ML20212H300

Forwards GE 1997 Annual Rept, Which Provided Updated GE Corporate & Financial Info

ML20212H300
Person / Time
Site:	07000754
Issue date:	03/25/1998
From:	Murray B GENERAL ELECTRIC CO.
To:	Ten Eyck E NRC OFFICE OF NUCLEAR MATERIAL SAFETY & SAFEGUARDS (NMSS)
References
NUDOCS 9804080182
Download: ML20212H300 (1)

Text

{{#Wiki_filter:YY GE NucIcar Energy 10 ~4N c..m.nearm cie:w, wevus nm cenw P O Bn OR Va!!vnt ei hal Pleu:,a'ston CA 9aSts March 25,1998 h. Elizabeth Q. Ten Eyck Division of Fuel Cycle Safety & Safeguards Office of Nuclear Material Safety & Safeguards U.S. Nuclear Regulatory Commission Washington, D.C. 20555

Reference:

Docket 70-754

Dear Ms. Ten Eyck:

As is customary, copies of the General Electric Annual Report are forwarded to the Commission in order to provide updated General Electric corporate and financial information. Accordingly, copies of the 1997 Annual Report are enclosed for the referenced docket. Sincerely, bf% B. M. Murray Senior Licensing Engineer (925) 862-4455 /ca Enclosures i \\L\\ O 9804080182 980325 6 'J PDR ADOCK 07000754 C PDR l l l

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o Financial Highlights.- General Electric Company and consolidated affiliates (Dollar amounts in rnillions; per-share amounts in dollars) 47 1996 1995 Revenues $90,840 $79,179 $70,028 l Net earnings 3,203 7,280 6,573 jj Dividends declared 3,535 3,138 2,838 Per share Net earnings 2.50 2.20-1.95 i Dividends declared -1.08 .95 ~.845 4 GE ongoing operating inargin 15.7 % 14.8 % 14.4 % i Per-share amouets have been adjusted to reflect the 2-for.1 stock split effective on April Y8,1997. Within this report, certain 1997 results are refened to as " ongoing? Such results exclude both the revenues and earnings k associated with the tockheed Martin transat tion described in note 2 to the consolidated financial staternents as well as t restrurturing and ottwr special charges. { f a j 4 L4 i t 'i i I i I .g Centents e 1 Letter to Share Owners 7 SixSigma 8 Business Review - 19 CommunityService 20 Board of Directors - 22 Management 25 FinancialSeetion 67 Corporateinformation @ This entire Annual Re}x2rt is printed on ircpled paper. f: 1 + -_--_--e--,,--.

To Our Share Owners and Employees In 1997, your Company had a great year-pv a record year. r . Ongoing revenues rose to $89.3 billion; e up 13%. . Global (non-U.S.) revenues rose to $38.5 g billion, now 42% of total revenues. g ? . Earnings increased to more than $8.2 bil-lion; up 135 -; s ) y f. . Earnings per share increased 14% to a record $2.50. t B . Ongoing operating margin rose to a record ,4 2 Mi 15.7% exceeding 15% fbr the first time in the history of our Company. . Operating cash flow rose to a record $9.3 hillion. This, in combination with our Triple A debt rating, fueled the Chairrnan and Chief Executive officer investment of $17.2 billion in more than 75 industrial and financial Joha f welch.Jr-(tront) and Vice Chair-seIYiCes aC(}llisitiolis in 1997. men end reecutiv, Officers Paolo Fresco .This record cash flow also allowed us to return $7 billion to share Ic",7r,"r$"nfrI','n, owners: $3.5 billion in dividends and $3.5 billion ihr the repurchase $[,"C$lo'c),*'""" of GE stock. Dividends were increased by 15% our 22nd consecutive annual dividend increase. . In April, our share owners approved a 2-fbr-1 stock split, the fourth in the last 15 years. Our share owners - including our active and retired employees, who now own more than $12 billion in GEstoch in theirsavings plans - were rewardedfor thisperfonnance. The total return on a share of GE stoch was 51 % in 1997; thisfollowed gains of 40 % in 1996 and 45 % in 1995. 1

1 We delivered these 1997 results by executing Mexico in the mid-1990s was a similar simy: dis-on our three major initiatives: globaliza-location, uncertainty and turbulence. Reacting to I tion, a focus on product senices and our drive fi>r the peso crisis of 1995 and its aftermath, GE moved, Six Sigma quality, lluilding on these same three acquiring 10 companies and investing more than initiatives will be critical to our future success. $1 billion in new and existing operations. The The uncertainty brought about by the Asian result was revenue growth of 60% and a doubling economic difficuhies creates both challenges and of earnings in the twu years following the crisis. opportunities. For GE, Asia represents about 9% Today, we are determined, and poised, to do of our revenues (about halfinJapan) - exposure the same thing in Asia we have done in the United ~ that is by no means insignificant, but certainly States, Europe and Mexico: invest in the future. manageable - and we are confident that we can minimize any impact on our existing operations. Globalization It has been our repeated experience that busi. ness uncertainty is inevitably accompanied by Globalization is one of the engines of GE growth, opportunity. The Asian situation should be no now and well into the next century. There will be exception;it should prmide us with a unique dislocations and speed bumps on the road to pros-opportunity to make the strategic moves that will perity in all the world's critical markets, but one increase our presence and our participation in cannot afTord to write off any region in diff cuhy. what we know will be one of the world's great mar-Ilad business management or bad govenuner t kets of the 21st Century, policies that weaken competitiveness can be reme-We've been down this path before. In the early died by tough restnicturing and policy changa 1980s, we experienced a United States mired in recession, hand-wringing from the pundits and 7'OddJ, we are de/ennined, and poised, dirges being sung over Ameiican manufacturing. fg gg ffjg ygjyg ffjjpg g ASjg gg fjggg j l We didn't buy this dismal scenario; instead, we invested in both a widespread restructming and in done in the United States, Europe and new businesses. We emerged into the recovery a MfX/ col inUest in ///d[HINTE, much more competitive and productive company. Our successful experience with U.S. business The same conditions that made restructuring uncertainty gave us a very dilTerent view of the and reform necessary frequently create a cur-European malaise of the caily 1990s. rency weakness that, when coupled with the j To us, Europe looked a lot like the United increased competitiveness brought about by States in the 1980s, and in need of the same reme-restructuring, leads the country out of recession, dies: restructuiing, spin-offs, and the like. So, via internal growth and increased ex}mns. while many were " writing-ofl' Europe, we invested The path to greatness in Asia is irreversible, heavily, buying new companies and expanding and GE will be there. our existing presence. Following the restructuring ofits industrial and financial structure, as well as Services a dose of the powerful export medicine of a deval. ued currency, Europe is now recovering, and Another growth engine, which we have described "GE Europe"is now a $20.6 billion operation. fbr you in the past, is Senices. By any measure, l Our revenues have tuore than doubled from 1994 GE is today a global senice company, and in 1998 l to 1997; net income has tripled to more than more than two-thirds ofits revenues will come l $1.5 billion; and this growth is accelerating as the from financial,infonnation and product senices. I European recovery progresses. Our second major initiative is focused on high-technology product senices. In 1997, we achieved 2

i i a second consecutive year of double-digit growth in GE had another huge advantage that acceler-product senice revenues and improved ongoing ated our quality effort: we had a Company that was operating margin, while making 20 acquisitions and open to change, htmgry to learn and anxious to joint ventures, primarily in the industrial, power, move quickly on a g<ml idea. medical and aircraft engine senices businesses. Key This learning emironment came from a decade-among these were the $1.5 billion Greenwich /UNC long, soul-transforming cuhural initiative called jet engine senice acquisition and the recently com- " Work-Out." Wor k-Out is a continuing effort to pleted $600 million acquisition of the gas imbine-achieve what we call "boundagless behasior"- j related businesses of Stewart & Stevenson Senices, a business behasior that tramples or demolishes all global power generation equipment senice company, barriers of rank, function, geography and bureau-The opportunity for growth in pmduct senices cracy in an endless pursuit of the best idea -in is unlimited. We have the ability, using high-the cause of engaging and involving every mind = technology senices, to make our customers' existing in the Company. assets (e.g, power plants, locomotives, airplanes, After a decade of Work-Out, most of the old factories, hospital equipment and the like) more bureaucracy and the boundaries among us have productive, and by doing so reduce their capital been demolished. (We are, however, aware that outlays. This growing capability, much ofit infor-bureaucracy is the Dracula ofinstitutional behav-mation technology-based, will enable us to increase ior, and will rise again and again, requiiing even-our revenues from product senices by more than one in the organir.ation to reflexively pound stakes 30% in 1998 - to S13 billion. through its reappearances.) But at GE today-and we are obviously proud of this-finding the better way, the best idea, from whomever Six Sigma - wiii share it wid, us, has become our central focus. We have desciibed our progress in globalization Nowhere has this learning environment, this and senices rather quickly so we couhl cover in scarch for the better idea, been more powerfully depth something we talk to each other about all demonstrated than in our drive fbr Six Sigma qual-day: the centerpiece of our dreams and aspirations ity. 's w enty-eight months ago, we became con-for this great Company - the drive for Su vmced tha; six Sigma quality coukt play a central ~ma quality. "Six Sigma" is a disciplined methodology, role in GE's fuere; but we believed, as well, that it led and taught by highly trained GE employees would take years of consistent communication, called "51 aster Black Belts" and " Black Behs," that relentless emphasis and impassioned leadenhip to h>cuses on moving every process mat touches our move this big Company on this bohl new course. customers - every product and senice - toward We were wrong! near-perfect quality. Weare the ones who now find ourselves run-Six Sigma project wor k consists of five basic ning to keep up with the excited charge of tens of activities: Defining, Measuring, Analyting, thousands of GE employees who have seen the huproving and then Controlling processes. These transformational magic - the rejuvenation - that t projects usually focus on improving our customers' this combination of rigid discipline and cheerful productivity and ieducing their capital outtavs, fimaticism can achieve in our businesses. Projec-while increasing the quality, speed and efficiency tions of our progress in Six Sigma, no matter how of our operations. optimistic, have had to bejunked every few months We didn't invent Six Sigma - we learned it. as gross underestimates. Motorola pioneered it and AlliedSignal success-Six Sigma has spread like wildfire across the fully embraced it. The experiences of these two Company, and it is transforming everything we do. companies, which they shared uith us, made the launch of our initiative much simpler and fastes. 3

We had our annual Operating hianagers . Superabrasives - our industrial diamond busi-hiceting-500 of our senior business leaders ness - described how Six Sigma quadrupled from around the globe - during the first week of its return on investment and, by improving Janumy 1998, and it turned out to be a wonderful yields, is giving it a full decade's worth of snapshot of the way this learning Company-this capacity despite growing volume -without new GE - has come to behave; and now, with Six spending a nickel on plant and equipment Sigma, how it has come to work. capacity. Today,in the uncountable number of business Our railcar leasing business described a 62% meetings across GE - both organized and "in-reduction in turnaronnd time at its repair the-hall"- the gates are open to the largest flood shops: an enormous productivity gain for our ofinnovative ideas in world business. These ideas railroad and shipper customers and for a busi-are generated, improved upon and shared by 350 ness that's now two to three times faster than its nearest rival because of Six Sigma improve-GE had another huge advantage ments. In the next phase, spread across the entire shop network, lilack Belts and Green that accelerated our quality <ffort: we iscus,,,,xioy ,,n inci,,c,ms,,cacsiyoca,n, had a Company that was open to overhaul process, resulting in a 50%further reduction in cycle time. change, hungry to learn and anxious I.he plasu.cs business, through rigorous S.ix lo move Guickly on a good idea. Sigma process work, added 300 million pounds of new capacity (equindent to a " free plant"), business segments - or, as we think of them,350 saved $400 million in investment and will save business laboratories. Today, these ideas center another $400 million by 2000. on spreading Six Sigma "best practices" across our At our meeting, realot after zealot shared stories busin ess operations. of customers made more competitive, of credit At this particular Operating hianagers hiceting, card and mortgage application processes stream-about 25 speakers, from across the Company and lined, ofinventories reduced, and of whole facto-around the world, excitedly described how Six ries and businesses performing at levels never Sigma is transfbi ming the way their businesses work. believed possible. They shared what they had learned from projects The sharing process was repeated at another such as streamlining the back room of a credit card level two weeks later in Paris, as 150 hiaster Illack operation, or improving turnaround time in ajet Belts and Black Belts, from every GE business engine overhaul shop, or " hit-rate" improvements throughout Europe, came together to share and in commercial finance tnmsactions. hinst of the learn quality technology. This learning is done in presenters focused on how their process improve-the boundaryless, transcultural language of Six ments were making their customers more com-Sigma, where "CTQs" (critical to quality charac-petidve and productive: teristics) or "DPMO's" (defects per million oppor- . Medical Systems described how Six Sigma tunities) or "SPC" (statistical process control) have designs have produced a 10;[old increase in uactly the same meaning at every GE operation the life of CT scanner x-ray tubes - increasing from Tokyo to Delhi and from Budapest to Cleve-the " uptime" of these machines and the prof-land and Shanghai. itability and level of patient care given by hospi-The meeting stories are anecdot2d; hig compa-tais and other health care providers. nies can make great presentations and impressive charts. But the cumulative impact on the Com-pany's numbers is not anecdotal, nor a product of 4

charts. It is the product of 276,000 people execut-Six Sigma costs and benefits ing.. and delivering the results of Six Sigma to our bottom line. On ne _ sw Operating margin, a critical measure of busi-f ness efficiency and profitability, hovered around the 10% level at GE for decades. With Six Sigma _M embedding itself deeper into Company operations, GE in 1997 went through the " impossible" 15% ~ level-approaching 16% - and we are optimistic , com _ m ~ g about the upside, a s-= Six Sigma, even at this relatively cady stage, i,,s i,,7 i,,, delivered more than $300 million to our 1997 operating income. In 1998, returns will more than double this operating profit impact. In the early 1990s, after we had finished defin-Six Sigma is quickly becoming part of the ing ourselves as a company of boundaqless people genetic code of our future leadership. Six Sigma with a thirst Ior learning and a compulsion to share, training is now an ironclad prerequisite for pro-it became amthinhable for any of us to tolerate - motion to any professional or managerial position much less hire or promote - the tyrant, the turf in the Company-and a requirement for any defender, the autocrat, the big shot. They were award of stock options. simply " yesterday." Senior executive compensation is now heasily .As we move toward 2000 and beyond, with Six weighted toward Six Sigma commitment and suc-Sigma penneating much of what we do all day, it cess - success now increasingly defined as " eatable" will be likewise unthinkable to hire into the Com-financial returns, for our customers and for us. pany, promote or tolerate those who cannot, or Six S,igma is quirkly becoming will not, commit to this way of work. It is simply too important to our future. ) parl 0[l/le gCNelic C0(/C 0[ONT[N/MIF And as we " raise the bar" from three to four to [MTS/h f te and then to Six Sigma.. we must raise, again, I the bar of quality as it applies to ourselves. The There are now nearly 4,000 full-time, fully reality is, we simply cannot afford to field anything trained lilack llelts and Alaster lilack llelts: Six but teams of"A" players. Sigma instructors, mentors and pnject leaders. What is an "A"? At the leadership level, an "A" i There are more than 60,000 Green llelt part-time is a man or woman with a vision and the ability to pn> ject leaders who have completed at least one articulate that vision to the te:un, so vividly and Six Sigma pndect. powerfully that it also becomes their visi m. Ah eady, lilack llelts and Master lilack llelts who An "A" leader has enormous personal energy are finishing Six Sigma.wignments have become and, beyond that, the ability to energize others the most sought-after candidates for senior leader-and draw out their best, usually on a global basis. shipjobs in the Company, including " ice presi-An "A" leader has " edge" as welk the instinct dents and chief financial oflicers at some of our and the courage to make the tough calls-deci-businesses. Ilundreds have already moved upward sively, but with fairness ani absolute integrity. through the pipeline. They are true believers, As we go fonvard, there will be nothing but speaking the language of the futme, energized by "A's" in every leadership position in this Company. successiul projects under their belts, and drawing They will be the best in the world, and they will act other conunitted 7ealots upward with them. 5

to field teams consisting of nothing but "A" play. r This is now the business of your Company: ers. The best leaders - the "A's"- are really

1. "A" pnnlucts and "A" senices delivered by coaches. What coach, with any instinct or passion "A" players arourul the globe.

Ibr winning, would field an Olympic swimming or We are feverish on the subject of Six Sigma gymnastics team, or a Super ihnvl team, that quality as it relates to products, senices and peo-wasn't made up of the absolute best available? In ple - maybe a bit imbalanced - because we see the same vein, what business leader worthy of the it as the ultimate way to make real our dreams of ( name would even consider fielding a team with what this great Company could become. l anything other than the veiy best, the "A" players? Six Sigma has turned up the voltage in every ~ GE business across the globe, energizing and This is now the business ofyour exciting ali or us and moving us closer dmn ever to what we have always wanted to become: more than Company: "A " products and "A " a hundred-billion-dollar global enterprise with sfru/Ces df//Ufrfd by "A "((ayCTS die agility, customer focus and fire in the belly of a around the g/obf.

• *"II '"* P'"Y' In our 1994 letter to you, we addressed the What characterizes "A" playersf perennial question put to nunagement teams, In finance, for example,"A's" will be people whit h is "how much more can be squeezed from whose talents include, but transcend, traditional the lemon?" We claimed, then, that there was in controllership. The bigger role is one of full-fact unlimitedjuice in this "lcmon," and that none fledged participant in drhing the business to win of this had anything to do with " squeezing" at all.

in the marketplace - a role far bigger than the We believed there was an ocean of creatisity and dreary and wasteful budget " drills" and bean-passion and energy in GE people that had no bot-counting that once defined and limited thejob. tom and no shores. We believed that then, and we In engineering,"A's" are those who emh ace are convinced ofit today. And when we said that l the methodology of Design for Six Sigma "A" there was an " infinite capacity to improve every-en;rincers can't stand the thought of" riding it thing," we believed that as well-viscerally-but out" i 3 the lab, but rather relish the rapid pace of there was no methodology or discipline attached technological change and continually re-educate to that belief. There is now. It's six Sigma quality, themselves to stay on top ofit. along with a culture oflearning, sharing and in mannfacturing,"A" players will be people unending excitement. who are inunersed in Six Sigma technology, who For GE, these are the best of times, and in our consider inventory an embarrassment, especially siew they will only get better. with a whiff ordeflation in the air-people who Thanks, as always, fbr your continuing support. Understand how to dtive 1sset turns and reduce inventory while at the same time increasing our leadines' 'o setYe the custoiner. John r. Weh h. Jr. Itt sales,"A" players will use the enormous 'Chainn,m oi oie noaro.ma d h e""i'* ""' " custoiller value that Six Sigma generates to difTer-entiate GE frolll tile coillpetitioll, to Illld lleW Yke Chainnan of the Board accounts, and to reftesh alid expand the old 01 "5 Mb and herutise oiln ci - as contrasied with c" players whose days are nyne r. ungm Via haiinian of one Boant spellt visilillg " friends" oil the "Inilk-run" circuit and berutise Olbrer of, customer calls. John u. One Vke Chairman of the Ibard ichruai) 13.l W and herutise Of h< er 6

'3 - = f gs p 7 ~ e [^ D 5 Y 45i Six Sig'ma [J ] ^ D-d ]h3 .. [d ~W .y o p jy j: 1, g g,; e39 q ~ c.a + ~' y [y Our Six Sigma quahty initiative 1s changing the way we do everything.. l ytV

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'g l 3g .~ 1 _j ( g ~~ for the benefit of our Customers and GE. ., 3.my g....,3 ( .g i a s ^ 17 ,1 Matching Colors Quickly inom Redesigning a Refrigerator Process,nmm Making Consistency Pay Off inw...o Shown here in a color lab at the GE Plastics Black Belt Frank Pennisi(center) led a Six As part of the Loan Workout Consistency Team plant in Singapore, Cindy L.ee (standing) and Sigma team that improved on time delivery, at GE Capital Mortgage Insurance, Black Belt S. Maniwere part of a Six Sigma team that has increased productivity and saved $4 million Marquita Webb (right) and Master Black Belt reduced the lead time for matching colors of GE for GE Appliances by changing the test and Jay DesMarteau applied Six Sigma to the resins to customer requirements by 85%, a dis-repair process for refrigerators. The team process of working with delinquent borrowers tinct competitive advantage in the f ast paced replaced a continuous test loop, from which to find alternatives to foreclosure. By cutting global market for plastics. refrigerators were pulled off the 1,ne for repairs defects in the workout process by 96%, GE and then returned, with eight test cells in which Capital was able to offer borrowers quicker Creating a Better CT Tube m aan dedicated operators test refrigerators for pos-solutions while reducing claims payments Using Six Sigma tools and methodology, a team sible mechanical problems and make any by $8 million. from GE Medical Systems and the GE Research necessary adjustments before the electrical and Development Center has developed the test is done. With Pennisi are test cell operatc,r Clearing Paperwork for Customs e,o. cy l new Performix'" 630 tube with key attnbutes Joan Raines (left) and GE Appliances guditY Claire Bunuan, an edministrative associate for that customers want. This new generation in leader Tanya Fratto. GE Aircraft Engines in Canada, has used her Six tube technology offers dramatically longer tube Sigma training as a Green Belt on a project to life, faster patient exams and improved image make the paperwork perfect every time GE I quahty.Here Dave Stwedo does precision Canada imports a marine and industrial engine, assembly of the core of a Performix'" CT tube parts or tooling for a Canadian customer. In with the aid of computer quahty control checks addition to cutting customs costs, her project that ensure superior image quality. has reduced border delays by at least 50% 7

Aircraft Engines GE Engine Senices is growing dramatically, Six Sigrita is </rivirtg rit//ttral cliarige with l99s nevenues exvected u, pass s4 billion. e have niuhi> car senic e mntracts with Federal b'i I/trollg/10 lit ollr rifl/Tr 0/Frnlio11 #7t(/ Ex] ness, Southwest Airlines, UPS and US Ainvays. arre/rraling olir /n/5/7 ten TrAN//$. The auluisition of Gicenwich Air Senices and UNC Incorporated broadens our capacity aml y capabilities worldwide and gives us a strung pres-In a > car of strategic initiatises, GE Aircraf t ence in senicing busim ~ jet engines and aircraf: Engines not only achiewd double-digit gains au essories. We also are formingjoint ventmes in revenue.and ongoing carnings, but also took with global airlines and maintenam e providers. bold actions to position itself foi long-team prol-CFM International's new CFN15(i-7 is corniner-W. James McNerney. Jr. itable growth in a highly competitive global mat Let. cial aviation's best-selling engine, with more than President and Cluef Foremost ainong our initiatises, Six Sigina 1,500 ordered for Ikicing's Next-Generatum e37 becutwe Officer, GE Aircraft EnD$nes quality is driving rultural ( hange thruughout our series. The first CFS156-power ed 737-700 aircraft entire operation and accelerating our business was deliwred to Southwest Airlines in 1997, while sesults. Six Sigma tools allow us to improve results Alaska Aidine laum hed llocing's new CF5156-dramatically by enhancing the value we provide to poweird 737-900. The CFN156-5 engine, which our customers. Almost one-thisd of our employ-powers Aiibus industric's sun essful A320 aircraf t ces have been trained to lead projects and s[nead Isinily, increased its leadership position, and the Six Sigma tools to co-wor Len, sesulting in moic f ucl saving CFh156-511/P derivathe engine main-than $70 million in gnoductivity gains in 1997. tained its industry-leading reliability. We made progr ess in other areas as well. The GE90 engine is demonstrating outstanding Consistent with our man ketplace suucss this f uel burn, noise, emissions and reliability power-decade, GE Aircrafi Engines and CFht Interna-ing the ik>eing 777. While ma:Let conditions have tional, ourjoint company with Snerma of France, not warranted developing higher-thrust versions, again won a significant majority of the world5 we are investing signi:icantly in the GE90 to fur-large commercial engine orders. Key 1997 wins ther provide the best solution to 777 customers included American Airlines, the Civil Aviation who require up to 92,000 pounds of thrust. Administration of China, Continental Airlines, Our best-selling CF6-80C2 engine, selected by Delta Air 1.ines, Finnair, Northwest Airlines, Delta to laum h the new 11ocing 767-400ER. won TliY and US Airways, several strategic orders. The CF6-80El A4, lamu h engine for the new Alibus A330-200 twinjet, was certified by the Federal Aviation Administration. The CF34 engine showed strong growth power-ing the Canadair Regionaljet, the best seller in its class. Development continues on the CF34-8C engine for Canadair's new RegionalJet Series 700, whirh was lauru hed in 1997 by American Eagle. In military programs, our F414 fighter engine j received initial pmduction orders f or the U.S. a f(f.*9

• $'RIfAPFg, Nasy's new F/A-18E/F Super llornet. Our T700 helimpter engine icceived contracts from the C

U.S. gmernment through the year 2000. The '. ~rTg $ Republic of Korea selected our F40l engine for its

1. • ~$~ f 2

i advanced trainer / light combat aircraf t. The scam 4 aq. l of GE, Allison and Rolk-Royce screived a four- '~ 1 year development contract f or the Ahernate a Engine Program for the U.S. Joint Strike Fighter. Our investment in more powerf ul, more ef fi-rient and lower-emission engines for the matine and industrial sector, such as the uprated 1.M6000 The CF34 engine has becorne a favorite among regionalairlines like Concinnati-based Comair. which ordered another 30 and an imps owed 1.h12500 der.watiw engine, fur-Canadair RegionalJets powered by the popular GE engine. ther enhatu es our leades ship in 1 hat man Let. 8

4 l I holder. Profile Performance laundry products I g WP(ON//NHfd/0driveOur[0NThuliHfM include our newest washer, with outstanding per-themes ofgrowth, brand, fn'odu(livity I""" ' " I " K '" 'I'"'" "" 0 ' '* P" " '* " l'"' ' l and our quietest dn er ever, with an electromc and Six Sigma. sensor to help dry clothes more evenly. ~ Our record lesel of variable cost reduction was aided significantly by Six Sigma projects aimed at Wongoing earnings in 1997 while facing a e achined record lesels of resenues and improsing process efliciency, reducing scrap and rework, and getting better factory output for our-turbulent year in the intensely competitive appli-selves and our suppliers. We now have 40 suppli-ance industry. Our revenues advanced to $6.7 bil-ers, representing a third of our total purchases, David M. Cote lion and ongoing earnings were higher despite participating in Six Sigma. [',8j o E the biggest U.S. industry price decline in over A defect-free mindset has become part of the C GE Appliances 30 years. culture at GE Appliances through the efrorts of During 1997, GE Appliances continued to some 1,000 employees trained in applying Six drise its four business themes of growth, brand, Sigma methodology to every aspect of our opera-productisity and Six Sigma. tion, including design, manufacturing, sales and We made great progress with our growth pro-senice. Consumers are benefiting from a stream grams by introducing new produc ts, including the of new quality products designed for Six Sigma, GE SmartWater* filtration and softening systems; while Six Sigma projects in manufacturing are broadening our Senice Managemem capabilities: lowering costs and reducing working capital. Six and expanding our global presence. We launched Sigma, which accounted for $44 million in savings a new line of dishwashers, upgraded existing prod-in 1997, will continue to provide the foundation ucts, enhanced our ultra-high-end Monogram

• for our growth, brand and productivity initiatives.

line and added outdoor grills to it, and intro-duced a stainless steel built-in refrigerator. Responding to consumer demand for softer,

o cleaner, better tasting water, our GE SmartWater Y

line is off to a terrific start. GE Senice Manage-A ment, w hich provides warranty administration, 1 7 risk management and expanded senice plans to f 3 ' tetailers, builders and OEMs, completed ajoint h.[ venture with National Tech Team to bring our }: l personal computer senices to new heights. Glob. p l ally, our strategy of highly selective investments ~' W l based on expanding bnmd recognition has paid offin Europe, Asia and South America, particu-larly in Brazil with our 1996 acquisition of DAKO. Capitalizing on our brand-our most valuable asset-we focused on the growing high-end seg-ment by introducing the GE Profile Performance" series, a step up from our highly successful GE ProFle'line. Each Profile Performance product has unique and value-added features for sophisti-cated consumers. For example, we added a Water by Culligan* filtration system to rehigerators with ice and water dispensers. Our new TrueTemp" oven ofTers consistent oven temperatures, making Q it the most accurate oven in America. A new ~~ A' microwave oven, with its sensor combmation, blends the benefits of microwave and convection Part of the new high-end GE Profile Performance

• senes, the cooking. Our SureClean" dishwasher has a special GE SmartWater* taucetprovides high quahty, clean water for china and cn'stal cycle and StemSafe' glassware drinking or cooking.

9

Capital Services and equipment leasing reach in heland,lhitain, g Our H nique lJalanct' oflarge-rotnlJany Denmas L and Por tugal. In addition, Railcar Sen-AlrrngI/l wil/l Arnall-roinlJany vigor an(/ i(es made its European debut with the acquisition of pan-European Cargowaggon. }lrXillility confinHrA 10 Art US uf>HYl In a smdor plivatiration vffort in Spain, our Structured Finaru e Group lent capital and exper-tise to Cableuropa, one of that country's largest ith each of our 27 disersified businesses cable 'IY operators and a leading telephone oper-focusing on completely satisfving our ator, to help finance a modernization program. rustomers' needs profitably, GE Capital Senices In ilungary, we prmided advisory senices and achieved record net earnings of $3.3 billion. That equity to allow Magyar Telecom to triple the Gary C. Wendt tranwates into a $139 million,16% inct case over number of telephone lines in its senice area by Se" cut OIce,d 1996 levels and is the 23rd consecutive year of the > car 2000, ceneramectne increased profits from continuing operations. Japan and Australia form the cornerstones of Capitai sonnces. inc. Our ability to deliver strong, steady and pic-our operations in the Asia-Pacific region, with dirtable carnings in a highly competitive global Japan continuing to build on its strong consmner emironment is predicated on a three-pronged business and GE Capital Australia gaining leader-strategic focus: continued globalization of our ship in credit cards, fleet senices and four other ki-revenue su cam, dedication to providing value-operating areas. In China, we were the first for-3 4 added senices and a conunitment to Six Sigma eign-owned company to receise a finance license. ] quality that is unequaled in the financial senices Despite currency tunnoil in Southeast Asia in wor Id. 1997, GE Capital's prudent hedging policies pre-GE Capital's overseas operations continue to vented losses due to foreign exchange rate fluctu- + - - expand at a dynamic pace, with assets outside the ations in the operations we control. United States constituting inore than 30% of our Throughout the Asia-Pacific and I.atin Ameiica total assets. Net income from non U.S. operations regions, our small but solid presence has us well grew to $1 billion in 1997. positioned to take advantage if opportunities in Gn' I uropean [n nem'e innead as a muh the mnnu1cial aml nmsmnn hnandal mb Denis J. Nayden President and of several important acqttisitions coupled with inat kets alise hom the 1997 tunnoil. fon operating enhancements in existing businesses Providing innovative, value-added senices to a c and cffcctive integration of companies into the our customers means differentiating ourselves in GE Capital iamily. The addition of Woodchester, a competitive marketplace, enhancing our value one of Ireland's largest financial senices compa-to customers and increasing our profitability. nies, was a 1997 milestone, expanding our auto We strive to do this in each of our 27 businesses. %3&y$ Jhh h {> ~ y j g i. 3 4 1. , s,,. - Steve Moore of GE Railcar Services, a globalleaderin railcar GE Capital Austraha has become a fmancialservices leaderin leasing and related servoces, uses a hand-held computer to Australia, where it handles the private-lobel credit card business record repairs to a leased car before its return to the customer. of Coles Myer Ltd, the country's leading retailer.

During 1997, GE Capital took seseral steps to automobiles in the United States, wrote S5.2 billion grow the types of senices we prmide to businesses in reinsurance premiums and seniced 73 million Manausimmat and indisiduals around the globe. credit card accotmts. . Aviation swvien a IT Solutions, for example, now focuses on Our Six Sigma initiative continues to produce $,",',$'[,n, supplying full life-cycle senices that prmide cus-significant benefits in the form of increased rev-

• Tssution -

. Moduler Space tomers with cost-ef fective management of their enues and lower costs. Our basic approach is to . penske Truct Laosing - information technology on a global basis. reduce " defects" by focusing on customer needs, ' "'f" 8"'" With 199Ts launch of the GE-1E satellite and improving procenes and invohing all employees. gg% the planned 1998 launch of an Asian satellite. Commercial Finance, for example, used Six .conwiidet drianciar Americom's fleet of 11 satellites will pimide serv-Sigma tools to win more deals by better under- ,$'s Reinsurance it es reaching about 807c of the world's population. $tanding customer requir ements. It developed a corporation.

• Financial Guarany TIP, our mer the-road trailer leasing business, Customer Expectations Pact that has contributed inurance Company,

added a U.S. customer senice center for easy, toll-to a 160% increase in new transactions won. '"'"'*8"*"" free customer access to its branch network across Mortgage Insurance developed a flexible new the country. TIP also established an emergency billing system that contributed not only to cus-4 Consurw Fmencial. breakdown senice that allows customers to call for tomer retention but aho was instnunental in win- . $,*,'n',m irs, >, help, day or night,365 days a year,in the United ning $60 million in new insurance written from

• GE Financiel Assurance
• Global Consumer Finance States and Canada.

one customer. InJapan, Global Consumer . uongage suvien ' "#" N"**d*8 8"d'" Americom and TIP ar e working together on Finance helped customers overcome payment dif-advanced satellite and terrestrial communications fic ulties associated with limited banking hourn to help cmnpanies monitor, track and collect data and saved money by establishing an alternate pay- . Cummercial RulEstate a on fixed and mobile assets in the field. ment method through a network of 25,000 conve- . I,"u'Na'p'n"a!GroN" ' FGIC, a leading provider of municipal bond nience stot es, now used by 407c ofits customers.

• Studured Finance Group insurance and other financial senices to state and While our employee conunitment to Six Sigma MW Madetnameseng
• Commercial fquipment.

local gover nments, expanded its capabih..ues m is substannal-mor e than 16,000 assoc. iates Financing. investment contracts, revenue management, and involved and more than 2,000 projects under way $C,*P"g*186, property and casualty insurance for public entities. - the benefits to our competitive position are To better serve our individual customers, we tremendous. Customers are enjoying the resu!ts organized the way we help people accumulate, pre-of Six Sigma as our merall responsiveness to their serve and transfer weahh under the GE Financial business needs improves dramatically. Assurance umbiella while consolidating b;u k-room 1.ooking ahead, our unique balance oflarge-operations to ieduce costs. company strength with small-company sigor and During the year, GE Capital also seniced $104 flexibility continues to set GE Capital apart on an billion of home mortgages, financed half a million increasingly competitive global playing field. p ~- s . r

1. WMtf

%ms ,, q g g y psy gy g getur; a y '$ppjw%% .:' ~, < g t Global Consumer finance uses telemarketers at this center in Penske Truck leasing operates more than 100,000 vehicles in ieeds, England. to successfully sell consumerloans, credit card North America, while l'enske logistics and Penske Logistics insurance and payment protectron insurance to U K. customers. Europe provide globalsupply chain management solutions. I1

Lighting are now responsible for the global operating per-W(' llGll 014 Y lH'Sf Jr(Ir l'U( r as Six Sigrila formance of their s especti,e proauct lines. We also i""0"0 *"h*"400"'" Y'"0""'"""O 5lluuW511S !!(W WHJS (0 illllIr00('(Jliftl5fy, the world in 1997; and of our total global sales for .vivlrt' an(/ pr0($nr/lvity. the year, ahnost 30% resuhed from products pro-duced on one continent and sold on another. gr Our technology organization, which manages kj y posting a double digit gain in ongoing projects across the globe, now has more than half earnings and imprming our overall senice its engineers out. side the United States, with out-to customers, GE 1.ighting had its best year ever. standing talent in llungary and China. Our sourc-The Six Sigma initiative continued to show us new ing organization continues to capitalize on GE

• • 4, David L Calhoun ways to improse our quality and senice delivery, Lighting % worldwide presence to attairi the best

[',8j[nt a"bCh' f increase our total cost productivity and improve products, price and senice available. oo Gr ughting our capital efficiency. The North America business expanded in 1997 Six Sigma represents a massive change in the with the signing of an agreement with MagneTek, way we approach our work - more driiberate, Inc., that gis es GE Lighting exclusive sales respon-mor e measured, mm e disciplined. In 1997 alone, sibility for electronic ballasts in North America. we invested $33 million, provided extensise train-This should increase our ballast sales significantly ing to more than 2,600 employees and added our and make GE Lighting a force in this rapidly second 100 illack llelts - experts in Six Sigma changing indusuy. We also implemented a supply methodology-to our business. The return was chain organization to improse our im entory man- $47 million in benefits. In addition, Six Sigma agement and senice to customers. drme us to imest more in equipment mainte-In Asia, GE Lighting continued to invest for nance and control hardware in order to gain free growth. Hitachi GE Lighting, Ltd. consolidated capacity from our existing plants. Overall, our all marketing and sales into one business, resulting capital efficiency has improved 15% annually. in increased sales through thisjoint venture and, We made great progress on our other major more importantly, a simpler approach to our cus-initiative - globalization. We continued to organ-tomers. This action positions us for strong growth lie and invest in the development of" global brains" inJapan, the world's second-largest lighting mar-to achieve better operating performance from our ket. Throughout Asia, we introduced more than worldwide enterprise. Our new-product managers 80 new products, increased sales by 25%, grew market share in GE-branded lighting products and achieved 10% factory productivity. Our European business continued to make gains in customer senice, as customer satisfaction I 9 improved by 20% and fill rates improved by eight ON OE I points. In addition, the European operations '[$, >&If gir j increased factory productivity by 7%. Our busi-l I j - g. g,' nesses in Eastern Europe and Turkey again gener-ated about a 20% increase in sales volume. We j 4F '$F $ also acquired selected assets of Flame Electrical ~" p'* d' Ltd., a commercial,indusuial and onsumer I-o \\ , 7-g - ~~ lighting products distributor in South Africa. The GE Quartz business had anmher strong l O reer as ii centinued io diversifv and invesi xiobeiiv r, w.. y f while gaining share with its traditional customers. p Approximately one-third of sales was from new

• ~

gy,w l g , ' +., than 50% of the total. products, and non-U.S. sales accounted for more i E For GE Lighting,1997 proved to be another strong operating year in which we continued John Brefus fright) and fellowproduct managers Jonathan Du and Clare Frissora discuss ways to grow the GE namo in lighting to make improvements and investments towas d j around the world via packaging, advertising and promotions. a bright futm e for our global business. j l 12

Medical Systems image arc hiving, have given us a strong global We on/pured Ihr marhet in all nylon $ position in the rapidly expanding medical image wil/l 1H'w lnuduct und Service 0,((rrings I"I"""I"" E* '" GE technology leadership was remforced with for //te /tenll/l ratr indu$lty. the announcement of a first-of-its-Lind multiple-purpose digital x-ray detector, which offers the potential for better, faster and more cosi-effective N e posted record ongoing earnings during x-ray examinations. The new detector, which will 1997 despite continued price erosion in he manufactured exclusively for GE by EGkG, a slow-growing worldwide diagnostic imaging Inc.,is the result of a 10-year, S100 million R&D hC ~ market. Our year was highlighted by the success-effort. Lt will replace comentional x-ray film and Jettrey R immelt iulintegration of several global ventures, an process ng chemicals with computer images that $,*$'oN,7 unprecedented investment to achieve Six Sigma can be stored and transmitted electronically. GE Medical Systems quality, and a commitment to deliver technology, Prodt et introductions in 1997 strengthened productivity and economic solutions to the our entit e product line. Among the more excit-health case industry, ing, the.iew Signa

• Horizon" LX MRI system is GE hledical Systems outpaced the market in the firs. to combine advanced imaging technology all regions with new product and senice offerings, with a high-perfonnance, lightweight magnet for expanded distribution coverage, and new eflorts lower operating costs and easier installation. The to drive customer value and productivity. We con-new SignaS Profile
• Platinum system is our latest tinued our strong momentura in the senice area.

generation of open MRI systems that maximize Part of the growth came from GE IlealthCare patient comfort. Senices, our inulti-vendor senices group, which With the introduction of SmartView" sof t-surpassed $200 million in revenues for the first ware, GE's computed tomography systems have tir c. We also extended our Insite

• remote diag-been enhanced to provide real-time monitoring nostic senice capability to the senicing of non-ofinterventional procedures. Our position in GE equipment.

vascular x-ray was enhanced with the introduc-Infonnation technology is spurring growth tion of the Advantx8 LC+ cardiac system as well across the business. Our acquisitions of lockheed as the GEMnet" 2000 digital networking and Martin Medical Systems and Innomed of Gennany, aichising system. as well as a 20% stake in ALI, a leader in uhrasound Our leadership in women's health care was extended by the introduction of the Senovision" Digital Spot and Stereotactic Mammogiaphy Sys-tem, our first digital product in this key segment. In ultrasound, GE's global position has been strengthened by the LOGlQE 700 system, a break-through product that delivers leading quality in ,s. ] m) SD imaging applications. 's GE Medical Systems is utilizing Six Sigma to 3 ( y improve customer benefits and reduce costs. We f' recorded $42 million in productivity benefits dur-ing 1997, and we have completed more than 600 projects to date. One example: using Six Sigma methodology, the new Perfonnix 630 x-ray ' M,. tube has yielded a 10-fold increase in tube life "' j W j expectancy and perfonnance. Looking fonvard, we are optimistic that GE's investment in technology, quality and information systems will help us grow as "the total solutions .,,/ > yn e,4 sw. S MW company" to health care providers worldwide. ah ~ ..s.. ,4%Ra ' With its open design. GE's new Signa

• Profile " Platinum MRI system can make patients more comfortable and relaxed and give technologists more room to monitor patients.

13

NBC the award-winning DatelineNBCadded a fourth night to its multi-night Iranchise. Meet the Press, Tlie Piacoch rielwork lett firirite-tistit" ,ue gangc,,.7,un;ng p7og7,, ou uc,wo,y,c,cy;_ o Talillgsf0T (I M'Coliti S!!YliglIl year, sion, marked a television milestone in 1997 with the celebration ofits 50th anniversary. N15C Sports has secured long-tenn relation-ships with organizations such as the International he National llroadcasting Company regis-Olympic Committee, the NilA and the USGA. .1 tered its fifth consecutive year of double-digit NilC Sports will be the exclusive over-the-air gains in ongoing earnings in 1997 and led the broadcaster of the NilA through the 2002 season. prime-time ratings for a second straight year. We and the network will present the USGA's major Rotart C.Wnght also had impressive growth in our primary cable golf championships through the year 2003. More-President and Chief properties, CNilC and MSNilC. In addition, the oser, af ter the 1998 Winter Games, every Olympics Executwe Offaer, National Broadcastm0 year 1997 marked the laum h of NilC's Six Sigma through 2008 will be broadcast on NiiC, which Company,lnc. quality initiative, will bolidify our position as a broadcast leader well We finished the 1996-97 season as the nation's into the next century. most-wan hed network, winning the prime-time NitC Stations had record revenues and profits ratings battle by more than 25% in the prized in 1997. In December, WVIT in liartford became aduh age 18-49 demographic with regular pro-NilC's 12th owned-and-operated station, and gramming. Led by "must-sce" series such as ER NitC will soon take a majority ownership position the Peacock network had the top six prime-time in INAS in Dallas, the nation's eighth-largest shows, was number one across the board in late-market. Expected to be finalized in the first half night programs, and with Days of Our Live 3 had the of 1998, this innovative partnership with flicks, number one daytime drama in advertisers' target Muse, Tate & Furst will bring the reach of our female demographic. owned stations to 27% of U.S. households. N15C News enjoyed its fifth straight year of CNBC enhanced its position as the world record profits. NBC Nightly News with Tom Brokaw leader in bm.iness televisionjournalism in 1997, surged ahead in the evening news ratings race to delivering a record year by every measurement. become the top rated broadcast, Today beat the Ongoing earnings were up more than 40% and competition by an average margin of 67% and business news audience was up 76% in the fourth celebrated more than 100 weeks in first place, and quarter compared with the same period a year ago. In a move that will expand the global value of CNBC, we entered into a strategic alliance with DowJones to merge our European and Asian business news senices under the CNitC banner and to utilire the Dowjones editorial resaurces for CNBC in the United States. After its first full year of operation, MSNBC, the 24-hour cable and Internet news senice, now reaches 36 million households, and it has commit-ments in place to reach 56 million by the year 2001. Since coverage of the death of Princess Diana on August 31, MSNilC has considerably narrowed the ratings gap with CNN in several major television markets. Ad sales and subscriber fees more than tripled in 1997. Finally, one of N11C's most significant accom-plishments in 1997 was the rollout of Six Sigma, which will play a crucial role in helping us maintain our leadership position in the broadcast industry, in 1998, we expect to have quality projects under CNBC has become the "must-see" channel for business news I W"Y U 'YT an ea of.our businew at stock exchanges, in shops and homes, and on Broadway, where the giant Astrovision

• screen looms over Times Square.

14

Plastics Cycolac* sesin business continued work on capac-Oltr St/rcrMfit/ Sa/r3 growl /l is //ftl ity expansions at Ottawa, Illinois, and liay St. Louis, to oltr ril5/olnerS'[ortis on m(Ithel hiississippi, to meet future needs of the automo-tive and building and construction indmtries. (levelo///nent. Construction also continued on the 130,000-ton polycarbonate s esin plant in Cartagena, Spain. b Our successf ul sales growth is tied to our e achieved record ongoing earnings on rev-customers' focus on market development. Key enues of $6.7 billion in 1997 as double-digit cmtomers include manufactm era of computers, rohune growth and total cost productivity more CD-RONis, compact discs and digital videodiscs. d7 M" than offset selling price crosion. In addition, cash Also, continuing efforts to bring productivity to our Gary L Rogers flow of more than $M00 million was due to improved automotive customers through weight reduction of {esyan wo: Ling capital management. and parts consolidation have led to increased sales. 9 GE Plastics A highlight for GE Plastics was our Six Sigma Enviruninental and safety excellence have ~ efforts, which reached targets for quality imprme-always been hallmarks of our business. We con-ment, cost-out and, most importantly, customer tinue to invest resources to improve process safety satisfaction. Our Superabrasives business is a management. We're also working in close part-model of Six Sigma implementation whete a nership with our plant communities to communi-totally integrated quality focus has made double-cate our capabilities in safety and emironmental digit impimements in total cost productivity and stewardship. yichied h ec capacity equal to the existing plant. Aided by our focus on Six Sigma quality and a Store than 2,200 GE Plastics employees have business-wide passion to bring value and produc-been trained in Six Sigma during the past two tivity to our customers, GE Plastics is well posi-years, and we have nmre than 3,000 projects com-tioned to have another strong year in 1998 as our pleted or currently in process. Total benefit for customers continue to grow around the wodd. 1997 was about $137 inillion. j During 1997, we continued to take the steps 7 /, ne< ess uy to expand our global reach. We are entering into two joint ventures with M / llayc AG of Germany that are expected to be A finalized during the first half of 1998. The fitst is q g an automonte glaringjoint venture designed to 3 desclop polycarbonate and coatings te(hnology N Q to impr ove the impact resistance and safety of automotive side and scar windows. Successful h' development of pohcarbonate glazing technology / V represents an enormom additional growth oppor- ,I tunity for our products. t g manufacturing, technological and cormnercial / '] The secondjoint ventur e will combine the )' l'- resources of GE Silicones and llayer's silicones j operations in Europe to serve cmtomers in Eurojo jh ' ' Africa and the Sliddle East. GE Plastics expanded its portfolio of products by acquiring Resinmec, a nylon resin compounder with two plants in Italy, and Polimeros Argentinos S.A. of iluenos Aires, a compounder and distribu-tor of a wide range of engineering thermoplastics. s In addition, ne continued to invest in our wuild-class facilities. Our Structm ed Products business completed capacity expansions for sheet Howard Yv of GE Plastics inspects the quality of engineering and film products in lharil and China, and our plastics strands at the Nansha China, plant. which is being expanded to better serve Chinese and export snarkets. 15

Power Systems Power Systems ac hieved S94 million in sasings We llave FXfHintletl Oltrllartici})aliott in from 2,560 Six Sigma quality projects in 1997, lltr glOlHil rHelgy Inuthel it'ilh a l>01]l' ll0 with resources in place to more than double that 0 savings in 1998. Customer dashboards for nearly ofinH011al11'r Sr!TilfrS HHilf)Tocifirts, 50 major global accounts are driving the benefits of our quality efforts directly to the marketplace. Resenues from operation and maintenance y steady stream of energy pr oduct and senice (O&hl) and long-term senice agreements grew innovations helped GE Power Systems reach 40% in 1997. Customer conunitments now total [ J.#/. '."""".es of S7.5 billion in 1997 despite $1.2 billion through nearly Sr O&M and long-connnumg pace pressure driven in part by dereg-term senice agreements now in place at power flobert L Nardelli ulation of the energy industry. We also had a dou-plants around the world. {',';d["18"N rl f ble-digit gain in ongoing earnings. GE power-generating technology remained the ,0 GE Pomr Systems We cominued expanding our siew of the global preferred choice around the globe in 1997 as sales ~ cnergy market during 1997 and increased our increased 5% in an extremely competitive market. participation in it by adding to our portfolio of GE Nuclear Energy completed work on the sec-senices and products that reach from the well-head ond Advanced Boiling Water Reactor power sta-to the consumer. This included investing more tion for Tokyo Electric Power Company inJapan than $250 million in programs. joint seutures and and began work on a two-unit project in Taiwan, acquisitions to meet growing customer needs in Our fleet of"F" technology gas turbines reached the deregulated energy indusuy. an important milestoac in 1997, surpassing one Another year of solid growth at Nuovo Pignone million fired hours of operation in power plants included almost $2 billion in orders. successfully worldwide. The "F" technology machines have building a backlog to replace work completed on compiled two times as many fired hours as all the the Gazprom pipeline project in Russia. Nuovo competition combined. Pignoue also strengthened its worldwide leader-We also continued development of our "11" gas ship in gas compression technology by winning turbine technology, which has the potential to key pipeline and offshore platform orders, includ-break the 60% thermal efliciency barrier and lead ing projects in Oman, Algeria and Cimada. Also, the next generation of advanced combined-cycle a major 550-megawatt low-BTU gas power project

turbines, in southern Italy went into full operation.

GE Ilarris Energy Control Svstems, ourjoint j venture with liarris Corporation, grew more than M 30% in its first year. It won several key contracts w. Kg. for monitoring systems and devices that automate W'

• 7 power distribution, including one of the industry's largest awards for remote terminal units.

The recently completed acquisition of the gas turbine division of Stewat t & Stevenson Senices, Inc. will greatly enhance our business by providing additional product and senice offerings to an expanded customer base. Stewart & Stevenson has an outstanding reputation for packaging gas turbines for use in industrial power generation markets. During 1998, we will continue expanding our participation in the broader energy market with innovative senice initiatives, and we will continue pursuingjoint ventmes and acquisitions that increase our product offerings. We also will use our Six Sigma quality initiatives as a competitive ""Y" Y ""' b" Christine laskowski of Minnesota Power uses the XA21 ** con-trolsystem from GE Harris to automatically monitor and control the electric power gnd across the northern tier of Minnesota. 16

Electrical Distribution and Control hwestment in infonnation technology h [ o and advanced ehrtronics is bringing y value-WldNl solutions to our rustomers. ~ ~ he year 1997 man ked one of the best in the bt .L history of GE Electrical Distribution and Con-t Dennis Baldie trightf oM, shown here with Philadelphia proj. trol as we achieved record ongoing earnings and t ects engineer Thomas Varughese, designed this new power sig'ulicantly higher ongo,ng operattng snargnns, management system for the Philadelphia lnternational Airport. Lloyd 6 Trotter although revenues were flat. President and Ctuoi \\\\'e contintled to invest in new product devel-hiexico and Ilraril are expected to deliver benefits Executive Officer, GE E3ctncel Distribution opment, focusing on in!ormation technology and in 1998. In addition, the Annericas business was and Control advanced electronics to provide new n llue for our realigned in order to leverage product and com-customers. Sales of value-added systems, like our mercial synergies. energy management system, havejuruped dnunat-Our Six Sigma quality efforts drove strong pro-ically as customers look to ED&C for solutions ductivity gains dming 1997 that resulted in about that improve productivity and facility uptime. S35 million in financial benefits for our business Globally, Shiltilin of Canada has quadrupled while improving customer satisfaction. Afore than earnings and maintained double-digit revenue half of our employees are engaged in Six Sigma; growth annually since being acquired in 1995. the rest should be trained by the end of 1998. In Europe, our AEG low voltage business experi-Ily focusing on quality, global growth and new enced steady growth, while expansion efforts in products, we anticipate another successiul year. Industrial Control Systems ~.ur serses ,t Customer satisfaction, top-line results, . w , i. ,t._ l opemting margins and cash flow are y allimpnnred by Six Sigma. v... y [ f t was another year of strategic and operational ~,.i .Lprogress for GE Industrial Control Systems, y 'j which symbolically changed its name from Slotors F t 'h A and Industrial Systems in 1997. Sales and ongoing Jr.

