accompanying consolidating information We conducted our audits in accordance with auditing appearing on pages 73, 75 and 77 is presented for pur-standards generally accepted in the United States of poses of additional analysis of the consolidated financial America. Those standards require that we plan and statements rather than to present the financial position, perform the audit to obtain reasonable assurance about results of operations and cash flows of the individual whether the financial statements are free of material entities. The consolidating information has been sub-misstatement. An audit includes examining, on a test jected to the auditing procedures applied in the audits of basis, evidence supporting the amounts and disclosures the consolidated financial statements and, in our opinion, in the financial statements. An audit also includes assess- is fairly stated in all material respects in relation to the ing the accounting principles used and significant esti- consolidated financial statements taken as a whole.

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 K<PMPci LLS appearing on pages 72, 74, 76, 57, and 78-109 present KPMG LLP fairly, in all material respects, the financial position of Stamford, Connecticut General Electric Company and consolidated affiliates at December 31, 2002 and 2001, and the results of their February 7,2003 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.

a GE 2002 ANNUAL REPORT 45

MANAGEMENT'S DISCUSSION AND ANALYSIS Except as otherwise noted, the analysis in the remain-der of this section presents the results of GE (with GECS Overview included on a one-line basis) and GECS. See the Segment General Electric Company's consolidated financial state- Operations section on page 50 for a more detailed dis-ments represent the combination of the industrial cussion of the businesses within GE and GECS.

manufacturing and product services businesses of General Electric Company (GE) and the financial services G5 o;.! i WFv-ii',s were $79.0 billion in 2002, compared businesses of General Electric Capital Services, Inc. with $74.0 billion in 2001 and $69.5 billion in 2000.

(GECS or financial services). GE sales of goods and services were $73.3 billion We present Management's Discussion of Operations in 2002, an increase of 8% from 2001, which in turn was in three parts: Consolidated Operations, Segment 7% higher than in 2000. Volume was about 9% higher Operations and International Operations. in 2002, reflecting double-digit increases at Power Systems, NBC, Medical Systems, Specialty Materials and Consolidated Operations Industrial Systems, partially offset by decreases at Aircraft We achieved record earnings in 2002, demonstrating the Engines and Transportation Systems. Selling prices were benefits of our diverse business portfolio and continuing lower across most segments other than NBC and Power emphasis on globalization, technology, growth in services, Systems. The net effect in 2002 of exchange rates on digitization and the Six Sigma Quality initiative. sales denominated in currencies other than the U.S. dol-Our consolidated revenues were $131.7 billion in 2002, lar was slightly positive. Volume in 2001 was about 7%

an increase of 5% over revenues of $125.9 billion in 2001, higher than in 2000, with selling price and currency reflecting a 7% increase in our industrial businesses and effects both slightly negative.

a slight decrease in financial services. Our consolidated GE/S&P CUMULATIVE DIVIDEND GROWTH revenues of $125.9 billion in 2001 decreased 3% from SINCE 1997

$129.9 billion in 2000, reflecting a 6% increase in industrial business revenues partially offsetting a 12% decrease 114% ----- -----------------

in financial services-the result of significant strategic 95 repositioning activities.

Our earnings before accounting changes increased 76 to a record $15.1 billion in 2002, a 7% increase from 57

$14.1 billion in 2001. Per-share earnings before accounting changes increased to $1.51 during 2002, up 7% from the 38 prior year's $1.41. (Except as otherwise noted, when we 19 refer to "per-share earnings" or "earnings per share:' we mean earnings per share on a diluted basis.) 98 99 00 01 02 Contributions from acquisitions affect earnings com- 51 GE O S&P 500 parisons. Our consolidated net earnings in 2002, 2001 and 2000 include approximately $636 million, $225 mil-lion and $345 million, respectively, from acquired busi- For purposes of the financial statement display of nesses. We integrate acquisitions as quickly as possible sales and costs of sales on pages 72 and 73, "goods" is and only earnings during the first 12 months following required by U.S. Securities and Exchange Commission the quarter in which we complete the acquisition are regulations to include all sales of tangible products, and considered to be related to acquired businesses. "services" must include all other sales, including broad-casting and information services activities. We refer to 1 O i s-PN SHAW.'. ) ,.:Nl's -CU Y

'f(excluding sales of both spare parts (goods) and repair services as the effect of accounting changes) was 25.8% in 2002, sales of "product services;' which is an important part of compared with 271 % in 2001, which was about the our operations. Sales of product services were $20.8 bil-same as in 2000. lion in 2002, an 11% increase over 2001. Increases in i

D`!' .'Arl:/~ .'.

M-Et t;lii.iia .19 ,'dVPer-share div- product services in 2002 and 2001 were widespread, led idends of $0.73 were up 11% from 2001, following a by continued strong growth at Power Systems, Medical 16% increase from the preceding year. We have rewarded Systems andTransportation Systems. Operating margin our share owners with 27 consecutive years of dividend from product services was approximately $5.2 billion, growth. Our dividend growth for the past five years has up 11% from 2001. The increase reflected improvements significantly outpaced dividend growth of companies in in most product services businesses and was led by the Standard & Poor's 500 stock index. Power Systems and Medical Systems.

46 GE 2002 ANNUAL REPORT C or

-,r- ,R,corrE, earned from a wide variety of sources, that ceased at the beginning of 2002 ($0.6 billion in 2001) was $1.1 billion, $0.4 billion and $0.5 billion in 2002, 2001 and lower taxes ($0.6 billion).

and 2000, respectively. Other income in 2002 included GECS earnings before accounting changes in 2001 a $0.6 billion pre-tax gain resulting from NBC's exchange increased 8% from 2000. Principal factors in the 2001 of certain assets for the cable network Bravo and a increase were strong productivity ($0.7 billion) and lower

$0.5 billion pre-tax gain on the sale of 90% of Global taxes ($0.5 billion) partially offset by reduced earnings eXchange Services. at GE Global Insurance Holding Corporation (GE Global Insurance Holding), the parent of Employers Reinsurance c f. iorAo,W iirIvi+Mtws decreased slightly to $58.2 billion in Corporation ($0.5 billion) reflecting the events of 2002, following a 12% decrease to $58.4 billion in 2001.

September 11, 2001, losses and lower realized gains on The largest single factor affecting 2002 revenues was financial instruments. Excluding effects of Paine Webber growth from increases in acquisitions and originations-Group, Inc. (PaineWebber) in 2000 and Americom in primarily at Commercial Finance. This growth was more 2001, such pre-tax gains were lower in 2001 by $0.5 than offset by the absence of revenues from Americom billion ($0.3 billion after tax). Pre-tax gains on sales of after its sale in late 2001 ($1.7 billion), increased esti-investment securities declined in 2001 by $0.5 billion, mates of prior-year loss events and lower investment of which $0.4 billion related to GE Equity; other GE gains at Insurance ($0.9 billion), lower securitization Equity gains were $0.8 billion lower; while gains on activity in all segments ($0.6 billion), and lower market securitizations were up $0.8 billion from 2000.

interest rates.

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

$138 - .............

The Six Sigma Quality initiative continues to reduce rework, 115 ........... ..... ---- ....

simplify processes and reduce direct material costs.

92 ...... .... ... .. 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 98 99 00 01 02 include improved customer service, expanded product and service offerings and increased operating efficiency

i. GE GECS for us and our customers.

The three principal reasons for the decrease in revenues Our principal U.S. postretirement benefit plans (plans) in 2001 compared with 2000 were: the deconsolidation contributed $806 million to pre-tax earnings in 2002, or of Montgomery Ward LLC (Wards) and resulting absence 3.5% of earnings before accounting changes, compared of sales in 2001 ($3.2 billion); the effects of rationalization with $1,480 million (6.8%) and $1,266 million (6.5%) in of operations and market conditions at ITSolutions 2001 and 2000, respectively. Considering current and

($2.9 billion); and reduced surrender fees ($1.2 billion) expected asset allocations, as well as historical and associated with the planned run-off of restructured expected returns on various categories of assets in which insurance policies of Toho Mutual Life Insurance our plans are invested, we assumed that long-term returns Company (Toho) at GE Financial Assurance. Additional on our pension plan assets would be 8.5% in 2002 and information about other revenue items is provided in 9.5% in 2001 and 2000. Reducing the assumed return by the Segment Operations section on page 50. 100 basis points in 2002 increased annual pension costs Despite good growth in underlying operations, GECS by about $480 million pretax. Of course, actual annual earnings before accounting changes of $4.6 billion in investment returns can be extremely volatile. Because 2002 were down 17% from 2001. The Insurance segment this short-term market volatility occurs in context of more than accounted for the decline, with $2.3 billion the long-term nature of pension plans, U.S. accounting after tax of adverse development and adjustments to principles provide that differences between assumed estimates of prior-year loss events. Realized investment and actual returns are recognized over the average gains and gains on asset securitization declined by $0.8 future service of employees.

billion after tax. Partial offsets were goodwill amortization GE 2002 ANNUAL REPORT 47

MANAGEMENT'S DISCUSSION AND ANALYSIS Two other significant factors affecting postretirement lower base cost productivity primarily at Power Systems, benefit costs are the discount rate used to measure the Industrial Systems and Specialty Materials. In 2001, total present value of plan obligations and changes in postre- cost productivity was 2.2% as productivity in Power tirement healthcare costs. We reduced our discount rate Systems and Medical Systems was partially offset by from 7% to 71X% for 2002, a reduction that increased negative productivity across several businesses, particu-our costs by about $90 million pretax. Postretirement larly Plastics, reflecting volume declines.

healthcare costs also increased substantially in 2002.

(E I E.TI a it R jNrCi. C! 'S in 2002 See notes 5 and 6 for additional information about fund-amounted to $569 million, down 30% from $817 million ing status, components of earnings effects and actuarial in 2001, which was about the same as 2000. The decrease assumptions of the plans. See pages 70-71 for discus-in 2002 was primarily the result of lower interest on tax sion of pension assumptions.

liabilities (see page 49). During 2001, the benefits of Our postretirement benefit costs will likely increase lower average interest rates and lower average borrowing in 2003 for a number of reasons, including a reduction levels were partially offset by increased provisions in the discount rate from 7% to 6%, amortization of investment losses and sustained increases in healthcare for interest on tax liabilities.

costs. We continue to expect that our plan assets will L-'-Cv 1 N RErST -NT ON Oi.RtROWN; sin 2002 was earn 8%, on average, over the long term. Our labor $9.9 billion, compared with $10.6 billion in 2001 and agreements with various unions expire in June 2003, and $11.1 billion in 2000. Changes in both years reflected the results of union negotiations, which are uncertain, could effects of lower interest rates, partially offset by the affect postretirement benefit costs in 2003 and beyond. effects of higher average borrowings used to finance We will not make any contributions to the GE Pension Plan in 2003. To the best of our ability to forecast the GECS BORROWINGS next five years, we do not anticipate making contributions (In billions) to that Plan so long as expected investment returns are

$276 achieved. The present funding status provides assurance of benefits for our participants, but future effects on oper- 230 ating results and funding depend on economic conditions 184 and investment performance.

138 1 i, ls sales of goods and services less the costs of goods and services sold, as well as selling, gen- 92 eral and administrative expenses. GE operating margin 46 . 0 was 19.1% of sales in 2002, down from 19.6% in 2001 O ° 0 0 and about the same as the comparable 18.9% in 2000. 98 99 00 01 02 The decline in 2002 was attributable to the Materials seg- Senior notes ment and the Lighting business in Consumer Products Commercial paper and also reflected restructuring and other charges of O Commited credit ines e Other

$0.6 billion, partiaily offset by improvements in operating margins at Power Systems and NBC. Restructuring and acquisitions and asset growth. The average composite other charges included $0.4 billion for rationalizing certain effective interest rate was 4.07% in 2002, compared with operations and facilities of GE's worldwide industrial busi-5.11% in 2001 and 5.89% in 2000. In 2002, average nesses. The improvement in operating margin in 2001 was assets of $455.2 billion were 18% higher than in 2001, led by Power Systems and Aircraft Engines, reflecting which in turn were 7% higher than in 2000. See page 62 increasing benefits from the digitization, product services for a discussion of interest rate risk management.

and Six Sigma Quality initiatives. Reported operating margin was 18.6% in 2000, including the costs of a one- FINAN.NG .,I'iADDS. Over the last three years, market time retirement benefit provision associated with the interest rates have been more volatile than GECS average labor agreement concluded in that year. composite effective interest rates, principally because of J .. (sales in relation to costs, both the mix of effectively fixed-rate borrowings in the GECS on a constant dollar basis) for GE in 2002 and 2001 was financing structure. Yields on our portfolio of fixed and floating-rate financial products have behaved similarly; about 2%. Variable cost productivity improvements (led by Industrial Systems and Plastics) and base cost produc- consequently, financing spreads have remained relatively tivity improvements at Plastics were more than offset by flat over the three-year period.

48 GF 2002 A.NNUAIREPORT C03-

. ... 11-..... -... .

INCOME TAXES on consolidated earnings before accounting The result of our applying the new rules as of changes were 19.9%, compared with 28.3% in 2001 and January 1, 2002, was a non-cash charge of $1.2 billion 31.0% in 2000. A more detailed analysis of differences ($1.0 billion after tax, or $0.10 per share), which we between the U.S. federal statutory rate and the consoli- reported in the caption "Cumulative effect of accounting dated rate, as well as other information about our income changes" Substantially all of the charge elates to the tax provisions, is provided in note 7 GECS IT Solutions business and the GECS GE Auto and The effective tax rate of GE decreased to 20.2% in Home business. Factors contributing to the impairment 2002 from 22.9% in 2001 and 23.0% in 2000. During charge were the difficult economic environment in the 2002, GE entered into settlements with the U.S. Internal information technology sector and heightened price com-Revenue Service (IRS) concerning certain export tax petition in the auto insurance industry. After the required benefits. The result of those settlements, included in the accounting changes, our 2002 earnings and earnings per line "Tax on international activities including exports" in share were $14.1 billion and $1.41, respectively, com-note 7, was a decrease in the GE effective tax rate of pared with $13.7 billion and $1.37, respectively, in 2001.

approximately two percentage points. Also during 2002, In 2002, we adopted the stock option expense GE entered into a tax advantaged transaction to exchange provisions of SFAS 123, Accounting for Stock-Based certain assets for the cable network Bravo. The effect of Compensation. This accounting change did not result in this transaction on the GE effective tax rate is included a cumulative effect charge, but increased 2002 costs in the line "All other-net" in note 7 by $45 million and reduced net earnings by $27 million.

GECS effective tax rate decreased to negative 1.7% in See note 1 on page 81 for additional information.

2002 from 19.8% in 2001 and 26.9% in 2000. The 2002 The cumulative effect of accounting changes in 2001 effective tax rate reflects effects of pre-tax losses at GE related to the adoption, as of January 1, 2001, of SFAS Global Insurance Holding (ERC) and GE Equity, 133, Accounting for Derivative Instruments and Hedging the effects of lower taxed earnings from international Activities, as amended, and the consensus of the FASB's operations and favorable tax settlements with the IRS dis- Emerging Issues Task Force on Issue 99-20, Recognition cussed below. Pre-tax losses of $2.9 billion at ERC and of Interest Income and Impairment on Purchased and

$0.6 billion at GE Equity reduced the effective tax rate Retained Beneficial Interests in Securitized Financial of GECS by approximately 17 percentage points. Assets. Adoption of these standards resulted in a one-During 2002, as a result of revised IRS regulations, time, non-cash charge that reduced our 2001 earnings GECS reached a settlement with the IRS allowing the by $444 million ($0.04 per share). After these required deduction of previously realized losses associated with the accounting changes, our 2001 eamings and earnings per prior disposition of Kidder Peabody. Also during 2002, a share were $13.7 billion and $1.37, respectively, compared settlement was reached with the IRS regarding the treat- with $12.7 billion and $1.27, respectively, in 2000.

ment of certain reserves for obligations to policyholders on life insurance contracts in the GE Financial Assurance busi-MAJOR PROVISIONS OF NEW ACCOUNTING STANDARDS that will affect us follow.

ness. The benefits of these settlements, which reduced SFAS 143, Accounting for Asset Retirement Obligations, the GECS rate approximately four percentage points requires recognition of the fair value of obligations associ-(excluding the ERC and GE Equity losses), are included in ated with the retirement of long-lived assets when there the line "All other-net" in note 7 is a legal obligation to incur such costs. This amount is The 2001 effective tax rate of GECS reflected the accounted for like an additional element of cost, and, like effects of lower taxed earnings from international opera-other cost elements, is depreciated over the correspon-tions and certain other transactions (see note 7). That rate ding asset's useful life. SFAS 143 primarily affects our also included effects of a $0.6 billion pre-tax charge accounting for costs associated with the future retire-related to the events of September 11, 2001, principally ment of facilities used for storage and production of at ERC, which reduced the GECS effective tax rate by one nuclear fuel. On January 1, 2003, we recorded a liability percentage point.

for the expected present value of future retirement NEW ACCOUNTING STANDARDS. The Financial Accounting costs of $363 million, increased net property, plant and Standards Board's (FASB) Statement of Financial equipment by $24 million and recognized a one-time, Accounting Standards (SFAS) 142, Goodwill and Other cumulative effect charge of $215 million (net of tax).

Intangible Assets, generally became effective for us on This accounting change will not involve cash and will have January 1, 2002. Under SFAS 142, goodwill is no longer only a modest effect on future earnings.

amortized but is tested for impairment using a fair value methodology. We stopped amortizing goodwill effective January 1, 2002.

GE 2002 ANNUAL REPORT 49

MANAGEMENT'S DISCUSSION AND ANALYSIS In November 2002, the FASB issued Interpretation losses, responsibility for which precedes the current busi-No. (FIN) 45. Guarantor's Accounting and Disclosure ness management team. Segment profit excludes any Requirements for Guarantees, Including Indirect Guaran- goodwill amortization, the effects of pensions and other tees of Indebtedness of Others. Among other things, the retiree benefit plans and accounting changes. Segment Interpretation requires guarantors to recognize, at fair profit excludes or includes interest and other financial value, their obligations to stand ready to perform under charges and segment income taxes according to how certain guarantees. FIN 45 is effective for guarantees segment management is measured-excluded in deter-issued or modified on or after January 1, 2003. It will mining operating profit for Aircraft Engines, Consumer have an inconsequential effect on our financial position Products, Industrial Products and Systems, Materials, and future results of operations. NBC, Power Systems and Technical Products and In January 2003, the FASB issued FIN 46, Consolidation Services, but included in determining net earnings for of Variable Interest Entities, which we intend to adopt Commercial Finance, Consumer Finance, Equipment on July 1, 2003. FIN 46's consolidation criteria are based Management, Insurance and All Other GECS.

on analysis of risks and rewards, not control, and repre-AIRCRAFT ENGINES reported a 2% decrease in revenues in sent a significant and complex modification of previous 2002 as commercial engine pricing pressures and reduced accounting principles. FIN 46 represents an accounting commercial product services revenues combined with change, not a change in the underlying economics of lower industrial units were substantially offset by asset sales. Under its provisions, certain assets previ-increased military sales. Operating profit was 4% lower, ously sold to our special purpose entities (SPEs) could primarily as a result of lower pricing for commercial be consolidated on our books, and, if consolidated, any assets and liabilities now on our books related to those OPERATING PROFIT OF GE SEGMENTS SPEs would be removed. In the event we consolidated lin billions) these assets, we would not reacquire their legal owner-ship, nor would our legal rights and obligations change. $15.0 Any consolidated assets would earn returns substantially 12.5 ------------..... . -

like the returns we would have earned had we never f1 sold them. Even assuming the legal provisions controlling these SPEs are not changed between now and the July 1 7.5 effective date of FIN 46, the very complexity of the new consolidation rules and their evolving clarification make 5.0----

forecasting that July 1 effect impracticable. It is also clear that many alternative structures for sales of financial 2.5 assets would continue to be reported as sales under 9S 99 00 01 02 FIN 46 with the assets qualifying for sale not consoli-dated. We are evaluating whether characteristics of those engines, lower product services volume from reduced structures can cost-beneficially be applied to our arrange-flight hours and higher labor costs, partially offset by ments before the July 1 effective date. Further informa-lower material costs and productivity. Revenues and tion about entities that potentially fall within the scope of operating profit increased 6% and 7%, respectively, in FIN 46 is provided in note 29.

2001, reflecting higher volume in product services and higher volume of commercial engines and aero-derivative Segment Operations products. The improvement in operating profit was also REVENUES AND SEGMENT PROFIT FOR OPERATING SEGMENTS attributable to productivity.

are shown on page 57 For additional information, includ- In 2002, revenues from sales to the U.S. government ing a description of the products and services included in were $2.2 billion, compared with $1.9 billion in 2001.

each segment, see pages 108 and 109. Aircraft Engines received orders of $11.6 billion in Segment profit is determined based on internal per- 2002, compared with $12.1 billion in 2001. The $11.6 bil-formance measures used by the Chief Executive Officer lion total backlog at year-end 2002 comprised unfilled to assess performance of each business. Generally, the product orders of $9.8 billion (of which 43% was sched-results of decisions made by the Chief Executive Officer uled for delivery in 2003) and product services orders of regarding unusual matters are excluded from internal $1.8 billion scheduled for 2003 delivery. Comparable business measurements. Historically, such matters have December 31, 2001, total backlog was $11.2 billion.

included charges for restructuring; rationalization or other similar expenses; and litigation settlements or other 50 GE 2002 ANNUAL REPORT

COMMERCIAL FINANCE acquisitions and origination growth, productivity across

~~~~~~~~~~~..

(Inmillions) . ........2002

_................. 2001............

........ ....................... 2000 all businesses and growth in lower taxed earnings from international operations, partially offset by increased REVENUES Commercial Equipment credit losses and lower securitization activity at CF and Financing $ 5,005 $ 4,535 $ 3,634 Commercial Equipment Financing. The 2001 increase Real Estate 2,160 1,919 1,977 reflected securitization gains, asset growth from acquisi-Commercial Finance (CF) 2,350 1,786 1,617 tions at Commercial Equipment Financing, CF and Vendor Structured Finance Group 1,243 1,093 999 Financial Services, origination growth at Structured Aviation Services 2,694 2,173 1,962 Finance Group, and higher asset gains and productivity Vendor Financial Services 2,342 2,095 1,792 at Real Estate. Other Commercial Finance principally Other Commercial Finance 246 279 1 includes 2002 revenues of $246 million and net earnings Total revenues $16,040 $13,880 $11,982 of $62 million of the Healthcare Financial Services busi-NET EARNINGS ness that we acquired in October 2001, offset by certain Commercial Equipment costs related to our acquisition of Heller Financial, Inc.

Financing $ 786 $ 642 $ 537 Real Estate 618 489 374 CONSUMER FINANCE Commercial Finance (CF) 587 368 290 (Inmillions) 2002 2001 2000 Structured Finance Group 479 386 344 ............--

Aviation Services 439 475 479 REVENUES Vendor Financial Services 369 320 274 Global Consumer Finance $ 6,489 $5,561 $5,429 Other Commercial Finance (93) 44 (4) Card Services 3,777 3,947 3,891 Total net earnings S 3,185 $ 2,724 S 2,294 Total revenues $10,266 $9,508 $9,320 NET EARNINGS 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 Global Consumer Finance $ 1,255 $1,033 $ 856 in this segment for internal purposes. Such charges, included in All Other Card T. _ Services . earning.... .._...... _.... 675 . .......... $.1,702. ...669 .. ._$1,3_ 520 GECS, related to restructuring various global operations and to provisions for disposition of assets. Total net earnings S 1,930 $1,702 S1,376 Charges of $57 million in 2001 were not allocated to this segment December 31 (n millions) 2002 2001 because we did not include these costs in measuring the performance of businesses in this segment for internal purposes. Such charges, included TOTAL ASSETS in All Other GECS, related to unprofitable financing product lines that Commercial Equipment have been exited.

Financing $ 57,764 $ 53,386 Real Estate 30,041 23,861 December 31 (Inmillions) 2002 2001 Commercial Finance ICF) 26,897 25,668 TOTAL ASSETS Structured Finance Group 19,293 17,130 Global Consumer Finance $58,310 $43,893 Aviation Services 30,512 24,546 Card Services 18,655 19,085

..T tal a ................................................ ...... ..........

Vendor Financial Services 23,761 20,941 Total assets $76,965 $62,978 Other Commercial Finance 7,498 5,723 Financing receivables -net $63,254 $47,891 Total assets $195,766 $171,255 Financing receivables -net $128,277 $117,540 Consumer Finance revenues increased 8% following a 2%

increase in 2001. Revenues increased in 2002 primarily as Commercial Finance revenues increased 16% in both a result of acquisitions and increased international origina-2002 and 2001. The 2002 increase principally reflected tions, partially offset by lower securitization activity at acquisitions and increased originations across substan-Card Services. The revenue performance in 2001 tially all businesses, partially offset by reduced market reflected the post-acquisition revenues from acquired interest rates and lower securitization activity at CF and businesses and volume growth. Net earnings increased Commercial Equipment Financing. The 2001 increase 13% following a 24% increase in 2001, as a result of resulted from acquisition and volume growth at origination growth, acquisitions, growth in lower taxed Commercial Equipment Financing, Vendor Financial earnings from international operations and productivity Services, Aviation Services and CF, including the acquisi-benefits, partially offset by lower securitization activity tion of Heller Financial, Inc. in October, volume growth at Card Services. The 2001 increase reflected produc-at Structured Finance Group and increased securitization tivity at Global Consumer Finance and volume growth activity. Net earnings increased 17% in 2002 and 19%

at Card Services.

in 2001. The 2002 increase in net earnings resulted from GE 2002 ANNUAL REPORT 51

MANAGEMENT'S DISCUSSION AND ANALYSIS CONSUMER PRODUCTS benefits frorn a restructuring of the Penske joint venture, (in millions) 2002 2001 2000 and recognized asset impairments atTransport REVENUES International PoolModular Space and GE European Appliances $6,072 $5,810 $5,887 Equipment Management.

Lighting 2,384 2,625 2,830 INDUSTRIAL PRODUCTS AND SYSTEMS Total revenues $8,458 $8,435 $8,717 (in millionsl 2002 2001 2000 OPERATING PROFIT ....... .. _..

Appliances $ 451 $ 406 $ 439 REVENUES Lighting 44 242 440 Industrial Systems $4,968 $4,440 $4,469 Total operating profit $ 495 $ 648 $ 879 Transportation Systems 2,314 2,355 2,263 GE Supply 2,473 2,302 2,159 Total revenues $9,755 $9,097 $8,891 Consumer Products revenues were flat in 2002 as 5%

OPERATING PROFIT higher Appliances revenues, reflecting success of new Industrial Systems S 488 $ 527 $ 596 products, were offset by a 9% decline in Lighting rev-Transportation Systems 402 400 436 enues. Consumer Products pricing was down during the GE Supply 109 99 80 year. Operating profit decreased 24%, reflecting adverse Total operatig p t -, $ .. 0......2. . ......... .......

..... .$...1.........

Total operating profit S 999 S1.026 S1.112 results in Lighting, particularly from lower prices, higher base costs and higher charges resulting from customer credit issues. Consumer Products revenues in 2001 Industrial Products and Systems reported a 7% increase were 3% lower than in 2000 as price erosion at Appli- in revenues and 3% lower operating profit as volume ances and Lighting offset modest market share gains at increased and selling prices declined across the segment.

Appliances. Operating profit decreased by 26% in 2001, Industrial Systems revenues rose 12% compared with largely as a result of lower selling prices at Appliances 2001, but operating profit declined 7%, reflecting the and Lighting and increased program spending on new negative effects of lower selling prices, partially offset by products at Appliances. the positive effects of acquisitions and productivity.

Transportation Systems revenues were 2% lower and EQUIPMENT MANAGEMENT operating profit was about the same as in 2001, as prod-(in millionsl 2002 2001 _ 2000 uct services revenues, strong variable cost productivity and lower materials costs offset the effects of lower vol-REVENUES $4,254 $4,401 $4,969 ume and pricing pressures. Industrial Products and NET EARNINGS $ 311 $ 359 $ 465 Systems revenues in 2001 were 2% higher than in 2000, Charges of $17 million in 2001 were not allocated to this segment because as higher product services revenues atTransportation we did not include these costs in measuring the performance of busi-nesses in this segment for internal purposes. Such charges, included in All Systems, including acquisitions, more than offset selling Other GECS, related to the restructuring of various global operations. price decreases across the segment and lower volume at Industrial Systems. Operating profit decreased 8% in December 31 in millionsl 2002 2001 2001 primarily as a result of the decline in selling prices Total assets $26,117 $25,410 and cost inflation.

Equipment leased to others $ 9,416 $ 9,749 Transportation Systems received orders of $2.8 billion in 2002, compared with $2.6 billion in 2001. The $2.1 bil-Equipment Management businesses experienced busi- lion total backlog at year-end 2002 comprised unfilled ness-wide declining utilization rates throughout the product orders of $1.6 billion (of which 53% was sched-period, resulting in both lower revenues and lower earn- uled for delivery in 2003) and product services orders ings. Equipment Management realized productivity bene- of $0.6 billion scheduled for 2003 delivery. Comparable fits in 2002, partially offsetting the utilization's effect on December 31, 2001, total backlog was $1.7 billion.

earnings. In 2001, Equipment Management realized tax 52 GE2002 ANNUAL REPORT

INSURANCE of certain reserves for obligations to policyholders on life

~~~~~~~~~~.......

