ML20246L634

GE 1988 Annual Rept

ML20246L634
Person / Time
Site:	Vallecitos Nuclear Center, 05000000, Vallecitos
Issue date:	12/31/1988
From:	Bossidy L, Hood E, Welch J GENERAL ELECTRIC CO.
To:	NRC OFFICE OF INFORMATION RESOURCES MANAGEMENT (IRM)
References
NUDOCS 8903240237
Download: ML20246L634 (71)

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' To Our kre Owners

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l h

ineteen eighty-eight was another exciting and suc-1988, we began hearing: GE is "too dillicult to under-cessful year for GE. Earnings per share grew 17%. Earn-stand" and " portfolio managing." We even heard ourselves -

- ings were $3.386 billion on revenues of $50.089 billion.

described by the "C" word - conglomerate - with its p

The fourth quarter was the first in which GE's reported net usual pejorative corollary: "Who knows what they'll buy or -

E earnings broke the one-billion <lollar mark. Return on sell nextP f

equity was 19.4%, up almost a point. Operating margins You get the idea.

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grew, as did total cost pnxluctivity, which is now gaining at Perhaps a strategy that appears to us crystal clear arxl three times the national average and accelerating.

consistent - because we live by it - seems less so to some fy The year was punctuated by several key acquisitions, of our key constituencies in the media and financial community, alliances andjoint ventures that strengthened the Compa-ny's [xisition around the globe. The results of these arxl This is more likely a failure of our conununication other globalization efforts'were apparent as revenues from efforts rather than one of understanding, so we have

. international operations approached $11 billion, pr xiuc decided to use a goal part of this letter to explain again, _

ing an operating profit of $2 billion-up more than 50%

without adornment, the operative premises and world l-from the level ofjust two years ago and accounting for view that have guided, without exception, every major j

more than one-third of GE's total operating profit in 1988.

move we've made since 1981.

The strong demaml for our products around the world There is no denying we are a diverse company. We are l

l helped GE make a $3.1 billion positive contribution to the not a computer, or oil, or auto, or steel monolith. Those i

L U.S. balance of tmde in 1988,50% greater than in 1987.

who track us in the financial analyst community or finan-By virtually every measurement, it was a great year. But, cial press have much more homework than do those who i

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as is usually the case in most years, a few thorns can be watch arxl re[x>rt on our peers. We have businesses rang-

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found among the roses - two, to be exact.

ing from plastics to network broadcasting to the manufac-The first was a problem we've experienced with a new ture ofjet engines to reinsurance. But the strategy, the l-

- type of rotary compressor in certain models of our large management philosophy that drives the Company, is the refrigerators. There is no safety issue involved, and we are essence of simplicity.

in the midst of an active campaign to replace every one of these compressors With minimum inconvenience to our

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customers. Our aimis to come out of this situation with j

our reputation for custo.mer support and satisfaction not only intact but -if anything-enhanced. While the cost to the CompanyWil be substantial, we have set up reserves e have two basic premises. The first is that we will -

to cover the estimated cost of the fix - and we still had a run only businesses that are number one or number two in record perfbrmante in 1988, their global markets - or, in the case of services, that have The second disappointment of 1988 is one you, as share a substantial position -and are of scale and potential owners, are quite familiar with: the price of our stock, appropriate to a $50 billion enterprise. Currently, there Those who have held GE shares from t early 1980s have are 14 of these businesses, highly diverse in their pursuits been rewarded handsomely Nipreciation and @id pro-but closely knit by common values, shared technology and vided a return avemging 20% per year, com;munded from substantial resources; and they draw urxm a [xx>l of man-

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l 1981 to 1988, even with the October 1987 correction, com.

agement talent we believe is unequaled in the world.

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pared with a return of 15% lbr the S&P 500. But that's The second premise is that in addition to the strength, j

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didn't keep pace with the Company's performance, already built, we are committed to developing the sensitiv-yesterday's performance. In 1988, the snick appreciation resources aixl reach of a big company, which we have

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We're not sure why this is the case, but it occurs to us ity, the leanness, the simplicity arxl the agility of a small that perhaps the pace and variety of our activity appear company. We want the best ofImth.

j unfbcused to those who view it from the outside. The gen.

These premises shape and explain everything we do.

i eral media and the financial press have, fbr the most part, in acquisition philosophy, for example, being number i_

been more than favorable in their appraisal of our per-one or number two dictates that we will only acquire com-l lbrmance, but as we've picked u p the tempo, especially in panies that are a direct and enhancing graft onto one of i

our 14 key businesses or that are large, freestanding and in a position ofleadership in their market places. The RCA acquisition, while oki news, illustrates this principle very I

well. NBC was a part of RCA and the nation's number one the Roper Cor[x> ration to strengthen the [x>sition of GE network. We kept it and added it to our other leadership Appliances in the domestic range market. GE Financial businesses.

Services (GEFS) acquired the credit card business of Mont.

The RCA Aerospace group, on the other hand. was a gomery Ward, a move that effectively doubled our private-natural fit with our own GE Aerospace business, so we label credit card assets and enhanced our number one merged them, strengthening our overall aerospace posi-

[x>sition in that market segment. GEFS' 1988 integration tion. Several discrete RCA businesses that were not stra-of the 1987 Gelco acquisition created a leading [x)sition in tegic to us, such as the carpet company, were neither automotive Ileet leasing as well as in the cargo shipping graftable to our 14 key businesses nor large and freestand-container business.

ing, so we dis [x> sed of them almost immediately.