1. 8 ##""

Jame:W. Rogers carninRs wete both uP inodestly desi>ite soft mar-

1. 1. "#Y 'ies AC Drive which provides customers a newInnovation Ser

• ',j,fg"ff cer,

" "Oi'i""'i" 'h' h'*'i"Y'Yenti13 tion and aIT with more power and reliabihty for theirindustrialprocesses. GE Industrial Control conditioning (1IVAC) industries. D** Six Sigma took center stage, becoming the dri-tire hardware, software, project integration and sing force of our tmnsformation from a set of inter-post-installation engineering senices. In addition, nally focused product businesses to an externally we introduced several products, including the focused system solution business. Store than 4,300 Innovation

• Series AC Drive, new Pl C-based con-employees have been through Six Sigma training, trol systems, advanced Clh1PLICIW software and and our results to date have been terrific. Customer a global 95nnu liVAC motor, satisfaction, top-line results, openuing margins As we enter 1998, we are stronger operationally and cash flow are all improved by this initiative.

and better positioned strategically to deliver on As a system solution prmider, we now ofIer our goals of creating real customer vahie and gen-customers a coordinated set of globally competi-enuing sound financial returns. 17

a,.. Information Services %,,_ l 4 We are 'intmtetworking'glolial enter-3, jn'ises with their tradingparinm to z redure costs and incirase quality. 4 ngoing car nings nere much improved at I GE Information Senk es as our Six Sigma hyster rporation en Horn #elt/ 6nunn the benefits of initiathes comributed to a 94 incicase in oIwra-GE TradeWeb ", a revolutionary Internet based EDI service. tional gnuductivity. Resenues from contemporasT with GE's Gene Frentz (centerl and Tim Tegeder. Harvey F Seegers elec tr onic commes( c sohitions gr ew nearly 20% President and Cluef despite weakened cunencies in overseas mat kets Internet EDI seni(c. Clupler has shortened invoice Executive Off+cer, GE Information Services and an inricasingly (ompetitise marketplace. processing cycles with some suppliers from 30 days ~ We secmed a munber ofimportant new elec-to 24 hours, saving millions of dollars in purc hasing tronic data inten hange (EDI) customer s, includ-costs annually. Others are achieving similar results ing Kmart, the Association of American Railroads as the Internet brings more and more companies and Chrpler Corporation. We also expanded our into the worhi of on-line conunerce. transition toward Inte inet services, with open We increased our global alliances during 1997, technology solutions becoming almost half of our continuing to build the world's largest electronic 1997 res enues. trading community. Newjoint ventures in 15razil, Chrysler, for example, is dramatically reducing ilong Kong, Israel andJapan expanded our pres-cycle times, costs and transaction errors through ence in these countries and will electronically link = electronic conunerce on the Internet. Using our their trading commimities on a global scale. Transportation Systems Our new AC6000 locornatives will 'l2 t?;\\. enterfull-scaleproduction in 1998. Q. 'g ith ordeis surging to a record level in 1997 and t reating an unpiecedented bac klog, g GE Transportation Systems delivered a double-digit increase in cash flow and improved earnings. wo new MF locornotwes trorn GE pulla union Pacific John G Rice Shipments to Canada and hiexico will exceed 450 President and Chee, train at the Bailey Yardin North Platte, Nebraska the largest tmits from 1997 to 1999, underscoring the grow-railroad yardin the world. Executive Officer, GE Transportation ing importance of these trading partners. S" *

• Thirteen new AC6000 prototype locomotives senice contrarts in Canada, Australia and Kenya.

have completed 80,000 hours of reliability testing Our GE-1larris Railway Electronicsjoint venture on the CSX and Union Pacific railroads in prepa-won contracts from Union Pacific and Norfolk ration for f all-scale produc tion in 1998. Store Southern to install its Foresigbt" advanced plan-than 36'i of the AC6000-horsepower imits aheady ning technology for train dispatching. aic on order from U.S. and Australian railroads. Six Sigma is becoming a way of lif e, bringing Global senice grew 44% in 1997 and will $34 million in productivity savings in 1997 and account for ahnost one-third of our total global intohing moic than 1,000 employees in projects. resenue in 1998. 51aintenance senice and parts In addition, our suppliers have undertaken more are expanding, and we are implementing new than 175 projects to improve their own quality. 18

l[ Y l f-p 7g M' ~ J '.-{ ['fai 4 .. a .n [s.(f f'( M. Q.f Akilll'MW88 % .f5]{ O, f ~ [ f. (- LLl . W g F- . p. : W ~., $ y1-.r g_p

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' 3s 7 6 e p p7 ...9.ipe 4/. Ma ._.y (,,, 3 ~. ,. w v s Sprucing Up a Wildlife Sanctuary um, Throwing Out the First Balliam Sponsoring a Scientific Study mim m.m Led by Elfuns from GE Plasticsin Pittsfield, Mass-Shomari Dailey, a senior at the University of Illi-Students and teachers from nine high schools achusetts, some 230 volunteers transformed the nois at Urbana Champaign and recipient of a in the GE College Bound program spent a week Pleasant Valley Wildhfe Sanctuary during a four year Jackie Robinson Foundation /GE Fund during the summer of 1997 at the Northeastern " Share-To-Gain" project. In one day, they con-scholarship, threw out the ceremonial first ball University Marine Biology Lab in Massachusetts, structed a maintenance building, renovated two at baseball's 1997 World Series Opening Game. where they collected scientific data and speci-Other buildings, landscaped the area, built 320 The GE Fund contributed more than $14 million mens from the local marine environment for i bluebird houses and installed 680 feet of cause-to higher education in 1997. review with students at home. Started in 1989, way trails such as this boardwalk shown here the award-winning $20 million College Bound between Bob Young and Sue Walter. Creating Original 0pera inm m. program combines grants from the GE Fund Third-and fourth grade students at Farmland with GE volunteer mentors in a focused, multi-Mentoring Students in Milwaukee m an Elementary School in Rockville, Maryland, are year attempt to double or significantly increase Tony McGraw is one of many volunteers from learning about opera and a whole lot more the college-going rate at selected rural or inner-GE Medical Systems who are mentoring stu-through a unique program developed by the city schools near GE f acihties. dents like Lakeisha Jackson at Clarke Street Metropolitan Opera Guild and funded by the School, an elementery school in Milwaukee. In GE Fund. Shown here with members of the addition to reading and helping with homework, La Clevique Kids Opera Company are Grant the GE volunteers filled backpacks purchased Hunter (foreground) and Jeremy Insh (at the by GE with school supplies for each student. keyboard),two of the GE Information Services A marketing manager at GE, McGraw is chair-volunteers who have helped the students in man of the Milwaukee Chapter of Elfun, a world-many ways, including development of an wide volunteer organization of GE leaders. award-winning Web site. 19

Board of Directors.,m.,_ n. Twu Directors were added to the GE Ik>ard in mid 1997, while another is retiring from the ik>ard in 1998. seeinde s.amshelson, Chairmen liarbara Scott Preiskel, a Director since 1982, will retire from the . seine s. comment H Ihsard in April. A former Senior Vice President of the Motion Picture =,os,,er s.ressen -n ,,,eseespreshd < Asmciations of America, Mrs. Pseiskel chaired the Operations Frank ett.nhedes. Onnmittee for the past six years. Draning on her extensive back. Finsece Conumuse gnamd in law and business and her commitment to public senice, (3 ,l*$','y ; 8'"8' C Mrs. Preisket has prmided broad-gauged and thoughtful adsire to mesers.Penske i the Gunpany. GE will miss her hmnane and wise coumel. hy'"ki",",d",, joining the Itoard weicJames 1. Cash,Jr. and Eugene F. Murphy. . _.,g Dr. Gnh. who was elected to the floard in August, isJames E. C ^ ion Ceaunense seine s. cens.ut. Cheirmen - Robison Profesmr ofIlusiness Administration at the Hanaid Gradu. ~ casameM.sesselee ate School of 15usiness. A member of the school's faculty since 1976, aweede s.es-he has taught in all ofits major programs and served as chairman Freak H.T. Ahodes Andrew c.sisier - of the MilA program from 1992 to 199~). Nominating Conuninee Mr. Murphyjoined the lloard as a Vice Chairman in August after

Assowc. sis n.Chainnen ;

e guiding GE Aircraft Engines for the past fom yean. A former Execu-

s. Waves conswer s

tive Vice President of RCA, he became a GE St nior Vice President in e 1986 when RCA merged with GE and later sentd as President of GE LDoesleeAWernerW Aerospace until its 1993 transfer to Martin Marietta Corporation. Operations Ceaunimee . serbere seest Preinhei, Chairman - There were 1i meetings of the GE 11oard during 1997.

n. Worm cenewey in December, the Directors voted to increase GE,s quarterly dm..-

Jesse L cesh.Jr, dend by 15%,Irom 26c to 30r per share, marking the 22nd consecu-tive year of GE dividend increases. The lloard also increased GE's Passe Fessee. + share repurchase prognun by $4 billion, bringing the total autho- ,3,ewmain ,,,g aired to $17 billion, and extended the program through 1999. It also semeisse d,',"",8 8,',",,g. approved a direct stock purchase plan, effectivejune 1,1998, that 4 will allow investors to buy Company stock directly from GE. Aseew c. sis n e '"E" A """" " lloard committees addressed a variety of matters during 1997. Public fleeponsibilities Csnuniaos The Audit Committee, which consists entirely of outside Directors, D.Weyse CeNewey. Chairmen - met four times. It reviewed the actmues and. dependence of GE., m s Jehe F. Welch.Jr Vice Cnsirmen independent auditors and the activities of GE's internal audit staff as J""* 3,C"h well as the Company's financial reporting process, internal financial cinese x.seasein g,6 M6ohdue controls and compliance with key GE policies and applicable laws. 4 The Mnance Committee, at its four meetings, reviewed GE's pension see Num trust and retirement plans, foreign exchange exposure, airline in-J,',"', D8, i dustn financing and other matters intohing major uses of GE funds. sunne seen Prenehel The Management Ihvelopment and Compensation Committee, which

• • • • l* R y.

consists entirely of outside Directors, held nine meetings. Its activities - Technology and science included all executive compensation plans, policies and practices, all Cenmittu., changes in executive assignments and responsibilities, and succession QH Modes. Chairman plans for key positions. Eessee F.merphy J'h' O 8,',i', The Nominating Committer, at its three meetings, reviewed candi-g dates for the lloard and recommended the stnicture and member-Askew c.sisiw ship of Iloard committees for the ensuing y ear. The Operations Committee, which met four times, resiewed the Company's operating plan and various operational matters. The Public kpcmsibilities Committee held two meetings at which it evaluated emironmental and other public responsibility issues as well as the activities of the GE Fund. The Technoh>gy and Scieme Committee participated in one meeting at which it reviewed GE Medical Systems products and senices. I 20

r [ ~ l y ~, r h. .. t m f D.W yne calloway James 1. Cash, Jr. Silas S.Cathcart Dennis D.Dammerman Paolo Fresco Claudio X. Gonzalez Durt sur and artired James E. Rohimn Retired Choirman of .%rnior Via e Prc*ident, Vice Chanman of the Chairman of the iband Chaurnan of the floard Profraor of flusmens the Ibard and Chief Fmance, and Chief Isnard and Executne and Chief Executnr ad Chief Excr utive Adnumstration, f arrutisr Officer, Finain ial of f u rr, () flu er. General Otti< rr, Kiinterly-Clar k Ot.% rr Prpsdka, Inc., Ilarvaid Graduair lihnois Tool WarLs, General Electric Elr< tric uimpany. de Mrxiro, S.A. de bever, urs, snat k foods N hool of Ilusiness. Inc.. dnersified pnul-Company. Ihret tor Direc tor snu e 19.n C.V., Mexic o Cit 3. and and te taurants, Cambridge, Mass. tu ts, Chir ago. Ill. sinc r 1994 Du rctor, Kimleriv-Pun h. ar, N Y. Ihrre tor sinc e IW7, Dircrior 197219N7 Cla L Corporation. Durc tor snu r 1991, and tim e 19% consmner and paper prothu in. Du et tor sin < r 1991 y e-3 ( k. ~ k 's %- { I:. c) }, u..L ff. '3s h) . : 7.g G2rtrude G. Michelson Eugene F. Murphy Sam Nunn John D.Dpie Roger S. Penske Barbara Scott Preiskel Fm mer Senior Vit e Vic r Chairman of the Former U.S. Senator Vit e Chairman of the Chairman of the floard, Former henior Vic e President - External Board and Exet utne fium the Mate of Board and Execuiise Penske Corporation. President, Motion Affairs and former Ofin er, General Georgia and Partner, Of fit er, Genrial Penske Motorsports, Pictme Associations of Dis crior, R.I1. Mars Elcriric Company. King & Spalding. law Elcrtric Company. Inc., Detroit Diesel Americ a, New Yor L. N Y. & Co, Inc., retailers. Durctor amt r 1997. firm, Atlanta. Ga. Durctor since IWi Corporation and Director sim e 19M2. New Yor k. N.Y. Directos sime IW7. Prnske Truc k 1. casing thrr< ten snu e 1976. Corporation. transpor-tation and automotive Arrvices. Detroit, Mit h. Director situr 1994. n yy .1 I a' \\

g.

.4 q - q 1' + g, y Frank H.T. Rhodes Andrew C.Sigler Douglas A.Wamer til John F. Welch, Jr. Pirsident Ementus, Retir ed Chairman of Chairman of the Board. Chairman of the Board Cornell University, the lloard and Chirl Chief Fxecutive Olliter and Clurf Exec utise Ithara, N.Y. Du ertor Executne Olh< cr, and P rsident, Of fit er. General s'ncr 19M4. Champion Interna-J P. Moigan & Co. Inc. Llcrtru Comp,un. tional Corpo:arion, and Mo gan Guaranty Dnertoi sim e 19Mn. paper and forest pnxt-1 rust G unpany. New ut is, St,unford, Con n. You L. N.Y. Du er tor Duettor sin < r 19M. smt e lu92. 21

anagement (Asof Februan 13,19'*) Setuor [ xecutive Ofhuns John F. Welch, Jr. Paolo Fresco Eugene F. Murphy John D. Dpie (hairman of the ikiard and We (;hairman of the Ibiard Vic c Chairinan of the ikiard Vu e (1:airniani of the Ikaani Chief I art uust Of fu rr and i vrutne Of brrr and I tr< utne Offic er and I krc uanc Of fu er Sene Corporate Off a ers Corpor ate Stan Off m eis Philip D. Ameen W e Preudent and Cornptroller Mark W. Begor Virr President. Insestor Cornmunic anons .d James R. Bunt f.. o. Vire President and 'ltranuirr

• ks -

s Alberto F.Cerruti

9. -

Vic r Perudent. Meigris and Ac qmsitions '3 and Imcinauonal I mant c /// Pamela Daley W c President and Senior (bunsel, Tun %u nons Brackett B.Denniston 111 William J.Conaty Dennis D. Dammerman Lewis S.Edelheit vice President and Senior Coun*ct. Senia W r Prcudent. Senior W e hendent. Senior Vire Firsident. Eiiigation and 1.cgal Pohcy I hanan Resourt n Finam r. and Chirl Researili and Patrick Dupuis Financ ial Othccr Desclopment We President. Audit Staff R. Michael Gadbaw Vic r President and Senior Counsel. InternationalI.aw and Polict h ij Joyce Hergonhan g W r Preudent. Pubhr Relations k-Steven Kerr c k C Vu r heudent. ludership Dnclopment 7 William J. Lansing Vic c President, iluuness Deselopment John H. Myers h esident. GE 1mesunents Robert W. Nelson Vice President. Finanual Plannmg Denjamin W. Heineman, Jr. G6ran S. Malm Gary M. Reiner and Anahus Senior W e hrsident. Senmr W r hrsdent Senior Vu c Prrudent fa, d9mm y (w ne I (bunsel and arut l'rrsident, GE Asia. id ( lurf Inf ormation Stephen D. Ramsey W e Prendent. Environmental h ograins John M. Samuels W e b rudent and Semor Counsel. Tases Ronald A. Stern W e henident and Senior Counsel. Anutrust Susan M. Walter W r President.(.osernment Relauons 22

Operating Management a,e,mma,om, t I Aoi nih f nyums Captal Sem es Medical Systems W. J:mes McNerney, Jr. Gary C. Wendt Jeffrey R. Immelt Prnident and Chirt t senatne Chairman. Pinident and Chwi Preudent and Chief bnutne ( Hin er, GE. Am raf t F uginen f an utnr OHu rs. Gennal Ein int Of fu ri. GE Mnhcal Suirms Cerl ett D. Caudill "P "' " " "' 3 """ d'd Ch d" **" d and t :hwi i an umr Off u rr, Scott C. Donnelly \\..u c Prrudent. I numerung \\..u e brutent, Global Tre hnologs pg g Charles L Chadwell Thomas E. Dunham Den. J.Nayden James A.Parke is W r heudent. (kunmen tal i nginn Viu hmde Amenm Wu-hrudent and Cluri Opnaung .or \\ u r Prrwirni, hnam e Rob:rt L Colman Onu rr. GL C.qmal Cen p.n anon Yoshiaki Fujimori W r hewirni. Ihunan Rnoun n ".ichard D.Avino Pn udem ed aiid i mane Nigel D.T. Andrews \\ u e brudent and semor OHu n. GI Medw-d Nurms Am H:rbert D. Depp t xn ume W r hnident, 1ax Gmnwl I.ida and Chairman and Chirl \\ u e heudent. MaiLrung GI Captal(hmponems Jo S. Wem bromu ohm V4n Robert W. Spectzen senioi W r hrudeni. Girporair Mrdu al Sntems JIhn J. Falconi Piruarnt and Chid Leawr3 and Global Fundmg Serge Huot \\ u r Pinuinli n huology

t. huam e and Lxn ume OHiter, Daniel W. Porter W r Prrudent. Global informain m GL Raih ar serm n y,

k% MmmyNle MMeW 0:nnis R. Little James A.Celica Lawrence J.Toole Lawrence R.Johnston \\,u e hewirnt. Manan I ngmn srnuer W c hnideni. Glob.d w % Vi Ps+ Pmidemnd and turmne David L Uoyd, Jr. R 'u M '""*"""'"' Human Rnounn OHu cr. GL \\ledu al swirma Eurnpr W c Prnideni and Gennal ( bunwl Sandra L. Derickson Paul J. Mirabella Rob:rt G. Stiber h""I""' M U ""' P W r Prnident. Ameikas san and ^"'"""""'d W c hewirnt, hoduruon ygng Mar ketmg dini Pn H uienu*iu Henry A. Hubschman James G. Del Mauro Wdliam J.Vareschi h ""k"' "dP"dl David L Calhoun Vice hnident. Girpoiate ^"'""" W r B eudent. l.ngmr Seni< n Pinident and Chief bn utise Annunis Robert L Lewis OHuri.GEI.ighung hussell F. Sparks J. Keith Morgan h d""' " "" ' "' "d W r Prnident. Engmr seniin William F.Banholzer Vu c Prewirni and General (bumel I*'"" " ""E hochu t Management W r Prnident. In hnolog' Keith S. Sherin Michael A.Neal Theodore R.Torbeck PaulT. Bossidy Wc hnident. Unaner and I"" C" GL G."'""l G mponems Vu r brudent. i ngme hrrm n W e hnidem. North Amerk a l'inam ial Seni n apna "I"'""""' Joseph S. Barranco Stephen M. Bennett Viw hnide hWnin W e houdem.T,rndoi t manual sen u n Robert J. Herbolich NBC Appham es W e h nidem. sain 1 Christopher H. Richmond Robert C. Wright I D:vid M. Cote W r Pnmdent Cainunruial John E. Breen p,n dent and Chid Exerume hnident and Cind bn utnc blui[nnent hnandng )I " h""I"W" ,u r brMent and Wrf OHu cr. Nauonal Broad < asung C"*Pd"V I"" OHu rt. GI Appham n Ronald R. Pressman Bruce R. Albertson hewknt M ognial Real Mar \\y S;'Hac W an William Bolster " " I "d""' ^"#"# " W e hnident. Maiketmg Edward D. Stewart P"'id""' CNBC Crsig Arnold h" "'" " u " I"'" '""', Richard M. Jackson. Jr. Neil Brnun Prewirnt and Regional GF Capital O n pin anon; and \\ u r Prrudem and Gennal u.mnwl h eudent.1 rlermon Neiwor k usulent t.u n huanual i herutnr. Ava James E. Mohn Richard Cotton hen n n Bri:n P.Kelley ""g""'y"*" h" ""'" u " h "*"' d"d a himann Vuc hrudrui salm George E. Murphy Genn al Counwl Chan man. Picudent and Chid VW. Umidm h%ide m %d H:ppy R. Perkins I scrutne OHu rr. Emphnen udmt d"Me""'nt h nutent $ pons General G unwl and Reinunam e Em pnranon We newlent. Pubh< Allans David L Pawl Randel Falco Robert J.Dellinger "'""d""' """^I"' P"'*"' B"'" h d ""d Sus:n P. Peters senior W r brudent. Onam e Yh e brudent, llaman Rnoun n Mike S.Zafirovski Nd""rk Opnations ~ h " ""HulCh d b eruthe Warren C.Jenson Paul A.Raymont r r eudent. DO" W r nnhirnt.1 n hniilogs General ramnwl atul $ctretan StIphen J. Sedita Michael D. Fraizer 8tanley F. Davis Andrew R. Lack .""I'"" Vk e h rwl-nt. F mam e h nidenl and Chitf i xn uine P"'"I""' N"" OHu n. G Hn.un 'al A*uram e Richard F.Segalini Donald W. Dhlmeyer.Jr. Vice hnutent. Pun haung Christopher A.A.E. Mackenzie h""l"* NBC# "'("d and Manuhu turing hnident.GF CapnalI moPr Thomas S. Rogers Thomas H. Mann h ""'""' N h""d d" ""d Brudent and Clurfi secutar nounew Dnclogonent OHu rr. GE Capital Mortgage Scott M. Sassa Corporation hewirnt. IrInision Statiom David R. Nissen Edward L Scanlon Prnideni. Global Gimumer t xn uiive W r hnident, huamr i mph ner Relatiom 2'l

Operating Management oecnenn Plashr s Powm Systeim. f im tr a W Distobunon inter n ation al and Disntr oi G:ry L Rogers Robert L Nardelli Scott R. Bayman Prrudent and Chirt Exec utisc Preudent and Chirl Executive Lloyd G. Trotter Prnident and Chief Executive Othi re, GE 11 antic s Offk cr. GE Power hptems Prnident and Chirf Fxecutive of ficn, GE India Ferdinando F.Beccelli Ricardo Artigas OfIk er, GE Liectrical Dntribution Arno Bohn and Gintrol Vic r President, GL I%stic s-Ykr Prnident, Global Parts Prnident and Quef Executne 4 Amerk as and heritcc Joatluim Agut Of f u rr, GE Germany Ch2rin E. Crew. Jr. Ernest H. Gault P'"id#"' ""d bhi"I E *""'i Kenneth C. Brown Vire Prnident bles Vke Prnident. Global hre.r <a N" "' bE I""" b"""'"I" PO,- Prnident, GL Noutheast Asia Matthxw J. Espe 9""""ns Richard L Pease Ugo Draetta henident and Reprnentarne Francis S. Blake Vke Pn sident. Power Equipment Yk e President and senior Counsel Dnct tor, GE PlasticePacifk General Counsel and Vice J.Jeffrey Schaper j,y p, tap;, Jean M. Houschen I' ""I"" U"" """ U"' "I"I""""' Vi' e Prnident, Sal" Prnident and Chief Executive Vii r b rudent, Stephen B. Bransfield Otlk er. GEJapan John T. McCarter Worldwide Tn hnology Yk e Prrsident, Power Generation "d"'"."" JamIs W. ireland til industnal Contr 01 Systenis Prnident and Chief Executhe Yk e Prrudent, Finam e Dennis M. Donovan ookcr, GE 1. ann America l %cc Pn sulent. Huinan Rnoun n James W.Rgers Alistair C. Stewart Paul F. McBride Prnident and ChicI Execuu.ve Yk r brudent, GE Silu ones Jon A. Ebacher Prnident GL Middle East. Africa, ('h [ "' ' P" " ""'i"" ^ " ' ' " '"" " "P R bert E. Muir,Jr. h ' Yk e Prnident, Human Knourc es Rand E.Dobbs Y Mark M. Little Uwe S.Wascher YN ' E'"Id'" h"K """'i"M I Viw Prnident Gli>61 Pwn Plants Senior Managmg Director, Senices g %I% j GE Plasta eturope Thomas P.Saddlemire i Joseph M. Hogan William L Meddaugh Yk e Prnident, Finant c Pitt C. van Abeelen President and Chief Executne Prnident and Chief Executhe Vk r hesident. Furope Steven R. Specker Offk cr. GE Fanut Automari"" Ofhcn, GE supply Manufactunng Vi< r hesident. Nuclear Energs North America, Int. Willi:m A.Woodburn Richard R. Stewart Robert P.Morgala Yk c Prnident, GE Superabrasnn hnident, h&S Energy Pniducts Vic e Prnident. Production and li""b*9I'dd*9 Dennis K. Williams s,,urrmg President and Chief Exet uthe Russell L Shade, Jr. Stuart A. Fisher Ofik cr, Numo Pignone Vice Prnident, systems Integration Prnident and Chief Executive Pier Luigi Ferrara Ofhccr, GE and RCA Lic ensing Deput3 Chief Executise, Management Operation. Inc. and D*E"80""Pd"* Nuno hgnonc Infomiation Services Delbert L Williamson Prnident, Global %ln Gary M. Reiner

unnan, Infonnauon senices; Marketmg and Sales William G.Wert and Senior Vice Prnident and

\\,u e Prnident, Global Lies Chief Monwion Oth'L hu E %M General Electric Vice President. WasLington O nations P Harvey F. Seegers President and Chief Executhe Albert J. Febbo Offic cr, GE Information Senices Vice Prnident GE Automoine and Corpotate Marketing Transportation Systems. John G. Rico Prnident and Chief Execuute Otficer GE Transportation Sntems 24

Financial Section Contents Consolidated revenues 46 Independent Auditors' Report on biikons) s9s Audited Financial Statements 76 26 ~ Earnings 28 Financial h>sition 30 Cash Flows 57 47 Notes to Consolidated Financial Statements 3 Management's Discussion 18 32 Operations 32 Onisolidated Operations 0 33 GE Operations 31 1ndusuy Segments 36 GECS Operations 39 International Operations 40 Financial Resotirces and 1.iquidity 44 Selected Financial Data Earnings per share from continuing operations 46 I inancial Responsibihty g (in dollars) $2.75 1993 1994 1995 1996 1997 Dividends per share (in dollars) $1.10 MI .88 il Nll ~ g ny - 1rgi se lNr[ NE l 1993 1994 1995 1996 1997 25

Statement of Earnings General Electric Company and consolidated affiliates her the yrars rmied Detember 31 (In milhons) nL 1996 1995 Revenues Salca of goods $ 40,675 $ 36,106 $ 33,624 Sales of senice, 12,729 11,791 9,733 Other income (note 2) 2,300 638 752 Earnings of GECS Gli.S revenues frorn senices (note 3) 35,136 30,644 25,919 Total revenues l 90,840 79,179 70,028 l Costs and expenses (note 4) Cost of goods sold 30,889 26,298 24,703 Cost of senices sold 9,199 8,293 6,682 Interest and other financial charges 8,384 7,904 7,286 Insurance losses and policyholder and annuity benefits 8,278 6,678 5,285 Provision for losses on financing receivables (note 7) 1,421 1,033 1,117 Other costs and expenses 21,250 17,898 15,014 Minority interest in net earnings of consolidated affiliates 240 269 204 Total cost 3 and expensen l 79,661 68,373 60,291 Earrings before income taxes l 11,179 10,806 9,737 Provision for income taxes (note 8) l (2,976) (3,526) (3,164) Net earnings l $ 8,203 $ 7,280 $ 6,573 Per share amounts (in dollars) liasic carnings per share (note 9) $ 2.50 $ 2.20 $ 1.95 Diluted earnings per share (note 9) $ 2.46 $ 2.16 $ 1.93 Dividends declared per share (in dollars) l $ 1.08 $ 0.95 $ 0.845 The noirs to consolidated financial statements on pages 47-rf> are an integral part of this statement. Per-share amounts have born adjusted for the 2-for-1 stoc L nplit rik clive on Apiil 28, IW7.

GE GECS 1996 1995 E 1996 1995 8 36,059 $ 34,196 $ 33,177 $ 4,622 $ 1,926 $ 467 12,893 11,923 9,836 2,307 629 753 3,256 2,817 2,415 35,309 30,787 26,025 l 54,515 49,565 46,181 39,931 32,713 26,492 26.747 24,594 24,308 4,147 1,720 415 9,363 8,425 6,785 797 595 649 7,649 7,326 6,661 8,278 6,678 5,285 1,421 1,033 1,117 7,476 6,274 5,743 13,893 11,741 9,354 119 102 64 121 167 140 l 44,502 39,990 37,549 35,509 28,665 22,972 l 10.013 9,575 8,632 4,422 4,048 3,520 ) (1,810) (2,295) (2,059) (1,166) (1,231) (1,105) l $ 8,203 $ 7,280 $ 6,573 $ 3,256 $ 2,817 $ 2,415 in the < onsolidating data on this page,"GE* means the basis of conmlidation as destihed in notr 1 to the conmli-dated hnancial statements;"G113' meann Genetal Elenric Capital Sctrie rs, Inc. and all of its afbliates and associ-ated companica. Tratisactionin irtwerit GL aind GE(3 lieve 1. wen cliinitiated lioin die

• Genet al Electric Cornpany and a onmlidated afbliates" colunma on page 26.

lW7 tratrm turing and other qwrial c harges air inicluded in dir folkswing GE capdons:"Cime of go<xin nold'- $1,%4 inillion; ht of nervit en mild" ~ 530 million; and 'Other costs and expensen"- $708 million. O 27

Statement of Financial Position General Electric Company 1 l and consolidated affiliates M 1996 j At linember 31 dn mdluine I Assets Cash and equivalents $ 5,861 $ 4,191 investment securities (note 10) 70,621 59,889 Current receivables (note 11) 8,924 8,704 . Inventories (note 12) 5,895 4,849 Financing receivables (investments in time sales, loans and financing leases) - net (notes 7 and 13) 103,799 99,714 Other GECS receivables (note 14) 17,655 15,418 l Property, plant and equi [nnent (including equipment leased to others) - net (note 15) 32,316 28,795 { investment in GECS Intangible assets (note 16) 19,121 16,007 All other assets (note 17) 39,820 34,835 Total assets $ 304,012 $ 272,402 Liabilities and equity Short term borrowings (note 19) $ 98,075 $ 80,200 i Accounts payable, principally trade accounts 10,407 10,205 Progress collection, and price adjustments accrued 2,316 2,161 979 855 Dividends payable All other GE current costs and expenses accrued (note 18) 8,891 7,086 long-term borrowings (note 19) 46,603 49,246 Insurance liabilities, reserves and annuity benefits (note 20) 67,270 61,327 All other liabilities (note 21) 22,700 18,917 Deferred income taxes (note 22) 8,651 8,273 Total liabilities 265,892 238,270 Minority interest in equity of consolidated affiliates (note 23) 3,682 3,007 Ccnnmon stock (3,714,026,000 shar es issued) 594 594 Unrealiied gains on invesunent securities - net 2,138 671 Other capital 3,636 2,498 Retained earnings 43,338 38,670 less common stock held in treasury (15,268) (11,308) Total share owners' equity (notes 25 and 26) 34,438 31,125 Totalliabilities and equity $ 304,012 S 272,402 The noirs to consolidated financial statements on pages 47-f6 are an integal part of this statement. Share data base been adjusted for the 2-for-1 sta k split clicctive on April 28,1997. I 28

I GE GECS 199 19 % 99 1996 $ 1,157 $ 957 $ 4,904 $ 3,234 265 17 70,356 59,872 9,054 8,826 5,109 4,473 786 376 103,799 99,714 18,332 15,962 . 11,118 10,832 21,198 17,963 17.239 14,276 8,755 7,367 10,366 8,640 14,729 13,177 25,667 21,658 8 67,426 $ 59,925 $ 255,408 $227,419 $ 3,629 $ 2,339 $ 95,274 $ 77,945 4,779 4,195 6,490 6,787 2,316 2,161 979 855 8,763 6,870 729 1,710 45,989 47,676 67,270 61,327 11,539 9,660 11,067 9,138 (315) 533 8,966 7,740 32,419 28,323 235,056 210,613 569 477 3,113 2,530 594 594 1 1 2,138 671 2,135 668 3,636 2,498 2,152 2,253 43,338 38,670 12,951 11,354 ' (15.268) (11,308) 34,438 31,125 17,239 14,276 8 67,426 $ 59,925 $ 255,408 $ 227,419

• In the conw,lidating data on this page,'GE" means the basis of consohdation as described in note I to the comg>lidated financial statements; GECS" means Gener;d Electric Capital Senices, Inc. and all of its affiliates and associated companies, Transactions between GE and GECS have been eliminated from the " General Elecuit Company and convalidated affiliate-n" cohunns on page 28.

29

Statement of Cash Flows General Electric Company and consolidated affiliates WL 1996 1995 for the yeari emtra pncmber st on amthon>> Cash flows from operating activities Net earnings $ 8,203 $ 7,280 $ 6,573 Adjustments to reconcile net earnings to cash prmided from operating artisities Depreciation and amortiration 4,082 3,785 3,594 Earnings retained by GECS Deferred income taxes 284 1,145 1,047 Decicase (increase) in GE current receivables' 250 118 (632) l Decrease (increase) in inventories (386) (134) 40 Increase (decrease) in accounts payable 200 641 244 increase in insurance liabilities, resenes and annuity benefits 1,669 1,491 2,490 l Provision (c.e losses on financing receivables 1,421 1,033 1,117 All other operating nctivities (1,483) 2,492 473 Cash from operating activities 14,240 17,851 14,946 Cash flows from investing activities Additions to property, plant and equipment (8,388) (7,760) (6,447) Dispositions of property, plant and equipment 2,251 1,363 1,542 Net increase in GECS linancing receivables (1,898) (2,278) (11,309) Payments for principal businesses purchased (5,245) (5,516) (5,641) All other intesiing activities (4,995) (6,021) (3,362) Cash used forinvesting activities (18J/5) (20,212) (25,217) Cash flows from financing activities Net change in borrowings (maturities of 90 days or less) 13,684 11,827 - (3,487) Newly issued debt (maturities longer than 90 days) 21,249 23,153 37,604 Repayments and odier reductions (maturities longer than 90 days) (23,787) (25,906) (18,580) Net purchase of GE shares for treasury (2,815) (2,323) (2,523) Dividends paid to share ownen (3,411) (3,050) (2,770) All other financing acthities 785 28 259 Cash from (used for) financing activities 5,705 3,729 10,503 Increase (decrease)in cash and equivaltmts during year 1,670 1,368 232 Cash and equivalents at beginning of year 4,191 2,823 2,591 Cash and equivalents at end of year S 5,861 $ 4,191 $ 2,823 Supplemental disclosure of cash flows information Cash paid during the year for interest $ (8,264) $ (7,874) $ (6,645) Cash recovered (paid) during the year for income taxes (1,937) (1,392) (1,483) 1hr notes to connohdated financial stairments on pages 47 66 are an integral part of this statement. 30

GE GECS 1*E 1996 1995 N 1996 1995 $ 8,203 $ 7,280 $ 6,573 $ 3,256 $ 2,817 $ 2,415 1,622 1,635 1,581 2,460 2,150 2,013 (1,597) (1,836) (1,324) (514) 68 369 798 1,077 678 215 152 (739) (145) (76) 55 (244) (58) (15) 237 197 462 (64) 318 418 1,669 1,491 2,490 1,421 1,033 1,117 1,296 1,647 (912) (3,071) 939 961 9,317 9,067 6,065 6,225 9,767 10,077 (2,191) (2,389) (1,831) (6,197) (5,371) (4,616) 39 30 38 2,212 1,333 1,504 (1,898) (2,278) (11,309) (1,425) (1,122) (238) C.! (4,394) (5,403) 483 (106) 408 (5,646) (6,090) (3,913) (3,094) (3,587) (1,623) (15,349) (16,800) (23,737I l 809 974 1,061 13,594 11,026 (4,510) 424 252 826 20,825 22,901 36,778 (1,030) (1,250) (1,535) (22,757) (24,656) (17,045) (2,815) (2,323) (2,523) (3,411) (3,050) (2,770) (1,653) (981) (1,091) 785 28 259 (6,023) (5,397) (4,941) 10,794 8,318 14,391 200 83 (499) 1,670 1,285 731 957 874 1,373 3,234 1,949 1,218 $ 1,157 $ 957 $ 874 $ 4,904 $ 3,234 $ 1,949 $ (467) $ (411) $ (468) $ (7,797) $ (7,463) $ (6,177) j e (1,596) (1,286) (1,651) (341) (106) 168 In the wnmlidating data on this page. *GE' incaiu the basis of conmhdation as described in note I to the consoli-dated financial staternents; 'Gif3* means General Electric Capital Services, Inc. and all of its afbliates and associ-e ated rumpanies. Tranuctions letwern GE and GE(3 have tren climinaird from the

• General Electric Gompany i

and a unsolidated aflitiates* columns un page 30. ) 31

Manag: ment's Discussion of Operations i Ov:rview Segmenis beginning on page 3t Aggregate resueturing General Electric Company's consolidated financial state-a rgn om,m mimon n>m cenain costmf plans that will ments represent the combination of the Gmnpany's manu-enham e GE's global competitiveness through rationalization facturing and nonfinancial senices businesses CGE") and the of certain production, senic e and administration actisities of acn>unts of General Electric Capital Services. Inc. ("GECS"). ns worldwide industrial businesses; among these charges is See note I to the i onsolidated financial statements, whic h $577 million of special early retirement pension, health and explains how the variom financial data are presented. hfe benent n>sts, imluding a fourth-quarter, one-time vohm-Management's Discussion of Operations is presented in tary early retirement progr m that was provided to the U.S. won k for ce in the 1997 labor contracts. Also included in four parts: Consolidated Operatiom; GE Operations, im lud-ing Industry Segments; GECS Operations; and International n estructuring chargn are mher memnce costs as well as cer-Operations. tain costs of exiting affected properties, including site demo-litions, asset write-offs and expected losses on subleases. Cnsolidated Operations Finure cadumtlays, including capital expenditures, amount-GE ac hieved rn ord resenues, earnings and cash generation ing to approximately $555 million will be incurred in order to in 1997. This year's perfonnanre again demonstrated the execute these restructuring programs. Other special charges ability of GE's diverse mix of leading global businesses to amounting to $1,079 million were also recorded in 1997, deliver top-line growth and increased margins. principally associated with strategic decisions to enhance the llevenues, including acquisitions, rose to a s ecord $90.8 long4cnn cunpentivennmf certain industrial businesses billion in 1997, up 15% from 1996. This increase was primar-and fourth-quarter developments arising from past activities ily attributable to increased global activities, particularly at at several current and fonner manuf acturing sites not associ-GEGS, stronger airnaft engine shipments, and higher sales ated with any current business segments. The largest such of spare parts and senices b) GE's equipment businesses. special charge related to contracts on existing orders for an Revenues ina cased at ten of GE's twelve businesses, led by aircraf t engine prognun and is discussed on page 34. double-digit growth at GE Capital Senices, Aircraf t Engines New accounting standards issued in 1997 are described below. and Transportation Systems. Resennes in 1996 were $79.2 Neither of these standards will have any effect on the finan-billion, a 13% inctcase attributable primarily to increased cial position or resuhs of operations of GE or GECS. international artisities. In 1996, nine of GE's twelve busi. The Financial Accounting Standards lioard issued two nesses increased revenues, with GE Capital Senices, NBC Statements of Financial Accounting Standards (SFAS) that and Power Systems ieporting double-digit increases, will affcct presentation in GE's 1998 Annual Report to Share Basic earnings per share increased to $2.50 during 1997, Owners. SFAS No.130, luparting Com/nrhensive lnrome, will up 14% from the prior year's $2.20. On a diluted basis, require display of certain infonnation about adjustments carnings per share also increased I4%, to $2.46 from $2.16. to equity-most notably, adjustments arising from market Earnings increased 13% to a record $8.203 billion. In 1996, value changes in marketable securities. SFAS No.131 Disclo-basic carnings per share inneased 13% from $l.95 per share sures about Synents of an Enterprise and IMated infunnation, will in 1995 (12% ham $1.93 on a diluted basis). For 1996, carn. iequire additional infonnation about industry segments. ings of S7.280 billion were up 11% from $6.573 billion in 1995. Growth rates in earnings per shaie exceeded growth rates in earnings as a result of the ongoing repurchase of GE/S&P cumulative dividend growth since 1992 shares under the five-year, $17 billion share repurchase plan initiated in December 1991. 80 %. in 1997, GE realized an af ter-tax gain of $1,538 million from exchanging preferred stock in loc kheed Martin }.' 64 Corporation (lockheed Martin) for the stock of a newly formed subsidiary as described in note 2. 48 Also in 1997, GE recorded restructuring and other special l g ~ charges amounting to $2,322 million, which are included in E l 32 ^ costs and expenses in the following captions: " Cost of goods L sold"- $1,364 million; " Cost of senices sold'- $250 mil-a r,t = i 16 g h lion; and 'Other costs and expenses"- $708 million. These , ap oo charges are discussed below and, as relevant, in Industry M IE 0 1993 1994 1995 1996 1997 32 l

Dividends declared in 1957 amounted to $3535 billion. Per-share GE operating marf,in as a percentage of sales dividends of $1.08 were up 14% from 1996, following a 12% increase from the preceding year. GE has rewarded its share 16.0 % owners with 22 consecutive years of disidend growth. The chart on the previous page illustrates that GE's dividend 12.8 - growth for the past five years has significantly outpaced disi-dend growth of companies in the Standard & Poor's 5()0 9.6 stock index. Return on average share owners' equity reached 25.0% in 1997, up from 24.0% and 23.5% in 1996 and 1995, respectively. "(- @ "d e g a.,, GE Operations = ^= a <' d GE total revenues were $54.5 billion in 1997, compared with toes ises tses toss tee e $49.6 billion in 1996 and $46.2 billion in 1995.

• GE sales of goods and senices were $49.0 billion in 1997, an increase of 6% from 1996, which in turn was 7% higher trative expenses. GE reported operating margin as 11.0%

than in 1995. The improvement in 1997 was led by Aircraft of sales in 1937, after the efTects of festructuring and other Engines, Transportation Systems and Power Systems. special charges. GE ongoing operating margin (before such Volume was about 9% higher in 1997, reflecting growth charges) reached a record 15.7% of sales, up from 14.8% in most businesses during the year. While overall selling in 1996 and 14.4% in 1995. The improvement in operating prices were down slightly in 1997, the effects of selling margin in 1997 - with ten businesses, led by Power Systems, prices on sales in various businesses differed markedly. Aircraft Engines, Medical Systems and NBC, reporting j Revenues were also negatively affected by exchange rates higher operating margins - showed the increasing benefits for sales denominated in other than U.S. dollars. Volume from GE's product senices and Six Sigma qualityinitiatives. in 1996 was about 9% higher than in 1995, with selling Total cost productivity (sales in relation to costs, both on a price and currency effects both slightly negative, constant dollar basis) has paralleled recent significant For purposes of the required financial statement display improvement in GE's ongoing operating margin and accel-of GE sales and costs of sales on pages 26 and 27, " goods" erated over the period. Productivity in 1997 was 4.2%, refers to tangible products, and "senices" refers to all reflecting sharp improvements associated with variable costs, other sales, including broadcasting and infonnation serv-largely attributable to the Six Sigma quality program, as well ices activities. An increasingly important element of GE as base costs, associated largely with higher volume. Four sales relates to product senices, including both spare parts businesses - Power Systems, NBC, Plastics and Information (goods) as well as repair senices. Such product senices Senices - achieved productivity in excess of 5%. Total pro-sales amounted to $9.7 billion in 1997 and were up 16% ductivity was 2.9% in 1996, principally on the positive effects from 1996, which was l1% higher than 1995. of higher volume. In 1996, three businesses - Power Systems, o GE other income, er ed from a wide variety of sources, NBC and Aircraft Engines - reported productivityin excess was $2.3 billion in 13C 7, $9.6 Ginn, M 1996 and $0.8 bil-of 5%. The total contribution of productivity in the last two a lion in 1995. The increase in other income in 1997 was years ofIset not only the negative effects of cost inflation, but primarily attributable to the Lockheed Martin transaction also the effects of selling price decreases. described in note 2. which also provides details of GE GE interest and other financial charges in 1997 amounted to other income. $797 million, compared with $595 million in 1996 and $649

• Earnings of GECS were up 16% in 1997, following a 17%

million in 1995, as inte rest rates trended lower over the increase the year before. See page 36 for an analysis of period, lower rates in 1997 were more than offset by higher these earnings. levels of average borrowings and other interest-bearing Principal costs and expenses for GE are those classified as costs obligations. of goods and senices sold, and selling, general and adminis-Income taxes on a consolidated basis were 26.6% of pretax trative expenses. earnings in 1997, compared with 32.6% in 1996 and 32.5% Operating margin is sales of goods and senices less the costs in 1995. The 1997 decrease in elrective tax rate was primarily of goods and senices sold, and selling, general and adminis. attributable to the realized gain on the tax free exchange of 33

lockheed Martin preferred stock. That gain accounted for than in 1995, reflecting industry growth and U.S. market 4.8% of the difference between the expected and actual tax share gains across core product lines. Operating profit rates shown in note 8. A more detailed analysis of the dilfer-increased 8% in 1996, primarily as a result of productivity and ences between the U.S. federal statutory rate and the consoli-higher volume, partially offset by lower selling prices. dated rate, as well as other infonnation about income tax Bmadcasting revenues decreased 2% in 1997 as a strong prmisions,is also prmided in note 8. advertising marketplace was more than offset by the absence GE industry segment revenues and operating profit for the past of a curient year counterpart to Nf3C's broadcast of the 1996 five years are slown in the table on page 35. For additional Summer Olvmpic Games. Operating profit increased 5% in ' information,ieluding a description of the pr' ducts and 1997, despite restructuring charges of $161 million associ- - senices included in each segment, see note 2r ated with certain broadcast properties, primarily interna-Airwap Engines achieved a 24% increase in revenues in tional properties, and including asset wiite-offs, expected 1997, following a 3% increase in 1996, on higher volume in losses on subleases fmm excess capacity, and severance costs. l Excluding the effects of such charges, operating profit { commercial engines and product senices. Operating profit decreased 14% in 1997, prirrarily as a result of $342 million increase d 22%, reflecting improved prime-time pricing, I of charges. The largest cha ge followed Boeing Co.'s fourth, strong growth in both owned-and-operated stations and . quarter announcement tl*at development oflonger-range cable programming senices, and increased international derivatives of the 777 jetliner would be slowed. It was con. distribution of programming, the combination of which cluded nt that time that development of a higher-thrust more than offset the absence of a current-year counterpart derivative of the GE90 engine was notjustified, resulting in to the Olympics broadcast and higher license fees for charges of $275 million to reflect higher estimated manufac-certain prime-time programs that were renewed. Revenues turing costs to fill firm customer orders. An additional charge increased 34% in 1996, reflecting a strong advertising of $67 million was recorded for restmcturing, covering costs market, excellent ratings, strong growth in the owned-and-l l associated with closing certain redundant manut'acturing operated stations and the Olympics broadcast. Operating and warehousing facilities. Excluding these charges, operat. profit increased 29% in 1996 as the combination of excellent ing profit increased 14% ' reflecting the effects of volume ratings, sharply higher results in owned-and-operated increases in commercial engines and product senices and stations and profitable Olympics coverage more than offset improved product senices pricing, the combination of which higher license fees for certain prime-time programs that were renewed. more than offset cost increases. Operating profit increased by4% in 1996 as a result ofimprovements in the product Industrial Nducts and Systems revenues rose 5% in 1997, senices business and producthity, c1Tset somewhat by with improved volume more than offsetting weaker pricing reduced selling prices and cost inflation. across all businesses in the segment. Operating profit ' In 1997, $1.5 billion of revenues were from sales to the declined 8%, reflecting $352 million of charges, essentially

U.S. government, down $0.3 billion from 1996, which was all of which were related to restructuring - mostly for sever-

$0.1 billion higher than in 1995. ance costs related to work force reductions and for facility Aircraft Engines received orders of $8.9 billion in 1997, closing costs. Excluding these charges, operating profit up $1.8 billion from 1996. The backlog at year-end 1997 was increased 14% in 1997, the result of Six Sigma-based pro- $9.8 billion ($9.0 billion at the end of 1996). Of the total, ducti ity and volume improvements across the segment, $7.5 billion related to products, about 50% of which was which more than offset the efTects oflower selling prices. scheduled for delivery in 1998, and the remainder related to Revenues increased 2% in 1996, reflecting volume increases ' 1998 prmluct senices. in 1 ighting, Electrical Distribution and Control, and Indus-Appliances revenues were 6% higher than a year ago, reflect. trial Control Systems. Operating profit increased 6% as ing primarily acquisition-related volume. Operating profit productivity imprmements across the segment more than decreased 39%, primarily as a result of restructuring and offset the efTects of cost inflation and lower selling prices for other special charges of $330 million, principally for sever. certain products, ance costs related to work force reductions and facility closing Transportation Systems received orders of $2.4 billion in costs. Excluding such charges, operating profit increased 5%, 1997, an increase of 20% from 1996. The backlog at year-end 1997 was $2.0 billion, an increase of $0.5 billion from reflecting producti ity and improved volume, partially offset i by lower selling prices. Revenues in 1996 were 7% higher 1996. Of the total, $1.8 billion related to products, about 82% of which was scheduled for shipment in 1998, and the remainder related to 1998 product senices. 34

Summary of Industry S:gments General Electric Company and consolidated affiliates for the years ended I)ccernher 31 (in millions) m 1996 1995 1994 1993 Revenues GE Aircraft Engines S 7,799 $ 6,302 $ 6,098 $ 5,714 $ 6,580 Appliances 6,745 6,375 5,933 5,965 5,555 Ilroadcasting 5,153 5,232 3,919 3,361 3,102 Industrial Products and Sysierns 10,954 10,412 10,194 9,406 8,575 Materials 6,695 6,509 6,647 5,681 5,042 Power Generation 7,495 7,257 6,545 5,933 5,530 Tec hnical Products and Senices 4,917 4,692 4,424 4,285 4,174 All Other 3,564 3,108 2,707 2,348 1,803 Corporate iteins and cliininations 1.193 (322) (286) (195) (242) Total GE 54,515 49,565 46,181 42,498 40,119 GECS Financing 31,165 24,554 19,446 15,064 12,454 Specialty insurance 8,844 8,155 7,042 4,794 4,807 All Other (78) 4 4 17 15 Total GECS 39,931 _ 2,713 26,492 19,875 17,276 3 Eliminations (3,606) (3,099) (2,645) (2,264) (1,694) l Consolidated revenues $ 90,840 $ 79,179 $ 70,028 $ 60,109 $55,701 l Operating profit (a) GE Aircraft Engines $ 1,051 $ 1,225 $ 1,176 $ 935 $ 798 Appliances 458 750 697 683 372 l liroadcasting 1,002 953 738 500 264 indnsnial Products and Systems 1,490 1,617 1,519 1,328 901 Materials 1.476 1,466 1,465 %7 834 Power Generation 758 1,%8 769 1,238 % 1,024 Technical Products and Senices 828 849 801 787 706 All Other 3,558 3,088 2,683 2,309 1,725 Total GE 10,621 11,016 9,848 8,747 6,624 GECS Financing 3,736 3,460 3,062 2,671 1,733 Specialty insurance 1,293 1,238 1,002 580 764 All Other (607) (650) (544) (302) (288) Total GECS 4,422 4,048 3,520 2,949 2,209 Eliminations (3,209) (2,795) (2,396) (2,072) (1,554)

• Consolidated operating profit 11,834 12,269 10,972 9,624 7,279 GE interest and other financial charges -

net of eliminations (782) (600) (644) (417) (529) GE items not traceable to segments 127 (863) (591) (546) (614) Earnings from continuing operations before income C:xes and accounting change $11,179 $ 10,806 $ 9,737 $ 8,661 $ 6,136 (a) Operating profit for 1997 and 1993 included significant restructuring and other s[wtial < harges. The IW7 effects for indhidual segments are discuned I on pages 34 and 36. l The notes to ronsolidated financial statements on pages 474i6 are an integral part of this statement. "GE" means the basm of < onsolidation as descriled in note I to.he conmlidated financial statements;"GECS" means General Electric Capital Services, Inc. and all ofits afbliates and asmsiated companies. Operating profit of GE segments escludes

• Interest and other financial charge."; operating profit of GECS includes
• Interest and other financial charges,"

whic h is one of the largent elements of GECS' operadng costs. The 1993 accounting change reprenents adoption of Statement of Financial Accounting Standards (SFAS) No. Il2. Empimm*Anountingfor 1%stempigment flenefutt 35

Afaterials revenues grew 3% in 1997, reflecting an increase GECS revenues in volume that was largely offset by lower selling prices and adverse currency exchange rates. Operating profit increased on billions) $42.0 by 1%, including restnicturing charges amounting to $63 million for severance costs related to work force reductions n6 and outsourcing. Excluding such charges, operating profit 212 increased 5%, as Six Sigma-based producthity and higher volume more than offset lower selling prices. Materials rev-16.8 enues decreased 2% in 1996 and operating profit was about the same as the previous year, primarily as a result of lower j selling prices. The adverse efrects oflower selling prices on I operating profit were offset in part by eductions in material g costs, volume improvements and producthity. Pbwer Generation revenues were 3% higher than in 1996, reflecting higher voluine in gas mrbines and in product serv-ices. Operating profit decreased 29% in 1997, reflecting for the segment increased 6% in 1996 as productivity, growth aggregate charges of $437 million, including $261 million in senices at Medical Systems and volume improvements that was principally a combination of gas turbine warranty more than offset selling price decreases. costs and costs arising from renegotiation and resolution of Orders received by Medical Systems in 1997 were $4.3 certain disputes. Additionally, $176 million was recognized billion, up $0.4 billion from 1996. The backlog of unfilled for restructuring, covering costs of exiting certain facilities, orders at year-end 1997 was $2.4 billion, about the same as at including severance benefits, site demolitions and associated the end of 1996. Of the total, $1.3 billion related to products, l write-offs. Absent such charges, operating profit increased by about 91% of which was scheduled for delivery in 1998, and 12%, the result of strong Six Sigma-based producthity and the remainder related to 1998 product senices. higher volume, which more than offset lower selling prices. All Other consists primarily of GECS earnings, which are dis-Revenues increased 11% in 1996, reflecting primarily strong cussed in the next section. Also included are revenues growth at Nuovo Pignone and higher product senices vol-derived from licensing the use of GE technology to others. l ume. Operating profit increased 39% in 1996 as producthity l more than offset cost inflation and lower selling prices. GECS Operations l Power Generation orders were $6.6 billion for 1997, com-GECS conducts its operations in two segments - Financing l pared with $8.0 billion in 1996. The backlog of unfilled and Specialty Insurance. The Financing segment includes l orders at year-end 1997 was $9.8 billion ($10.9 billion at the the financing and consumer savings and insurance opera-end of 1996). Of the total, $8.9 billion related to products, tions of General Electric Capital Corporation (GE Capital). I about 41 % of which was scheduled for delivery in 1998, and The consumer savings and insurance operations, conducted the remainder related to 1998 product senices. prheiarily by GE Financial Assurance IIoldings, Inc., provide Technical Nducts and Sereiers revenues rose 5% in 1997, consumers financial security solutions through a wide variety l following a 6% increase in 1996. Medical Systems reported ofinsurance, investment and retirement products, primarily higher resenues in both years, reflecting higher equipment in the United States. The Specialty Insurance segment volume and continued growth in product senices, partially includes operations of GE Global Insurance IIolding Corpo-offset by lower selling prices. Information Senices revenues ration (GE Global Insurance), the principal subsidiary of were up slightly in 1997 and were essentially flat in 1996, as which is Employers Reinsurance Corporation, and the other declines in selling prices offset increased vohime in electronic. insurance businesses described on page 63. commerce. Operating profit for the segment decreased 2% . GECS total revenues from operations were $39.9 billion in in 1997, reflecting aggregate charges of $157 million princi-1997, up 22% from 1996, which was up 23% from 1995. pally for severance costs related to work force reductions and The 1997 increase reflected primarily the contribution of l facility closing costs. Excluding such costs, segment operating businesses acquired in 1997 and 1996. profit increased 16% as producthity and higher volume mo e a GECS earnings were $3.3 billion in 1997, up 16% from 1996, l than offset the effects oflower selling prices. Operating profit which was up 17% from 1995. The improved operating results for 1997 and 1996 were attributable to continued 36

asset growth, with business and portfolio acquisitions GECS earnings from continuing operations throughout the period and higher origination volume in ' 1997. Earnings in 1997 were afrected by higher losses asso-(in billions) s3.5 ciated with the investment in Montgomery Ward IIolding . Corp., discussed on page 38, as well as by increased auto-mobile residual losses. These matters were more than offset by asset gains, the largest of which was $284 million 2.1 (net of tax) from a transaction that included the reduction of the GECS investment in the common stock of Paine u Webber Group Inc. Increased investment income was the result of ongoing gniwth in the invesunent portfolios and a higher level of gains on imeatment securities. o e GECS cost of goods sold was associated with the computer a m .m a y equipment distribution businesses. This cost amounted to $4.1 billion in 1997, compared with $1.7 billion in 1996 and $0.4 billion in 1995, the result of acquisition-related Operating profit was $3.7 billion in 1997,8% higher than growth in 1997 and 1996. in 1996. As previously noted,1997 operating profit included