(in millions) . ....... . _.....

2002 2001 2000 insurance contracts at GE Financial Assurance.

REVENUES The level of reported claims activity at ERC related to GE Financial Assurance $12,311 $12,826 $12,888 prior-year loss events, particularly for liability-related expo-Mortgage Insurance 1,090 1,075 973 sures underwritten in 1997 through 2001, accelerated at GE Global Insurance a rate higher than we had anticipated. In 2002, considering Holding (ERC) 9,432 9,453 10,223 the continued acceleration in reported claims activity, we Other Insurance 457 536 682 concluded that our best estimate of ultimate losses was Total revenues $23,296 $23,890 $24,766 higher in the range of reasonably possible loss scenarios NET EARNINGS than previously estimated. Accordingly, we recognized a GE Financial Assurance $ 844 $ 726 $ 672 fourth quarter pre-tax charge of $2.5 billion to increase Mortgage Insurance 460 407 356 recorded reserves to reflect the revised indications of GE Global Insurance remaining liability. The more significant adverse develop-Holding (ERC) (1,827) 32 505 Other Insurance 214. 169 109 ment was in hospital medical malpractice ($300 million),

product liability 1$300 million), professional liability Total net earnings $ (509) $ 1,334 $ 1,642

($250 million), umbrella liability 1$200 million), workers Charges of $306 million in 2001 were not allocated to this segment compensation $200 million), individual liability ($150 mil-because we did not include these costs in measuring the performance of businesses in this segment for internal purposes. Such charges, lion) and asbestos ($150 million). With amounts recognized included inAll Other GECS. related to unprofitable insurance products in previous quarters of 2002, our overall 2002 pre-tax and lines that have been exited and to provisions for disposition of charge for adverse development amounted to $3.5 billion.

nonstrategic investments.

Insurance loss provisions are based on the best available estimates at a given time. As described on page 70 under Insurance revenues decreased 2% in 2002, because of the caption "Insurance Liabilities and Reserves, these the ongoing planned run-off of acquired policies atToho estimates will be adjusted in the future as required.

and lower realized investment gains. Segment revenues We have continued our rigorous commitment to declined 4% in 2001 on reduced net premiums earned improved underwriting initiatives at ERC aimed at ensur-at ERC, reflecting the events of September 11, 2001, ing that consistent and diligent underwriting standards decreased investment income, and the planned run-off are applied to all risks. Throughout 2002, we have been of restructured insurance policies at Toho. These factors disciplined in rejecting risks that either fail to meet the were partially offset by increased premium income established standards of price or terms and conditions, associated with origination volume at ERC and by post-or that involve areas for which sufficient historical data do acquisition revenues from acquired businesses and not exist to evaluate the risk adequately. For risks that volume growth at GE Financial Assurance.

pass our criteria, we have sought to retain or even judi-Net pre-tax realized investment gains in the equity ciously expand our business. On the other hand, we have and debt securities portfolios amounted to $413 million, curtailed or exited business in particular property and

$972 million and $818 million in 2002, 2001 and 2000, casualty business channels when expected returns respectively.

do not appear to justify the risks.

Net earnings decreased $1.8 billion in 2002, following Net earnings decreased $0.3 billion in 2001, reflecting a $0.3 billion decrease in 2001. The 2002 decrease was underwriting results at ERC, which were partially offset primarily attributable to the recognition of adverse devel-by productivity benefits at GE Financial Assurance. Net opment related to prior-year loss events at ERC, discussed earnings in 2001 at ERC were adversely affected by below. With retrocession coverages previously purchased approximately $575 million ($386 million after tax) related by ERC, the recording of this adverse development both to the insurance losses arising from the events of increased policyholder losses and, to a lesser extent, September 11, 2001. This amount primarily resulted from decreased premium revenues (principally because of contingent premium payment provisions contained in higher levels of contingent ceded premiums following certain retrocession agreements. After these particular these reserve adjustments). Also contributing to the losses, total losses exceeded retrocession policy limits in reduction in 2002 net earnings were lower investment place at ERC. Substantially all of the September 11, 2001, gains across all businesses, including a $110 million after-losses are recoverable under reinsurance policies that tax impairment on WorldCom, Inc. bonds at GE Financial require additional premiums to those retrocessionaires.

Assurance. These decreases were partially offset by core Therefore, the 2001 Statement of Earnings reflects a premium growth, including higher premium pricing at ERC

$698 million reduction in net premiums earned and and the $152 million benefit from recognition of a favor-able tax settlement with the IRS related to the treatment GE 2002 ANNUAL REPORT 53

MANAGEMENT'S DISCUSSION AND ANALYSIS

$78 million of increased losses, partially offset by $201 mil- Plastics declined 28% as productivity and increased vol-lion in lower insurance acquisition costs. Historical experi- ume were not sufficient to offset substantially lower ence related to large catastrophic events has shown that selling prices and increased raw material costs. Specialty a broad range of total insurance industry loss estimates Materials revenues increased 32%, reflecting the contri-often exists following such an event, and it is not unusual butions of recent acquisitions, partially offset by lower for there to be significant subsequent revisions to such selling prices. Operating profit at Specialty Materials rose estimates. Our best estimate of the existing liability, net 6%, reflecting higher acquisition volume and lower mate-of estimated recoveries under retrocession arrangements, rial costs, partially offset by lower pricing and higher base has not changed significantly from our initial estimate. costs. In 2001, Materials revenues were 12% lower than Excluding events of September 11, 2001, net earnings the prior year, reflecting increased pricing pressures and in 2001 and 2000 were also adversely affected by the lower volume at both Plastics and Specialty Materials.

continued general deterioration of underwriting results Plastics experienced continued softness in the automotive, at ERC, reflecting higher property and casualty-related optical media, telecommunications and business equip-losses (principally as a result of adverse development ment markets, while Specialty Materials was adversely relating to prior-year loss events) and the continued affected by lower sales in the semiconductor market.

effects of low premiums in the property and casualty Operating profit in 2001 was 23% lower than in 2000, insurance/reinsurance industry. ERC underwriting results primarily as a result of lower pricing and volume, which in 2001 tracked performance in the global property and more than offset base cost reductions at both Plastics casualty industry. and Specialty Materials.

The majority of the adverse development at ERC in NBC reported record revenues of $71 billion in 2002, a 2001, and to a lesser extent in 2000, related to higher 24% increase compared with 2001, and operating profit projected ultimate losses for liability coverages, especially of $1.7 billion, up 18%. Primary factors contributing to in the hospital liability, nonstandard automobile (automobile this performance included our improved performance in insurance extended to higher-risk drivers) and commercial the advertising market, our broadcast of the 2002 Winter and public entity general liability lines of business. Results Olympics and contributions from the Telemundo acquisi-in 2000 also reflected an increase in industry-wide loss tion. NBC's 2002 results also included $0.2 billion of the estimates related to certain large property loss events,

$0.6 billion total gain from the exchange of certain assets with the largest effect resulting from the European for the cable network Bravo and $0.2 billion of other windstorms occurring in late 1999.

charges for various asset impairments. Revenues declined Our Mortgage Insurance business had favorable loss 15% in 2001, mostly from an industry-wide decline in experience throughout the three years ended Decem-advertising volume and pricing, as well as lost revenue ber 31, 2002, reflecting continued strength in certain related to covering the events of September 11, 2001.

real estate markets and the success of our loss contain-Operating profit decreased 12% in 2001, reflecting ment initiatives.

adverse advertising market conditions, the events of MATERIALS September 11, 2001, and charges resulting from dissolving the XFL, which more than offset savings (In millions) 2002 2001 2000 from cost reduction actions.

REVENUES Plastics $5,245 $5,252 $6,013 POWER SYSTEMS revenues increased 13% to $22.9 billion Specialty Materials 2,406 1,817 2,007 in 2002, following an increase of 36% in 2001. Operating Total revenues $7,651 $7,069 $8,020 profit rose 29% to $6.3 billion in 2002, following a 93%

OPERATING PROFIT increase in 2001. Operating profit improvements at Power Plastics $ 843 $1,166 $1,518 Systems reflect the $0.9 billion positive effect of cus-Specialty Total Materials operatn prof1,1... 282 . .. $ .,43......

267 3475........tomer contract termination fees, net of associated costs.

........ ... $ ,5...

Total operating profit S1,125 S1.433 S1,865 Results in 2002 also include restructuring and other charges of $0.2 billion as Power Systems adjusted its Materials revenues increased 8% in 2002 and operating cost structure.

profit declined 21%. Plastics revenues were relatively These results reflected the changing conditions in the unchanged from 2001 levels, as continued weakness in power generation business as demand for new power pricing offset increased volume. Operating profit at 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 ALL OTHER GECS fees. In all cases, we expect such fees to cover our invest- lIn millions)

_ _~~~~~~~~ .... . . ....... .. _......

2002?. . .... .. __

2001. .... ... . ..... _2000 ment in the contracts. At least a portion of this investment REVENUES has generally been received as progress collections. We IT Solutions $3,733 $4,180 $ 7,072 also expect to recover at least part of lost profits. GE Equity (384) (126) 1,079 Power Systems orders were $14.2 billion in 2002, Americom gain - 1,158 compared with $24.5 billion in 2001, reflecting the sharp Americom - 540 594 decline in demand for new power generation equipment Asset impairments - (383) (238) in the United States. The $16.7 billion total backlog at year- Product line exits - (53) -

end 2002 comprised unfilled product orders of $13.1 bil- PaineWebber gain - - 1,366 Wards - - 3,234 lion (of which 73% was scheduled for delivery in 2003)

Other-All Other GECS 982 1,358 2,033 and product services orders of $3.6 billion scheduled for Total revenues $4,331 $6,674 $15,140 2003 delivery. Comparable December 31, 2001, total NET EARNINGS backlog was $28.9 billion. As a result of current market conditions, we are in discussions with certain customers IT Solutions $ (24) $ 47 $ (152)

GE Equity (377) (270) 525 regarding their equipment requirements. These discus-Americom gain - 642 -

sions may result in changes to contractual agreements, Americom - 256 197 iicluding delays or cancellations, and may also result in Asset impairments - (310) (49) further termination fees. Product line exits - (180) -

Restructuring - (144) 1298)

TECHNICAL PRODUCTS AND SERVICES PaineWebber gain - - 848 (In millions) 20 2001 2000 Wards - (22) (782)

Other-All

. t..g Other GECS.

110

. (....... .. ..............

13..... ..

(254)

REVENUES Medical Systems $8,955 $8,409 $7,275 Total net earnings S 291) S 19 S 35 Global eXchange Services 311 602 640

_ _ . .. ~~~~..... ...

Total revenues $9,266 $9,011 $7,915 All Other GECS includes GECS activities and businesses OPERATING PROFIT that we do not measure within one of the other financial Medical Systems $1,546 $1,498 $1,321 services segments.

GlobalTotaleXchange Services operating profit 16

$1,562 125

$1,623 114

$1,43.........

. ....... In addition to comments on All Other GECS else-Total operating profit S1.562 S1,623 S1.435 where in this report, the following comments relate to the table above:

Technical Products and Services revenues increased 3%

• ITSolutions (ITS)-Revenues and net earnings in 2002 in 2002, primarily as a result of 6% revenue growth at decreased primarily as a result of market conditions and Medical Systems, which reported higher equipment and 2001 product line and geographic market exits. During product services volume, partially offset by weak market 2001 and 2000, in response to intense competition and conditions in Latin America and Japan. Operating profit transition of the computer equipment market to a direct for the segment declined 4% with sharply lower earnings distribution model, ITS exited its underperforming opera-from Global eXchange Services, 90% of which was sold tions in the United Kingdom, France, Brazil and Mexico and significantly reduced its reseller role inthe United in September 2002. Productivity and increased volume States. Costs for involuntary termination benefits, asset were partially offset by lower pricing at Medical Systems.

impairments, facilities exit costs and losses on sales of Technical Products and Services revenues rose 14% in portions of the business amounted to $45 million ($43 2001, primarily as a result of sharply higher volume at million after tax) and $246 million ($191 million after tax)

Medical Systems. Operating profit grew 13% in 2001, in 2001 and 2000, respectively, and are included in largely as a result of productivity and volume growth. restructuring in the table above. The number of employ-Orders received by Medical Systems in 2002 were ees was reduced from a 2000 peak of 11,000 to 6,600

$9.6 billion, an 8% increase over 2001. The $4.0 billion at the end of 2002.

total backlog at year-end 2002 comprised unfilled product

• GE Equity-GE Equity manages equity investments in orders of $2.6 billion (of which 95% was scheduled for early-stage, early growth, pre-IPO companies. GE Equity delivery in 2003) and product services orders of $1.4 billion revenues include income, gains and losses on such scheduled for 2003 delivery. Comparable December 31, investments. Revenues and net earnings during 2002 2001, total backlog was $4.1 billion. reflected increased losses on investments, including losses GE 2002 ANNUAL REPORT 55

MANAGEMENT'S DISCUSSION AND ANALYSIS in the telecommunications and software industries, and largest of which were held by GE Financial Assurance, GE lower gains. Effective in the fourth quarter of 2002, GE Equity and ERC. These losses, $383 million of which were Equity will no longer make new investments in private charged to revenues, included $130 million ($84 million companies. GE Equity will continue to give financial after tax) of losses on Enron bonds; such bonds support to companies within its existing portfolio. The were written down to a cost basis of $32 million at existing portfolio will be managed for maximum value December 31, 2001. Such losses also included investment over time, eventually winding down. During 2001, losses impairment charges of $199 million ($130 million after tax) on GE Equity's investments exceeded gains and other on non-U.S. mutual funds and the technology sector.

investment income, resulting in negative revenues and In response to escalating losses, GECS in 2001 a $270 million net loss, which increased over the prior decided to cease further underwriting and exit certain year principally from reduced asset gains. insurance and financing product lines. Charges associated Americom-On November 9, 2001, GECS exchanged its with such loss events and the resulting exits totaled satellite operations, comprising the stock of Americom $180 million after tax, of which $149 million related to and other related assets and liabilities, for a combination the loss events in ERC product lines, primarily non-of cash and 31% of the publicly-traded stock of SES standard automobile and higher limit industrial property Global, a leading satellite company, in order to create the insurance coverages.

world's largest satellite services provider. The transaction Restructuring of several GECS global businesses resulted in a gain of $1,158 million ($642 million after tax), included consolidation of several European Equipment representing the difference between the carrying value Management businesses and rationalization of European of the 69% investment in Americom and the amount of Equipment Finance businesses. Costs related to the exit cash plus the market value of SES Global shares received of these activities amounted to $144 million after tax and at the closing date. No gain was recorded on the 31% consisted of involuntary termination benefits, facilities interest in Americom that was indirectly retained by exit costs, and asset impairments.

GECS. GECS investment in SES Global is accounted for Other-All Other GECS includes GECS corporate function on the equity method in Commercial Finance. expenses, liquidating businesses and other non-segment 2001 Asset impairments and product line exits- aligned operations, the most significant of which were Operations included $656 million of after-tax charges Auto Financial Services (AFS) and GE Auto and Home.

related to disposing of and providing for disposition of The decrease in revenues in 2002 and 2001 resulted from several nonstrategic investments and other assets, to cer- AFS, which stopped accepting new business in 2000. Net tain unprofitable insurance and financing product lines earnings increased in 2002 primarily because of a favor-that were exited, and to restructuring various global oper- able tax settlement with the IRS allowing the deduction ations. These costs, not allocated to the related busi- of previously realized losses associated with the prior nesses as we did not include these costs in measuring disposition of Kidder Peabody and tax benefits from growth the performance of those businesses for internal pur- in lower taxed earnings from international operations.

poses, included $478 million ($310 million after tax) for other-than-temporary impairments of investments, the 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 _1_8 199 REVENUES Aircraft Engines $ 11,141 $ 11,389 $ 10,779 $ 10,730 $ 10,294 Commercial Finance 16,040 13,880 11,982 9,822 8,072 Consumer Finance 10,266 9,508 9,320 7,562 6,750 Consumer Products 8,456 8,435 8,717 8,525 8,520 Equipment Management 4,254 4,401 4,969 4,789 4,234 Industrial Products and Systems 9,755 9,097 8,891 8,642 8,305 Insurance 23,296 23,890 24,766 19,433 16,841 Materials 7,651 7,069 8,020 7,118 6,796 NBC 7,149 5,769 6,797 5,790 5,269 Power Systems 22,926 20,211 14,861 10,099 8,500 Technical Products and Services 9,266 9,011 7,915 6,863 5,323 All Other GECS 4,331 6,674 15,140 14,143 12,797 Corporate

....... .CONSO ITE..

items REV , E.,

and eliminations S.._ , ...... , ........

(2,833) (3,421) (2,304) (1,886) (1,232)

CONSOLIOATED REVENUES $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 i: 0s' MN;.)

'Af CiSA SRVICE'S t

6 OM" GE f Capital historically has issued about (In millions} 2002 2001 2000

$8 of debt for each $1 of equity-a "leverage ratio" of Europe $24,301 $23,878 $24,144 8:1. For purposes of measuring segment profit, each of Pacific Basin 12,026 11,447 12,921 I .

our financial services businesses was also assigned debt -

Americas 5,165 5,507 5,912 2 and interest costs on the basis of that consolidated 8:1 Other international 3,911 3,456 2,842 leverage ratio. In eva uating expected returns on potential _

45,403 44,288 45,819 3 investments, however, we also used business-specific, Exports from the U.S. to .

market-based leverage ratios. As of January 1, 2003, we external customers 7,481 7,149 7,138 . _

extended the business-specific, market-based leverage $52,884 $51,437 $52,957 _ _

to the performance measurement of each of our financial services businesses, and consequently to the definition GE international revenues were $29.0 billion, $28.3 billion of segment profit. As a result, at January 1, 2003, debt and $26.7 billion in 2002, 2001 and 2000, respectively.

of $12.5 billion previously allocated to the segments was -

GE international revenues of $29.0 billion in 2002 were allocated to the All Other GECS segment. At the same

$0.7 billion higher than in 2001. Revenues in 2001 of time, we revised our historical techniques for allocating

$28.3 billion increased $1.6 billion over 2000. The increase , .

shared costs and unusual items to financial services busi-in 2002 related to both an increase in operations outside nesses. In this report, the results of our financial services the U.S. and higher U.S. exports. Revenue increases segments are presented on the historic 8:1 leverage ratio basis. Beginning in 2003, the new leverage ratios and 2002 CONSOLIDATED INTERNATIONAL .

recast comparative historical results will be as follows: REVENUES BY REGION IINCLUDING EXPORTS FROMTHE U.S.) -

IDollars in millionsl 2002 2001 2000 1999 ..........

Americas COMMERCIAL FINANCE 140/

Leverage ratio 7.4:1 7.5:1 7.4:1 75:1 Adjusted net earnings $3,189 $ 2,788 $2,416 $1,834 Other -

10%

CONSUMER FINANCE Europe Leverage ratio 12.4:1 12.3:1 12.3:1 12.4:1 50%

Adjusted net earnings $1,799 $ 1,602 $1,295 $ 848 EQUIPMENT MANAGEMENT m-........ Pacif c -

Leverage ratio 5.0:1 5.1:1 5.1:1 4.9:1 Basin Adjusted net earnings 26%

$ 313 $ 377 $ 484 $ 416 INSURANCE Leverage ratio 0.4:1 0.4:1 0.4:1 0.4:1 t in Europe were led by Medical Systems and Industrial Adjusted net earnings -

$ (95) $ 1,879 $2,201 $2,142 Systems. Growth in Specialty Materials revenues across ALL OTHER GECS Adjusted net earnings all geographic areas was partially offset by lower sales

$ (580) $ (508) $ (584) $ (285) in all areas by Aircraft Engines. Increases in U.S. export -

sales in 2002 were primarily in Plastics and Power International Operations Systems, partially offset by lower exports by Medical Estimated results of international activities include the Systems and Transportation Systems.

results of our operations located outside the United GECS international revenues were $23.9 billion in j

States plus all U.S. exports. We classify certain GECS 2002, an increase of 3% from $23.1 billion in 2001. GECS operations that cannot meaningfully be associated with revenues in the Pacific Basin increased 9% in 2002, as a specific geographic areas as "Other international" for result of acquisitions and origination growth, primarily at this purpose. Consumer Finance and Commercial Finance. Revenues International revenues of $52.9 billion, $51.4 billion in "Other international" increased 11% in 2002, primarily -

and $53.0 billion in 2002, 2001 and 2000, respectively, as a result of origination growth at Aviation Services.

represented about 40% of consolidated revenues in Revenues in Europe decreased 2% as a result of lower each year. investment gains and adjustments to estimates of prior year loss events at Insurance, the 2001 divestiture of 58 GE 2002 ANNUAL REPORT

. . ...........I

Americom, and market conditions and geographic exits at ITSolutions, partially market Financial results of our international offset by acquisitions at activities reported Consumer Finance and in U.S. dollars are affected Commercial Finance. by currency exchange.

Consolidated international a number of techniques We use operating profit was $6.5 to manage the effects of lion in 2002, an increase bil- rency exchange, including cur-of 7% over 2001, which selective borrowings in 11% lower than in 2000. was currencies and selective local Operating profit rose 24% hedging of significant cross-cur-

$1.2 billion in the Americas to rency transactions. Principal and 28% to $0.9 billion currencies are the euro, "Other international" and in Japanese yen and the Canadian the was relatively unchanged dollar Europe ($2.1 billion) and in the Pacific Basin ($2.3 Total assets of international billion). Environmental Matters operations were $229.0 billion in 2002 (40% of Our operations, like operations consolidated assets), an of $49.0 billion, or 27%, increase of other companies over 2001. GECS international engaged in similar businesses, assets grew 28% from involve the use, disposal

$161.6 billion at year-end and cleanup of substances

$2075 billion at the end 2001 to regulated under environmen-of 2002. GECS assets increased tal protection laws.

41 % and 26% in the Pacific Basin and Europe, respec- In 2002, we expended tively, resulting from acquisitions about $43 and origination growth. projects related to the environment. million for capital Our international activities The comparable span all global regions amount in 2001 was $52 primarily encompass manufacturing and million. These amounts expenditures for remediation exclude for local and export actions, which are principally expensed and are discussed below. Capital expenditures 2002 TOTAL ASSETS OF for environmental purposes INTERNATIONAL OPERATIONS have included pollution devices-such as wastewater control treatment plants, ground-water monitoring devices, air strippers or separators, Americas incinerators-at new and and existing facilities constructed 8% upgraded in the normal or course of business. Consistent Other Nith policies stressing 15%

environmental responsibility, age annual capital expenditures aver-Europe other than for remediation 52% projects are presently expected to be about $65 million over each of the next two years for new or expanded rams to build facilities or pro-Pacific modify manufacturing Basin rocesses to minimize waste and reduce emissions.

25% his is about the same level as recent experience.

We are also involved in markets, import and sale a sizable of products produced in in actions to clean up hazardous number of remedia-regions, leasing of aircraft, other wastes as required by sourcing for our plants deral and state laws. Such ciled in other global regions domi- statutes require that respon-and provision of financial )le parties fund remediation services within these regional actions regardless of fault, economies. Thus, when gality of original disposal countries or regions experience or ownership of a disposal currency and/or eco- e. Expenditures for site nomic stress, we may remediation actions amounted have increased exposure approximately $113 million risks, but also may have to certain in 2002, compared with new profit opportunities. 19 million in 2001. We presently Potential increased risks expect that such reme-include, among other things, tion actions will require higher receivables delinquencies average annual expenditures and bad debts, delays range of $120 million to in or cancellation of sales $170 million over the next and orders principally related years.

Power and aircraft equipment, to higher local currency The U.S. Environmental financing costs and a slowdown Protection Agency (EPA) in established financial ebruary 2002 that approximately ruled services activities. New 150,000 pounds of profit opportunities include, ,chlorinated biphenyls (PCBs) among other things, lower must be dredged from costs of goods sourced -mile stretch of the upper countries with weakened from Hudson River in New York currencies, more opportunities e. We have submitted what for lower cost outsourcing, is known as a "Good expansion of industrial Offer" under the Superfund financial services activities and law nies or assets at reduced through purchases of compa- )tiations with EPA to undertake and have begun prices and lower U.S. debt the design and

'neering of the remedy. Our financing costs. Statement of Financiai ion as of December 31, 2002 and 2001, includes ty for the estimated costs a of this remediation.