In all, we've invested some $16 billion in the 1980s on acquisitions. We would argue that some $15 billion of these funds has been very successfully invested. Only two niche electronics acquisitions - amounting to alx>ut $400 mil-But, for some reason, our trade of the merged lion -didn't pan out and were sold. Another $600 million invested in Kidder, Pealxxty has thus far had-for a vari-ety of reasons-difficulty in reaching its potential. Even GF/RCA television manufacturing business to Thomson of so, Kidder increased its 1988 earnings 20% to $46 mil-France in exchange for its medical diagnostic business and lion-admittedly a small part of the total GEFS net of cash provoked some puuling res[xmses. Suddenly, the

$788 million: nevertheless, we see Kidder as a business manufacture of televisions became something quintessen-with important synergies across GEFS that should become tially American, like baseball. Some felt we had betrayed more significant in the 1990s.

our heritage in our compulsion to "do deals." We heard This track record gives us confidence in the acquisition phrases like: "Un-American,""giving up on manufactur-process as one of the means to strengthen our global lead-ing,""exportingjobs."

ership [x>sitions.

The facts were these: The combined GFlRCA television In addition to acquisitions, we continue to invest in alli-business lost $125 million in the 1980s, was a cash drain ances andjoint ventures with other companies all over the and was number three or four in the global market with no globe to enhance our 14 Ley businesses. In 1988 alone, we way in sight of getting to number one or two. Thomson's concluded alliances between GE 1.ighting and Toshiba of TV business, while profitable, was in a similar market-Japan and between GE Motors and Bosch of West Ger-share situation-stuck in the middle of the pack. Our many, and we expanded an alliance between GE Electrical trade with Thomson pnxtuced the following results.

Distribution and Control and Fuji.

Thomson, including its new employees from GE, broke out of the pack, doubled its volume and moved into a number one or two [x>sition in the industry. GE, by acquir-ing Thomson's medical business, with its $ 1 billion in sales, and grafting it onto the already strong GE Medical Sys-tems business, became number one in a game central to inally, in early 1989, we signed a series of historic our strategy. Exportingjobs? Some 21,000 of the 31,000 agreements with GEC of the United Kingdom that will jobs in the TV business had been overseas for a decade or open the door to increased European participation by four more. Hurting employees? The employees in that busi-of our 14 businesses-Medical Systems, Appliances, ness, fonnerly endangered by being part of an also-ran in a Industrial and Power Systems, and Electrical Distribution global market, now have the reach and volume that gives and Control. This move appears complicated on the sur-them a real shot at winning.

face because there are four businesses involved, but it is We think it is one of the most im[mrtant, logical and driven, once again, by the simple strategy dictating that we universally beneficial moves made anywhere in the 1980s advance our 14 businesses, on a global insis, whenever we

-a win for the employees of the GFlRCA television busi-can, consistent with a consistent strategy.

ness, a gmxt deal for Thomson and a key victory for a in addition to acquiring, divesting and fonning alliances high-technology GE manufacturing business-Medical to sup[mrt these key businesses, we continue to supply Systems-that is now the global technology and market them with resources to propel their internal growth -

leader.

im esting close to $16 billion since 1981. In 1988, we made The divestitures we've made in the 1980s have pnr a muhiycar, $1.8 billion commitment to buikt a Spanish duced $9 billion in cash, which has been used for acquisi-plastics complex that will supply the European market, we tions to strengthen our 14 key businesses. In 1988, we committed another billion dollars to further fuel the purchased Borg-Warner's chemicals businesses to expand strong growth of GE Financial Services, and we spent a GE Plastics' global market basket. In addition, we Imaght total of more than $1.8 billion on new plant and equi [9 ment. Another $3.6 billion-about $1.2 billion funded by the Company-was spent on research and development, almost exclusively in support of these 14 key businesses.

2

To those who perceive us as institutionally fickle, we i

would x> int to two of our key 14 businesses-Trans[x>rta-i M

tion Systems, which is mainly locomotives, and Industrial p,

and Power Systems. Iloth went through purgatory in the l

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1980s, in the bottom of market troughs of several years' duration that saw few orders in locomotives and none in

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large steam turbines.

Instead of closing or selling these businesses, we reduced i

their costs consistent with the market, invested to make them roore competitive ($300 million in h>comotives i

alone) and stuck with them through the lean years-not out of sentimentality or inertia but because they are large,

' 3 world-leading bu:inesses with big potential and because doing so fits our strategy. And in 1988, we saw a significant market revival under way in kicomotives and the approach-l s-g.

ing dawn of a revivalin areas of the turbine business.

Y That, then, is the first part of our strategy: Creating a company consisting only of world-class global businesses

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that can compete and win in the 1990s and beyond. The focus of our 14D, investment, acquisitions and alliances -

everything we do-is ensuring the growth and vitality of those businesses.

E.Q u o

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Chairman of the Board and Chief Executive Officer John F Welch. Jr (centerl is flanked by he second part of the strategy, as we mentioned,.is Vice Chairman of the Board and Executive making this $50 billion enterprise as lean, as agile and as

• '#U

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rman f he 8 rd a xec t ve O cer Edward E. Hood. Jr (right).

the heart and hunger of a small one.

We've been grappling with how to achieve this unbeat-able amalgam for the entire decade, and, while we haven't yet achieved it, our progress is accelerating. Once again, the actions we have taken ate totally consistent with our oft-stated theory of the case.

We believed layers of management were " big-company" encumbrances-so we reduced om s from nine to as few as four, from us in the Corporate Executive Office to the factory floor of any given business. In the mid-1980s, we made a calculated gamble and removed the entire second and third echelons of management in the Company-layers we called sectors and groups. The 14 key businesses now report not, as often in the past, to senior vice presi-dents who report to executive vice presidents - all with staff entourages - but directly to us three. This arrange-ment is dependent for its success on the quality ofleader-ship at the business level. We gambled that we had that quality, and we won. The new arrangement has proved breathtakingly clean, simple and effective. Ideas, initiatives l

and decisions move, often at the speed of sound - voices j

- where once they were muffled and garbled by a gaunt-let of approvals and the oppressive ministrations of staff reviews.