• GECS interest on borrowings in 1997 was $7.6 billion,4%

higher losses associated with the investment in Montgomery higher than in 1996, which was 10% higher than in 1995. Ward IIolding Corp. as well as increased automobile residual The increases in 1997 and 1996 were caused by higher losses. These items were more than offset by acquisition and average borrowings used to finance asset growth, partially core growth as well as gains on asset transactions, including offset by the effects oflower average interest rates. The securitirations. Operating profit increased 13% in 1996, pri-composite interest rate on GECS borrowings was 6.07% in marily because of asset growth. Financing spreads (the excess 1997, compared with 6.24% in 1996 and 6.76% in 1995. of yields over interest rates on borrowings) were essentially See page 42 for an analysis ofinterest rate sensithities. flat in 1997 and 1996 as the reduction in yields was offset by

• GECS insurance losses and policyholder and annuity ben-decreases in borrowing rates. Cost of goods sold associated efits ir. creased to $8.3 billion during 1997, comparect with with the computer equipment distribution businesses

$6.7 billion in 1996 and $5.3 billion in 1995, primarily increased significantly in both years, primarily because of because of business acquisitions and growth in originations acquisiti ns. The prmision forlosses on financing recehables throughout the period. increased in 1997 on higher average recchable balances as well as increased delinquencies, consistent with industry

• GECS other costs and expenses increased to $13.9 billion expenence, m the consumer portfolio. Higher portfoh.

o m 1997 from $11.7 billion in 1996 and $9.4 billion in 1995 growth from originations resulted in higher prov.. mona m on mcreased costs associated with acquired businesses and 1995 than in 1996. Insurance losses and policyholder and portfolios as well as higher investment levels. annuity benefits associated with the consumer savings and GECS indstry segment resenues and operating profit for the insurance operations increased during 1997 and 1996 as a past five years are shown in the table on page 35. Revenues result of acquisitions. Other costs and expenses increased in from senices are detailed in note 3. both yean, the result of costs associated with acquired busi-Financing segment revenues from operations increased 27% nesses and portfolios and higher levels ofinvestment. to $31.2 billion in 1997, following a 26% increase in 1996. Financing recei ables are the Financing segment's largest - Significant portions of the revenue increase arose from the asset and its primary source of revenuer. The portfolio of computer equipment distribution businesses acquired dur. financing recchables, before allowance for losses, increased ing 1997 and 1996 and from the consumer savings and Insur-to $106.6 billion at the end of 1997 from $102.4 billion at the ance businesses acquired during 1996 and 199"). Asset end of 1996, principally reflecting acquisition growth and growth contributed to increased revenues in both years, but origination volume that were partially offset by securitiza-was partially offset by lower yields. Financing segment rev-tions of receivables. The related allowance for losses at the enues were negatively affected by higher losses associated end of 1997 amounted to $2.8 billion (2.63% of receivables with the investment in Montgomeiy Ward Holding Corp. - the same as 1996 and 1995) and, in management'sjudg-That effect was more than offset by gains on asset transac-ment,is appropriate given the risk profile of the portfolio. tions, including securitizations. 37

A discussion of the quality of certain elements of the As discussed in note 13, Montgomery Ward llolding Corp. Financing segment portfolio follows. *Noncarning" receiv-(MWilC) filed a bankruptcy petition for reorganizadon in ables are those that are 90 days or more delinquent (or for 1997. GECS' share of the losses of MWIIC and affiliates in which collection has otherwise become doubtful) and 1997 was $380 million (after tax). The GECS investment in " reduced-earning" receivables are commercial receivables MWIIC and affiliates at December 31,1997, was $795 million whose terms have been restructured to a below-market yield. ($617 million classified as financing receivables), income 1 I The foUowing discussion of the noncarning and reduced-recognition had been suspended on these pre.bankrt.ptcy earning receivable balances and write-off amounts excludes investments. Subsequent to the petition, GECS committed to amounts related to Montgomery Ward liolding Corp. and prmide MWIIC up to $1.0 billion in debtor-in-possession affiliates, which are separately discussed below. financing, subject to certain conditions, in order to ftmd Consumer financing receivables at year-end 1997 and working capital requirements and general corporate expenses. 1996 are shown in the following table: A majority of this facility has been syndicated; total borrowings under this facility at December 31,1997, were insignificant. (in minions) man a GECS loans and leases to commercial airlines amounted Credit card and personal loans $ 25,773 $ 27,127 to $9.0 billion at the end of 1997, up from $8.2 billion at Auto loans B.973 5,915 die end of 1996. GECS commercial a.ircraf.t positmns also Auto financing leases 13,346 13,113 included financial guarantees, funding commitments and Total consumer financing receivables 8 48,092 $ 46.155 aircraft orders as discussed in note 17. Noncarning $ 1,049 $ 926 - As percentage of total 2.2% 2.0% Specialty Insumnce segment revenues from operations were $8.8 billion in 1997, an increase of 8% from 1996,which Rece.mable wn.te-offs for the year $ 1,298 $ 870 increased 16% over 1995. The increase in 1997 resulted J fr m increased premium and investment income associated The decrease in credit card and personalloan portfolios with migination mlume, acquisitions and continued growth primarily resulted from serwitization of receivables, partially in the investment portfolios, as well as a higher level of gains offset by portfolio acquisitions and origination volume.110th on investment securities. GE Global Insurance net presniums - the auto loan and financing lease portfolios increased as a ear ned on U.S. business increased in 1997 - the result of result of acquisition growth; however, the increase in auto 5tmng gmwth in the life reinsurance business-while net financing leases was partially offset by a shift in U.S. lease vol. premiums earned on European business declined, reflecting j ume from financing leases to operating leases. Nonearning receivables did not change significantly during 1997. A sub-the effects of currency translation and market conditions. The increase in 1996 resulted primarily from inclusion of stantial amount of the nonearning consumer receivables a full year's results for the European property and casualty were U.S. private-label credit card loans that were subject reinsurance businesses acquired in 1995. GE Global Insur. to various loss-sharing agreements that provide full or partial ance net premiums earned on U.S. business declined in recourse to the originating retailer, increased write-offs of 1996 on lower industry-wide pricing and the exit of certain consumer:cceivables were primarily atuibutable to the impact l of higher delinquencies and personal bankruptcies on the unprofitable reinsurance contracts. Revenues fmm the other insurance businesses of GECS increased dtning 1997 and

credit card loan portfolios in the United States, consistent 1996 as a result of both origination volume and acquisitions.

with overall industry experience, as well as higher average Specialty Insucance operating pr fit increased 4% to recchuble balances worldwide. $1.3 billion in 1997 from $1.2 billion in 1996. The increase ( Other financing receivables, totaling $58.5 billion at December 31,1997, consisted of a divenc commercial, indus-in 1997 primarily reflected higher investment income, the result f c ntinued growth in investment portfolios and trial and equipment loan and lease portfolio. This port-higher gains on investment securities, as well as improved folio increased $2.3 billion during 1997, primarily because earnings in the mortgage insurance business, the result of increased origination volume, partially offset by sales of fimpr ved market conditions. liigher insurance losses, recchables Related noneaming and reduced-carning receiv-reserves and other costs and expenses parzially oilset these ables were $353 million at year-end 1997, compared with incre ses. Operating profit increased 24% in 1996 as the $471 million at year-end 1996. I' year included a full year's results of the European reinsur-ance acquisitions: higher premium and investment income, partially offset by increases in insurance losses and other costs and expenses. 38

l IntIrnational Operations international assets grew 21% from $65.3 billion at December 31,1996, to $79.2 billion at the end of 1997. Estimated results ofinternational operations include all expo = from the United States, plus the results of GE and This twenue and asset growth occurred pnmarily in Europe and, to a lesser extent, in Canada and the Pacific Basin. GECS operations k>cated outside the United States. Certain GECS operations that cannot meaningfully be associated These increases were retributable to continued expansion with specific geographic areas were classified as *other inter-of GECS as a global provider of a wide range of senices. national" for this purpose. Financial results reported in U.S. dollars are all'ected by International revenues in 1997 were $38.5 billion (42% of currency exchange. A number of techniclues are used to consolidated revenues), compared with $33.3 billion in 1996 su n ge the effects of currency exchange, including selective and $28.2 billion in 1995. In 1997, about 48% of GE's rev-borrowings in h> cal currencies and selective hedging of sig-enues were international, which was about 2% higher than nific nt cross-currency transactions. International activity is divene, as shown in the international revenues chart at the in 1996 and 1995. The chart below left depicts the growth in 9 international revenues in relation to total revenues over the bottom right of this page. Principal currencies include major past five years. European currencies as well as theJapanese yen and the Canadian dollar. International operating profit was $4.8 billion (41% of con-solidated operating profit) in 1997, compared with $4.0 bil-GE's total exports from the United States follow. lion in 1996 and $3.2 billion in 1995. GE's total exports froia the United States GE internat onal revenues were $24.8 billion in 1997, an increase of 14% from 1996, reflecting sales growth in opera-On miltions) m 1996 1995 tions based outside the United States and in U.S. exports. Pacific Basin $ 3,176 $ 3,180 $ 3,397 European revenues were 10% higher in 1997, reflecting Europe 2,423 2,060 1,701 increases in both local operations and in exports to the f2 7 cricas 5 region, with particularly strong g'rowth at Aircraft Engines. Exports to external customers B.793 7,522 7,085 Pacific Bas.m revenues increased by 2% in 1997, reflectmg Expons to affiliates 2,471 2,292 2,123 primarily increased revenues from lo al operations, led by Total exports $ 11,264 $ 9,814 $ 9,208 Plastics and Lighting. Revenues from the Americas increased I 37E primarily as a result of strong growth in h> cal opera-GE made a positive 1997 contribution of approximately tions, particularly at Apphances and Aircraft Engines, and $6.3 billion to the U.S. balance of trade. Total exports in increased exports. 1997 were $11.3 billion, direct imports from external suppli-GECS international revenues were $13.7 billion in 1997, ers were $3.0 billion and imports from GE affiliates were an increase of 18% from $11.6 billion in 1996, while $2.0 billion. 1 Consolideted revenues Consolidated international revenues (In billions) $95 (In billions) $40 e. 76 32 n om e u 1993 1994 1995 1996 1997 1993 1994 1995 1996 1997 i J 39 t

Management's Discussion of Financial Resources and Liquidity Overview GE annual internal working capital turnover This discussion of financial resources and liquidity focuses on the Statement of Financial Position (page 28) and the 8.o Statement of Cmh Flows (page 30). Throughout the discussion, it is important to understand M the differences between the businesses of GE and GECS. Although manufacturing and senices activities invohe a vari-ety of GE businesses, their underlying characteristics are 3.2 development, preparation for market and delivery of tangi-ble goods and senices. Risks and rewards are directly related 1.6 to the ability to manage and I'mance those actmues. The principal businesses of GECS proside financing, asset o management, consumer sasings and insurance, and other 1993 1994 1995 1996 1997 insurance and senices to third parties. The underlying char-acteristics of most of these businesses involve the manage-ment of financial risk. Risks and rewr.rds stem from the Statement of Financial Position abilities ofits businesses to continue to design and prmide a wide range of senices in a competitive marketplace and to Irmestment securities for each of the past two years comprised receive adequate compensation for such senices. GECS is mainly investment-grade debt securities held by the specialty not a " captive finance company" or a vehicle for "off-balance-insurance and annuity and invesunent businesses of GECS sheet financing" for GE: a small portion of GECS business is in support of obligations to policyholders and annuitants. directly related to other GE operations. GE investment securities were $265 million at year-end 1997, Despite the different business profiles of GE and GECS, up $248 million over 1996. The increase in 1997 ptimarily the global commercial airline indusuy is one significant reflected an equity security acquired as part of the lockheed example of an important source of business for both. GE Martin transaction discussed previously. The increase of assumes financing positions primarily in support of engine $10.5 billion at GECS during 1997 was principally related to sales, whereas GECS is a significant source oflease and loan acquisitions and increases in fair value as well as investment financing for the industry (see details in note 17). Manage-of premiums received. A breakdown of the investment secu-ment believes that these financing positions are reasonably rities portfolio is provided in note 10. protected by collateral values and by its ability to control GE current treeivables were $9.1 billion at the end of 1997, assets, either by ownership or security interests. an increase of $0.2 billion from year-end 1996, and included The fundamental differences between GE and GECS are $6.1 billion due from customers at the end of 1997, which reflected in the measurements commonly used by investors, was $0.5 billion lower than the amount due at the end of 1996. rating agencies and financial analysts. These differences will As a measure of asset management, customer receivables become clearer in the discussion that follows with respect to turnover was 7.7 in 1997, compared with 6.8 in 1996. Other the more significant items in the financial statements. current receivables are primarily amounts that did not origi-Year 2000 compliance programs and information systems nate from sales of GE goods or senices, such as advances to modifications have been initiated in an attempt to ensure suppliers in connection with large contracts. that these systems and key processes will remain functional. GE inventories were $5.1 billion at December 31,1997, This objective is expected to be achieved either by modifying up $0.6 billion from the end of 1996. Inventory turnover a present systems using existing internal and external pro-improved to 7.8 in 1997, compared with 7.6 in 1996, reflect-gramming resources or by installing new systems, including ing continuing improvements in inventory management. enterpiisc systems, and by monitoring supplier and other Imt.in, first-out (LIFO) revaluations decreased $119 million third-party interfaces. While there can be no assurance that in 1997, compared with decteases of $128 million in 1996 all such modifications will be successful, management does and $87 million in 1995. Included in these changes were not expect that either costs of modifications or consequences dccreases of $59 million, $58 million and $88 million of any unsuccessful modifications should have a material in 1997,1996 and 1995, respectively, that resulted from j adverse effect on the financial position, results of operations lower LIFO inventory levels. There were net cost decreases i or liquidity of GE or GECS. in 1997 and 1996, and no cost change in 1995. 40

I 1 Customer receivables and inventories (at FIFO) are two key increased $1.6 billion, principally reflecting consideration components of GE's internal working capital measurement. received in exchange for GE's investment in lockheed Manm Internal working capital tumover increased as shown in the preferred stock and an increase in the prepaid pension asset. chart on the facing page: from 5.6 turns in 1995 to 6.3 and 7.4 In connection with the excha~ ge transaction, a portion of n turns in 1996 and 1997, respectively. Internal working capital such consideration was subsequently loaned to Lockheed alsc includes trade accounts payable and progress collections. Martin. The increase in GECS other assets of $4.0 billion GECS inventories were $786 million and $376 million at related principally to increases in assets acquired for resale. December 31,1997 and 1996, respectively. The increase in primarily residential mortgages, and increased " separate 1997 primarily reflected acquisitions in the computer equip. accounts," which are investments controlled by policyholders ment distribution businesses. and are associated with identical amounts reported as insur- ~ ante liabilities. GECSfinancing receivables were $103.8 billion at year-eml 1997, net of allowance for doubtful accounts, up $4.1 billion I"8"'una liabilities, rrserves and annuity benefits were $67.3 over 1996. These receivables are discussed on pages 37 and billion, $5.9 billion higher than in 1996. The increase was - 38 and in notes 7 and 13. primarily attributable to acquisitions in 1997 and the increase in sep rate acc unts. For additionalinformation on these GECSotherrrceivables were $18.3 billion and $16.0 billion at December 31,1997 and 1996. respectively. Of the 1997 increase, $1.2 billion was attributable to acquisitions and the Consolidated bonvwings aggregated $144.7 billion at Decem-remainder resuhed from core growth. her 31,1997, compared with $129.4 billion at the end of 1996. The major debt-rating agencies evaluate the financial Property, plant and equipinent (including equipment leased condition of GE and of GE Cap. l (the major ublic bor-ita to others) was $32.3 billion at December 31,1997, up $3.5 rowing entity of GECS) differently because of their distinct ' billion from 1996. GE property, plant and equipment consists i ofinvestments for its own productive use, whereas the largest ms new characterisy. Using criteria appropriate to each s. and considering their combmed strength, those major rating element for GECS is in equipment provided to third parties agencies continue to give the highest ratings to debt of both on operating leases. D.etads by category of.mvestment can be i GE and GE Ca ital. found m. note 15. GE has committed to contribute capital to GE Capital in l GE total expenditures for new plant and equipment dur-the event of either a decrease below a specified level in the mg 1997 totaled $2.2 bilh.on, down $0.2 billion from 1996. ratio of GE Capital's earnings to h.xed charges, or a failure to Total expenditures for the past five years were $9.7 bilh.on, 4 mamtam a specified debt-to-equity ratio in the event certain of which 38% was investment for growth through new capac.ity GE Capital preferred stock is redeemed. GE also has guaran-and product development: 33% was investment m produc-i teed subordinated debt of GECS with a face amount of $1.0 i tmty through new equipment and process improvements; l>illion at December 31,1997 and 1996. Management believes ) and 29% was investment for such other purposes as improve-the likelihood that GE will be required to contribute capital ment of research and development facib..ues and safety and it under e. her the commitments or the guarantees is remote. emironmental protection. GECS additions to equipment leased to others, including , business acquisitions, were $6.8 billion during 1997 ($5.3 bil-tion during 1996), principally reflecting a shift in auto lease GE cash flows from operating activities l volume from financing leases to operating leases and ~ increased acquisitions of new aircraft. (in bilhons) $9.5 l Intangible assets were $19.1 billion at year-end 1997, up from I $16.0 billion at year-end 1996. GE intangibles increased to $8.8 billion from $7.4 billion at the end of 1996, principally g as a result of goodwill related to the purchase of Greenwich i Air Senices/UNC and a number of smaller acquisitions. The 3.8 $1.7 billion increase in GECS intangibles also related pnmar-ily to goodwill from acquisitions. t9 All other assets totaled $39.8 billion at year-end 1997, an 0 increase of $5.0 billion from the end of 1996. GE other assets 1993 1994 1995 1996 1997 41

k GE total borrowings were $4.4 billion at year-end 1997 GE cumulative cash flows ($3.6 billion short-tenn, $0.8 billion long-tenn), an increase of about $9.3 billion from year-end 1996. GE total debt at (in billions) s 36.0 the end of 1997 equaled 11.1% of total capital, down from 11.4% at the end of 1996. 28 s GEGS total borrowings were $141.3 billion at December 31,1997, of which $95.3 billion is due in 1998 and $46.0 2L6 billion is due in subsequent years. Comparable amounts at the end of 1996 were $125.6 billion total, $77.9 billion due a c..n no, W within one year and $47.7 billion due thereafter. A large El Dmdends portion of GECS borrowings ($71.2 billion and $54.2 billion p.,d = y at the end of 1997 and 1996, respectively) was issued in a shai 0 repurchased active commercial paper markets that management beh, eves will continue to be a reliable source of short-term financing. Most of this commercial paper was issued by GE Capital. The average remaining terms and interest rates of GE Capital conunercial paper were 44 days and 5.83% at the end of 1997, so-called " shock tests," which model cffects ofinterest rate compared with 42 days and 5.58% at the end of 1996. GE and currency shifts on the reporting company. Shock tests, Capitalleverage (ratio ofdebt to equity, excluding from equity while probably the most meaningful analysis pennitted, are net unrealized gains on investment securities) was 7.94 to 1 constrained by several factors, including the necessity to con-at the end of 1997 and 7.92 to 1 at the end of 1996.11y com-duct the analpis based on a single point in time and by their parison, including in equity net unrealized gains on invest-inability to include the extraordinarily complex market tuent securities, the GE Capital ratio of debt to equity was reactions that normally would arise from the market shifts 7.45 to I at the end of 1997 and 7.84 to I at the end of 1996. modeled. While the following results of shock tests for inter-est rates and currencies may have some limited use as bench-Interest rate and currency risk management marks, they should not be viewed as forecasts. In normal operations, both GE and GECS must deal with

• One means of assessing exposure to interest rate changes effects of changes in interest rates and currency exchange is a duration-based analysis that measures the potential rates. The following discussion presents an oveniew of how loss in net earnings resulting from a hypothetical increase such changes are managed, a view of their potential effects, in interest rates of 100 basis points across all maturities and, finally, what considerations arise from recent develop-(sometimes referred to as a " parallel shift in the 3 eld i

ments in Asia. curve"). Under this model,it is estimated that, all else con-GE and GECS uw v;uious financial instniments, particularly stant, such an increase, including repricing effects in the interest rate and curency swaps, but also futures, options and securities portfolio, would Juce the 1998 net earnings of currency fonvards, to manage their respective interest rate and GECS based on year-end 19 7 positions by approximately currency risks. GE and GECS are exclusively end users of these $112 million; the pro fonna :ffect for GE was insignificant. instruments, which are commonly referred to as derivatives; . One means of assessing ex'.osure to changes in currency neither GE nor GECS engages in trading, market-making or exchange rates is to model effects on reported earnings other speculative activities in the derivatives markets. Estad>- using a sensitivity analysis. Year-end 1997 consolidated lished practices require that derivative financial instnaments currency exposures, including financial instruments desig-relate to specific asset, liability or equity transactions or to cur-nated and effective as hedges, were analyzed to identify rency exposures. More detailed infonnation about these GE and GECS assets and liabilities denominated in other financial instruments, as well as the strategies and policies for than their relevant functional currency. Net unbedged their use, is provided in notes 1,19 and 30. exposures in each currency were then remeasured assum-The Securities and Exchange Commission requires that ing a 10% decrease (substantially greater decreases for registrants include infonnation about potential effects of hyperinflationary currencies) in currency exchange rates { changes in interest rates and currency exchange in their compared with the U.S. dollar. Under this model, it is ) financial statements. Although the rules offer alternatives estimated that, all else constant, such a decrease would for presenting this infonnation, none of the ahernatives is reduce the 1998 net earnings of GE based on year-end without limitations. The following discussion is based on 1997 positions by approximately $10 million; the pro forma effec t for GECS was insignificant. 42

1 l Recent economic developments in parts of Asia have altered In December 1997, the GE Iloard of Directors increased somewhat the risks and opportunities of the GE and GECS the authorization to repurchase common stock to $17 billion activities in affected economies. These acthities encompass and authorized the program to continue through 1999, primarily manufacturing for local and export markets, import Funds used for the share repurchase are expected to be gen-and sale of products produced outside the area, leasing of erated largely from free cash flow, aircraf t, sourcing for GE plants domiciled in other global Based on past performance and current expectations,in regions and prmiding certain financial senices within those combination with the financial flexibility that comes with a Asian economics. As such, exposure exists to, among other strong balance sheet and the highest credit ratings, manage-things, increased receivables delinquencies and potential ment believes that GE is in a sound position to complete the - bad debts, delays in sales and orders principally related to share repurchase program, to grow dhidends in line with power and aircraft related equipment, and a slowdown in earnings, and to continue making selective investments ihr financial senices activities. Conversely, costs of sourced long-term growth. Expenditures for new plant and equip-goods may decline and new sourcing opportunitie nay arise, ment are expected to be about $2.0 billion in 1998, princi-sales of products such as plastics to now more-competitive pally for productivity and growth. The expected level of Asian manufacturers of products destined for export should expenditures was moderated by the Six Sigma quality pro-remain strong and liberalization of financial regulations gram's success in freeing capacity, opens new opportunities to penetrate Asian financial senices markets. Taken as a whole, while this situation bears close GECS monitoring and increased management attention, the cur-One of the primary sources of cash for GECS is financing rent situation is not expected to have a material adverse acthities invohing the continued rollover of short-tenn bor-etrect on the financial position, results of operations or rowings and appropriate addition of borrowings with a rea-liquidity of GE or GECS in 1998. sonable balance of maturities. Over the past three years, GECS borrowings with maturities of 90 days or less have Statement of Cash F10WS increased by $20.1 billion. New borrowings of $80.5 billion liccause cash management activities of GE and GECS are having maturities longer than 90 days were added during separate and distinct, it is more useM, review their cash those years, while $64.5 billion of such longer-term borrow-flows separately. ings were retired. GECS also generated $26.1 billion from continuing operating activities. GE The principal use of cash by GECS has been investing in GE cash and equivalents aggregated $1.2 billion at the end assets to grow its businesses. Of the $55.9 billion that GECS of 1997, an increase of $0.2 billion from 1996. During 1997, invested over the past three years, $15.5 billion was used for GE generated a record $9.3 billion in cash from operating additions to financing recchables; $16.2 billion was used to acthities, an increase of $0.2 billion over 1996, principally invest in new equipment, principally for lease to others; and as a result ofimprovements in earnings, wor king capital and $13.6 billion was used for acquisitions of new busimsses. higher dhidends from GECS. The 1997 cash generation pro-With the financial flexibility that comes with excellent sided most of the resources neeGed to repurchase $3.5 billion credit ratings, management believes that GECS should be of GE common stock under the share repurchase program, to well positioned to meet the global needs ofits customers for pay $3.4 billion in dividends to share owners, to invest $2.2 capital and to continue providing GE share owners with billion in new plant and equipment and to make $1.4 billion good returns. in acquisitions. Operating activities are the principal source of GE's cash flows. Over the past three years, operating aethities have l provided more than $24 billion of cash. The principal appli-cation of this cash was distributions of more than $19 billion to share owners, both through payment of dividends ($9.2 billion) and through the share repurchase program ($9.9 billion) described below. Other applications included investment in new plant and equipment ($6.4 billion) and acquisitions ($2.8 billion). 43 i

Management's Discussion of Sel::cted Financial Data Selected financial data summarizes on the opposite page Orders constituting this backlog may be canceled or deferred some data frequently requested about General Electric by customers, subject in certain cases to cancellation penal-Company. The data are dhided into three sections: upper ties. See Industy Segments beginning on page 31 for further portion - consolidated data; middle portion - GE data that discussion on unfilled orders of relatively long-cycle manu-reflect various conventional measurements for industrial facturing businesses. enterprises; and lower portion - GECS data that reflect key Regarding environmental matters, GE's operations, like opera-information pertinent to financial senices businesses. tions of other companies engaged in similar businesses, GE's total research and development expenditures were involve the use, disposal and cleanup of substances regulated $1,891 million in 1997, about the same as in 1996 and 1995. under emiremmental protection laws. In 1997, expenditures from GE's own funds were $1,480 in 1997, GE expended about $80 million for capital proj-million, an increase of 4% over 1996, reflecting continuing ects related to the environment. The comparable amount in research and development work related to new product, 1996 was $87 million. These amounts exclude expenditures senice and process technologies. Product technology efforts for remediation actions, which are principally expensed and in 1997 included continuing development work on the next are discussed below. Capital expenditures for environmental genemtion of gas turbines, further advances in state-of-the-purposes have included pollution control devices - such as art diagnostic imaging technologies, and development of wastewater treatment plants, groundwater monitoring more fuel-efficient, cost-effective aircraft engine designs. devices, air strippers or separators, and incinerators - at New senices technologies include advances in diagnostic new and existing flicilities constructed or upgraded in the applications, including remote diagnostic capabilities related normal course of business. Consistent with policies stressing - to repair and maintenance of medical equipment, aircraft emironmental responsibility, average annual capital expen-engines, power generation equipment and locomotives. ditures other than for remediation projects are presently New process technologies - vital to Six Sigma quality pro-expected to be about $85 million over the next two years. grams - provided improved product quality and perfonn-This level is in line with existing levels for new or expanded ance and increased capacity for manufacturing engineered prognuns to build flicilities or modify manufacturing. materials. Expenditures from funds prmided by customers processes to minimize waste and reduce emissions. (mainly the U.S. government) were $411 million in 1997, GE also is involved in a sizable number of remediation down $54 million from 1996, primarily reflecting transition actions to clean up hazardous wastes as required by federal of the F414 program at Aircraft Engines from development and state laws. Such statutes require that responsible parties to production, fund remediation actions regardless of fault, legality of origi-GE's total backlog of firm unfilled orders at the end of 1997 nal disposal or ownership of a disposal site. Expenditures was $26.4 billion, compared with $26.2 billion at the end of for site remediation actions amounted to approximately $84 1996. Of the total, $22.0 billion related to products, about illi n in 1997, compared with $76 million in 1996. It is 55% of which was scheduled for deliven in 1998. Senices presently expected that remediation actions will require orders are included in backlog for only the succeeding 12 average annual expenditures in the range of $80 inillion to months; such backlog at the end of 1997 was $4.4 billion. $140 million over the next two years. 4 Ye:r-cnd market capitalization GE share price activity On billions) 8250 Un dollars) $80 Tf 200 64 150 mrt 48 E h _._32 FCinse F F rex - I 1993 1994 1995 1996 199 1993 1994 1995 1996 1997 44

Sel:cted Financial Data i met::.nounts in mimons: per-6are amounts in dc.an) m 1996 1995 1994 1993 lbneral Electric Comp:::.y and consolidated affiliates Rea.m, 90,840 $ 79,179 $ 70,028 $ 60,109 $ 55,701 Earnings from continuing operations 8,203 7,280 6,573 5,915 4,184 Earnings (loss) from discontinued operations (1,189) 993 (862) Effect of accounting change Net earnings 8,203 7,280 6,573 4,726 4,315 Disidends declared 3,535 3,138 2,838 2,546 2,229 Earned on average share owners' equity 25.0 % 24.0 % 23.5 % 18.1 % 17.5 % Per share i Earnings from continuing operations - basic 2.50 2.20 1.95 1.73 1.22 Earnings (loss) from discontinued operations (0.35) 0.29 Effect of accounting change (0.25) Net earnings - basic 2.50 2.20 1.95 1.38 1.26 Net earnings - diluted 2.46 2.16 1.93 1.37 1.25 Dividends declared 1.08 0.95 0.845 0.745 0.6525 Stock price range 76 % -47 % 53W-34% 36W-24% 27W 22n 26% 20W 7 Total assets of continuing operations 304,012 272,402 228,035 185,871 166,413 Long-term borrowings 46,603 49,246 51,027 36,979 28,194 Shares outstanding - average (in thousands) 3,274,692 3,307,394 3,367,624 3,417,476 3,415,958 Share owner accounts - average 509,000 486,000 460,000 458,000 464,000 Employees at year end United States 165,000 155,000 150,000 156,000 157,000 Other countries 111,000 84,000 72,000 60,000 59,000 Discontinued operations (primarily U.S.) 5,000 6,000 Total employees 276,000 239,000 222,000 221,000 222,000 GE data Short-term Imrrowings 3,629 2,339 1,666 906 2,391 long-term borrowings 729-1,710 2,277 2,699 2,413 Minority interest 569 477 434 382 355 Shan e owners' equity 34,438 31,125 29,609 26,387 25,924 Total capital invested 39,365 $ 35,651 $ 33,986 $ 30,374 $ 30,983 Return on average total capital invested 23.6 % 22.2 % 21.3 % 15.9 % 15.2 % Borrowings as a percentage of total capital invested 11,1 % 11.4 % 11.6 % 11.9 % 15.5 % Working capital (4,881) $ (2,147) 204 544 (419) Additions to property, plant and equipment 2,191 2,389 1,831 1,743 1,588 GEC$ data Revenues 39,931 $ 32,713 $ 26,492 $ 19,875 $ 17,276 Earnings from continuing operations 3,256 2,817 2,415 2,085 1,567 Earnings (loss) from discontinued operations (1,189) 240 Net earnings 3,256 2,817 2,415 896 1,807 Share owner's equity 17,239 14,276 12,774 9,380 10,809 a Minority interest 3,113 2,530 2,522 1,465 1,301 Bonowings from others 141,263 125,621 111,598 91,399 81,052 Ratio of deht to equity at GE Capital (a) 7.94:1 7.92:1 7.89:1 7.94:1 7.96:1 Total assets of GE Capital 228,777 $ 200,816 $ 160,825 $ 130,904 $ 117,939 Reserve coverage on financing receivables 2.63 % 2.63 % 2.63 % 2.63 % 2.63 % Insurance premiums written 9,396 8,185 6,158 3,962 3,956 (a) Equity excludes net unrealised gains / losses on iraestment securities. Discontinued operations reflect the resuha of Kidder, Peabe,dy, the discontinued GECS necurities broker-dealer,in IW4 and IW3. and the results of discon-tinued GE Aerospace businesws in IW3. The IW3 accounur.g < hange represents the adoption of SFAS No.112, Empl ers' Ammntingfor Niemployment Beur-9 fis. "GE" means the basis of consolidation as described in note i to the conmitidated financial statements; *'GECS* means General Electric Capital Services, Inc. and all ofits aHiliates and anociated companies. Transactions twtween GE and GFCS hase Iren climinated from the consolidated infunnation. Share data and per-share amounts have been adjusted to reflect the 2-for-1 stoc k split effective on April 2M, lW7. I

Management's Discussion of Financial Responsibility The financial data in this report, including the audited finan-programs and resiew actisities, such as those conducted by cial statements, have been prepared by management using the the Company's Policy Compliance Resiew Board, are best available infonnation and applyingjudgment. Account-designed to create a strong compliance culture - one that ) ing principles used in preparing the financial statements are encourages employees to raise their policy questions and those that are generally accepted in the United States. concerns and that prohibits retribution for doing so. Management believes that a sound, dynamic system of KPMG Peat Marwick 11P proside an objective, indepen-internal financial controls that balances benefits and costs dent resiew of management's discharge ofits obligations j provides a sital ingredient for the Company's Six Sigma qual-relating to the fairness of reporting operating results and ity program as well as the best safeguard for Company assets. financial condition. Their report for 1997 appears below. Professional financial managers are responsible for imple-The Audit Committee of the 1 oard (consisting solely menting and overseeing the financial control system, report-of Directors from outside GE) maintains an ongoing ing on management's stewardship of the assets entrusted to appraisal-on behalf of share owners-of the activities it by share owners and maintaining accurate records. and independence of the Company's independent auditors, GE is dedicated to the highest standards ofintegrity, ethics the activities ofits internal audit staff, financial reporting and social responsibility. This dedication is reflected in written process, internal financial controls and compliance with policy statements covering, among other subjects, environ-key Company policies. mental protection, potentially conflicting outside interests of g employees, compliance with antitrust laws, proper business s practices, and adherence to the highest standards of conduct and practices in transactions with the U.S. government. Man-John F. Wekh,Jr. Dennis D. Dammennan agement continually emphasizes to all employees that even Chainnan of the Board and Senior Vice President. Finance, and eU2ecutive Officer Chief Financial Officer the appearance ofimpropriety can erode public confidence in the Company. Ongoing education and com:nunication Februan 13, wm l Independent Auditors' Report To Share Owners ars : M of Diteurs of the accounting principles used and significant estimates General Electric Company made by management, as well as evaluating the overall finan-We have audited the accompanying statement of financial cial statement presentation. We believe that our audits pro-position of General Electric Company and consolidated vide a reasonable basis for our opinion. afIiliates as of December 31,1997 and 1996, and the related in our opinion, the aforementioned financial statements statements of earnings and cash flows for each of the years in appearing on pages 26-31,35, and 47-66 present fairly, in all the three-year period ended December 31,1997. These con, material respects, the financial position of General Elecuic solidated financial statements are the responsibility of the Company and consolidated afliliates at December 31,1997 Company's management. Ou responsibility is to express an and 1996, and the results of their operations and their cash opinion on these consolidated financial statements based on flows for each of the years in the three-year period ended our audits. December 31,1997,in confonnity with generally accepted We conducted our audits in accordance with generally accounting principles. accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assur-pg) gQg ance about whether the financial statements are free of s material misstatement. An audit includes examining, on a RPMG Prat Marwic k 13J> stamford. Connectic ut test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing February 13 Mm 46

i Not:s to Consolidated Financial Statem:nts l ' Summary of Significant Accounting Policies Consolidation. The consolidated financial statements rep-Operating lease income is recognized on a straight-line resent the adding together of all affiliates - companies that basis over the terms of underlying leases. General Electric directly or indirectly controls. Results of Origination, commitment and other nonrefundable fees associated companies - generally companies that are 20% related to fundings are deferred and recorded in earned to 50% owned and over which GE, directly or indirectly, has income on the interest method. Commitment fees related to significant influence - are included in the financial state-loans not expected to be funded and line-of-credit fees are ments on a "one-line" basis, deferred and recorded in earned income on a straight-line - Financial statement presentation. Financial data and related basis over the period to which the fees relate. Syndication measurements are presented in the following categories. fees are recorded in earned income at the dme related serv-

• GE. This represents the adding together of all affiliates ices are performed unless significant contingencies exist.

Premium income fr m msurance activiues is discussed other than General Electric Capital Senices, Inc. (GECS), whose operations are presented on a one-line basis. under GECS insurance accounting policies on page 48.

• GECS. This afIlliate owns all of the common stock of Depreciation and amortization.The cost of most of GE's manu-General Electric Capit2d Corporation (GE Capital) and factuting plant and equipment is depreciated using an J GE Global Insurance llolding Corporation (GE Global accelerated method based primarily on a sum-of-the-years Insurance). GE Capital, GE Global Insurance and their digits fonnula.

respective afTiliates are consolidated in the GECS columns e cmt of GECS equipment leased to others on operat-and constitute its business. ing leases is amortired, principally on a straight-line basis, to estimated net sahage value over the lease tenn or over the

• Consolidated. These data represent the adding together of estimated economic life of the equipment. Depreciation of GE and GECS.

property and equipment used by GECS is recorded on either The effects of transactions among related companies within a sum-of-the-years digits formula or a straight-line basis over and between each of the above-mentioned gmups are elimi-the lives of the assets. nated. Tmnsactions between GE and GECS are not material' flecognition of losses on financing receivables and investments. Certain prior-year amounts have been reclassified to con-GECS maintains an allowance for losses on financing receiv-form to the 1997 presentation. ables at an amount that it believes is sufficient to provide The preparation of financial statements in conformity with ade protection against future losses in the portfolio. generally accepted accounting principles requires manage-When collateralis repossessed in satisfaction of a loan, the ment to make estimates and assumptions that affect reported id is written down against the allowance for losses to amounts and related disclosures. Actual results could differ estimated fair value less costs to sell, transferred to other assets from those estimates. and subsequently carried at the lower of cost or estimated fair Sales of goods and services. A sale is recorded when title value less costs to sell. This accounting method has been passes to the customer or when senices are performed in employed principally for specialized financing transactions. accordance with contracts. Cash and equivalents. Marketable securities with original , GECS revenues from services (earned income). Income on all maturities of three months or less are included in cash equiv-loans is recognized on the interest method. Acental ofinter-alents unless designated as available for sale and classified as est in(ome is suspended at the earlier of the time at which nvestment securities. , collection of an account becomes doubtful or the account investment securities. Investments in debt and marketable becomes 90 days delinquent. Interest income on impaired equity securities are reported at fair value. Substantially all loans is recognized either as cash is collected or on a cost-investment securities are designated as available for sale, with recovery basis as conditions warnmt. tmrealized gains and losses included in equity, net of applic-Financing lease income is recorded on the interest method able taxes and other adjustments. Unrealized losses that are so as to produce a level yield on funds not yet recovered. Esti-other than temporary are recognized in earnings. Realized mated unguaranteed residual values ofleased assets are based gains and losses are accounted for on the specific idendfica-i primarily on periodic independent appraisals of the values of tion method. leased assets remaining at expiration of the lease terms. l -e I

leventories. All inventories are stated at the lower of cost or agreements. For retrospectively rated reinsurance nn-realizable values. Cost for sirtually all of GE's U.S. inventories tracts, premium adjustments are recorded based on esti-is detennined on a last-in, first-out (LIFO) basis. Cost of mated losses and loss expenses, taking into consideration other GE imentories is primarily determined on a first-in, both case and incurred-but-not-reported resenes. first-out (FIFO) basis. . For traditionallong-duration insurance contracts (includ-GECS inventories consist primarily of finished products ing term and whole life contracts and annuities payable for held for sale. Cost is primarily determined on a FIFO basis. the life of the annuitant), premiums are reported as int ngible assets. Goodwill as amortired over its estimated earned income when due. period of benefit on a simight-line basis; other intangible . Fo.-investment contracts and universal life contracts, pre-assets are amortized on appropriate bases over their estimated miums received aie reported as liabilities, not as revenues. lives. No amortization period exceeds 40 years. Goodwill in Universal life contracts are long-duration insurance con-excess of associated expected operating cash flows is consid-tracts with terms that are not fixed and guaranteed; for ered to be impaired and is written down to fair value, which these contracts, revenues are recognized for assessments is determined based on either discounted future cash flows against the policyholder's account, mostly for mortality, or appraised values, depending on the nature of the asset. contract initiation, administration and surrender. Invest-Interest rate and currency risk management. As a matter of pol-ment contracts are contracts that have neither significant icy, neither GE nor GECS engages in desivatives trading, mortality nor significant morbidity risk, including annu-market-making or other speculative activities. ities payable for a determined period; for these contracts, GE and GECS use swaps primarily to optimize funding revenues are recognized'on the associated investments and costs. To a lesser degree, and in combination with options amounts credited to policyholder accounts are charged to and limit contracts, GECS uses swaps to stabilize cash flows expense. from mortgage-related assets. Defenedpolicy acquisition costs. Costs that vary with and are Interest rate and currency swaps that modify borrowm, gs or primarily related to the acquisition of new and renewal designated assets, including swaps associated with Ibrecasted insurance and investment contracts are deferred and amor-commercial paper renewals, are accounted for on an accrual tired over the respective policy tenus. basis.110th GE and GECS require all other swaps, as well as + For short-duration insurance contracts, these costs are futures, options and currency forwards, to be designated and anmrdzed pm mta over the contract periods m which the accounted for as hedges of specific assets, liabilities or com. related premiums are e rned. mitted transactions; resulting payments and receipts are recognized contemporaneously with effects of hedged trans.

• For traditional long-duration insurance contracts, these -

actions. A payment or receipt arising from early tennination costs are amortized over the respective contract periods in of an effective hedge is accounted for as an adjustment to the proportion to either anticipated premium income or, in basis of the hedged transaction, the case oflimited-payment contracts, estimated benefit Instnnnents used as hedges must be effective at reducing

Payments, the risk associated with the exposure being hedged and must

• For investment contracts and universal life contracts, these be designated as a hedge at the inception of the contract.

costs are amortized on the basis of anticipated gross Accordingly, changes in market values of hedge instruments profits. must be highly correlated with changes in market values of Periodically, deferred policy acquisition costs are reviewed underlying hedged items both at inceptiowf $a hedge and for recoverability; anticipated investment income is consid-over the life of the hedge contract. Any instnnnent'desig-cred in making recoverability evaluations. nated but ineffective as a hedge is marked to market and rec-Present t'alue offuture profits. The actuarially detennined ognized in operations immediately. present value of anticipated net cash flows to be realized from GECS insurance accounting policies. Accounting policies for insurance, annuity and investment contracts in force at the GECS insurance liusinesses follow. date of acquisition oflife insurance enterprises is recorded Premiurn income. Insurance premiums are reported as s the present value of future profits (PVFP). PVFP is amor- , earned income as follows: tired over the respective policy tenns in a manner similar to deferred policy acquisition costs; unamortized balances are

• For short-duration insurance contracts (including prop-adj.usted to reflect experience and impairment,if any.

erty and casualty, accident and health, and financial guar-anty insurance), premiums are reported as earned income, generally on a pro rata basis, over the tenus of the related 48 i m 9

i F GE OthIrinc:m3 At December 31,1997, minimum rental commitments under noncancelable operating leases aggregated $2,368 (in miHions) ufa 1996 1995 million and $5,097 million for GE and GECS, respectively. Royalty and tec hnical agreements $ 405 $391 $ 453 Amounts payable over the next five years are shown below, Associated companies 50 50 111 Marketable securities and (In millions) 1998 1999 2000 2001 2002 bank deposits 78 72 70 GE $433 $360 $260 $213 $166 Customer financ, g 26 29 26 GECS 652 574 512 467 452 m Other investments Dividends 62 79 62 Interest 1 18 18 GE,s selling, general and administrative expense totaled Other items 1,685 (10) 13 $7,476 million in 1997, $6,274 million in 1996 and $5,743 $ 2.307 $629 $ 753 million in 1995. Insignificant amounts ofinterest were cap-italized by GE and GEGS in 1997,1996 and 1995. Included in the "Other items' caption is a gain of $1,538 mi' lion related to a tax-free exchange between GE and Lockheed hlartin Corporation (lockheed h1artin) in the E F7 3 Pens. ion Benefits , fourth quarter of 1997. In exchange for its investment in lockheed h1artin Series A preferred stock, GE acquired a GE and its affiliates sponsoi a number of pension plans. Inkheed h1artin subsidiaq containing two businesses, an Principal pension plans are discussed below; other pension equity interest and cash to the extent necessag to equalize plans are not significant indisidually or in the aggregate. the value of the exchange, a portion of which was subse-Principal pension plans are the GE Pension Plan and the GE quently loaned to Lockheed h1artin. Supplementay Pension I,lan. The GE Pension Plan covers subst:mtially all GE employees in the United States as well as approximately two thirds of V3 GECS Revenues from Services such GECS employees. Generally, benefits are based on the greater of a fonnula recognizing career earnings or a fonnula (In millions) una 1996 1995 recognizing length of senice and final average earnings. Time sales, loan and llenefit provisions are subject to collective bargaining. At the other income $ 12,211 $ 11,310 $ 9,995 end of 1997, the GE Pension Plan covered approximately Operating lease rentals 4,819 4,341 4,080 466,000 participants, including 132,000 employees, 148,000 Financing leases 3,499 ,485 3,176 o, Investment income 5,512 3,506 2,542 former employees wa. h vested n. hts to future benefits, and g Premium and commission 186,000 retirees and beneficiaries receising benefits. income orinsurance affiliates 9,268 8,145 6,232 The GE Supplementaq Pension Plan is an unfunded plan $ 35,309 $ 30,787 $ 26,025 providing supplementag retirement benefits primarily to higher-level, longer-senice U.S. employees. Details ofincome for principal pension plans follow. FM suppiementai cost octalis Pension plan income (In millions) ula 1996 1995 Total expenditures for research and development were Actual return on plan assets $ 6,587 $ 4,916 $ 5,439 , $1,891 million, $1,886 million and $1,892 million in 1997, Unrecognized portion of return (3,866) (2,329) (3,087) 1996 and 1995, respectively. The Company-funded portion Senice cost for benefits earned (a) (596) (550) (469) aggregated $1,480 million in 1997, $1,421 million in 1996 Interest cost on benefit obligation (1,606) (1,593) (1,580) ation 304 265 394 and $1,299 million in 1995. Special early retirement cost (412) Rental expense under operating leases is shown below. Total pension plan income $ 331 $ 709 $ 697 (In millions) uim 1996 1995 (a) Net of empkiver contributions. GE $ 536 $512 $523 GECS 734 547 524 Actual return on trust assets in 1997 was 19.8%, compared with the 9.5% assumed return on such assets. The effect of this higher return will be recognized in future years. 1 l L i l 49 J

Funding policy for the GE Pension Plan is to contribute Retiree Health and Life Benzfits amounts sufficient to meet minimum funding requirements as set forth in employee benefit and tax laws plus such addi-GE and its affiliates sponsor a number of retiree health and tional amounts as GE may determine to be appropriate. life insurance benefit plans. Principal retiree benefit plans GE has not made contributions since 1987 because the fully are discussed below; other such plans are not significant funded status of the GE Pension Plan precludes cuirent tax indisidually or in the aggregate. deduction and because any Company contribution would Principal retiree benefit plans generally provide health and life require payment of annual excise taxes. insurance benefits to employees who retire under the GE Pension Plan with 10 or more years of senice. Retirees share Funded status of pension plans n the cost of their health care benefits. Benefit provisions December 31 (In millions) utm 1996 are subject to collective bargaining. At the end of 1997, these Market-related value of assets 8 32,638 $ 29,402 plans covered approximately 250,000 retirees and dependents. Projected benefit obligation 25.874 23,251 Details of cost for principal retiree benefit plans follow. The market-related value of pension assets recognizes Cost of retiree benent plans market appreciation or depreciation in the portfolio over (In minions) nra 1996 1995 five years, a method that reduces the short-term impact of Retiree health plans market fluctuations. Senice cost for benefits earned $ 90 $ 77 $ 73 Plan assets are held in trust and consist mainly of common interest cost on benefit obligation 183 166 189 Amortization 13 (12) stock and fixed-income investments. GE common stock rep. Special early retirement cost 152 resented about 6% and 5% of trust assets at year-end 1997 and 1996, respectively. Retiiec health plan cost 438 243 250 An analysis of amounts shown in the Statement of Finan- - sff{r benefits earned 17 16 13 cial Position is presented below. Interest cost on benefit obligation 116 106 108 Actual return on plan assets (343) (225) (329) Prepaid pension asset Unrecognised portion of return 206 93 206 Am rtization 8 12 1 December 31 (In millions) urm 1996 Special early redrement cost 13 Current value of trust assets $ 38,742 $ 33,686 Add (deduct) unamortized balances Retiree life plan cost (income) 17 2 (1) SFAS No. 87 transition gain (462) (615) Total cost $455 $ 245 $249 Experience ;,ains (7,538) (5,357) Plan amendments 1,003 1,012 Funding policy for retiree health benefits is generally to pay Projected benefit obligation (25,874) (23,251) covered expenses as they are incurred. GE funds retiree life Pension liability 703 637 insurance benefits at its discretion and within limits imposed Prepaid pension asset S 6,574 $ 6,112 by tax laws. The accumulated benefit obligation was $24,675 million Funded status of retiree benefit plans and $22,176 million at year-end 1997 and 1996, respectively; December 31 (In millions) n rm 1996 the vested benefit obligatmn was approximately equal to the Market-related value f assets $1,621 $ 1,437 accumulated benefit obligation at the end of both years. Accumulated postretirement Actuarial assurnptions and techniques used to determine costs benefit obligation 4,775 ; 3,954 and benefit obligations for principal pension plans follow. Actuarial assumptions ognizes market appreciation or depreciation in the portfolio December 31 una 1996 over five years, a method that reduces the short term impact Discount rate 7.0% 7.5% f m rket fluctuations. Compensation increases 4.5 4.5 Plan assets are held in trust and consist mainly of common Return on assets for the year 9.5 9.5 stock and fixed-income investments. GE common stock rep-resented about 4% and 3% of trust assets at year-end 1997 Experience gains and losses, as well as the effects of and 1996, respectively, changes in actuarial assumptions and plan provisions, are amortized over employees' average future senice period. 50 i

An analysis of amounts shown in the Statement of Finan [ GECS Allowance f:r t.csses en Financing Recsivables cial Position is presented below. The allowance for losses on small-balance receivables is Retiree benettliability/ asset tw W >s determined principally on the basis of actual experience during the preceding three years. Further allowances are Dnember 31 (In millions) mm 1996 mm 1996 to reflect management'sjudgment of addi ional Accumulated pm e t postretirement 3055 Potential. For other receivables, principally the larger 1rnefit obligation loans and leases, the allowance for losses is detennined pri-Retirees and marily on the basis of management'sjudgment of net loss dependents $2,445 $1,889 $ 1,417 $ 1,305 potential, including specific allowances for known troubled Ernployees eligible to retire 104 86 45 t,5 acc unts. The table below shows the activity in the allowance Other employees 549 440 215 189 for losses on financing receivables during each of the past 3,098 2,415 1,677 1,539 three years.