GE 2002 ANNUAL REPORT 59

MANAGEMENT'S DISCUSSION AND ANALYSIS MANAGEMENT'S DISCUSSION OF including $348 million from the telecommunications and FINANCIAL RESOURCES AND LIQUIDITY cable industries, of which $167 million was recognized in the second quarter of 2002 following the events relating Overview toWorldCom, Inc.

This discussion of financial resources and liquidity addresses the Statement of Financial Position (pages WORKING CAPITAL, representing GE cash invested in 74-75), Statement of Changes in Share Owners' Equity inventories and receivables from customers less trade (page 72) and the Statement of Cash Flows (pages 76-77). payables and progress collections, increased to $3.8 bil-Only a small portion of GECS business is directly lion at the end of 2002. Working capital declined from an related to other GE operations. The fundamental differ- investment of $3.9 billion at the beginning of 2000 to a ences between GE and GECS are reflected in the meas- negative $2.4 billion at the end of 2001 on much higher urements commonly used by investors, rating agencies progress collections from Power Systems customers.

and financial analysts. These differences will become Working capital balances are significantly affected by clearer in the discussion that follows with respect to the progress collections, primarily from Power Systems more significant items in the financial statements. customers, as shown below.

December 31 lin millions) _2002 . 2001 Statement of Financial Position (pages 74-75)

Working capital $ 3,821 $ (2,398)

Because GE and GECS share certain significant elements Less progress collections 8,603 11,638 of their Statements of Financial Position-property, plant ..... ........ ..... ...

Working capital, excluding and equipment, and borrowings, for example-the fol- progress collections $10,424 $ 9,240 lowing discussion addresses significant captions in the "consolidated" statement. Within the following discus- We expect Power Systems progress collections to sions, however, we distinguish between GE and GECS decline about $3 billion in 2003, and that working capital activities in order to permit meaningful analysis of each turnover otherwise will show improvement as a result individual statement. of our Six Sigma and digitization initiatives. We discuss INVESTMENT SECURITIES for each of the past two years current receivables and inventories, two important ele-comprised mainly investment-grade debt securities held ments of working capital, in the following paragraphs.

by Insurance in support of obligations to annuitants and CURRENT RECEIVABLES for GE were $11.0 billion at the end policyholders. Investment securities were $116.9 billion in of 2002, an increase of $1.2 billion from year-end 2001, 2002, compared with $101.0 billion in 2001. The increase and included $6.3 billion due from customers at the end of $15.9 billion resulted from investment of premiums of 2002, compared with $5.9 billion at the end of 2001.

received, reinvestment of investment income, the addition Turnover of customer receivables from sales of goods and of investment securities from acquired companies and services was 10.9 in 2002, compared with 10.1 in 2001.

increases in fair value, primarily debt securities, partially Other current receivables are primarily amounts that did offset by sales and maturities as well as impairments and not originate from sales of GE goods or services, such as losses related to certain debt and equity securities. advances to suppliers in connection with large contracts.

Gross unrealized gains and losses were $4.4 billion and $2.5 billion, respectively, at December 31, 2002 INVENTORIES for GE were $9.0 billion at December 31, (gross unrealized gains and losses of $2.2 billion and 2002, up $0.7 billion from the end of 2001. GE inventory

$2.7 billion, respectively, as of December 31, 20011. turnover was 77 in 2002, a decrease from 79 in 2001, as Market value for these purposes is defined by relevant a result of higher inventories at Power Systems, Plastics accounting standards and should not be viewed as a and Medical Systems.

forecast of futUre gains or losses. We estimate that GECS inventories were $208 million and $270 million at available gains, net of hedging positions and estimated December 31, 2002 and 2001, respectively. The decrease impairment of insurance intangible assets, could be as in 2002 primarily reflected reduced sales volume and much as $1.4 billion. improved inventory management at IT Solutions.

We regularly review investment securities for impair- FINANCING RECEIVABLES is the largest category of assets ment based on criteria that include the extent to which for GECS and represents one of its primary sources of cost exceeds market value, the duration of that market revenues. The portfolio of financing receivables, before decline and the financial health and specific prospects allowance for losses, increased to $205.4 billion at for the issuer. Of securities with unrealized losses at December 31, 2002, from $178.9 billion at the end of December 31, 2002, approximately $800 million of portfo- 2001, as discussed in the following paragraphs. The lio value is at risk of being charged to earnings in 2003. related allowance for losses at the end of 2002 Impairment losses recognized for 2002 were $759 million, 60 GE 2002 ANNUAL REPORT

amounted to $5.5 billion I$4.8 billion at the end of 2001), 2.16% and 1.68% at year-end 2002, 2001 and 2000, representing our best estimate of probable losses inher- respectively, on a managed basis. The decline at ent in the portfolio. December 31, 2002, primarily reflected a higher con-A discussion of the quality of certain elements of the centration of Vendor Financial Services receivables financing receivables portfolio follows. "Nonearning" coupled with improved collection results at Commercial receivables are those that are 90 days or more delinquent Equipment Finance. The increase at December 31, 2001, (or for which collection has otherwise become doubtful) reflected the acquisition of Heller Financial, Inc. Future and "reduced-earning" receivables are commercial provisions for losses will depend primarily on the size of receivables whose terms have been restructured to a the portfolio, which is expected to continue to grow, and below-market yield. on associated business and economic conditions.

Commercial Finance financing receivables before INSURANCE RECEIVABLES of GECS were $31.6 billion at year-allowance for losses totaled $130.9 billion at December end 2002, an increase of $3.3 billion that was primarily 31, 2002, ($120.1 billion at December 31, 2001) and con-attributable to acquisitions and core growth at GE sisted of loans and leases to the equipment, commercial Financial Assurance, increased recoveries under existing and industrial, real estate and commercial aircraft indus-retrocession agreements at ERC and an increase in mort-tries. This portfolio of receivables increased primarily from gages held for investment at Mortgage Insurance.

increased acquisitions and originations growth, partially offset by sales and securitizations. Related nonearning OTHER RECEIVABLES of GECS totaled $13.0 billion at and reduced-earning receivables were $2.2 billion at December 31, 2002, and $13.3 billion at December 31, December 31, 2002, about 1.7% of outstandings, com- 2001, and consist primarily of nonfinancing customer pared with $2.0 billion, about 1.7% of outstandings at receivables, accrued investment income, amounts due year-end 2001. Commercial Finance receivables are gen- from GE (generally related to certain trade payable pro-erally backed by assets and there is a broad spread grams), amounts due under operating leases, receivables of geographic and credit risk in the portfolio. due on sales of securities and various sundry items.

Consumer Finance financing receivables before PROPERTY PLANT AND EQUIPMENT (including equipment allowance for losses, primarily installment loans, leased to others) was $47.2 billion at December 31, 2002, auto loans and leases, and residential mortgages, were up $5.1 billion from 2001, primarily reflecting acquisitions

$66.0 billion at December 31, 2002, an increase of of commercial aircraft at Commercial Finance. GE property,

$16.0 billion from year-end 2001. This portfolio of receiv-plant and equipment consists of investments for its own ables increased primarily from increased originations, productive use, whereas the largest element for GECS is acquisition growth and the net effects of foreign currency equipment provided to third parties on operating leases.

translation, partially offset by sales and securitizations.

Details by category of investment are presented in note 15.

Nonearning consumer receivables at December 31, GE expenditures for plant and equipment during 2002 2002, were $1.6 billion, about 2.4% of outstandings, totaled $2.4 billion, compared with $2.9 billion in 2001.

compared with $1.3 billion, about 2.7% of outstandings at Total expenditures for the past five years were $12.4 bil-year-end 2001.

lion, of which 38% was investment for growth through "Other, principally Equipment Management' financing new capacity and product development; 35% was invest-receivables before allowance for losses amounted to $8.5 ment in productivity through new equipment and process billion at December 31, 2002, a decrease of $0.3 billion improvements; and 27% was investment for other pur-from year-end 2001, primarily as a result of the run-off of poses such as improvement of research and develop-the liquidating Auto Financial Services portfolio. Non-ment facilities and safety and environmental protection.

earning receivables at December 31, 2002, were $0.1 bil-GECS additions to property, plant and equipment lion, about 1.0% of outstandings, compared with $0.2 (including equipment leased to others) were $11.0 billion billion, about 1.8% of outstandings at year-end 2001.

and $12.6 billion during 2002 and 2001, respectively, Delinquency rates on consumer financing receivables primarily reflecting acquisitions of commercial aircraft at at December 31, 2002, were 5.34%; at year-end 2001 Commercial Finance.

were 5.21 %; and at year-end 2000 were 4.53% on a managed basis. Increased 2002 and 2001 delinquencies INTANGIBLE ASSETS were $46.2 billion at year-end 2002, reflected our secured financing business acquired in 2001 up from $35.1 billion at year-end 2001. GE intangibles and volume growth in that business in 2002. When delin- increased to $23.1 billion from $14.4 billion at the end quent, these loans have relatively lower losses than the of 2001, principally as a result of goodwill and other intan-rest of our consumer portfolio. Delinquencies on Com- gibles related to acquisitions by NBC, Specialty Materials mercial Finance equipment loans and leases were 1.72%, 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- INSURANCE LIABILITIES, RESERVES AND ANNUITY BENEFITS of gibles associated with acquisitions and purchase account- $135.9 billion at December 31, 2002, were $21.6 billion ing adjustments primarily related to the 2001 acquisition higher than in 2001. The increase was primarily attributable of Heller Financial, Inc., partially offset by the impairment to acquisitions, growth in deferred annuities and guaran-of goodwill from adopting SFAS 142 (see notes 1 and 16). teed investment contracts at GE Financial Assurance and adverse development at ERC. For additional information ALL OTHER ASSETS totaled $93.2 billion at year-end 2002, on these liabilities, see note 19.

an increase of $16.6 billion from the end of 2001. GE other assets increased $5.0 billion, principally reflecting INTEREST RATE AND CURRENCY RISK MANAGEMENT is important increases in the prepaid pension asset and acquisitions. in our normal business activities. We use derivative finan-GECS other assets increased $12.1 billion, principally the cial instruments to mitigate or eliminate certain financial result of acquisitions affecting real estate and separate and market risks, including those related to changes in accounts (investments coritrolled by policyholders); the interest rates and currency exchange rates. As a matter transfer of Home Depot private label credit card receiv- of policy, we do not engage in derivatives trading, deriva-ables (assets held for sale) in preparation for their sale tives market-making or other speculative activities.

when that contract is terminated in 2003; and increasing The U.S. Securities and Exchange Commission deferred acquisition costs in connection with ongoing requires that registrants provide information about poten-insurance operations, partially offset by a reduction in our tial effects of changes in interest and currency exchange investment in associated companies reflecting the con- rates. The following discussion is based on so-called solidation of the Banc One joint venture (see note 17). .shock tests:' which model effects of interest rate and currency shifts on the reporting company. While the fol-CONSOLIDATED BORROWINGS aggregated $279.4 billion at lowing results of shock tests for changes in interest rates December 31, 2002, compared with $232.9 billion at the and currency exchange rates may have some limited use end of 2001. The major debt-rating agencies evaluate the as benchmarks, they should not be viewed as forecasts.

financial condition of GE and of GE Capital Corporation (GE Capital), the major public borrowing entity of GECS,

• One means of assessing exposure to interest rate changes differently because of their distinct business characteris- is a duration-based analysis that measures the potential tics. Using criteria appropriate to each and considering loss in net eamings resulting from a hypothetical increase their combined strength, those major rating agencies in interest rates of 100 basis points across all maturities (sometimes referred to as a "parallel shift in the yield continue to give the highest ratings to debt of both GE curve"). Under this model, with all else held constant, we and GE Capital.

estimate that such an increase, including repricing in the GE total borrowings were $9.8 billion at year-end 2002 securities portfolio, would reduce the 2003 net earnings of

($8.8 billion short term, $1.0 billion long term), an increase GECS based on year-end 2002 positions by approximately of $73 billion from year-end 2001. GE total debt at the $184 million; the pro-forma effect for GE was $61 million.

end of 2002 equaled 13.1% of total capital, up from 4.3% Based on positions at year-end 2001, the pro-forma effect at the end of 2001. on 2002 net eamings of such an increase in interest rates GECS total borrowings were $270.9 billion at was estimated to be a decrease of approximately $189 mil-December 31, 2002, of which $130.1 billion is due in lion for GECS and was insignificant for GE.

2003 and $140.8 billion is due in subsequent years. Com-

• Our geographic distribution of operations is diverse. One parable amounts at the end of 2001 were $239.9 billion in means of assessing exposure to changes in currency total, $160.8 billion due within one year and $79.1 billion exchange rates is to model effects on reported earnings due thereafter. A large portion of GECS borrowings ($84.2 using a sensitivity analysis. We analyzed year-end 2002 billion and $1175 billion at the end of 2002 and 2001, consolidated currency exposures, including financial instruments designated and effective as hedges, to iden-respectively) was issued in active commercial paper mar-tify assets and liabilities denominated in other than their kets that we believe will continue to be a reliable source relevant functional currencies. Net unhedged exposures of short-term financing. Most of this commercial paper in each currency were then remeasured, generally assum-was issued by GE Capital. The average remaining terms ing a 10% decrease (substantially greater decreases for and interest rates of GE Capital commercial paper were hyperinflationary currencies) in currency exchange rates 47 days and 1.95% at the end of 2002, compared with 46 compared with the U.S. dollar. Under this model, we days and 2.37% at the end of 2001. The GE Capital ratio estimated at year-end 2002 that such a decrease would of debt to equity was 6.58 to 1 at the end of 2002 and have an insignificant effect on 2003 earnings.

731 to 1 at the end of 2001.

62 GE 2002 ANNUAL REPORT

Statement of Changes in Share Owners' Equity (page 72) increased net cash from borrowings by $6.8 billion, for Share owners' equity increased $8.9 billion, $4.3 billion a total of $26.7 billion. We used the cash to invest in and $7.9 billion in 2002, 2001 and 2000, respectively. strategic acquisitions ($9.0 billion) and property, plant and The increases were largely attributable to net earnings of equipment ($2.4 billion); to reward our share owners with

$14.1 billion, $13.7 billion and $12.7 billion, partially offset increased dividends (totaling $72 billion) and to buy shares by dividends declared of $7.3 billion, $6.6 billion and $5.6 under our share repurchase program ($2.0 billion); and to billion in 2002, 2001 and 2000, respectively. contribute capital to our financial services businesses Currency translation adjustments increased equity by ($6.3 billion, including $1.8 billion contributed to ERC).

$1.0 billion in 2002, compared with reductions of $0.6 bil- During 2001 and 2000, GE generated $32.6 billion lion and $1.2 billion in 2001 and 2000, respectively. of cash from operating activities, including $6.7 billion Changes in the currency translation adjustment reflect the cumulative additional cash from progress collections.

effects of changes in currency exchange rates on our net This cash provided resources for dividends to share own-investment in non-U.S. subsidiaries that have functional ers ($11.8 billion); continuation of the share repurchase currencies other than the U.S. dollar. In 2002, strengthen- program ($5.4 billion); investment in property, plant and ing in the euro and, to a lesser extent, Asian currencies equipment ($5.4 billion); and completion of strategic versus the U.S. dollar reversed trends in those exchange acquisitions ($2.6 billion).

relationships over the prior two years. The euro strength-ened significantly versus the U.S. dollar in 2002, and was GE CUMULATIVE CASH FLOWS SINCE 1994 (In bi lions) relatively unchanged in 2001 after weakening in 2000.

Asian currencies also strengthened against the dollar in

$96.

2002, and had weakened in 2001 and 2000. Accumulated currency translation adjustments affect net earnings only 80--.......

when all or a portion of an affiliate is disposed of or sub-stantially liquidated.

Adoption of SFAS 133 in 2001 reduced equity by 46-

$955 million, including $827 million at the date of adop- 32 ------- -----

tion. Further information about this accounting change 16.

is provided in note 1.

98 99 00 01 02 Statement of Cash Flows (pages 76-77)

P Cashflows from operating act vities Because cash management activities of GE and GECS are Dividends paid separate and distinct, it is more useful to review Shares repurchased their cash flows separately.

CASH AD l 0ULI~ .T ',aggregated $1.1 billion at the Under the share repurchase program initiated in end of 2002, down from $9.8 billion at year-end 2001. December 1994, we have purchased 1.1 billion shares of GE periodically invests available cash in GECS short-term GE stock. In December 2001, the GE Board of Directors borrowings. Such amounts are classified as cash equiva- increased the amount authorized from $22 billion to $30 lents in the GE Statement of Financial Position. No such billion. Funds used for the share repurchase are expected investments were made as of December 31, 2002, com- to be generated largely from operating cash flow.

pared with $8.7 billion at December 31, 2001. Based on past performance and current expectations, During 2002, GE generated $10.1 billion in cash from in combination with the financial flexibility that comes operating activities, a $71 billion decrease from 2001 as with a strong balance sheet and the highest credit ratings, orders for new Power Systems equipment and the asso- we believe we are in a sound position to continue the ciated progress collections declined sharply. Excluding share repurchase program, to grow dividends and to con-effects of progress collections, cash from operating activ- tinue making selective investments for long-term growth.

ities increased 10% in 2002 and 13% in 2001, including We expect expenditures for plant and equipment to be effects of receivables monetization programs in both about $2.2 billion in 2003, principally for productivity years. In addition to the $10.1 billion of cash from operat- and growth.

ing activities, GE began 2002 with $9.8 billion of cash and Co&

GE 2002 ANNUAL REPORT 63

MANAGEMENTS DISCUSSION AND ANALYSIS GECS CASH AND EQUIVALENTS aggregated $79 billion at the insurance business, had $1.9 billion of investment securi-end of 2002, up from $73 billion at year-end 2001. Over ties related to the airline industry. In addition, Commercial the past three years, GECS borrowings with maturities Finance had funding commitments of $0.5 billion and had of 90 days or less have decreased by $13.2 billion. New placed multi-year orders for various Boeing, Airbus and borrowings of $173.7 billion having maturities longer than other aircraft with list prices approximating $15.4 billion at 90 days were added during those years, while $1072 bil- year-end 2002. Commercial Finance held placement lion of such longer-term borrowings were retired. GECS agreements with commercial airlines for 40 of the 42 air-also generated $48.1 billion from operating activities over craft scheduled for delivery in 2003.

the last three years, which benefited in 2002 and 2001 Two of our major airline customers, US Airways Group from increases in insurance liabilities and reserves. Inc. and UAL Corp, the parent companies of US Airways The principal use of cash by GECS has been investing and United Airlines, respectively, are experiencing signifi-in assets to grow our businesses. Of the $122.9 billion cant financial difficulties and both filed for reorganization that GECS invested over the past three years, $48.0 bil- in bankruptcy in 2002. At December 31, 2002, our expo-lion was used for additions to financing receivables; $35.0 sure related to these airlines amounted to $3.7 billion, billion was used to invest in new equipment, principally including loans, leases, investment securities, guarantees for lease to others; and $24.8 billion was used for acquisi- and commitments as discussed above. Various Boeing tions of new businesses, the largest of which were and Airbus aircraft secure these financial exposures. We Australian Guarantee Corporation, Security Capital and have provided for our best estimate of probable losses Deutsche Financial Services in 2002 and Heller Financial, under these particular arrangements in light of estimated Inc. and Mellon Leasing in 2001. amounts recoverable under recourse provisions.

With the financial flexibility that comes with excellent In December 2002, Commercial Finance and US credit ratings, we believe that GECS should be well Airways Group Inc. agreed on a global restructuring plan positioned to meet the global needs of its customers that was approved by the cognizant Bankruptcy Court in for capital and to continue providing our share owners January 2003. The plan will provide the airline with up to with good returns. $120 million debtor-in-possession financing, which will be subsequently refinanced as part of a $360 million facility Additional Considerations being provided by us upon US Airways Group Inc.'s exit-COMMERCIAL AIRLINES. Following the events of September ing from Chapter 11, and $350 million of future lease 11, 2001, many of our airline customers have experienced financing for regional jet aircraft. Upon US Airways Group financial difficulties. In the face of declining traffic, they have Inc.'s emergence from bankruptcy we would receive war-responded by curtailing flight schedules and deferring and rants to buy five percent of the Class A shares of the canceling deliveries of commercial aircraft. Deteriorating reorganized US Airways Group Inc. along with 3.8 million aircraft utilization and pricing affects Commercial Finance, shares of its Class A preferred stock.

which owned 1,161 commercial aircraft at December 31, Commercial aviation is important to us, as it is to 2002, when, despite pressure on the industry, 1,149, or the global economy, and we are pleased that our technol-99% were on lease. We believe, however, that the financial ogy, our proactive partnering and our financial strength difficulties of our airline customers will continue to weigh have earned us the loyalty of our customer base in that on the airline industry in 2003. industry. At the same time, we are pleased to have Aircraft Engines sales of new equipment often include served the needs of our global investors with prudent long-term customer financing commitments. Under these management of our exposure to the industry's risks.

commitments, it is our policy to establish a secured Our underwriting establishes positions that are secured position in the aircraft being financed. At year-end 2002, by tangible assets; our risk management protects our guarantees of $0.7 billion were in place. Further, we had investments; and we record losses in accordance with committed $1.6 billion to provide financial assistance the applicable requirements.

on future aircraft sales see note 30). Our guarantees TELECOMMUNICATIONS. Financial services investments in and commitments are secured by individual aircraft or and contractual commitments to customers in the tele-pools of aircraft engines related to the specific financing communications and cable industries amounted to $9.2 arrangement. At December 31, 2002, the total estimated billion and $2.9 billion, respectively, as of December 31, fair value of aircraft securing these guarantees exceeded 2002, and primarily comprised financing receivables and the guaranteed amounts, net of the associated allowance investment securities. Included in the telecommunica-for losses. tions amount is Commercial Finance's equity method At year-end 2002, Commercial Finance had provided investment in SES Global of $1.7 billion. Like all financial loans and leases of $26.6 billion, and combined with our services positions, these receivables and investments 64 GE 2002 ANNUAL REPORT

have been entered into subject to strict risk and under- regard to other property and casualty insurance and rein-writing criteria, are diversified, and financing receivables surance entities at about the same time. Debt ratings for are generally secured. During recent declines in the val- GE Global Insurance Holding affect $1.7 billion of out-ues of these portfolios, the positions have been routinely standing debt. These ratings were adjusted negatively in reviewed for credit and impairment losses, and actions 2002, but remained investment grade. We do not believe have been taken to mitigate exposures. We have made these actions will materially affect GE Global Insurance provision for probable losses. Future losses, if any, will Holding liquidity or capital resources or the ability to write depend upon business and economic developments as future business.

well as the success of risk mitigation actions.

GLOBAL COMMERCIAL PAPER MARKETS are also a primary source of liquidity for GE and financial services. GE Liquidity Capital is the most widely-held name in those markets The major debt-rating agencies evaluate the financial con- and is the principal issuer of financial services debt.

dition of GE and of GE Capital Corporation (GE Capital), Financial services debt composition as of December 31, the major public borrowing entity of GECS, differently 2002 and 2001, follows.

because of their distinct business characteristics. Factors December 31 2002 2001 that are important to the ratings of both include the fol-lowing: cash generating ability-including cash generated Senior notes 52% 33%

from operating activities; earnings quality-including rev- Commercial paper 31 49 enue growth and the breadth and diversity of sources of Other-principally current portion of long-term debt 17 18 income; leverage ratios-such as debt to total capital and ...... .. . .. ... .... .. .... .. ... ..... .... ... ..... ..... .. . ... . . ..... ..... ..

interest coverage; and asset utilization, including return on Total 100% 100%

assets and asset turnover ratios. Considering those factors, those major rating agencies continue to give the highest During 2002, GE Capital issued approximately $88 billion ratings to debt of both GE and GE Capital (long-term credit of long-term debt in U.S. and international markets. These rating AAANAaa; short-term credit rating A-1 +/P-1). funds were used primarily to reduce the amount of com-One of our strategic objectives is to maintain these mercial paper outstanding by $33 billion and to fund ratings on debt issued by GE and GE Capital. Our Triple-A acquisitions and new asset growth. We target a ratio for rating lowers our cost of borrowings and facilitates access commercial paper of 25% to 35% of outstanding debt to a variety of lenders. We manage our businesses in a based on the anticipated composition of our assets. GE manner consistent with maintaining these Triple-A ratings. Capital anticipates issuing approximately $60 billion of To support the GE Capital rating, at the end of 2002, long-term debt using both U.S. and international markets GE was contractually committed to maintain the ratios during 2003. The proceeds from such issuances will be of earnings to fixed charges at GE Capital at a specified used to fund maturing long-term debt, additional acquisi-level. To build equity, the GECS Board of Directors intends tions and asset growth. The ultimate amount of debt to reduce GECS dividend payments to GE to 10% of issuances will depend on the growth in assets, acquisi-operating earnings. GE contributed $6.3 billion of cash in tion activity, availability of markets and movements in 2002, of which $1.8 billion funded certain loss develop- interest rates.

ment at ERC. See also "January 1, 2003, Reclassification We believe that alternative sources of liquidity are of Financial Services Segment Profit" on page 58. Our sufficient to permit an orderly transition from commercial plans are to reduce the level of debt and increase equity paper in the unlikely event of impaired access to those in financial services; targeting 2005 for elimination of the markets. Funding sources on which we would rely would

$12.5 billion of debt allocated to All Other GECS as of depend on the nature of such a hypothetical event, but January 1, 2003. Proceeds from any strategic dispositions include $54 billion of contractually committed lending will be evaluated when and if they are received, but we agreements with highly-rated global banks and invest-anticipate using at least some of those proceeds to ment banks, an increase of $21 billion since December reduce financial services debt. 31, 2001, as well as other sources of liquidity, including During 2002, certain external credit rating agencies medium and long-term funding, monetization, asset announced the lowering of financial strength ratings with securitization, cash receipts from lending and leasing respect to GE Global Insurance Holding and subsidiaries. activities, short-term secured funding on global assets, Those rating agencies made similar announcements with and potential asset sales.