Secondly, we found ourselves in the early 1980s with corporate and business staffs ihat were viewed - and 3

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viewed themselves -as monitors, checkers, kihitiers and despite our mix of global cuhures and emerprises an approvers. We changed that view and that mission to the American company; and, as such, our system, while pro-

[xiint where staff now sees itself as facilitatory, advisor and viding no guarantees, also has the fewest barriers to partner of operations - with a growing sense of satisfac-innovation,lxildness and risk-taking-the stuff that will tion and cooperation on lx>th sides. Territoriality has given propel the real winners in the 1990s.

way to a growing sense of unity and conunon pur[xise.

And that's the "why" behind our program ofliberation The third step toward a smalbcompany management and empowerment - more fulfilling work for all and system began in 1988 when we fonnulated and began greater competitiveness for our Gunpany. The worst thing planning a project we call " work-out," This will be an we could do is to stifle with bureaucracy our employees-intense and continuing prognun, conducted within the the Americans and Gerrnans, the French andJapanese, and businesses and with support from the Onnpany's manage-the scores of other nationalities that are now part of the nwnt institute, to " liberate" the employees of our Onn-global GE. If we did, we would then have none of the pany from the cramping artifacts that pile up in the dusty advantages of our competitors-and many of the encum-attics ofcentury-old companies: the re[mrts, meetings, rit-bnmces that burden them all. We won't let that happen.

uals, approvals, controls and forests of paper that often if we can become that big-company /small<ompany seem necessary until they are removed.

hybrid while pursuing our global strategies and encourag-ing even more boldness in the leadership ofour busi-nesses, we will be within striking distance of the goal we set out in pursuit of eight years ago: We will be a more con-A s we succeed over the next three years in ridding temporary, more accessible, more responsive company, in touch with our customers, firmly in control of our own destiny, driven by more-fulfilled people in control our Onnpany of the tentacles of ritual and bureaucracy, oftheirs.

we are now better able to attack the final, and perhaps the We are on the brink of the most exciting and op3xn tunity-most difficult, challenge of all. And that is the em[mwering rich decade in world business history. We approach it with of our 300,000 people, the releasing of their creativity and a strategy that has been lxah consistent and very successful ambition, the direct coupling of theirjobs with some posi-during the 1980s. If this sununary of the strategy we have tive effect on the quality of a pnxluct or service. We want once again presented in this letter is cicar, you will have no each man and woman in this Company to see a connection dilliculty understanding everything we do in the 1990s.

between what he or she does all day-and winning in the And we intend to do a lot.

marketplace. Their roles, res[xmsibilities and rewards must become clear to them and to everyone. Small compa-nies thrive and grow on that sense of contribution and reward. We want it as well, and everything we do to evolve our management system will be consistent with getting it.

)M E Welch,Jr.

1.iberation and empowennent, as we use the concept, Chainnan of the Board and stems from what we believe is a very solidly grounded view Chid Emim Ofh of winning and losing around the world. We, as a globally competing company, have some serious disadvantages as we line up against our foreign competitors. Some of those competitors enjoy protection from foreign inroads into their markets; others are financially supported by their governments. Some are beneficiaries of nationally focused lawrence A.Ilossidy R&D in key technologies. Others are part of regimented, Vice Chairman of the P.oard atxI Executive Officer paternalistic cultures that serve them well.

' We complain, on occasion, about all of this, but it is we who have the ultimate advantage, one that few of us,if pressed, would ever wish to trade. It is the fact that we are, Edward E. Hood,J r.

Vice Chainnan of the lloard and Executive Officer February 10,1989 4

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b Manager Cetla Knauer(left) of the Virginia Beach. Va, store discusses new credit programs with Tom Doyle and Kim luckes of Montgomery Ward Credit Corporation, which is now part of GE financial Services GE FinancialServices(GEFS) had GE Capitars conunercial real munications, financial senices, strong growth in 1988. One of the estate operation expanded its earn-medical, retail and manufacturing most diversified participants in the ing assets in 1988 by continuing to markets.This GE Capital business global financial services market, it fi>cus on its highly successful also expanded geogmphic bases in reached ahnost $75 billion in assets, approach of financing well-utilized Canada and the United Kingdom an inacase of about $14 billion, and existing properties.

in 1988.

Als during the year, GE Capital grew earnings 43% to $788 million.

Full-service leasing also continued GEFS has three subsidiaries-to expand. One of GE Capitars fast-rmnged to acquire, subject to cer-GE Capital Cm [x> ration, Employers est-growing areas,it includes auto tain approvals, FGIC Cor[x> ration, Reinsurance Corporation and Kid-and truck leasing; trailer and space n insurer of municipal bonds. In der, Pealxxty Group-that operate leasing; the leasing of more than ortgage insurance, GE Capital 17 different financial and asset man-47,000 railcars: Genstar Container cquired Foremost htortgage Insur-ance of Wisconsin.

agement businesses.

Corporation, the world's largest GE Capital, with $42 billion in lessor of shipping containers; and Employers Reinsurance Cor[x>ra-earning assets,is a major suppher of Polaris Aircraft 1. casing, the world's tion, the second largest property capital and financial expertise to largest lessor of commercialjet air, and casualty reinsurer in the United U.S. business. Dming 1988,it made craft. Anotherareaofservice St tes and fi>urth largest in the gains in retailer financing, commer-involves 18 auto auctions.

world, increased its net tvritten pre-cial real estate, fleet leasing, corpo-In addition, GE Capital strength, miums and earnings again in 1988.

and mortgage insurance. It also h>rming ajoint venture with the '

This company, with $4 billion in rate restructuring, auto auctions ened its poe son in truck leasing by assets, has increased earnings each gained a first-place position in con-Penske Corporation. When com, year since it was acquired in 1984, tainer leasing.

bined with GE Capitars existing Kidder, Pealxxty spent 1988 In private-label credit cards, GE fleet, the resuhing business has repositioning to meet the future in Capital acquired the hiontgomery more than $ 1.5 billion in assets and its highly competitive trading, retail Ward Credit Cor[x> ration and its six Fi,000 vehicles.

brokerage, institutional brokerage million active customers. With thi;s in structuring and financing and mmtment banking fields.