• Add (dedus t) unamortized (In millions) mm 1996 1995 balances Balance atJanuary 1

$ 2,693 $ 2,519 $2,062 Experience Provisions charged to operations 1.421 1,033 1,117 (losses) gains (423) (195) 127 (41) Net transfers primarily related to Plan amendmenis (171) 157 55 109 companies acquired or sold 127 139 217 Current value of Amounts written off-net (1,439) (998) (877) trust assets (1,917) (1,682) Balace at December 31 $ 2,802 $ 2,693 $2,519 Retiree benettliability (prepaid asset) $2,504 $2,377 $ (58) $ (75) All accounts or portions thereof deemed to be uncollect-Actu:n l assumptions and techniques used to determme costs ible or to require an excessive collection cost are written off a to the allowance for losses. Small-balance accounts generally and benefit obligations f.or principal retiree benefit plans are shown below, are written off when 6 to 12 months delinquent, although any balancejudged to be uncollectible, such as an account in Actuarial assumptions bankruptcy, is written down immediately to estimated realiz-able value. Large-balance accounts are reviewed at least quar-U"""*" 3 ' terly, and those accotmas with amounts that arejudged to be Discount rate 7.0% 7.5% uncollectible are written down to estimated realizable value. Compensation increases 4.5 4.5 lleahh care cost uend (a) 7.8 8.0 Return on assets for the year 9.5 9.5 (a) Gradually declining to 5.0% after 2002. g>p Provision forincome Taxes Increasing the health cate cost trend rates by one per-(in mimons) mm 1996 1995 centage point would not have had a material effect on the December 31,1997, accumulated postretirement benefit f,Etimated amounts payable $ 2,332 $ 2,235 $1,696 obligation or the annual cost of retiree health plans. Deferred tax expense (benefit) Experience gains and losses, as well as the effects of from temporary diflerences (522) 60 363 changes in actuarial assumptions and plan provisions, are 1,810 2,295 2,059 amortized over employees' average f uture sersice period. GECS Estimated amounts payable 368 164 434 Deferred tax expense from j temgmrary differences 798 1,067 671 l 1,166 1,231 1,105 Consolidated Estimated amounts payable 2,700 2,309 2,130 Deferred tax expense from temporary differences 276 1,127 1,034 $ 2,976 $ 3,526 $3,164 GE includes GECS in filing a consolidated U.S. federal income tax return. The GECS provision for estimated taxes payable includes its effect on the consolidated return. 51

Estimated consolidated amounts payable includes amounta Except for certain earnings that GE intends to reinvest applicable to non-U.S. jurisdictions of $1,298 million, $1,204 indefinitely, provision has oeen made for the estimated U.S. million and $721million in 1997,1996 and 1995, respectively. federal income tax liabilities applicable to undistributed Deferred income tax balances reflect the impact of tempo-earnings of affiliates and associated companies. rary differences between the carrying amounts of assets and Consolidated U.S. income before taxes was $8.2 billion in liabilities and their tax bases and are stated at enacted tax 1997, $8.0 billion in 1996 and $7.6 billion in 1995. The corre-rates expected to be in effect when taxes are actually paid or sponding amounts for non-U.S.-based operations were $3.0 ) recovered. See note 22 for details, billion in 1997, $2.8 billion in 1996 and $2.1 billion in 1995. Reconciliation of U.S. federal Consolidated CE GECS statutory tax rate to actual rate LLram 1996 1995 L L >- 1996 1995 L L r-1996 1995 Strtutory 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 reaulting from: Inclusion of after-tax earnings of GECS in before-tax earnings of GE (11.4) (10.3) (9.8) lockheed Martin exchange (note 2) (4.8) (5.4) Amortization of goodwill 1.1 1.1 1.1 0.8 0.8 0.8 1.1 1.2 1.1 Tax-exempt income (1.9) (2.0) (2.1) (4.9) (5.4) (5.8) Foreign Sales Corporation tax benefits (1.0) (0.7) (0 9) (0.9) (0.6) (1.1) (0.5) (0.3) Dnidends received, not fully taxable (0.5) (0.6) (0.5) (0.2) (0.2) (0.2) (0.9) (1.1) (0.8) All other - net (1.3) (0.2) (0.1) 0.2 (0.7) (0.8) (3.4) 1.0 1.9 (8.4) (2.4) (2.5) (16.9) (11.0) (11.1) (8.6) (4.6) (3.6) Actual income tax rate 26.6% 32.6 % 32.5 % 18.1 % 24.0 % 23.9 % 26.4 % 30.4 % 31.4 % F" Earsings Per Share Information (Dollar amounts and shar es in millions; per-share amounts in dollars) Basic Diluted Basic Diluted Basic Diluted Consolidated operations Net earnings available to common share owners $ 8.203 $ 8,203 $ 7,280 $ 7,280 $ 6,573 5 6,573 Dhidend equivalents-net of tax 10 9 9 Net earnings available for per-share calculation S 8,203 $ 8,213 $ 7,280 $ 7,289 $ 6,573 $ 6,582 Average equivalent shares Shares of GE common stock outstanding 3,275 3,275 3,307 3,307 3,368 3,368 Employee compensation-related shares, including stock options 70 64 46 Total average equivalent shares 3,275 3.345 3,307 3,371 3,3G8 3,414 Net earnings per share $ 2.50 $ 2.46 $ 2.20 $ 2.16 $ 1.95 $ 1.93 Share data and per-share amounts have tren adjusted for the 2.for.1 stcx k split cHective on. April 28.1997. FN investment securities GE held equity securities with an estimated fair value of December 31.1997 were $13 million and $5 million, respec- $265 million (amortized cost of $257 million) and $17 mil-tively. There were no unrealized gains or losses at December lion (amortized cost of $17 million) at December 31,1997 31,1996. and 1996, respectively. Gross unrealized gains and losses at An analysis of GECS investment securities follows on the next page. 52

GECS invesenent securities GE Curr:nt Ric:ivables Gross Gross Amortized unrealized unrealized Estimated (In millions) cost gains losses fair value December 31 (in millions) n rm 1996 mmmrser Aircraft Engines $ 2,118 $ 1,389 A li PP ances 479 713 i Debt securities 'o ca ting 8 U.S. corporate $ 24,580 $ 1,028 $ (53) $ 25,555 d State and municipal 10,780 636 (2) 11,414 fatena Mortgage-backed 12.074 341 (30) 12,385 j Technical Pmducts and Senices 787 698 S 7,683 310 (12) 7,981 AH Other 131 86 Government - Corporate 534 377 non-U.S. 3,714 - 150 (3) 3,861 U.S. government and 9,292 9,066 federal agency 2,413 103 (4) 2,512 Less allowance for losses (238) (240) Equity securities 5,414 1,336 (102) E,648 $ 9,054 $ 8,826 $ 66,658 $ 3,904 $(206) $ 70,356 Receivables balances at December 31,1997 and 1996, before allowance for losses, included $6,125 million and $6,629 million, respectively, from sales of goods and senices Sc rate $ 22.080 $ 308 $(641) $ 21,747 State and municipal 10,232 399 (34) 10,597 to cust mers, and $285 million and $290 million, respec-Mortgage-backed 11,072 297 (108) 11,261 tively, from transactions with associated companies. Corporate - Current receivables of $303 million at year-end 1997 and non-U.S. 5,587 142 (13) 5,716 $326 million at year-end 1996 arose from sales, principally of Government - non U.S. 3,347 99 (2) 3,444 aircraft engine goods and senices, on open account to van-U.S. government and ous agencies of the U.S. government, which is GE's largest federal agency 2,340 34 (7) 2,367 single customer. About 4% of GE's sales of goods and sen-Equity securities 4,117 677 (54) 4,740 ices were to the U.S. government in 1997 (about 5% in 1996 $ 58,775 $ 1,956 $(859) $ 59,872 and 1995). The majority of mortgage-backed securities shown in the table above are collateralized by U.S. residential mortgages. g At December 31,1997, contractual maturities of debt secu-Ek inventories rities, other than mortgage-backed securities, were as follows: December 31 (In millions) nra 1996 GECS contractual maturities of debt securities GE (:xcluding mortgage-backed securities) Amortized Estimated Raw materials and work in process $ 3,070 $ 3,028 (in millions) cost fair value Finished goods 2,895 2,404 Unbilled shipments 242 258 Due in 1998 $ 2,570 $ 2,583 6,207 5,690 1999-2002 13,329 13,653 Less revaluation to LIFO (1,098) (1,217) 2003-2007 12,881 13,406 5,109 4,473 2008 and later 20,390 21,681 GECS Finished goods 786 376 s it is expected that actual maturities will differ from con- $ 5,895 $ 4,849 tractual maturities because bonowers have the right to call or prepay certain obligations, sometimes without call or LIFO revaluations decreased $119 million in 1997, com-j prepayment penalties. Proceeds from sales ofinvestment pared with decreases of $128 million in 1996 and $87 million securities in 1997 we re $14,728 million ($11,868 million in in 1995. Included in these changes were decreases of $59 1996 and $11,017 million in 1995). Gross realized gains were million, $58 million and $88 million in 1997,1996 and 1995, $1,018 million in 1997 ($638 million in 1996 and $503 mil-respectively, that resulted from lower LIFO inventory levels. lion in 1995). Gros, realized losses were $173 million in 1997 There were net cost decreases in 1997 and 1996, and no cost ($190 million in 1996 and $157 million in 1995). change in 1995. As of December 31,1997, GE is obligated to acquire certain raw materials at market prices through the i year 2003 under various take-or-pay or similar arrangements. Annual minimum commitments under these arrangements are insignificant. 53

M GECS Fin:ncing RIctivables (inv:stm:nts in RE m3 timi s:lis,1:ans and fin:ncing Iras:s) December 31 Un milhons) urm 1996 tractual maturity. Accordingly, the maturities of time sides Time sales and loans and loans are not to be regarded as forecasts of future cash Cmsumer services $ 42,270 $ 40,479 collections. Specialiicd financing 13,974 14,832 Investment iti financing leases consists of direct financing Mid-market financing 11,401 9,978 leveraged leases of aircraft, radroad rolling stock, autos, an Equipment management 469 448 Specialty insurance 202 339 other transportation equipment, data processing equipment 68,316 66,076 and medical equipment, as well as other manufacturing, Deferred income (3,484) (3,244) power generation, mining and commercial equipment and Time sales and loans-net 64,832 62,832 facilities. Investmentin financing leases As the sole owner of assets under direct financing leases Direct fmancing leases 38,616 36,576 and as the equity participant in leveraged leases, GECS is Leveraged leases 3,153 2,999 taxed on total lease payments received and is entitled to tax Investment in financing leases 41,769 39,575 deductions based on the cost ofleased assets and tax de-106,601 102,407 ductions for interest paid to third-party participants. GECS Less allowance for losses (2,802) (2,693) ~ generally is entitled to any residual value ofleased assets. $103,799 $ 99,714 Investment in direct financing and leveraged leases repie-sents unpaid rentals and estimated unguaranteed residual Time sales and loans represents transactions in a variety values ofleased equipment, less related deferred income, of forms, m.cluding time sales, revohing charge and cred.it, GECS has no general obligation for pn.ncipal and interest on mortgages, installment loans, m.tennediate-tenn loans and notes and other m. o struments representing third-party par. revohing loans secured by business assets. The portfoh. ticipation related to leveraged leases; such notes and other mcludes time s: des and loans carried at the pn.ncipal amount instruments have not been m.cluded in liabilities but have on which finance charges are billed periodically, and time been offset against the related rentals receivable. GECS' share sales and loans canied at gron book value, which m.cludes of rentals receivable on leveraged leases.is subordinate to the finance charges. At year-end 1997 and 1996, speciah. red share of other participants who also have security interests in financing and consumer senices loans m.cluded $10,503 mil-the leased equipment. lion and $12,075 m.dlion, respectively, for commercial real At December 31,1997, contractual maturities for net estate loans. Note 17 contains infonnation on airline loans and leases. rentals receivable under financing leases were $12,820 mil-lion in 1998; $10,616 million in 1999; $8,395 million in 2000; At December 31,1997, contractual maturities for time $3,871 nu.lh.on m 2001; $2,371 tmlh.on m 2002; and $8,373 sales and loans were $28,983 milh.on m 1998; $12,792 milh.on in 1999; $7,967 million in 2000; $5,156 million in 2001; nullion thereafter-aggregating $46,446 m.dlion. As with $3,985 million in 2002; and $9,433 million thereafter - '" ". #*E#N#" # * * * ' * * " ""E aggregating $68,316 m.llion. Experience has shown that a these receivables will be paid prior to contractual maturity, i and these amounts should not be regarded as forecasts of substantial portion of receivables wd. l be pa.d prior to con-i future cash flows. Netinvestment in financing leases Totalfinancing leases Direct financing leases Leveraged leases December 31 Un Wit 6ns) una 1996 unau 1996 urm 1996 Total minimum lease payments receivable $ 58,543 $ 54,009 $ 42,901 $ 40,555 $ 15,642 $ 13,454 Irss principal and interest on third-party nonrecourse debt (12,097) (10,213) (12,097) (10,213) Net rentals receivable 46,446 43,796 42,901 40,555 3,545 3,241 Estimated unguaranteed residual v:due ofleased assets 5,591 6,248 4,244 4,906 1,347 1,342 i Leu defened income (10.268) (10,469) (8,529) (8,885) (1,739) (1,584) lovestment in Enancing leases (as shown above) 41,769 39,575 38,616 36,576 3,153 2,999 i Less amounts to arrive at net investment Allowance for losses (656) (720) (575) (641) (81) (79) Defeired taxes arising from financing leases (7,909) (7,488) (4,671) (4,077) (3,238) (3,411) Notinvestment in Anancing leases $ 33,204 $ 31,367 $ 33,370 $ 31,858 $ (166) $ (491) l 54 3

GECS has a noncontrolling investment in the common F Oth;r GECS Rectinblis stock of hiontgomery Ward floiding Corp. (h!WilC), which together with its wholly owned subsidiary, Montgomery This account includes reinsurance recoverables of $5,027 inillion and $4,403 million and insurance-related receivables Ward & Co., Incorporated (MWC),is engaged in retail merchandising and direct response marketing, the latter of $4,932 million and $4,833 million at year-end 1997 and conducted primarily through Signature Financial / Marketing 1996, respectively. Premium receivables, funds on deposit Inc. (Signature), which markets consumer club and insur-with reinsurers and policy loans are included in insurance-rel ted receivables. Also in "Other GECS receivables" are ance products. OnJulv 7,1997, MWIIC, MWC and certain of their affiliates (excluding Signature) filed for reorganiza-tr de receivables, accrued investment income, operating tion under Chapter 11 of the U.S. Bankruptcy Code. As a le se receiv bles and a variety of sundry items. result, inventory financing loans to MWHC and affiliates became " impaired" loans (as defined below) because, due t g Property, Plant and Equipment i the automatic stay in bankruptcy, GECS is not receiving cur-EE (including equipment leased to others) rent interest payment on its loans and, in management's judgment,it is therefore probable that GECS will be unable necemt,er M on minions) um 1996 to collect all amounts due according to original contractual Original cost terms of the loan agreements. The total amount of such GE loans was $617 million at Decernber 31,1997. The nonearn. Land and improvements $ 459 $ 476 ing and reduced-earning receivable balances and the U"ildi"gs, structures and related eqmpment 6,375 6,315 impaired loan balances discussed below exclude amounts hiac hinen and equipment 18,376 17,824 related to MWIIC and affiliates. trasehold costs and manufacturing Nonearning consumer receivables were $1,049 million and plant under construction 1,621 1,308 Other 24 27 $926 million at December 31,1997 and 1996, respectively, 26,855 25,950 a substantial amount of which were U.S. private-label credit GECS card loans subject to various loss-sharing agreements that eq 3,W 3,075 provide full or partial recourse to the originating retailer. ng(a n] Nonearning and reduced-earning receivables other than Vehides 9,144 6,789 consumer receivables were $353 million and $471 million Aircraft 7,606 6,647 at year-end 1997 and 1996, respectively. Marine shipping containers 2.774 3,053 m d romng sud 2 " Impaired" loans are defined by generally accapted accounting principles as loans for which it is probable that the lender wdl be unable to collect all amounts due accord- $ 55,657 $ 50,784 mg to ongmal contractual terms of the loan agreement. That "N"" definition excludes, among other things, leases or large "j" "'," ; groups of smaller-halance homogenous loans and therefore (;E $ 15,737 $ 15.118 applies principally to GECS commercial loans. GECS Under these principles, GECS has two types of" impaired-Buildings and equipment 1,478 1,246 Equipment leased to others 6.126 5,625 loans as of December 31,1997 and 1996: loans requiring $ 23,2 $ 21,989 allowances for losses ($339 million and $583 million, respec-tively); and loans expected to be fully recoverable because Amortization of GECS equipment leased to others was the carrying amount has been reduced previously through $2,102 million, $1,848 million and $1,702 million in 1997, ^ charge-offs or deferral ofincome recognition ($167 million 1996 M 199E np&$ kmaW Mm mtals and $187 million, respectively) - allowances for losses on due from customers for equipment on operating leases at these loans were $170 million and $222 million, respectively. year-end 1997 totaled $10,438 million and are due as follows: Average investment in these loans during 1997 and 1996 was $3,247 million in 1998; $2,243 million in 1999; $1,473 mil- $647 million and $842 million, respectively, before allowance lion in 2000; $935 million in 2001; $628 million in 2002; and for losses; interest income earned, principally on the cash $ 912 miHion defn basis, while they were considered impaired was $32 million and $30 million in 1997 and 1996, respectively. 55

Int ngible Ass:ts airline financing programs, GE had issued loans and guaran-tees (principally guarantees) amounting to $1,590 million at December 31 (In millions) nrm 1996 year-end 1997 and $1,514 million at year-end 1996; ar.d it GE. had entered into commitments totaling $1,794 million and Goodwill $ 8,046 $ 6,676 $1,554 million at year-end 1997 and 1996, respectively, to Other intangibles 708 691 provide financial assistance on future aircraft engine sales. 8,755 7,367 Estimated fair values of the aircraft securing these receivables GECS and associated guarantees exceeded the related account bal-Goodwill B,090 5,847 Present value of future profits (PVFP) 1,824 2,438 ances and guaranteed amounts at December 31,1997. GECS Other intangibles 452 355 acts as a lender and lessor to the commercial airline industry. 10,386 B,640 At December 31,1997 and 1996, the balance of such GECS $19,121 $16,007 1 ans, leases and equipment leased to others was $8,980 mil-lion and $8,240 million, respectively. In addition, at Decem-GE intangible assets are shown net of accumulated amor-ber 31,1997, GECS had issued financial guarantees and tization of $2,976 million in 1997 and $2,637 million in 1996. funding commitments of $123 million ($221 million at year-GECS intangible assets are net of accumulated amortization end 1996) and had placed multiyear orders for various of $2,615 million in 1997 and $1,988 million in 1996. Boeing and Airbus aircraft with list prices of approximately PVFP amortization, which is on an accelerated basis and $6.2 billion ($6.5 billion at year-end 1996). net ofinterest,is projected to range from 13% to 8% of the At year-end 1997, the National Broadcasting Company had year-end 1997 unamortized balance for each of the next $9,388 million of commitments to acquire broadcast material five years, and the rights to broadcast television programs, including U.S. television rights to future Olympic games, and commit-ments under long-term television station affiliation agree-F All Other Assets ments that require payments through the year 2008. In connection with numerous projects, primarily power generation bids and contracts, GE had issued various bid and December 31 (In millions) arm 1996 Perfinmance bonds and guarantees totaling $2,895 million GE Investments at year-end 1997 and $3,250 million at year end 1996. Associated companies (a) $ 1,288 $ 1,526 Separate accounts represent investments controlled by Other 1,139 1,591 policyholders and are associated with identical amounts 2,427 3,117 reported as insurance liabilities in note 20. Prepaid pension asset 6,574 6,112 Notes receivable 1,412 26 Other 4,316 3,922 10 14,729 13,177 DED GE All Other Current Costs and Expenses Accrued GECS Investments At ye r-end 1997 and 1996, this account included taxes Assets acquired for resale 4,403 2,993 accrued of $2,866 million and $2,487 million, respectively, Associated companies (a) 4,695 ' '11 6 and compensation and benefit accruals of $1,321 million Real estate ventures 2,326 2,469 and $1,315 million, respectively. Also included are amounts Other 2,452 2,095 for product warranties, estimated costs on shipments billed 13,876 12.473 ~ to customers and a variety of sundry items. Separate accounts 4,926 3,516 Servicing assets 1,713 1,663 Deferred insurance acquisition costs 2,521 1,720 Other 2,631 2,286 25,667 21,658 Eliminations (576) $ 30,820 $ 34,835 (a) Includes advances. In line with industry practice, sales of commercialjet air-craft engines often involve long-term customer financing commitments. In making such commitments,it is GE's gen-eral practice to require that it have or be able to establish a secured position in the aircraft being financed. Under such 56 i

P B:rr: wings short tenn borrowings B rrowings of GE and GECS are addressed below from two perspectives -liquidity and interest rate management. m 1996 Additional information about borrowings and associated swaps can e un n note M December 31 (In millions) Amount rste Amount rate GE Liquidity requirements of GE and GECS are principally met commercial paper through the credit markets. Maturities oflong-term borrow-(U.S.) $ 1,835 5.88 % $ 914 5.41 % ings during the next five years follow. Payable to banks 348 8.38 204 8.58 Current portion of (in millions) 1998 1999 2000 2001 2002 long-term debt 1,099 5.85(a) 551 6.39(a) GE $ 1,099 $ 97 $ 69 $ 57 $ 38 Other 347 670 GECS 15,101 9,801 6,927 5,763 4,816 o 3.629 2,339 GECS Confirmed credit lines of $3.9 billion had been extended Commercial paper to GE by 22 banks at year-end 1997. Substantially all of GE's credit lines are available to GECS and its affiliates in addition h ri-U.S. 3 ,7 3 to their own credit lines. Current portion of long-term debt 15.101 6.30(a) 16,471 6.17(a) At year-end 1997, GECS and its af filiates held committed Other 8.939 7,302 lines of credit aggregating $20.9 billion, including $11.8 bil-95.274 77,945 lion of revolving credit agreements pursuant to which it has Eliminations (828) (84) the right to borrow funds for periods exceeding one year. $ 98,075 $ 80,200 A total of $1.4 billion of GE Capital credit lines is available for use by GE. During 1997, neither GE nor GECS borrowed under any Long-term borrowings 1997 of these credit lines. Both GE and GECS compensate certain Average banks for credit facilities in the form of fees, which were December 31 (In milhons) rate (a) Maturities urm 1996 GE Indusuialdevelopment/ Interest rates are managed by GECS in light of the anticipated pollution control behavior, including prepayment behavior, of assets in which bonds 3.82 % 1999 2021 $ 270 $ 244 debt proceeds are invested. A variety ofinstruments, includ-Payable to banks 7.60 1999-2005 195 312 ing interest rate and currency swaps and currency forwards, Semor notes 500 Other (b) 264 654 are employed to achieve management's interest rate objec-tives. Effective interest rates are lower under these " syn-729 1,710 thetic" positions than could have been achieved by issuing GECS Senior notes 6.59 1999 2055 44,993 46,680 debt direcdy. Subordinated notes (c) 7.88 2006 2035 996 996 The following table shows GECS borrowing positions con-45,989 47,676 sidering the effects of swaps. Eliminations (115) (140) Effective borrowings (including swaps) gg December 31 (In milhons) nrm 1996 ^ (a) Includes the effects of associated interest rate and currency swaps. (b) includes a variety of obligations having various interest rates and Short-term $ 56,961 $ 46,450 maturities, including certain borrowings by parent operating com-long-term (including current portion) p(ments and afnliates. Fixed rate (a) $ 59,329 $ 56,190

4) Guaranteed by GE.

Floating rate 24,973 22,981 Total long-term 8 84,302 $ 79,171 (a) Includes the notional amount of long term interest rate swaps that eflectively convert the floating-rate nature of short-term borrowings to fixed rates ofinterest. At December 31,1997, interest rate swap maturities ranged from 1998 to 2029, and average interest rates for " synthetic" fixed-rate borrowings were 6.32% (6.45% at year-end 1996). 57

gg cnd A:nuity B:n; fits GECS Insinanco Li biliti:s, Risirves necember si (In mimons) o rm 1996 Insumnce risk is ceded on both a pro rata and an excess Investment contracts and universal basis. When GECS cedes insurance to third parties,it is not life benefits $ 28,266 $ 26,140 relieved ofits primary obligation to policyholders. losses on 1.ife insurance benefits and other (a) 14,356 13,854 ceded risks give rise to claims for recovery; allowances are Unpaid claims and claims adjustment established for such receivables from reinsurers. expenses 14,654 13,184 Unearned premiums 5,068 4,633 %e effects of reinsurance on premiums written and pre-Separate accounts (see note 17) 4,926 3,516 miums and commissions earned were as follows: $ 67,270 $61,327 (In millions) u rE 1996 199$ (a) 1. ire insurance benefits are accounted for mainly by a net level-emunns wnnen premium methat using estimated yicMs generally ranging from 5% to 9% in both 1997 and IMNi. Direct S 5,206 $ 3,926 $ 2,984 Assumed 5,501 5,455 3,978 Ceded (1,311) (1,196) (804) The liability for unpaid claims and claims adj. ustment S 9,396 $ 8,185 $ 6,158 expenses, principally property and casualty resenes, consists of both case and incurred-but-not-reported resenes. Where Premiums and commissions earned experience is not sufficient to determine resenes,industy ed 5 averages are used. Estimated amounts of sahage and subro-Ceded (1,256) (1,058) (786) gation recoverable on paid and unpaid losses are deducted S 9,268 $ 8.145 $ 6,232 from outstanding losses. A summary of activity for this liabil-ity follows. Reinsurunce recoveries recognized as a reduction ofinsur-ante losses and policyholder and annuity benefits amounted to (In milliom) urm 1996 1995 $903 million, $937 million and $459 million for the years Balance atJanuary 1 - gross $13,184 $12,662 $ 7,032 ended December 31,1997,1990 and 1995, respectively. less reinsurance recoverables (1,822) (1,853) (1,084) Balance atJanuary 1 - net 11,362 10,809 5,948 Claims and expenses incurred gg Current year 4,494 4,087 3,268 Yg GE AllOtherLiabilities Prior years 146 104 492 Claims and expenses paid This account includes noncurrent compensation and benefit Cm rent year (1,780) (1,357) (706) Prior years (2,816) (2,373) (1,908) accru is at year-end 1997 and 1996 of $5,484 m. h.d on and Claim reserves related to $5,177 million, respectively. Also included are amounts for acquired companies 1,360 309 3,696 deferred incentive compensation, deferred income, product Other (358) (217) 19 warranties and a variety of sundry items. Balance at December 31 - net 12,408 11.362 10,809 GE is involved in numerous remediation actions to clean Add reinsurance recoverables 2,246 1,822 1,853 up hazardous wastes as required by federal and state laws. Balance at December 31 - gross $14,654 $1084 $12,662 liabilities for remediation costs at each site are based on Prior-year claims and expenses incurred '.n the above table in nagement's best estimate of undiscounted future costs. . resulted principally from settling claims enablished in earlier excluding possible insurance recoveries. When there appears to be a range of wible costs with equallikelihood,liabili-t accident years for amounts that differed from expectations. ties re based on the lower end of such range. Uncertainties Financial guarantees and credit life risk ofinsurance afliliates are summarized below. bout the status oflaws, regulations, technology and infor-mation related to indhidual sites make it difficult to develop December 31 (In milliom) urm 1996 a meaningful estimate of the reasonably possible aggregate Guarantees, principally on municipal environmental remediation exposure. Ilowever, even in the bonds and structured finance issues $ 144,647 $140,575 unlikely event that remediation costs amounted to the high Mortgage insurance risk in force 46,245 36,279 end of the range of costs for each site, the resulting addi-Credit hfe insurance risk in force 26,593 25,961 tionalliabih.ty would not be material to GE,s h.nancial posi-less reinsurance (33,528) (32,413) $183,957 $170,402 don, L su ts of operadons or Hquidity. i 1 58

D;f:rred inc:me Texts R stricted N;t Ass:ts cf GECS Affilitt:s Aggregate deferred tax amounts are sununarized below. Certain GECS consolidated afliliates are restricted from remitting funds to GECS in the form of dhidends or loans j Dnemier 31 (In mithons) um 1996 by a variety of regulations, the purpose of which is to protect GE $ 4,891 $ 4,097 afTected insurance policyholders, depositors or investors. ) GECS 4,320 3,310 At year-end 1997, net assets of regulated GECS afliliates 9,211 7,407 amounted to $22.9 billion, of which $19.4 billion was Liabilities rest icted. GE 4,576 4,630 At December 31,1997 and 1996, the aggregate statutory GECS 13,286 11,050 capital and surplus of the insurance businesses totaled $12.4 17,862 15,680 billion and $10.2 billion, respectively. In preparing statutory Not deferred tax liability $ 8,651 $ 8,273 statements, no significant permitted accounting practices are used that difTer from prescribed accounting practices. Principal components of the net deferred tax balances for GE and GECS are as follows: j December 31 (In miltions) Na 1996 f Share Owners' Equity GE Provisions for expenses $(3,367) $(2,740) (In millions) mm 1996 1995 Retirce insurance plans (856) (806) Common stockissued S 594 $ 594 5 594 Prepaid pension asset 2,301 2,139 Depreciation 955 836 Unrealized gains on Other - net 652 1,104 investment securities-net $ 2,138 $ 671 $ 1/)D0 (315) 533 Other capital GECS 11alance atJ nuary l $ 2,498 $ 1,663 $ 1,122 Financing leases 7,909 7,488 Cunency uanslation adjustments (742) (117) 127 Operating leases 2,156 1,833 G ins on treasury sud Net unrealised gains dispositions 1,800 952 414 on securities 1,264 404 Balance at Decemtwr 31 $ 3,636 $ 2,498 $ 1,663 Allowance for losses (1,372) (1,184) Retained earnings insurance seserves (1,000) (787) Balance atJanuary 1 $ 38,670 $ 34,528 $ 30,793 AMT credit carryforwards (354) (561) Net earnings 8,203 7,280 6,573 Other - net 363 547 Dividends dedared (3,535) (3,138) (2,838) 8,966 7,740 Balance at December 31 $ 43,338 $ 38,670 $ 34,528 Not deferred tax liability $ 8,651 3 8,273 Common stock held in treasury Balance atJanuary 1 $ 11,308 $ 8,176 $ 5,312 The GE provisions for expenses category represents Purchases 6,392 4,842 4,016 1 the tax effects of temporary difTerences related to expense Dispositions (2,432) (1,710) (1,152) accruals for a wide variety of items, such as employee Balance at December 31 $ 15,268 $ 11,308 $ 8,176 compensation and benefits, interest on tax deficiencies, In December 1997, GE's Board of Directors increased product warranties and other provisions for sundry losses and expenses that are not currendy deductible. the authorization to repurchase Company common stock to $17 billion and authorized the program to continue through 1999. Funds used for the share repurchase will be GECS MinorityInterestin Equity generated largely from free cash flow. Through year-end of Consolidated Affiliates 1997, a total of 244 million shares having an aggregate cost of $9.9 billion had been repurchased under this program i Minority interest in equity of consolidated GECS affih.ates and placed into treasury, includes preferred stock issued by GE Capital and by an a!Ill-l In April 1997, share owners authon. zed (a) an increase sate of GE Capital. The pref. erred stock pays cumulative dm..- M a dMM h dann M h dends at variable rates. The hquidauon preference of the 00#00MO ams MW plMW m a preferred shares is summanted below. 00,000,000 shares each with a par value of $0.16 and Dn ember 31 (in milhoni) mm 1996 (b) the split of each unissued and issued common share, GE Capital $ 2,230 $ 1,800 including shares held in treasury, into two shares of common GE Capital athliate 660 485 stock each with a par value of $0.16. All share data and per-share amounts have been adjusted to reflect this change. Di idend rates on the pref. erred stock ranged i. rom 3.8% to 5.2% during 1997 and 1996, and from 4.2% to 5.2% during

1995, 59

Common shares issued and outstanding are summarized There were 92.8 million and 62.1 million additional shares in the following table. available for grants of options, SARs, restricted stock and restricted stock units at December 31,1997 and 1996, Shares of GE common stock respectively. Under the 1990 Long-Term Incentive Plan, December 31 On thousands) m 1996 1995 0.95% of the Company's issued common stock (including issued 3,714,026 3,714.02f, 3,714,026 treasury shares) as of the first day of each calendar year dur-In treaeury (449,434) (424,9,',2) (381,002) ing which the Plan is in efTect becomes available for granting Outstanding 3,264,582 3.289,084 3,333,024 awards in such year. Any unused portion,in addition to shares allocated to awards that are canceled or forfeited,is GE has 50 million authorized shares of preferred stock available for later years. ($1.00 par value), but no such shares have been issued. Outstanding options and SARs expire on various dates The effects of translating to U.S. dollars the financial state-through December 19,2007. Restricted stock grants vest on menta of non U.S. affiliates whose functional currency is the various dates up to normal retirement of grantees. I local currency are included in other capital. Asset and liabil-The following table summarizes information about stock ity accounts are translated at year-end exchange rates, while options outstanding at December 31,1997. revenues and expenses are translated at average rates for the period. Cumulative currency translation adjustments repre. Stock options outstanding (Shares in thousands) sented reductions of other capital of $798 million and $56 million in 1997 and 1996, respectively, and an addition to gy,,,,, gy,,,,, other capital of $61 million in 1995. Exercise Average exercise exercise price rance Shares life (a) price Shares price $ 10% - 21W 34,059 3.6 $ 17.45 34,059 $ 17.45 $21% -31% 72,754 6.4 25.61 37,441 24.31 Other Stock Related lnformation $ 36W -51% 18,867 8.5 42.59 205 47.20 $ 51% -73 13.223 9.8 68.80 Total 138,903 6.3 30.03 71,705 21.11 Stock option activity Average per share (a) Average contractuallife remaining in years. subject Exercise Market At year-end 1996 options with an average exercise price of $19.58 were (Shares in thousands) to option price price exercisable on 81 million shares: at year-end 1995, options with an average exerche Price of $17.61 were exercisable on 74 million shares. Balance at December 31,1994 138,996 $ 19.91 $ 25.50 Options granted 24,179 27.94 21.94 Re placement options 1,506 20.91 20.91 Stock options expire 10 years from the date they are Options exercised (15,568) 15.72 29.61 granted; options vest over service periods that range from Options terminated (4,239) 23.67 one to five years. Balance at December 31,1995 144,874 21.60 36.00 Disclosures required by SFAS No.123, AccountingforStock-Options granted 19,034 42.39 42.39 Based Compensation, are as follows: Replacement options 8,622 26.34 26.34 Options exercised (18,278) 17.70 43.25 December 31 1996 1995 Options terminated (4,707) 26.18 Weighted average fair value Balance at December 31,1996 149,545 24.86 49.44 per option (a) $ 17.81 $ 9.34 $ 5.98 Options granted (a) 13,795 68.07 68.07 Valuation assumptions Replacement options 30 24.16 24.16 Expected option term (years) 6.3 6.2 5.5 Options exercised (21,746) 18.47 61.22 Options terminated (2,721) 31.10 Expected volatility 20.0 % 20.1 % 20.0 % Expected dividend yield 1.5% 2.3% 3.1% Balance at December 31,1997 138,903 30.03 73.38 Risk free interest rate 6.1% 6.6% 7.0% (c) Without ad,ju ting for the eflect of the 2-for-1 stock split in Apnl 1997, Pro forma effects (b)(c) the number of options granted during 1997 would have been 13.476. Net earnings $ 8,129 $7,235 $ 6,557 Earnings per share - basic 2.48 2.19 1.95 Stock option plans, stock appreciation rights (SARs). - diluted 2.43 2.15 1.92 restricted stock and restricted stock units are described in (a) Estimated using IWack-Sc holes option pricing model. GE's current Proxy Statement. With cettain restrictions, (b) Valuations only of grants made afterJanuary 1,1995; thus, the pro l requirements for stock option shares can be met from either (c)kee[n nher nn a n nisin liars. I unissued or treasury shares. The replacement options replaced canceled SARs and have identical terms thereto. At year-end 1997, there were 1 3.2 million SARs outstanding at an average exercise price of $21.02. There were 9.6 million restricted stock shares and l restricted stock units outstanding at year-end 1997. f i 60 I

Suppl!mentil Cish Firws inf:rmati:n Changes in operating assets and liabilities are net of acquisi-for gains and losses on assets, increases and decreases in tions and dispositions of businesses. assets held for sale, and adjustments to assets such as amorti- " Payments for principal businesses purchased' in the zation of goodwill and intangibles. Statement of Cash Flows is net of cash acquired and includes The Statement of Cash Flows excludes certain noncash debt assumed and immediately repaid in acquisitions. transactions that, except for the exchange transaction "All other operating activities' in the Statement of Cash described in note 2, had no significant effects on the invest. Flows consists principally of adjustments to current and ing or financing activities of GE or GECS. noncurrent accruals and deferrals of costs and expenses, Certain supplemental information related to GE and increases and decreases in progress collections, adjustments GECS cash flows is shown below. For the years ended December 31 (in millions) um 1996 1995 GE Not purchase of GE shares for treasury Open market purchases under share repurchase program 8 (3,492) $ (3,266) $ (3,101) Other purchases (2,900) (1,576) (915) Dispositions (mainly to employee and dividend reinvestment plans) 3,577 2,519 1,493 $ (2,815) $ (2,323) $ (2.523) GEC$ Financing receivables Increase in loans to customers 8 (55,609) $(49,890) $(46,154) Principal collections from customers -loans 50,679 49,923 44,840 Investment in equipment for financing leases (16,420) (14,427) (17,182) Principal collections from customers - financing leases 13,796 11,158 8,821 Net change in credit card receivables (4,136) (3,068) (3,773) Sales of financing receivables 9,922 4,026 2,139 $ (1,898) $ (2,278) $(11,309) All otherinvesting activities Purchases of securities by insurance and annuity businesses $ (19,274) $(15,925) $(14,452) Dispositions and maturities of securities by insurance and annuity businesses 17,290 14,018 12,460 Proceeds from principal business dispositions 241 575 Other (3,893) (4,183) (2,496) $ (5,646) $ (6,090) $ (3,913) Newly issued debt having maturities longer than 90 days Short-term (91 to 365 days) $ 3,502 $ 5,061 $ 2,545 Long term (longer than one year) 15,566 17,245 32,507 long-term subordinated 298 Proceeds - nonrecourse, leveraged lease debt 1,757 595 1,428 $ 20,825 $ 22,901 $ 36,778 Repayments and other reductions of debt having maturities longer than 90 days Short-term (91 to 365 days) $ (21,320) $(23,355) $(16,075) long-tenn (longer than one year) (1,150) (1,025) (678) Principal payments - nonrecourse, leveraged lease debt (257) (276) (292) $ (22,757) $(24,656) $(17,045) All other Enancing activities Proceeds from sales ofinvestment and annuity contracts $ 4,717 $ 2,561 $ 1,754 Preferred stock issued by GECS affiliates 605 155 1,045 Redemption ofinvesunent and annuity contracts (4,537) (2,688) (2,540) 785 28 $ 259 ) i 61

~ industry S gments Revenues For the years ended December 31 Totairevenues intersegment revenues External revenues 1957 1996 1995 1997 1996 1995 1997 1996 1995 (in millions) GE Aircraft Engines $ 7,799 $ 6,302 $ 6,098 $ 101 $ 86 $ 115 $ 7,698 $ 6,216 $ 5,983 Appliances 6,745 6,375 5,933 12 5 4 6,733 6,370 5,929 Ik oadcasting 5,153 5,232 3,919 5,153 5,232 3,919 Industrial Pnxlucts and Systems 10,954 10,412 10,194 490 455 436 10,464 9,957 9,758 Materials 6,695 6,509 6,647 24 22 19 6,671 6,487 0,628 Power Generation 7,495 7,257 6,545 81 65 57 7,414 7,192 6l488 Technical Products and Senices 4,917 4,692 4,424 18 23 19 4,899 4,669 4,405 All Other 3,564 3,108 2,707 3,564 3,108 2,707 Corporate items and climinations 1,193 (322) (286) (726) (656) (650) 1,919 334 364 Total GE 54,515 49,565 46,181 54,515 49,565 46,181 GECS Financing 31,165 24,554 19,446 31,165 24,554 19,446 Specialty Insurance 8,844 8,155 7,042 8,844 8,155 7,042 All Other (78) 4 4 (78) 4 4 Total GECS 39,931 32,713 26,492 39,931 32,713 26,492 Eliminations (3,606) (3,099) (2,645) (3,606) (3,099) (2,645) Consolidated revenues $ 90,840 $ 79,179 $ 70,028 $ 90.840 $79,179 $70,028 GE revenues indude income from sales of gomis and senices to customers and other income. Sal-from one Company component to another generally are priced at equivalent commercial selling prices. "All Other" GE resenues consists primarily of GECS carnings. Assets Property, plant and equipnSto (including equipment leased sa others) At December 31 For the > cars ended Decemler Si Additions Cepreciation and amortization (In milhons) LLrm 1996 1995 LLim 1996 1995 LLimu 1996 1995 GE Aircraf t Engines 8 8,895 $ 5,423 $ 4,890 $ 729 $ 551 $ 266 3 255 $ 260 $ 273 Appliances 2.533 2,569 2,304 83 168 143 112 104 93 Itroadcasting 4,877 4,899 3,915 116 176 97 96 86 64 Industrial Pnxtucts and Systems 6,658 6,580 6,117 487 450 446 368 340 308 Materials 8,890 9,130 9,095 618 748 521 427 475 478 Power Generation 5,605 5,741 5,679 176 185 155 161 165 166 Technical Pnxtucts and Senices 2,438 2,246 2,200 189 154 110 115 113 109 All Other 17,496 14,556 13,113 1 2 2 1 Corporate items and eliminations 10,034 8,781 8,403 168 114 113 96 90 89 Total GE 67,426 59,925 55,716 2,566 2,546 1,852 1,622 1,635 1,581 OECS Financing 211,139 188,472 151,952 7,188 5,663 5,143 2,411 2,111 1,963 Specialty Insurance 44,048 38,575 33,714 65 35 133 35 29 23 All Other 221 372 63 67 64 36 14 10 27 Total GECS 255,408 227,419 185,729 7,320 5,762 5,312 2.460 2,150 2,013 Clintinations (18,822) (14,942) (13,410) Jonsolidated totals $ 304,012 $ 272,402 $ 228,035 $ 9,886 $ 8,308 $ 7,164 $ 4,082 $ 3,785 $ 3,594 - "All Other" GE assets c onsists primarily of investment in GECS. Additions to property, plant and equipment include amounts relating to principal businenes purchased. 62-

Details of operatin, profit by~1ndustry seg.nent can be Power Generution. Power plant products and senices, includ-found on page 35 of this report. A descripnon ofindustry ing design, installation, operation and maintenance senices, segments for Gmd Electric Company and consolidated Markets and competition are global. Gas turbines are sold aflitiates fbilows. principally as part of packaged power plants for electric utili- ~ Alimrft Engines. Jet engines and replacement parts and repair ties and for industrial cogeneration and mechanical drive and maintenance senices for all categories of commercial applications. Steam turbine-genemtcrs are sold to electric aircraft (short/ medium, intermediate and long-mnge); for a utilities, to the U.S. Navy and, for cogeneration, to industrial wide variety of military aircraft, including fighters, bombers, and other power customers. Power Generation also includes tanken and helicopters; and Ibr executive and conunuter nuclear reactors and fuel and support senices for GE's new aircraft. Sold worldwide to airf rame manufacturers, airlines and installed boiling water reactors. and govermnent agencies. Also, aircraft engine derivatives TechnicalProduds and Services. Medical systems such as used as marine propulsion and industrial power sources. magnetic resonance (MR) and computed tomography (CT) ' Appliances. Major appliances and related senices Ihr prod. scanners, x-ray, nuclear imaging, ultmsound, other diagnostic ucts such as refrigerators, freerers, electric and gas ranges, equipment and related senices sold worldwide to hospitals dishwashers, clothes washers and dryers, microwave ovens and medical facilities. Also includes a full range of computer-and room air conditioning equipment. Sold in North Amer-based information and data interchange senices fbr internal ica and in global markets under various GE and private-label use and external conunes cial and industrial customers. brands. Distributed to retail outlets, mainly fbr the replace-GECSIinancing. Operations of GE Capital, as follows: ment market, and to building contractors and distributors Consumersemices -private-label and bank credit card loans, for new installations. personal loans, time sales and revohing credit and inventory Broadaisting. Primarily N11C. Principal businesses are the financing for retail merchants, auto leasing and inventory furnishing of U.S. network television senices to more than f nancing, mortgage servicing, and consumer savings and 200 afTiliated stations, production of television programs, insurance services. Insurance senices, previously included operation of 12 VIIF and UIIF television broadcasting sta, within the Specialty Insurance segment, has been combined ' tions, operation of four cable / satellite networks around the with the consumer savings and insurance operations in this world, and investment and programming activities in multi. segment. Prior-year infbrmation has been reclassified to media and cable television. reflect this change. Industrial Products and Systems. Lighting products (includ-Sfecialiudfinancing-l ans and financing leases for major u mg a wide variety of. lamps, lighting fixtures, winng devices capital assets, including industrial facilities and equipment, an energprelate t s; conunercial and resMendal mal and quarti products); elecuical distribution and control

1. 1. ""I ""5"*I "**""#"'*;""

I"*"' '" ".nd im estments equipment (including power delivery and control products such as transfbrmers, meten, relap, capacitors and arrest-in management myouts, mcluding those with hig 4 leverage,

• • ' '"I*'* ** '"' P I"II'"'I "

I ers); transportation systems prmf ucts (including diesel-electric locomotives, transit propulsion equipment and Quifnnent managmen eases,I ans, sales and asset motorized wheels for off-highway vehicles); electric moton management 5en Ce5 fM Py"M"ls of commercial and and related products; a broad range of electrical and elec-transportation equ pment, mcludmg aircraft, trailers, auto fleets, modular space units, railroad rolling stock, data tronic industrial automation products (including drive sys-pmcessing equ pment, containers used on ocean-going tems); installation, engineering and repair senices, which includes management and technical expertise for large projects such as process control systems; and GE Supply, a mayfinan neh>ans and financing and operating ~ e ses nu m et cuumnen, inclu ng rnanuf ctun network of electrical supply houses. Markets are extremely en, mt n ami end users, for a variety of rqmp'nent diverse. Products are soki to commercial and industrial cr$d users, including utilities, to original equipment manufactur-at nclu es data pmcening equipment, mehal and agn stic equipment, and equipment used in construction, ers, to electrical distributors, to retail outlets, to railways and to transit authorities. Increasingly, products are developed inanuf cturing, office applications and telecommunications "C for and sold in global markets. Very few of the products financed by GE Capital are M:terials. liigh-performance engineered plastics used in manufactured by GE. applications such as automobiles and housings fbr comput-ers and other business equipment; AILS iesins; silicones; GECS Specialty Insurance. U.S. and international multiple-line property and casualty reinsurance; certain directly superabrasive indusuial diamonds; and laminates. Sold written speci Ity usurance and life reinsurance; financial worldwide to a diverse customer base consisting mainly guamnty insurance, principally on mumcipal bonds and of manufacturers. structured finance issues; private mortgage insurance; and creditor insurance covering international customer l loan repayments. 63

4 Geogr phic S:gmentinf:rmation(c:nsilidatid) Revenues and operating profit shown below are classified the caption " United States" include ropity and licensing according to their country of origin (including exports from income from non-U.S. sources. U.S. exports to international such areas). Revenues and operating profit classified under customers by major areas of the world are shown on page 39. Revenues For the years ended December 31 Totai revenues intersegment revenues External rever.oes - (In millions) Li rm 1996 1995 orm 1996 199% Lum 1923 1995 United States $66,330 $58,110 $52,935 $ 2,471 $ 2,292 $ 2,123 $63,858 $55,818 $50,812 Europe 13,166 15,964 12,293 787 714 656 17,379 15,250 11,637 Pacific Basin 4,742 4,343 3,725 ISO 796 457 3,862 3,547 3,268 Other (a) 6,420 5,140 4,750 600 576 439 5,740 4,564 4,311 3 Intercompany climinations (4,818) (4,378) (3,675) (4,818) (4,378) (3,675) Total $90,840 $79,179 $70,028 $90,840 $79,179 $70,028 Opwrating prott(b) Assets Non-U.S. not assets For the years ended Devember 31 At December 31 At December 31 (In millions) uim 1996 1995 urm 1996 1995 nem 1996 1995 United States 5 8,825 $ 9,693 $ 9,002 $206,655 $189,593 $158,884 (c) (c) $ (c) Europe 2,024 1,724 1,043 66,740 55,196 44,107 31,076 23,021 20,059 Pccitic Basin 302 269 375 8,881 8,125 6,442 6,237 5,082 3,740 Other (a) 706 576 543 21,526 19,655 18,776 12.233 11,439 11,472 Intercompany eliminations (23) 7 9 (190) (167) (174) (72) (62) (51) Total $11,834 $12,269 $10,972 $304,012 $272,402 $228,035 $49,474 $39,480 $35,220 (a) Principally the Americas other than the t'nited States, but also indudes operations that cannot meaningfully be asociated with specihc geographic areas (for example, shipping containers used on ocean-going venels). (b) Net of IW7 restructuring and other special < harges. (c) Not applicable. Additional information about Financial lnstruments This note contains estimated fair values of certain financial Values are estimated as follows: instruments to which GE and GECS are parties. Apart from Borrowings. Based on quoted market prices or market com-borrowings by GE and GECS and certain marketable securi-parables. Fair values ofinterest rate and currency swaps on t ties, relatively few of these instruments are actively traded. borrowings are based on quoted mar ket prices and include Thus, fair values must often be determined by using one or the efTects of counterparty creditworthiness. more models that indicate value based on estimates of Time sales and loans. Based on quoted market prices, recent quantifiable characteristics as of.a particular ciate. Because transactions and/or discounted futuie cash flows, using this undertakm, g is, by its nature, difficult and high!-judg-rates at which s.mular loans would have been made to similar - mental, for a limited number ofinstruments, alternative val-borrowers. uation techniques may have produced disclosed values investment contract benefits. Based on expected future cash different from those that could have been realized at Decem, fl ws, discounted at currently offered discount rates for ber 31.1997 or 1996. Moreover, the disclosed values are rep-immediate annuity contracts or cash surrender values for resentative of fair values only as of the dates indicated. Assets and liabilities that, as a matter of accounting policy, are single premium deferred annuities. reflected in the accompanying financial statements at fair Financial guarantees and credit life. Based on future cash value are not included in the following disclosures; such flows, considering expected renewal premiums, claims, items include cash and equivalents, investment securities and refunds and servicing costs, discc.unted at a market rate. separate accounts. All other instruments. Based on comparable transactions. l market comparables, discounted future cash flows, quoted i market prices, and/or estimates of the cost to terminate or otherwise settle obligations to counterparties. 1 64

Financialinstruments 1997 1996 Assets {liabiGries) Assets (liabihties) Carrying Carrying Notional amount Estimated fair value National amount Estimated fair value Dec ember 31 (In milhons) amount (net) Hs0h Low amount (net) High Low GE Investment related Investments and notes receivable (a) $ 1,909 8 1,915 $ 1,908 (a) $ 1,675 $ 3,127 $ 3,127 Cancelable interest rate swap 1,421 25 19 19 Borrowings and related instruments Borrowings (b)(c) (a) (4,358) (4,377) (4,377) (a) (4,049) (4,058) (4,058) (12) (12) 536 (11) (11) Interest rate swaps 531 180 25 25 Currency swaps , Recourse obligations for receivables sold 427 (23) (23) (23) 424 ( Financial guaranters 2,141 1,805 Other firm commitments Cunency forwards and options 6,656 82 270 270 5,476 70 150 150 0 Financing commitments 1,794 1,554 GECS Assets Time sales and loans (a) 62,712 63,105 61,171 (a) 60,859 61,632 60,544 Integtated interest rate swaps 12,323 19 (125) (125) 4,376 91 91 Purcnased options 1,617 31 31 31 1,938 11 12 12 hjortgage-related positions hfortgage purchase commiunents 2,882 11 11 1,193 2 2 (9) (9) 1,417 3 3 Mortgage sale commitments 2,540 Mortgages held for sale (a) 2,378 2,379 2,379 (a) 1,112 1,165 1,165 Options, including

• floors" 30,347 51 141 141 27,422 78 81 81 23 23 1,731 (29)

(29) Interest rate swaps and futures 3,681 Other cash financialinstruments (a) 2,242 2,592 2.349 (a) 2,240 2,735 2,487 Liabilities Borrowings and related instruments Borrowings (b)(c) (a) (141,263) (141,828) (141,828) (a) (125,621) (125,648) (125,646) (250) (250) 34,491 (575) (575) Interest rate swaps 42,531 Currency swaps 23,382 (1,249) (1,249) 24,588 368 368 Currency forwards 15,550 371 371 6,165 72 72 Purt hased options 375 33 8 8 1,882 10 1 1 Investment contract benefits (a) (23,045) (22,385) (22,885) (a) (20,210) (19,953) (19,953) Insurance - financial guarantees and credit life 183,957 (2,897) (2,992) (3,127) 170,402 (3,801) (3,614) (4,025) Credit and liquidity support - securitirations 13,634 (46) (46) (46) 6,842 (73) (9) (9) Performance guarantees - principally letters of credit 2,699 (34) (67) 3,470 (55) (132) (133) Other 3,147 (1,134) (1,282) (1,303) 2,901 (1,560) (1,175) (1,176) Other firm commitments Currency forwards 1,744 11 11 1,823 3 2 Currency swaps 1,073 192 192 192 1,134 (38) (38) Ordinary course of business (62) (62) 4,950 (27) (27) lending commitments 7,891 Unused revohing credit lines Commercial 4,850 3,375 Consumer - principally credit cards 134,123 l 116,878 (a) Not apphcable. (b) Indudes eff ects of interest rate and currency swaps, which aho are hare 1 separately. (c) See note 19. Additionalinformation about certain financialinstruments note 19. These financialinstruments generally are used to fix in the table above follows, the local currency cost of purchased goods or senices or selling Currency forwards and options are employed by GE and GECS prices denominated in currencies other than the functional to manage exposures to changes in currency exchange rates currency, Currency exposures that result from net invest-associated with commercial purchase and sale transactions ments in affiliates ate managed principally by funding assets and by GECS to optimiie borrwing costs as discussed in denominated in local currency with debt denominated in 65

those same currencies. In certain circumstances, net invest-to indhidual counterparties. At December 31,1997 and ment exposures are managed using currency forwards and 1996, this gross market risk amounted to $2.0 billion and i currency swaps. 50.9 billion, respectively. Aggregate fair values that represent Options and instrurnents containing option features that behave associated probable futm e obligations, nonnally associated based on limits (" caps," "fh> ors" or " collars") on interest rate with a right of offset against probable future receipts, a unted to $2.9 billion and $0.7 billion at December 31, movement are used primarily to hedge prepayment risk in certain GECS business activities, such as the mortgage serv-1997 and 1996, respectively. icing and annuities businesses. Except as noted above for positions that are integrated Swcps of interest rates and currencies are used by GE and nto nnancings, all swaps, purchased options and forwards am carne out un tk follning creda policy constraints. GECS to optimize lxurowing costs for a particular funding strategy (see note 19). A cancelable interest rate swap was nce a counterpany excee cre t exposure h, nuts a (see table below), no additional transactions are pennitted used by GE to hedge an m. vestment positmn. Interest rate and currency swaps, along with purchased options and t e expPuje with that centeqny b reduced to an un futures, are used by GECS to establish specific hedges of anmunt that is walun the established haut. Open contracts remain in force. mortgage-related assets and to manage net invesunent expo-sures. Credit risk of these positions is evaluated by manage-Counterparty credit criteria ment under the credit criteria discussed below. As part ofits credit rating oligoing customer activities, GECS also entess into swaps that Mood /s Standard & Poor's are integrated into investments in or loans to particular cus-Tenn of transanion tomers and do not involve assumption of third-party credit Between one and five years Aa3 AA-risk. Such integrated swaps are evaluated and tuonitored like Greater than five years Aaa AAA C edit exposure limits the.ir assonated investments or loans and are not therefore Up to $50 million Aa3 AA-subject to the sr.tne credit criteria that would apply to a Up to $75 million Aaa AAA stand alone position. Counterparty credit risk - risk that counterparties will be

• AU "*"P" "'" **""""d ""dC' * $'C' '* P "8'"#* *"'*

financially unable to make payments according to the tenus Containing snutual aedit downgrade provisions that pro-of the agreements-is the principal risk associated with dde the ability to require assignment or termination in swaps, purchased options and forwards. Gross market value the event either party is downgraded below A3 or A. of probable future receipts is one way to mea;,ure this risk, More credit latitude is pennitted for transactions having but is meaningful only in the context of net credit exposure original maturities shorter than oin year becatise of their lower risk. GL Quarterly information (unaudited) First quarter Second quarter Third quarter Fourth quarter (Dollar amounts in milh.ons; per. share arnounts in dollan) in 19 % u t. 19 % u r. 1996 u r) 1996 Consolidated operations Net earnings $ 1,677 $ 1,517 $ 2,162 $ 1,908 $ 2,014 $ 1,788 $ 2,350 $ 2,067 Earnings per share - basic 0.51 0.46 0.66 0.58 0.62 0.54 0.72 0.63 - diluted 0.50 0.45 0.65 0.57 0.00 0.53 0.70 0.62 Selected data GE Sales of goods and mervices 10,322 9,742 12,620 11,520 11,698 11,478 14,112 13,379 Gross profit from sales 2,970 2,781 3,886 3,475 3,368 3,060 2.618 3,784 GECS Total resenues 9,544 7,245 9,317 7,457 10,182 8.449 10.388 9,562 Operating profit 1,081 073 1,138 951 1,229 1,179 974 945 For GE, gross profit from sales is sales of goods and serv-1997, GE completed an exchange transaction with Inckheed ices less costs of goods and senices sold. For GEC5, operat. Manin as described in note 2. ing profit is *Eaniings before income taxes." Earnings-per-share amounts for each quarter are required Fourth-quarter grou profit from sales in 1997 was reduced to be computed independently and, as a result, their sum by restructuring and other special charges. Such charges, does not equal the total year earnings-per-share amounts including amounts shown in *Other costs and expenses," for 1997 and 1996. Per-share amounts have been adjusted were $2,322 million before tax. Also in the fourth quarter of for the 2-for-1 stock split eflective on April 28,1997. 66

Corporate 1nformation C.,,.r.t.noa*.a,iers r.,no -n.d o.or Re,.,is ' General Electric Company - The financialinformation in this report,in the opinion of 3135 Easton Turnpike management, substantially conforms with information re- - Fairfield, CT 06431 quired in the "10-K Report" to be submitted to the Securi. [ '(203)373-2211 ties and Exchange Commission (SEC) by the end of March Annushig 1998. Certain supplemental information is in that report, . General Electric Company's 1998 Annual Meeting will however, and copies without exhibits are available, without be held on Wednesday, April 22, at the Aronoff Center . charge, from GE Corporate Investor Conununications, -

• in Cincinnati, Ohio..