GE 2002 ANNUAL REPORT 65

MANAGEMENrS DISCUSSION AND ANALYSIS OFF BALANCE SHEET ARRANGEMENTS are used in the ordinary paper. Support activities include credit reviews at acquisi-course of business to achieve improved share owner tion and ongoing review, billing and collection activities-returns. One of the most common forms of off balance the same support activities that GECS employs for its sheet arrangements is asset securitization. The securitiza- own financing receivables. These entities are not consoli-tion transactions we engage in are similar to those used dated in the accompanying financial statements.

by many financial institutions and are part of a $700 bil- Our sponsored SPEs are routinely evaluated by the lion annual market for asset-backed commercial paper. major credit rating agencies, including monthly reviews We use sponsored and third-party entities to execute of key performance indicators and annual reviews of securitization transactions funded in the commercial paper asset quality. Commercial paper issued by these entities and term markets. As part of this program, we consider has always received the highest available ratings from the the relative risks and returns of each alternative and major credit rating agencies and at year-end 2002 was predominantly use sponsored entities. We believe that rated A-1 +/P-1.

these transactions could be readily executed through Assets held by SPEs include: receivables secured by non-sponsored entities or term securitization at modest equipment, commercial real estate and other assets; incremental cost. Beyond improved returns, these securi- credit card receivables; and trade receivables. In addition tization transactions serve as funding sources for a variety to being of high credit quality, these assets are diversified of diversified lending and securities transactions, transfer to avoid concentrations of risk. Examples of these assets selected credit risk and improve cash flows while include loans and leases on manufacturing and trans-enhancing the ability to provide a full range of competi- portation equipment, loans on commercial property, tive products for customers. commercial loans, and balances of high credit quality Simply stated, in a typical securitization transaction, accounts from sales of a broad range of products and we sell high-quality financial assets to entities that have services to a diversified customer base. Such assets financed those purchases using low-cost, highly-rated totaled $42.2 billion and $43.0 billion at December 31, commercial paper. In the following paragraphs, we 2002 and 2001, respectively.

describe in more detail how these transactions with such Sales of securitized assets to SPEs result in a gain or entities typically work. loss amounting to the net of sales proceeds, the carrying The first step in the securitization process uses entities amount of net assets sold, the fair value of retained inter-that meet the accounting criteria for Qualifying Special ests and servicing rights and an allowance for losses.

Purpose Entities (qualifying entities). Among other criteria, Total securitization sales resulted in gains of $0.8 billion a qualifying entity's activities must be restricted to passive and $1.3 billion in 2002 and 2001, respectively, and are investment in financial assets and issuance of retained included in revenues net of any effects of replenishing interests in those assets. Under generally accepted securitized credit card balances.

accounting principles, entities meeting these criteria are In addition to the securitization activities discussed not consolidated in the sponsor's financial statements. previously, Financial Guaranty Insurance Company IFGICi, We sell selected financial assets to qualifying entities. an affiliate that is a leader in the municipal bond insurance Examples include financing and credit card receivables market, uses SPEs that offer municipalities guaranteed and trade receivables. On the whole, the credit quality investment contracts with interests in high-quality, fixed of such assets is equal to or higher than the credit maturity, investment grade assets. FGIC actively man-quality of similar assets we own. ages these assets under strict investment criteria and Qualifying entities raise cash by issuing retained inter- GE Capital also provides certain performance guarantees.

ests-rights to cash flows from the assets-to other Total assets in sponsored FGIC entities amounted to SPEs we sponsor that issue highly-rated commercial paper $13.7 billion and $13.4 billion at December 31, 2002 and to third-party institutional investors. These SPEs use 2001, respectively.

commercial paper proceeds to obtain retained interests We provide financial support related to assets held by in the financial assets of qualifying entities, as well as certain SPEs through liquidity agreements, credit support, financial assets originated by multiple third parties. We performance guarantees and guarantee and reimburse-provide credit support for certain of these assets, as ment contracts. Net credit and liquidity support amounted well as liquidity support for the commercial paper. In to $272 billion after consideration of participated liquidity accordance with our contractual commitments to the and arrangements that defer liquidity draws beyond 2003, qualifying entities, we rigorously underwrite and service a reduction of $15.9 billion from 2001. This amount the associated assets, both those we originate and includes credit support, in which we provide recourse those originated by other participants. All of the qualifying for a maximum of $16.9 billion of credit losses in SPEs.

entities' assets serve as collateral for the commercial 66 GE 2002 ANNUAL REPORT

Potential credit losses are provided for in our financial

• If the long-term credit rating of GE Capital were to fall statements. Based on management's best estimate of below AA/Aa2, GE Capital would be required to provide probable losses inherent in the portfolio, we provided an substitute credit support or liquidate the SPEs. The allowance of $233 million for recourse obligations at year- maximum amount that GE Capital would be required to end 2002. Performance guarantees relate to letters of substitute in the event of such a downgrade is deter-mined by contract, and amounted to $2.7 billion at credit and liquidity support for guaranteed investment December 31, 2002.

contracts and are subject to a maximum of $3.8 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 None of the GE sponsored SPEs is permitted to hold fall below A-1 +/P-1, GE Capital could be required to GE stock, and there are no commitments or guarantees provide up to $1.1 billion to the FGIC SPEs and could be that provide for the potential issuance of GE stock. These required to repay an amount of FGIC's guaranteed invest-entities do not engage in speculative activities of any ment contracts as specified by contract; at December 31, description, are not used to hedge our asset positions, 2002, that maximum repayment was $3.6 billion.

and under GE integrity policies, no GE employee, officer

• If the long-term credit rating of either GE or GECS under or director is permitted to invest in any sponsored SPE. certain swap, forward and option contracts falls below We have extensive experience in evaluating eco- A-A3, certain remedies are required as discussed in nomic, liquidity and credit risk. In view of this experience, note 28.

the high quality of assets in these entities, the historically

• If GE Capital's ratio of earnings to fixed charges, which robust quality of commercial paper markets, and the his- was 1.65:1 at the end of 2002, were to deteriorate to torical reliability of controls applied to both asset servic- 1.10:1 or, upon redemption of certain preferred stock, ing and to activities in the credit markets, we believe its ratio of debt to equity, which was 6.58:1 at the end that, under any reasonable future economic develop- of 2002, were to exceed 8:1, GE has committed to ments, the likelihood is remote that any such arrange- contribute capital to GE Capital. GE also has guaranteed ments could have an adverse economic effect on us. subordinated debt of GECS with a face amount of

$1.0 billion at December 31, 2002 and 2001.

Under FIN 46, Consolidation of Variable Interest Entities, new consolidation criteria will be applied to cer- None of these conditions has been met in GE or GECS tain SPEs, which it defines as Variable Interest Entities' history, and we believe that under any reasonable future Additional information about entities that fall within the economic developments, the likelihood is remote that scope of FIN 46 is provided in note 29. any such arrangements could have a significant effect on our operations, cash flows or financial position.

PRINCIPAL DEBT CONDITIONS that could automatically result in remedies, such as acceleration of GE or financial serv- TIMING OF CONTRACTUAL COMMITMENTS at GE and GECS dur-ices debt, are described below. ing the next five years, related to leases and debt, follows.

If the short-term credit rating of GE Capital or certain lIn billions) 2003 2004 2005 2006 2007 SPEs discussed further in note 29 were to fall below .. ......... ..... .......... . ..... ................ . .......s............. _- ..... ....... ........ ___

A-1/P-1, GE Capital would be required to provide GE $ 0.6 $ 0.8 $ 0.4 $ 0.4 $ 0.3 substitute liquidity for those entities or provide funds to GECS retire the outstanding commercial paper. The maximum Commercial paper 84.2 amount (net of participated liquidity and arrangements Other 46.6 475 (a) 22.3 10.3 14.8 that defer liquidity to 2004) that GE Capital would be Id Extendible notes amounting to $12 billion are floating rate securities required to provide in the event of such a downgrade is with an initial maturity of 13 months, which can be extended on a determined by contract, and amounted to $22.6 billion rolling basis, at the investor's option to afinal maturity of five years at December 31, 2002. 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

MANAGEMENT'S DISCUSSION AND ANALYSIS MANAGEMENT'S DISCUSSION OF MANAGEMENT'S DISCUSSION OFTHE SELECTED FINANCIAL DATA APPLICATION OF CRITICAL ACCOUNTING POLICIES SELECTED FINANCIAL DATA, summarized on the following Accounting policies discussed in this section are those page, are divided into three sections: upper portion- that we consider to be critical to an understanding of our consolidated data; middle portion-GE data that reflect financial statements because their application places the various conventional measurements for such enterprises; most significant demands on our ability to judge the and lower portion-GECS data that reflect key informa- effect of inherently uncertain matters on our financial tion pertinent to financial services businesses. results. For all of these policies, we caution that future events rarely develop exactly as forecast, and the best GE'S TOTAL RESEARCH AND DEVELOPMENT expenditures were estimates routinely require adjustment.

$2.6 billion in 2002, compared with $2.3 billion and $2.2 billion in 2001 and 2000, respectively. In 2002, expendi- LOSSES ON FINANCING RECEIVABLES are recognized when tures from GE's own funds were $2.2 billion, an increase they are incurred. Measurement of such losses requires of 12% from 2001, reflecting continuing research and consideration of historical loss experience, including the development work related to new product, service, infor- need to adjust for current conditions, and judgments mation and process technologies. Product technology about the probable effects of relevant observable data, efforts in 2002 included continuing development work on including present economic conditions such as delin-the next generation of gas turbines, further advances in quency rates, financial health of specific customers and state-of-the-art diagnostic imaging technologies, develop- market sectors, collateral values, and the present and ing reduced emissions and more fuel-efficient locomo- expected future levels of interest rates. Exposure to tives, improving the performance and efficiency of wind losses on financing receivables at year-end 2002 was energy turbines and continuing development of more $222.3 billion, including credit support for special purpose fuel-efficient, cost-effective aircraft engine designs. entities, against which an allowance for losses of $5.8 bil-Services technologies include further advances in diagnos- lion was provided. Further information is provided on tic applications, including remote diagnostic capabilities pages 60 and 61, and in notes 1, 12, 13 and, for special related to repair and maintenance of medical equipment, purpose entities, in note 29. While losses depend to a aircraft engines, power generation equipment and locomo- large degree on future economic conditions, we do not tives. Information technology advances in the healthcare anticipate significant adverse credit development in 2003.

field are helping our customers integrate their various IMPAIRMENT OF INVESTMENT SECURITIES results in a charge devices and critical systems. Process technologies pro-to operations when a market decline below cost is other vided improved product quality and performance and than temporary. We regularly review each investment increased capacity for manufacturing engineered materi-security for impairment based on criteria that include the als. Expenditures funded by customers (mainly the U.S.

extent to which cost exceeds market value, the duration government) were $416 million in 2002, compared with of that market decline and the financial health of and

$369 million in 2001.

specific prospects for the issuer. GECS investment secu-GE'S TOTAL BACKLOG of firm unfilled orders at the end of rities amounted to $116.5 billion at year-end 2002. Gross 2002 was $36.1 billion, a decrease of 24% from year-end unrealized gains and losses included in that carrying 2001, reflecting softening demand for new equipment in amount related to debt securities were $4.2 billion and the power generation business at Power Systems, par- $1.9 billion, respectively. Gross unrealized gains and tially offset by higher backlog at Transportation Systems losses on equity securities were $0.2 billion and $0.5 bil-and Aircraft Engines. Of the total backlog, $28.6 billion lion, respectively. Of securities with unrealized losses related to products, of which 65% was scheduled for at year-end 2002, and based on application of our account-delivery in 2003. Product services orders, included in this ing policy for impairment, approximately $800 million of reported backlog for only the succeeding 12 months, portfolio value, including approximately $200 million from were $7.5 billion at the end of 2002. Orders constituting the telecommunications and cable industries, is at risk of this backlog may be canceled or deferred by customers, being charged to earnings in 2003. GECS actively performs subject in certain cases to penalties. See Segment comprehensive market research, monitors market condi-Operations beginning on page 50 for further information. 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 2000 1999 1998

.------- ..........._._.r-GENERAL ELECTRIC COMPANYAND CONSOUDATED AFFLIATES Revenues $131,698 $125,913 $129,853 $111,630 $100,469 Earnings before accounting changes 15,133 14,128 12,735 10,717 9,296 Cumulative effect of accounting changes (1,015) (444) - - -

Net earnings 14,118 13,684 12,735 10,717 - 9,296 Dividends declared 7,266 6,555 5,647 4,786 4,081 Earned on average share owners' equity excluding effect of accounting changes 25.8% 27.1% 27.5% 26.8% 25.7%

Per share Earnings before accounting changes -diluted $ 1.51 $ 1.41 $ 1.27 $ 1.07 $ 0.93 Cumulative effect of accounting changes -diluted (0.10) (0.04) - -

Earnings - diluted 1.41 1.37 1.27 1.07 0.93 Earnings before accounting changes-basic 1.52 1.42 1.29 1.09 0.95 Cumulative effect of accounting changes -basic (0.10) (0.04) - - -

Earnings - basic 1.42 1.38 1.29 1.09 0.95 Dividends declared 0.73 0.66 0.57 0.48Yj 0.41S Stock price range 41.84-21.40 52.90-28.25 60.50-41.67 53.17-31.42 34.65-23.00 Year-end closing stock price 24.35 40.08 47.94 51.58 34.00 Total assets 575,244 495,023 437,006 405,200 355,935 Long-term borrowings 140,632 79,806 82,132 71,427 59,663 Shares outstanding-average (in thousands) 9,947,113 9,932,245 9,897,110 9,833,478 9,806,995 Share owner accounts - average 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'

.... Total ........

equity capi.. ...... .....

v .6......... -7....... .......... .7.......... ............

63.706 7

54,824 50,492 53...4 42,557 4

38,880

....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 24.5% 27.0% 27.4% 25.8% 23.9%

Borrowings as a percentage of total capital invested 13.1% 4.3% 3.3% 6.4% 9.5%

Working capitallb) $ 3,821 $ (2,398) $ 799 $ 3,922 $ 5,038 Additions to property, plant and equipment 2,386 2,876 2,536 2,036 2,047 Employees at year end United States 125,000 125,000 131,000 124,000 125,000 Other countries 94,000 94,000 92,000 86,000 .2 82,000 Total employees 219,000 219,000 223,000 210,000 207,000 GECS DATA Revenues $ 58,187 $ 58,353 S 66,177 S 55,749 $ 48,694 Earnings before accounting changes 4,626 5,586 5,192 4,443 3,796 Cumulative effect of accounting changes (1,0151 (169) - -

Net earnings 3,611 5,417 5,192 4,443 3,796 Share owner's equity 36,929 28,590 23,022 20,321 19,727 Minority interest 4,445 4,267 3,968 4,391 3,459 Total borrowings 270,982 239,935 205,371 200,025 172,200 Ratio of debt to equitV at GE Capital 6.58:1 7.31:1 7.53:1 8.44:1 7.86:1 Total assets $489,828 $425,484 $370,636 $345,018 $303,297 Insurance premiums written 16,999 15,843 16,461 13,624 11,865 Employees at year end United States 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.

(a3Working 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

MANAGEMENT'S DISCUSSION AND ANALYSIS REVENUE RECOGNITION ON LONG-TERM AGREEMENTS to provide for reinsurance entities (as opposed to primary insurers) product services (product services agreements) requires due to coverage often being provided on an "excess-of-estimates of profits over the multi-year terms of such loss" basis and the resulting lags in receiving current agreements, considering factors such as the frequency claims data. GECS insurance liabilities, reserves and and extent of future monitoring, maintenance and over- annuity benefits within the Insurance segment totaled haul events; cost of personnel; spare parts and other $135.9 billion at year-end 2002. Of that total, $30.6 billion resources required to perform the services; and future ($20.9 billion net of reinsurance recoverables) related to cost changes. We routinely review estimates under prod- unpaid claims and claims adjustment expenses under uct services agreements and regularly revise them to short-duration insurance contracts of which ERC's share adjust for changes in outlook. Revisions that affect a approximated $26.6 billion ($174 billion net of reinsurance product services agreement's total estimated profitability recoverables).

will also result in an immediate adjustment of earnings. We continually evaluate the potential for changes in We also regularly assess customer credit risk inherent in loss estimates with the support of qualified reserving the carrying amounts of contract costs and estimated actuaries and use the results of these evaluations both earnings and provide for losses when they are incurred. to adjust recorded reserves and to proactively modify Carrying amounts for product services agreements in underwriting criteria and product offerings. For actuarial progress at December 31, 2002 and 2001, were $2.9 bil- analysis purposes, reported and paid claims activity is lion and $2.3 billion, respectively, and are included in segregated into several hundred reserving segments, "contract costs and estimated earnings" in note 17. each having differing historical settlement trends. A Adjustments to earnings resulting from revisions to variety of actuarial methodologies are then applied to estimates on product services agreements have been the underlying data for each of these reserving segments insignificant for each of the years in the three-year in arriving at an estimated range of "reasonably possible" period ended December 31, 2002. loss scenarios. Factors such as line of business, length of historical settlement pattern, recent changes in under-INSURANCE LIABILITIES AND RESERVES differ for short and writing standards and unusual trends in reported claims long-duration insurance contracts. Short-duration contracts activity will generally affect which actuarial methodologies such as property and casualty policies are accounted for are given more weight for purposes of determining the based on actuarial estimates of losses inherent in that "best estimate" of ultimate losses in a particular reserv-period's claims, including losses for which claims have ing segment. As discussed on pages 53-54, in recent not yet been reported. Short-duration contract loss esti-periods and continuing throughout 2002, the level of mates rely on actuarial observations of ultimate loss reported claims activity related to prior year loss events, experience for similar historical events. Measurement of particularly for liability-related exposures underwritten in long-duration insurance liabilities (such as term and whole 1997 through 2001 at ERC, has been significantly higher life insurance policies) is also based on approved actuarial than anticipated. Full consideration of these trends was techniques that include assumptions about mortality, incorporated into a comprehensive reserve study com-lapse rates and future yield on related investments.

pleted in the fourth quarter of 2002.

Historical insurance industry experience indicates that a greater degree of inherent variability exists in assessing PENSION ASSUMPTIONS. Pension benefit obligations and the the ultimate amount of losses under short-duration prop- related effects on operations are calculated using actuar-erty and casualty contracts than exists for long-duration ial models. Two critical assumptions, discount rate and mortality exposures. This inherent variability is particularly expected return on assets, are important elements of significant for liability-related exposures, including latent plan expense and/or liability measurement. We evaluate claims issues (such as asbestos and environmental related these critical assumptions at least annually. Other coverage disputes), because of the extended period of assumptions involve demographic factors such as retire-time-often many years-that transpires between when ment, mortality and turnover. These assumptions are eval-a given claim event occurs and the ultimate full settlement uated periodically and are updated to reflect our of such claim. This situation is then further exacerbated experience. Of course, actual results in any given year 70 GE2002 ANNUAL REPORT

will often differ from actuarial assumptions because of OTHER LOSS CONTINGENCIES are recorded as liabilities when economic and other factors. it is probable that a liability has been incurred and the The discount rate enables us to state expected future amount of the loss is reasonably estimable. Disclosure cash flows at a present value on the measurement date. is required when there is a reasonable possibility that We have little latitude in selecting this rate, as it is required the ultimate loss will exceed the recorded provision.

to represent the market rate for high-quality fixed income Contingent liabilities are often resolved over long time investments. A lower discount rate increases the present periods. Estimating probable losses requires analysis of value of benefit obligations and increases pension multiple forecasts that often depend on judgments about expense. For our principal plans, a 50 basis point decrease potential actions by third parties such as regulators.

in the discount rate would increase pension expense by OTHER SIGNIFICANT ACCOUNTING POLICIES, not involving approximately $180 million. We reduced our discount rate the same level of measurement uncertainties as those from 7Y4% to 64% for 2003 to reflect market interest discussed above, are nevertheless important to an under-rate conditions.

standing of the financial statements. Policies related to To determine the expected long-term rate of return revenue recognition, financial instruments and business on pension plan assets, we consider the current and combinations require difficult judgments on complex expected asset allocations, as well as historical and matters that are often subject to multiple sources of expected returns on various categories of plan assets.

authoritative guidance. Certain of these matters are A 50 basis point decrease in the expected return on among topics currently under re-examination by account-assets of principal plans would increase pension expense ing standard setters and regulators. Although no specific on our principal plans by approximately $240 million per conclusions reached by these standard setters appear year. We assumed that long-term returns on our pension likely to cause a material change in our accounting policies, plans were 8X% in 2002 and 9X% in 2001 and 2000.

outcomes cannot be predicted with confidence. Also see Further information on our principal pension plans is pro-note 1, Summary of Significant Accounting Policies, which vided on pages 47-48 of Management's Discussion and discusses accounting policies that we have selected from Analysis under the caption Principal Costs and Expenses acceptable alternatives.

for GE. Note 6 to the consolidated financial statements includes disclosure of these assumptions.

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

GE GECS 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

STATEMENT OF FINANCIAL POSITION General Electric Company nd consolidated affiliates At December 31 (in millionsl 2002 2001

........... ...._ _ _ .r ..._ _ _

ASSETS Cash and equivalents $ 8,910 S 8,433 Investment securities (note 9) 116,862 101,017 Current receivables (note 10) 10,681 9,590 Inventories note 11) 9,247 8,565 Financing receivables (investments in time sales, loans and financing leases) -

net (notes 12 and 13) 199,917 174,140 Insurance receivables (note 14) 31,585 28,312 Other GECS receivables 11,444 11,105 Property, plant and equipment (including equipment leased to others) -

net (note 15) 47,204 42,140 Investment in GECS Intangible assets-net (note 16) 46,180 35,124 All other assets (note 17) 93,214 76,597

- . .... ... 4.. 5.... 2 TOTAL ASSETS $575,244 $495,023 LIABILITIES AND EQUITY Short-term borrowings (note 18) $138,775 $153,076 Accounts payable, principally trade accounts 18,874 18,158 Progress collections and price adjustments accrued 6,706 11,751 Dividends payable 1,895 1,787 All other current costs and expenses accrued 15,577 14,132 Long-term borrowings (note 18) 140,632 79,806 Insurance liabilities, reserves and annuity benefits (note 19) 135,853 114,223 All other liabilities (note 20) 35,236 32,921 Deferred income taxes (note 21) ..... I... ..... . . ...... ....... . ....

12,517 ... _ ........ _

9,130 Total liabilities _.... . . ........ . ...... . .... . .....

506,065 .... _..._.

434,984 Minority interest in equity of consolidated affiliates (note 22) 5,473 5,215 Common stock (9,969,894,000 and 9,925,938,000 shares outstanding at year-end 2002 and 2001, respectively) 669 669 Accumulated gainst(losses) -net Investment securities 1,071 (232)

Currency translation adjustments (2,136) (3,136)

Derivatives qualifying as hedges (2,112) (955)

Other capital 17,288 16,693 Retained earnings 75,553 68,701 Less common stock held in treasury .............

(26,627) (26,916)

Total share owners' equity (notes 24 and 25) 63,706 54,824 TOTAL LIABILITIES AND EQUITY $575,244 $495,023 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 74 GE 2002 ANNUAL REPORT

GE GECS 2002 2001 2002 2001 S 1,079 $ 9,798 $ 7,918 $ 7,314 332 879 116,530 100,138 10,973 9,805 9,039 8,295 208 270 199,917 174,140 31,585 28,312 12,996 13,267 13,743 12,799 33,461 29,341 36,929 28,590 23,049 14,367 23,131 20,757 30,167 25,200 64,082 51,945

$125,311 $109,733 $489,828 $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

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 GECS 2002 2001 .....

2000. .... . ......

2002 .

2001 2000

$14,118 $13,684 $12,735 $ 3,611 $ 5,417 $ 5,192 1,015 444 1,015 169 2,199 1,919 1,725 3,799 3,451 3,314 545 486 707 860 (2,661) (3,625) (3,370) 1,005 564 470 1,409 862 683 (486) 207 (550)

(149) (881) (663) 62 396 (261) 708 364 845 (880) 4,804 3,047 (5,062) 3,U6 3,255 9,454 8,194 (1,009) 3,087 2,481 2,045 (590) 530 483 (559) (8,688) (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 in certain of the businesses referred to below. Consumer

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES lighting products and computer hardware and software are often sold with a right of return. Accumulated experi-Consolidation ence is used to estimate and provide for such returns.

Our consolidated financial statements represent the adding Sales of goods in the Aircraft Engines, Medical together of all affiliates-companies that General Electric Systems, Power Systems, Transportation Systems and Company directly or indirectly controls. Results of associated certain Industrial Systems businesses sometimes include companies-generally companies in which we own 20% multiple components and sometimes include services such to 50% and over which we, directly or indirectly, have sig- as installation. In such contracts, amounts assigned to nificant influence-are included in the financial statements each component are based on that component's objectively on a "one-line" basis. determined fair value, such as the sales price for the component when it is sold separately or competitor prices Financial statement presentation for similar components. In general, sales are recognized We have reclassified certain prior-year amounts to conform individually for delivered components only when undeliv-to this year's presentation. ered components are not essential to their functionality.

Financial data and related measurements are presented However, when undelivered components are inconsequen-in the following categories: tial or perfunctory, such as certain training commitments,

• GE This represents the adding together of all affiliates sales are recognized on the total contract with provision other than General Electric Capital Services, Inc. IGECS), made for the cost of the incomplete elements.

whose operations are presented on a one-line basis. We record sales of product services and certain power

• GECS This affiliate owns all of the common stock of generation equipment in accordance with contracts. For General Electric Capital Corporation GE Capital) and GE long-term product services agreements, we use estimated Global Insurance Holding Corporation (GE Global Insurance contract profit rates to record sales as work is performed.

Holding), the parent of Employers Reinsurance For certain power generation equipment, we use esti-Corporation. GE Capital, GE Global Insurance Holding and mated contract profit rates to record sales as major their respective affiliates are consolidated in the GECS components are completed and delivered to customers.

columns and constitute its business.

Estimates are subject to change; revisions that affect

• CONSOLIDATEDThis represents the adding together of an agreement's total estimated profitability result in an GE and GECS. immediate adjustment of earnings. Losses, if any, are The effects of transactions among related companies provided for when probable.

within and between each of the above-mentioned groups Sales by NBC are recorded when advertisements are are eliminated. Transactions between GE and GECS broadcast, with provision made for any shortfalls from are immaterial and consist primarily of GECS services for viewer commitments "make goods") based on specific material procurement and trade payables and receivables contracts and independent viewer census information.

management, aircraft engines and medical equipment GECS revenues from services (eamed ncome) manufactured by GE that are leased to others, buildings and equipment leased by GE from GECS, and GE invest- We use the interest method to recognize income on ments of cash in GECS commercial paper. all loans. We stop accruing interest income at the earlier Preparing financial statements in conformity with gen- of the time at which collection of an account becomes erally accepted accounting principles requires us to make doubtful or the account becomes 90 days delinquent.

estimates and assumptions that affect reported amounts We recognize interest income on impaired loans either and related disclosures. Actual results could differ from as cash is collected or on a cost-recovery basis as con-those estimates. ditions warrant.

We record financing lease income on the interest Sales of goods and services method to produce a level yield on funds not yet recovered.