[x>rtfolio, GE Capital now authorves leveraged buyouts and cor[x> rate Kidder, Peabody's operations were more than three million consumer restructuring, GE Capital contin.

profitable in 1988.

purchases each week.

ued its conservative but creative One of GEFS' strongest 1988 This transaction was part of a approa(h. In addition to the h1ont.

thrusts was into foreign markets as

$3.8 billion leveraged buyout of gomery Ward transaction,it pro.

non.U.S. assets more than tripled to

$3.5 billion.

hfontgomery Ward & Co., a deal vided financial restructuring also partially financed by GEFS.

sen. ices for cuuomers in the com-

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Plastic parts for tomorrow's automobiles go through a series of tests at GE's Application Development Centerin Southfield, Mich.

Reviewing test results are (left to righ; Susan Nasiatha. Tracy Williamson, Doug Wright, Ray Kolberg and Tony Kieliszewski.

GE Plastics marked a true milestone is a recently formed global market-ing technology.To that end, GE is year in 1988 as this business pre-ing organization. The new group is establishing a major process devel-pares fi>r another decade of growth dedicated to providing a single, opment center in Pittsfield.The in the 1990s.

focused product and market strat-facility, over 100,000 square feet This business saw its third straight egy that addresses the growing in size, will feature the Alpha 1 year of record sales and earnings.

international markets of today.

machine, the world's largest, most Even more important was the Major markets for the plastics advanced multiprocess machine for acquisition in September ofIlorg-business will continue to be led by plastics. The new fiicility is seen as a Warner's chemicals businesses, the the automotive industry. A good key resource in maintaining wor!d world's largest producer of Alls example: The 1989 Cadillac Fleet-leadership in the high-performance thermoplastics. Alls is one of indus-w<xxl and DeVille models feature plastics business.

try's most versatile materials amt is the enhonced value ofimpact-Along with thermoplastics, highly complementary to GE Plas-resistant front fenders made from GE Plastics also markets several tics' existing materials port folio.

Noryl8 GTX resin while the lxxty other high-performance mate.

rials. For example, GE Silicones The two businesses will combine side claddingis made from Xenoye excellent commercial teams and resin and the front fascia and rear recently announced a significant similar glolxd marketing strategies.

fender extensions are made from breakthrough in UV-curable The Cycolac* Alls resin line will lx>mml5 engineering clastomers, all epoxy-silicone technology.The be one of the first pnxlucts to go from GE Plastics.

new, solventless material, which into pnxluction at GE's recently Work continues on the GE Plas.

was developedjointly with the announced European expansion in tics "Living Environments" concept Company's Research and Develop-Cartagena, Spain.

house in Pittsfield, Mass. It is a ment Center in Schenectady, N.Y.,

in the 1iir East, a new Alls resin working lalx>ratory fi>r the building will initially be used in a coating sys-compounding plant will be built in and construction industry. The ini, tem fi>r labels, tapes and other Ilong Kong. A new polycarbonate tial step will be pouring the fi>un.

pressure-sensitive adhesives.

pilot plant, utilizing a new polymer dation using unique, lightweight GE Superabrasives, which began process, was recently completed in forms made fmm a GE Plastics with GE's invention of Man-Made" Japan; and a new technical center material.

diamonds, today produces a broad and com[x>unding plant are under In the packaging industry, a pat.

range of abrasive materials for high-way in Korea.

ented new PPOS fi>am tray is being tolerance applications in the world-Complementing this gmwing intnxluced fi>r the fast-growing wide construction, automotive and worldwide manufacturing network microwave-ready fix>d market, aerospace industries.

All of these market innovations require advanced polymer process-7

MedicalSystems

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' y% n : alt j Yh ' 1 i i o ? a ,1 i l ~' f _i h g1i e / "i j g 1 Technician Die Cadiou of GeneralBectric CGR checks new Senographe' 600TS x-ray systems in production et Stains, france. GE MedicalSystems achieved addition to its already leading [x>si-I hieanwhile, the U.S. ann of GE strong gains in orders, sales and tion in the U.S. market, hiedical Systems continues to lead earnings over the record levels Globalization also has provided the way in the premium b1R and posted in 1987. substantial benefits in technology, CT segments with pnxtucts such Several pnxluct lines drove these pnxtucts and human resources. as the Signa

• system and the excellent results, especially mag-General Electric CGR, for exam-CT 9800 Quick scanner.They lx>th netic resonance (hIR). The h1R busi-ple, adds a world-class x-ray team maintained their technical pre-ness returned profits fi>r the first with leadership pnxlucts such as eminence with software improve-time in 1988 after investments of Senographe'" x-ray mammography ments that extend their perfonn-about $300 million since 1979.

systems, advanced vascular systems, ante and versatility. 'lixlay, the Company has more remote-control systems and radio-Other major pnxluct intnxiuc-CT scanners atxt more hlR systems therapy equipment.The new tions included a new Advantx'" dig-installed worldwide than any other Radius'" Doppler system with inno-ital x-ray system fi>r angiography manufacturer. Iloth types ofimag-vative radial array technology was and the new Starcam'" 2000/3000 ing systems were pioneered by GE's intnxiuced, giving GE an exception-nuclear imaging line that features Research and Development Center. ally strong entry in the premium rectangt;lar-field detector technology. GE's participation in diagnostic segment of the ultrasound market. While technical pre-eminence is imaging markets was substantially A new Paris headquarters facility l required in the globaldiagnostic boosted in 1988 by the integration has allowed the various manage-

imaging market, customer service of CGR into its global operations ment functions to be consolidated and satisfaction also are keys to and by thelaunch of GE hiedical at one kication.