31 5 hton Turnpike, Fairfield, G 06431.- Copies of the General Electric Pension Plan, the Sum- - Share Owner Services mary Annual Report for GE employee benefit plans subject To transfer securities, write to GE Share Owner Senices, to the Employee Retirement Income Security Act of 1974, 'c/o The Bank of New York, P.O. Box 11002, New York, NY and other GE employee benefit plan documents and infor-10286-1002. mation also are available by writing to Corpomte Investor For share owner inquiries, inchiding enrollm ent infonna-Communications and specifying the information desired.

tion and a prospectus for the Dividend Reinvestment Plan, GE Capital Senices and GE Capital Corporation file write to GE Sharc Owner Senices, c/o The Bank of New ~

Form 10-K Reports with the SEC. For copies of these York, P.O. Box 11402, New York, NY 10286-1402; or call reports, contact GE Capital Senices, Public Relations and 1-800-786-2543 (1-800-STOCK-GE)or 713-651-5065; or-Advertising,260 long Ridge Road, Stamford, CT 06927. send an e-mail to G-Share.imnm@bankofny.com. For the Annual Report of the Company's philanthropic ' - For Internet access to general share owner information foundation, write to the GE Fund,3135 Easton Turnpike, , and certain forms, including transfer instructions or stock Fairfield, CT 06431. power, visit the Web site at http://5fock.bankofny.com/ge. laternetAddress ' Stock ExchangeInfonnation Use hup://www.gr.com to reach the GE home page for In the United States, GE common stock is listed on the information about GE and its products and senices. New York Stoc k Exchange (its principal market) and the Bc: ton Stock Exchange. It also is listed on certain non-U.S. exchanges, including The Stock Exchange, london. For m. fonnation about GE consumer products and senices, call the GE Answer Center

• senice at (800)626-2000 or Trading and Dividendle8ormation (502)423-7710; for GE technical, ccmtaercial and industrial products and senices, call the GE Business Information Centc8 service at (8@)m-M or (518)M-M; and (In do11 aran h

ecla e ,gy for the varied financial products and senices offered by Fourth quarter $76% $59 $.30 GE Capital, call (800)243 2222 or (203)357-3301. . Third quarter 74 % 61 W .26 Cassette Recordings 2 Second quarter 68 % 48 % .26 For an audiocassette version of this report, contact First quarter 54 % 47'% .26 GE Corporate Communications,3135 Easton Turnpike, i 1MS Fairfield, CT 06431. Telephone: (203)373-2020. Fourth qttarter $53W $45 % $.26 Third quarter 46 - 38 % .23 CorporaNedsman .q Second quarter . 44W 37 W .23 To repon concerns related to U.S. government contracting - Fint quarter 40 % 34 % .23 m tters, other laws or GE policies, contact the GE Corporate Ombudsman, P.O. Box 911, Fairfield, CT 06430. The per-share amounts above reflect the 2-for-1 stock Telephone: (800)227 5003 or (203)373-2343. i . split effective on April 28,1997. As of December 31,1997, o 199M General Electric Company Printed in U.S.A. there were about 527,000 share owner accounts of record. Note: Unica otherwise indicated by the context. the terms "GE" "Genraal ' Elcetdc" and " Company" are used on the basis of consolidation described I on page 47. GE and 9 are registered trademarks of Gencral Electric Com-pany; NBC and A are registered trademarks of National Broadcasting Company. Inc.; MSNBC is a trademark of MSNBC Cable,t LC.; 6," and " indicate registered and unregistered trade and service marks. respectively. 67 a;

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Financial Highlights 1 General Electric Company and consolidated affiliates 1 (Dollar amounts in millions: per-share amotmts in dollars) iLt 1996 1995 Revenues $90,840 $79,179 $70,028 Net earnings - 8,203 7,280 6,573 Dividends declared 3,535 3,138 2,838 Per sharc Net earnings 2.50 ' 2.20 : 1.95 Dividends declared 1.08 .95 .845 GE ongoing operating margin 15.7% 14.8 % 14.4 % Pe r-rihare amounts have been adjusted to reflect the 2-for-1 stock split etTective on April 28,1997. Within this repnt, certain 1997 results are referred to as "on-ing." Such results exclude both the revenues and earnings associated with the lockheed Martin transaction describet note 2 to the consolidated financial statements as well as restructuring and other special charges. l t i 1 M 1 Letterto Shara Owners ) 7 SixSigma 8 BusinessReview l 19 CommunityService 20 Board of Directors 22 Management 25 FinancialSeetion 67 CorporateInformation @ This entire Armual Report is printed on recycled paper.

To Our Share Owners and Employees In 1997, your Company had a great year-1 M]. g j T, y." n a record year. t' 4 , E p. 4 - L ..o 4 f . Ongoing revenues rose to $89.3 billion; f. [$ $ 4j j..+- up 13%. MD 4 .' }.4g. " L. p (b . Global (non-U.S.) revenues rose to $38.5 y.jkid p -/fg billion, now 42% of total revenues. ]g. /j = . Earnings increased to more than $8.2 bil-1k [ s lion; up 13%. . L.' V' . Earnings per share increased 14% to a w. record $2.50. . Ongoing operating margin rose to a record ./ ,J' 15.7%, exceeding 15% for the first time in 4 the history of our Company. . g ~ (J v $.. i.4 g : ".? .w. n . Operating cash flow rose to a record $9.3 db;NNbSMNbbbkMD billion. This, in combination with our Triple A debt rating, fueled the - Ch8ir*8a8adChief Executive 0fficer investinellt of $l7.2 billioll in nlore than 75 industrial and financial Johaf Welch.- (frontland Vice l; hair-setVices acollisitions ill l997, men and Executive 3 Officers Paolo Fresco (left) John D. Opie .This record cash flow also allowed us to return $7 billion to share (center} end rugene F. Murphy fright) form owners: $3.5 billion in dividends and $3.5 billion for the repurchase ar s corgorete executive Office. of GE stock. Dividends were increased by 15%, our 22nd consecutive annual dividend increase. . In April, our share owners approved a 2-for-1 stock split, the fourth in the last 15 years. Our share owners - including our active and retired employees, who now own more than $12 billion in GEstoch in theirsavings plans - were rewardedfl>r this perfl>rmance. The total return on a share of GE stark was 51 % in 1997; thisfcdlowed gains of 40% in 1996 and 45 % in 1995. I

We delivered these 1997 results by executing Mexico in the mid-1990s was a similar story: dis-on our three major initiatives: globaliza-location, uncertainty and turbulence. Reacting to tion, a focus on product senices and our drive for the peso crisis of 1995 and its aftermath, GE moved, Six Sigma quality.15uilding on these same three acquiiirg 10 companies and investing more than initiatives will be critical to our future success. S1 billion in new and existing operations. The The uncertainty brought about by the Asian result was revenue growth of 60% and a doubling economic di!Iiculties creates both challenges and of earnings in the two years following the ciisis. opportunities. For GE, Asia represents about 9% Today, we are determined, ami poised, to do of our revenues (about halfinJapan) - exposure the same thing in Asia we have done in the United that is by no means insignificant, but certainly States, Europe and Mexico: invest in the future. manageable - and we are confident that we can minimite any impact on our existing operations. Globak.zation It has been our repeated experience that busi. ness uncertainty is inevitably accompanied by Globalization is one of the engines of GE growth, opportunity. The Asian situation should be no now and well into the next centiuy. There will be exception;it should provide us with a unique dislocations and speed bumps on the road to pros-opportunity to make the strategic moves that will perity in all the world's ciitical markets, but one increase our pr esence and our participation in cannot afford to write off any region in difficulty, what we know will be one of the world's great mar-Ilad business management or bad government kets of the 21st Centmy. policies that weaken competitiveness can be reme-We've been down this path before. In the early died by tough restructuring and policy change. 1980s, we experienced a United States mired in recession, hand-wringing from the pundits and IOdaJ, we are de/ennined, and poised, dirges being sung over American manufactiuing. lo dO lhe Same /h/ngin ASla Me have We didn't buy this dismal scenario; instead, we invested in both a widespread restructuring and in done in the United States, Enrope and new businesses. We emerged into the recoveiy a Mexico invest in Ihefuture. much more competitive and producuve company. Our successful experience with U.S. business The same conditions that made restructuring uncertainty gave us a very different view of the and reform necessary frequently create a cur-Emopean malaise of the early 1990s. rency weakness that, when coupled with the To us, Europe looked a lot like the United increased competitiveness brought about by States in the 1980s, and in need of the same reme-restructuring, leads the counuy out of recession, dies: restructuring, spin-offs, and the like. So, via internal growth and increased exports, while many were " writing-off Europe, w e invested The path to greatness in Asia is irreversible, heavily, buying new companies and expanding and GE will be there. our existing presence. Following the restructuring ofits industrial and financial structure, as well as Services a dose of the powerful export medicine of a desal. ued currency, Europe is now recovering, and Another growth engine, which we have described "GE Europe" is now a $20.6 billion operation. for you in the past, is Senices. liy any measure, Our revenues have more than doubled from 1994 GE is today a global senice company, and in 1998 to 1997; net income has tripled to more than more than two-thirds ofits revenues will come $1.5 billion; and this growth is accelerating as the from financial,infonnation and product senices. European recovery progresses. Our second major initiative is focused on high-technology product senices. In 1997, we achieved 2

a second consecutive year of double-digit growth in GE had another huge advantage that acceler-product senice revenues and improved ongoing ated our quality effort: we had a Company that was operating man gin, while making 20 acquisitions and open to change,Imngry to learn and anxious to joint ventures, primarily in the imiustrial, power, move quickly on a good idea. medical and aircraft engine senices businesses. Key This learning envirotunent came from a decade-among these were the $1.5 billion Greenuich/UNC long, soul-transfonning cultural initiative called jet engine senice acquisition and the recently com- " Work-Out." Work-Out is a continuing effort to pleted $600 million acquisition of the gas turbine-achieve what we call "boundaryless behasior"- related businesses of Stewart & Stevenson Senices, a business behasior that tramples or demolishes all I global power generation equi [nnent senice company. barriers of rank, function, geography and bureau-The opportunity for growth in product senices cracyin an endless pursuit of the best idea-in is unlimited. We have the ability, using high-the cause of engaging and irwolving every mind I technology senices, to make our customers' existing in the Company. assets (e.g., power plants, locomotives, airplanes, After a decade of Work-Out, most of the old factories. hospital equi [nnent and the like) more bureaucracy and the boundaries among us have I productive, and by doing so reduce their capital been demolished. (We are, however, aware that outlays. This growing capability, much ofit infor-bureaucracy is the Dracula ofinstitutional behav-mation technology-based, uill enable us to increase ior, and will rise again and again, requiring every-our revenues from product senices by more than one in the organization to reflexively pound stakes 30% in 1998 - to S13 billion. through its reappear;mces.) llut at GE today-l and we are obsiously proud of this - finding Six Sigma the better way, the best idea, from whomever i-will share it with us, has become our central focus. We have described our progress in globalization Nowhere has this learning enviromnent, this and senices rather quickly so we could cover in search for the better idea, been more powerfully depth something ue talk to each other about all demonstrated than in our drive for Six Sigma qual-day: the centerpiece of our dreams and aspirations ity. Twenty-eight months ago, we became con-for this great Company-the drive for Six Sigma vinced that Six Sigma quality could play a central quality. "Six Sigma" is a disciplined methodology, role in GE's future; but we believed, as well, that it l led and taught by highly trained GE employees would take years of consistent communication, called " Master Black llelts" and " Black llelts," that relentless emphasis and impassioned leadership to fbcuses on moving every process that touches our move this big Company on this bold new course. customers - every product and senice - toward We were wrong! near-perfect quality. We are the ones who now find ourselves run-Six Sigma project work consists of five basic ning to hecp up with the excited charge of tens of activities: Defining, Measuring. Analyzing, thousands of GE employees who have seen the Improving and then Controlling piocesses. These transformational magic - the rejuvenation - that prqjects usually fbcus on improving our customers' this combination of rigid discipline and cheerful productivity and reducing their capital outlays, fanaticism can achieve in our businesses. Projec-while increasing the quality, speed and elliciency tions of our progress in Six Sigma, no matter how of our operations. optimistic, have had to bejunked every few months We didn't invent Six Sigma - we learned it. as gross underestimates. Motorola pioneered it and AlliedSignal success-Six Sigma has spread like wildfire across the fully embraced it. The experiences of these two Company, and it is transforming everything we do. companies, which they shared with us, made the launch of our initiative much simpler and faster. 3

We had our annual Operating Managers . Superabrasives - our industrial diamond busi-Meeting - 500 of our senior business leaders ness - described how Six Sigma quadrupled from aroumi the globe - during the first week of its return on investment ami, by improving January 1998, and it turned out to be a wonderful yields, is giving it a full decade's worth of snapshot of the way this learning Company - this capacity despite growing vohmie - without new GE - has come to behave; and now, with Six spending a nickel on plant and equipment Sigma, how it has come to work. capacity. Today,in the uncountable number of business . Our railcar leasing business described a 62% meetings across GE - both organized and "in-reduction in turnaround time at its repair the-hall"- the gates are open to the largest flood shops: an enormous productisity gain for our ofinnovative ideas in world business. These ideas railroad and shipper customers and for a busi-are generated, improved upon and shared by 350 ness that's now two to three times faster than its nearest aival because of Six Sigma improve-GE had another /ntge advantage ments. In the next phase, spread across the entire shop network, Illack Behs and Green lhal a((f[Pralfd OUT (Jua((/J (((OTll Me Behs, working with their teams, redesigned the overhaul Process, resuhing in a 50%further had a Cornf>any titat was o]>en to reduction in cycle time. change, hungry to [ earn and anxious + The plasu.cs business, through rigorous S,.ix /0 n/Ove(fN/Ch/ On a gD0d [dfa. Sigma process work, added 300 million pounds J of new capacity (equivalent to a "frce plant"), business segments - or, as we think of them,350 saved $400 million in investment and will save business laboratories. Today, these ideas center another $400 million by 2000, on spreading Six Sigma "best practices" across our At our meeting, zealot after zealot shared stories business operations. of customers made mere competitive, of credit N ibis particular Operating Managers Meeting, card and mortgage application processes stream-about 25 speakers, from across the Company and lined, ofinventories reduced, and of whole facto-around the world, excitedly described how Six ries and businesses performing at levels never Sigma is inmsforming the way their businesses work. believed possible. They shared what they had learned from projects The sharing process was repeated at another such as streamlining the back room of a credit card level two weeks later in Paris, as 150 Master Black operation, or improving turnaround time in ajet Belts and Black Belts, from every GE business engine overhaul shop, or " hit-rate" improvements Moughout Europe, came together to share and in commercial finance transactions. Most of the learn quality technology. This learning is done in presenters fbrused on how their process improve-the boundaryless, transcultural language of Six ments were making their customers more com-Sigma, wheic "CTQ's" (critical to quality charac-petithe and productive: teristics) or "DPMO's" (defects per million oppor-Medical Systems described how Six Sigma tunities) or "SPC" (statistical process control) have designs have produced a 10-fold increase in exactly the same meaning at every GE operation the life of CT scanner x-ray tubes -increasing from Tokyo to Delhi and from Budapest to Cleve-the " uptime" of these machines and the prof-land and Shanghai. itability and level of patient care given by hospi-The meeting stories are anecdotal; big compa-tais and other health care prmiders. nies can make great presentations and impressive charts. But the cumulative impact on the Com-pany's numbers is not anecdotal, nor a product of i 4

charts. It is the product of 276,000 people execut-Six Sigma costs and benefits ing.. and delisering the results of Six Sigma to our bot (Oln line. M *HNI $1,250 Operating margin, a critical measure of busi-ness efficiency and profitability, hovered arotmd the 10% level at GE for decades. With Six Sigma 750 embedding itself deeper into Company operanons, GE in 1997 went through the " impossible" 15% 500 level-approaching 16% - and we are optimistic , a,, 250 I_. delivered more than S300 million to our 1997 g about the upside, m e.a.ou Six Sigma, even at tlus relauvely early stage, me m7 me operating income. In 1998, returns will more than double this operating profit impact. In the early 1990s, after we had finished defin-Six Sigma is quickly becoming part of the ing ourselves as a company of boundanless people genetic code of our future leadership. Six Sigma with a thirst for leanang ad a compulsion to share, training is now an ironclad prerequisite for pro-it became unthinhable for any of us to tolerate - motion to any professional or managerial position much less hire or promote-the tyrant, the turf in the Company-and a requirement fi>r any defender, the autocrat, the big shot. They were j award of stock options. simply " yesterday." 1 Senior executive compensation is now heavily As we move toward 2000 and beyond, with Six weighted toward Six Sigma commitment and suc-Sigma permeating much of what we do all day, it j cess - success now increasingly defined as " eatable" will be likewise unthinkable to hire into the Com-financial returns, for our customers and for us. pany, promote or tolerate those who cannot, or will not, conunit to this way of work. It is simply too 5utx h,igma is quickly becomin<r 6 important to our future. lJarl ofl/le grHeliC C0(lC Of 0HTfulHTC And as we " raise the har" from three to fimr to f ve and then to Six Sigma.. we must raise, again, /fa(/ PTS ////>. the bar of quality as it applies to om selves. The There are now nearly 4,000 full-time, fully reality is, we simply cannot afford to field anything trained Black Belts and Master Black Belts: Six but teams of"A" players. Sigma instructors, mentors and prqject leaders. What is an "A"? At the leadership level, an "A" There are more than 60,000 Green Belt part-time is a man or woman with a vision and the ability to project leaders who have completed at least one articulate that vision to the team, so vividly and Six Sigma project, powerfully that it also becomes their vision. Already, Black Belts and Master Black Belts who An "A" leader has enormous personal energy are finishing Six Sigma assignments have become and, beyond that, the ability to energize others the most sought-after candidates for senior leader-and draw out their best, usually on a global basis. shipjobs in the Company, including vice presi-An "A" leader has " edge" as well: the instinct dents and chief financialofficers at some of our and the courage to make the tough calls - deci-businesses. Ilundreds have already moved upward sively, but with fairness and absolute integrity. through the pipeline. They are true believers, As we go forward, there will be nothing but speaking the language of the future, energized by "A's" in every leadership position in this Company, successful projects under their belts, and drawing They will be the best in the world, and they will act other committed realots upward with them. 5

to field teams consisting of nothing but "A" play-f his is now the business of your Company: ers. The best leaders - the "A's" - are really

1. "A" pioducts aml "A" senices delivered by coaches. What coach, with any instinct or passion "A" players around the globe.

for winning, would field an Olympic swimming or We are feverish on the subject of Six Sigma gymnastics team, or a Super ik)wl team, that quality as it relates to products, senices ami peo-wasn't made up of the absolute best available? In pie - may be a bit unbalanced - because we see the same vein, what business leader worthy of the it as the ultimate way to make real our dreams of name wouhl even consider fiehling a team with what this great Company couhi bu ome anything other than the very best, the "A" players? Six Sigma has turned up the voltage in every GE business across the globe, energi/ing and This is now the business ofyour exciting an or us ana moving us aos than ever to Company: "A " products and "A " "h"' *e have a'"aY' "'n 'ed '" h"""'c'""" ' h'" a hundred-billion-dollar global enterprise with services delivered by "A " players the agility, cusanner rocus and fire in the beu or a r around the globe. sman '""'va"Y-In our 1994 letter to you, we addressed the What characterizes "A" players? perennial question put to management teams, In finance, for example,"A's" will be people which is "how much more can be squeezed from whose talents include, but transcend, traditional the lemon?" We claimed, then, that there was in controllership. The bigger role is one of full-fact unlimitedjuice in this "lcmon," and that none fledged participant in driving the business to win of this had anything to do with " squeezing" at all. in the marketplace -a role far bigger than the We believed there was an ocean of creativity and dreaiy and wasteful budget " drills" and bean-passion and energv in GE people that had no bot-counting that once defined and limited thejob. tom and no shores. We believed that then, and we in engineering,"A's" are those who embrace are convinced ofit today. And when we said that the methodology of Design for Six Sigma. "A" there was an " infinite capacity to improve every-engineers can't stand the thought of" riding it thing," we believed that as well-visecraHy-but out" in the lab, but rather relish the rapid pace of there was no methodology or discipline attached technological change and continually re-educate to that belief. There is now. It's Six Sigma quality, themselves to stay on top ofit. along with a culture oflearning, sharing and in manuflicturing,"A" players will be people unending excitement. who are immersed in Six Sigma technology, who For GE, these are the best of times, and in our consider inventory an embarrassment, especially view they will only get better. with a whiff of deflation in the air - people who Thanks, as always, for your continuing support. L understand how to drive asset turns and reduce inventmy while at the same time increasing our readiness to setTe the customer. In sales,"A" players will use the enormous Chinnan of d[Jr. }olm r. wek h. e ho.ud and / C' f" "' i"*" " "~ / h)> customer value that Six Sigma generates to differ-Pd"i" '" " entiate GE from the competition, to find new Vi< c (:bairman of the boatd accounts, and to l'efresh and expalld the ohl ones Xbg ana Exn nnte ona ct - as contrasted with "C" players whose days are rugne r31urphs Vu r Chinnan of du ho.ud Spent Visitillg " friends' on the " milk-Um" Circuit and Exn uihe ()ff u rt of, customer calls. J"hn D. Opa-Vit e Chaionan of the hoard rehruary 13. lWM and I xn uthe ()HW rr 6

~9 81 ; ; .. e. gt ' i 'f p.ed \\- y . ~ f' ~ - 9 _ y "v 4 a .i h .'d is, Q: ? [p s. .g -, wo ?. U_ Our Six Sigma quakty initiative iS changing the way we do everything.. for the benefit of our customels and GE. ~ ,y y yg 4 -, Matching Colors Quickly imm Redesigning a Refrigerator Process wm Making Consistency Pay Off min am Shown here in a color lab at the GE Plastics Black Belt Frank Pennisi(center) led a Six As part of the Loan Workout Consistency Team plant in Singapore, Cindy Lee (standing) and Sigma team that improved on-time delivery, at GE Capital Mortgage insurance, Black Belt S. Mani were part of a Six Sigma team that has increased productivity and saved $4 million Marquita Webb (right) and Master Black Belt reduced the lead time for matching colors of GE for GE Appliances by changing the test and Jay DesMarteau applied Six Sigma to the resins to customer requirements by 85%, a dis-repai process for refrigerators.The team process of working with delinquent borrowers tinct competitive advantage in the f ast paced replaced a continuous test loop, from which to find alternatives to foreclosure. By cutting global rnarket for plastics. refrigerators were pulled off the line for repairs defects in the workout process by 96%, GE and then returned, with eight test cells in which Capital was able to offer borrowers quicker Creating a Better CT Tube m.= dedicated operators test refrigerators for pos-solutions while reducing claims payments Using Six Sigma tools and methodology, a team sible mechanical problems and make any by SB million. from GE Medical Systems and the GE Research necessary adjustments before the electrical and Development Center has developed the test is done.With Pennisi are test cell operator Clearing Paperwork for Customs --o,m new Performix* 630 tube with key attnbutes Joan Raines(left) and GE Appliances quality Claire Bunuan, an administrative associate for that customers want. Tnis new generation in leader Tanya Fratto. GE Aircraft Engines in Canada, has used her Gix tube technology offers dramatically longer tube Sigma training as a Green Belt on a project to life, faster patient exams and improved image make the paperwork perfect every time GE quality. Here, Dave Szwedo does precision Canada imports a marine and industrial engine, assembly of the core of a Performix* CT tube parts or tooling for a Canadian customer, in with the aid of computer quakty control checks addition to cutting customs costs, her project that ensure superior image quality. has reduced border delays by at least 50%. 7

Aircraft Engines GE Engine Senices is growing dramatically, Six Sigma is ddving culturalchange with 1998 ievenues expened io pass s4 billion. h4!Ib //troug/20Hf our entire 0/Fration and e have multiyear senice contracts with Federal Exiness, Southwest Airlines, UPS and US Airways. accelerating our EntSineSS results. The acquisition of Greenwich Air Senices and UNC Incorporated broadens our capacity and f capabilities worktwide and gives us a strong pres-In a year of strategic initiatives, GE Aircraf t ence in senicing businessjet engines and aircraft Engines not only achieved double-digit gains accessories. We also are fuimingjoint venttn es in actenues and ongoing carnings, but also took with global airlines and maintenance prmiders. bold actions to position itself f or long-tenn prof-CF51 International's new CFM56-7 is commer-W. James McNerney. Jr. it tble growth in a highly competitive global market. cial asiation's best-selling engine, with more than President and Chief Foremost among our initiatives, Six Sigma 1,500 ordered for liocing's Next-Generation 737 ExecutWe Officer, GE Aircraft Engmes quality is drising cuhural change throughout our series. The first CFM56-powered 737-700 aircraft entire operation and accelemting our business was delivered to Southwest Airlines in 1997, while results. Six Sigma tools allow us to improve results Alaska Airlines launched liocing's new CFM56 dramatically by enhancing the value we proside to powered 737-900.1he CFM56-5 engine, which our customers. Ahnost one-third of our employ-powers Airbus Industrie's successful A320 aircraft ces have been trained to lead projects and spread family, increased its leadership position, and the Six Sigma tools to co-workers, resulting in more fuel-saving CFM56-515/P derivative engine main-than $70 million in productivity gains in 1997. tained its industry-leading reliability. We made progress in other areas as well. The GE90 engine is demonstrating outstamding Consistent with our marketplace success this fuel burn, noise, emissions and reliability power-decade, GE Aircraft Engines and CFM Interna-ing the llocing 777. While market conditions have tional, ourjoint company with Snecma of France, not warranted developing higher-thrust versions, again won a significant majmity of the world's we are investing significantly in the GE90 to fur-large conunercial engine orders. Key 1997 wins ther provide the best solution to 777 customers included Ame ican Airlines, the Civil Asiation who require up to 92,000 pounds of thrust. Administration of China, Continental Airlines, Our best-selling CF6-80C2 engine, selected by Delta Air Lines, Finnair, Northwest Airlines, Delta to launch the new 150cing 767-400ER, won TilYand US Airways. several strategic orders. The CF6-80El A4, launch engine for the new Airbus A330-200 twinjet, was certified by the Federal Aviation Administration. The CF34 engine showed strong growth power-ing the Canadair Regionaljet, the best seller in its class. Development continues on the CF34-8C engine for Canadair's new RegionalJet Series 700, which was latmched in 1997 by American Eagle. In military programs, our F414 fighter engine received initial production orders for the U.S. 1

• Q Pjd1 g'gr$n:Gil -

Navy's new F/A-18E/F Super ilornet. Our T700 helicopter engine received contracts from the fG" M U.S. government through the year 2000. The f <7 ~ Republic of Korea selected our F404 engine for its a advanced trainer / light combat aircraf t. The team ~~*C' m, of GE, Allison and Rolls-Royt e received a four-year desclopment contract for the Alternate Engine Program for the U.S. Joint Strike Fighter. Our investment in more powerful, more elli-cient and lower-emission engines for the marine and industrial sector, such as the uprated 1.M6000 The CF34 engine hadecome a favorite among regionalairknes like Cincinnati. based Comair, which ordered another 30 and an improved 1 M2500 derivative engine, fttr-Canadair RegionalJets powered by the popular GE engine. ther enhances our leadership in that man ket. 8

Appliances holder. Profile Perfonnance laundry products g-We confir Hiti 10 (' rive Ou rfour ljusiness include our newest washer, with outstanding per- //leines Ofgrowl/l, //ran(/, //ro(lurlivity form nce in gentleness and temperature control,

/

and our quietest dryer ever, with an electromc an(/ Six Sigina. sensor to help dry clothes more evenly. Our record level of variable cost reduction was aided significantly by Six Sigma projects aimed at We achieved record levels of revenues and imprcning process efficiency, reducing scrap and ongoing earnings in 1997 while facing a rework, and getting beuer factory output for our-g turbulent year in the intensely competitive appli-selves and our suppliers. We now have 40 suppli-Le4. ance indusuy. Our revenues advanced to $6.7 bil-ers, representing a third of our total purchases, David M. Cote lion and ongoing earnings were higher despite participating in Six Sigma. President and Chief the biggest U.S. industry price decline in over A defect-free mindset has become part of the Executwe Officer, GE Apphances 30 years. culture at GE Appliances through the efTorts of During 1997, GE Appliances continued to some 1,000 employee trained in applying Six drive its four business themes of growth, brand, Sigma methodology to every aspect of our opera-productivity and Six Sigma, tion, including design, manufacturing, sales and We made great progress with our growth pro-senice. Consumers are benefiting from a stream grams by introducing new products, including the of new quality products designed for Six Sigma, GE SmartWater" filtration and softening systems; while Six Sigma projects in manufacturing are broadening our Senice Af anagement capabilities; lowering costs and reducing working capital. Six and expanding our global presence. We launched Sigma, which accounted for $44 million in savings a new line of dishwashers, upgraded existing prod-in 1997, will continue to provide the foundation ucts, enhanced our ultra-high end Afonogram* for our growth, brand and productivity initiatives. line and added outdoor grills to it, and intro-l duced a stainless steel built-in refrigerator. a m Responding to consumer demand for softer, 4 y! cleaner, better tasting water, our GE SmartWater line is off to a terrific start. GE Senice Afanage-e ment, which provides warnmty administration, h risk management and expanded senice plans to [Q retailers, builders and OEAfs, completed a jomt venture with National Tech Team to bring our J personal computer senices to new heights. Glob-f ally, our strategy of highly selective investments based on expanding brand recognition has paid ofTin Europe, Asia and South America, particu-larly in Brazil with our 1996 acquisition of DAKO. Capitalizing on our brand - our most valuable asset -we focused on the growing high-end seg-ment by introducing the GE Profile Performance" series, a step up from our highly successful GE Profile

• line. Each Profile Performance product has unique and value-added features for sophisti-cated consumers. l'or example, we added a Water by Culligan* filtration system to refrigerators with ice and water dispensers. Our new TrueTemp" g'

oven offers consistent oven temperatures, making it the most accurate oven in America. A new ~ ~ ~ ~ microwave oven, with its sensor combination, blends the benefits of microwave and convection Part of the new high end GE Profile Performance

• series, the cooling. Our SureClean" dishwasher has a special GE SmartWater* faucetprovides high quahty, clean water for china and crystal cycle and StemSafe" glassware dnnking or cooking 9

l

Capital Services and equipment leasing reach in Ireland, !!ritain, p Our unit /ur />alance oflarge-rotn/>any Demnark and Portugal. In addition, Railcar Serv-Strengilt willt slnall-rotnf>any vigor and I' '""U" I Y"'"P'"" d'h"' *i' h ' h' "'R"I*i'I"" of pan-European Cargowaggon. I - flexillility continues to $rt us a/> art. In a mdor privatization eilort in Spain, our f. Stnictured Finance Group lent capital and exper-tise to Cableuropa, one of that country's largest Wfocusing on completely satisfying our ith each of our 27 dhersified businesses cable 'IV operatois and a leading telephone oper-ator, to help finance a modernization piogram. customers' needs profitably, GE Capital Senic es in Hungary, we provided achisory senices and achieved iecord net cainings of $3.3 billion. That equity to allow Magyar Telecom to triple the Gary C. Wendt translates into a $439 million,16% increase over number of telephone lines in its senice area by Chairman, President and 1996 lesels and is the 23rd consecutive year of the ) car 2000. ['n1r increased profits hom continuing operations. Japan and Australia form the cornerstones of E ectr c Capital $ervices, lnc. Our ability to deiiver strong, steady and pre-our operations in the Asia-Pacific region, with dictable carnings in a highly competitive global Japan continuing to build on its strong consmner T-emironment is predicated on a three-pronged business and GE Capital Australia gaining leader-strategic focun continued globalization of our ship in credit cards, fleet senices and four other i revenue stream, dedication to providing value-operating areas, in China, we were the first for- %.s added senices and a commitment to Six Sigma cign-owned company to receive a finance license. \\g quality that is unequaled in the financial senices Despite currency turmoilin Southeast Asia in world. 1997, GE Capital's prudent hedging policies pre-y. GE Capital's overseas operations continue to vented losses due to foreign exchange rate Huctu-expand at a dynamic pace, with assets outside the ations in the operations we control. United States constituting more than 30% of our Throughout the Asia-Pacific and Latin America total assets. Net income from non-U.S. operations regions, our small but solid presence has us well

1. • tA-grew to $1 billion in 1997.

positioned to take advantage if opportunities in Denis J Nayden Our Flumpean presence increased as a result the commercial and consumer financial senices President and of several important acquisitions coupled with markets arise from the 1997 turmoil. IE ap operating enhancements in existing bminesses Providing innondive, value-added senices to C r n and effective integration of companies into the our customers means differentiating ourselves in GE Capital family. The addition of Woodchester, a competitive marketplace, enhancing our ndue one ofIreland's largest financial senices compa-to customers and increasing our profitability. nies, was a 1997 milestone, expanding our auto We strive to do this in each of our 27 businesses. It N. f h N f N' h h ll h ? { v , a 1 ..p ohm . $\\ c.s

'e

[ .k

== .apte < ~ e j-Steve Moore of GE Railcar Services, a globalleaderin railcar GE Capital Australia has become a financialservices leader in leasing andit lated services, uses a hand-held computer to Australia, where it handles the private label credit card business record repairs to a leased car before its return to the customer. of Coles Myer Ltd. the country's leading retailer. 10

During 1997, GE Capital took several steps to automobiles in the United States, wrote S5.2 billion grow the types of senices we prmide to businesses in reinsurance premiums and seniced 73 million M*"*M'"*"' and individuals asuund the globe. credit card accounts.

• Aviation Services IT Solutions, for example, now focuses on Our Six Sigma initiative continues to produce fo',*n",82n'te' ner supplying iull life-cyc le senices that prmide cus-significant benefits in the form ofincreased rev-

' f7 8*t$ns

• %dular Space tomets with (ost-effective management of their enues ar'd lower costs. Our basic approach is to
• Penska Truck t. easing information technology on a global basis.

reduce " defects" by focusing on customer needs, ' "'/"' 8'"" With 199Ts launch of the GE-1E satellite and improving processes and imuhing all employ ees. 3p,,;,,,,i,,,,,,, the planned 1998 launch of an Asian satellite, Commercial Finance, for example, used Six

• Consolidated Financial Americom's flect of 1I satellites will prmide sen.

Sigma tools to win more deals by better under- . [%,'yers Reinsurance ices reaching about 807c of the world's population, standing customer lequirements, it des eloped a Corporation -

• Financial Guaranty -

TIP, our m er-the-ioad trailer leasing business, Customer Expectations Pact that has contributed insurance company. added a U.S. customer senice center for easy, toll-to a 160% increase in new transactions won.

• • "8'8"'"""

hee customer access to its branch networ k across Mortgage Insurance developed a flexible new ,$"l FIj*"s' ' des the countiv. TIP also established an emergency billing s> stem that contributed not only to cus-

• Consumer Financiei breakdown senice that allows customers to (all for tomer retention but also was instrumental in win-

.$p'$d AustrWie help, day or night,365 days a 3 ear,in the United ning 560 million in new insurance written from

• GE Financial Assurance
• Global Consumer Finance States and Canada.

one customer. InJapan, Global Consumer e mngage services

• Retainer Financial Servicts Americom and TIP are working together on Finance helped customers overcome payment dif-advanced satellite and terresuial communications ficulties associated with limited banking hours

,{'*j'*[ilanclng to help companies monitor, track and collect data and saved money by establishing an alternate pav-

• Commweis Resi tstate on fixed and mobile assets in the field, ment method through a netwoil of 25,000 conve-

. [q ity c",8 '"jg,*,$ 8 pt FGIC, a leading provider of municipal bond nience stores, now used by 40% ofits customers.

• structured Finance Group insurance and other financial senices to state and While our employee comminnent to Six Sigma Mid-Market Financing
• Commercial Equipment local governments, expanded its capabilities in is substantial-more than 16,000 associates

-Financing investment contracts, revenue management, and involved and more than 2,000 projects under way $8P($8;ali, property and casuahy insurance for public entities. - the benefits to our competitive position are To better serve our individual customers, we tremendous. Customers are enjoying the r esuhs organiicd the way we help people accumulate, pre-of Six Sigma as our merall responsiveness to their sene and transfer weahh under the GE Financial business needs improves dramatically. Assurance umbrella while consolidating back-room Looking ahead, our unique balance oflarge-operations to reduce costs. company strength with small-company vigor and During the 3 ear, GE Capital aho seniced $104 flexibility continues to set GE Capital apart on an billion of home mortgages, financed half a million increasingly competiti e global playing field. f%&%;g Mblg W ~ .i * '.

• 1

[{ i l 1 o (7 ..A.. ~ Y- . [,7, ,g s y J V I ~ [ s %% -Q 1 l; n1 ? f Global Consumer For:ance uses telemarketers at this center in Penske Truck leasing o,'etates more than 100,000 vehicles in ieeds, England to successfully sell consumer loans, credit card North America, whole Pe 'ske logisttcs and Penske Logistics insurance andpaymentprotection insurance to U.K. customers. Europe provide global suply chain management solutions. I1

Lighting are now responsible for the global opemting per-We had our brSt year evt'r as Six Sigrita formance of their respective product lines. We also showed us new ways to iinj, rove cfHality, introduced more than 400 new products around the world in 1997; and of our total global sales for Smiire and /Fodur//vi/J. the year, almost 30% resulted from products pro-duced on one continent and sold on another. Our technology organization, which manages %g* . y posting a double-digit gain in ongoing projects across the globe, now has more than half "~ earnings and imprming our overall senice its engineers outside t'ie United States, with out-to customers, GE Lighting had its best year ever, standing talent in Hungary and China. Our sourc-out., b The Six Sigma initiative continued to show us new ing organizuion continues to capitalize on GE David L Calhoun ways to improve our quality and senice delivery, Lighting's worldwide presence to attain the best Qd*"jt n[ chm increase our total cost productivity and improve products, price and senice available. GE Lighting our capital efficiency. The North America business expanded in 1997 Six Sigma represents a massive change in the with the signing of an agreement with MagneTek, way we approach our work-more deliberate, Inc., that gives GE Lighting exclusive sales respon-more measured, more disciplined. In 1997 alone, sibility for electronic ballasts in North America. we invested $33 million, provided extensive train-This should increase our ballast sales significantly ing to more than 2,600 employees and added our and make GE Lighting a force in this rapidly second 100 Black Belts - experts in Six Sigma changing indusuy. We also implemented a supply methodology - to our business. The return was chain organization to improve our inventory man. S47 million in benefits. In addition, Six Sigma agement and senice to customers. drove us to invest more in equipment mainte-In Asia, GE Lighting continued to invest for nance and control hardware in order to gain free growth. Hitachi GE Lighting, L.td. consolidated capacity from our existing plants. Overall, our all marketing and sales into one business, resulting capital efficiency has improved 15% annually, in increased sales through thisjoint venture and, We made great progress on our other major more importantly, a simpler approach to our cus-initiative - globalization. We continued to organ-tomen. This action positions us for strong growth ize and invest in the development of" global brains" inJapan, the world's second-largest lighting mar-to achieve better operating performance from our ket. Throughout Asia, we introduced more than worldwide enterprise. Our new-product managers 80 new products, increased sales by 25%, gret market share in GE-branded lighting products and achieved 10% factory productivity. Our European business continued to make gains in customer senice, as customer satisfaction improved by 20% and fill rates improved by eight points. In addition, the European operations increased factory productivity by 7%. Our busi-nesses in Eastern Europe and Turkey again gener- -p ated about a 20% increase in sales volume. We also acquired selected assets of Flame Electrical Ltd., a commercial, industrial and consumer ~ lighting products distributor in South Africa. 4 The GE Quartz business had another strong WJCE year as it continued to diversify and invest globally Sdthir while gaining share with its traditional customers. O Approximately one-third of sales was from new products, and non-U.S. sales accounted for more + ^ 4 than 50% of the total. For GE Lighting,1997 proved to be another strong oper ting year in which we continued John Brelus (rightl and fellow product managers Jonathan Qu and Clare Frissora discuss ways to grow the GE name in lighting to make improvements and investments taward around the world via packaging. advertising and promotions. a blight future for our global business. 12

Medical Systems image archiving, have given us a strong global WP oillpuff(/ lbf IH/Ilhf/ in (l(( TfgiallS position in the rapidly expanding inedical image b.; with nno produrl and service ol]erings ' " (""" * ' i ""

• K"" ' -

J GE technology leadership was reinfi>rced with for the hen [lh rare indus/1,T. the armouncement of a first-of-its-kind multiple-purpose digital x-ray detector, which offers the potential fer better, faster and more cost-effective e posted record ongoing earnings dming x uv evaminations. The new detector, which will 1997 despite continued price erosion in be manutauured exclusively for GE by EG&G, a slow-growing worldwide diagnostic imaging Inc.,is the result of a 10-year, $100 million R&D Y market. Our year was highlighted by the success-effm t. It will replace conventional x-ray film and Jeffrey R. Immett Iul integration of several global ventures, an proc essing chemicals with computt r images that President and Chief unprecedented investment to achieve Six Sigma can he stored an l transmitted electronically. Executwo Officer, GE Medical Systems quality, and a commitment to deliver technology, Product introdactions in 1997 suengthened productivity and economic solutions to the our entire product line. Among the more excit-health cas e industry. ing, the new Signa

• liorizon" LX MRI system is GE Medical Systems outpaced the market in the first to combine advanced imaging technology all regions with new product and senice oilerings, with a high-perf ormance, lightweight magnet for i

expanded distribution coverage, and new efforts lower operating costs and easier installation. The to drive customer value and productisity. We con-new Signa

• Profile" Platinum system is our latest tinued our strong momentum in the senice area.

generation of open MRI systems that maximize Part of the growth came irom GE IleahhCare patient comfort. Senices, our multi-vendor senices group, which With the introduction of SmartView" soft-surpassed $200 million in revenues for the first ware, GE's computed tomography systems have tim We also extended our insite" remote diag-been enhanced to provide real-time monitoring senice capability to the senicing of non-of inten entional procedures. Our position in no-( ,uipment. vascular x-ra) was enhanced wnh the introduc-

m. formation technology is spurring growth tion of the Advantx* LC+ cardiac system as well across the business. Our acquisitions of Lockheed as the GEMnet* 2000 digital networking and Manin Medical Systems and Innomed of Germany, archiving sy stem.

as well as a 20% stake in A1.1, a leader in ultrasound Our leadership in women's health care was extended by the introduction of the Senovision" Digital Spot and Stereotactic Mammography Sys-tem, our first digital product in this key segment. In ultrasound, GE's global position has been strengthened by the LOGlQE 700 system, a hreak-through product that delivers leading quality in 3 3 3D imaging applications. i \\'3 4. r ' Cyg% GE Medical Systems is utilizing Six Sigma to j d e A Ae A;e in rove customer benehts and reduce costs. We 4s 1-recorded $42 million in productivity benefits dur-ing 1997, and we have completed mme than 600 projects to date. One example: using Six Sigma M methodologv. the new Perf ormix" 630 x-ray f tube has yielded a 10-fold increase in tube life g g]y t/'-). expectancy and performance. .4 i 1 ooking f.onvard, we are optmnstic that GE,,s ~, i%{,,m # ,f ', investment in technology, quality and infoimation /'p systems will help tn grow as "the total solutions / company" to health care providers worldwide. .c. a l With its open desig.., GEs new Signa

• Profile
• Platinum MRI l

system can make patients more comfonable and relaxed and gave technologist? more room to momtor patients. 13

NBC the award-winning Dateline NBC added a knirth night to its multi night franchise. Meet thelten, T/ie Pe(irock ne/ work lerl/m.ine-linie the longest-running program on network televi-T(t/ingsfor a Secon(I Str(lig/l/ year. sion, marked a telesision milestone in 1997 with s-the celebration ofits 50th anniversary. NBC Sports has secured long-term relation-V ships with organizations such as the International ii he National Broadcasting Company regis-Olvmpic Committee, the NBA and the USGA. tered its fifth consecutive year of double-digit NBC Sports will be the exclusive over-the-air g gains in ongoing carnings in 1997 and led the broadcaster of the NBA through the 2002 season, F-prime-time ratmgs for a second straight year. We and the network will present the USGA's major Robert C. Wnght also had impressive growth in otar primary cable golf championships through the year 2003. More-President and Chief properties, CNBC and MSNBC. In addition, the over, af ter the 1998 Wimer Games, every Olympics Executwe Officer. National Broadcasting year 1997 malked the latmch of NBC's Six Sigma through 2008 will be broadcast on NBC, w hich Cornpany. inc-quality initiative, will solidify aur position as a broadcast leader well We finished the 1996-97 season as the nation's into the next century. most-watched network, winning the prime-time NBC Stations had record revenues and profits ratings battle by more than 25% in the prized in 1997. In December, WVIT in llartford became adult age 18-49 demographic with regular pro-NBC's 12th owned-and-operated station, and granuning. Led by "must-see" series such as ER NBC will soon take a majority ownership position the Peacock network had the top six prime-time in KXAS in Dallas, the nation's eighth-largest shows, was number one across the board in late-market. Expected to be finalized in the first half night programs, and with Days of Our Lives had the of 1998, this innovatise partnership with flicks, number one daytime drama in advertisers

• taiget Muse, Tate & Furst will bring the reach of our female demographic.

owned stations to 27% of U.S. households. NBC News enjoyed its filth straight year of CNBC enhanced its position as the world record profits. NBCNightly News with Tom Bn> ham leader in business televisionjournalism in 1997, surged ahead in the esening news ratings race to delivering a record year by every measurement, become the top-mted broadcast, Today beat the Ongoing earnings were up more than 40% and competition by an average margin of 67% and business news audience was up etWe in the fourth celebrated more than 100 weeks in first place, and quarter compared with the same period a year ago. In a move that will expand the global value of CNBC, we entered into a strategic alliance with m we'gy 9 DmMw to n y m-Emop ad <bim i A <1 c business news senices under the CNBC bannen h ]. and to utilize the Dowjones editorial resources 64 ~ ' for CNBC in the United States. T After its first full year of operation, MSNBC, the 24-hour cable and Internet news senice, now n eaches 36 million households, and it has commit-ments in place to reach 56 million by the y ear 2001. Since coverage of the death of Princess Diana on August 31, MSNBC has considerably narrowed the ratings gap with CNN in several major television maikets. Ad sales and subscriber fees more than tiipled in 1997. Finally, one of NBC's most significant accom-plishments in 1997 was the rollout of Six Sigma, \\ which will play a crucial role in helping us maintain our leadership position in the broadcast indusuy. CNBC has become the "must see~ channelfor business news '" W "" h'I"*l'YY'"b~""d at stock exchanges. in shops and homes. and on Broadway, way in every area of our business. where the giant Astrovision '* screen looms over Times Square. 14

Plastics t Cycolac resin business continued work on capac-Oltr SitrresS[Iil Sales grow /h IS //n/ ity expansions at Ottaxa, Illinois, azul llay St. Louis, to our ritslomerS' fort /S oil mathel Alississippi, to meet fieure needs of the automo-tive and building and cc nstruction indusuies. (levelopment. Omstruction also contir.ued on the 130,000-ton polycarbonate resin plant m Cartagena, Spain, b Our successful sales growth is tied to our [e achiesed record ongoing earnings on rev-customers' focus on market deselopment. Key / enues of $6.7 billion in 1997 as double-digit customers include manufacturers of computers, volume growth and total cost producthiry more CD-ROMS, compact discs and digital sideodiscs. [// 2h" than offset selling price erosion. In addition, cash Also, continuing efforts to bring productLity to our Gary L Rogurs flow of more than $800 million wasdue toimproved automotive customers through weight reduction ' ((cs'oQf[{ ' wor king capital management. and parts consolidation have led to increased sales. i GE Plastics A highlight for GE Plastica was our Six Sigma Emironmental and safety excellence have j efforts, which reached targets for quality improve-always been hallmarks of our business. We con-l ment, cost-out and, most importantly, customer tinue to invest resources to improve process safety satisfaction. Our Superabrasives business is a management. We're also working in close part-model of Six Sigma implementation where a nership with our plant conununities to conununi-totally integrated quality focus has made double-cate our capabilities in safety and emironmental digit improsements in total cost productivity and stewardship. yielded free capacity equal to the existing plant. Aided by our fot us on Six Sigma quality and a More than 2,200 GE Plastics employees have business-wide passion to bring value and produc-been trained in Six Sigma during the past two tivity to our customers, GE Plastics is well posi-years, and we base more than 3,000 projects com-tioned to have another strong year in 1998 as our pleted or cun ently in process. Total benefit for customers continue to grow around the world. 1997 was about $137 million. Dming 1997, we continued to take the steps necessary to expand our global reach. We are entering into twojoint ventures with c. llayer AG of Germany that are expected to be gMMi i finalized dming the first half of 1998. The first is an automotive glazingjoint venture designed to develop polycaibonate and coatings technology to imprme the impact resistance and safety of automotise side and rear windows. Successful f development of polycarbonate glaring technology represent.s an enormous additional growth oppor-tunity for our products. The secondjoint venture will combine the manufacturing, technological and commercial resources of GE Silicones and liayer's silicones operations in Europe to seire customers in Europe, Atrica and the Middle East. GE Plastics expanded its portfolio of products by acquiring Resinmec, a nylon resin compounder with two plants in Italy, and Polimeros Argentinos S.A. of lluenos Alics, a compounder and distribu-tor of a wide range of engineering thermoplastics. In addition, we continued to imest in our world-class facilities. Our Structured Products business completed capacity expansions for sheet Howard Yv of GE Plastics inspects the quality of engineering and film prodtu ts in l\\rari1 and China, and our plastics strands at the Nansha, China, plant, which is being expanded to better serve Chinese and export mark ets. 15

i Power Systems Power Systems achiewd S94 million in sasings Wf lllivf FX})(Ill($f($ OllY})(Irli(5})(llioll ill from 2,500 Six Sigma quality projects in 1997, lllf glol>(ll flingy tilarhel wiflI a flo11 folio with resources in place to more than double that savings in 1998. Customer dashboards for nearly ofillllovativf Snvires artcl})roilliris. 50 major global accounts are duising the benefits ( of our quality efforts directly to the marketplace, Revenues from operation and maintenance g. steady stream of energv product and senice (O&M) and long-term senice agreements grew linnovarions helped GE Power Systems reach 40% in 1997. Customer commitments now total g record revenues of $7.5 billion in 1997 despite $1.2 billion through nearly 50 O&M and long-continuing price pressure driven in part by dereg-term senice agreements now in place at power Robert L Nard.m ulation of the energy indusuy. We also had a dou-plants around the world. [',8g *g"{Cllef ble-digit gain in ongoing earnings. GE power-generating technology remained the GE Power Systems We continued expanding our view of the global preferred choice around the globe in 1997 as sales energy market during 1997 and increased our increased 5% in an extremely competitive market. participation in it by adding to our portfolio of GE Nuclear Energy completed work on the sec-senices and products that reach from the well head ond Advanced 11 oiling Water Reactor power sta-to the consumer. This included investing more tion for Tokyo Electric Power Company inJapan i than $250 million in programs. joint ventures and and began work on a two-unit project in Taiwan, acquisitions to meet growing customer needs in Our fleet of"F" technology gas turbines reached the deregulated energy industry. an important milestone in 1997, surpassing one Another year of solid growth at Nuovo Ph;none million fired hours of operation in power plants included almost $2 billion in orders, successfully worldwide. The "F" technology machines have building a backlog to replace work completed on compiled two times as many fired hours as all the the Gazprom pipeline project in Russia. Nuovo competition combined. Pignone also strengthened its worldwide leader-We aho continued development of our "II" gas ship in gas compression technology by winning turbine technology, which has the potential to key pipeline and offshore platform orders, includ-break the 60% thermal efficiency barrier and lead ing projects in Oman, Algeria and Canada. Also, the next generation of advanced combined-cycle a major 550-megawatt low-IITU gas power project turbines. in southern Italy went into full operation. GE Harris Energy Control Systems, ourjoint venture with Ilarris Corporation, grew more than g_ 30'/o in its first year. It won several key contracts Ek for monitoring systems and devices that automate WP _g power distribution, including one of the industry's ed 7h largest awards for remote terminal units. x The recently completed acquisition of the gas turbine division of Stewart & Stevenson Senices, Inc.will greatly enhance our business bs providing additional product and senice of ferings to an expanded customer base. Stewart & Stevenson has an outstanding reputation for packaging gas tmbines for use in industrial power generation 4 markets. During 1998, we will continue expanding our participation in the broader energy market with innovative senice initiatives, and we will continue pursuingjoint ventmes and acquisitions that increase our product offerings. We also will use our Six Sigma quality initiatises as a competitive ~"~ Christine Laskowski of M nnesota Power uses the XM1

• con.

trol system from GE Harris to automatically monitor and control the electric power grid across the northern tier of Minnesota. 16

Electrical Distribution and Control Investment in infonnation technolojg h and advanced electronics is bdnging y' value-added solutions to our customers. be year 1997 marked one of the best in the lE .L history of GE Electtical Distribution and Con-s Dennis Belickie trightl of GE shown here with Philadelphia proj-trol as we achieved record ongoing earnings and ects engineer Thomas Varughese, designed this new power stgntlicantly higher ongo,mg operatmg margtns, management system for the Philadelphia lnternational Airport. lJoyd G. Trotter although revenues were flat. President and Ctuef We continued to invest in new product devel-hlexico and lirazil are expected to delis er benefits A Executwe Officer. GE Electncal Distribution opment, focusing on information technology and in 1998. In addition, the Americas business was and Control advanced electr onics to proside new value for our realigned in order to leverage product and com-customers. Sales of value-added systems, like our mercial synergies. energy management system, havejumped dnunat-Our Six Sigma quality efli>rts drove strong pro-ically as customers look to ED&C for solutions ductivity gains during 1997 that resulted in about that improve productisity and facility uptime. 535 million in financial benefits for our business Globally, N1ultilin of Canada has quadrupled while improving customer satisfaction. htore than earnings and maintained double-digit revenue half of our employees are engaged in Six Sigma; growth annually since being acquired in 1995. the rest should be trained by the end of 1998. In Europe, our AEG lw voltage business expeii-11y focusing on quality, global growth and new enced steady growth, while expansion efTorts in products, we anticipate another successful year. Industrial Control Systems umua serres . I Customer satisfaction, top-line results, e tn av operating margins and cashflow are y. allimproved by Six Sigma. ~ ', ' v,,,. .v ,/ 3 t was another year of strategic and operational [6 d, 'j Lprogress for GE Industrial Control Systems, which symbolically changed its name from 51otors F ~ and Industrial Systems in 1997. Sales and ongoing Ernest Linn of GE uses a multimeter to check the firing circuit on James W. Rogers earnings were both up modestly desp.ite soft mar-a new innovation'* Series AC Drive, which provides customers y',j"ln"d Cy*' Let conditions in the heating, ventilation and air with more power and reliabihty for their industrialprocesses. GE industrial Control conditioning (IIVAC) industries. Systems Six Sigma took center stan,c, becoming the dri-tive hardware, sof tware, project integration and ving force of our transfbnnation from a set ofinter-post-installation engineering senices. In addition, nally focused product businesses to an externally we introduced several products, including the j focused system solution business. $1 ore than 4,300 Innovation

• Series AC Drive, new Pl.C-based con-employees have been through Six Sigma training, trol systems, advanced Clh1Pl lCflY1 software and and our results to date have been tenific. Customer a global 95mm IIVAC motor.

satisfaction, top-line results. operating margins As we enter 1998. we are stronger operationally and cash flow are allimproved by this initiative. and better positioned strategically to deliver on As a system solution pnnider, we now offer our goals of creating real customer value and gen-customers a coordinated set of globally competi-erating sound financial returns. 17

Information Services y .m km.M We are 'internetworking' global entn-t a -~ prises with their tradingpartners to reduce costs and increase quality. I# ngoing earnings were much improved at [2 g GE Infi>rmation Senices as our Six Sigma sier Cogo ation's On Horn Ued discunes the benehts of initiatires contributed to a 9% increase in opera-GE Tradeweb [, a revolutionary Internet-based EDI service, tional productivity. Revenues from contemporasT with GE's Gene Frantz (center) and Tim Tegeder. Harvey F. Seegers electsonic cornmerce solutions grew neady 20% President and Chief despite weakened currencies in overseas Inalkets Internet EDI senice, Chnsler has shortened imoire Executwe Officer, s GE Information Services and an increasingly competithe mar ketplace. processing cycles with some suppliens from 30 days We seciu ed a number ofimportant new elec-to 24 hours, saving millions of dollars in purchasing tronic data interchange (EDI) customers, includ-costs annually. Others are achieving similar results ing Kmart, the Association of American Railroads as the Internet brings more and more companies and Chrysler Corporation. We also expanded our into the world of on-line commerce. transition toward internet scivices, with open We increased our global alliances during 1997, technology solutions becoming almost half of our continuing to build the world's largest electronic 1997 resenues. tr ading conununity. Newjoint ventures in 11razil, Chrysler, for example, is dramatically reducing Ilong Kong, Israel andJapan expanded our pres-cycle times, costs and transaction errors through ence in these countries and will electronically link electronic commerce on the Internet. Using our their trading cominunities on a global scale. Transportation Systems A Our nno AC6000 loconwtives will M' enterfull-scaleproduction in 1993. i ith orders surging to a scrord lesel in 1997 1 and ricating an unprecedented backlog, GE Transpoit uion Systems delivered a double-chgit mcicase m cash flow and improved earnings. h w@r locomoh ham Wu#a hn Pa* Shi >ments to Canada and Mexico will exceed 450 John G~ Rice I train at the Bailey Yard in North Platte, Nebraska, the largest a es ont a units from 1997 to 1999, underscoring the grow-railroad yardin the world 0 GE Transportation ing importance of these trading partners. Systems Thineen new K6000~ pototme locomotives service contracts in Canada, Australia and Kenya. hase completed 80,000 hours of teliability testing Our GE-llarris Railway Electronicsjoint venture on the CSX and Union Pacific railroads in prepa-won contracts from Union Pacific and Norfolk ration for iull-scale production in 1998. More Southern to install its Foresight'" advanced plan-than 365 of the AC6000-hmsepower units aheady ning technology for train dispatching. are on order hom U.S. and Australian railroads. Six Sigma is becoming a way oflife, bringing Global senice giew 44% in 1997 and will S34 million in productivity savings in 1997 and account for almost one-third of our toud global involving tuore than 1,000 employees in pn>jects. resenne in 1998. Maintenance senice aint parts in addition, our suppliers have undertaken more are expanding, and we are implementing new than 1,a projects to unprove their own <guality. 18

s y e y 4 g ,gy [ _. lf- ~ C,ommu.nity Service L o'-\\ l ~ JES$qIEW L ~' ~' 1 HN, - f. [ ~ t m. .w GE mIunteers, GE businesses and the GE Fund are hetging to ma.ke the world o ~ O m}; g g .p 4 g, als ' i a $etter place every day.