We record sales of goods when a firm sales agreement Estimated unguaranteed residual values of leased assets is in place, delivery has occurred and collectibility of the are based primarily on periodic independent appraisals of fixed or determinable sales price is reasonably assured. the values of leased assets remaining at expiration of the If customer acceptance of products is not assured, sales lease terms. Significant assumptions we use in estimating are recorded only upon formal customer acceptance. residual values include estimated net cash flows over the Sales of goods in the Appliances, Industrial Systems, remaining lease term, results of future remarketing and ITSolutions, Lighting, Plastics, Specialty Materials and future component part and scrap metal prices, discounted GE Supply businesses typically do not include multiple at an appropriate rate.

product and/or service elements, as compared with sales 78 GE 2002 ANNUAL REPORT

We recognize operating lease income on a straight- All accounts or portions thereof that are deemed to be line basis over the terms of underlying leases. uncollectible or to require an excessive collection cost are We defer origination, commitment and other non- written off to the allowance for losses. Small-balance refundable fees related to fundings and record them accounts generally are written off when six to 12 months in earned income on the interest method. We defer delinquent, although any such balance judged to be commitment fees related to loans that we do not expect uncollectible, such as an account in bankruptcy, is written to fund and on line-of-credit fees and record them in down immediately to estimated realizable value. Large-earned income on a straight-line basis over the period balance accounts are reviewed at least quarterly, and those to which the fees relate. We record syndication fees in accounts with amounts that are judged to be uncollectible earned income at the time related services are performed are written down to estimated realizable value.

unless significant contingencies exist. When collateral is repossessed in satisfaction of a loan, See below and page 80 for our discussion of income the receivable is written down against the allowance for from investment and insurance activities. losses to estimated fair value of the asset less costs to sell, transferred to other assets and subsequently carried Depreciation and amortization at the lower of cost or estimated fair value less costs to The cost of most of GE's manufacturing plant and equip- sell. This accounting method has been employed principally ment is depreciated over its estimated economic life for commercial lending transactions.

using an accelerated method based primarily on a sum-of-the-years digits formula. Cash and equivalents The cost of GECS equipment leased to others on Debt securiies with original maturities of three months or operating leases is amortized, principally on a straight-line less are included in cash equivalents unless designated as basis, to estimated residual value over the lease term available for sale and classified as investment securities.

or over the estimated economic life of the equipment.

Investment securities Depreciation of property and equipment used by GECS is recorded on either a sum-of-the-years digits formula We report investments in debt and marketable equity or a straight-line basis over the lives of the assets. securities, and equity securities at our insurance affili-ates, at fair value based primarily on quoted market Losses on financing receivables prices or, if quoted prices are not available, discounted The allowance for losses on small-balance receivables expected cash flows using market rates commensurate reflects our best estimate of probable losses inherent in with credit quality and maturity of the investment.

the portfolio determined principally on the basis of histori- Substantially all investment securities are designated cal experience. For other receivables, principally the as available for sale, with unrealized gains and losses larger loans and leases, the allowance for losses is deter- included in share owners' equity, net of applicable taxes mined primarily on the basis of our best estimate of prob- and other adjustments. We regularly review investment able losses, including specific allowances for known securities for impairment based on criteria that include troubled accounts. Small balance receivables consist of the extent to which cost exceeds market value, the dura-consumer loans, primarily credit card receivables, and tion of the market decline, and the financial health of and certain homogeneous leases and secured loans. Large specific prospects for the issuer. Unrealized losses that balance receivables comprise all other commercial loans are other than temporary are recognized in earnings.

and leases. Realized gains and losses are accounted for on the Losses on financing receivables are recognized when specific identification method.

they are incurred. Measurement of such losses requires Inventories consideration of historical loss experience, including the need to adjust for current conditions and judgments about All inventories are stated at the lower of cost or realizable the probable effects of relevant observable data, including values. Cost for substantially all of GE's U.S. inventories is present economic conditions such as delinquency rates, determined on a last-in, first-out (LIFO) basis. Cost of financial health of specific customers and market sectors, other GE inventories is primarily determined on a first-in, collateral value, and the present and expected levels of first-out (FIFO) basis. GECS inventories consist primarily interest rates. For large balance, non-homogeneous loans, of finished products held for sale. Cost is primarily deter-the following sources of value are used to determine mined on a FIFO basis.

recoverability, as appropriate under the circumstances: Intangible assets present value of expected future cash flows discounted As of January 1, 2002, we completed adoption of at the loan's effective interest rate, the loan's observable Statement of Financial Accounting Standards SFAS) 142, market price, or the fair value of the collateral.

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 tracts with terms that are neither fixed nor guaranteed; using a fair value approach, at the "reporting unit" level. for these contracts, we recognize revenues for assess-A reporting unit is the operating segment, or a business ments against the policyholder's account, mostly for mor-one level below that operating segment (the "component" tality, contract initiation, administration and surrender.

level) if discrete financial information is prepared and reg- Investment contracts are contracts that have neither sig-nificant mortality nor significant morbidity risk, including ularly reviewed by management at the component level.

annuities payable for a determined period; for these con-We recognize an impairment charge for any amount by tracts, we recognize revenues on the associated invest-which the carrying amount of a reporting unit's goodwill ments and amounts credited to policyholder accounts are exceeds its fair value. We use discounted cash flows to charged to expense.

establish fair values. When available and as appropriate, LIABILITIES FOR UNPAID CLAIMS AND CLAIMS ADJUSTMENT we use comparative market multiples to corroborate discounted cash flow results. When a business within EXPENSES represent our best estimate of the ultimate a reporting unit is disposed of, goodwill is allocated obligations for reported claims plus those IBNR and the to the gain or loss on disposition using the relative fair related estimated claim settlement expenses for all value methodology. claims incurred through December 31 of each year.

We amortize the cost of other intangibles over their Specific reserves-also referred to as case reserves-estimated useful lives unless such lives are deemed are established for reported claims using case-basis eva indefinite. Amortizable intangible assets are tested for uations of the underlying claim data and are updated as impairment based on undiscounted cash flows and, if further information becomes known. IBNR reserves are impaired, written down to fair value based on either determined using generally accepted actuarial reserving discounted cash flows or appraised values. Intangible techniques that take into account historical loss experi-assets with indefinite lives are tested for impairment ence data and, as appropriate, certain qualitative factors.

and written down to fair value as required. IBNR reserves are adjusted to take into account certain Before January 1, 2002, we amortized goodwill over additional factors that can be expected to affect the liabil-its estimated period of benefit on a straight-line basis; we ity for claims over time, such as changes in the volume amortized other intangible assets on appropriate bases and mix of business written, revisions to contract terms over their estimated lives. No amortization period and conditions, changes in legal precedence or developed exceeded 40 years. When an intangible asset's carrying case law, trends in healthcare and medical costs, and value exceeded associated expected operating cash general inflation levels. Settlement of complex claims rou-flows, we considered it to be impaired and wrote tinely involves threatened or pending litigation to resolve it down to fair value, which we determined based on disputes as to coverage, interpretation of contract terms either discounted future cash flows or appraised values. and conditions or fair compensation for damages suf-fered. These disputes are settled through negotiation, GECS insurance accounting policies arbitration or actual litigation. Recorded reserves incorpo-Accounting policies for GECS insurance businesses follow. rate our best estimate of the effect that ultimate resolu-tion of such disputes have on both claims payments and PREMIUM INCOME. We report insurance premiums as related settlement expenses. Liabilities for unpaid claims earned income as follows:

and claims adjustment expenses are continually reviewed

• For short-duration insurance contracts (including property and adjusted; such adjustments are included in current and casualty, accident and health, and financial guaranty operations and accounted for as changes in estimates.

insurance), we report premiums as earned income, gen-erally on a pro-rata basis, over the terms of the related DEFERRED POLICY ACQUISITION COSTS. Costs that vary with agreements. For retrospectively rated reinsurance con- and are primarily related to the acquisition of new and tracts, we record premium adjustments based on esti- renewal insurance and investment contracts are deferred mated losses and loss expenses, taking into consideration and amortized over the respective policy terms. For-short-both case and incurred-but-not-reported (IBNR) reserves. duration insurance contracts, acquisition costs consist

• For traditional long-duration insurance contracts (including primarily of commissions, brokerage expenses and pre-term and whole life contracts and annuities payable for mium taxes. For long-duration insurance contracts, these the life of the annuitant), we report premiums as earned costs consist primarily of first-year commissions in excess income when due. of recurring renewal commissions, certain variable sales

• For investment contracts and universal life contracts, we expenses and certain support costs such as underwriting report premiums received as liabilities, not as revenues. and policy issue expenses.

Universal life contracts are long-duration insurance con-80 GE 2002 ANNUAL REPORT

• For short-duration insurance contracts, we amortize lin millions; per-share amounts in dollarsl 2002 2001 2000 these costs on a pro-rata basis over the contract periods . . ... .. ....__... .....

.... . r- : _ . .... ..... . .. ........ . ..... ... .......

in which the related premiums are earned. Net earnings, as reported $14,118 $13,684 $12,735 Earnings per share,

• For traditional long-duration insurance contracts, we amor-as reported tize these costs over the respective contract periods in Diluted 1.41 1.37 1.27 proportion to either anticipated premium income or, Basic 1.42 1.38 1.29 in the case of limited-payment contracts, estimated Stock option expense benefit payments. included in net earnings 27 _

• For investment contracts and universal life contracts, Total stock option we amortize these costs on the basis of anticipated expense(') 330 296 233 gross profits. PRO-FORMA EFFECTS Net earnings, on We review deferred policy acquisition costs periodically for pro-forma basis 13,815 13,388 12,502 recoverability considering anticipated investment income. Earnings per share, on pro-forma basis PRESENT VALUE OF FUTURE PROFITS. The actuarially deter- Diluted 1.38 1.33 1.24 mined present value of anticipated net cash flows to be Basic 1.39 1.35 1.26 realized from insurance, annuity and investment contracts 2002 and 2001 net earnings and earnings per share amounts Include in force at the date of acquisition of life insurance enter- effects of accounting changes.

prises is recorded as the present value of future profits <a)As if we had applied SFAS 123 to expense stock options in all periods.

Includes $27 million actually recognized in 2002 earnings.

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 In November 2002, the Financial Accounting Standards impairment, if any. Board (FASB) issued Interpretation No. (FIN) 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Accounting changes Including Indirect Guarantees of Indebtedness of Others.

Under SFAS 142, goodwill is no longer amortized but is The resulting disclosure provisions are effective for year-tested for impairment using a fair value methodology. We end 2002 and such disclosures are provided in notes 29 stopped amortizing goodwill effective January 1, 2002. and 30. Recognition and measurement provisions of FIN Under SFAS 142, we were required to test all existing 45 become effective for guarantees issued or modified goodwill for impairment as of January 1, 2002, on a report- on or after January 1, 2003.

ing unit basis, and recorded a non-cash charge of $1.204 In January 2003, the FASB issued FIN 46, Consolidation billion ($1.015 billion after tax, or $0.10 per share), which of Variable Interest Entities, an Interpretation of Accounting we reported in the caption "Cumulative effect of account- Research Bulletin No. 51. FIN 46's disclosure requirements ing changes.' Substantially all of the charge relates to the are effective for year-end 2002 and such disclosures are GECS iT Solutions business and the GECS GE Auto and provided in note 29. We plan to adopt FIN 46's account-Home business. Factors contributing to the impairment ing provisions on July 1, 2003.

charge were the difficult economic environment in the At January 1, 2001, we adopted SFAS 133, Accounting information technology sector and heightened price compe- for Derivative Instruments and Hedging Activities, as tition in the auto insurance industry. No impairment charge amended. Under SFAS 133, all derivative instruments had been required under our previous goodwill impairment are recognized in the balance sheet at their fair values.

policy, which was based on undiscounted cash flows. Further information about derivatives and hedging is In 2002, we adopted the stock option expense provisions provided in note 28.

of SFAS 123, Accounting for Stock-Based Compensation, The cumulative effect of adopting this accounting resulting in a $27 million charge to net eamings. We first change at January 1, 2001, follows.

measure the total cost of each option grant at the grant Share date, using market-based option trading models. We then owners' (In millions) _.__

.~~............

Earnings() equity recognize each grant's total cost over the period that the Adjustment to fair value of derivatives S(502) $1,340) options vest. Under this approach, our 2002 option grants Income tax effects 178 513 had a total value of approximatelv $200 million, after tax; Total S(324) S (827) we charged $27 million to net earnings in 2002, and after-tax expense from this grant for the next three years will The earnings per share effect was $0.03.

be about $80 million, $50 million and $30 million. A com- (0) For eamings effect, amount shown is net of adjustment to hedged items.

parison of reported and pro-forma net earnings, including effects of expensing stock options, follows.

GE 2002 ANNUAL REPORT 81

NOTESTO CONSOLIDATED FINANCIAL STATEMENTS The cumulative effect on earnings of adopting SFAS 133 NOTE 3 comprised two significant elements. One element repre- GECS REVENUES FROM SERVICES sented the fair value of equity options embedded in loans (Inmillions) _ 2002 2001 2000 that provided both us and the borrower the right, but not the obligation, to convert the loans into shares of the Time sales, loan and other income(s) $22,030 $21,894 $22,002 borrower's stock. The second element of the transition Operating lease rentals 6,191 6,088 6,183 effect was a portion of the effect of marking to market Financing leases 4,616 4,517 4,012 options and currency contracts used for hedging. The Investment income 5,570 6,593 8,479 cumulative effect on share owners' equity was primarily Premiums earned by attributable to marking to market forward and swap con- insurance businesses 16,484 15,634 16,093 tracts used to hedge variable-rate borrowings. Decreases Total $54,891 $54,726 $56,769 in the fair values of these instruments were attributable

() Indudes gains on sales of financial assets through securitizations of $767 to declines in interest rates since inception of the hedg- million in 2002, compared with S1,327 million in 2001 and $489 million in ing arrangements. As a matter of policy, we ensure that, 2000, net of any effects of replenishing securitized credit card balances.

including the effect of derivatives, lending and financing asset positions are substantially matched in character For insurance businesses, the effects of reinsurance on (e.g., fixed vs. floating) and duration. As a result, declines premiums written and premiums earned were as follows:

in the fair values of these effective derivatives are offset (In millionsl 2002 2001 2000 by unrecognized gains on the related financing assets and hedged items, and future earnings will not be subject PREMIUMS WRITTEN to volatility from interest rate changes. Direct $11,659 $ 9,958 $ 9,390 In November 2000, the Emerging IssuesTask Force Assumed 9,409 9,603 9,552 Ceded (4,069) (3,718) (2,481)

(EITF) of the FASB reached a consensus on accounting for -... --- .-.. . . .......... , , ,. .. . . . . . . . .

impairment of retained beneficial interests (EITF 99-20). Total $16,999 $15,843 $16,461 Under this consensus, impairment of certain retained PREMIUMS EARNED interests in securitized assets must be recognized when Direct $10,922 S 9,912 $ 9,026 (1)the asset's fair value is below its carrying value, and Assumed 9,569 9,471 9,643 (21 it is probable that there has been an adverse change Ceded .....

(4,007) (3,749) (2,576) in estimated cash flows. The cumulative effect of adopt- Total $16,484 $15,634 $16,093 ing EITF 99-20 at January 1, 2001, was a one-time reduc-tion of net earnings of $120 million ($0.01 per share).

NOTE 4 These 2001 accounting changes did not involve cash, SUPPLEMENTAL COST INFORMATION and we expect that they will have no more than a mod-est effect on future results. Total expenditures for research and development were

$2,631 million, $2,349 million and $2,193 million in 2002, NOTE 2 2001 and 2000, respectively. The portion we funded was GE OTHER INCOME $2,215 million in 2002, $1,980 million in 2001 and $1,867 million in 2000.

!Inmillions) 2002 2001 2000 Rental expense under operating leases is shown below.

Bravo exchange(a) $ 571 $ - $ -

(In millions) 2002 2001 2000-Global eXchange Services ......... _,

gain(b) 488 - - GE $773 $ 694 $ 648 Licensing and royalty GECS 977 1,006 1,176 income 103 75 65 Associated companies (170) (106) (1111)

At December 31, 2002, minimum rental commitments Marketable securities and bank deposits 31 184 55 under noncancelable operating leases aggregated $2,635 Other items 83 280 489 million and $4,449 million for GE and GECS, respectively.

Total $1,106 $433 $ 498 Amounts payable over the next five years follow.

lIn millions) 2003 2004 2005 2006 2007 (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.

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 FUNDING POLICY for retiree health benefits is generally

$9,131 million in 2002, $8,637 million in 2001 and $8,392 to pay covered expenses as they are incurred. We fund million in 2000. Capitalized interest is insignificant in retiree life insurance benefits at our discretion.

2002, 2001 and 2000. Changes in the accumulated postretirement benefit We recorded restructuring charges of $270 million obligation for retiree benefit plans follow.

($354 million including other related charges) in 2002 to ACCUMULATED POSTRETIREMENT BENEFIT OBLIGATION IAPBO) rationalize certain operations and facilities of GE's world-fIn millions) 2002 2001 wide industrial businesses. Major elements of these pro-grams included costs for employee severance, lease Balance at January 1 S6,796 $6,422 termination, dismantlement, and other exit costs. An Service cost for benefits eamed 277 191 analysis of changes in the restructuring liability follows. Interest cost on benefit obligation 469 459 Participant contributions 32 30 Termination Exit Plan amendments (60) fin millions) benefits coat Total Actuarial loss 567 287 2002 provision $195 $75 $270 Benefits paid (687) (593)

Usage (93) 14) (97) Other _......_......... 41 -

Balance at Balance at December 31 1. $7,435 $6,796 December 31, 2002 $102 $71 $173 lIThe APBO for the retiree health plans was SS,458 million and $4,965 million at year-end 2002 and 2001, respmectively.

Substantially all of the 2002 balance is expected to be used by year-end 2003.

Changes in the fair value of assets for retiree benefit plans follow.

NOTE 6 FAIR VALUE OF ASSETS RETIREE HEALTH AND LIFE BENEFITS (in millions) 2002 2001 We sponsor a number of retiree health and life insurance Balance at January 1 $1,771 $2,031 benefit plans (retiree benefit plans). Principal retiree ben- Actual lss on plan assets (225) (163) efit plans are discussed below; other such plans are not Employer contributions 535 466 significant individually or in the aggregate. Participant contributions 32 30 Benefits paid (687) (593)

PRINCIPAL RETIREE BENEFIT PLANS generally provide health Balance at December 31 S1,426 $1,771 and life insurance benefits to employees who retire under the GE Pension Plan (see note 6) with 10 or more years Plan assets are held in trust and consist mainly of com-of service. Retirees share in the cost of healthcare bene-mon stock and fixed-income securities. GE common fits. Benefit provisions are subject to collective bargain-stock represented 4.8% and 6.4% of trust assets at ing. These plans cover approximately 250,000 retirees year-end 2002 and 2001, respectively.

and dependents.

Our recorded assets and liabilities for retiree benefit The effect on operations of principal retiree benefit plans are as follows:

plans is shown in the following table.

RETIREE BENEFIT ASSET/(LIABILITY)

EFFECT ON OPERATIONS December 31 in millions) 2002 2001 (in milionI_ 2002 2001 2000 Funded status f1 $16,009) 6(5,025)

Expected retum on Unrecognized prior service cost 753 909 plan assets 6(170) 6(185) $0178)

Unrecognized net actuarial loss 2,277 1,393 Service cost for benefits earned 277 191 165 Net liability recognized $12,979) S(2.723)

Interest cost on benefit Amounts recorded In the Statement obligation 469 459 402 of Financial Position:

Prior service cost 96 90 49 Prepaid retiree life plans asset $ 87 $ 68 Net actuarial loss recognized 78 60 40 Retiree health plans liability (3,066) (2,789)

Retiree benefit plans cost $ 750 $615 S 478 Net liability recognized $(2,979) $12,723) 1l Fel value of assets lss APBO, as shown inthe preceding tabLes.

GE 2002 ANNUAL REPORT 83

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ACTUARIAL ASSUMPTIONS used to determine costs and EFFECT ON OPERATIONS benefit obligations for principal retiree benefit plans follow. (In millions).. ,,,,,__,, ......... _ ~...._

2002 . ..__.._

2001 2000 ACTUARIAL ASSUMPTIONS Expected return on plan assets $ 4,054 $ 4,327 $ 3,754 December 31 2002 2001 2000 Service cost for benefits Discount rate 6V4% 714% 71/2% eamed(s) (1,107) (884) 1780)

Compensation increases 5 5 5 Interest cost on benefit obligation (2,116) 12,065) (1,966)

Healthcare cost trend a) 13 12 10 Prior service cost (217) (244) (237)

Expected return on assets 8% 9Y2 9_%

SFAS 87 transition gain - - 154 151For 2002, gradually declining to 5% after 2mo. Net actuarial gain recognized 912 961 819 Income from pensions 1,556 2,095 1,744 Increasing or decreasing the healthcare cost trend rates Retiree benefit plans by one percentage point would have had an insignificant cost (note 5) (750) (615) (478) effect on the December 31, 2002, accumulated postre- Net cost reductions from tirement benefit obligation and the annual cost of retiree principal postretirement health plans. Our principal retiree benefit plans are collec-benefit plans $ 80S $ 1,480 $ 1,266 tively bargained and have provisions that limit our per (a) Net of participaant contributions.

capita costs.

We apply our expected rate of return to a market- FUNDING POLICY for the GE Pension Plan is to contribute related value of assets. The market-related value of amounts sufficient to meet minimum funding require-assets recognizes the performance of our retiree life ments as set forth in employee benefit and tax laws plus plans portfolio over five years and reduces the effects such additional amounts as we may determine to be of short-term market fluctuations. appropriate. We have not made contributions to the GE We amortize experience gains and losses, as well as Pension Plan since 1987 because any GE contribution the effects of changes in actuarial assumptions and plan would require payment of excise taxes and would not be provisions, over a period no longer than the average deductible for income tax purposes.

future service of employees. Changes in the projected benefit obligation for princi-pal pension plans follow.

NOTE S PROJECTED BENEFIT OBLIGATIOJ PBO)

PENSION BENEFITS (In millionsl 2002 2001 We sponsor a number of pension plans. Principal pension Balance at January 1 $30,423 $28,535 plans are discussed below. Other pension plans are not Service cost for benefits earnedl) 1,107 884 significant individually or in the aggregate with total Interest cost on benefit obligation 2,116 2,065 assets and obligations amounting to less than 10% of Participant contributions 158 141 those of the principal plans. Plan amendments 9 -

Actuarial o55 (b 1,650 889 PRINCIPAL PENSION PLANS are the GE Pension Plan and the Benefits paid (2,197) (2091)

GE Supplementary Pension Plan. Balance at December31 $33,266 $30,423 The GE Pension Plan provides benefits to certain U.S.

(I) Net of participant contributions.

employees based on the greater of a formula recognizing (bl Principally associated with discount rate changes.

career earnings or a formula recognizing length of service and final average earnings. Benefit provisions are subject Changes in the fair value of assets for principal pension to collective bargaining. The GE Pension Plan covers plans follow.

approximately 508,000 participants, including 136,000 employees, 171,000 former employees with vested rights FAIR VALUE OF ASSETS to future benefits, and 201,000 retirees and beneficiaries (in millions) 2002 2001 receiving benefits.

Balance at January 1 $45,008 $49,757 The GE Supplementary Pension Plan is a pay-as-you-go Actual loss on plan assets (5,251) (2876) plan providing supplementary retirement benefits primarily Employer contributions 96 75 to higher-level, longer-service U.S. employees. Participant contributions 158 141 Details of the effect on operations of principal pension Benefits paid (2,197) (2,091) plans, and the total effect on cost of principal postretire- Balance at December 31 $37,811 $45,006 ment benefit plans, follow.

84 GE 2002 ANNUAL REPORT

The GE Pension Plan's assets are held in trust. At NOTE 7 December 31, 2002, investments in publicly traded equity PROVISION FOR INCOME TAXES securities, fixed-income securities, and other investments (In million .002 2001 x ,o 2

were 56%, 26% and 18%, respectively, of trust assets.

Trust assets are invested subject to the following policy GE restrictions: short-term securities must be rated Al/P or Current tax expense $2,833 $3,632 $3,331 Deferred tax expense from better; investments in real estate-6% of trust assets at temporary differences 1,004 561 468 year end-may not exceed 25%; other investments in 3,037 4,193 3,799 securities that are not freely tradable-11 % of trust GECS assets at year end-may not exceed 20%. GE common Current tax expense (benefit) (1,488) 517 1,229 stock represented 6.0% and 8.6% of trust assets at year-Deferred tax expense from end 2002 and 2001, respectively, and is subject to a temporary differences 1,409 863 683 statutory limit when it reaches 10% of total trust assets. (79) 1,380 1,912 Our recorded assets and liabilities for principal pen- CONSOUDATED sion plans are as follows: Current tax expense 1,345 4,149 4,560 PREPAID PENSION ASSET/ILIABILITY) Deferred tax expense from temporary differences 2,413 1,424 1,151 December 31 In millions) 2002 2001 Total $3,758 $5,573 $5,711 Funded statusll $ 4,545 $14,583 Unrecognized prior service cost 1,165 1,373 GE and GECS file a consolidated U.S. federal income Unrecognized net actuarial loss 1gain) 8,36 . (3,541) tax retum. The GECS provision for current tax expense Net asset recognized $14,066 $12,415 includes its effect on the consolidated retum.

Amounts recorded in the Statemient Consolidated current tax expense includes amounts of Financial Position: applicable to U.S. federal income taxes of $137 million, Prepaid pension asset

$15,611 $13,740 $2,514 million and $3,005 million in 2002, 2001 and 2000, Supplementary Pension Plan liability (1,545) (1,325) respectively, and amounts applicable to non-U.S. jurisdic-Net asset recognized tions of $1,061 million, $1,225 million and $1,246 million in 2002, 2001 and 2000, respectively. Consolidated Is) Fair value of assets less PB0, as shcown 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 ACTUARIAL ASSUMPTIONS used 1 to determine costs and ben- 2002, 2001 and 2000, respectively.

efit obligations for principal pension plans follow. Deferred income tax balances reflect the effect of ACTUARIAL ASSUMPTIONS temporary differences between the carrying amounts of assets and liabilities and their tax bases and are stated December 31 2002 .. 200 2000....

• . --- -i- ---- at enacted tax rates expected to be in effect when taxes Discount rate 64% 74% 7%2o are actually paid or recovered. See note 21 for details.