achieving market differentiation Systems-Asia, a new manufacturing, From the other side of the world, and a sustainable o mpetitive marketing, sales and service organi-GE's 791-owned Japanese joint advantage. zation in the Far East. CGR was venture, Yokogawa hiedical Systems In 1988, GE NIedical Systems acquired from Thomson, S.A. of (YhtS), contributes a line of in$ aging c ntinued to expand its offering of France in late 1987. pnxlucts to GE customers around customer-oriented senices and sup-General Electric CGR, the combi-the gk>be. These include the self-Ix>rt. Included were innovative nation of CGR and existing opera-shielded h1R hiax" midfield mag-fin ncing pacb iew equipment niaintenance s .ns and a n newed tions in Europe, and GE hiedical netic resonance system and an Systems-Asia give GE a highly com-extensive line of outstanding ultra-conunitment to pnxtuct quality atxl petitive [xisition in Europe and the sound pnxtucts. YhtS' broad CT market responsiveness. Far East - two of the world's largest line was strengthened by the debut medicalequipment mar kets-in of the new CT hiax" G10 scanner with enhanced image display. 8 l

NBC .4 m p e t t f '. eWP [i, w a p W \\ 4 ~ / ? v s N------ 6 Brandon Tartikoff(centert, president of NBC Entertainment and NBC Productions, talks about an upcoming entertainment show with programming executives Tom Gabbay and Charisse McGhee. The NationalBroadcasting Company agreement with Reuters and the system for U.S. broadcasters should (NilC) held its commarxling lead as BilC gave NBC News a 38% inter-be compatible with existing home the nation's most successful and est in Visnews, a worldwide video TV receivers.This is a favorable profitable television network in news gathering organization. development for viewers who cur-1988 while exploring new cable NilC Sports also had an exciting rently rely on terrestrial broadcast-opponunities in the rapidly chang-year, covering both the 1988 Sum-ing or cable and fi>r the Advanced ing man Letplace. mer Olympic Games and the 1988 Compatible Television (ACTV) sys-For the fi>urth year in a row, NBC World Series, and followed that with tem s[xmsored by N BC and others. led in prime-time ratings, winning Super Bowl XXIll in early 1989. Taking a major step into the 47 of 52 weeks. Television advertis-NBC, which also won U.S. broad-cable TV business in 1988, NBC ing revenues are based on ratings cast rights to the 1992 Sununer announced the fi>rmation of CN BC, performance. Games, dominated the ratings dur-the Cmsumer News and Business Ileading the NBC cast of pro-ing the 180 hours devoted to the Charmel-a 24-hour, consumer-gnuns was "The Cosby Show," XXIV Olympiad at Seoul, South oriented business news prognun which entered its fifth season as Mrea. For the live-game World service. CNBC is scheduled to TV s highest-rated series. "Cosby," Series between the los Angeles begin in 1989 with about 10 million " Cheers,""A I)ifferent World," thxigers and Oakland Athletics, subscribers. " Golden Girls" and two new hit NBC's ratings exceeded what ABC NBC also announced a major connlics," Empty Nest"and "l) car had drawn in the first five games of cable prognunming venture with John,"gave NBC six of the top 10 the 1987 Series. Cablevision Systems Cor[x> ration series at year's end. The NBC Network currently serves under which NBC will obtain 50% "'lixlay,""The'limight Show more than 200 affiliated stations in of Cablevision's interest in nine pro-StarringJohnny Carson" and " late the United States. In addition, NBC granuning services. This includes Night With 1) avid letterman" con-owns arxl openites seven TV sta-SP*O"dMd"'"" tinued to outpace their competition. tions located in Chicago, Cleveland, n tional cable service that NBC Funbering its innovative leadership I)enver, los Angeles, Miami, New will help develop and manage. in late-night television, NBC suc-York and Washington,1).C. N BC also will pioneer the develop-cessfully launched the talk show I)uring 1988, NBC sold all but numt of a 1992 Sununer Olympics "Iater With Bob Costas." one ofits eight nulio stations as part package for pay-per-view cable, it was an extremely busy year in of a planned exit from the radio which will be in addition to its free TVjournalism. In [ residential pri-business. over-the-air coverage to U.S. homes. mary, convention, debate and elec The Federal Conununications A new division, N BC Cable, was tion coverage, NBC was the most-Commission tentatively ruled that " rated to nianage thm and other watched networ L. In addition, an cable TV and media initiatives. any future high-definition television I { 9 I i

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} _ l h, [ '; N <w ~- ..u, ,3 <v 'g e s .' -[ e ,= 9 y Dantas took delivery ofits first GE-powered aircraft. this Boeing 767 with CF640C2 engines, during 1988. GE Aircraft Engines extendedits !7 aircraft per month. Each is ;xiw-the U.S. Air Force and five fi> reign long string of global successes in the cred by CFM56 engines. governments as well as fi>r the U.S. commercial, military, marine and The CFM56 engine has been se-Navy's F-14s. Technical advance-industrial engine and aviation serv-lected for the majority of A320s on ments are being incorimrated into ice markets during 1988. order worldwide. Significant cus-the Fl10 Increased Perfi>rmance For example, seven new cus-tomers included 1,ufthansa, North-Engine now competing for use on tomers ordered the CF6-80C2 west arxl All Nip;x>n Airways. Work the U.S. Air Force's upgradedjet engine for their new commercial also has begun on an increased-fighters. Switzerland and Kuwait wideixxty aircraft, bringing to 41 thrust version of the engine to ordered F/A-18 jet fighters, which the total number of CF6-80C2 cus-gmwer the new long-range A340 are [x>wered by GE's F404 engines. tomers. Once again, this [x>pular aircraft, which is scheduled to enter The Air Force also unveiled the GE engine was the world's best-service in 1992. B-2 Advanced Tactical Bomber, selling high-thrust engine. GE continues to taketheleadin powered by Fl18 engines from GE. GE is determined to maintain that new aviation engine technology with Engines for the Navy's Advanced Tactical Aircraft and the Air Force's leadership wellinto the 1990s with further development ofits UDI., Advanced Tactical Fighter also are the continuing development of the engine, which may revolutionize the CF6-80El engine.This advanced industry over the next decade by under development fi>r the 1990s. version provides fi>r a future per-drastically reducing fuel consump. Adding to the 1988 success story, formance capability in excess of tion compared with today's commer, the LM2500 marine engine was 70,000 pounds of thrust fi>r the cial engines. The UDFSengine selected by two more navies to heavier twinjets of the future. continues to be actively considered lower surface vessels, bringing the current world total to 19 GE-The CFM56 engine, marketed by fi>r short-to-medium-range aircraft GE arxl SNECM A of France, contin-for the 1990s. lx>wered navies. ued its record-breaking sales per-GE's military engines scored sev. Recognizing the critical role cus-liinnance. More than $6 billion eralimportant wins in 1988.The tomer service has played in GE's worth of CFM56 onters were '1700 engine received a third multi. attaining its current world leader-announced in 1988 alone to power year pmcurement contract from the ship Imsition, GE is placing an even Airbus A320 sand A340s,lhicing U.S. Army to }mwer Black Hawk greater emphasis on serving cus-737s, U.S. Air Force KC-135R tank-and Seahawk helicopters.The U.S. tomers. By continuing to improve ers arxl other military aircraft. Navy selected Iockheed's antisub. its global network of pnxluct senice Because of enonnous demand for marine aircraft, which launched the and supixnt for an exparxled cus-the 737 family of twinjets,ik>eing new GE38 turloprop engine. tomer base,GE Aircraft Engines aims to ensure continued success announced a pnxluction increase to Also, G E's Fi 10 fighter engine con. wellinto the future. tinues in pnxluction for F-16s fi>r 10