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? .v'..; ,i., ~ n ; ..v c. q g..p s p - 4 ?j f w?' mg . +, 'M f. LN Sprucing Up a Wildlife Sanctuary uno Throwing Out the First Ball mum Sponsoring a Scientific Study ww non led by Elf uns from GE Plasticsin Pittsfield, Mass-Shomari Dailey, a senior at the University of Illi-Students and teachers from nine high schools achusetts, some 230 volunteers transformed the nois at Urbana-Champaign and recipient of a in the GE College Bound program spent a week

• PleasantValleyWildlife Sanctuary during a four year Jackie Robinson Foundation /GE Fund during the summer of 1997 at the Northeastern

" Share-To Gain" project. In one day,they con-scholarship, threw out the ceremonial first ball University Marine Biology Lab in Massachusetts, structed a maintenance building, renovated two at baseball's 1997 World Series Opening Game. where they collected scientific data and speci- , other buildings, landscaped the area, built 320 The GE Fund contributed more than $14 million mens from the local marine environment for bluebird houses and installed 680 feet of cause-to higher education in 1997. review with students at home. Started in 1989, way trails such as this boardwalk shown here the award-winning $20 million College Bound between Bob Young and Sue Walter. Creating Original Opera mn.=*o program combines grants from the GE Fund Third and fourth-grade students at Farmland with GE volunteer mentors m a focused, multi-Mentoring Students in Milwaukee w awi Elementary School in Rockville, Maryland, are year attempt to double or significantly increase Tony McGraw is one of many volunteers from learning about opera and a whole lot more the college-going rate at selected rural or inner-GE Medical Systems who are mentoring stu-through a unique program developed by the city schools near GE f acilities. dents hke Lakeisha Jackson at Clarke Street Metropohtan Opera Guild and funded by the School, an elementary school in Milwaukee. In GE Fund. Shown here with members of the addition to reading and helping with homework, La Clevique Kids Opera Company are Grant the GE volunteers filled backpacks purcnased Hunter (foreground) and Jeremy Irish (at the by GE with school supplies for each student. keyboard),two of the GE Information Services A marketing manager at GE, McGraw is chair-volunteers who have helped the students in man of the Milwaukee Chapter of Elfun, a world-many ways, including development of an wide volunteer organization of GE leaders. sward-winning Web site. 19

Board of Directors ~,tme.- l wo Directors were added to the GE Iloard in mid-1997, while Audit Committee another is retiring from the Board in 1998, seende s.ana s=== Chairman llarbara Scott Preiskel, a Director since 1982, will retire from the . sitee s.cedieert s'" floard in April. A fonner Senior Vice President of the Slotion Picture seenPreidd ' Associations of America, hirs. Preiskel chaired the Operations Freak ni.nhedse Committee for the past six years. Drawing on her extensive back-Finance Commenee . clease air en ground in law and business and her commitment to public service, Mrs. Preiskel has prosided broad-gauged and thoughtful advice to negers.Penske - T modu l the Company. GE will miss her humane and wise counsel. 'Q'ad werurm Joining the lloard wereJames I. Cash,Jr. and Eugene F. Murphy. M me kpmen d Dr. Cash, who was elected to the lloard in August,isJames E. Compensation comuniaee Robison Professor of Business Administration at the Harvard Gradu. sites s.cembeset. Chairman ' ciesdie x.eessaise ate School ofIlusiness. A member of the school's faculty since 1976, ownede s.Midween he has taught in all ofits major programs and served as chairman , ?reak H.T.nhedee i Andrew c. sister ' o of the MilA program f rom 1992 to 1995. - Nominating Censnittee - Mr. Murphyj..omed the Board as a V. ice Chairman in August af ter Andrewc. sister, Chairman. guiding GE Aircraft Engines for the past four years. A former Execu. c.weyne cenewey s tive Vice President of RCA, he became a GE Senior Vice President in 1986 wben RCA merged with GE and later sened as President of GE Dessies A. Worser M - Aerospace until its 1993 transfer to Martin Marietta Corporation. Operations Comminee Ba'here seest Preiskel, Chairman There were i1 meetings of the GE Board during 1997. . D. Wayne cesseway in December, the Directors voted to increase GE.s quarterly divi- - Jemen t. cash,Jr. dend by 15% from 26r to 30c per share, marking the 22nd consecu. comimet g_,_ tive year of GE dividend increases. The Board also increased GE's PoweFrese.. ',x eeereier share repurchase program by $4 billion, bringing the total autho-4 riied to Sl7 billion, and extended the program through 1999. It also sem mean - J,d",8 b,,,,, approved a direct stock purchase plan, effectiveJune 1,1998, that ,, i will allow investors to buy Company stock directly from GE. Andrew c.Fici Board committees addressed a briety of matters during 1997. '"8'"""**"" Public Responsibilities Committee The Audit Corninittee, which consists entirely of outside Dit ectors, D. Wayne Celsewey. Chairman met four times. It neuewed the activines and m. dependence of GE,s John F. Welch,Jr.,Vice Chairman ' J"* L 88* J'- independent auditors and the activities of GE's internal audit staff as Dam D.Dammaman well as the Company's financial reporting process, internal financial ciesdiex.sen,wn 8""d* 8 M'*h'*" conuols and compliam e with key GE policies and applicable laws. Eugene F. Murphy The Finanic Corninitter, at its four meetings, reviewed GE's pension som mene J,d",8 %,,",, trust and reth ement plans, foreign exchange exposure, airline in-g dustry financing and other matters intohing major uses of GE funds. Barbare sceu Preiskel - The Alanagement Developonent and Gmnpenwtion Cornmitter which &R8),'*,,, consists entirely of outside Dir ectors, held nine meetings. Its activities Technelegy and Science included all executive compensation plans, policies and practices, all Committee changes in executive assignments and responsibilities, and succession Freak KT.nhedes, Chairman Peelo Freses i plans for key positions. Ees no F.merphy l The Nominating C<nnmittee, at its three meetings, reviewed candi-Jda 0 OP ei nosor S.Penske I dates for the Board and recommended the structure and member-Andrew c.sielw ship of Board committees for the ensuing year. The Opemtions Committee, which met four times, reviewed the Company's operating plan and nuious operational matters. The Public kp<msibilities Committee hehl two meetings at which it evaluated environmental and other public responsibility issues as well as the activities of the GE Fund. The Tnhnol<p and &ience Cmnmittee participated in one meeting at which it reviewed GE Medical Systems products and senices. 20

1:fg n f ~h. i L. s. 4 4 D. Wayne Calloway James L Cash, Jr, Silas S.Cathcart Dennis D. Dammerman Paolo Fresco Claudio X.Gonzalez Director and retired James E. Robison Retired Chairman of Senior Vice Prraident, Vice Chairman of tlw Chairman of the lloard , Chairman of the Ikiard Professor of Business the ikiard and Chief Finance, and Chief Board and Executise and Chief Exec utive and Chief Escrutive Admimstration, Executise Ofiker, Financial Offic er. Of ficer, General Offic cr, Kimberly-Clark Officer, PepsiCo, Inc., llarvard Graduate Illinois Tool Wor ks, General Electric Electric Company. de hiexico, S.A. de heverages, sna< k foods Sc hool of Business, Inc., diversified pnxi. Company. Director Director sinc e 1990 C.V., hiexico City, and and restaurants, Cambridge, Mass. utts, Chicago, Ill. since 1994. Director, Kimberly-6 Purchane, NY Diret tor sin < c 1997. Director 1972 1987 Clark Corporation, Director sinc e 1991, and since 1990. consumer and paper products. Director smce 1991 85 i f 'h b ~ ,h. by .hk 9, s. .,p dhit q, Gsrtruda G.Michelson Eugene F. Murphy Sam Nunn John D. Opie Roger S.Penske Barbara Scott Preiskel Former Senior Vice Vice Chairman of the Former U.S. Senator Vice Chairman of the Chairman of the Board. Former Senior Vice Pruident - External Board and Executive from the State of Ikiard and Executive Penske Corporation, President, Motion Aff airs and former Oth(er, General Georgia and Partner, Oth(ct, General Penske Motorsports, Picture Asmciations of Director, R.ll. Mery Electric Company. liing & 5paldmg, law Electric Company. Inc., Detroit Diesel America, New Yor k, NY & Co., Inc., retailers, Duector sinc e 1997. firm, Atlanta. Ga. Director since 1995. Corporation and Director since 19M2. New York, NX Director since 1997. Penske Tnick Ecasing Disector since 197ti Corporation, transpor-tation and automotive senices. Detroit, Mic h. Director since 1994. } y &.f g igf / f.;.9 _ ? h Frank H.T. Rhodes Andrew C. Sigler Douglas A.Warnerlil John F. Welch, Jr. Picsident Emeritus. Retired Chairman of Chairman of the ik>ard, Chairman of the Board Cornell l'niversity, the Board and Chief Chief Executne Ofker and Chief hrcutise Ithaca, NY Duector Executive Ollic cr, and President, Ofh< cr, General since 1984. Champion Interna-J P. Morgan & (h Inc. Electric Company. nonal Corporation, and Morgan Guarants Dirca tot since 1980. paper and forest prod. Trust Company, New ucts, Stamford. Conn. York, NX Duet tor Director aim e 1984. since 1992. 21

aHagement (As of February 13,IMm) l l l Senim lxecutive 0fficers l John F. Welch, Jr. Paolo Fresco Eugene F. Murphy John D. Opie Chairman of the Ibard and Vit e Chairman of the IW.trd Vi<c Chainnan of the Ibard Vite Chainnan of the Ibard Chief Executive Offu er and Exet utisc Ofhter and Executive Of h< cr and Exes utive Of h< er l l l l Senior Corporare Officed Corporate Stati Officers Philip D. Ameen Vic e President and Comptroller Mark W. Begor s s Vic c President, Investor Communit ations >...[- .[ ' James R. Bunt t, g vi< c Preudent and 1 rcasuier Alberto F.Cerruti Vu e President. Mergen and A<quisitions 5 and international Fman< c

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/ Pamela Daley Vit c President and Senior Counsel, 4 Transac tions Brackett B. Denniston 111 William J.Conaty Dennis D.Dammerman Lewis S. Edelheit Vic c President and hemor Giunsel. Senior Vic e Pra sident, Senior Vice President, Senior Vit e President. 1.itigation and Ecgal Polic) iluman Resoun es finant c, and Chirt Resem h and tr q Financial offi< cr Desclopment , - s ud r, Audit Stall R. Michael Gadbaw Vit e Prenir cnt and Senior Giunsel. 8 International law and Polict %'A Joyce Hergenhan Vi< r President. Public Relations ,, ' ~ ' Steven Kerr C - q, . l Vic c President,1.radership Desclopment ~ William J. Lansing Vice President.11usiness Deselopment John H. Myers Preudent, GE Insratments Robert W. Nelson Vit e President, Financial Planning Benjamin W. Heinemen, Jr. G6 tan S. Malm Gary M. Reiner and Anah3is 53emor Vic e Preudent, senior Vice President Senior Vice President Charles E. Okosky General Counsel and and President.GE Asia-and Chief Infonnation Vu e President. Executive Desclopment Senetarv ] atific Of fic er Stephen D. Ramsey Vic e Presicient, Environmental Puigrams John M. Samuels Vitc President and $rnior Counsel. Taxes Bonald A. Stern Vic e President and senior Counsel. Antitrust Susan M. Walter Vice President. Gosermnent Relations U2

Operating Management <Ase<rtsn,a,T 1s. l An u utt [ nyines Capital Ser mes Medical Systems W. James McNerney, Jr. Gary C. Wendt Jeffrey R. Immelt President and Chirl Excrutist Chairman. Prnident and Chirl Prnident and Chief Estrutnr OfIwer. GE Ain rafi E nginn f sn utive Of f u rr. General Ein tric Of fit er, GF Medu al Nurms Corbatt D.Caudill 'dPNd """'I""'"d"'i'"'"" and thief Exn utisc Of h< cr. Scott C. Donnefly \\..uc P cudent. Engincenng \\..u e Prnidont. Global in knologs gp c ,g g, ,,,n Charlas L Chadwell Thomas E. Dunham Vh e Persident. Gunmen ial Engines Denis J. Nayden James A.Parke Viu Pn sident Amnius % nin-President and Chirl Operating N nior \\ a r Punident, Financ e Robert L Colman Ofin er. 61 Capital Onporati"" \\ n e Prrudent. Human Rnoun es Richard D'Avino Pirsident and Chirl F xn utise Nigel D.T. Andrews \\ur Pinident and henm.r of f u rr. GE Medu al svairms Asia Horbsrt D. Depp F xn unvr Vh e Prnident. Tax Giunsel 1.td.: and Chainnan and Chief \\,a t h nident. Mai Letmg GE Gipital O mponents Jeffrey S.Werner I xn utne Oth< rr. Yokogawa Robert W. Speetzen N nior Vh r hnident. Coq oraic stedu al sssiems John J. Falconi Prnident and Chief Tarasun and Global Funding Serge Huot \\ u r Prnidern. Finane e and Exn utist OHW rr' ) Daniel W. Porter Vn e Preudent. G;obal Informauon in hmelogs GF Railcar Senn n h niden t. Consumer Pr ojn.s Manutat iuring Dsanis R.Little James A; Colica Lawrence J.Toole Lawrence R.Johnston \\ u r Prnident Nhlaan i nginn semor \\ u e Pinident Global m Yb.P a. President and Chief I xn utnr Devid L Lloyd, Jr. " Md"d k"""'"' linman Remunn Oth< er. GL Medwal s3urms F urope Vk e Preudeni and Gennal Counsel Sandra L Derickson Pauf J. Mirabella Robert G. Stiber I'"'d""' "I cdp""I Yk r hnident. Amerire haln and ^"'" h """d'I Vk e rrnident. Prodm iion Md' k"i"E bghtmg and Pnu memeni Henry A. Hubschman James G. Del Mauro William J.Vareschi h "d""' "9 P"'I David L Calhoun Vic r Prnident. Owporate Vn e Prnident Ergine Senh n Prnident and Chief Exn utisc Au ounts Robert L Lewis OHn tr. GE !.ighnng Russell F. Sparks J. Keith Morgan "'"""l """"""I Yk e hnident Engine Senh n U "'""' ' :" "" P William F. Banholier Vie e Prnident and General Omnsel Prodm a Managernent Yk e Prnident. In hnolop Keith S. Sherin Michael A Neal Theodore R.Torbeck Paul T.Bossidy Vn e Prnident. Finam e and Vice hnident. I ngme N nk n "I 'yune \\.. Exn w e Pumdent. Yk e hnident. Nor th Ameri< a Financial N ni< n " P"'I " "" P""""" Operanons Stephen M. Bennett Joseph S. Barranco \\.u e I scudent. I rodu< tion \\..u r hnident. \\.endor Financial seni< n Robert J. Herbolich NBC Apphan &s Yk e heudent s.dn Christopher H. Richmond Robert C.Wri ht D David M. Cote Y"" I"'d""' C"nune n ia! John E. Breen Prnideni and Chief bn unse hnident and Chief Exn utiv lm[nnent Dnam ing W ePnufcu and M Olhccr. National Broadmung t ( Ofh rr. GE Apphan< n Ronald R. Pressman I " h ""I"K G"nPant.1"c-l Bruce R. Albertson P"'M""I CdI"ial Real tuate Kirk S.Hachigion William Bolster \\""P"*""'^".a - h" ihr Yh r hnident. Marketing Edward D. Stewart Prnident CNBC i uig Arnold bn uuse Vu e Pnmdent, Richard M. Jackson, Jr. Neil Braun hrudent and Regional paa niu nwnon; and W e heu&ni and Gennal Omnsel Prnident. Television Netwo:L N n ent. Raadn Dn.unial Executnr. Asia James E. Mohn Richard Cotton Brisn P.Kelley \\ " " P"*d""' h "" " bn utnr Vh c hnident and Yk r h nident. Sain Kd hlmann George E. Murphy General Counsel Chainnan. Prnident and Chief \\..w e I.nw ent Worldwide Dick Ebersol Hsppy R. Perkins berutne Of brer. Emplosers d

• MW o General (:ounsr! and Reuisuraru e Guporatiosi NWdent. 5cs Vh r hnident Pubhr Afhur' U*'Id L Pawl Randel Falco Robert J.Dellinger Susan P. Peters senior Vn e hnident Enance P"*.d""' "W"'" A 3 "'

h oudent. Broadrasi and Vie r Prrudent. Human Remunn Mike S.Zafirovski Non.ork Operaiions 5 Nancy E. Barton I "d""' ""d "'"I h""""" Warren C.Jenson - 8 Paul A. Raymont Senior Vke hcudent. o"f h< cr. GF Lighting i urope Vice Prnident T n huolop General Counsel and Secrrlan Senior Vi< c Prnidem. Finance Staphen J. Sed.ta MichaelD. Freirer 8tanley F. Davis Andrew R. Lack \\." " I" ""1 dI" Vice Prnident. Onam e hoidens and Chief berutise Pnwident Nm Of brer, GE Finamial Awurante Richsrd F.Segalini Donald W. Dhlmeyer,Jr. Vke President. Pun hasing Christopher A.A.E. Mackenzie h "MC"' Nh"." ' " ' " " and Manuf acturing Presideni. GE Capital l urope Thomas S. Rogers Thomas H. Mann P"*d""'NBC Cd'I"d"d hrudent and Chirl becutist Businns Deve: *pment Ofhc n,(pF Capital Mortgage Scott M. Sassa ~ Coquaan"" hndent. Teletiuon Maions David R. Nissen Edward L Scanlon nnident. Gloh.d Consum" Em um Vn e Pn sMan. Imant e Emplosre Relations 23

Operating Management onh_dl I Power Systems [lectm al [hsthbunon International and Conn 01 G:ry L Rogers Robert L Nordelli Scott R. Bayman President and Chief Executive President and Chirl Executive Lloyd G. Trotter Prcudent and Chief Executive Of f u rr, GE Planucs Offu rr, GE Power Sptern$ Prnident and Chief Executne Offu rr, GE India Of ficer, GE Electrical Dmtribution Arno Bohn Ferdinando F.Beccelli Ricardo Artigas and Control Prnidem and Chief Exec utise Vite Prnident, GE Plasticw Vic c President, Global Par t, Arnentan and senic e Joaquim Agut Offk cr, GE Germany Prnident and Chief Executise Kenneth C. Brown Ch:rles E. Crew, Jr. Ernes; H. Gault Olbcer, GE Power Controls ILV. Piraident, GE Southeast Ania Yk e Pinident, haln Vic e /rnident, Global Senic n O c auons Richard L Pease Ugo Draetta P Matthew J. Espe VIC" P'"*id""t Power L m.9 Pment vit,. Pinide ni and senior (bunsel Prnident and Reprnentatisc Francis S. Blah Dirrt tor, GE Plastics-Pac ihc General Coun cl and Vicc J.Jeffrey Schaper 3,y r, t,p;, P'""I"" U"' ""* U"' "I"I""""' Vi'

• Pf"id""' hdI"'

Prnident and Chief Executise J:an M. Houschen Vke Pinident, Stephen B. Bransfield Ofik rr, GEJapan Worldwide Terhnob,gy Vue Penident. Power Generation John T.McCarter P'"d "C""" Jame:W,lreland ill Inda' qal Contr ol Systems Prnident and chief Executisc Yk e Pinident, Finant c Dennis M. Donovan Othcr GE Latin Arnerica <e n dent Hunian Rnounen James W. Rogers Alistair C. Stewart Prul F.McBride Prnident and Chir! Exc< uu.ve Prnidem.GE hhddle East, Africa, Vit c Prnident. GE Silicones Jon A.Ebacher C"' " " d "*f"I Vn r Ptnident. Power Generation Central and Ear,lern Europe RIbirt E. Mu. Jr. S"'"*" ir, .l et hnologv Yke Pinident, iluman Resources Randy E. Dobbs Mark M. Little Vice Prnident, Engineering Uwe S.Wasche' Yke Pinident. Glob,d Power Plants g seniur Stanaging Duc< tor, $cnit es GE Plastin 4urope Thomas P.Saddlemire Joseph M. Hogan William L Meddaugh Vice hnident, Einante Pict C. van Abesten President ard Chief Execum.e Pinident and Chirf Executise Vn e Prnident, Europe Steven R.Specker Offk er, GE Eanur Automation Ofik cr, GE Supply hlanufacturing Vic e Prcudent Nuclear Energv North America,Inc. William A.Woodburn Richard R. Stewart Robert P.Mozgela Yke President, GE Superabrasiven Pinident, $&S Energs Products Vice Prnident, Produt tion and l K UW"9' ' dd'"9 Sourting Dennis K. Williams President and Chief Executiw Russell L Shade, Jr. Stuart A. Fisher of th er, Nuovo Pignone Yk e Prnident. Splems Integration Prnident and Chief Exec utise Othrer, GE and RCA Lk enning Pier Luigi Ferrara hianagement Operation, Inc. and Depuis Chief Executise, " "E ""'I'" 7:uosn Pignone information Servu es Delbart L Williamson Prnident Global Sain Gary M.Reiner Chairman, GE Information henirn; Maiketmg and Sales William G. Wort and Se nior Vn e Pirsident and Yn e Pinident, Global Sales Chirf information Othc cr. Thomas E. Cooper General Elec tric Yk e President, Washington U ""U""' P Harvey F, Seegers Prnident and Chief Excrutisc Albert J.Febbo Officer, GE Information Senic es Yke Prnident,GE Automotive and Corporate klar Lrting Transportation Sysfhms John G. Rice Prnident and Chief Executive Ofht et. GE Tranaportauon swiems 24

Financial Section Contents Consolidated revenues 6 Indcaandent Auditors' Report (In billions) $95 Audited Financial Statements 78 6 Earnings 8 Financial Position q O Casti Flows 7 Notes to Connolidated Financial Statements 3g Management's Discussion 2 Operations I9 2 Consolidated Operations li d st ments i GECS Operations J International Operations 0 Financial Resources and I..iquidity 4 Selected Financial Data Earnings per share from continuing operations 6 Financial Responsibility before accounting change (in dollars) $2.75 2.20 1.65 1.10 >- Diluted a Basic 1993 1994 1995 1996 1997 Dividends per share I (In dollan) $1.10 l [ .88 4 l o ;; .t t h )g_ u a .22 h Y b. f 0 1993 1994 1995 1996 1997 l 25

Stat: ment of Financial Pcsition General Electric Company vd consolidated affiliates At December 31 (In miUions) N* L 1996 Assets Gmh and equivalents $ 5,861 $ 4,191 Investment securities (note 10) 70,621 59,889 Current receivables (note 11) 8,924 8,704 Inventories (note 12) 5,895 4,849 Financing receivables (investments in time sales, loans and financing leases) - net (notes 7 and 13) 103,799 99,714 Other GECS receivables (note 14) 17,655 15,418 Property, plant and equipment (including equipment leased to others) - net (note 15) 32,316 28,795 Investment in GECS Intangible assets (note 16) 19,121 16,007 All other assets (note 17) 39,820 34,835 Total assets $ 304,012 $ 272,402 Liabilities and equity Short-term borrowings (note 19) $ 98,075 $ 80,200 Accounts payable, principally trade accounts 10,407 10,205 Progress collections and price adjustments accrued 2,316 2,161 Disidends payable 979 855 All other GE current costs and expenses accrued (note 18) 8,891 7,086 long term borrowings (note 19) 46,603 49,246 Insurance liabilities, reserves and annuity benefits (note 20) 67,270 61,327 All other liabilities (note 21) 22,700 18,917 Deferred income taxes (note 22) 8,651 8,273 Total liabilities 265,892 238,270 Minority interest in equity of consolidated affiliates (note 23) 3,682 3,007 Conunon stock (3,714,026,000 shares issued) 594 594 Unrealized gains on investment securities - net 2,138 671 Other capital 3,636 2,498 Retained earnings 43,338 38,670 less common stock held in treasury (15,268) (11,308) Total share owners' equity (notes 25 and 26) 34,438 31,125 Totalliabilities and equity $ 304,012 $ 272,402 The notes to consolidated financial statements on pages 47Wi are an integral part of this statement. Share data have been adjusted for the 2-for 1 stod split ethrtive on April 2N,1997. d i 2N

1 i GE GECS E. 1996 E 1996 $ 1,157 $ 957 $ 4,904 $ 3,234 265 17 70,356 59,872 9,054 8,826 5,109 4,473 786 376 103,799 99,714 18,332 15,962 11,118 10,832 21,198 17,% 3 17.239 14,276 8,755 7,367 10,366 8,640 14,729 13,177 25,667 21,658 $ 67,426 $ 59,925 $ 255,408 $ 227,419 $ 3,629 $ 2,339 $ 95,274 $ 77,945 4,719 4,195 6,490 6,787 2.316 2,161 ' 979 855 8,763 6,870 729 1,710 45,989 47,676 67,270 61,327 11,539 9,660 11,067 9,138 (315) 533 8,966 7,740 32.419 28,323 235,056 210,613 569 477 3,113 2,530 594 594 1 1 2.138 671 2.135 668 3,636 2,498 2,152 2,253 43,338 38,670 12,951 11,354 (15,268) (11,308) 34,438 31,125 17,239 14,276 $ 67,426 $ 59,925 $ 255,408 $ 227,419 i e In the consohdating data on this page,"GE" means the basis of conwlidation as described in note I to the consolidated financial statements;"GECS" means General Electric Capital Senic es, Inc. and all of its af filiates and asmciated companies. Transactions between GE and GECS have been eliminated from

• the Wneral Electric Gunpany and consolidated affiliates" cohunns on page 28.

i l r l 29

-Statement of Cash Flows General Electric Company and consolidated affiliates For the years ended Deternher 31 (In milliom) L* L 1996 1995 Cash flows from operating activities Net earnings $ 8203 $ 7,280 $ 6,573 Adjustments to reconcile net earnings to cash prosided from operating activities Depreciation and amortization 4,082 3,785 3,594 Earnings retained by GECS Deferred income taxes 284 1,145 1,047 Decrease (increase) in GE current receivables 250 118 (632) Decrease (increase) in inventories (386) (134) 40 Increase (decrease) in accounts payable 200 641 244 Increase in insurance liabilities, reserves and annuity benefits 1,669 1,491 2,490 Prosision for losses on financing teceivables 1,421 1,033 1,117 All other operating activities (1,483) 2,492 473 C3h from operating activities 14240 17,851 14,946 Cash flows from investing activities Additions to property, plant and equipment (8,388) (7,760) (6,447) Dispositions of property, plant and equipment 2251 1,363 1,542 Net increase in GECS financing receivables - (1,898) (2,278) (11,309) Payments for principal businesses purchased (5,245) (5,516) (5,641) All other investing activities (4,995) (6,021) (3,362) Cash used forinvesting activities (18275) (20,212) (25,217) Cash flows from financing activities Net change in borrowings (maturities of 90 days or less) 13,684 11,827 (3,487) Newly issued debt (maturities longer than 90 days) 21249 23,153 37,604 Repayments and other reductions (maturities longer than 90 days) (23,787) (25,906) (18,580) Net purchase of GE shares for treasury (2,815) (2,323) (2,523) Dividends paid to share owners (3,411) (3,050) (2,770) All other financing activities 785 28 259 Cash from (used for) financing activities 5,705 3.729 10,503 fncrease (decrease)in cash and equivalents during year 1,670 1,368 232 Cash and equivalents at beginning of year 4,191 2,823 2,591 Cash and equivalents at end of year $ 5,861 $ 4,191 $ 2,823 Supplemental disclosure of cash flows information l Cash paid during the year for interest $ (8264) $ (7,874) $ (6,645) l Cash recovered (paid) during the year for income taxes (1,937) (1,392) (1,483) The notes to c omolictued financial niatements on pages 474 are an integral part of this statement. 30 L___

GE GECS E 1996 1995 99 1996 1995 $ 8,203 $ 7,280 $ 6,573 $ 3,256 $ 2,817 $ 2,415 1,622 1,635 1,581 2.460 2,150 2,013 (1,597) (1,836) (1,324) (514) 68 369 798 1,077 678 215 152 (739) (145) (76) 55 (244) (58) (15) 237 197 462 (64) 318 418 1,669 1,491 2,490 1,421 1,033 1,117 1,296 1,647 (912) (3,071) 939 961 9,317 9,067 6,065 6,225 9,767 10,077 (2,191) (2,389) (1,831) (6,197) (5,371) (4,616) 39 30 38 2,212 1,333 1,504 (1,898) (2,278) (11,309) (1,425) (1,122) (238) (3,820) (4,394) (5,403P 483 (106) 408 (5,646) (6,090) (3,913) ( (3,094) (3,587) (1,623) (15,349) (16,800) (23,737) l 809 974 1,061 13,594 11,026 (4,510) 424 252 826 20,825 22,901 36,778 l (1,030) (1,250) (1,535) (22,757) (24,656) (17,045) (2,815) (2,323) (2,523) (3,411) (3,050) (2,770) (1,653) (981) (1,091) 785 28 259 l (6,023) (5,397) (4,941) 10,794 8,318 14,391 200 83 (499) 1,670 1,285 731 957 874 1,373 3,234 1,949 1,218 - $ 1,157 $ 957 $ 874 $ 4,904 $ 3,234 $ 1,949 $ (467) $ (411) $ (468) $ (7,797) $ (7,463) $ (6,177) e . (1,596) (1,286) (1,651) (341) (106) 168 in the ronmlidating data on this page,"GE' means the basis of conmlidation as desciibed in note 1 to the consoli-

• dated imancial statements; "GE(K' meann General Electric Capital Senices, Inc. and all of its athliates and asoci-ated companies. Transactions between GE and GECS have been climinated frum the
• General Electric Company and consolidated afbliates" columns on page 30.

31

Management's Discussion of Operati::ns Dv:rview Segments beginning on page 34. Aggregate restructuring General Electric Company's consolidated financial state-ch;,rys of $1,243 milli n cover certain costs of plans that will inents represent the combination of the Company's manu-enhaare GE's global competitiveness through mtionalization facturing and nonlinancial senices businesses ("GE") and the of certain production, senic e and administration activities of accounts of General Electric Capital Senices, Inc. ("GECS"). its worldwide industrial businesses; among these charges is See note I to the consolidated financial statements, which $577 million of special early retirement pension, health and explains how the various financial data are presented. life benefit costs, including a fourth-quarter, one-time volun-Management's Discussion of Operations is presented in tary cady retirement program that was prmided to the U.S. work force in the 1997 labor contracts. Also included in fi ur parts: Consolidated Operations: GE Operations, includ-ing Industry Segments; GECS Operations; and International restructming charges are other severance costs as well as cer - Operations. t in cmts of exiting afrected properties, including site demo-litions, asset write-offs and expected losses on subleases. C:nsolidated Operations Future cash outlays, including capital expenditures, amount-GE achieved record revenues, earnings and cash generation ing to approximately $555 million will be incurred in order to in 1997. This year's perfonnance again demonstrated the execute these restructuring prograuns. Other special charges ability of GE*s diverse mix ofleading global businesses to anmunting to $1,079 million were also recorded in 1997, deliver top-line growth and increased margins. princip lly associated with strategic decisions to enhance the Revenues, including acquisitions, rose to a record $90.8 longdenn coropetitiseness of certain industrial businesses billion in 1997, up 15% from 1996. This increase was primar-and fourth-quaries developments arising from past activities ily attributable to increased global activities, particularly at at several cunent and fbrmer manufacturing sites not associ-GECS, stronger aircraft engine shipments, and higher sales ated with any current business segments. The largest suc h of spare parts and senices by GE's equipment businesses. special charge related to contracts on existing orders fbr an Revenues increased at ten of GE's twelve businesses, led by aircmft engine program and is discussed on page 34. double-digit growth at GE Capital Senices, Aircmft Engines New accounting standards issued in 1997 are described below. and Transportation Systems. Revenues in 1996 were $79.2 Neither of these standards will have any effect on the finan. billion, a 13% increase attributable primarily to increased cial position or results of operations of GE or GECS. international activities. In 1996, nine of GE's twelve busi-The Financial Accounting Standards lloard issued two nesses increased revenues, with GE Capital Senices, NilC St2uements of Financial Accounting Standards (SFAS) that and Power Systems reporting double-digit increases. will affect presentation.in GE's 1998 Annual Report to Share liasic earnings per share increased to $2.50 during 1997 Owners. SFAS No.130, Reporting Com/mhensive Income, will up 14% from the prior yrar's $2.20. On a diluted basis, require display of certain infonnation about adjustments earnings per share also increased 14%, to $2.46 from $2.16. to equity-most notably, adjustments arising from market Earnings increased 13% to a record $8.203 billion. In 1996, value changes in ma:Letable secmities. SFAS No.131, Divlo-basic eaniings per share increased 13% from $1.95 per share sures about &gments of an Enterprise and Related Information, will in 1995 (12% from $1.93 on a diluted basis). For 1996, earn-require additional infonnation about industry segments. ings of $7.280 billion were up 11% from $6.573 billion in 1995. Growth rates in earnings per share exceeded growth rates in earnings as a result of the ongoing repurchase of GE/S&P cumulative dividend growth since 1992 shares under the five-year, S17 billion share iepurchase plan initiated in December 1994. g In 1997, GE realized an after-tax gain of $1,538 million from exchanging preferred stock in Lockheed Martin [ 64 Corporation (lockheed Martin) for the stock of a newly formed subsidiary as described in note 2. 48 Also in 1997, GE recorded restructuring and other special G p charges amounting to $2,322 million, which are included m i 32 sts and expenses in the following captions: " Cost of goods sold"- $1,364 million; " Cost of senices sold"- $250 mil-16 m lion; and "Other costs and expenses"- 5708 million. These , sap son charges are discussed below and, as relevant, in Industry 0 1993 1994 1995 1996 19U 32

Dividends declared in 1997 amounted to $3.535 billion. Per-share GE operating margin as a percentage of sales dhidends of $1.08 were up 14% from 1996, following a 12% incicase from the preceding year. GE has rewarded its share 16 n owners with 22 consecutive years of dhidend growth. The chart on the presious page illustrates that GE's disidend 12.8 growth for the past five years has significantly outpaced dhi-dend growth of companies in the Standard & Poor's 500 9.6. stock index. ^ Return on average share owners' equity reached 25.0% in 1997

• up from 24.0% and 23.5% in 1996 and 1995. ret pectively.

"lylyad 3.2 Charges GE Operations = e.d

• GE total revenues were $54.5 billion in 1997, compared with issa isse ises sees tse

$49.6 billion in 1996 and $46.2 billion in 1995.

• GE sales of goods and senices were $49.0 billion in 1997, an increase of 6% from 1996, which in turn was 7% higher trative expenses. GE reported operating margin'as 11.0%

than in 1995. The improvement in 1997 was led by Aircraft of sales in 1997, after the effects of Eestructuring and other Engines, Transportation Systems and Power Systems. special charges. GE ongoing operating margin (before such Volume was about 9% higher in 1997, reflecting growth charges) reached a record 15.7% of sales, up from 14.8% in most businesses during the year. While overall selling in 1996 and 14.4% in 1995. The improvement in operating prices were down slightly in 1997, the effects olielling margin in 1997 -with ten businesses, led by Power Systems, prices on sales in various bminesses difTered markedly. Aircraft Engines, Medical Systems and NBC, reporting , Revenues were also negatively affected by exchange rates higher operating margins - showed the increasing benefits for sales denominated in other than U.S. dollars. Volume from GE's product senices and Six Sigma quality initiatives. in 1996 was about 9% higher than in 1995, with selling Total cost productivity (sales in relation to costs, both on a price and currency effects both slightly negative, constant dollar basis) has paralleled recent signiScant For purposes of the required financial statement display improvement in GE's ongoing operating margin and accel-of GE sales and costs of sales on pages 26 and 27," goods" erated over the period. Producthity in 1997 was 4.2%, refers to tangible products, and "senices" refers to all reflecting sharp improvements associated with variable costs, other sales, including broadcasting and information sen-largely attributable to the Six Sigma quality program, as well ices acthities. An increasingly important element of GE as base costs, associated largely with higher volume. Four sales relates to product senices, including both spare parts businesses - Power Systems, NBC, Plastics and Information (goods) as well as repair senices. Such product senices Senices - achieved producthity in excess of 5%. Total pro-sales amounted to $9.7 billion in 1997 and were up 16% ducthity was 2.9% in 1996, principally on the positive effects from 1996, which was 11% higher than 1995. of higher volume. In 1996, three businesses - Power Systems, o GE other income, earned from a wide variety of sources, NBC and Aircraft Engines-reported producthity in excess - e was $2.3 billion in 1997, $0.6 billion in 1996 and $0.8 bil-of 5%. The total contribut on of producthity in the last two i lion in 1995. The increase in other income in 1997 was years offset not only the negative effects of cost inflation, but primarily attributable to the lockheed Martin transaction also the effects of selling price decreases. described in note 2, which also provides details of GE GE interest and other financial charges in 1997 amounted to other income. $797 million, compared with $595 million in 1996 and $649

• Earnings of GECS were up 16% in 1997, following a 17%

million in 1995, as interest rates trended lower over the increase the year before. See page 36 for an analysis of period. lower rates in 1997 were more than offset by higher these earnings. levels of average borrowings and other interest-bearing Principal costs and expenses for GE are those classified as costs obligations. of goods and senices sold, and selling, general and adminis-Income taxes on a consolidated basis were 26.6% of pretax trative expenses. earnings in 1997, compared with 32.6% in 1996 and 32.5% Operating margin is sales of goods and senices less the costs in 1995. The 1997 dec rease in effective tax rate was primarily of goods and senices sold, and selling, general and adminis. attributable to the realized gain on the tax-free exchange of 33 L

Lockheed l\\f artin preferred stock. That gain accounted for than in 1995, reflecting industry growth and U.S. market 4.8% of the difTerence between the expected and actual tax share gains across core product lines. Operating profit rates shown in note 8. A more detailed analysis of the difTer-increased 8% in 1996, primarily as a result of producthity and ences between the U.S. federal statutory rate and the consoli-higher volume, partially offset by Icwer selling prices. dated rate, as well as other infonuation about income tax Broadcasting revenues decreased 2% in 1997 as a strong prmisions,is also pro ided in note 8. advertising marketplace was more than offset by the absence GE Industry segment revenues and operating profit for the past of a current-year counterpart to NBC's broadcast of the 1996 five years are shown in the table on page 35. For additional Summer Olympic Games. Opemting profit increased 5% in information, including a description of the products and 1997, despite restructuring charges of $161 million associ-senices included in each segment, see note 28. ated with certain broadcast properties, primarily interna-Airrraft Engines achieved a 24% increase in revenues in tional properties, and including asset write-offs, expected 1997, following a 3% increase in 1996, on higher volume in I sses n subleases from excess capacity, and severance costs. commercial engines and product senices. Operating profit Excluding the effects of such charges, operating profit decreased 14% in 1997, primarily as a result of $342 million increased 22%, reflecting improved prime-time pricing, of charges. The largest charge followed Boeing Co.'s fourth, strong growth in both owned-and-operated stations and quarter announcement that developmeni oflonger-range cable programming senices, and increased international derivatives of the 777 jetliner would be slowed. It was con-distribution of programming, the combination of which cluded at that time that development of a higher-thrust more than ofTset the absence of a current-year counterpart derivative of the GE90 engine was notjustified, resulting in to the Olympics broadcast and higher license fees for charges of $275 million to reflect higher estimated manufac. certain prime-time programs that were renewed. Revenues turing costs to fill firm customer orders. An additional charge increased 34% in 1996, reflecting a strong advertising of $67 million was recorded for restructuring, covering costs market, excellent ratings, strong growth in the owned-and-associated with closing certain redundant manufacturing Operated stations and the Olympics broadcast. Operating and warehousing facilities. Exch. ding these charges, operat. profit increased 29% in 1996 as the combination of excellent ing profit increased 14%, reflecting the effects of volume ratings, sharply higher results in owned-and-operated increases in commercial engines and product senices and stations and profitable Olympics coverage more than offset improved product senices pricing, the combination of which higher license fees for certain prime-time programs that were renewed. more than offset cost increases. Operating profit increased by 4% in 1996 as a result ofimprovements in the product IndustrialProducts and Systems revenues rose 5% in 1997, senices business and producthity, offset somewhat by with improved volume more than offsetting weaker pricing reduced selling prices and cost inflation, across all businesses in the segment. Operating profit in 1997, $1.5 billion of revenues were from sales to the declined 8%, reflecting $352 million of charges, essentially U.S. government, down $0.3 billion from 1996, which was ali of which were related to restructuring-mostly for sever- $0.1 billion higher than in 1995. ance costs related to work force reductions and for facility Aircraft Engines received orders of $8.9 billion in 1997, closing costs. Excluding these charges, operating profit up $1.8 billion from 1996. The backlog at year-end 1997 was increased 14% in 1997, the result of Six Sigma-based pro- $9.8 billion ($9.0 billion at the end of 1996). Of the total, ducthity and volume improvements across the segment, $7.5 billion related to products, about 50% of which was which more than offset the effects oflower selling prices. scheduled for delivery in 1998, and the remainder related to Revenues increased 2% in 1996, reflecting volume increases 1998 product sen' ices. in Lighting, Electrical 1)isuibution and Control, and Indus-Appliances revenues were 6% higher than a year ago, reflect. trial Contrcl Systems. Operating profit increased 6% as ing primarily acquisition-related volume. Operating profit producti ity improvements across the segment more than decreased 39%, primarily as a result of restructuring and offset the effects of cost inflation and lower selling prices for other special charges of $330 million, principally Ibr, ver. certain products. ance costs related to work force reductions and facility closing Transportation Systems received orders of $2.4 billion in costs. Excluding such charges, operating profit increased 5%, 1997, an increase of 20% from 1996. The backlog at year-reflecting producthity and improved volume, partially offset end 1997 was $2.0 billion, an increase of $0.5 billion from by lower selling prices. Revenues in 1996 were 7% higher 1996. Of the total, $1.8 billion related to products, about 82% of which was scheduled for shipment in 1998, and the remainder related to 1998 product senices. 1 34 i ]

Summary of Industry Segments General Electric Company and consolidated affiliates r the scars ended Decemtwr $1 (In millions) In 1996 1995 1994 1993 avsnues GE Aircraft Engines $ 7,799 $ 6,302 $ 6,098 $ 5,714 $ 6,580 Appliances 6,745 6,375 5,933 5,965 5,555 11roadcasting 5,153 5,232 3,919 3,361 3,102 Indnstrial Products and Systems 10,954 10,412 10,194 9,406 8,575 Materials 6,695 6,509 6,647 5,681 5,042 Power Generation 7,495 7,257 6,545 5,933 5,530 Technical Products and Senices 4,917 4,692 4,424 4,285 4,174 All Other 3,564 3,108 2,707 2,348 1,803 Corporate items and climinations 1,193 (322) (286) (195) (242) Total GE 54,515 49,565 46,181 42,498 40,119 GECS Financing 31,165 24,554 19,446 15,064 12,454 Specialty Insurance 8,844 8,155 7,042 4,794 4,807 All Other (78) 4 4 17 15 Total GECS 39,931 32,713 26,492 19,875 17,276 Eliminations (3,606) (3,099) (2,645) (2,264) (1,694) ' nsolidatsd revenues $ 90,840 $79,179 $70,028 $ 60,109 $ 55,701 e lparating profit (a) GE Aircraft Engines $ 1,051 $ 1,225 $ 1,176 $ 935 $ 798 Appliances 458 750 697 683 372 Ilroadcasting 1,002 953 738 500 264 Indnstsial Products and Systems 1,490 1,617 1,519 1,328 901 Materials 1,476 1,466 1,465 967 834 Power Generation 758 1,068 769 1,238 1,024 Technical Products and Senices 828 849 801 787 706 All Other 3,558 3,088 2,683 2,309 1,725 Total GE 10,621 11,016 9,848 8,747 6,624 GECS Financing 3,736 3,460 3,062 2,671 1,733 Specialty Insurance 1,293 1,238 1,002 580 764 All Other (607) (650) (544) (302) (288) Total GECS 4,422 4,048 3,520 2,949 2,209 Eliminations (3,209) (2,795) (2,396) (2,072) (1,554) $nsolidatzd operating profit 11,834 12,269 10,972 9,624 7,279 l GE interest and other financial charges - l net of climinations (782) (600) (644) (417) (529) GE items not traceable to segments 127 (863) (591) (546) (614) Drnings from continuing operations before income 12xss end accounting change $ 11,179 $ 10,806 $ 9,737 $ 8,661 $ 6,136 h) Operating profit for 1997 and 1993 imluded nigmhcant restruc turing and other special c harges. The 1997 eflects for individual segments are discussed on pages 34 and 36. e notes to convalidated financia! statements on pages 47-66 are an integral pan of this statement. "GE" means the basis of consolidation as describe d note I to the consolidated financial statements: "GEGS" means General Elet tric Capital Senic es, Inc. and all of its affiliates and associated companics. perating profit of GE segments culudes " Interest and other financial < harges"; operating profit of GECS includes " Interest and other financial charges," hich is one of the largest elements of GEGS' o[erating costs. The 1993 accounting change represents adoption of Statement <>f Financial Auonnting andards (SFAS) No. Il2, Empt, yrs' Accountmgy,r Postemployment Bmefsts. 35

M:terials revenues grew 3% in 1997, reflecting an increase GECSrevenues in volume that was largely offset by lower selling prices and adverse currency exchange rates. Operating profit increased (in billions) s42.0 by 1% including restructuring charges amounting to $63 million for severance costs related to work force reductions 33.6 and outsourcing. Excluding such charges, operating profit inct cased 5%, as Six Sigma-based producthity and higher 212 volume more than offset lower selling prices. Materials rev-16.8 enues decreased 2% in 1996 and operating profit was about the same as the presious year, primarily as a result cflower selling prices. The advene effects of lower selling price on --i8 operating prone were offset in part by reductions in material g cost 3, volume impreements and productisity. hwer Generation revenues were 3% higher than in 1996, reflecting higher volume in gas turbines and in product sen-ices. Operating profit decreased 29% in 1997, reflecting for the segment increased 6% in 1996 as productivity, growth aggregate charges of $437 million, including $261 million in senices at Medical Systems and volume improvements that was principally a combination of gas turbine warranty more than offset selling piice decreases. costs and costs arising from renegotiation and resolution of Orders received by Medical Systems in 1997 were $4.3 certain disputes. Additionally, $176 million was recoguized hillion up $0.4 billion from 1996. The backlog of unfilled for restructuring, covering costs of exiting certain facilities, orders at year +nd 1997 was $2.4 billion, about the same as at including severance benefits, site demolitions and associated the end of 1996. Of the total, $1.3 billion related to products, write-offs. Absent such charges, operating profit increased by about 91% of which was scheduled for delivery in 1998, and 12%, the result of strong Six Sigma-based producthity and the remainder related to 1998 product senices, higher volume, which more than offset lower selling prices. All Other consists primarily of GECS earnings, which are dis-Revenues increased 11% in 1996, re flecting primarily strong cussed in the next section. Also included are revenues growth at Nuovo Pignone and higher product senices vol-derived from licensing the use of GE technology to others. ume. Operating profit increased 39% in 1996 as productivity more than offset cost inflation and lower selling prices. GECS Operations Power Generation orden were $6.6 billion for 1997, com-GECS conducts its operations in two segments - Financing pared with $8.0 billion in 1996. The backlog of unfilled and Specialty Insurance. The Financing segment includes orders at year-end 1997 was $9.8 billion ($10.9 billion at the the financing and consumer savings and insurance opera-end of 1996), Of the total, $8.9 billion related to products, tions of General Electric Capital Corporation (GE Capital). about 41% of which was scheduled for delivery in 1998, and The consumer savings and insurance operations, conducted . the remainder related to 1998 product senices. primarily by GE Financial Assurance 11oldings, Inc., provide Technical Pmducts and Services revenues rose 5% in 1997, consumers financial security solutions through a wide variety following a 6% increase in 1996. Medical Systems reported ofinsurance, investment and retirement products, primarily J higher revenues in both years, reflecting higher equipment in the United States. The Specialty Insurance segment volume and continued growth in product senices, partially includes operations of GE Global Insurance llolding Corpo-offset by lower selling prices. Information Senices revenues ration (GE Global Insurance), the principal subsidiary of ) were up slightly in 1997 and were essentially flat in 1996, as which is Employers Reinsurance Corporation, and the other declines in selling prices offset increased volume in electronic insurance businesses described on page 63. commerce. Operating profit for the segment decreased 2% . GECS total revenues from operations were $39.9 billion in in 1997, reflecting aggregate charges of $157 million princi* 1997, up 22% from 1996, which was up 23% from 1995. pally for severance costs related to work force reductions and The 1997 increase reflected primarily the contribution of facility closing costs. Excluding such costs, segment operating businesses acquired in 1997 and 1996. profit increased 16% as productivity and higher volume more a GECS earnings were $3.3 billion in 1997, up 16% from 1996, than offset the effects oflower selling prices. Operating profit which was up 17% from 1995. The improved operating results for 1997 and 1996 were attributable to continued 36

asset growth, with business and portfolio acquisitions GECS setnings from continuing operations throughout the period and higher origination volume in 1997. Earnings in 1997 were affected by higher losses asso-Un billions) $3.5 ciated with the investment in Montgomeg Ward IIolding Corp., discussed on page 38, as well as by increased auto-u mobile residual losses. These matters were more than offset by asset gains, the largest of which was $284 million 11 (net of tax) from a transaction that included the reduction of the GECS investment in the common stock of Paine Webber Group Inc. Increased investment income was the 4 result of ongoing growth in the investment portfolio,s and a higher level of gains on investment securities. g

• GECS cost of goods sold was associated with the computer un 1su ms as m7 equipment distribution businesses. This cost amounted to

$4.1 billion in 1997, compared with $1.7 billion in 1996 and $0.4 billion in 1995, the result of acquisition-related Operating profit was $3.7 billion in 1997,8% higher than growth in 1997 and 1996. In 1996. As previously noted,1997 operating profit included

• GECS interest on borrowings in 1997 was $7.6 billion,4%

higher losses associated with the investment in Montgomen higher than in 1996, which was 10% higher than in 1995. Ward 11olding Corp. as well as increased automobile residual The increases in 1997 and 1996 were caused by higher losses. These items were more than ofTset by acquisition and average borrowings used to finance asset growth, partially core growth as well as gains on asset transactions, including offset by the effects oflower average interest rates. The securitizations. Operating profit increased 13% in 1996, pri-composite interest rate on GECS borrowings was 6.07% in marily because of asset growth. Financing spreads (the excess 1997, corr. pared with 6.24% in 1996 and 6.76% in 1995, of yields over interest rates on borrowings) were essentially See page 12 for an analysis ofinterest rate sensitivitici flat in 1997 and 1996 as the reduction in yields was ofTset by decreases in borrowing rates. Cost of goods sold associated

• GECS ins irance losses and policyholder and annuity ben-efits incre.tsed to $8.3 billion during 1997, compared with with the computer equipment distribution businesses

' $6.7 billio in 1996 and $5.3 billion in 1995, primarily increased significantly in both years, primarily because of because of business acquisitions and growth in originations acquisiti ns. The prmision for losses on financing receivables throughout the period. incre sed in 1997 on higher average receivable balances as well as increased delinquencies, consistent with industry

• GECS otler costs and expenses increased to $13.9 bilh.on expenence, m the consumer portfolio. Iligher portfoh.

o m 1997 from $11.7 bilh.on m 1996 and $9.4 bilh.on in 1995 growth from on..gmations resulted in higher provismns m on increased costs associated with acquired businesses and 1995 than m. 1996. Insurance losses and policyholder and - portfolios as well as higher investment levels, annuity benefits associated with the consumer sasings and GECS industry segment revenues and operating profit for the insurance operations increased during 1997 and 1996 as a past five years are shown in the table on page 35. Revenues result of acquisitions. Other costs and expenses increased in from services are detailed in note S. both years, the result of costs associated with acquired busi-l Financing segment revenues from operations increased 27% nesses and portfolios and higher levels ofinvestment.. to $31.2 billion in 1997, following a 26% increase in 1996. Financing recchables are the Financing segment's largest Significant portions of the revenue increase arose from the asset and its primag source of revenues. The portfolio of - coniputer equipment distribution businesses acquired dur-financing receivables, before allowance for losses, increased ing 1997 and 1996 and from the consumer savings and insur-to $106.6 billion at the end of 1997 from $102.4 laillion at the ance businesses acquired during 1996 and 1995. Asset end of 1996, principally reflecting acquisition growth and growth contributed to increased revenues in both years, but origination volume that were partially offset by securitiza-was partially offset by lower yields. Financing segment rev-tions of recei ables. The related allowance for losses at the enues were negatively affected by higher losses associated end of 1997 amounted to $2.8 billion (2.63% of receivables with the investment in Montgomen Ward llolding Corp. - the same as 1996 and 1995) and,in management'sjudg-That efTect was more than offset by gains on asset transac. ment,is appropriate given the risk profile of the portfolio. tions, including securitizations. 37

.A discussion of the quality of certain elements of the As discussed in note 13, Montgomery Ward liolding Corp. Financing segment portfolio follows. "Nonearning" receiv-(MWIIC) filed a bankruptcy petition for reorganization in ables are those that are 90 days or more delinquent (or for 1997. GECS' share of the losses of MWIIC and affiliates in which collection has othensise become doubtful) and 1997 was $380 million (after tax). The GECS investment in " reduced-earning" receivables are commercial receivables MWHC and afliliates at December 31,1997, was $795 million whose terms have been restructured to a below-market yield. ($617 million classified as fmancing receimbles). Income The following discussion of the nonearning and reduced-recognition had been suspended on these pre-bankruptcy earning receivable balances and write-off amounts excludes investments. Subsequent to the petition, GECS committed to amounts related to Montgomery Ward Holding Corp. and proside MWIIC up to $1.0 billion in debtor-in-possession affiliates, which are separately discussed below, financing, subject to certain conditions, in order to fund Consumer financing receivables at year-end 1997 and working capital requirements and general corporate expenses. 1996 are shown in the following table: A majority of this facility has been syndicated; total borrowings under this facility at December 31,1997, were insignificant. On mulions) mam 26 GECS loans and leases to commercial airlines amounted Credit card and personal loann $ 25,773 $ 27,127 to $9.0 billion at the end of 1997, up from $8.2 billion at Auto loans 8.973 5,915 Auto financing leases 13,346 13,113 the end of 1996. GECS commercial aircraft positions also included fin ncial guarantees, funding commitments and Total consumer financing receivables $ 48.092 $ 46,155 aircraft orders as discussed in note 17. Nonearning $ 1,049 $ 926 - As percentage of total 2.2% 2.0% Specialty Insurance segment revenues from operations were $8.8 billion in 1997, an increase of 8% from 1996, which Rece.nable wn.te-offs for the year $ 1,298 $ 870 increased 16% over 1995. The increase in 1997 resulted The decrease in credit card and personal loan portfolios fr m incre sed premium and investment income associated primarily resulted from securitization of receivables, partially with origination volume, acquisitions and continued growth ofTset by portfolio acquisitions and origination volume. Iloth in the investment portfolios, as well as a higher level of gains the auto loan and financing lease portfolios increased as a n invesunent securities. GE Global Insurance net premiums earned on U.S. business increased in 1997 - the result of result of acquisition growth; however, the increase in auto financing leases was partially offset by a shift in U.S. lease vol-str ng gr wth in the life reinsurance business - while net ume from financing leases to operating leases. Noncarning premiums earned on European business declined, reflecting - receivables did not change significantly dming 1997. A sub-the ekts of currency translation and market conditions. stantial amount of the nonearning consumer receivables The increase in 1996 resulted primarily from inclusion of were U.S. printe-label credit card loans that were subject full ye r's results for the European property and casualty to various loss-sharing agreements that provide full or partial reinsurance businesses acquired in 1995. GE Global Insur-recourse to the originating retailer. Increased write-offs of ance net premiums earned on U.S. business declined in consumer receivables were primarily attributable to the impact 1996 on lowes industry-wide pricing and the exit of certain of higher delinquencies and personal bankruptcies on the unprofitable reinsurance contracts. Revenues from the other credit card loan portfolios in the United States, consistent insur nce businesses of GECS increased during 1997 and . with overall indusuy experience, as well as higher average 1996 as a result of both origination volume and acquisitions. S eciItyInsur nce Perating profit increased 4% to P receivable balances worldwide. $1.3 billion in 1997 from $1.2 billion in 1996. The increase Other financing receivables, totaling $58.5 billion at December 31,1997, consisted of a diven,e commercial, ind us-in 1997 primarily reflected higher investment income, the trial and equipment loan and lease portfolio. This port-result of continued growth in investment portfolios and folio increased $2.3 billion during 1997, primarily because higher gains on investment securities, as well as improved I-ofincreased origination volume, partially offset by sales of earnings in the mortgage insurance business, the result receimbles. Related nonearning and reduced-earning receiv-fimpr ved market conditions. Higher insurance losses, ableo were $353 million at year-end 1997, compared with merTes and other costs and expenses partially offset these $471 million at year-end 1996. increases. Operating profit increased 24% in 1996 as the year included a full year's results of the European reinsur-ance acquisitions: higher premium and investment income, partially offset by increases in insurance losses and other costs and expenses. 38

I Int:rnational Operations international assets grew 21% from $65.3 billion at Estimated results ofinternational operations include all December 31,1996, to $79.2 billion at the end of 1997. exports from the United States, plus the results of GE and This rewnue and asset growth occurred primarily in Europe GECS operations located outside the United States. Certain and, to a lesser extent, in Canada and the Pacific Basin. GECS operations that cannot meaningfully be associated These increases were attributable to continued expaasion with specific geographic areas were classified as "other inter-f GECS as a global prmider of a wide range of senices. national" for this purpose. Financial resuhs reported in U.S. dollars are afTected by International revenues in 1997 were $38.5 billion (42% of currency exchange. A number of techniques are used to consolidated revenues), compared with $33.3 billion in 1996 m n ge the efTects of currency exchange, including selective and $28.2 billion in 1995. In 1997, about 48% of GE's rev-borrowings in local currencies and selective hedging of sig-ennes were international, which was about 2% higher than nificant cross-currency transactions. International activity is n 1996 and 1995. The chart below left depicts the growth in diverse, as shown in the international revenues chart at the international revenues in relation to total revenues over the bottom iight of this page. Principal currencies include major - past five years. European currencies as well as theJapanese yen and the International operating profit was $4.8 billion (41% of con-Canadian dollar. solidated operating profit) in 1997, compared with $4.0 bil-GE's total exports from the United States follow. lion in 1996 and $3.2 billion in 1995. GE's total exports from the United States 1 GE m. ternan.onal revenues were $24.8 bilh.on m 1997, an increase of 14% from 1996, reflecting sales growth in opera-(in millione mm 1996 1995 tions based outside the United States and in U.S. exports. Pacific Basin $ 3.176 $ 3,180 $ 3,397 European revenues were 10% higher in 1997, reflecting Europe 2,423 2,060 1,701 . increases in both local operations and in exports to the $5lC ' j' 7 1' 5 region, with particularly strong growth at Aircraft Engines. Exports to external customers 8,793 7,522 7,085 Pacific Ilasin revenues increased by 2% m. 1997, reflecting Exports to amliates 2,471 2.292 2,123 primarily increased revenues from local operations, led by .rotal exports $ 11,264 $9,814 $ 9.208 Plastics and 1.ighting. Revenues from the Ameiicas increased 37%, primarily as a result of strong growth in local opera-GE made a positive 1997 contribution of approximately tions, particularly at Appliances and Aircraft Engines, and $6.3 billion to the U.S. balance of trade. Total exports in increased exports. 1997 were $11.3 billion, direct imports from external suppli-GECS international revenues were $13.7 billion in 1997, ers were $3.0 billion and imports from GE affiliates were an increase of 18% from $11.6 billion in 1996, while $2.0 billion. C:ns:lidated revenues Consolidated international revenues (in billions) $95 (in bilhons) $40 1 76 32 c on i a 1993 1994 1995 1996 1997 1993 1994 1995 1996 1997 39

Management's Discussion of Financial Resources and Liquidity 1 Ov;rview GE annual internal working capital turnover This discussion of financial resources and liquidity focuses 8o on the Statement of Financial Position (page 28) and the Statement of Cash Flows (page 30). Throughout the discussion, it is important to understand 6.4 the differences between the businesses of GE and GECS.