Compensation increases 5 5 5 We have not provided U.S. deferred taxes on cumula-Expected retum on assets 8% 9% 9% tive eamings of non-U.S. affiliates and associated compa-nies that have been reinvested indefinitely. Such amount We apply our expected rate ollreturn to a market-related relates to ongoing operations and, at December 31, value of assets. The market-re lated value of assets recog- 2002, was approximately $15 billion. Because of the avail-nizes the performance of our Ipension plan portfolio over ability of U.S. foreign tax credits, it is not practicable to five years and reduces the effiacts of short-term market determine the U.S. federal income tax liability that would fluctuations.

be payable if such earnings were not reinvested indefi-We amortize experience geiins and losses, as well as nitely. Deferred taxes are provided for earnings of non-the effects of changes in actuiarial assumptions and plan U.S. affiliates and associated companies when we plan to provisions, over a period no longer than the average remit those earnings.

future service of employees. 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 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0%

Increase (reduction) in rate resulting from:

Inclusion of after-tax earnings of GECS in before-tax earnings of GE 85) (10.7) (11.0)

Amortization of goodwill - 1.0 1.1 - 0.8 0.7 - 0.9 1.1 Tax-exempt income (1. (1.3) (1.5) (5.1) (3.8) 4.0)

Tax on international activities including exports (10.0) (5.4) (4.9) (5.2) (3.2) (3.0) (22.5) (6.7) (5.8)

Americom(Rollins goodwill - (1.1) - - (3.2) -

All other-net (1(3.3)) (0.1 1.3

(..0) 4....... (1.1)

._4J) 1.0 (12.1).. (12, 1.3

......0,_)

(9.1) (2.4) 0.6 (15.1) 116.7) (4.0) (14.8) 1112.1) (12.0) (3.71) 15.2) (8.1)

.. ...... I. ........ . ...... . ........-. ..... ..... . .......... . .......- - -

Actual income tax rate 19.9% 28.3% 31.0% 20.2% 22.9% 23.0% 11.7)% 19.8% 26.9eYe 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 $15,133 $14,128 $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

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

...............I----------------------------------------- . ...,

436 10 (114) 332 .......

762 146 ,--- ..... . (29) 879 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 Supplemental information about gross realized gains and shown in the table above are collateralized by U.S. losses on investment securities follows.

residential mortgages.

lin millions) 2002 2001 2000

{In... .......... ..... ...... ... .... ... ..... .. ....... ..... .......... .... ......... .

CONTRACTUAL MATURITIES OF GECS INVESTMENT GE IN DEBT SECURITIES EXCLUDING MORTGAGE-BACKED Gains $ - $ 236 $ 8 AND ASSET-BACKED SECURITIES)

Losses, including Amontized Estimated impairments (76) ........... (100) (76) lIn millions) cost fair value ----------------- ------- ... 136 Net... ...... ..........................

(76) 136 (68)

Due in 2003 $ 7,795 $ 7,833 GECS 1,578 1,800 3,581 2004-2007 19,648 19,947 Gainslal 2008-2012 23,26023,26023,821 23,821 Losses, impairments including (1,277) (8381 (714) 2013 and later 40,154 41,072 -----..... .. . .... . ...... ......... .... .. ......... .. ........... ..

Net 301 962 2,867 Total $ 225 $1,098 $2,799 We expect actual maturities to differ from contractual maturities because borrowers have the right to call or {a) Includes $1,366 million, in 2000, from the sale of GECS investment in prepay certain obligations. common stock of PaineWebber Group, Inc.

Proceeds from securities sales amounted to $46,406 million in 2002, $39,950 million in 2001 and $24,748 mil-lion in 2000.

GE 2002 ANNUAL REPORT 87

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 10 NOTE 12 GE CURRENT RECEIVABLES GECS FINANCING RECEIVABLES (INVESTMENTS IN DJecember 31 {In millionh) 2002 2001 TIME SALES, LOANS AND FINANCING LEASES)

L _.T . +P v....... .....___.. _.... .. ....... ... ..

Aircraft Engines $ 1,841 $ 1,976 December 31 (In milijonsl 2002 2001 Consumer Products 734 605 COMMERCIAL FINANCE Industrial Products and Systems 1,206 876 Equipment $ 61,961 S 54,842 Materials 1,242 1,008 Commercial and industrial 36,512 35,239 NBC 891 335 Real estate 21,041 20,891 Power Systems 3,754 3,587 Commercial aircraft 11,397 9,081 Technical Products and Services 1,411 1,341 130,911 120,053 Corporate items and eliminations 347 439 CONSUMER FINANCE 11,428 10.167 Non U.S. installment, revolving Less allowance for losses (453) (362) credit and other 23,655 18,371

$10,973 $ 9,805 Non U.S.-Auto 15,113 11,938 U.S. -installment, revolving Receivables balances at December 31, 2002 and 2001, credit and other 14,312 11,465 Non U.S. residential 9,731 5,820 before allowance for losses, included $6,269 million and Other 3,225 2,470

$5,893 million, respectively, from sales of goods and _. . ..... . ..... . ....... . ....... .....

68,038 50,064 services to customers, and $304 million and $447 million, respectively, from transactions with associated companies. Other, principally Equipment Management 8,482 8,824 Current receivables of $344 million at year-end 2002 205,429 178,941 and $270 million at year-end 2001 arose from sales, prin-Less allowance

.9.....1 .....

for losses (note 13) (5,512) (4,801) cipally of aircraft engine goods and services, on open S199,917 S174.140 account to various agencies of the U.S. government, which is our largest single customer. About 4%, 4% and GECS financing receivables include both time sales and 3% of our sales of goods and services were to the U.S.

loans and financing leases. Time sales and loans repre-government in 2002, 2001 and 2000, respectively.

sents transactions in a variety of forms, including time sales, revolving charge and credit, mortgages, installment NOTE 11 loans, intermediate-term loans and revolving loans secured INVENTORIES by business assets. The portfolio includes time sales and December31 (inmilI.ns) 2002 2001 loans carried at the principal amount on which finance charges are billed periodically, and time sales and loans GE carried at gross book value, which includes finance charges.

Raw materials and work in process $4,894 $4,708 3,951 Investment in financing leases consists of direct Finished goods 4,379 Unbilled shipments 372 312 financing and leveraged leases of aircraft, railroad rolling stock, autos, other transportation equipment, data pro-9,645 8,971 Less revaluation to LIFO (606) (676) cessing equipment and medical equipment, as well as other manufacturing, power generation, commercial real 9,039 8,295 estate, and commercial equipment and facilities.

GECS As the sole owner of assets under direct financing Finished goods .. ........ .. .......... . ......... . ......... 208 . .........

270

... leases and as the equity participant in leveraged leases, S9.247 S8,565 GECS is taxed on total lease payments received and is entitled to tax deductions based on the cost of leased LIFO revaluations decreased $70 million in 2002, com-assets and tax deductions for interest paid to third-party pared with decreases of $169 million in 2001 and $82 mil participants. GECS is generally entitled to any residual lion in 2000. Included in these changes were decreases value of leased assets.

of $21 million, $8 million and $6 million in 2002, 2001 and Investment in direct financing and leveraged leases 2000, respectively, that resulted from lower LIFO inven-represents net unpaid rentals and estimated unguaran-tory levels. There were net cost decreases in each of the teed residual values of leased equipment, less related last three years. As of December 31, 2002, we are obli-deferred income. GECS has no general obligation for gated to acquire certain raw materials at market prices principal and interest on notes and other instruments through the year 2019 under various take-or-pay or similar representing third-party participation related to leveraged arrangements. Annual minimum commitments under leases; such notes and other instruments have not been these arrangements are insignificant.

88 GE2002 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 (Inmillionsl 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 Impaired' loans are defined by generally accepted Total time sales Not rentals accounting principles as large balance loans for which it fin millions) and lna ----r.ceivable"I) is probable that the lender will be unable to collect all Due in amounts due according to original contractual terms of 2003 $ 47,887 $16,705 the loan agreement. An analysis of impaired loans follows.

2004 25,120 14,479 2005 21,225 10,314 D ember 31 (In mIllon) _. _ 2002 2001 2006 11,686 6,741 Loans requiring allowance for losses $1,140 $1,041 2007 9,30 3,888 Loans expected to be fully recoverable 845 574 2008 and later 28,083 14,076-----. ..... $1,985 $1,615 Total $143,309 $68,203 Allowance for losses $ 397 $ 422 (al Experience has shown that a substantial portion of receivables will Average investment during year 1,747 1,121 be paid prior to contractual maturity, and these amounts should not Interest Income earned while impairedla 16 17 be regarded as forecasts of future cash flows.

1.1Recognized principally on cash basis.

GE 2002 ANNUAL REPORT 89

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 13 NOTE 14 GECS ALLOWANCE FOR LOSSES ON GECS INSURANCE RECEIVABLES FINANCING RECEIVABLES December 31 (Inmillions)

......I-------------------------

2002 2001 (In millions) 2002 2001 2000 Reinsurance recoverables $13,551 $12,606 BALANCE AT JANUARY 1 Commercial mortgage loans 5,358 4,634 Commercial Finance $2,513 $1,682 $1,435 Premiums receivable 5,314 5,113 Consumer Finance 2,173 2,149 2,025 Residential mortgage loans 1,919 1,364 Other 115 203 248 Corporate and individual loans 1,801 1,244 4,801 4,034 3.708 Policy loans 1,539 1,290 Funds on deposit with reinsurers 830 749 PROVISION CHARGED TO OPERATIONS Other 1,552 1,602 Commercial Finance 1,092 756 453 Allowance for losses .................................... ................

(279) 1290)

Consumer Finance 1,950 1,646 1,471 Total $31,585 $28,312 Other 45 79 121 3,087 2,481 2,045 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 2.01% 2.09%

Consumer Finance 4.21 4.34 Total 2.68 2.68 NONEARNING AND REDUCED EARNING FINANCING RECEIVABLES AS A PERCENTAGE OFTOTAL FINANCING RECEIVABLES Commercial Finance 1.7% 1.7%

Consumer Finance 2.4 2.7 Total 1.9 2.0 90 GE 2002 ANNUAL REPORT

NOTE 15 NOTE 16 PROPERTY, PLANT AND EQUIPMENT INTANGIBLE ASSETS (INCLUDING EQUIPMENT LEASEDTO OTHERS)

December 31 (Inmillions) 2002 2001 December ..........

31 (in millionsi 2002 2001

......................... GE ORIGINAL COST Goodwill $20,044 $12,354 GE Capitalized software 1,559 1,435 Land and improvements $ 623 $ 577 Other intangibles

.. . ..... ................ . ........ ........ .... ..I.

1,446 ............-

578 Buildings, structures and related 23,049 14,367 equipment 8,398 7,281 GECS Machinery and equipment 22,264 21,414 Goodwill 19,094 15,933 Leasehold costs and manufacturing Present value of future profits (PVFP) 2,457 2,198 plant under construction 1,964 1,960 Capitalized software 894 901 33,249 ...

31,232

.......................... Other intangibles 686 ....... ...........1,725 1 .............. .... .... .............. ................ . ... ... ...

GECS (8

---

. ....... 23,131 20,757 Buildings and equipment 4,731 3,600 Total $46,180 $35,124 Equipment leased to others Aircraft 20,053 16,173 GE intangible assets are net of accumulated amortization of $5,203 mil-Vehicles 10,859 10,779 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 Railroad rolling stock 3,376 3,439 in 2001.

Marine shipping containers 1,611 1,618 Mobile and modular structures 1,383 1,325 INTANGIBLE ASSETS SUBJECT TO AMORTIZATION Information technology equipment 1,033 1,321 Construction and manufacturing December 31 In millions) 2002 2001 equipment 1,239 799 Gross Gross Scientific, medical and other carrying Accumulated carrying Accumulated

.................. ...,,....................... _2 amount 2 -r~

amortization L - ... ._

amount amorization equipment 2,058 1,001 46,343 40,055 Present value of future profits 4PVFP) 5,261 $12,804) $ 4,744 $(2,546)

$79,592 $71,287 Capitalized software 4,269 (1,816) 3,660 (1,324)

ACCUMULATED DEPRECIATION AND AMORTIZATION Servicing assets(s) 3,582 (3,240) 3,768 (2,629)

GE $19,506 $18,433 Patents, licenses and other 2,250 (675) 1,344 (5501 GECS All other 556 (341) 708 (338)

Buildings and equipment 1,838 1,579 Equipment leased to others 11,044 9,135 Total $15,918 $18,876) $14,224 $17,387)

...... ........ , ......... ..1........................ .................

$32,388 $29,147 lal Servicing assets, net of accumulated amortization, are associated primarily with serviced residential mongage loans amounting to Is)Includes $1.4 billion and $0.2 billion of assets leased to GE as of

$33 billion and $59 billion at December 31, 2002 and 2001, respectively.

December 31,2002 and 2001, respectively.

Consolidated amortization expense related to intangible Amortization of GECS equipment leased to others was assets, excluding goodwill, for 2002 and 2001 was

$3,406 million, $2,958 million and $2,620 million in 2002,

$1,999 million and $1,386 million, respectively. The 2001 and 2000, respectively. Noncancelable future rentals estimated percentage of the December 31, 2002, net due from customers for equipment on operating leases PVFP balance to be amortized over each of the next at year-end 2002 are due as follows:

five years follows.

(in.............................

millions)  ! .ilo .........................................................-

2003 2004 2005 2006 2007 Due in . ......... . ........... .......... ............ .......... . ......... . ......... ........... .......... . ....... .. ...............

2003 $ 4,553 11.2% 9.7% 8.7% 7.6% 6.7%

2004 3,716 2005 2,802 2006 2,074 2007 1,549 After 2007 5,030 Total $19,724 GE2002 ANNUAL REPORT 91

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Amortization expense for PVFP in future periods will be The amount of goodwill amortization included in net affected by acquisitions, realized capital gains/losses or earnings (net of income taxes) in 2001 and 2000 was other factors affecting the ultimate amount of gross prof- $499 million and $439 million for GE and $552 million and its realized from certain lines of business. Similarly, future $620 million for GECS, respectively.

amortization expense for other intangibles will depend on The effects on earnings and earnings per share of acquisition activity and other business transactions. 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 $14,118 $13,684 $12,735 $3,611 $5,417 $5,192 Net earnings, excluding goodwill amortization $14,118 $14,735 $13,794 $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 (Inmillions) 200 (In

.-.-.- _ .r . _. _. . .....-2001 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.

Separatehog 00represent investments controlled Other. ....... 1,016 1,336 pyet

._.... _ .... . ..... ...... .... accounts 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 Our borrowings are addressed below from two perspec-BORROWINGS tives-liquidity and interest rate risk management.

Additional information about borrowings and associated SHORT-TERM BORROWINGS swaps can be found in note 28.

2002 2001 Average Average LIOuIDIry requirements are principally met through the December31 in millions) Amount ratela) Arnount .....rate IcC

• ! credit markets. Maturities of long-term borrowings (includ-GE ing the current portion) during the next five years follow.

Commercial paper U.S. $ 668 1.69% $ (in millions) 2003 2004 2005 2006 2007 Non-U.S. 296 2.89 266 3.87 Payable to banks, GE $ 57 $ 351 $ 30 $ 132 $ 41 principally non-U.S. 660 4.88 1,160 5.58 GECS 35,606 46,855s)8 21,723 9,840 14,244 Current portion of long-term debt a) Extendible notes amounting to $12 billion are floating rate securities 57 9.61 80 with an initial maturity of 13 months, which can be extended on a Other 1,205 216 rolling basis at the investor's option to a final maturity of five years 8,788 1,722 ending in 2007.

GECS Commercial paper Committed credit lines totaling $54.1 billion had been U.S. 68,629 1.51 100,170 2.21 extended to us by 90 banks at year-end 2002. Included in Non-U.S. 17,611 3.41 17,289 3.36 this amount was $47.0 billion provided directly to GECS Current portion of long-term debt 35,617 4.19 30,952 5.08 and $7.1 billion provided by 21 banks to GE to which Other 10,280 12,590 GECS also has access. The GECS lines include $19.2 bil-130,137 161,001 lion of revolving credit agreements under which we can Foreign currency borrow funds for periods exceeding one year. We pay loss(b)

(11) - ..

(157) banks for credit facilities, but compensation amounts 130,128 160,844 were insignificant in each of the past three years.

ELIMINATIONS (137) (9,490)

INIERESI RATERISK iS managed in light of the anticipated

$138,775 $153,076 behavior, including prepayment behavior, of assets in which debt proceeds are invested. A variety of instruments, LONG-TERM BORROWINGS including interest rate and currency swaps and currency 2002 Average forwards, are employed to achieve our interest rate December 31 (in millions) rate(a Maturities 2002 2001 objectives. Effective interest rates are lower under these GE "synthetic" positions than could have been achieved by Industrial development/ issuing debt directly.

pollution control bonds 1.84% 2004-2027 346 $ 336 The following table shows GECS borrowing positions Payable to banks, principally non-U.S. 6.44 2004-2007 246 241 considering the effects of currency and interest rate swaps.

Other(cl------- -,,,,,,

378 210 GECS El`FEClIVt BORROWINGS INCLUDING SWAPS) 970 787 2002 GECS Average 2001 Senior notes 3.79 2004-2055 126,947 78,347 December 31 (In millions) Amount rate Amount Extendible notes 1.46 2007 12,000 -

Short-term Cal $ 60,151 2.12% $101,101 Subordinated notesid) 7.53 2004-2035 1,263 1,171

.....H ..---------------------------- - -- 7 -- -

Long-term (including 140,210 79,518 current portion)

Foreign currency Fixed rateb) $121,147 5.29% $105,387 gain (loss)Ibl 626 (427)

Floating rate 89,049 2.30 34,031 140,836 79,091 Total long-term $210,198 $139,418 ELUMINATIONS (1,174) (72)

$140,632 $79,806 (a) Includes commercial paper and other short-term debt.

b Includes fixed-rate borrowings and $34.4 billion ($28.9 billion in 20011 18lBased on year-end balances and year-end local currency interest rates notional long-term interest rate swaps that effectively convert the including the effects of interest rate and currency swaps, if any, directly floating-rate nature of short-term borrowings to fixed rates of interest.

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. At December 31, 2002, swap maturities ranged from 1

l A variety of obligations having various interest rates and maturities, in- 2003 to 2048.

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.

94 GE 2002 ANNUAL REPORT

NOTE 19 A summary of activity affecting unpaid claims and GECS INSURANCE LIABILITIES, RESERVES AND claims adjustment expenses, principally in property and ANNUITY BENEFITS casualty lines, follows.

December31 in millions) 2002 2001 (In millions)

._ .... ~. ...

2002 2001 .... . .. _...._

2000 Investment contracts and Balance at January 1 -gross $27,233 $22,886 $21,473 universal life benefits $ 44,677 $ 39,052 Less reinsurance Life insurance beneftsis) 38,191 31,198 recoverables (9,400) 15,477) (4,832)

Unpaid claims and daims BalanceatJanuary1-net 17,833 17,409 16,641 adjustment expenseslbl 30,571 27,233 Claims and expenses incurred Unearned premiums 7,436 6,337 Current year 9,505 9,199 9,718 Separate accounts (see note 17) 14,978 10,403 Prior years 3,188 682 607

$135,853 $114,223 Claims and expenses paid Current year (3,173) (3,021) (3,704) is)Life insurance benefits ore accounted for mainly by a net-level-premium method using estimated yields generally ranging from Prior years (6,918) (6,694) (6,572) 1.6% to 8.5% In 2002 and 2% to 9% In 2001. Claims reserves related to tb)Principally property and casualty reserves amounting to $26.1 billion acquired companies 81 - 488 and $23.4 billion at December 31, 2002 and 2001, respectively. Includes Other ~~~~~~~~~... 409 .

258 ...

231 amounts for both reported and ncurred-but-not-reported claims, reduced by anticipated selvage and subrogation recoveries. Estimates Balance at December 31-net 20,925 17,833 17,409 of liabilities are reviewed and updated continually with changes In Add reinsurance recoverables 9,646 9,400 5,477 estimated losses reflected In operations. Balance at December31 -

gross S30,571 $27,233 $22,886 When insurance affiliates cede insurance to third parties, they are not relieved of their primary obligation to policy- 'Claims and expenses incurred-prior years" represents holders. Losses on ceded risks give rise to claims for additional losses (adverse development) recognized in any recovery; we establish allowances for probable losses year for loss events that occurred before the beginning of on such receivables from reinsurers as required. that year. Adverse development, which amounted to We recognize reinsurance recoveries as a reduction 18%, 4% and 4% of beginning of year net loss reserves of insurance losses and policyholder and annuity bene- in 2002, 2001 and 2000, respectively, was primarily fits. Insurance recoveries were $2,234 million, $5,863 encountered at GE Global Insurance Holding ERC),

million and $3,232 million for the years ended December where we experienced a shift from property to liability 31, 2002, 2001 and 2000, respectively. insurance losses. In 2000, ERC experienced its share of The insurance liability for unpaid claims and claims an increase in industry-wide loss estimates related to adjustment expenses related to policies that may cover certain large property loss events, the largest of which environmental and asbestos exposures is based on resulted from the European windstorms of December known facts and an assessment of applicable law and 1999. In 2001, we began to identify an acceleration of coverage litigation. Liabilities are recognized for both reported claims activity in certain liability-related cover-known and unasserted claims (including the cost of ages-specifically, hospital liability, non-standard auto related litigation) when sufficient information has been (automobile insurance extended to higher-risk drivers) and developed to indicate that a claim-has been incurred and commercial and public entity general liability lines of busi-a range of potential losses can be reasonably estimated. ness-and recognized the increase in projected ultimate Developed case law and adequate claim history do not losses. During 2002, reported claims activity accelerated exist for certain claims principally due to significant uncer- dramatically, affecting much of our liability-related insur-tainties as to both the level of ultimate losses that will ance written in 1997 through 2001. In connection with our occur and what portion, if any, will be deemed to normal actuarial updates, we adjusted our best estimate of be insured amounts. 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 NOTE 21 affiliates are summarized below. DEFERRED INCOMETAXES December3111rn millbonsl )_ _ _ ___2002 2001 Aggregate deferred income tax amounts are summarized Guarantees, principally on municipal below.

bonds and asset-backed securities $225,559 $215,874 December31 in millions) 2002 2001 Mortgage insurance risk in force 101,530 79,892 Credit life insurance risk in force 23,283 24,323 ASSETS Less reinsurance (38,883)

(41,148)

GE $ ,817 $ 6,416

$312,489 $278,941 GECS 7,584 8,585 14,401 15,001 Certain insurance affiliates offer insurance guaranteeing UABILITIES the timely payment of scheduled principal and interest GE 8,744 7,429 on municipal bonds and certain asset-backed securities. GECS 18,174 16,702 These insurance affiliates also provide insurance to pro- 28,918 24,131 tect residential mortgage lenders from severe financial NET DEFERRED INCOMETAX UABILTY $12,517 $ 9,130 loss caused by the non-payment of loans and issue credit life insurance designed to pay the balance due on a loan Principal components of our net liability/(asset) represent-if the borrower dies before the loan is repaid. As part of ing deferred income tax balances are as follows:

their overall risk management process, insurance affili- December31 0Inmillionsl 2002 2001

, I.. . .. ,.. . . ..._.,....

ates cede to third parties a portion of their risk associated GE with these guarantees. In doing so, they are not relieved Provisions for expenseslal $ (4,693) $(4,432) of their primary obligation to policyholders. Retiree insurance plans (1,043) 1953)

Prepaid pension asset 5,464 4,809 NOTE 20 Depreciation 1,536 932 ALL OTHER LIABILITIES Other - net 663 657 1,927_ 1,013 This caption includes noncurrent compensation and bene- GECS fit accruals at year-end 2002 and 2001 of $8,826 million Financing leases 9,783 9,168 and $8,745 million, respectively. Also included are Operating leases 3,627 3,399 amounts for deferred income, interest on tax liabilities, Deferred insurance acquisition costs 1,494 1,360 product warranties and a variety of sundry items. Allowance for losses (1,569) (2,139)

We are involved in numerous remediation actions to Derivatives qualifying as hedges (1,252) (480) clean up hazardous wastes as required by federal and Insurance reserves (1,218) (1,397) state laws. Liabilities for remediation costs at each site AMT credit carryforward (597) (695) are based on our best estimate of undiscounted future Other - net 342 (1,099) costs, excluding possible insurance recoveries. When ,.,,.. ._...... . ._ ..

10,590 _ _

8,117 there appears to be a range of possible costs with equal NET DEFERRED INCOME TAX UABILITY $12,517 $ 9,130 likelihood, liabilities are based on the lower end of such 'a' Represents the tax effects of temporary differences related to expense range. Uncertainties about the status of laws, regula- accruals for a wide variety of Items, suCi as employee compensation and benefits, interest on tax liabilities, product warranties and other tions, technology and information related to individual sundry items that are not currently deductible.

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.

96 GE 2002 ANNUAL REPORT

NOTE 22 NOTE 24 GECS MINORITY INTEREST IN EQUITY OF SHARE OWNERS' EQUITY CONSOLIDATED AFFILIATES (in millions) 2002 2001 2000 Minority interest in equity of consolidated GECS affiliates COMMON STOCK ISSUED S 669 $ 669 $ 669 includes preferred stock issued by GE Capital and by affili- ACCUMULATED NONOWNER ates of GE Capital. The preferred stock primarily pays CHANGES OTHER THAN EARNINGS cumulative dividends at variable rates. Value of the pre-Balance at January 1 $(4,3231 $(2,5001 S (7441 ferred shares is summarized below.

Cumulative effect of adopting SFAS 133 - net of December

_, 31 ~~~~~~.....

_ (in millions) . .... . ...

. ...... 2002

_ 2001 deferred taxes of $4513) - (827) -

GE Capital $2,600 $2,600 Investment securities - net GE Capital affiliates 1,588 1,446 of deferred taxes of $805,

$111 and $68618) 1,555 203 1,363 Currency translation Dividend rates in local currency on the preferred stock adjustments - net of deferred ranged from 1.44% to 6.20% during 2002 and from taxes of $20, $48 and $(312) 1,000 (562) (1,204) 1.62% to 6.40% during 2001. Derivatives qualifying as hedges - net of deferred taxes of $4822) and $(505) 12,070) 1690) -

NOTE 23 Reclassification adjustments -

RESTRICTED NET ASSETS OF GECS AFFILIATES Investment securities -net of deferred taxes of $4135),

Certain GECS consolidated affiliates are restricted from $4274) and $11,031) (252) (509) (1,915) remitting funds to GECS in the form of dividends or loans Derivatives qualifying as by a variety of regulations, the purpose of which is to pro- hedges - net of deferred tect affected insurance policyholders, depositors or taxes of $207 and $397 913 662 -

investors. At year-end 2002, net assets of regulated Balance at December 31 Sf3,177) $(4,323) S(2,500)

GECS affiliates amounted to $43.7 billion, of which OTHER CAPITAL

$378 billion was restricted. Balance at January 1 $16,693 $15,195 $10,790 At December 31, 2002 and 2001, the aggregate Gains on treasury stock dispositionslb) 595 1,498 4,480 statutory capital and surplus of the insurance businesses Adjustment for stock split - - (75) totaled $179 billion and $177 billion, respectively. Account-Balance at December 31 $17,288 $16,693 $15,195 ing practices prescribed by statutory authorities are used RETAINED EARNINGS in preparing statutory statements.