Lighting ammm . anum.,,,, =mmemme 1 ~ 1 A h Night baseball finally came to Chicago's Wrigley Field in 1988 with illumination provided by 546 GE Powr Spot

• floodlights using Multi-Vapor
• metalhalide lamps from GL I

GE Lighting took initiatives during in addition, GE 1.ighting inte-of tomonuw. New arc discharge 1988 to enharne its international grated its U.S. distribution liicilities headlamp systems, for example, will presence while simultaneously into nine key centen, an action that pnxluce light comparable to that of strengthening its lighting leader-improved customer delivery times present comixisite lamps but will ship in the U.S. market arxl contin-and increased order fill rates while require less space. uing i's emphasis on new pnxlurt at the same time reducing invento-In addition, GE's new high-development. rics and improving pnxluctivity. lumen, biax Fluorescent lamps are Internationally, G E 1.ighting The largest lighting manulitc-gaining enthusiastic acceptance accelemted the marketing of new turerin North America,GE 1.ight-among customers based on the energy-ellicient lighting pnxlucts ing currently of fers more than lamps' efficiency, compactness and in Europe. It also established ajoint 6,000 different lighting pnxlucts color rendition. venture with 'liishiba ofJapan to for the commercial, industrial and Other 1988 highlights included cmKluct rescan h and development consumer markets.These include the design of a new lighting system programs, tojointly manufiicture incandescent, fluorescent, high for the Washington Monument with lighting pnxlucts and to partici-intensity discharge, halogen arxl GE lamps and fixtures providing pate in mar ket development oppor-specialty lamps. bright, energy-efficient lighting tunities in the Asia-Pacific region. Consumer preference for GE's wide for the landmark, and the lighting Domestically, GE 1 ighting [x>sted range oflighting pnxiucts was of the NationalChrisunasTreein substantial pnxtuctivily improve-lxx>sted in 1988 by strong TV and Washington, D.C., fi>r the 25th year. ments, providing funds li>r invest-print advertising programs aimed at GE 1.ighting also added Chicago's ment in new programs and new reinforcing brand awareness. In Wrigley Field, home of the baseball pnxlucts. It also improved its cus-addition, GE 1.ighting began s[xm. Cubs, and Philadelphia's Veterans tomer service with the implementa-sorship of the illuminations light Stadium, home of the baseball Phil-tion of an innovative distribution show at EPC(7f Center in Florkla's lies and fix>tball Eagles, to the long progam called "1.ighting Express." Walt Disney World. This nightly list "ISixn-ts stadiums lighted by G E. f A key feature of the "1.ighting extravaganza features live miles of Express" program was the consoli. GE light bulbs and will be seen dation of 25 order entry fiirilities annually by nine million visitors. into one world-class customer serv-looking to the future, GE I.ight-ice center in Ric hmond, Va. ing's rescan h has generated techni-l cal developments that are creating advances for headlamps on the cars l l l l1