1. 8 Ahhough manufacturing and senices activities involve a vari-ety of GE businesses, their underlying characteristics are y

development, preparation for market and delivery of tangi-4 ~ ble goods and senices. Risks and rewards are directly related 1.6 to the ability to manage and finance those acthities. The principal businesses of GECS prmide financing, asset o management, consumer savings and insurance, and other 1993 test iss5 1ses its insurance and senices to third parties. The underlying char-acteristics of most of these businesses involve the manage-ment of financial risk. Risks and rewards stem from the Statement of Financial Position abilities ofits businesses to continue to design and proside a wide range of senices in a competitive marketplace and to Investment securities for each of the past two years comprised receive adequate compens;uion for such senices. GECS is mainly investment-grade debt securities held by the specialty not a " captive finance company" or a vehicle fbr "off-balance-insurance and annuity and investment businesses of GECS sheet financing" for GE; a small portion of GECS business is in support of obligations to policyholders and annuitants. directly related to other GE operations. GE investment securities were $265 million at year-end 1997, Despite the different business profiles of GE and GECS, up $248 million over 1996.The increase in 1997 primarily the global commercial airline industry is one significant reflected an equity security acquired as part of the Lockheed example of an important source of business for both. GE Martin transaction discussed previously. The increase of assumes financing positions primarily in support of engine $10.5 billion at GECS during 1997 was principally related to sales, whereas GECS is a significant source oflease and loan acquisitions and increases in fair value as well as investment financing for the industry (see details in note 17). Manage-of preminms received. A breakdown of the investment secu-ment believes that these financing positions are reasonably rities portfolio is prmided in note 10. protected by collateral values and by its ability to control GE current receivables were $9.1 billion at the end of 1997, assets, either by ownership or security interests. an increase of $0.2 billion from year-end 1996, and included The fundamental dif ferences between GE and GECS are $6.1 billion due from customers at the end of 1997, which reflected in the measurements commonly used by investors, was $0.5 billion lower than the amount due at the end of 1996. rating agencies and financial analysts. These differences will As a measure of asset management, customer receivables become clearer in the discussion that follows with respect to turnover was 7.7 in 1997, compared with 6.8 in 1996. Other the more significant items in the financial statements. current receivables are primarily amounts that did not origi-Year 2000 compliance programs and information systems nate from sales of GE goods or senices, such as advances to a modifications have been initiated in an attempt to ensure suppliers in connection with large contracts. that these systems and key processes will remain functional. GE inventories were $5.1 billion at December 31,1997, This objective is expected to be achieved either by modifying up $0.6 billion from the end of 1996. Inventory turnover _ present systems using existing internal and external pro-improved to 7.8 in 1997, compared with 7.6 in 1996, reflect-gramming resources or by installing new systems, including ing continuing improvements in inventory management. enterprise systems, and by moniton ng supplier and other Last-in, first-out (LIFO) revaluations decreased $119 million third-party interfaces. While there ran be no assurance that in 1997, compared with decreases of $128 million in 1996 all such m(>difications will be successful, management does and $87 million in 1995. Included in these changes were . not expect that either costs of modifications or consequences decreases of $59 million, $58 million and $88 million of any unsuccessful modifications should have a material in 1997,1996 and 1995, respectively, that resulted from adverse effect on the financial position, results of operations lower LIFO inventony levels. There were net cost decreases or liquidity of GE or GECS. in 1997 and 1996, and no cost change in 1995. 40

Customer receivables and inventories (at FIFO) are twu key increased $1.6 billion, principally reflecting consideration components of GE's internal working capital measurement. received in exchange for GE's invesunent in lakheed Martin Internal working capital turnover increased as shown in the preferred stock and an increase in the prepaid pension asset. chart on the facing page: from 5.6 turns in 1995 to 6.3 and 7.4 In connection with the exchange transaction, a portion of turns in 1996 and 1997, respectively. Intemal working capital such consideration was subsequently loaned to Lockheed aho includes trade accounts payable and progress collections. Martin. The increase in GECS other assets of $4.0 billion GECS inventuries were $786 million and $376 million at related principally to increases in assets acquired for resale, December 31,1997 and 1996, respectively. 'l he increase in primatily residential mortgages, and increased " separate 1997 primarily reflected acquisitions in the computer equip-accounts," which are investments controlled by policyholders ' ment distribution businesses. and are associated with identical amounts reported as insur-GECSfinancingirreicables were $103.8 billion at year-end 1997, net of allowance for doubtful accounts, up $4.1 billion Insurunce liabilities, reserves and annuity bemfits were $67.3 over 1996. These receivables are discussed on pages 37 and billion, $5.9 billion higher than in 1996. The increase was 38 and in notes 7 and 13. primarily attributable to acquisitions in 1997 and the increase GECS other rweicables were $18.3 billion and $16.0 billion n sepamte cc unts. add &nalinfonnadon on these liabilities, see note 20. at December 31,1997 and 1996, respectively. Of the 1997

increase, $1.2 billion was attributable to acquisioons and the Consolidated borimeings aggregated $144.7 billion at Decem-l remainder resulted from core growth.

ber 31,1997, compared with $129.4 billion at the end of 1996. The major debt-rating agencies evaluate the financial Pivperty, plant and equipinent (including equipment leased condiuon of GE and of GE Capital (the major public bor-to others) was $32.3 billion at December 31,1997, up $3.5 rowing entity of GECS) differently because of their distinct billion from 1996. GE property, plant and equipment consists business charactensucs. Using criteria appropriate to each ofinvestments for its own productise use, whereas the largest ud conMenng Wen conhned stren@, dmse major rating element for GECS is in equipment provided to third parties agencies continue to give the highest ratings to debt of both on operating leases. Details by categmy of,mvestment can be GE and GE Capital. found in note 15. GE has committed to contribute capital to GE Capitalin GE total expenditures for new plant and equipment dur-the event of either a decrease below a specified level in the mg 1997 totaled $2.2 billion, down $0.2 billion from 1996. ratio of GE Capital's earnings to fixed charges, or a failure to Total expenditures for the past five years were $9.7 billion, rnaint in specif ed debt-to-equity ratio in the event certain of which 38% was investment for growth through new capacity GE Capital preferred stock is redeemed. GE also has guamn-and product des.elopment: 33% was investment in produc-teed subordinated debt of GECS with a face amount of $1.0 tivity through new equipment and process improvements; billion at December 31,1997 and 1996. Management believes and 29% was investment for such other purposes as improve-the likelihood that GE will be required to contribu e capital ment of research and development faciliu.es and safety and w comm ments w gu rantees b ienmte. un er en environmental protection. ' GECS additions to equipment leased to others, including business acquisitions, were $6.8 billion during 1997 ($5.3 bil-Hion dtuing 1996), principally reflecting a shift in auto lease GE cash flows from operating activities vohune from financing leases to operating leases and increased acquisitions of new aircraft. (In bilhons) $ 9.5 Entangible assets were $19.1 billion at year-end 1997, up from 16 $16.0 billion at year-end 1996. GE intangibles increased to $8.8 billion from $7.4 billion at the end of 1996, principally g as a result of goodwill related to the purchase of Greenwich Air Senices/UNC and a number of smaller acquisitions. The $1.7 bilhon increase in GECS intangibles also related primar-y ily to goodwill from acquisitions. tg Allother assets totaled $39.8 billion at year-end 1997, an increase of $5.0 billion from the end of 1996. GE other assets 0 1993 1994 1995 1996 1997 41

GE total borrowings ucre $4.4 billion.at year-end 1997 GE cumulative cash flows ($3.6 billion shor t-tenn, $0.8 billion long tenn), an increase of about $0.3 billion from year-end 1996. GE total debt at un billions) 5 36.0 the end of 1997 equaled 11.1% of total capital, down from 11.4% at the end of 1996. 2h8 GECS total borrowings were $141.3 billion '.t December d 2t6 31,1997, of which $95.3 billion is due in 1998 and $46.0 = biPion is due in subsequent years. Comparable amounts at - ( j the end of 1996 were $125.6 billion total, $77.9 billion due e coh w% 3 r i ~i within one year and $47.7 billion due thereafter. A large e o,'o.no. 7'2 po f portion of GECS borrowings ($71.2 billion and $54.2 billion at die end of 1997 and 1996, respectively) was issued in 0 a Shares tueurchased active conunercial paper markets that management belieses 1993 1994 1995 1996 1997 will continue to be a reliable source of short. term financing. Most of this commercial paper was issued by GE Capital. The average remaining tenns and interest rates of GE Capital conunercial paper were 44 days and 5.83% at the end of 1997, so-called " shock tests," which model efIects of interest rate compared with 42 days and 5.58% at the end of 1996. GE and currency shifts on the reporting company. Shock tests. Capitalleverage (ratio of debt to equity, excluding from equity while probably the most meaningful analysis pennitted, are net unrealized gains on investment securities) was 7.94 to 1 constrained by several factors, including the necessity to con-at the end of 1997 and 7.92 to I at the end of 1996. By com-duct the analysis based on a single point in time and by their parison, including in equity net unrealized gains on invest-inability to include the extraordinarily complex market ment securities, the GE Capital ratio of debt to equity was reactions that nonnally would arise from the market shifts 7.45 to 1 at the end of 1997 and 7.84 to 1 at the end of 1996. modeled. While the following results of shock tests for inter-est rates and currencies may have some limited use as bench-Interest rate and currency risk management marks, they shout <1 not be viewed as forecasts, in normal operations, both GE and GECS must deal with

• One means of assessing exposure to interest rate changes efTects of changes in interest rates and currency exchange is a duration-based analysis that measures the potential rates. The following discussion presents an oveniew of how loss in net earnings resulting from a hypotheticalincrease such changes are managed, a siew of their potential effects, in interest rates of 100 basis points across all maturities and, finally, uhat considerations arise from recent develop.

(sometimes referred to as a " parallel shift in the yield ments in Asia. curve"). Under this model, it is estimated that, all else con-GE and GECS use various financial instnunents, particularly stant, such an increase, including repricing effects in the interest rate and currency swaps, but also futures, options and securities portfolio, would reduce the 1998 net earnings of currency fonvards, to manage their respective interest mte and GECS based on year-end 1997 positions by approximately currency risks. GE and GECS are exclusively end users of these $112 million; the pro fonna etfect for GE was insignificant. instntments, which are commonly referred to as derivatives; e One means of assessing exposure to changes in currency neither GE nor GECS engages in trading, market. making or exchange rates is to model cfTects on reported earnings other speculative activities in the derivatives markets. Estab-using a sensitivity analysis. Year-end 1997 consolidated lished practices require that derivative financial instnnnents currency exposures, including financialinstruments desig, relate to specific asset, liability or equity transactions or to cur-nated and efTective as hedges, were analyzed to identify rency exposmes. More detailed infonnation about these GE and GECS assets and liabilities denominated in other financial instruments, as well as the strategies and policies for than their relevant functional currency. Net unbedged their use, is provided in notes 1,19 and 30. exposures in each currency were then remeasured assum-The Securities and Exchange Cmumission requires that ing a 10% decrease (substantially greater decreases for registrants include infonnation about potential effects of hyperinflationary cunencies) in currency exchange rates changes in interest rates and currency exchange in their compared with the U.S. dollar. Under this model, it is financial statements. Although the rules oiTer alternatives estimated that, all else constant, such a decrease would for presenting this infonnation, none of the alternatives is reduce the 1998 rr arnings of GE based on year-end without limitations. The following discussion is based on 1997 positions ' eximately $10 million; the pro forma efIect f( ',ECS was insignificant. 42

Recent economic developv ts in parts of Asia have altered in December 1997, the GE Board of Directors increased somewhat the risks and - -ortunities of the GE and GECS the authorization to repurchase common stock to $17 billion acthities in affected cronomies. These acthities encompass and authoriicd the program to continue through 1999. primarily manufacturing for local and export maikets, import Funds used for the share repurchase are expected to be gen-and sale of products produced outside the area, leasing of erated largely from free cash flow, aircraf t, sourcing for GE plants domiciled in other global Based on past performance and current expectations, in regions and prosiding certain financial senices within those combination with the financial flexibility that comes with a Asian economics. As such, exposure exists to, among other strong balance sheet and the highest credit ratings, manage. things, increased receivables delinquencies and potential ment believes that GE is in a sound position to complete the bad debts, delays in sales and orders principally related to share repurchase program, to grow dhidends in line with power and aircraft related equipment, and a slowdown in earnings, and to continue making selective investments for financial senices acthitbs. Conversely, costs of sourced lung-term growth. Expenditures for new plant and equip-goods may decline and new sourcing opportunities may arise, ment are expected to be about $2.0 billion in 1998, princi-sales of products such as plastics to now more-competitive pally for productivity and growth. The expected level of Asian manufacturers of products destined for export should expenditures was moderated by the Six Sigma quality pro-remain strong and liber lization of financial regulations gram's success in freeing capacity. t opens new opportunities to penetrate Anian financial senices

markets. Taken as a whole, while this situation bears close GECS

monitoring and increased management attention, the cur-One of the primaty sources of cash for GECS is financing

rent situation is not expected to have a material adverse activities invohing the continued rollover of short-term bor-

effect on the financial position, results of operations or rowings and appropriate addition of borrowings with a rea-liquidity of GE or GECS in 1998.

sonable balance of maturities. Over the past three years, GECS borrowings with matmities of 90 days or less have ' Statement of Cash Flows increased by $20.1 billion. New borrowings of $80.5 billion s . Because cash management activities of GE and GECS are having maturities longer than 90 days were added during separate and distinct, it is more useful to review their cash those years, while $64.5 billion of such longer-term borrow-flows separately. ings were retired. GECS also generated $26.1 billion from continuing operating activities. GE The principal use of cash by GECS has been investing in GE cash and equivalents aggregated $1.2 billion at the end assets to grow its businesses. Of the $55.9 billion that GECS - ~ ' ' of 1997, an increase of $0.2 billion from 1996. During 1997, invested over the past three years, $15.5 billion was used for GE generated a record $9.3 billion in cash from operating additions to financing receivables: $16.2 billion was used to activities, an increase of $0.2 billion over 1996, principally invest in new equipment, principally for lease to others; and as a result ofimprovements in earnings, working capital and $13.6 billion was used for acquisitions of new businesses. higher dhidends from GECS. The 1997 cash generation pro. With the financial flexibility that comes with excellent vided most of the resources needed to repurchase $3.5 billion credit ratings, management believes that GECS should be of GE common stock under the share repurchase program, to well positioned to meet the global needs ofits customers for pay $3.4 billion in dhidends to share owners, to invest $2.2 capital and to continue providing GE share owners with billion in new plant and equipment and to make $1.4 billion good returns. in acquisitions. Operating activities are the principal source of GE's cash flows. Over the past three years, operating acthities have provided more than $24 billion of cash. The principal appli-cation of this cash was distributions of more than $19 billion to share owners, both through payment of dividends ($9.2 billion) and through the share repurchase program ($9.9 billion) desciibed below. Other applications included investment in new plant and equipment (56.4 billion) and acquisitions ($2.8 billion). 43

Management's Discussion of Selected Financial Data Sslected financial data suunnariies on the opposite page Orders constituting this backlog may be canceled or deferred some data frequently requested about General Electric by customers, subject in certain cases to cancellation penal-Company. The data are dhided into three sections: upper ties. See Industry Segments beginning on page 34 for further portion - consolidated data; middle portion - GE data that discussion on unfilled orders of relatively long-cycle manu-reflect various conu ntional measurements for industrial facturing businesses. enterprises; and lower portion - GECS data that reflect key Regarding environmental matters, GE's operations, like opera-infonnation pertinent to financial senices businesses-tions of other companies engaged in similar businesses, GE's total research and development expenditures were involve the use, disposal and cleanup of substances regulated $1,891 million in 1997, about the same as in 1996 and 1995. under emironmental protection laws. In 1997, expenditures from GE's own funds were $1,480 in 1997, GE expended about $80 million for capital proj-million, an increase of 4% over 1996, reflecting continuing ects related to the emironment. The comparable amount in research and development work related to new product, 1996 was $87 million. These amounts exclude expenditures senice and process technologies. Product technology efforts for remediation actions, which are principally expensed and " in 1997 included continuing development work on the next are discussed below. Capital expenditures for emironmental generation of gas turbines, further advances in state-of-the-purposes have included polhition control desices - such as art diagnostic imaging technologies, and development of wastewater treatment plants, groundwater monitoring more fuel-efficient, cost-efrective aircraft engine designs. devices, air strippers or separators, and incinerators - at i New senices technologies include advances in diagnostic new and existing facilities constructed or upgraded in the applications, including remote diagnostic capabilities related nonnal course of business. Consistent with policies stressing to repair and maintenance of medical equipment, aircraft emironmental responsibility, average annual capital expen-engines, power generation equipment and locomotives. ditures other than for remediation projects are presently New process technologies -vital to Six Sigma quality pro-expected to be about $85 million over the next two years. grams - provided imprmed product quality and perform-This level is in line with existing levels for new or expanded ance and increased capacity for manufacturing engineered programs to build facilities or modify manufacttning materials. Expenditures from fimds provided by customers processes to minimize waste and reduce emissions. (mainly the U.S. govenunent) were $411 million in 1997, GE also is involved in a sizable number of remediation down $54 million from 1996, primarily reflecting tramition actions to clean up hazardous wastes as required by federal of the F414 program at Aircraft Engines from development and state laws. Such statutes require that responsible parties to production, fund remediation actions regardless of fault, legality of origi-GE's total backlog of firm unfilled orders at the end of 1997 nal disposal or ownership of a disposal site. Expenditures was $26.4 billion, compared with $26.2 billion at the end of for site remediation actions amounted to approximately $84 1996. Of the total, $22.0 billion related to products, about million in 1997, compared with $76 million in 1996. It is 55% of which was scheduled (br delivery in 1998. Senices presently expected that remediation actions will require orders are included in backlog for only the succeeding 12 average annual expenditures in the range of $80 million to months; such backlog at the end of 1997 was $4.4 billion. $140 million over the next'two years. 4 Year-end market capitalization GE share price activity (in billions) $250 (in dollar:) $80 200 64 150 y [ 48 .f K 100 E ms 32 'g Fom F m~ s 50 ,.y 16 b 0 0 1993 1994 1995 1996 1997 19 2 1994 1995 1996 1997 44

Selected Financial Data (Douar amounts in milhons; per-share amounts in dollars) M 1996 1995 1994 1993 G:n:ral Electric Company and consolidated affiliates Revenues $ 90,840 $ 79,179 $ 70,028 $ 60,109 $ 55,701 Earnings from continuing operations 8203 7,280 6,573 5,915 4,184 Earnings (loss) from discontinued operations (1,189) 993 Effect of accounting change (862) Net earnings 8203 7,280 6,573 4,726 4,315 Disidends declared 3,535 3,138 2,838 2,546 2,229 Earned on average share owners' equity 25.0 % 24.0 % 23.5 % 18.1 % 17.5 % . Per share Earnings from continuing operations - basic 2.50 2.20 1.95 1.73 1.22 Earnings (loss) from discontinued operations (0.35) 0.29 Effect of accounting change (0.25) Net earnings - basic 2.50 2.20 1.95 1.38 1.26 Net earnings - diluted 2.46 2.16 1.93 1.37 1.25 Disidends declared 1.08 0.95 0.845 0.745 0.6525 Stock price range 76W-47% 53Ms-34% 36 % -24 % 27W-22% 26%-20W Total assets of continuing operations 304,012 272,402 228,035 185,871 166,413 1,ong-tenn borrowings 46,603 49,246 51,027 36,979 28,194 Shares outstanding-average (in thousands) 3,274,692 3,307,394 3,367,624 3,417,476 3,415,958 Share owner accounts - average 509,000 486,000 460,000 458,000 464,000 Employees at year end United States 165,000 155,000 150,000 156,000 157,000 Other countries 111,000 84,000 72,000 60,000 59,000 Discontinued operations (primarily U.S.) 5,000 6,000 Total employees 276,000 239,000 222,000 221,000 222,000 GE data Short-term borrowings S 3,629 5 2,339 1,666 906 2,391 long-term borrowings 729 1,710 2,277 2,699 2,413 Minority interest 569 477 434 382 355 Share owners' equity 34,438 31,125 29,609 26,387 25,824 Total capital invested $ 39,365 $ 35,651 $ 33,986 $ 30,374 $ 30,983 Return on average total capital invested 23.6 % 22.2 % 21.3 % 15.9 % 15.2 % Borrowings as a percentage of total capital invested 11.1 % 11.4 % 11.6 % 11.9 % 15.5 % l Working capital $ (4,881) $ (2,147) 204 544 (419) l Additions to property, plant and equipment 2,191 2,389 1,831 1,743 1,588 l GECS data l Revenues $ 39,931 $ 32,713 $ 26,492 $ 19,875 $ 17,276 Earnings from continuing operations 3256 2,817 2,415 2,085 1,567 Earnings (loss) from discontinued operations (1,189) 240 Net earnings 3256 2,817 2,415 896 1,807 Share owner's equity 17239 14,276 12,774 9,380 10,809 Minority interest 3,113 2,530 2,522 1,465 1,301 Borrowings from others 141263 125,621 111,598 91,399 81,052 Ratio of debt to equity at GE Capital (a) 7.94:1 7.92:1 7.89:1 7.94:1 7.96:1 Tot;d assets of GE Capital $ 228,777 $ 200,816 $ 160,825 $ 130,904 $ 117,939 Reserve coverage on financing receivables 2.63 % 2.63 % 2.63 % 2.63 % 2.63 % Insurance premiums written 9,396 8,185 6,158 3,962 3,956

(a) Fquity exdudes net unreahred gains / losses on imesunent securities.

l Discontinued operations reflect the results of Kidder, Peatxuly, the discontinued GECS secunties broker-dealer,in lW4 and lW3, and the results ofdiscon- ! tinued GE Acrospace businewes in IW3. The IW3 accounting < hange represents the adoption of SFAS No. I12, Empigers' Arrountingfor tbstemp/gment Bene-I fas.T.E" means the basis of consohdation as described in note I to the consohdated financial statements:"GECS" meam General Electric Capital Senices. Inc. and all ofits affiliates and awwiated companies. Tramattions between GE and GECS have been climinated f rom the consolidated information. Share data and per. share amounts base been adjusted to reflect the 2-lor.1 sto(L split eficctive on April 28.1997. 15

Management's Discussion of Financial Responsibility The financial data in this report, including the audited finan-programs and review activities, such as those conducted by cial statements, have been prepared by management using the the Q3mpany's Policy Onnpliance Resiew Board, are best available infonnation and applyingjudgment. Account-designed to create a strong compliance culture-one that ing principles used in preparing the financial statements are encourages employees to raise their policy questions and those that are generally accepted in the United States. concerns and that prohibits retribution for doing so. Management believes that a sound, dynamic system of KPMG Peat Mamick LLP prmide an objective,indepen-internal financial controls that balances benefits and costs dent review of management's discharge ofits obligations provides a vital ingredient for the Company's Six Sigma qual-relating to the fairness of reporting operating results and ity program as well as the best safeguard for Gmnpany assets, financial condition. Their report fi>r 1997 appears below. Professional financial managers are responsible for imple-The Audit Conunittee of the Board (consisting solely menting and overseeing the financial control system, report-of Directors from outside GE) maintains an ongoing ing on management's stewardship of the assets entrusted to appraisal-on behalf of share owners-of the activities it by share owners and maintaining accurate records, and independence of the Company's independent auditors, GE is dedicated to the highest standards ofintegrity, ethics the actisities ofits internal audit stafT, financial reporting and social responsibility. This dedication is reflected in written process, internal financial controls and compliance with policy statements covering, among other subjects, emiron-key Company policies. mental protection, potentially conflicting outside interests of s employees, compliance with antitrust laws, proper business practices, and adherence to the highest standards of conduct and practices in transactions with the U.S. government. Man-John F. Welch.Jr, Dennis D. Dammennan Chainnan of the Ibrd and Senior Vice President, Finance, and I agement continually emphasizes to all employees that even

• • • "*"'id'"

the appearance ofimpropriety can erode public confidence l in the Company. Ongoing education and communication February 13. Iws l l Independent Auditors' Report To Share Owners and Board of Directors of the accounting principles used and significant estimates General Electric Company made by maragement, as well as evaluating the overall finan-ci i statement presentation. We believe that our audits pro-We have audited the accompanying statement of financial side a reasonable basis (br our opinion. position of General Elecuic Company and consolidated affiliates as of December 31,1997 and 1996, and the related in our opinion, the afbrementioned financial statements statements of earnings and cash flows for each of the years in appearing on pages 26-31,35, and 47-66 present fairly,in all terial respects, the financial position of General Electric the three-year period ended December 31,1997. These con. Company and consolidated affiliates at December 31,1997 solidated financial statements are the responsibility of the ud 1996, and the results of their operations and their cash Company's management. Our responsibility is to express an flows f r each of the years in the three-year period ended opinion on these consolidated financial statements based on December 31,1997,in conformity with generally acc epted our audits. We conducted our audits in accordance with generally cc unting principles. accepted auditing standards. Those standards require that we plan and perfonn the audit to obtain reasonable assur-gg g Q g ance about whether the fmancial statements are free of sj material misstatement. An audit includes examining, on a KPMG Peat Marwi(L Lt.P M^"* * * """#C 'i""' test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing Februaq 13. Iwx 4d

Notes to Consolidated Financial Statements ? ' Summary of Significant Accounting Policies Consolidation.The consolidated financial statements rep-Operating lease income is recognized on a straight-line resent the adding together of all affiliates-companies that basis mer the terms of underlying leases. General Elecuic directly or indirectly controls. Results of Origination, commitment and other nonrefundable fees associated companies - generally companies that are 20% related to fundings are deferred and recorded in earned to 50% owned and over which GE, directly or indirectly, has income on the interest method. Commitment fees related in significant influence-are included in the financial statc-loans not expected to be funded and line-of-credit fees are ments on a "one-line" basis, deferred and recorded in earned income on a straight-line d Financial statement presentation. Financial data and related basis over die period to which the fees relate. Syndication measurements are presented in the fiillowing categories. fees are recorded in earned income at the time related serv-

• GE. This represents the adding together of all affiliates

"' ". performed unless significant contingencies exist. Premmm mcome from insurance activines is discussed other than General Electnc C,ap. l S.enices, Inc. (GE.CS), ita under GECS insurance accounting policies on page 48. I whose operations are presented on a one-line bas.is. Depreciation and amortization.The cost of most of GE's manu-

• GECS. This affiliate owns all of the common stock of General Electric Capital Corporation (GE Capital) ami facturing plant nd equipment is depreciated using an GE Global Insurance Ilolding Corporation (GE Global acalerated method based primarily on a sum-ofdhe-years Insurance). GE Capital, GE Global Insurance and their digits funnula.

respective affiliates are consolidated in the GECS columns e cost of GECS equipment leased to others on operat-and constitute its business. ing leases is amortiied, principally on a straight-line basis, to estimated net salvage value over the lease term or over the

• Consolidated. These data represent the adding together of estimated economic life of the equipment. Depreciation of GE and GECS.

property and equipment used by GECS is recorded on either The effects of transactions among related companies within a sum-of-the-years digits fiarmuh or a straight-line basis over and between each of the above-mentioned groups are elimi-the lives of the assets. nated. Transactions between GE and GECS are not material. Ilecognition of losses on financing receivables and investments. Certain prior-year amounts have been reclassified to con-GECS maintains an allowance for losses on financing receiv-form to the 1997 presentation. ables at an amount that it believes is sufficient to provide The preparation of financial statements in confonnity with adequate protection against future losses in the portfolio. generally accepted accounting principles requires manage-g.g gg.M is o d in wisfaction of a loan, the ment to make estimates and assumptions that affect reported receivable is written down against the allowance for losses to amounts and related disclosures. Actual results could ditTer esumated fa.ir value less costs to sell, transferred to other assets from those estimates. and subsequently carried at the lower of cost or estimated fair Sales of goods and services. A sale is recorded when title value less costs to sell. This accounting method has been passes to the customer or when senices ate performed in employed principally for specialized financing transactions, accordance with contracts' Cash and equivalents. Marketable securities with original .GECS revenues from services (earned income). Income on all maturities of three months or less are included in cash equiv-loans is recognized on the interest method. Accrual ofinter-alents unless designated as available for sale and classified as est income is suspended at the earlier of the time at which investment securities. , collection of an account becomes doubtful or the account Investment securities. Investments in debt and marketable becomes 90 days delinquent. Interest income on impaired equity securities are reported at fair value. Substantially all loans is recognized either as cash is collected or on a cost-investment securities are designated as available for sale, with recovery ban,s as cond..itions warrant. unre:.h.ied gains and losses m.cluded m. eqmtv, net of apph.c-Financing lease income is recorded on the interest method able taxes and other adjustments. Unreah. zed losses tha: are so as to produce a level vield on funds not yet recovered. Esti-other than temporary are recognized in earnings. Reah.ied mated unguaranteed residual values ofleased assets are based gains and losses are accounted for on the specih..dentih,ca-ci primarily on periodic independent appraisals of the values of h diod leased assets remaining at expiration of the lease tenns. 47

inventories. All inventories are stated at the lower of cost or agreements. For retrospectively rated reinsurance con-realizable values. Cost for sirtually all of GE's U.S. inventories tracts, premium adjustments are recorded based on esti-is detennined on a last-in, first-out (LIFO) basis. Cost of mated losses and loss expenses, taking into consideration other GE inventories is primarily determined on a first-in, both case and incurred-but-not reported reserves. first-out (FIFO) basis.

• For traditional long-duration insurance contracts (includ.

GECS inventories consist primarily of finished products ing term and whole life contracts and annuities payable for. held for sale. Cost is primarily determined on a FIFO basis. - the life of the annuitant), premiums are reported as intingible assets. Goodwill is amortized over its estimated earned income when due, period of benefit on a straight-line basis; other intangible

• For investment contracts and universal life contracts, pre-assets are amortized on appropriate bases over their estimated miums received are reported as liabilities, not as revenues.

lives. No amortization period exceeds 40 years. Goodwill in Universal life contracts are long-duration insurance con-excess of associated expected operating cash flows is consid-tracts with terms that are not fixed and guaranteed; for cred to be impaired and is written down to fair value, which these contracts, revenues are recognized for assessments. is determined based on either discounted future cash flows against the policyholder's account, mostly for mortality, or appraised values, depending on the nature of the asset. contract initiation, administration and surrender. Invest-Interest rate and currency risk management. As a matter of pol-ment contracts are contracts that have neither significant icy, neither GE nor GECS engages in derivatives trading, mortality nor significant morbidity risk, including annu-market-making or other speculatise activities. ities payable fbr a determined period; for these contracts, GE and GECS use swaps primarily to optimize funding revenues are recognized on the associated investments and costs. To a lesser degree, and in combination with options amounts credited to policyholder accounts are charged to and limit contracts, GECS uses swaps to stabilize cash flows expense. from mortgage-related assets. Deferredpolicy aquisition costs. Costs that vary with and are Interest rate and currency swaps that modify borrow, gs or primarily related to the acquisition of new and renewal m ~ designated assers, including swaps associated with forecasted nsurance and investment contracts are deferred and amor-commercial paper renewals, are accounted for on an accrual tized over the respective policy terms, basis. Both GE and GECS require all other swaps, as well as

• For short-duratmn insurance contracts, these costs are futures, options and currency forwards, to be designated and amortized pro rata over the contract periods m, which the accounted for as hedges of specific assets, liabilities or com-related premiums are earned.

nutted transactions; resulting payments and receipts are recognized contcmporaneously with efTects of hedged trans-

• F r traditionallong-duration insurance contracts, these mts are mortized over the respective contract periods in actions. A payment or receipt arising from early termination of an effective hedge is accounted for as an adjustment to the proportion to either anticipated premium income or, in basis of the hedged transaction.

the case oflimited-payment contracts, estimated benefit Instnaments used as hedges must be effective at reducing P }ments. the risk associated with the exposure being hedged and must

• For investment contracts and universal life contracts, these be designated as a hedge at the inception of the contract.

costs are amortized on the basis of anticipated gross Accordingly, changes in market values of hedge instruments profits. must he highly correlated with changes in market values of Periodically, deferred policy acquisition costs are resiewed underlying hedged items both at inception of the hedge and for recoverability; anticipated investment income is consid- - over the life of the hedge contract. Any instrument desig-cred in making recoverability evaluations. nated but ineffective as a hedge is marked to market and rec-Present calue offuture profits. The actuarially determined ogniied in operations immediately, present value of anticipated net cash flows to be realized from GECS insurance accounting policies. Accounting policies for insurance, annuity and investment contracts in force at the GECS insurance businesses follow, date of acquisition oflife insurance enterprises is recorded Premium income. Insurance premiums are reported as as the present value of future profits (PVFP). PVFP is amor-e carned income as follows: tized over the respective policy terms in a manner similar to j deferred policy acquisition costs; unamortized balances are

• For short-duration insurance contracts (including prop-adjusted to reflect experience and impairment,if any.

erty and casualty, accident and health, and financial guar-anty insurance), premiums are reported as earned income, j generally on a pro rata basis, over the tenns of the related 48

GE Ottnrinc:me At De. ember 31,1997, minimum rental commitments under noncancelable operating leases aggiegated $2,368 on mittions) uim 1996 1995 million and $5,097 million for GE and GECS, respectively. Royalty and technical agreements $ 405 $391 $453 Amounts payable over the next five years are shown below. Associated companies 50 50 111 Marketable securitics and On millions) 1998 1999 2000 2001 2002 bank deposits 78 72 70 GE $433 $360 $260 $213 $166 Customer financing 26 29 26 GECS 652 574 512 487 452 Other investments I GE's selling, general and administratise expense totaled Other items 1,685 (10) 13 $7,476 million in 1997, $6,274 million in 1996 and $5,743 $ 2,307 $629 $ 753 million in 1995. Insignificant amounts ofinterest were cap-italized by GE and GECS in 1997,1996 and 1995. included in the "Other items" caption is a gain of $1,538 4 million related to a tax-free exchange between GE and lockheed h1artin Corporation (lockheed h1artin) in the P Pension Benefits . fourth quarter of 1997. In exchange for its investment in lockheed h1artin Series A preferred stock, GE acquired a GE and its affiliates sponsor a number of pension plans. Lockheed hiartin subsidiary containing two businesses, an Principal pension plans are discussed below; other pension equity interest and cash to the extent necessary to equalire plans are not significant individually or in the aggregate. the value of the exchange, a portion of which was subse-Principal pension plans are the GE Pension Plan and the GE quently loaned to lockheed hiartin. Supplementary Pension Plan. The GE Pension Plan covers substantially all GE employees in the United States as well as approximately two-thirds of F3 GECS Revenues from Services such GECS employees. Generally, benefits are based on the greater of a fonnula recognizing career earnings or a fonnula On millions) use 1996 1995 recognizing length of senice and final avemge earnings. Time sales, loan and lienefit provisions are subject to collective bargaining. At the other income $ 12,211 $ 11,310 $ 9,995 end of 1997, the GE Pension Plan covered approximately Operating lease rentals 4,819 4,341 4,080 466,000 participants, including 132,000 employees, 148,000 Financing leases 3,499 3,485 3,176 Investment income 5,512 3,506 2,542 former employees with vested rights to future benefits, and Premium and commission 186,000 retirees and beneficiaries receiving benefits. income ofinsurance alliliates 9,268 8,145 6,232 The GE Supplementary Pension Plan is an unfunded plan $ 35,309 $ 30,787 $26,025 providing supplementary retirement benefits primarily to higher-level, longer-senice U.S. employees. Details ofincome for principal pension plans follow. PP Supplemental Cost Details Pension plan income On millions) ufa 1996 1995 Total expenditures for research and development were Actual return on plan assets $ 6,587 $ 4,916 $ 5,439 $1,891 million, $1,886 million and $1,892 million in 1997, Unrecognized portion of return (3,866) (2,329) (3,087) 1996 and 1995, respectively. The Company-funded portion Senice cost for benefits earned (a) (596) (550) (469) aggregated $1,480 million in 1997, $1,421 million in 1996 Interest cost on benefit obligation (1,686) (1,593) (1,580) and $1,299 million in 1995. ^*".rtiration 304 265 394 Special early retirement cost (412) Rental expense under operating leases is shown below. Total pension plan income $ 331 $ 709 $ 697 On millions) urm 1996 1995 (a) Net of employee contributions. GE $ 536 $512 $523 GECS 734 547 524 Actual return on trust assets in 1997 was 19.8%, compared with the 9.5% assumed return on such assets. The effect of this higher return will be recognized in future years. 49

Funding pclicy for the GE Pension Plan is to contribute [ Hetiree Health and Life Benefits amounts sufficient to meet minimum funding requirements GE and its affiliates sponsor a number of retiree health and as set fonh in employee benefit and tax laws plus such addi-life insurance benefit plans. Principal retiree benefit plans tional amounts as GE may determine to be appropriate, are discussed below; other such plans are not significant GE has not made contributions since 1987 because the fully indisidually or in the aggregate. funded status of the GE Pension Plan precludes current tax deduction and because any Compa,y contribution would Principal retiree benefit plans generally provide health and life require payment of annual excise taxes. insurance benefits to employees who retire under the GE Pension Plan with 10 or more years of senice. Retirees share Fundtd status of pension plans in the cost of their health care benefits. Benefit provisions December 31 un minions) tam 1996 are subject to collective bargaining. At the end of 1997, these Market-related value of awets $ 32,638 $ 29,402 plans covered approximately 250,000 retirees and dependents. Projected benefit obligation 25,874 23,251 Detaile of cost for principal retiree benefit plans follow. The market related value of pension assets recognizes Cost of retiree benefit plans market appreciation or depreciation in the portfolio over (In miniom) Lum 1996 1995 five years, a method that reduces the short-term impact of Retiree health plans market fluctuations. Senice cost for benefits carned $ 90 $ 77 $ 73 Plan assets are held in trust and consist mainly of common Interest cost on benefit obligation 183 166 189 Am nization 13 (12) stock and fixed-income investments. GE common stock rep-Spenal early retirement cost 152 resented about 6% and 5% of trust assets at year-end 1997 Retiree health plan cost 438 243 250 and 1996, respectively. An analysis of amounts shown in the Statement of Finan- ', [,f,f,' benefits earned 17 16 13 cial Position is presented below. Interest cost on benefit obligation 116 106 108 Actual return on plan assets (343) (225) (329) Prepaid pension asset Unrecogniied portion of return 206 93 206 December 31 (In minions) Lum 1996 Cunent value of trust assets $ 38,742 $ J3,686 Retiree life plan cost (income) 17 2 (1) Add (deduct) unamortized balances SFAS No. 87 transition gain (462) (615) Total cost $455 $245 $249 Experience gains (7,538) (5,357) Plan amendments 1,003 1,012 Funding policy for retiree health benefits is generally to pay Projected benefit obligation (25,874) (23,251) covered expenses as they are incurred. GE funds retiree life Pension liability 703 637 insurance benefits at its discretion and within limits imposed Prtp:id pension asset , $ 6,574 $ 6,112 by tax laws. The accumulated benefit obligation was $24,675 million Funded status of retiree benefit plans and $22,176 million at year-end 1997 and 1996, respectively; December 31 (In millions) mm 1996 the vested benefit obligation was approximately equal to the M rket-related value of assets $1,621 $ 1,487 accumulated benefit obligation at the end of both years. Accumulated postretirement Actuarial assumptions and techniques used to determine costs benefit obligation 4,775 3,954 and benefit obligations for principal pension plans follow. 4 Actuarlsl assumptions ognizes market appreciation or depreciation in the portfolio December 31 mm 19 % OVer IIVe lears, a method that reduces the short-term impact, f m rket fluctuations. Discount rate 7.0% 7.5% Compensation increases 4.5 4.5 Plan assets are held in trust and consist mainly of common Return on assets for the year 9.5 9.5 stock and fixed-income investments. GE common stock tep-resented about 4% and 3% of trust assets at year-end 1997 Experience gains and losses, as well as the effects of and 1996, respectively. changes in actuarial assumptions and plan provisions, are amortired over employees' average future senice period. 50

An analysis of amounts shown in the Statement of Finan-U GECS Allowance f:r Lossis en Fin ncing R:ceivahlis cial Position is presented below. The allowance for losses on small-balance receivables is Retiree benett liability / asset determined principally on the basis of actual experience ,n, ,n, during the preceding three years. Further allowances are Derrmber 31 (In milhons) mm 1996 mm 1996 provided to reflect management'sjudgment of additional Accumulated postictirement I ss p tential. For other receivables, principally the larger benefit obligation loans and leases, the allowance for losses is determined pri-Retirees and marily on the basis of management'sjudgment of net loss dependents $2,445 $1,889 $ 1,417 $ 1,305 potential, including specific allowances for known trou'oled Emplo>ces eligible to retire 104 86 45 45 accounts. The table below shows the actmty m the allowance Other employees $49 440 215 189 for losses on financing receivables during each of the past 3,098 2,415 1,677 1,539 three years. ' Add (deduct) unamurtized (in millions) urm 1996 1995 balances Balance atJanuary 1 $ 2,693 $ 2,519 $2,062 Experience Prmisions charged to operations 1,421 1,033 1,117 (losses) gains (423) (195) 127 (41) Net transfers primarily related to Plan amendments (171) 157 55 109 companies acquired or sold 127 139 217 Current value of Amounts written off-net (1,439) (998) (877) trust assets (1,917) (1,682) Balan(e at December 31 $ 2.802 $ 2,693 $2,519 Retiree beno6t liability (prepaid esset) 8 2,504 $2,377 $ (58) $ (75) All accounts or portions thereof deemed to be uncollect-Actuan. l assumptions and techniques used to detertmne costs ible or to require an excessive collection cost are written off a to the allowance for losses. Small-balance accounts generally and benef.it obligations f.or pnncipal retirce beneh.t plans are are written off when 6 to 12 months delinquent, although shown below. any balancej. dged to be uncollectible, such as an account m u Actuarial assumptions bankruptcy, is written down immediately to estimated realiz-able value. Large-balance accounts are reviewed at least quar-Det emher 31 mm 1996 terly, and those accounts with amounts that arejudged to be uncollectible are written down to estimated realizable value. i n increases llealth care cost trend (a) 7.8 8.0 Return on assets for the year 9.5 9.5 (a) Gradually declining to 5.0% atter 2002. F Provision forincome Taxes increasing the health care cost trend rates by one per-(in milhons) urm 1996 1995 centage point would not have had a matetial effect on the December 31,1997, accumulated postretirement benefit timated amounts payable $ 2,332 $ 2,235 $1,6% obligation or the annual cost of retiree health plans. Deferred tax expense (benefit) Experience gains and losses, as well as the effects of from temimrary differences (522) 60 363 changes in actuarial assumptions and plan provisions, are 1,810 2,295 2,059 amortized over einployees' average future senice period. GECS Estimated amounts payable 368 164 434 Def s x expense from te a m differences 798 1,067 671 e 1,166 1,231 1,105 Consolidated Estimated amounts payable 2,700 2,399 2,130 Deferred tax expense from temporary dif f erences 276 1.127 1,034 $ 2,976 $ 3,526 $3,164 l GE includes GECS in filing a consolidated U.S. fedemi income tax return. The GECS provision for estimated taxes payable includes its effect on the consolidated return. 51

Estimated consolidated amounts payable includes amounts Except for certain earnings that GE intends to reinvest applicable to non-U.S. jurisdictions of $1,298 million, $1,204 indefinitely, provision has been made for the estimated U.S. million and $721 million in 1997,1996 and 1995, respectively. federal income tax liabilities applicable to undistributed Deferred income tax balances reflect the impact of tempo-carnings of aHiliates and associated companies. rag differences between the carqing amounts of assets and Consolidated U.S. income before taxes was $8.2 billion in liabilities and their tax bases and are stated at enacted tax 1997, $8.0 billion in 1996 and $7.6 billion in 1995. The corre-I rates expected to be in effect when taxes are actually paid or spotiding amounts for non U.S.-based operations were $3.0 l recovered. See note 22 for details. billion in 1997, $2.8 billion in 1996 and $2.1 billion in 1995. l l R: conciliation of U.S. federal Consohdated GE GECS stItut:ry tax rate to actual rate nrm 1996 1995 i um 1996 1995 u imm 1996 1995 l l Statutory U.S. federal sacome tax rate 35.0 % 35.0 % 35.0% 35.0 % 35.0 % 35.0 % 35.0 % 35.0 % 35.0 % l Increase (s eduction) in rate l resulting from: inclusion of af ter-tax earnings of GECS in before-tax (11,4) (10.3) (9.8) l earnings of GE l lockheed Martin exchange (note 2) (4.8) (5.4) Amortization of goodwill 1.1 1.1 1.1 0.8 0.8 0.8 1.1 1.2 1.1 Tax-exempt income (1.9) (2.0) (2.1) (4.9) (5 4) (5.8) Foreign Sales Corporation tax benefits (1.0) (0.7) (0.9) (0.9) (0.6) (1.1) (0.5) (0.3) Dividends received, not fully taxable (0.5) (0.6) (0.5) (0.2) (0.2) (0.2) (0.9) (1.1) (0.8) All other - net (1.3) (0.2) (0.1) 0.2 (0.7) (0.8) (3.4) 1.0 1.9 (8.4) (2.4) (2.5) (16.9) (11.0) (11.1) (8.6) (4.6) (3,6) Actualincome tax rate 26.6 % 32.6 % 32.5 % 18.1 % 24.0 % 23.0 % 26.4 % 30.4 % 31.4 % F IEarnings Per Share Information ~ (Dollar amounts and shan s in milhons; per-share amounts in dollars) Basic Dduted Basic Dduted Basic Dduted Constlidated operations Net carriings available to common share owners $ 8.203 $ 8,203 $ 7,280 $ 7,280 $ 6,573 $ 6,573 Dividend equivalents - net of tax 10 9 9 Net earnings availatile for p r-share calculat. ion $ 8,203 $B,213 $ 7,280 $ 7,289 $ 6,573 $ 6,582 Avertge equivalent shares Shares of GE <ommon stock outstanding 3,275 3.275 3,307 3,307 3,368 3,368 Employee compensation-rvlated shares, including stock options 70 64 46 Total average equivalent shares 3.275 3.345 3,307 3,371 3,368 3,414 Net earnings per share $ 2.50 $ 2.46 $ 2.20 $ 2.16 $ 1.95 $ 1.93 Share data and per-share amounts have been adjusted for the 2-for-1 sim k spht effectne on Apnl 28,1997. 4 [" investment Securities GE held equity securities with an estimated fair value of December 31,1997 were $13 million and $5 million, respec- $')65 million (amortized cost of $257 million) and $17 mil-tively. There were no unrealized gains or losses at Decen her lion (amortized cost of $17 million) at December 31,1997 31,1996. and 1996, respectively. Gross unrealized gains and losses at An analysis of GECS investment securities follows on the next page. j 52

GEC$ investment securities GE C rrent R:ctivibl;s Gross Gross Amortized unreahzed unrealized Estimated (in millions) cost. gains . losses fair value December 31 (In millions) lifa 1996 simwrminor Aircraft Engines $ 2,118 $ 1,389 PP ances 479 713 li A Debt securities ma Casting 362 698 U.S. corporate $ 24,580 $ 1,028 $ (53) $ 25,55'i Industrial Products and Systems 1,638 1,574 State and municipal 10,750 636 (2) 11,414 "'#[ neration Mortgage-backed 12,074 341 (30) 12,305 e 2, cctm cal mducts and SeMces M 698 l rtS 7,883 310 (12) 7,981 All Other 131 86 Gosernment - Corporate 534 377 non-U.S. 3,714 150 (3) 3,861 U.S. government and 9.292 9,066 federal agency 2,413 103 (4) 2,512 Ins allowance for losses (238) (240)

• Equity securities 5,414 1,336 (102) 6,648

$ 9,054 $ 8,826 $lis,658 $ 3,904 $(206) $ 70,356 Receivables balances at December 31,1997 and 1996,