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 All grants of GE options under all plans must be authorization to repurchase GE common stock to $30 approved by the Management Development and billion. Funds used for the share repurchase will be Compensation Committee, which comprises entirely generated largely from free cash flow. Through year-end outside directors.

2002. 1,091 million shares having an aggregate cost of Stock options expire 10 years from the date they are approximately $22.7 billion had been repurchased under granted; options vest over service periods that range this program and placed in treasury. from one to five years.

Common shares issued and outstanding are summa-STOCK OPTION ACTIVITY rized in the following table.

Shares Average per shar subject ExercIse Market SHARES OF GE COMMON STOCK December31 (Inthousands) 2002 2001 2000

~~~~~~~~~~~......

(Shares Inthousands) to option price price

_. . .. ... Balance at

,_,~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~..

Issued 11,145,212 11,145,212 11,145,212 December 31, 1999 341,374 $16.01 $51.58 In treasury (1,175,318) 11,219,274) (1,213,206) Options granted 46,278 47.84 47.84 Options exercised (u,758) 8.82 53.00 Outstanding 9,969,894 9,925,938 9,932,006 Options terminated (9,715) 2&47 -

Balance at GE has 50 million authorized shares of preferred stock December 31, 2000 333,179 21.03 47.94

($1.00 par value), but had not issued any such shares as Options granted 60,946 41.15 41.15 of December 31, 2002. Options exercised (31,801) 10.04 43.95 The effects of translating to U.S. dollars the financial Options terminated (7,8711 39.02 statements of non-U.S. affiliates whose functional cur- Balance at rency is the local currency are included in share owners' December 31, 2001 354,453 25.08 40.08 equity. Asset and liability accounts are translated at year- Options granted 46,928 27.37 27.30 end exchange rates, while revenues and expenses are Options exercised (29,146) 9.45 31.88 translated at average rates for the period. Options terminated (10,177) 38.14 -

Balance at December 31, 2002 362,058 $26.26 $24.35 NOTE 25 OTHER STOCK-RELATED INFORMATION STOCK COMPENSATION PLANS We grant stock options, stock appreciation rights SARs) Weighted Securities Securities aerage available for and restricted stock units RSUs) to employees under the December 31 to beissued exerci" future (Shares nthousanids) __upon_exercise pri co issuance 1990 Long-Term Incentive Plan as described in our cur-rent Proxy Statement. In addition, we grant options and APPROVED BY SHARE RSUs in limited circumstances to consultants, advisors OWNERS Options 360,884 $26.27 (a) and independent contractors (primarily non-employee RSUs 28,488 (bl lal talent at NBC) under a plan approved by our Board of NOT APPROVED BY SHARE Directors in 1997 the consultants' plan). Through the OWNERS end of 2002, we also granted options to non-employee Options 1,194 24.35 kl directors under two separate option plans. With certain RSUs 3,761 Ib) .....

1c restrictions, requirements for stock option shares may Totalidi 394,307 $26.26 130,803 be met from either unissued or treasury shares. RSUs 1.1 Under the 1990 Long-Term Incentive Plan, 0.95% of GE issued common give the recipients the right to receive shares of our stock stock (including treasury shares) asof the first day of each calendar year during which the plan is Ineffect becomes available for awards In that upon the lapse of their related restrictions. In the past, calendar year. Total shares available for future issuance under the 1990 restrictions on most RSUs lapsed for 25% of the total Long-Term Incentive Plan amounted to 106.9 million shares.

shares awarded after three years, 25% after seven years, Ib)Not applicable.

and 50% at retirement. We changed the vesting schedule (cITotal shares available for future issuance under the consutants' plan amounted to 24.9 million shares.

for RSUs granted in 2002 so that 25% of the restrictions (d) In connection with various acquisitlons, there are an additlonal lapse after three, five and ten years, with the final 25% 2.0 million options outstanding, with a weighted average exercise price of $21.3.

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.

98 GE 2002 ANNUAL REPORT

Outstanding options and SARs expire on various dates NOTE 26 through December 12, 2012. Restricted stock grants vest SUPPLEMENTAL CASH FLOWS INFORMATION on various dates up to retirement of arantees.

The following table summaarizes information about Changes in operating assets and liabilities are net of stock options outstanding at CDecember 31, 2002. acquisitions and dispositions of principal businesses.

"Payments for principal businesses purchased" STOCK OPTIONS OUTSTANDING in the Statement of Cash Flows is net of cash acquired (Shares In thousands) Outstandling Exercisable and includes debt assumed and immediately repaid Average Average in acquisitions.

Average exercse exercise 'Al other operating activities" in the Statement of Exercise price range Shares life a) price Shares price Al op

$ 815 61926 $ 815 Cash Flows consists primarily of adjustments to current

$ 6.39- 8.51 61,926 1.1 8.58 -14.73 70,357 3.0D 11.70 70,352 11.70 and noncurrent accruals and deferrals of costs and 15.83- 27.05 88,577 7.4* 25.58 38,240 23.77 expenses, adjustments for gains and losses on assets, 27.20 -41.35 63,136 7.33 36.89 24,876 37.55 increases and decreases in assets held for sale, and 42.33- 57.31 78,062 8.0I 45.95 18,980 44.76 adjustments to assets.

Total 362,058 5.6 $26.26 214,374 $18.75 Noncash transactions include the following: in 2002, the acquisitions of Interlogix, Inc. for GE common stock At year-end 2001, options with an ever age exercise price of $14.73 were valued at $395 million and the acquisition of Bravo for exercisable on 209 million shares; at year-end 2000, options with an average exercise price of $11.35 were axercisable on 205 million shares. GE common stock and other investment securities valued Ia)Average contractual life remaining i years. at $335 million and $886 million, respectively; in 2001, the acquisition of Imatron Inc. for GE common stock val-OPTION VALUE INFORMATION c'I ued at $205 million; and in 2000, the acquisition of (indollars) 2002 _ 2001___ _ 2000 Harmon Industries for shares of GE common stock Fair value per option Ibl S7.73 $12.15 $15.76 valued at $346 million.

Valuation assumptions Expected option term Cyrs) 6.0 6.0 6.4 Expected volatility 33.7% 30.5% 27.1%

Expected dividend yield 2.7% 1.6% 1.2%

Risk-free interest rate 3.5% 4.9% 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 (Inmillionel 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 Assets leased to othereiial Depreciation and amortization At December 31 For te years ended December 31 Forthe 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 13,414 10,517 10,065 927 814 573 658 557 507 NBC 10,401 5,572 5,136 252 64 99 109 94 77 Power Systems

• 15,835 13,237 11,759 , 731 774 657 505 328 265 Technical Products and Services 7,575 6,984 6,229 170 213 211 249 210 143 All Other GECS 8,683 10,341 21,709 1,358 401 627 223 392 579 Corporate items and eliminations Ibh 13,707 11,346 12,565 110 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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Basis for presentation hedged item. Further information about hedge effective-Our operating businesses are organized based on the ness is provided on page 103.

nature of products and services provided. Certain We use currency forwards and options to manage businesses do not meet the definition of a reportable exposures to changes in currency exchange rates associ-operating segment and have been aggregated. The ated with commercial purchase and sale transactions.

Industrial Products and Systems segment consists of These instruments permit us to eliminate the cash flow Industrial Systems, Transportation Systems and GE variability, in local currency, of costs or selling prices Supply. The Materials segment consists of Plastics denominated in currencies other than the functional cur-and Specialty Materials. TheTechnical Products and rency. In addition, we use these instruments, along with Services segment consists of Medical Systems and interest rate and currency swaps, to optimize borrowing Global eXchange Services, 90% of which was sold in costs and investment returns. For example, currency 2002. Segment accounting policies are the same as swaps and non-functional currency borrowings together described in note 1. provide lower funding costs than could be achieved by A description of our operating segments can be issuing debt directly in a given currency.

found on pages 108-109 and details of segment profit At December 31, 2002, amounts related to derivatives by operating segment can be found on page 57 of qualifying as cash flow hedges amounted to a reduction this report. of equity of $2,112 million, of which $519 million was expected to be transferred to earnings in 2003 along NOTE 28 with the earnings effects of the related forecasted trans-actions. In 2002, there were no forecasted transactions DERIVATIVES AND OTHER FINANCIAL that failed to occur. At December 31, 2002, the maximum INSTRUMENTS term of derivative instruments that hedge forecasted Derivatives and Hedging transactions was 24 months.

Our global business activities routinely deal with fluctua- Fair value hedges tions in interest rates, currency exchange rates and com-Under SFAS 133, fair value hedges are hedges that modity and other asset prices. We apply strict policies to eliminate the risk of changes in the fair values of assets, managing each of these risks, including prohibitions on liabilities and certain types of firm commitments. For derivatives trading, derivatives market-making or other example, we will use an interest rate swap in which we speculative activities. These policies require the use of receive a fixed rate of interest and pay a variable rate of derivative instruments in concert with other techniques to interest to change the cash flow profile of a fixed rate reduce or eliminate these risks.

borrowing to match the variable rate financial asset that it Cash flow hedges is funding. Changes in fair value of derivatives designated Under SFAS 133, cash flow hedges are hedges that use and effective as fair value hedges are recorded in earn-simple derivatives to offset the variability of expected ings and are offset by corresponding changes in the fair future cash flows. Variability can appear in floating rate value of the hedged item.

assets, floating rate liabilities or from certain types of We use interest rate swaps, currency swaps and inter-forecasted transactions, and can arise from changes in est rate and currency forwards to hedge the effect of inter-interest rates or currency exchange rates. For example, est rate and currency exchange rate changes on local and GECS often borrows at a variable rate of interest to fund nonfunctional currency denominated fixed rate borrowings our financial services businesses. If Commercial Finance and certain types of fixed rate assets. Equity options are needs the funds to make a floating rate loan, there is used to hedge price changes in investment securities and no exposure to interest rate changes, and no hedge is equity-indexed annuity liabilities at Insurance.

necessary. However, if a fixed rate loan is made, we will Net Investment hedges contractually commit to pay a fixed rate of interest to a The net investment hedge designation under SFAS 133 counterparty who will pay us a variable rate of interest refers to the use of derivative contracts or cash instru-(an "interest rate swap"). This swap will then be desig-ments to hedge the foreign currency exposure of a net nated as a cash flow hedge of the associated variable investment in a foreign operation. We manage currency rate borrowing. If, as would be expected, the derivative exposures that result from net investments in affiliates is perfectly effective in offsetting variable interest in the principally by funding assets denominated in local cur-borrowing, changes in its fair value are recorded in a rency with debt denominated in that same currency. In separate component in equity and released to earnings certain circumstances, we manage such exposures with contemporaneously with the earnings effects of the currency forwards and currency swaps.

102 GE 2002 ANNUAL REPORT

Derivatives not designated as hedges Counterparty credit risk SFAS 133 specifies criteria that must be met in order to The risk that counterparties to derivative contracts will be apply any of the three forms of hedge accounting. For financially unable to make payments to us according to example, hedge accounting is not permitted for hedged the terms of the agreements is counterparty credit risk.

items that are marked to market through earnings. We We manage counterparty credit risk on an individual use derivatives to hedge exposures when it makes eco- counterparty basis, which means that we net gains and nomic sense to do so, including circumstances in which losses for each counterparty to determine the amount at the hedging relationship does not qualify for hedge risk. When a counterparty exceeds credit exposure limits accounting as described below. We also will occasionally in terms of amounts they owe us see table below), typi-receive derivatives, such as equity warrants, in the ordi- cally as a result of changes in market conditions, no addi-nary course of business. Under SFAS 133, derivatives that tional transactions are permitted to be executed until the do not qualify for hedge accounting are marked to market exposure with that counterparty is reduced to an amount through eamings. that is within the established limit. All swaps are required We use option contracts, including caps, floors and to be executed under master swap agreements contain-collars, as an economic hedge of changes in interest ing mutual credit downgrade provisions that provide the rates, currency exchange rates and equity prices on cer- ability to require assignment or termination in the event tain types of assets and liabilities. For example, Insurance either party is downgraded below A3 or A-. If the down-uses equity options to hedge the risk of changes in equity grade provisions had been triggered at December 31, prices embedded in liabilities associated with annuity 2002, we could have been required to disburse up to contracts it writes. We also use interest rate swaps, pur- $4.0 billion and could have claimed $1.9 billion from coun-chased options and futures as an economic hedge of the terparties-the net fair value losses and gains. At fair value of mortgage servicing rights. We occasionally December 31, 2002 and 2001, gross fair value gains obtain equity warrants as part of sourcing or financing amounted to $5.0 billion and $3.3 billion, respectively.

transactions. Although these instruments are considered At December 31, 2002 and 2001, gross fair value losses to be derivatives under SFAS 133, their economic risk is amounted to $7.1 billion and $5.4 billion, respectively.

similar to, and managed on the same basis as, other As part of its ongoing activities, our financial services equity instruments we hold. businesses enter into swaps that are integrated into investments in or loans to particular customers. Such Eamings effects of derivatives integrated swaps not involving assumption of third-party The table that follows provides additional information credit risk are evaluated and monitored like their associ-about the eamings effects of derivatives. In the context ated investments or loans and are therefore not subject of hedging relationships, effectiveness' refers to the to the same credit criteria that would apply to a stand-degree to which fair value changes in the hedging instru- alone position. Except for such positions, all other swaps, ment offset the corresponding expected earnings effects purchased options and forwards with contractual maturi-of the hedged item. Certain elements of hedge positions ties longer than one year are conducted within the credit cannot qualify for hedge accounting under SFAS 133 policy constraints provided in the table below. Foreign whether effective or not, and must therefore be marked exchange forwards with contractual maturities shorter to market through earnings. Time value of purchased than one year must be executed with counterparties options is the most common example of such elements having an A-1/ P-1 credit rating and the credit limit for in instruments we use. Pre-tax earnings effects of such exposures on these transactions is $150 million.

items are shown in the following table as "amounts excluded from the measure of effectiveness!' COUNTERPARTY CREDIT CRITERIA Credit rating December 31 fIn millions) 2002 2001 Moody's S&P CASH FLOW HEDGES Term of transaction Ineffectiveness $124) $ 1 Between one and five years Aa3 AA-Amounts excluded from the Greater than five years Aaa AAA measure of effectiveness - (1i Credit exposure limits FAIR VALUE HEDGES Up to $50 million Aa3 AA-Ineffectiveness 3 26 Up to $75 million Aaa AAA Amounts excluded from the measure of effectiveness 3 (16)

GE 2002 ANNUAL REPORT 103

NOTESTO CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL INSTRUMENTS 2002 2001 Asset (liabilities) Aast (labilities)

Canying Canying Notional amount Estimated fair value Notional amount Estimated fair value r)l.b.r 21 In millions amount ..... .

/nt)..... .

Hiah L,1w amount Inetl Hiah Low GEIO)

Investments and notes receivable $ Ib) S 567 $ 567 $ 567 $ Ib $ 570 568 S 568 Borrowings(IcHd Ib) (9,756) (9,816) (9,816) (bi (2,509) (2,509) (2,509)

GECSIel Assets Time sales and loans fbI 138,695 141,784 138,834 ibN 115,773 117,159 115,135 Other commercial and residential mortgages tbs 8,093 8,504 8,417 ib) 6,505 6,671 6,638 Other financial instruments ib 6,702 6,772 8,834 Ib) 4,742 4,806 4,734 Liabilities Borrowingsl(cid)(i) IbI (270,347) (286,824 (273,717 Ibl (240,519) (249,516) (240,519)

Investment contract benefits Ibl 137,814) (37,731) (37,312) Ibl (32,427) (32,192) (31,815)

Insurance-financial guarantees and credit life'1' 312,489 (3,814) (3,475) 13,564) 278,941 (2,941) (2,983) (3,091)

Other financial instruments Ib) (369) (369) (369) Ibl (629) (590) (590)

Other firm commitments Ordinary course of business lending commitments 11,958 - - - 10,279 Unused revolving credit lines Commercial 28,525 - - - 27,770 Consumer- principally credit cards 259,085 - - - 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.

IcdIncludes 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- Investment contract benefits ing financial statements at fair value are not included in Based on expected future cash flows, discounted at the following disclosures; such items include cash and currently offered discount rates for immediate annuity equivalents, investment securities, separate accounts and contracts or cash surrender values for single premium derivative financial instruments. Other assets and deferred annuities.

liabilities-those not carried at fair value-are discussed below. Apart from certain of our borrowings and certain Financial guarantees and credit life marketable securities, few of the instruments discussed Based on expected future cash flows, considering below are actively traded and their fair values must often expected renewal premiums, claims, refunds and be determined using models. Although we have made servicing costs, discounted at a current market rate.

every effort to develop the fairest representation of fair All other instruments value for this section, it would be unusual if the esti-mates could actually have been realized at December 31, Based on comparable market transactions, discounted 2002 or 2001. future cash flows, quoted market prices, and/or estimates A description of how we estimate fair values follows. of the cost to terminate or otherwise settle obligations.

Unused credit lines and lending commitments at Time sales and loans December 31, 2002, were as follows:

Based on quoted market prices, recent transactions Fixed Variable i millions) .n rate rate Total and/or discounted future cash flows, using rates at which similar loans would have been made to similar borrowers. Ordinary course of business lending commitments $ 842 $ 11,114 S 11,956 Borrowings Unused revolving credit lines Based on market quotes or comparables.

Commercial 8,879 19,648 28,525 Consumer-principally credit cards 136,249 12Z,836 259,085 104 GE 2002 ANNUAL REPORT

NOTE 29

• Credit and liquidity support agreements. We have NON-CONTROLLED ENTITIES agreed to lend to these entities on a secured basis if (a) certain market conditions render the entities unable to SPECIAL PURPOSE ENTITIES SPEsI are sponsored and used issue new debt instruments, or (b)the credit ratings of by GE in the ordinary course of business, most com- debt issued by such entities were reduced below speci-monly for asset securitization. The typical transaction fied levels, Timing of such liquidity support depends on involves our sale of high-quality, financial assets to highly- the associated maturities of supported debt. We reduce rated entities financed with commercial paper. Often, we our exposure to liquidity support agreements by obtaining provide credit support for certain of these assets as well offsetting support from third-party banks. Such offsetting support amounted to $11.7 billion at December 31, 2002.

as liquidity support for the commercial paper.

We also provide credit support for credit losses on certain The following table summarizes receivables held by assets: full recourse for $97 billion and the remaining SPEs that are sponsored or supported by us. $72 billion based on loss-sharing formulae at December December 31 inmilion) 2002 2001 31, 2002 This support is available for the life of the assets but generally amortizes in proportion to the assets Receivables - secured by outstanding. Assets with credit support are primarily Equipment $12,215 $12,781 funded by commercial paper that is subject to the liquid-Commercial real estate 11,079 9,971 ity support.

Other assets 7,769 7,761 Credit card receivables 10,46 9,470

• Performance guarantees. We provide both letters of Trade receivables 693 3,028 credit and lines of credit for guaranteed investment contracts. The letters of credit may be drawn upon occur-Total receivables $42.222 $43,011 rence of a credit event or a program event of default, GE assets Included inthe categories above at year-end 2001 were as which includes a downgrade of the SPE or failure to pay follows: Equipment- $31 million; Other assets-$757 million;Trade the SPE's secured obligations. The lines of credit enable receivables - 2,39 million. In2002, we transferred the trade receivables the SPEs to pay all amounts owed under investment program to a non-sponsored entity and acquired the entire amount classi-fied as equipment receivables and all but $416 million of other assets. agreements, hedge contracts and distributions on pre-ferred securities.

In addition to the activities discussed above, Financial

• Guarantee and reimbursement contracts. We provide Guaranty Insurance Company (FGIC), a consolidated protection to certain counterparties of interest rate swaps affiliate in the Insurance segment, uses SPEs that offer entered into by SPEs related to changes in the relation-municipalities guaranteed investment contracts with ship between commercial paper interest rates and the timing and amount of the payment streams. These interests in high-quality, fixed maturity, investment grade arrangements provide protection for the life of the assets assets. FGIC actively manages these assets under strict held by the SPE but generally amortize in proportion investment criteria and we also provide certain perform- to the assets outstanding. The fair value of the related ance guarantees. Total assets in sponsored FGIC entities liability is $26 million at year-end 2002.

amounted to $13.7 billion and $13.4 billion at December 31, 2002 and 2001, respectively. We evaluate the economic, liquidity and credit risk A summary of financial support provided to SPEs for related to the above SPEs and support arrangements the subsequent 12 months follows. and believe that the likelihood is remote that any such arrangements could have a significant adverse effect on Decmber 31 (in_ millions)

_ ~~~~~~~~~~~~~~... 2002. ......

2001

_ _... .... our financial position, results of operations or liquidity. We Credit and liquiditysb) $27247 $43,176 record liabilities, as disclosed above, for such guarantees Credit and liquiditV-unusedI) 6,034 9,404 based on our best estimate of probable losses.

Performance guarantees 3,836 3,759 Sales of securitized assets to SPEs result in a gain or Performance guarantees -unused ic 364 441 loss amounting to the net of sales proceeds, the carrying Guarantee and reimbursement amount of net assets sold, the fair value of servicing contracts 2,673 2,456 rights and retained interests and an allowance for losses.

tat Includes credit support of $16.0 billion and $16.8 billion at December 31, Amounts recognized in our financial statements related 2002 and 2001, respectively.

lb) Net of participated liquidity of $11.7billion and arrangements that defer to sales to sponsored or supported SPEs are as follows:

$1.9 billion of liquidity support to 2004.

December31 n millions) 2002 2001 Ic Available support conditioned on an Increase of qualified assets In SPEs.

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 upon, our position would be secured by the repurchased are required to recognize our retained interests, which bonds. While we hold any such bonds, we would receive represent our rights to expected net future cash flows, at interest payments from the municipalities at a rate their fair value. Retained interests generally approximate that is in excess of the stated rate on the bond. To the gain recognized, and are sometimes subject to credit, date, we have not been required to perform under prepayment and interest rate risks. such arrangements.

• Servicing assets. Following a securitization transaction,

• Credit support. We have provided $4.2 billion of credit we retain the responsibility for servicing the receivables, support on behalf of certain customers or associated and, as such, are entitled to receive an ongoing fee based companies, predominantly joint ventures and partnerships, on the outstanding principal balances of the receivables. using arrangements such as standby letters of credit and Servicing assets are primarily associated with residential performance guarantees. These arrangements enable our mortgage loans. Their value is subject to credit, prepay- customers and associated companies to execute transac-ment and interest rate risk. tions or obtain desired financing arrangements with third

• Recourse liability. As described previously, under credit parties. Should the customer or associated company fail support agreements we provide recourse for credit losses to perform under the terms of the transaction or financing in SPEs. We provide for expected credit losses under these arrangement, we would be required to perform on their agreements and such amounts approximate fair value. behalf. Under most such arrangements, our guarantee is secured, usually by the asset being purchased or Amounts in the table on page 105 relate to SPEs that are financed but possibly by total assets of the customer or sponsored or supported by us; amounts related to other associated company. The length of these credit support securitizations totaled $1,346 million and $1,345 million arrangements parallels the length of the related financing at December 31, 2002 and 2001, respectively. arrangements or transactions. The liability for such credit support was $51 million at December 31, 2002.

OTHER NON-CONTROLLED ENTITIES. We also have certain

• Indemnification agreements. These are agreements that investments in associated companies for which we pro- require us to fund up to $1.3 billion under residual value vide varying degrees of financial support and are entitled guarantees on a variety of leased equipment and $0.2 to a share in the results of the entities' activities. While billion of other indemnification commitments arising from all of these entities are substantive operating companies, sales of businesses or assets. Under most of our residual some may need to be evaluated for potential consolida- value guarantees, our commitment is secured by the tion under FIN 46. The types of support we typically leased asset at termination of the lease. The liability for provide to these entities consist of credit enhancement, indemnification agreements was $64 million at such as debt guarantees, take-or-pay contracts that December 31, 2002.

provide for minimum purchase commitments, and other

• Contingent consideration. These are agreements to pro-contractual arrangements. 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, NOTE 30 we had recognized liabilities for estimated payments COMMITMENTS AND PRODUCT WARRANTIES amounting to $72 million of our exposure of $0.3 billion.

Commitments Our guarantees are provided in the ordinary course of In our Aircraft Engines business, we have committed to business. We underwrite these guarantees considering provide financial assistance on future sales of aircraft economic, liquidity and credit risk of the counterparty.

equipped with our engines, totaling $1.6 billion at year- We believe that the likelihood is remote that any such end 2002. In addition, our Commercial Finance business arrangements could have a significant adverse effect had placed multi-year orders for various Boeing, Airbus on our financial position, results of operations or liquidity.

and other aircraft with list prices approximating $15.4 We record liabilities, as disclosed above, for such guaran-billion at year-end 2002. tees based on our best estimate of probable losses, At year-end 2002, we were committed under the fol- which considers amounts recoverable under recourse lowing guarantee arrangements beyond those provided provisions. For example, at year-end 2002, the total on behalf of SPEs (see note 29): fair value of aircraft securing our airline industry guaran-tees exceeded the guaranteed amounts, net of the

• Liquidity support. Liquidity support provided to holders of certain variable rate bonds issued by municipalities associated allowance for losses.

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 106 GE2002 ANNUAL REPORT

Product warranties (in millions) 2002 _ 200n 2000 We provide for estimated product warranty expenses Balance at January 1 $ 968 $ 767 $ 719 when we sell the related products. Because warranty Current year provisions S18 841 564 estimates are forecasts that are based on the best Expenditures(') (694) (658) {557) available information-mostly historical claims experi- Other changesib) 112- 18 41 ence-claims costs may differ from amounts provided. Balance at December 31 $1,304 $ 968 $ 767 An analysis of changes in the liability for product war- is) Primarily related to Power SVstems.