Industrialand Power Systems '. fg

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o. N..- i E_ 4 .i. A p.nisi. il llW u e[ y.; " . s% ~ ' ~h MI*.Th i a.v .----~~'"**'h L.' . E... i L j*"_ een g (; ~g g e.;.... Technicians in Greenville. SL work on one of three GE gas turbines being prepared for export to Egypt for use in a powerplant. GEIndustrialand Power Systems desulfurization systems, beating out improved quality for steel mills and continued to face accelerated seven international competitors. other customers. change in its markets during 1988. A transition for this business Another priority is sustaining Major global alliances and merg-began in 1988 as emphasis shifted GE's superior customer senice. ers restructured the competitive from an era of downsizing to selec-Engineering and manufacturing landscape, resulting in fewer but tive rebuilding. Faced with intensi-resources, for example, are fi>cused more formidable competitors as the fied global competition and the on programs that sup}xnt the suppliers of x)wer generation and prospects of a more robust market 12,000 GE turbines operating in 97 1 delivery equipment move aggres-in the 1990s, GE moved lin ward on countries. Upgrade programs fbr sively to gain economics of scale and prognuns to improve its competitive older GE steam and gas turbines not greater access to world man kets. stance in all major pnxluct lines. only exterxl pnxtuctive life but also Already well established in world For example, on the heels of improve efficiencies. markets with $5 billion in sales, this spending more than $400 inillion GE Nuclear Energy continues its GE business moved to strengthen its on restructuring and consolidation, commitment to provide customers global base in 1988. It now has 74 GE has earmarked an additional with the highest quality support alliances with 63 different compa- $500 million for reinvestment in the services and to be on the leading nies around the globe, arxlit is 1988-1991 time fnune. Technology edge of. nuclear fuel technology. actively expiming other alliances development (ontinued to receive Other customer senice prognuns that could bring additional technical high priority as GE moved to are focused on reducing delivery and global marketing strengths. advance world leadership lx>sitions cycles for critical parts and improv-Success in penetrating offshore in its turbine and other indusuial ing GE's field senice network. mat kets has helped offset a soft and [x>wer systems businesses. Prospects for the 1990s are domestic market in recent years. This technologyleadershipis most encouraging. Key industries, such Foreign shipnwnts accounted for evident in t xlay's worldwide interest s paper and metals, are reinvesting over one-third of power generation and acceptance of the new "F" gas to improve their competitiveness. revenues in 1988. Over 20% of the turbine nuxlets. A 7F unit, which set There also are signs that a long-awaited reinvestment in the U.S. current backlog is stated for off-new stamiants for ellicient use of shore installation, including large fuel, was shipped to Virginia Electric utility infrastructure is beginning. steam turbine-generators for Korea, Ibwer in 1988. Siaintaining a strong competitive Taiwan and China. GE's advanced solid-state meters position will be key to GE participa-GE also received a $93 millio" and electronic relays are winning tion in what pnnnises to be a strong conunitment fnnn the Taiwan wide acceptance in transmission and 'n rket with fierce competition. Ibwer Company for two flue gas distribution. Advances in industrial drives arul controls have resulted in l !2 i

Appliances y y b kh 3 1 = . p l@l..fj - +, ,.s, +uy s n '~ ;': " * .e 4 *1... ,. / ^ _p~. ,,.n .,s.EL- ~~ .'.'g) 1

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p,j =-: ' / g ?gh y j - ) E(N L ~ D ~ -. [.y.k,E N SE'l' un&1 m n w%. F w '. 1 This totally GE equipped kitchen includes a gas cooktop and other major appliances designed with l convenient features to make hfe easier and more enjoyable for homemaker 1 GE Appliances made significant as among the outstanding new featured models as a 27-cubic-lix>t strides during the year to product designs by Eminen Week side-by-side refrigerator with strengthen its {xisition in both magazine. Refreshment Center. domestic and world markets, driven Sening the high-end kitchen GE Appliances also made strong by its long-term strategy to concen-design market, the Monognun line gains in the private-label market to tmte resources in core pnxluct lines. added three new product offerings hedge against a mature appliance The 1988 aaluisition of the in 1988. Included were 24-inch imiustry in the United States. In j Roper Corix> ration atxt its range counter-depth refrigerators with ice particular,it began manufacturing l manufacturing facilities, f or exam-and water dispensers in the d<x>rs, refrigerators and ranges for Sears plc, senul to increase GE's [x>sition downdraft nuxlular cooktops aml under the Kenmore label. in the gas range market. GE Appli-gas-fueled cooktops. In addition, GE is participating in ances has been in this market for Rounding out the third phase of Sears' nationwide rollout of"15nuxl l only three years and already is an its investment in top-mount, no-Centnd" centers. At these centers, industry leader. frost refrigerators,GE Appliances the GE bnuxi will be available in The total U.S. market leader in introduced new 18-and I!bcubic-such major appliances as refrigera-major appliances with $5 billion in fix>t imxlets. They include features tors, cooking pnxlucts, dishwashers revenues, GE once again added to that have Ixen popular with con-and home laundry niuipment. its reputation for quality senice ami sumers on larger models, such as During 1988,GE Appliances innovative pnxtuct design in 1988. deep-<hx>r storage and increased experienced a problem with a new in customer senice, the U.S. internal capacity. type of rotary compressor in certain Ollice of Consumer Affairs named Because of high dealerinterest and large refrigerator mmlets. There is consumer trust in the image and no safety issue involved, ami the The GE Answer Center" senice as business is in the midst of an active the state-of-the-art toll-free cus-quality of the RCA brand, GE tomer assistance number now oper-Appliances will add RCA to its exist-campaign to replac e every one of ating in the United States. ing GE, Monogram amt ilotpoint these coinprewnwith inininuun in pnxtuct design, the GE bnux! brand names. lleginning in 1989, a inconvenience to customers. The dishwasher was selected by Fortune fullline of RCA appliances will be aim is to come out of this situation magaziac as one of the year's top distributed directly to dealers with the Company's reputation 10(hjuality pnxtucts. And the thn> ugh GE Appliances' sales and for customer supjx>rt and satis-custom-Litchen Monognun line of distribution organization. faction not only intact but -if built-in appliances was recognized The i tot [x> int line of appliances, anything-enhanced, known for reliability and durability, l l has been enhanced with such full-j i 1 1 13

Aerospace ' l - - ~' ~ ^ t, /-6 r wssewg 1 4P

Sifi, A worldleader in solid-state radar technology GE currently has orders for or has delivered more than 90 of these long-range air defense systems GE Aerospaceis one of thelargest lluikling on its tradition in space on a program to design and develop arxl most diversified manufacturers prognuns, GE Aerospace won a a combat system for the U.S. Navy's in its field.