• December 31,1996 before allowance for losses, included $6,125 ruillion and

$6,629 million, respectively, from sales of goods and senices Sc rate $ 22,080 $ 308 $(641) $ 21,747 l State and municipal 10,232 399 (34) 10,597 to customers, and $285 million and $290 million, respec-l Mortgage-backed 11,072 297 (108) 11,261 tively, from transactions with associated companies. Corporate - Current receivables of $303 million at year-end 1997 and imn S 5,587 142 113) 5,716 $326 million at year-end 1996 arose from sales, principally of aircr ft engine go ds and senices, on open account to vari-non-U.S. 3,347 99 (2) 3,444 U.S. government and ous agencies of the U.S. government, which is GE's largest federal ageng 2,340 34 (7) 2,367 single customer, About 4% of GE's sales of goods and serv-Equity securities 4,117 677 (54) 4,740 ices were to the U.S. government in 1997 (about 5% in 1996 $ 58,775 $ 1,956 $(859) $ 59,872 and 1993). The majority of mortgage-backed securities shown in the table above are collateralized by U.S. residential mortgages, q At December 31,1997, contractual maturities of debt secu. h inventories rities, other than mortgage-backed securities, were as follows: December 31 (In millionn) u em 1996 GECS contractual maturities of debt securitN GE (:xcluding mortgege-backed securities) Amortized Estimateo Raw materials and work in process 8 3,070 $ 3,028 (In milliort. cost fair value Finished goods 2,895 2,404 Unbilled shipments 242 258 l Due in 1998 $ 2,570 $ 2,583 6,207 5,690 1999-2002 13,329 13,653 less revaluation to LIFO (1,098) (1,217) 2003 2007 12,881 13,406 5,109 4.473 2008 and later 20 390 21,681 GECS Finished gomis 706 376 It is expected that actual maturities will differ f rom con- $ 5,895 $ 4,849 l tractual maturities because borrowers have the right to call o nrepay cestain obligations, sometimes without call or I.lFO revaluations decreased $119 million in 1997, com- , pr; payment penalties. Proceeds from sales ofinvestment pared with decreases of $128 million in 1996 and $87 million securitbs in 1997 were $14,728 million ($11,868 million in in 1995. Included in these changes were decreases of $59 1996 and $11,017 million in 1995), Gross realized gains were million, $58 million and $88 million in 1997,1996 and 1995, $1,018 million in 1997 ($638 million in 1996 and $503 mil-respectively, that resulted from lower IJFO inventory levels. lion in 1995). Gross realiied losses were $173 million in 1997 There were net cost decreases in 1997 and 1996, and no cost ($190.nillion in 1996 and $157 million in 1995). change in 1995. As of December 31,1997, GE is obligated to acquire certain raw materials at ma:Let prices through the year 2003 under various take-or-pay or similar arrangements. Armual minimum commitments undct G.c arrangements are insignificant. t 53

J GECS Fi=cing therivablis (inv:stments in BB time sis, inns and fin:ncirg 1:ans) Dec ember 31 On millions) arm 1996 tractual maturity. Accordingly, die maturities of time sales Time sales and loans and loans are not to be r egarded as foiecasts of future cash Consumer senices $ 42,270 $ 40,479 collections. C Specialized financing 13,974 14,832 Investment in financing leases consists of direct financing 8' "^'[#' "'h and leveraged leases of aircraft, railroad rolling stock, autos, ,g Specialty insurance 202 339 other transportation equipment, data processing equipment 68,316 66,076 and medical equipment, as well as other manufacturing, Defened income (3,484) (3,244) power generation, mining and commercial equipment and Time sales and loans - net 64,832 62,832 facilities. Investmentin financing lenses As the sole owner of assets under direct financing leases Direct financing leases 38,616 36,576 and as the equity participant in leveraged leases, GECS is Irveraged leases 3,153 2,999 taxed on total lease payments received and is entitled to tax Investment in financing leases 41,769 39,575 deduc6ns based on the cost ofleased assets and tax de-106,601 102,407 ductions for interest paid to third-party participants. GECS less allowam e for losses (2,802) (2,693) generally is entitled to any residual value ofleased assets. $ 103,799 $ 99,714 Investment in direct financing and leveraged leases repre-sents unpaid rentals and estimated unguaranteed residual . Time sales and loans represents transactions m a vanety values of leased equipment, less related deferred income, of forms, including time sales, revohing charge and cred.it, GECS has no general obligation f.or pnncipal and interest on mortgages, installment loans,.mtermediate-term loans and notes and other m.struments representing third-party par-revohing loans secured by business assets. The portfoh. o ticipauon related to leveraged leases; such notes and other mcludes time sales and loans canied at the pn.ncipal amount instnunents have not been m.cluded in liabilities but have on which finance charges are billed periodicah.y, and time been ofiset against the related rentals receivable. GECS, share sales and loans carried at gross book value, which m.cludes of rentals recchable on leveraged leases is subordi.iate to the finance charges. At year-end 1997 and 199t, speciah. zed share of other participants who also have security interests in financing and consumer senices loans m.cluded $10,503 nu.l-the leased equipment. h.on and $12,075 nu.llion, respectively, for commercial real At December 31,1997, contractual maturities for net estate loans. Note 17 contams mformation on airline loans rentals recei able under financing leases were $12,820 mil-lion in 1098; $10,616 million in 1999; $8,395 million in 2000; At December 31,1997, contractual maturities for u.me $3,871 m.lh.on in 2001; $2,371 milh.on m 2002; and $8,373 i sales and loans were $28,983 nu.lh.on m 1998; $12,792 milh.on nullion thereafter - aggregating $46,446 m. lion. As with d m 1999; $7,967 m. h.d on.in 2000; $5,156 nulh.on m 2001; time sales and loans, experience has shown that a ponion of. $3,98a. mdh.on m 2002; and $9,433 milh.on thereafter-these receivables w.ll be pa.d prior to contractual maturity, i i aggregating $68,316 m.llion. Experience has shown that a and these amounts should not be regarded as forecasts of i substantial portion of receivables wd. l be pa.d pnor to con-i future cash flows. Notinvestment in financing leases Totalfinancing leases Dnect financing leases Leveraged leases December 31 On millions) urm 1996 m au 1996 i ira 1996 Total minimum lease payments receivable $ 58,543 $ 54,009 8 42,901 $ 40,555 $ 15,642 $ 13.451 less principal and imerest on third-party nonrecourse debt (12,097) (10.213) (12,097) (10,213) Net rentals receivable 46,446 43,796 42,901 40,555 3,545 3,241 Estimated unguaranteed residual value ofleased awets 5,591 6,248 4.244 4,906 1,347 1,342 1ess deferred income (10.268) (10.469) (8.529) (8,885) 0,739) (1,584) Investment in 6aancing leases (as shown abm e) 41,769 39,575 38,616 36,576 3,153 2,999 (641)l Less amounts to anive at net investment Allowance for losses (656) (720) (575) (81) (79) Deferred taxes arising from financing leases (7,909) (7,488) (4,671) (4,077) (3,238) (3,411) Netinvestmentin 6nancing leases 5 33,204 $ 31,367 8 33,370 $ 31,858 $ (166) $ (491) 54

GECS has a noncontrolling investment in the common E Other GECS R:crivablis stock of hiontgomeg Ward lloiding Corp. (hiWilC), which This account includes reinsurance recoverables of $5,027 together with its wholly owned subsidiary, h1ontgomery million and $4,403 million and insurance-related receivables Ward & Co., incorporated (h1WC),is engaged in retail merchandising and direct response marketing, the latter of $4,932 million and $4,833 million at year-end 1997 and conducted primarily through Signature Financial /hlarketing 1996, respectively. Premium receivables, funds on deposit Inc. (Signature), which markets consumer club and insur-with reinsurers and policyloans are included in insurance-related receivables. Aho in *Other GECS receivables" are ance products. On July 7,1997, h1WilC, AfWC and certain of their alliliates (cxcluding Signature) filed for reorganira. trade receivables, accmed investment income, operating tion under Chapter 1) of the U.S. Bankruptcy Code. As a lease neceivables and a variety of sundry items. result, inventory financing loans to htWilC and affiliates became " impaired" loans (as defined below) because, due to Property, Plant and Equipment . the automatic stay in bankruptcy, GECS is not receiving cur-(including equipment leased to others) rent interest payment on its loans and, in management's judgment, it is therefore probable that GECS will be unable December 31 On milhone um 1996 o to collect all amounts due according to original contractual Original cost terms of the loan agreements.The total amount of such GE [ loans was $617 million at December 31,1997. The nonearn-Land and improvements $ 459 $ 476 ing and reduced-canning receivable balances and the Buildings, structures and related equipment 6,375 6,315 tmpaired loan balances discussed below exclude amounts Mainery and equipment 18,376 17,824 l related to hiWIIC and afliliates. Iraschuld cos s and manufacturing Noncarning consumer receivables were $1,049 million and plant under construction 1,621 1,308 other 24 27 $926 inillion at December 31,1997 and 1996, respectively, 26,855 25,950 a substantial amount of which were U.S. private-label credit GECS card loans subject to various loss-sharing agreements that BuHdings and equipment 3,987 3,075 l provide full or partial recourse to the originating retailer. Equipment leased to othe $ l j Noncarning and reduced-carning receivables other than Vehicles 9,144 6,789 l consumer receivables were $353 million and $471 million Aircraft 7,686 6,647 at year-end 1997 and 1996, respectively. Marine shipping containers 2,774 3,053 '" d "'lling stock " Impaired" loans are defined by generally accepted accounting principles as loans for which it is probable that 28,802 24,834 the lender wd. l be unable to collect all amounts due accord-3 55,657 $ 50,784 ing to original contractual terms of the loan agreement. That definition excludes, among other things, leases or large "j";'f;efadon groups of smaller-balance homogenous loans and therefore (;E $ 15,737 $ 15,118 applies principally to GECS commercial loans. GECS Under these principles, GECS has two types of" impaired" isuildings and equipmen' 1.478 1,246 Equipment leased to othe rs 6.126 5.625 loans as of December 31,1997 and 1996: loans requiring $ 23,341 $ 21,989 allowances for losses ($339 million and $583 million, respec-tively); and loans expected to be fully recoverable because Amortization of GECS equipment leased to others was i

• the carrying amount has been reduced previously through

$U O2 milliom SL83 million rul $1,702 million in 1997, charge-offs or deferral ofincome recognition ($167 million 1996 and 1995, respective lv. %ncancelable future rentd, and $187 million, respectively) - allowances for losses on h hm cwoms h pipw e opig hm

• these loans were $170 million and $222 million, respectively.

nd 1997 ed $1M38 mulim *md m dw m bilm Average investment in these loans during 1997 and 1996 was $3,247 million in 1998; $2,243 million in 1999: $1,473 mil- $647 million and $842 million, respectively, before allowance lion in 2000; $935 million in 2001; $628 million in 2002; and for losses; interest income earned, principally on the cash 9j g mg;; g,g basis, while they were considered impaired was $32 million and $30 million in 1997 and 1996, respertisely. 55

{ intangible Asscts airline fimancing programs, GE had issued loans and guaran-tees (principally guarantees) amounting to $1,590 million at onember 31 tin muhono o rm 1996 year-end 1997 and $1,514 million at year-end 1996; and it GE had entered into commitments totaling $1,794 milhon and Goodwill 8 8,046 $ 6,676 $1,554 million at year-end 1997 and 1996, respectively, to j Other intangibles 709 691 prmide financial assistance on future aircraft engine sales. f 6,755 7,367 1 Estimated fair values of the aircraft securing these receivables GECS and associated guararnees exceeded the related account bal-Goodwill 8,090 5,847 Present value of future profits (l%TP) 1,824 2,438 ances and guaran'.ced amounts at December 31,1997, GECS Otherintangibles 452 355 acts as a lender and lessor to the commercial airline industry. 10,366 8,640 At December 31,1997 and 1996, the balance of such GECS $19,121 $16,007 loans, leases and equipment leased to others was $8,980 mil-tion and $8,240 million, respectively. In addition, at Decem-GE intangible assets are shown net of accumulated amor-ber 31,1997, GECS had issued financial guarantees and tization of $2,976 million in 1997 and $2,637 million in 1996. funding commitments of $123 million ($221 million at year-GECS intangible asets are net of accttrnulated amortization end 1996) and had placed multiyear orders for various e of $2,615 million i.11997 and $1,988 million in 1996. Boeing and Airbus aircraft with list prices of approximately PVFP amortization, which is on an accelerated basis and $6.2 billion ($6.5 billion at year-end 1996). net ofinterest,is projected to range from 13% to 8% of the At year-end 1997, the National Broadcasting Company had year-end 1997 unamortized balance for each of the next $9,388 million of commitments to acquire broadcast material five years. and the rights to broadcast television programs, including U.S. television rights to future Olympic games, and commit-ments under long-term television station affiliation agree- [ A110ther Assets ments that require payments through the year 2008. In connection with numerous projects, primarily power generation bids and contracts, GE had issued vrrious bid and December 31 (In muhone ufa 1996 performance bonds and guarantees totaling $2,895 million E Investments at year-end 1997 and $3,250 million at year-end 1996. Associated companies (a) $ 1,288 $ 1,526 Separate accounts represent investments controlled by Other 1,139 1,591 policyholders and are associated with identical amounts 2,427 3,117 reported as insurance liabilities in note 20. Prepaid pension asset 6,574 6,112 Notes receivable 1,412 26 Other 4.316 3,922 I(E D GE All Other Current Costs and Expenses Accr O 14,729 13,177 GECS Investments At year-end 1997 and 1996, this account included taxes Assets acquired for resale 4,403 2,993 accrued of $2,866 million and $2,487 million, respectively, Associated companies (a) 4,695 4,916 and compensation and benefit accruals of $1,321 million Real estate sentures 2,326 2,469 and $1,315 million, respectively. Also included are amounts Other 2.452 2,095 for product warranties, estimated costs on shipments billed 13.876 12,473 to customers and a variety of sundry items. Separate accounis 4.926 3,516 Senicing assets 1,713 1,663 Deferred insurance acquisition costs 2,521 1,720 Other 2,631 2,286 25,667 21,658 Eliminations (576) $ 39,820 $ 34,835 (c) Incimies advances. In line with industry practice, sales of commercialjet air-i craft engines often invohe long-term customer financing commitments. In making such commitments, it is GE's gen-eral practice to require that it have or be able to establish a secured position in the aircraft being financed. Under such 56

? B:rt: wings short term borrowings B n wings of GE and GECS are addressed below from two perspectives -licuidity and interest rate management. - e 1996 Additional information about borrowings and associated swaps can be found in note 30. December 31 (In millions) Amount at Amount at GE Liquidity requirements of GE and GECS are principally met Commercial paper through the credit markets. Maturities oflong-term borrow-(U.S.) $ 1,835 5.88 % $ 914 5.41 % ings during the next five years follow. Payable to banks 348 8.38 204 8.58 Current portion of (In millions) 1998 1999 2000 2001 2002 long-term debt 1,099 5.35(a) 551 6.39(a) GE $ 1,099 $ 97 $ 69 $ 57 $ 38 Other 347 670 GECS-15,101 9,801 6,9'M 5,763 4,816 3,829 2,339 GECS Confirmed credit lines of $3.9 billion had been extended Commercial paper to GE by 22 banks at year-end 1997, Substantially all of GE's 5 8 credit lines are available to GECS and its affiliates in addition rbU.S. 3 30 to their own credit lines. Current portion of long term debt 15.101 6.30(a) 16,471 6.17(a) At year ::nd 1997, GECS and its affiliates held committed Other 8,939 7,302 lines of credit aggregating $20.9 billion, including $11.8 bil-95,274 77,945 lion of revohing credit agreements pursuant to which it has Eliminations (B28) (84) the right to borrow funds for periods exceeding one year. $98,075 $ 80.200 A total of $1.4 billion of GE Capital credit lines is available for use by GE. unng N, ne%eM noMNonowd under any Long-tenn borrowings 1997 of these credit lines. Both GE and GECS compensate certain Averap banks for credit facilities in the form of fees, which were December 31 (In millions) rata (a) Matunties are 1996 msigmficant m each of the past three years. GE Industrialdevelopment/ Interest rates are managed by GECS in light of the anticipated pollution control behavior, including prepayment behavior, of assets in which bonds 3.82 % 1999-2021 $ 270 $ 244 debt proceeds are invested. A variety ofinstruments, includ-Payable to banks 7.60 1999-2005 195 312 ing interest rate and currency swaps and currency forwards, Senior notes 500 Other (b) 264 654 are employed to ach.ieve management's mterest rate objec-tives. Effective interest rates are lower under these " syn-729 1,710 thetic" positions than could have been achieved by issuing GECS Senior notes 6.59 1999 2055 44,993 46,680 debt directly. Subordinated notes (c) 7.88 2006-2035 996 9% The following table shows GECS borrowing positions con-45,909 47,676 sidering the effects of swaps. Eliminations (115) (140) $ 46,603 $ 49.246 December 31 (In millions) uim 1996 '. (a) Includes the eficcts of associated interest rate and currency swaps. \\ (b) Includes a variety of obligations having various interest rates and Short-term $ 56,961 $ 46,450 maturities, including certain borrowings by parent operating com-long-term (including current portion) i prments and affiliates. Fixed rate (a) $ 59,329 3 56,190 8 (c) Guaranteed by GE. Floating rate 24.973 22,981 ptal long-term $ 84,302 $ 79,171 (a) includes the notional amotmt of long-term interest rate swaps that effectively convert the floating-rate nature of short-term borrowings to fixed rates ofinterent. At December 31,1997, interest rate swap m:m Wo ranged from 1998 to 2029, and average interes-e h>r " synthetic" fixed-rate borrowings were 6.32% (6.M at year-end 1996). 57

[ GECS insurance Liabiliti:s, R:sirves and Annuity Bin: fits necember 31 (in millions) ura 1996 Insurance risk is ceded on lxith a pro rata and an excess invesunent contracts and universal basis. When GECS cedes insurance to third parties, it is not life twnefits $ 28,266 $ 26,140 relieved ofits primary obligation to policyholders. Losses on Life imurance benefits and other (a) 14,356 13,854 ceded risks give rise to claims for recovery; allowances are Unpaid claims imd claims adjusunent established for such receivables from reinsurers. Ur ar e premiums e erects of reinsurance on prem ums written and pre-l Separate accounts (see note 17) 4,926 3,516 rniums and commissions earned were as follows: l $ 67.270 $ 61,327 i 1996 m (a) 1.ife insurance trneliu are accounted for mainly by a net-level. i p g premium method u ing estimated yields generally ranging from 5% to 9% in inth IW7 and IW6. 1)ircct S 5,206 $ 3,926 $ 2,984 ) Assumed 5,501 5,455 3,978 Ceded (1,311) (1,196) (804) .i. he liability for unpaid cla.ims and cla.ims adiustment 8 9,396 $ 8.185 $ 6,158 expenses, principally property and casualty reserves, consists i of both case and incurred-but-not-reported reserves. Where Premiums and commissions earned e "C' $ 5,138 $ 3,850 $2 experience is not suflicient to determine reserves, industry d averages are used. Estimated amounts of sahage and subro-Ceded (1,256) (1,058) (786) gation recoverable on paid and unpaid losses are deducted S 9,268 $ 8.145 $ 6,232 from outstanding losses. A summary of activity for this liabil. ity follows. Reinsurance recoveties recognized as a reduction ofinsur-ance losses and policyholder and annuity benefits amounted to (In millions) una 1996 1995 $903 million, $937 million and $459 million for the years Balance at anuary 1 - gross $13.184 $ 12,662 $ 7,032 ended December 31,1997,1996 and 1995, respectively. . less reirmuance ecoverables (1,822) (1,853) (1,084) ilalance atJanuary 1 - net 11,362 10,809 5,948 Claims and expenses incurred l Current year 4,494 4,087 3,268 ' : - GE All Other Liabilities Prior years 146 104 492 Claims and expenses paid This account includes noncurrent compensation and benefit i Current year (1,700) (1,357) (706) l Prior years (2,816) (2,373) (1,908) ccruals at year-end 1997 and 1996 of $5,484 m.llion and i Claim reserves related to $5,177 million, respectively. Also included are amounts for l acquired companies 1,360 309 3,606 deferred incentive compensation, deferred income, product Other (358) (217) 19 warranties and a variety of sundry items. Balam e at December 31 - net 12,408 11,362 10,809 GE is involved in numerous remediation actions to clean Add reinsurance recoverables 2,246 1,822 1,853 done u gid by federal and state laws. Balance at December 31 - gross $14,654 $ 13,184 $12,662 Liabilities for remediation costs at each site are based on I Prior-year claims and expenses incurred in the above table in n gement's best estimate of undiscounted future costs, resulted principally Irom settling claims established in railier excluding possible insurance recoveries. When there appears t a range f possible costs with equal likelihood, liabili-accident years for amounts that differed from expectations. Financial guarantees and credit life risk ofinsurance ties are based on the lower end of such range. Uncertainties affiliates are summarized below. about the status oflaws, regulations, technology and infor-mation related to individual sites make it di'Ticult to develop December 31 (In millions) una 1996 a meaningful estimate of the reasonably possible aggregate Guarantees, principally on municipal emironmentad remediation exposure. Ilowever, even in the bonds and structured finance issues $144,647 $ 140,575 unlikely event that remediation costs amounted to the high Mortgage insurance risk in force 46,245 36,279 end of the range of costs for each site, the resulting addi-Credit life insurance risk in force 26,593 25,961 non Ili bih.ty would not be material to GE,s fmancial posi-less reinsurance (33,528) (32,413) $ 183.957 $170,402 tion, results of operations or liquidity, 58

D;f tr:dinc:meTexes I R: strict:d N:t Ass:ts ruf GECS Affdiates l Aggregate deferred tax amounts are summarized below. Certain GECS consolidated affiliates are restricted from remitting funds to GECS in the fonn of disidends or loans Decemtwr 31 On milhone una 12 by a variety of regulations, the purpose of which is to protect GE $ 4,891 $ 4,097 affected insurance policyholders, depositors or investors. l (;ECS 4,320 3; At year-end 1997, net assets of regulated GECS aflitiates 9,211 7,407 amounted to $22.9 billion, of which $19.4 billion was Liabilities restricted. GE 4,576 4,630 At December 31,1997 and 1996, the aggregate statutory GECS 13,280 11,050 capital and surplus of the insurance businesses totaled $12.4 17,862 15,680 billion and $10.2 billion, respectively. In preparing statutory , Netdeferredtaxliability $ 8.651 $ 8,273 statements, no significant pennitted accounting pracuces Principal components of the net deferred tax balances for GE and GECS are as follows: Decemtwr 31 On mhu) urm im Share Owners' Equity GE Provisions for expenses $ (3,367) $(2,740) Un muhone mm la 1995 Retiree insurance plans (856) (806) Common stock issued $ 594 $ 594 $ 594 Prepaid pension asset 2,301 2,139 Depreciation 955 836 Unrealized gains on Other - net 652 1,104 investment securities-not $ 2,138 $ 671 $ 1,000 (315) 533 Other capital GECS halance atJanu q l $ 2,498 $ 1,663 $ 1,122 Financing leases 7,909 7,488 Currency translation adjustments (742) (117) 127 Operating leases 2,156 1,833 Gains on treasun stock Net unrealiicd gains dispositions 1,800 952 414 on securities 1,264 404 Italance at December 31 $ 3,636 $ 2,498 $ 1,663 Allowance for losses (1,372) (1,184) Retsined earnings insurance reserves (1,000) (787) Balance atJanuary 1 $ 38,670 $ 34,528 $ 30,793 Ah!T credit can)foruds (354) (561) Net earnings 8,203 7,280 6,573 Other - net 363 547 Div dends declared (3,5M) (3,138) (2.838) 8,966 7,740 Balance at December 31 3 43,338 $ 38,670 $ 34,528 l Net deferred tax liabiftty $ 8,651 $ 8,273 Common stock held in treasury Italance atJanuary 1 $ 11,308 $ 8,176 $ 5,312 The GE provisions for expenses category represents Purchases 6,392 4,842 4,016 the tax effects of temporary differences related to expense Dispositions (2.432) (1,710) (1,152) l accruals for a wide variety ofitems, such as employee Balance at December 31 $ 15,268 $ 11,308 $ 8,176 l compensation and benefits, interest on tax deficiencies, i In December 1997 GE's Board of Directors increased ) product warranties and other provisions for sundry losses and expenses that are not currendy deductible. the authorization to repurchase Company common stock ta $17 billion and authorized the program to continue through 1999. Funds used for the share repurchase will be q GECS Minority Intesest in Equity generated largely from free cash flow. Through yeat-end IliF-of Consolidated Affiliates 1997, a total of 244 million shares having an aggregate cost of $9.9 billion had been repurchased under this program Minority interest in equity of consolidated GECS af Miates M dim m m. includes preferred stock issued by GE Capital and by an affil-In April 1997, share owners authorized (a) an increase late of GE Capital. The preferred stock pays cumulative dh1-i k f d huf unm M he dends at variable rates. The liquidation preference of the M00M00M ach with a par value of $0.32 to preferred shares is summariied below. 4,400,000,000 shares cach with a par value of $0.16 and December 31 On milhone mm 1m (b) the split of each unissued and issued common share, GE Capital $ 2,230 $1,800 including shares held in treasury,into two shares of common GE Capital afhhate 660 485 stu k eac h with a par value of $0.16. All share data and per-Dividend rates on the preferred stock rangec' from 3.8% to 5.2% during 1997 and 1996, and from 4.2% to 5.2% during 1995. 59

Common shares issued and outstanding are summarized There were 92.8 million and 62.1 million additional shares in the following table, available for grants of options, SARs, restricted stock and restricted stock units at December 31,1997 and 1996, Sharon of GE common stock respectively, Under the 1990 Long-Term Incentive Plan, I Decen.ncr si (In thousands) um 1996 1995 0.95% of the Company's issued common stock (including issued 3,714,026 3,714,026 3,714,026 treasury shares) as of the first day of each calendar year dur-I In treaury (449.434) (424,942) (381,002) ing which the Plan is in effect becomes available for granting Outstanding 3,264,592 3,289,084 3,333,024 awards in such year. Any unused portion,in addition to shares allocated to awards that are canceled or forfeited, is GE has 50 million authorized shares of preferred stock available for later years. ($1.00 par value), but no such shares have been issued. Outstaraling options and SARs expire on various dates The effects of translating to U.S. dollars the financial state-through December 19,2007. Restricted stock grants vest on ments of non-U.S. affiliates whose functional currency is the various dates up to norinal retirement of grantees. local currency are included in other capital. Asset and liabil-The following table summariics information about stock ity accounts are translated at year-end exchange rates, while options outstanding at December 31,1997. revenues an<l expenses are translated at average rates for the period. Cumulative currency translation adjustments repre. Stock options outstanding (Sharn in thousands) sented reductions of other capital of $798 million and $56 Outstanding Exercisable million in 1997 and 1996, respectively, and an addition t Average Average other capital of $61 million in 1995. Exercise Average exercise exercise price range Shares hfe (a) price Shares price $ 10% - 21W 34,059 3.6 $ 17.45 34,059 $ 17.45 C $21% -31% 72,754 6.4 25.61 37,441 24.31 u____ Other Stock Related lnformatinn $ 36W -51% 18,867 8.5 42.59 205 47.20 $ 51 % -73 13,223 9.8 68.80 Stock option activity Total 138,903 6.3 30.03 71,705 21.11 Average per share g ia) Average contractuallife n maining in years. subject Exercise Market At year-end 19%, options with an average exercise price of $1' 58 were (Shyes in thousands) a option price price exercisable on 81 million shares; at year-end 1995, options with, n average Balance at December 31,1994 138,996 $ 19.91 $ 25.50 exncise price of $17.61 were exercisable on 74 million shares. Options granted 24,179 27.94 27.94 Replacement op%ns 1,506 20.91 20.91 Stock options expire 10 years from the date they are Options exercised (15,568) 15.72 29.61 granted; options vest over senice periods that range from Optiom terminated (4,239) 23.67 one to five years. Balance at December 31,1995 144,874 21.60 36.00 Disclosures required by SFAS No.123, AccountingforStock-Options granted .19,034 42.39 42.39 Based Compernation, are as follows: Replacement options 8,622 26.34 26.34 Options exercised (18,278) 17.70 43.25 December 31 mam 1996 1995 i Options terminated (4,707) 26.18 Weighted average fair value Balance at December 31,1996 149,545 24.86 49.44 per option (a) $17.81 $ 9.34 $ 5.98 Options granted (a) 13,795 68.07 68.07 Valuation assumptions Replacement options 30 24.16 24.16 Expected option term (years) 6.3 6.2 5.5 Opuons exercised (21,746) 18.47 61.22 Expected volatility 20.0 % 20.1 % 20.0 % Options terminated (2,721) 31.10 Expected dividend yield 1.5% 2.3% 3.1% Balance at December 31,1997 138,903 30.03 73.38 Risk-free interest rate 6.1% 6.6% 7.0% (a) Withcat adjusting for the effect of the 2-for 1 stock split in April 1997, Pro forma offects (b)(c) the number of options granted during 1997 would have been 13,476. Net earnings 88,129 $7,235 $ 6,557 f' Earnings per share - basic 2.48 2.19 1.95 I Stock option plans, stock appreciation rights (SARs), - diluted 2.43 2.15 1.92 restricted stock and restricted stock units are described in (a) Estimated using inack-Schoin option pricing model. GE's current Proxy Statement. With certain restrictions, N V*l"*'i "" only of grana made annJanuary 1,1995; thus. the pro forma effect mcreased over the periods presented. requirements for stock option shares can be met from e. her it (c) Net earnings in millions; per-share amounts in dollars. unissued or treasury shares. The replacement options replaced canceled SARs and have identical terms thereto. At year-end 1997, there were 3.2 million SARs outstanding at an average exercise price of $21.02. There wete 9.6 million restricted stock shares and restricted stock units outstanding at year-end 1997. 60 w

Suppl:mentil Cash Flows inf:rmati:n Changes in operaung assets and liabilities are net of acquisi-for gains and losses on assets, increases and decreases in tions and dispositions of businesses. assets held for sale, and adjustments to assets such as amorti.

• Payments for principal businesses purchased
• in the zadon of goodwill and intangibles.

Statement of Cash Flows is net of cash acquired and includes The Statement of Cash Flows excludes certain noncash debt assumed and immediately repaid in acquisidons, transactions that, except for the exchange transacdon "All other operating activities

• in the Statement of Cash described in note 2, had no significant effects on the invest-Flows consists principally of adjustments to current and ing or financing activities of GE or GECS.

noncurrent accruals and deferrals of costs and expenses, Certain supplemental informadon related to GE and increases and decreases in progress collections, adjustments GECS cash flows is shown below. For the years ended December M (in millions) um 1996 -1995

• GE Not purchase of GE shares for treasury Open market purchases under share epurchase program

$ (3,492) $ (3,266) $ (3,101) , Other purt hases (2,900) (1,576) (915) Dispositions (mainly to employee and dividend reinvestment plans) 3,577 2,519 1,493 $ (2,815) $ (2,323) $ (2,523) GECS Financing receivables increase in loans to customers 3 ($5,1i09) $(49,890) $ {46,154) Principal collections from customers -loans 50,679 49,923 44,840 Investment in equipment for financing leases (16,420) (14,427) (17,182) Principal collections from customers - financing leases 13,796 11,158 8,821 Net change in credit card receivables (4,106) (3,068) (3,773) Sales of financing receivables 9,922 4,026 2,139 $ (1,898) $ (2,278) $(11,309) All other investing activities Purchases of securities by insurance and anmiity businesses $ (19,274) $(15,925) $(14.452) Dispositions and maturities of securities by insurance and annuity businesses 17,280 14,018 12.460 ) Proceeds from principal business dispositions 241 575 Other (3,893) (4,183) (2,496) $ (5,646) $ (6,090) $ (3.913) Newly issued debt having maturities longer than 90 days Short-term (91 to 365 days) $ 3,502 $ 5,061 $ 2.545 Long-term (longer than one year) 1 5,51i6 17,245 32,507 long-term subordinated 298 Proc eeds - nonrecourse, leveraged lease debt 1,757 595 1,428 $ 20,825 $ 22,901 $ 36.778 Repayments and other reductions of debt having maturities longer than 90 days Short-term (91 to 365 days) $ (21,320) C'23,355) $(16.075) Long term (longer than one year) (1,150) (1,025) (678) Principal payments - nonrecourse, leveraged lease debt (287) (276) (292) 5(22,757) $(24,656) $(17,045) All other financing activities Proceeds from sales ofinvestment and annuity contracts $ 4,717 $ 2,561 $ 1,754 Preferred stock issued by GECS affiliates liO5 155 1,045 Redemption of investment and annuity contracts (4,537) (2,688) (2,540) 785 28 $ 259 61

intiustry Segments Revenues For the years ended Decemler 31 Total revenues Intersegrnent revenues External revenues (In millions) nra 1996 1995 nra 1996 1995 'Mg 1996 1995 GE Aircraft Engines $ 7,799 $ 6,302 $ 6,098 $ 101 $ 86 $ 115 $ 7,698 $ 6,216 $ 5,983 Appliances 6,745 6,375 5.933 12 5 4 6,733 6,370 5,929 15roadcasting 5,153 5,232 3,919 5,153 5,232 3,919 Industrial Products and Systems 10,954 10,412 10,194 493 455 436 10,464 9,957 9,758 Materials 6,695 6,509 6,647 24 22 19 6,671 6,487 6,628 Power Generation 7,495 7,257 6,545 81 65 57 7,414 7,192 6,488 Technical Products and Senices 4,917 4,692 4,424 18 23 19 4,899 4,669 4,405 All Other 3,564 3,108 2,707 3,564 3,108 2,707 Corporate items and eliminations 1,193 (322) (286) (726) (656) (650) 1,919 334 364 Total GE 54,515 49,565 46,181 54,515 49,565 46,181 GECS C Financing 31,165 24,554 19,446 31,165 24,554 19,446 Specialty Insurance 8,844 8,155 7,042 8,844 8,155 7,042 All Other (78) 4 4 (78) 4 4 Total GECS 39,931 32,713 26,492 39,931 32,713 26,492 Eliminations (3,liO6) (3,099) (2,645) (3,606) (3,099) (2,645) Consolidated revenues S 90,840 $ 79,179 $ 70,028 S - $ 90,840 $ 79,179 $70,028 GE revenues include income from sales of goods and senices to custorners and other income. Sales f rom one O nnpany comp ment to another generally are priced at equivalent c ommetrial selhng prices. "All Other" GE revenues consists %nanly ol GECS carnings. Assets Property, plant and equipment (including equipment leased to others) At Decendier 31 For the years ended Decemtwr 31 Additions Depreciation and anurtization (In millions) una 1996 1995 una 1996 1995 nrau 1996 1995 GE Aircraf t Engines S 8,895 $ 5,423 $ 4,890 $ 729 $ 551 $ 266 $ 255 $ 260 $ 273 Appliances 2,533 2,569 2,304 83 168 143 112 104 93 11rnadcasting 4,877 4,899 3,915 116 176 97 96 86 64 Ind.astrial Products and Systems 6,658 6,580 6,117 487 450 446 368 340 308 Materials 8,890 9,130 9,095 618 748 521 427 475 478 Power Generation 5,605 5,741 5,679 176 185 155 161 165 166 Technical Products and Senices 2,438 2.246 2,200 189 154 110 115 113 109 All Other 17,496 14,556 13,113 1 2 2 1 Corporate items and climinations 10,034 8,781 B,403_ 168 114 113 86 90 89 Total GE 67,426 59.925 55,716 2,256 2,546 1,852 1,622 1,635 1,581 GECS Financing 211,139 188,472 151,952 7,188 5,663 5,143 2,411 2,111 1,963 Specialty Insurance 44,048 38,575 33,714 65 35 133 35 29 23 All Other 221 372 63 67 64 36 14 10 27 Total GECS 255,408 227,419 185,729 7,320 5.762 5,312 2,460 2,150 2,013 Eliminatione (18,822) (14,942) (13,410) Consolidated totals $ 304,012 $ 272,402 $ 228,035 $ 9,886 $ 8,308 $ 7,164 $ 4,082 $ 3,785 $ 3,594 "All Other* GE assets consists primarily ofinvestment in GECS. Additions to property, plant and equipment inc lude amounts relating to principal huninesses pur< hased. i 62

Details of operating profit by industry segment can be Power Generution. Power plant products and senices,includ-found on page 35 of this report. A description ofindustry ing design, installation, operation and maintenance senices. segments for General Electric Company and consolidated Markets and competition are global. Gas turbines are sold affiliates follows. principally as part of packaged power plants for electric utili-Airrraft Engines. Jet engines and replacement parts and repair ties and ihr industrial cogeneration and mechanical drive and maintenance senices for all categories of commercial applications. Steam turbine-generators are sold to electric aircraft (short/medimn, intermediate and long-range); fi>r a utilities, to the U.S. Navy and, for cogeneration, to industrial wide variety of military aircraft, including fighters, bombers, and other power customers. Power Generation also includes tankers and helicopters; and for executive and commuter nuclear reactors and fuel and support senices for GE's new aircraft. Sold worldwide to airframe manufacturers, airlines and installed boiling water reactors. and govenunent agencies. Also, aircraft engine derivatives Technical Pinducts and Services. Medical systems such as used as marine propulsion and industrial power sources. magnetic resonance (MR) and computed tomography (CT)

• Appliances. Major appliances and related senices for prod.

scanners, x-ray, nuclear imaging, ultrasound, other diagnostic ucts such as refrigerators, freezers, electric and gas ranges, equipment and related senices sold worldwide to hospitals dishwashers, clothes washers and dryers, microwave ovens and medical facilities. Also includes a full range of computer-O and room air conditioning equipment. Sold in North Amer, based infonnation and data interchange senices for internal ica and in global markets under vaiious GE and piivate-label use and external commercial and industrial customers, brands. Distributed to retail outlets, mainly for the replace-GECS Financing. Operations of GE Capital, as follows: ment market, and to building contractors and distributors Consurner sen> ices - private-label and bank credit card loans, for new installations. personal loans, time sales and revohing credit and inventory Broadcasting. Primarily NilC. Principal businesses are the financing fbr retail merchants, auto leasing and inventory furnishing of U.S. network television senices to more than financing, mortgage senicing, and consumer savings and 200 alliliated stations, production of television programs, insurance senices, insurance senices, previously included operation of 12 VilF and UIIF television broadcasting sta, within the Specialty Insurance segment, has been combined tions, operation of four cable / satellite networks around the with the consumer savings and insurance operations in this world, and imestment and programming activities in multi. segment. Prior-year infonnation has been reclassified to media and cable television. reflect this change. Industrial Products and Systerns. Lighting products (includ-Speciali:.edfinancing-1 ns and financing leases for major ing a wide variety oflamps, lighting fixttires, wiring devices capital assets, including industrial facilities and equipment, and quarte products); electrical distribution and control and energy-related facilities; commercial and residential real estate loans and investments; and loans to and investments equipment (including power delivery and control products such as transfonners, meters, relays, capacitors and arrest-in m n gement buyouts, including those with high leverage, ers); transportation systems products (including diesel-nd corporate recapitalizations. electric h>comotives, transit propulsion equipment and Quiprnent innnaginent ses,lo ns, s s and aaset j m.-torized wheels for off-highway vehicles); electric motors ni n gement senices for p rtf li s f commercial and and related products; a broad range of electrical and elec-nansp nadon equipment, including aircraft, trailers, auto i tronic industrial automation products (including drive sys-Hects, mmlui r sp ce units, r ilroad rolling stock, data tems); installation, engineering and repair senices, which pn>cessng equipment, cont nen used on ocean-going vessels, and satellites. mcludes management and techm. cal expertise for large projects such as process control systems; and GE Supply, a Mid-rnarketfinancing'-loans and financing and operating network of electrical supply houses. Markets are extremely '"'"".f.ojnu e-madet cunonwn, indudng manufactun en, unbuton and end users, for a variety of equipment diverse. Products are sold to commercial and industrial end

• users, m.cludm.g utih..ues, to ongmal equipment manufactur-that includes data processing equipment, medical and ers, to electncal da.tnbutors, to retail outlets, to railways and diagnostic equipment, and equipment used in construction, to transit authon.. ties. Increasingly, products are developed manufacturing, office applications and telecommunications

actmues, for and sold m. global markets.

Very few of the pnxtucts financed by GE Capital are Materials. liigh-perfonnance engineered plastics ut.ed in manufactured by GE. appliotions such as automobiles and housings for comput-en and other business equipment; Alls resins; silicones; GECS Specialty Insurance. U.S. and international multiple-superabrasive mdustrial diamonds; and laminates. Sold line propeny and casualty reinsurance; certain direcdy written specialty insurance and life reinsurance; financial worldwide to a diverse customer base consisting mainly of manufacturers. guaranty insurance, principally on municipal bonds and structured finan<c issues; private mortyge insurance; and creditor insurance covering international customer loan epayments. 63

_ Ge:gr:phic S:gmentini:rmati:n(consilidited) Revenues and operating profit shown below are classified the caprion " United States" include royalty and licensing according to their country of origin (including exports from income from non-U.S. sources. U.S. exports to international such areas). Revenues and operating profit classified under customers by major areas of the world are shown on page 39. Revenues For the years ended December 31 Total revenues Intersegment revenues External revenues (in millions) urm 1996 1995 nvm 1996 1995 nrm 1996 1995 j United States $66,330 $58,110 $52,935 $ /.,471 $ 2,292 $ 2,123 $63,850 $55,818 $50,812 Europe 18,16C 15,964 12,293 787 714 656 17,379 15,250 11,637 Pacific Basin 4,742 4.343 3,725 880 7% 457 3,862 3,547 3,268 Other (a) 6,420 5,140 4,750 680 576 439 5.740 4,564 4,311 Intercompany eliminations (4,818) (4,378) (3,675) (4,818) (4,378) (3,675) Total $90,840 $79,179 $70,028 $90,840 $79,179 $70,028 D Operating proht(b) Assets Non-U.S.not assets For the yean ended December 31 At December 31 At December 31 (In millions) urm 1996 1995 urm 1996 1995 una 1996 1995 United States $ 8,825 $ 9,693 $ 9,002 $206,655 $189,593 $158,884 (c) (c) $ (c) Europe 2,024 1,724 1,043 66,740 55,196 44,107 31,076 23,021 20.059 Pacific Basin 302 269 375 8,881 8,125 6,442 6,237 5,082 3,740 Other (a) 706 576 543 21,926 19,655 18,776 12,233 11,439 11,472 Intercompany eliminations (23) 7 9 (190) (167) (174) (72) (62) (51) Total $11,834 $12,269 $10,972 $304,012 $272,4C. $228,035 $49,474 $39.480 $35,220 (a) Principany the Americas other than the United States, but also includes operations that cannot meaningtuHy be anociated with specific geographic areas (for example, shipping containen used on ocean-going venels). (b) Net of 1997 restructuring and other special charges. (c) Not applicable. [ Additional lnformation about Financiat instruments This note contains estimated fair values of certain financial Values are estimated as follows: instruments to which GE and GECS are parties. Apart from Borrowings. Based on quoted market prices or market com-borrowings by GE and GECS and certain marketable securi-parables. Fair values ofinterest rate and currency swaps % ties, relatively few of these instruments are actively traded. borrowings are based on quoted market prices and include Thus, fair values must often be determined by using one or the effects of counterparty creditworthiness. more niodels that indicate value based on estimates of Time sales and loans. Based on qcoted market prices, recent quantifiable characteristics as of a particular date. Because transactions and/or discounted future cash flows, using tlu.s undertakm.g is, by its nature, difficult and highlyj. dg-u rates at which s.mular loans would have been made to similar. mental, for a h.mited number of instruments, alternative val-borrowers, nation techniques may have produced disclosed values different from those that could have been realized at Decem-Investmect contract benefits. Based on expected future cash ber 31,1997 or 1996. Moreover, the dir. closed values are rep-11 ws, discounted at currently offered discount rates for s resentativt of fair values only as of the dates indicated. Assets immediate annuity contracts or cash surrender values for and liabilities that, as a matter of accounting policy, are single premium deferred annuities. reflected in the accompanying financial statements at fair Financial guarantees and credit life. Based on future cash value are not included in the following disclosures; such flows, considering expected renewal premiums, claims, items include cash and equivalents, investment +curities and refunds and servicing costs, discounted at a market rate. separate accounts. All other instruments. Based on comparable transactions, market comparables, discounted future cash flows, quoted market prices, and/or estimates of the cost to terminate or otherwise settle obligations to counterparties. f>4

Financialinstruments 1997 1996 Assets (liabihties) Assets (liabilities) Carrymg Carrying Notional amount Estimated fair value National amount Estimated fair value December 31 (in millional amount (net) High Low amount { net) High Low GE mvestment related Investments and notes receivable (a) $ 1,909 $ 1,915 $ 1,908 (a) $ 1,675 $ 3,127 $ 3.127 Can(clable inter est rate swap 1,421 25 19 19 Borrowings and related instruments Borrowings (b)(c) (a) (4,358) (4,377) (4,377) (a) (4,049) (4,058) (4,058) Interest rate swaps 531 (12) (12) 536 (11) (11) Currency swaps 180 25 25 e Recourse obligations for receivables sold 427 (23) (23) (23) 424 Financial guarantees 2,141 1,805 Other firm commitments Currency forwards and options 6,656 82 270 270 5.476 70 150 150 0 Financing commitments 1,794 1,554 GECS Assets Time sales and loans -(a) 62,712 63,105 61,171 (a) 60,859 61,632 60,544 Integrated interest rate swaps 12,323 19 (125) (125) 4,376 91 91 Purchased options 1,617 31 31 31 1,938 11 12 12 Mortgage-related positions Mortgage purchase c ommitments 2,082 11 11 1,193 2 2 Mortgage sale commitments 2,5 40 (*) (9) 1,417 3 3 Mortgages held for sale (a) 2,378 2,379 2,379 (a) 1,112 1,165 1,165 Options, including " floors" 30,347 51 141 141 27,422 78 81 81 Interest rate swaps and futures 3,681 23 23 1,731 (29) (29) Other rash financial instruments (a) 2,242 2,582 2,349 (a) 2,240 2,735 2,487 Liabilities Borrowings and related instruments Borrowings (b)(c) (a) (141,263) (141,828) (141,828) (a) (125,621) (125,648) (t25,648) Interest rate swaps 42,531 (250) (250) 34,491 (575) (575) Currency swaps 23,382 (1,249) (1,249) 24,588 368 368 Currency forwuds 15,550 371 371 6,165 72 72 Purchased optioru 375 33 8 8 1,882 10 1 1 Investment contract benefits (a) (23,045) (22,885) (22,885) (a) (20,210) (19,953) (19,953) Insurance - financial guarantees and ciedit life 183,957 (2,897) (2,992) (3,127) 170,402 (3,801) (3,614) (4,025) Credit and liquidity support - securitizations 13,634 (46) (46) (46) 6,842 (73) (9) (9) Performance guarantees - principally letters of credit 2,699 (34) (67) 3,470 (55) (132) (133) Other 3,147 (1,134) (1,282) (1,303) 2,901 (1,560) (1,175) (1,176) Other firm commitments Cunency forwards 1,744 11 11 1,823 3 2 Currency swaps 1,073 192 192 192 1,134 (38) (38) Ordinary course of business S lending commitments 7,891 (62) (62) 4,95C (27) (27) Unused revohing credit lines Commercial 4,850 3,375 o Consumer-principally credit cards 134.123 11f,878 (a) Not applicabic. 64 includes effects of interut rate and currency swaps, which also are listed separately. (c) See note 19. Additionaliniormation about certain financialiiistruments note 19. These financial instruments generally are used to fix in the table above follows. the local currency cost of purchased goods or senices or selling Currency forwards and options are employed tr CE and GECS prices denominated in currencies other than the functional to manage exposures to changes in currency exchange rates currency. Currency exposures that result from net invest-associated with commercial purchase and sale transactions ments in af filiates arc managed principally by funding assets and by GECS to optimize borrowing costs as discussed in denominated in local currency with debt denomina:cd in 65

those same currencies. In certain circumstances, net invest-to indhidual counterparties. At December 31,1997 and ment exposures are managed using currency forwards and 1996, this gross mar ket risk amounted to $2.0 billion and currency swaps. $0.9 billion, respectively. Aggregate fair values that represent Options and instruments containing option features that behave associated probable future obligations, normally associated based on limits (" caps,"" floors" or " collars") on interest rate with a right of offset against probable future receipts, movement are used primarily to hedge prepayment risk in mounted to $2.9 billion and $0.7 billion at 1)ecember 31, certain GEGS business activities, such as the mortgage sen,. 1997 nd 1996, respectively, icing and annuities businesses. Except as noted above for positions that are integrated Sw:ps of interest rates and currencies are used by GE and "*"' "E** "." "waps, purchased options and forwards are carried out with.m the following credit policy constraints. GECS to optimize borrowing costs for a particular funding + Once a counterparty exceeds credit exposure h.mits strategy (see note 19), A cancelable interest rate swap was (see table below), no adda..uonal transactions are permitted used by GE to hedge an investment position. Interest rate until the exposure with that counterparty is reduced to an and currency swaps, along with purchased options and amount that is wnh.m the established Im.ut. Open contracts futmes, are used by GECS to establish specific hedges of remain in force. mortgage-related assets and to manage net investment expo-sures. Credit risk of these positions is evaluated by manage-Counterparty credit criteria ment under the credit criteria discussed below. As part ofits credit rating ongoing customer activities, GECS also enters into swaps that Moody's Standard & Poor's are integrated into investments in or loans to particular cus. Tenn of transaction tomers and do not involve assumption of third-party credit Between one and five years Aa3 AA-risk. Such integrated swaps are evaluated and monitored like Greater than five years Aaa AAA Gredit exposure limits their associated investments or loans and are not therefore Up to $50 million Aa3 AA-subject to the same credit criteria that would apply to a Up to $75 million Aaa AAA stand-alone position. Counterpatty credit risk - risk that counterparties will be

• AU 8* PS ^ '" "* """ * "d "" d"' * * '"' '* P K'""* "" '"

financially unable to make payments according to the terms c ntaining mutual credit downgrade provisions that pro-of the agreements-is the principal risk associated with side the ability to require assignment or termination in t esent either party is downgraded below A3 or A. swaps, purchased options and forwards. Gross market value of probable future receipts is one way to measure this risk, hfore credit latitude is permitted for transactions having but is meaningful only in the context of net credit exposure original maturities shorter than one year because of their lower risk. T Quarterly Information (unaudited) First quarter Second quarter Third quarter Fourth quarter (Dollar amounts in millions; w per-sharr amounts m dollars) un 1996 una 1996 ut 1".36 un 1996 Consolidated operations Net earnings $ 1,677 $ 1,517 $ 2,162 $ 1,908 $ 2,014 $ 1,788 $ 2,350 $ 2,067 Earnings per share - basic O.51 0.46 0.66 0.58 O/,2 0.54 0.72 0.63 - diluted 0.50 0.45 0.65 0.57 0.60 0.53 0.70 0.62 Selected data GE Sales of goods and senices 10,522 9,742 12.620 11,520 11,698 11,478 14,112 13,379 Gross profit from sales 2.970 2,781 3,886 3,475 3,368 3,060 2,618 3,784 GECS Totai revenues 9,544 7,245 9,317 7,457 10.182 8,449 10,888 9,562 Operating profit 1,081 973 1,138 951 1,229 1,179 974 945 For GE, gross profit from sales is sales of goods c.nd serv-1997, GE completed an exchange transaction with Lockheed ices less costs of goods and senices sold. For GECS, operat-Martin as described in note 2. ing profit is

• Earnings before income taxes."

Earnings-per-share amounts for each quarter are required Fourth-quarter gross profit from sales in 1997 was reduced to be computed independently and, as a result, their sum by restructuring and other special charges. Such charges, does not equal the total year carnings-per-share amounts including amounts shown in *Other costs and expenses," for 1997 and 1996. Per-share amounts have been adjusted were $2,322 million before tax. Also in the fourth quarter of for the 2-for-1 stock split effective on April 28,1997. 66

My > ; c /. L ./ + .y. - - '^ w, L; t J

1. CorporatoinformationW 4

^ 3 i + L Cegerate headgeerters k4

Form 10-K and Other Reports

General Electric Company -

3135 Easton Turnpike;, '

The financialiinfonnation in this repon, in the opinion of

management, substantially conforms with information re j Fairfield,Cr 06431' (q'uired in the "10-K Report" to be submitted to the Securi - .(203)373-2211 ' o E ties and Exchange Commission _(SEC) by the end of March : wgg4 11998. Certain supplemental information is in that report, I General Electric Company's 1998 Annual Meeting willj Jmem, and copies without exhibits are available, without, q 'be held on Wednesday, April 22, at th'e Aronoff Center charge, from GE Corporate Investor Communications, : j' 3135 Easton Tumpike Fairfield, CF 06431,

• in Cincinnati,; Ohio

~1 Copies of the General Electric Pension Plan l the Sum-J j mary Annuai Report for GE employee benefit plans subject -

Shere OwnerServicesS To transfer securities, write to GE Share Owner Senices,

' t'o the Employee Retirement Income Security A'ct of 1974, h/o The Bank ~of New York, P.O. Box 11002, New Y6rk, NY-and other GE employee benefit plan documents and infor g [102861002.< ^ ~ H ~ mation also are available by writing to Corporate Investor i For share owner inquiries, including enrollment informa- / Communications and specifying the information desired. tion and.a pmspectus for the Dividend Reinvestment Plan, ; . GE Capital Senices and GE Capital Corporation file - Iwrite t6 GE Share Owner Senices, c/o Ths Bank of New i Form 10-K Repons with the SEC. For copies of these c York, P.O. Box 11402, New York, NY 10286-1402; or call : reports, contact GE Capital Services, Public Relations.and : 21 800-786-2543 (1-800-STOCK-GE)or 713-651-5065; or. . Advertising,260 Long Ridge Road, Stamford,' CT 06927.

sen6 an e-mail to GE-Shanvwners@bankofny.com.'

' For the Annual Report of the Company's philanthropic 1

For'internet access to general share ownef infonnation

foundation, write to the GE Fund,3135 Easton Turnpike, : 'and certain fcrms, including transfer instructions dr stock -~ s Fairfield, CT O6431. l power, visit ths Web site at http:// stock.bankofny.coM/ge.D i Stedk Exchange'information . Use http://www.gr.com to reach the GE home page for. 'Irt the United States, GE common stock is listed on the L. information about GE and its products and sen ces? Nw YorliStock Exchange (its principal market) ;snd the.f L1 : rBenon Stoc'r, Exchange. It also is listed on certain non-U.S. - ' exchanges, m.cludm.g The Stock Exchange, london.- ' For mformatwn about GE consumer products and senicas,. call the GE Ans'wer Center

• senice at (800)626-2000 or. '

Trading sad DM4andleformation (502)423-7710; for GE technical, commercial and industrial -

4 ~ pmducts and senices, call the GE Business information d Common stock Marke ce- : D nds ' Center

• service at (800)626-2004 or (518)869-5555; and for the varied financial products and senices offered by j

j Founh quarter ' ' $76 tis - ' $58 L8.30 - GE Capital, call (800)243-2222 or (203)357-3301. Third quarter ' - 74% ' . 61 %' 2 Cassepe Recedings LSecond quarter, 80 % 48% .26 L For an audiocassette version of this report, contact

Firstquarter 54 %.

~47 % 3' GE Corporate Communications,3135 Easton Turnpike, ges;.,, . $53Ms $45% _S.26 Fairfield, CF 06431. Telephone: (203)373-2020. A Fourth quarter Cegwathdsman NTidid quarter ~ 46 38 %, .23 H Second quaner 44 %s' 37 W .23 .To repott concerns related to U.S. government contracting ' Firs (quarter-c 40%I 34 % - .23 mauen, ther laws or GE policies, contact the GE Corporate - ~ . Ombudsman, P.O. Box 911, Fairfield, CF 06430. (; The per-share amounts above reflect the 2-for-1 stock Telephone: (800)227-5003 or (203)373-2343. (split effective on April 28,1997. As of December 31,1997, J gg pg g )MR re were about 527,060 dw owner accounts of record. ~ . Nees: Unless otherwise ndicated by the context, th( terms *GE,* 'Ge.ncral s i Electric

• and
• Company" are used on the tesis of consolidation described on page 47. GE and 9 are registered trademarks of General Electric Com-pany; NBC and A are registered trademarks ofNational Bmadcasting Company, Inc.; MSNBC is a trademark of ILtSNBC Cable. LLC.; 8,"' and "

indicate registered and unregistered trade and service marks, respectively. 1 i 4 N i 67 J k3 1 e 3

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