ranties follows. 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 Fourth quarter earnings in 2002 included an after-tax services less costs of goods and services sold. 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 Industrial Products and Systems A description of operating segments for General Electric Electrical distribution and control equipment (including Company and consolidated affiliates follows. power delivery and control products such as transformers, meters, relays, capacitors and arresters); measurement Aircraft Engines and sensing equipment (products and subsystems for Jet engines and replacement parts and repair and mainte- sensing temperatures, humidity and pressure); security nance services for all categories of commercial aircraft equipment and systems (including card access systems, (short/medium, intermediate and long-range); for a wide video and sensor monitoring equipment and integrated variety of military aircraft, including fighters, bombers, facility monitoring systems); transportation systems tankers and helicopters; and for executive and commuter products and maintenance services (including diesel aircraft. Products and services are sold worldwide to air- and electric locomotives, transit propulsion equipment frame manufacturers, airlines and government agencies. motorized wheels for off-highway vehicles, and railway Also includes aircraft engine derivatives, used as marine signaling communications systems); electric motors propulsion and industrial power sources; the latter is also and related products; a broad range of electrical and reported in Power Systems. electronic industrial automation products (including drive systems); installation, engineering and repair services, Commercial Finance which includes management and technical expertise for Loans, financing and operating leases, and other services large projects such as process control systems; and GE for customers, including manufacturers, distributors and Supply, a network of electrical supply houses. Markets end-users, for a variety of equipment and major capital are extremely diverse. Products and services are sold assets including industrial facilities and equipment, energy- to commercial and industrial end users, including utilities, related facilities, commercial and residential real estate to original equipment manufacturers, to electrical loans and investments, vehicles, aircraft, and equipment distributors, to retail outlets, to railways and to transit used in construction, manufacturing, data processing and authorities. Increasingly, products and services are office applications, electronics and telecommunications, developed for and sold in global markets.

and healthcare.

Insurance Consumer Finance U.S. and intemational multiple-line property and casualty Private-label credit card loans, personal loans, time sales reinsurance, certain directly written specialty insurance and revolving credit, residential mortgage financing and and life reinsurance, consumer investment, insurance and inventory financing for retail merchants, and auto leasing retirement services, financial guaranty insurance, princi-and inventory financing. pally on municipal bonds and asset-backed securities, and Consumer Products private mortgage insurance.

Major appliances and related services for products Materials such as refrigerators, freezers, electric and gas ranges, High-performance engineered plastics used in applica-cooktops, dishwashers, clothes washers and dryers, tions such as automobiles and housings for computers microwave ovens, room air conditioners and residential and other business equipment; ABS resins; silicones; water system products. Products and services are sold superabrasive industrial diamonds; quartz products; in North America and in global markets under various GE and laminates. Also includes engineered specialty and private-label brands. Distributed to both retail outlets chemical treatment programs for water and process and direct to consumers, mainly for the replacement systems in industrial, commercial and institutional market, and to building contractors and distributors for facilities worldwide. Products and services are sold new installations. Lighting products include a wide worldwide to a diverse customer base consisting variety of lamps, lighting fixtures and wiring devices. mainly of manufacturers.

Equipment Management NBC Leases, loans, sales and asset management services for Principal businesses are the furnishing of U.S. network portfolios of commercial and transportation equipment, television services to more than 220 affiliated stations, including tractors, trailers, auto fleets, railroad rolling stock, production of television programs, operation of 28 VHF intermodal shipping containers and modular space units. 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

GLOSSARY BACKLOG Unfilled customer orders for products and services. FINANCIAL LEVERAGE The relationship of debt to equity.

BORROWING Financial liability (short or long-term) that obliges Expressed for financial services businesses as borrowings us to repay cash or another financial asset to another entity. divided by equity. Expressed for industrial businesses as borrowings divided by total capital.

CASH EQUIVALENTS Highly liquid debt instruments with matu-rities of less than three months, such as commercial paper. FINANCING RECEIVABLES Investment in contractual loans and Typically included with cash for reporting purposes, unless leases due from customers (not investment securities).

designated as available for sale and included with investment FORWARD CONTRACT Fixed price contract for purchase or sale securities. of a specified quantity of a commodity, security, currency or CASH FLOW HEDGES Qualifying derivative instruments that other financial instrument with delivery and settlement at a we use to protect ourselves against exposure to volatility specified future date. Commonly used as a hedging tool.

in future cash flows. The exposure may be associated with See "Hedge' an existing asset or liability, or with a forecasted transaction. GOODWILL The premium paid for acquisition of a business.

See 'Hedge' Calculated as the purchase price less the fair value of net COMMERCIAL PAPER Unsecured, unregistered promise to assets acquired (net assets are identified tangible and repay borrowed funds in a specified period ranging from intangible assets, less liabilities assumed).

overnight to 270 days. GUARANTEED INVESTMENT CONT'RACTS GICS) (including funding CUSTOMER SERVICE AGREEMENTS (also referred to as 'product agreements) Deposit-type products that provide a stated services agreements") Contractual commitments to provide interest rate on funds deposited with the insurer for a stated specified services for products in our industrial installed period. These products are generally purchased by Employee base-for example, monitoring, maintenance, overhaul and Retirement Income Security Act of 1974 (ERISA) qualified spare parts for a gas turbine/generator set installed in a cus- defined contribution plans and institutional accredited investors.

tomer's power plant. HEDGE A technique designed to reduce or eliminate risk.

DERIVATIVE INSTRUMENT A financial instrument or contract Often refers to the use of derivative financial instruments with another party ("counterparty") that is structured to to offset changes in interest rates, currency exchange rates meet any of a variety of financial objectives, including those or commodity prices, although many business positions related to fluctuations in interest rates, currency exchange are "naturally hedged"-for example, funding a U.S. fixed rates and commodity prices. Options, forwards and swaps rate investment with U.S. fixed rate borrowings is a natural are the most common derivative instruments we employ. interest rate hedge.

See "Hedge!' INSURANCE RECEIVABLES Receivables of our insurance busi-DIRECT WRITTEN PREMIUMS Amounts charged to insureds in nesses associated with (1)reinsurance agreements in which exchange for coverages provided in accordance with the those businesses legally transferred (ceded) insurance losses terms of an insurance/reinsurance contract. (and related premiums) to reinsurers and are entitled to recovery of those insurance losses; (2)premiums on insur-EARNED PREMIUMS Prtion of the premium pertaining to the ance and reinsurance contracts; (3)policy loans to policyhold-segment of the policy period for which insurance coverage ers of certain life insurance contracts; and (4)premium funds has been provided. on deposit with reinsurance customers as collateral for our EFFECTIVE TAX RATE Provision for income taxes as a percent- obligations as a reinsurer.

age of earnings before income taxes and accounting INTANGIBLE ASSET A non-financial asset lacking physical sub-changes. Does not represent cash paid for income taxes in stance, such as goodwill, patents, trademarks and licenses.

the current accounting period.

Also includes present value of future profits, which are antici-EQUIPMENT LEASED TO OTHERS ELTO) Rental equipment we pated net discounted cash flows to be realized from certain own that is available to rent and is stated at cost less in-force insurance, annuity and investment contracts at the accumulated depreciation. date we acquire a life insurance business.

FAIR VALUE HEDGE Qualifying derivative instruments that INTEREST RATE SWAP Agreement under which two counterpar-we use to protect ourselves against exposure to volatility in ties agree to exchange one type of interest rate cash flows values of hedged assets, liabilities or certain types of firm for another type of cash flows on specified dates in the commitments. Changes in the fair values of derivative instru- future. In a typical arrangement, one party periodically will ments that are designated and effective as fair value hedges pay a fixed amount of interest, in exchange for which that are recorded in earnings, but are offset by corresponding party will receive variable payments computed using a pub-changes in the fair values of the hedged items. See "Hedge.' lished index. See "Hedge' 110 GE 2002 ANNUAL REPORT

INVESTMENT SECURITIES Generally, an instrument that pro- RETURN ON AVERAGE TOTAL CAPITAL INVESTED Eamings before vides an ownership position in a corporation (astock), a credi- accounting changes plus the sum of after-tax interest and tor relationship with a corporation or governmental body other financial charges and minority interest, divided by the (abond), or rights to ownership such as those represented sum of total equity, borrowings and minority interest (on an by options, subscription rights and subscription warrants. annual basis, calculated using a five-point average).

MONETIZATION Sale of financial assets to a third party for SECURITIZATION A process whereby loans or other receivables cash. For example, we sell certain loans, credit card receiv- are packaged, underwritten and sold to investors. In some ables and trade receivables to third-party financial buyers, instances, the assets sold are first transferred to an uncon-typically providing at least some credit protection and often solidated SPE. These entities are structured to be bankruptcy agreeing to provide collection and processing services for a remote in order to isolate the credit risk of the assets from fee. Monetization of interest-bearing assets such as loans the overall credit risk of the selling entity. Outside investors, normally results in gains; monetization of non-interest bear- usually institutions, typically purchase a debt instrument ing assets such as trade receivables normally results in issued by the SPE. Whether or not credit risk associated with losses. the securitized assets is retained by the seller depends on NET REVENUES For our lending and leasing businesses, rev- the structure of the securitization. See "Monetization.'

enues from services less interest and other financial charges. SEPARATE ACCOUNT Investments controlled by policyholders OPERATING MARGIN Sales of goods and services less the sum and associated with identical amounts reported as insurance of cost of goods and services sold plus selling, general and liabilities.

administrative expenses. Operating margin is often expressed TURNOVER Broadly based on the number of times that as a percentage of sales-the operating margin rate. working capital is replaced during a year. Accounts receivable OPERATING PROFIT Earnings before interest and other financial turnover is total sales divided by the five-point average charges, income taxes and effects of accounting changes. balance of customer receivables from sales of goods and services (trade receivables). Inventory turnover is total sales OPTIoN The right not the obligation, to execute a transaction divided by a five-point average balance of inventories. See at a designated price, generally involving equity interests, "Working Capital.'

interest rates, currencies or commodities. See Hedge' UNEARNED PREMIUMS Portion of the premium received that PREMIUM Rate that is charged under insurance/reinsurance relates to future coverage periods.

contracts.

UNPAID CLAIMS AND CLAIMS ADJUSTMENT EXPENSES Claims PRESENT VALUE OF FUTURE PROFITS See Intangible Asset' reserves for events that have occurred, including both PRODUCT SERVICES AGREEMENTS See Customer Service reported and incurred-but-not-reported (IBNR) reserves, Agreements.' and the expenses of settling such claims.

PRODUCTIVITY The rate of increased output for a given level of VARIABLE INTEREST ENTITY Entity defined by Financial input, with both output and input measured in constant cur- Accounting Standards Board Interpretation No. 46, and that rency. A decline in output for a given level of input is "nega- must be consolidated by its primary beneficiary. A variable tive" productivity. interest entity has one or both of the following characteris-PROGRESS COLLECTIONS Payments received from customers tics: 1) its equity at risk is not sufficient to permit the entity as deposits before the associated work is performed or prod- to finance its activities without additional subordinated finan-uct is delivered. cial support from other parties, or 12) as a group, the equity REINSURANCE A form of insurance that insurance companies investors lack one or more of the following characteristics:

buy for their own protection. (a)direct/indirect ability to make decisions, (b)obligation to absorb expected losses, or c) right to receive expected RETROCESSION AGREEMENT Contract to acquire third-party residual returns.

insurance protection for reinsurance policies written.

WORKING CAPITAL Sum of receivables from the sales of Retrocession is a risk mitigation technique.

goods and services, plus inventories, less trade accounts RETURN ON AVERAGE SHARE OWNERS' EQUITY Eamings before payable and progress collections.

accounting changes divided by average total equity (on an annual basis, calculated using a five-point average).

GE2002 ANNUAL REPORT111

CORPORATE MANAGEMENT (As of February 14, 20031 SENIOR EXECUTIVE OFFICERS SENIOR CORPORATE OFFICERS CORPORATE STAFF OFFICERS Jeffrey R.Immeit WiliIam J. Conaty Charles E.Alexander Bracket B. Dennlston III MarcA. Onetto Chairman of the Board & Senior Vice President President, GE Capital. Europe Vice President & Senior Counsel, Vice President, Chief Executive Officer Human Resources Philip D. Ameen Litigation &Legal Policy European Operations Dennis D. Dammerman Scott C. Donnelly Vice President & Comptroller Herbert D. Depp Stephen MWParks Vice Chairman of the Board & Senior Vice President, Scott R.Bayman Vice President Vice President Taxes, Europe Executive Officer, Global Research President &Chief Executive GE Aviation Operations Susan P Pater General Electric Company; and Yoshiaki Fujimori Officer, GE India R. Michael Gadbaw Vice President Chairman, General Electrc President & Vice President & Senior Counsel. Executive Development Capital Services, Inc. Fardinando Beccalli Chief Executive Officer, GE Asia President &Chief Executive International Law &Policy Stephen D.Ramsey Gary L Roger Benjamin W. Hilneman, Jr. Officer, GE Europe Joyce Hergenhan Vice President, Vice Chairman of the Board & SeniorVice President. Vice President & President, Environmental Programs Executive Officer Lynn A. Calpeter General Counsel & Secretary Vice President, Audit Staff GE Fund John M. Samuels Roben C.Wright RobertA. Jeffe Michael S. Ideichik Vice President &

Vice Chairman of the Board & Willm H. Cary Senior Vice President Vice President, Financial Vice President, Senior Counsel, Taxes Executive Officer. Corporate Business Global Research Center.

General Electric Company; and Planning &Analysis Marc J. Saperstain Development GE China Vice President, Chairman & Chief Executive KathrynA. Casidy Officer, National Broadcasting JamesA. Parks Vice President &GETreasurer Steven F Kiugr Corporate Citizenship Company, Inc. Senior Vice President & President & Chief Executive J. Jeffrey Schaper Chief Financial Officer. GE Capital James A. Colie Officer, Capital Markets Services Vice President, Global Risk Chief Commercial Officer Gary M. Renr Management. GE Capital Mark J. Krrkowhsk Steven J. Schneidr Senior Vice President & Vice President President &

Chief Information Officer Elizabeth J. Comstock Corporate Risk &Financing Vice President. Chief Executive Officer, Keith S. Sherin Corporate Communications William L Meddaugh GE China SeniorVice President, President & Ronald A. Stem Finance &Chief Financial Officer Robert L Corcoran Chief Executive Officer, Vice President & Vice President &

GE Supply Senior Counsel, Antitrust Chief Learning Officer John R. Myr Plot C.van Abeeldn Pamela Dey Chairman &President, Vice President & Vice President Six Sigma Quality GE Asset Management Senior Counsel. Transactions Richard .Wacker Mark Norbom Vce President Rlchard D'Avino President & Corporate Investor Relations Vice President & Chief Executive Officer, SeniorTax Counsel, GE Capital GE Japan OPERATING MANAGEMENT (As of February 14. 2003)

GE AIRCRAFT ENGINES ScottA. Emest GE COMMERCIAL FINANCE Robed L Lewis GE CONSUMER FINANCE Vice President & President &

David L Calhoun General Manager, MichaeA. Neal Chief Executive Officer, David R. Nissen President & Engine Services Global President & Structured Finance Group President & Chief Executive Chief Executive Officer, Services Overhaul Chief Executive Officer, Officer, GE Consumer Finance GE Aircraft Engines GE Commercial Finance J. Kelth Morgan David L Joyce Vice President & Ann N. Abays LorraineA. Bolsinger Vice President &General Carol S. Anderon General Counsel Vice President Vice President & Manager, Commercial Engines Vice President, Human Resources General Manager, Human Resources Michael E.Prall David L Uoyd, Jr. President & MarkW. Bogor Commercial Marketing Jeffrey S. Somstein President & CEO, Americas Vice President & Chief Executive Officer, Corbett D. Caudl General Counsel Vice President. Finance Real Estate Charies M. Crabtra Vice President & Paull Bocaidy Vice President &

General Manager Engineering Kenneth V. Meyer Jeffrey Malehom Vice President President & Chief Executive Officer, Chief Operations Officer MarcA ChinI Business Practices & Chief Executive Officer, Global Financial Restructuring Dan N. O'Connor Vice President. Processes Commercial Equipment President &

Human Resources Financing Joseph E. Parsons Roger N. Seager President, Chief Executive Officer, Thomas E. Cooper Vice President. Michael A.Gaudino North America Equity Europe Vice President Commercial Sales President & Maive R Scully Washington Operations Chief Executive Officer, Frederick E Wolfert Russell R Sparks President & Vice President Finance John J. Falconi Commercial Finance Vice President & Chief Execubve Officer TaketoYamakawa Vice President, General Manager, Daniel S. Hanson Healthcare Financial Services President &

Finance &Information Military Engines President & Chief Executive Officer, Japan Technology Chief Executive Officer, Theodore H.Torbeck Vendor Financial Services Russel R Mayr Vice President &

Vice President General Manager, Henry A. Hubschman Information/Technology Supply Chain President &

Daniel C.Heintzalman Chief Executive Officer, Vice President & Aviation Services General Manager, Norman Liu Engine Services Vice President, Commercial Operations 112 GE 2002 ANNUAL REPORT

OPERATING MANAGEMENT (continued)

GE CONSUMER PRODUCTS MarkT Jamieson GE MEDICAL SYSTEMS H.David Overbeeke James N. Suclu Vice President Finance Executive Vice President & Vice President, Sales James P Campbell Joseph M. Hogan Chief Information Officer Richard L Poase Stephen B. Bransfleld President & President &

Vice President David M. Zeslov Vice President, Chief Executive Officer, Chief Executive Officer.

Power Control Technologies President, NBC Cable Global Supply GE Consumer Products GE Medical Systems Chain Management Lawrence K. Blystone Patrick LA. Dupuis JamesW. Ireland III John D. Fish Jon A. Ebacher Vice President, Vice President Finance President Chief Operating Officer, Vice President Power Equipment Business NBCTelevision Stations Lighting &Area Executive RelnaldoA. Garc Power Systems Technology Michael J. Pilot President & Neal B.Shapiro Gregory L Levinsky Mark M. Uttlo Vice President, Sales Chief Executive Officer, President NBC News Vice President President, Energy Products Information Technology Joseph B. Ruocco Intemational Patricia A. Steele Vice President Executive Vice President, John C. Loomis Golnar Motaheripour Chlh Chen Human Resources Communications Vice President Vice President, Europe President, China Operations Pamela A. Thomas-Graham Human Resources Lynn S. Pendergrass Stuart Scott S. Omar shrak Vice President, President CNBC Happy R.Perkins Vice President, President &

Information Technology Vice President &

Sales & Marketing Chief Executive Officer, Lwence PTu Executive Vice President & General Counsel James S. Shepherd Global Ultrasound Paul A. Raymont Thomas P Saddlemire Vice President, Mary Elizabeth Klein General Counsel Vice President, Technology Vice President Finance GE Sensing Solutions Vice President, Mark LVchon Stephen J. Sedita Robert D. Sloan Healthcare Industry Sales Executive Vice President & Claudi Santigo Vice President, Finance President &

Vice President & GregoryT Lucelr Chief Financial Officer Richard F.SegalinI General Counsel Chief Executive Officer, President & Eileen G. Whelley Vice President. GE Oil &Gas Chief Executive Officer, Executive Vce President Appliances Supply Chain GE Medical Systems Human Resources Ranieri DeMarchis John M. Sollazzo GE INSURANCE Vice President, Finance InformationTechnologies Jeffrey A. Zucker Vice President, John M. Sel Michael D. Fralzer John R Lynch President, NBC Entertainment Human Resources Vice President President &Chief Executive Vice President James McNanar Officer, GE Insurance Human Resources President &CEO, Information Technology GE EQUIPMENT MANAGEMENT K Rone Baldwin Diane P Mellor Telemundo Richard R.Stewart Vice President, Vice President, President, Arthur H. Harper Strategic Development Global Supply Chain GE Aero Energy Products President & GE PLASTICS Thomas H. Mann Paul J. Mireblila Andrw C. White Chief Executive Officer, President & President & John Krenickl, Jr. President GE Nuclear GE Equipment Management Chief Executive Officer, Chief Executive Officer, President &Chief Executive Delbert LWilliamson Premod Shasin Mortgage Insurance Americas &Healthcare Services Officer, GE Plastics President Global Sales President &

Chief Executive Officer, India Ronald R. Pressman John R Chiminski WillIam Banholzer JohnT McCrter Chairman, President & Vice President, Vice President, Vice President, Joseph J. DeAngelo Chief Executive Officer, Americas Service Global Technology Energy Industry Sales President & Employers Reinsurance Chief Executive Officer, Eugene L Saregnese Chades E. Crew Corporation TlP/Modular Space Vice President, President &CEO, Marc A. Melches Global Technology GE SPECIALTY MATERIALS LNP Engineering Plastics Kathryn V. Marinello Vice President. Finance President & PeterY Solmssen John M. Dineen WillmA.Woodbum A. Louis Parker Vice President & Vice President, Global Lexan President &

Chief Executive Officer, Fleet Services & President & General Counsel Chief Executive Officer, Chief Executive Officer, Brient.Gladden Auto Financial Services Vice President, Finance GE Specialty Materials Commercial Insurance Glen A. Messina NBC William P Driscoli, Jr.

Richard F.Smith Wayne M. Hewett Vice President, Finance Vice President, GE Silicones President & President, GE Plastics Pacific John L Oliver Robert C.Wright Tenye D. Fratto Chief Executive Officer, Vice Chairman of the Board & Andre Horbach President & Property &Casualty President, GE Plastics Europe Vice President, Executive Officer, GE Superabrasives Chief Executive Officer, Reinsurance General Electric Company; and Robert E.Muir European Equipment George R.Oliver Afred J. Stanley Chairman &Chief Executive Vice President, Management Vice President, GE Betz Vice President & Officer, National Broadcasting Human Resources RobertW Speetzen General Manager, Company, Inc. Salvatore R. Piazzolls Vice President, Gerard P Podesta Global Operations William L Bolster Vice President, Strategic Initiatives Vice President Deborah M. Reif Chairman, CNBC Intemational GE Plastics Americas Human Resources President & Richard Cotton MaryroseT Sylester GaryW. Pritchard GE INDUSTRIAL SYSTEMS Chief Executive Officer, President & Vice President Vice President, GE Quartz, Inc.

Financial Guaranty Managing Director, Global Manufacturing Lloyd G.Tiroter Insurance Company CNBC - Europe President & GE TRANSPORTATION Leon E. Roday Dick Ebereol Chief Executive Officer, SYSTEMS Vice President & Chairman, NBC Sports & GE POWER SYSTEMS GE Industrial Systems General Counsel NBC Olympics John GRice CharleneT Begley Ruben C. Berumen Pamela S. Schutz President &

President & Randel A. Falco President &

President & Chief Executive Officer, Chief Executive Officer, Chief Executive Officer, President, Chief Executive Officer, GE Power Systems GE Transportation Systems GE Power Controls BYU NBC Television Network Wealth & Income Management Jeff R.Garwood Brandon Burgess Ricardo Artigas George R.Zippal Executive \Mce President. Vice President President & President & Business Development GE Energy Services Chief Executive Officer, Chief Executive Officer, GE Fanuc Automation Independent Brokerage Group John W. Eck Candace Creon North America, Inc. President, NBC Broadcast & Vice President. Finance M. Roger Gasaway Network Operations Vice President Manufacturing GE 2002 ANNUAL REPORT 113

CORPORATE INFORMATION Corporate Headquarters Copies also are available, without charge, from GE Corporate General Electric Company Investor Communications, 3135 Easton Turnpike, 3135 Easton Tumpike, Fairfield, CT 06828 Fairfield, CT 06828.

(203) 373-2211 GE Capital Services and GE Capital Corporation file Form 10-K Reports with the SEC, and these can also be viewed Annual Meeting at www.ge.com/en/company[investor/secfilings.htm General Electric Company's 2003 Annual Meeting of Information on the GE Fund, GE's philanthropic foundation, Share Owners will be held on Wednesday, April 23, at the can be viewed at www.gefund.org Charlotte Convention Center in Charlotte, North Carolina.

Intemot Address Information Share Owner Services Visit us online at www.ge.com for more information about To transfer securities, write to GE Share Owner Services, GE and its products and services.

c/o The Bank of New York, PO. Box 11002, The 2002 GE Annual Report is available online at NewYork, NY 10286-1002.

www.ge.com/annual02 For detailed news and information For share owner inquiries, including enrollment information regarding our strategy and our businesses, please visit our and a prospectus for the Direct Purchase and Reinvestment Press Room online at www.ge.com/news and our Investor Plan, "GE Stock Direct,' write to GE Share Owner Services, Information site at www.ge.co-n/investor c/oThe Bank of NewYork, PO. Box 11402, NewYork, NY 10286-1402; or call (800) 786-2543 (800-STOCK-GE) or Product Information (610) 312-5317; or send an e-mail to For information about GE's consumer products and GE-Shareholders-svcs@bankofny.com. services, visit us at www.geconsumerproducts.com For Internet access to general share owner information and Cassette Recordings certain forms, including transfer instructions or stock power, visit the website at wvvw.stockbny.com/ge For an audiocassette version of this report, write to Target Mail, 705 Corporations Park, Scotia, NY 12302; Stock Exchange Information or call (518) 381-3824; or send an e-mail to In the United States, GE common stock is listed on the target.mail@corporate.ge.com.

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exchanges, includingThe Stock Exchange, London. To report concerns related to compliance with the law, GE policies or government contracting requirements, contact Trading and Dividend Information the GE Corporate Ombudsperson, PO. Box 911, Fairfield, Common Stock Market Price CT 06824. Telephone: (800) 227-5003 or (203) 373-2603.

Dividends fIn dollars) High Low DOeclared Contact the GE Board of Directors 2002 For reporting complaints about GE's accounting, internal Fourth quarter $27.98 $21.40 $.19 accounting controls or auditing matters or other concerns Third quarter 32.98 23.02 .18 to the Board of Directors or the Audit Committee, write to Second quarter 37.80 27.42 .18 GE Board of Directors, General Electric Company (V2E),

First quarter 41.84 34.49 .18 3135 Easton Turnpike, Fairfield, CT 06828; or call 2001 (800) 417-0575 or 203) 373-2652; or send an e-mail to Fourth quarter $41.59 $35.88 $.18 Directors0corporate.ge.com.

Third quarter 49.59 28.25 .16 Second quarter 52.90 38.57 .16 C 2003 General Electric Company Printed in U.S.A.

First quarter 47.99 35.98 .16 Nota: Unless otherwise indicated by the context, the term "GE, As of December 31, 2002, there were about 669,000 share 'General Electric and 'Company' are used on the basis of consolidation described on page 78.

owner accounts of record.

GE and D are trademarks and service marks of General Electric Form 10-K and Other Reports Company; NBC and A are trademarks and service marks of The financial information in this report, in the opinion of National Broadcastng Company, Inc., and MSNBC is a trademark and service mark of MSNBC Cable, LLC. GE90 and CF34 are management, substantially conforms with information trademarks of General Electric Company. CFM56 is a trademark of required in the 10-K Report" to be submitted to the CFM Intemational, a 50/50 joint company between Snecma Moteurs Securities and Exchange Commission (SEC} by the end of of France and General Electric Company.

March 2003. However, the 10-K Report also contains certain Caution Conceming Forward-Looking Statements. This document supplemental information and it can be viewed on the ntemet includes certain 'forward-looking statements' within the meaning of at www gecom/en/companyrlnvestor/secfilings.htm. Our annual the Private Securities Litigation Reform Act of 1995. These statements report on Form 10-K, quarterly reports on Form 10-0, current are based on management's current expectations and are subject to reports on Form 8-K, and amendments to those reports are uncertainty and changes in circumstances. Actual results may differ materially from these expectations due to changes inglobal political, eco-available, without charge, on that website as soon as reason-nomic, business, competitive, market and regulatory factors. More infor-ably practicable after they are filed electronically with the SEC. mation about those factors iscontained in GE's filings with the Securities and Exchange Commission.

114 GE 2002 ANNUAL REPORT

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