contract worth over $260 million to new Seawolf sulnnarine. With annual sales over $5 billion, [novide NASA's Secorxl Tracking Other highlights fi>r this business GE Aeros[xice is a leader in many and Data Relay Satellite System in 1988 included a contract from pnxluct lines.These range from Ground Terminal. the U.S. Navy to study an anti air radar air defense systems to com-Nine new GE-built satellites were defense system for NA l'O. GE heads a multinational team of 10 munications systems aint satellites. launched during the year. GE televi-They also indude military data sion cameras and radios performed cmnpanies on this project. systems, visual simulation systems, flawlessly as America's space shuttle An ther major development was a $90 million contract from the aircraft elecunnics, automated test returned to flight status. systems, submarine combat systems, in addition, GE Aerospace was U.S. Navy fi>r an air defense system armament systems, transmissions awarded a five-year, $235 million for theJapanese Maritime Selt-Defense Force. and turret stabilization systems contract Ihr systems engineering for tracked vehicles, fire control and integration (br the nation's Stra-GE continues a vigorous pne and guidance systems, arxl surface tegic Defense Initiative program. gnun within GE Aerospace and ship sonar. In the radar business, orders were other businesses holding U.S. gov-In the face ofintensifying compe-received (br the manufacture and enunent contracts to comply with tition and a slightly declining installation of solid-state radars in contracting arxl procurement reg-domestic market, GE Aerospace Icelarxl atul West Gerinany. ulations and to self-police its con-experienced a 13% improvement in Two U.S. Navy cruisers equipped tracting activities. orders in 1988. It also took aggres-w th the GE-developed Aegis fleet Despite this, GE was indicted in sive action to provide for future air defense system were commis-November 1988 for alleged acts that occurred in 1983 in MATSCO, . competitiveness by streamlining its sioned in 1988. Aegis systems were organization to rellect market delivered Ihr three ships, and pro, a subsidiary of GE Aerospace.The trends, by reducing costs signifi-duction was under way tbr use on Company views this indictment as cantly arxl by increasing pnxtuctivity. 16 other cruisers and destroyers. unf ir arxl overreaching and intends todefe oi elf at trial. The U.S. Navy also awarded GE Aerospace a $277 million contract for the integration of antisubmarine warfare systems on surface ships. During 1988, work also progressed 14

Communications and Services l Computer. It also of fers a system lxiard facility in Salisbury, N.C., that l that allows treasury managers at furthers the Company's competi-internationallxmks to monitor and tiveness in rapidly developing inter-control the risk ofdealingin inter-national markets. national currency markets. As an industry leader in the man-GE Consulting Services, an infor-ufacture of pnxlucts for the distri-mation systems and professional bution, control arxl protection of service consulting company, pn> electrical power, GE continued its l vides custom software solutions to pngram ofintnxiucing innovative communications, financial arxl pnxlucts to the marketplace. ~ manufacturing clients. A newly designed safety switch, GE Mobile Communications molded from Valox* thermoplastic meets the growing need for mobile from GE, met strong acceptance in larxl-based communications with the growing retail home improve-pnxiucts ranging from hand-held ment market.The unit offers the two-way radios and cellular tele-do-it-younself consumer signifi-phones to new trunking systems. In cantly improved pnxluct features GE Americom's large dish-like antennas in New 1988,it started shipping the largest and benefits while providing the Jersey and Cahfornia keep track of GEs IIeet of international order in its history-a business with increased cost advan-orbiting communications satellites $35 milhon contract from the King-tages. Additional new" automation-dom ofJordan. designed" pnxiucts will be intnw GE Communications and Services GE Govenunent Senices per-duced to the market during 1989. provides communications e$1uip-forms various technical, profes-GE Electrical Distribution arxl ment and services,infonnanon sional arxl management services in Control also announced a sales services, mstallation services and the United States and abroad fi>r joint venture in the Middle East facility maintenance fi>r businesses, government customers arxl GE and Southeast Asia as another step governments and individuals that components. In 1988,it won a in strengthening its previously use satellites, computers and other contract to provide and maintain announced strategic alliance with advanced technologies. acrostats, which are tethered, radar. Fuji Electric ofJapan. In addition, This business, which had reve-equipped balloon surveillance sys-the Company continues to explore nues of more than $l.6 bilh,on and tems, fi>r U.S. Customs Senice use op;mrtunities with potential part-record ear;nings in 1988,is com-in the federal government's drug ners in Europe and North America posed of hve diverse operating intentiction program. to increase the global competitive-units. Sale of a sixth unit, GE C,om-ness of this business. puter Senice,is expected to be completed during 1989. ElectricalDistribution l GE American Communications OUd bOUlIOl 5 (Americom) continued its leader-ship in domestic commercial satel-lite senices in 1988. It was awarded in addition to approaching the a long-term contract with Alascom, billion-dollar sales mark during the di w the Alaskan longlines phone com-year, G E Electrical Distribution and G pany, for up to 16 transponders on Control made significant advances a new satellite to replace Alascom's in the areas ofcost-compeuuveness present satellite in 1991. and strategic alliances. GE Infiinnation Senices has one Despite higher-than-anticipated ofIhe world's largest commercially cost increases fi>r comm(xlities and available telepnicessing networks. It steel, this business continued to offers a bniad range of technically achieve strong earnings growth due advanced computing arxl value-to record working-capital turnover added communications senices fi>r and improved pnxluctivity. It also network-based business applications concluded the final phase of a major and systems integration. For exam-capital investment project, induding completed circuit breaker panetboards glide pie,it provides the worldwide dealer the automation of a lighting panel-down conveyors past warne Mosher at the I l communications system for Apple highty automates satisbury N c., plant. l l 15

E y l l Motors Transportation Systems Building on theleadership position 100 kxumotives included in a multi- ) established by its Dash 8 hxunur year commitment based on per- ) tive, GE'Ihms[x>rtation Systems is fonnance guarantees in the agree-implementing a scivice-driven ment. CSX placed its first onler fi>r organization, pursuing global part-Dash 8s. Conrail, Norfi>lk Southern, nerships aixl continually improv-Sama Fe, Southern Pacific, amt ing its cost structure. the New York, Susquehanna a x1 The Dash 8 delivers new value to Western all added Dash 8s to exist-railroads wuddwide as a result of ing llects. GE programs to lx>ost Imrse[x>wer arxl tractive effort while improving fuel efficiency arxl reliability. FGCt0Ty Aul0Mallon The service structure of GE

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" * ' " ~ ~ Mew motors from GL awaiting installation into Trane variable speed heat pumps and air condi-passes ful1-service support of LhlX fioners, help make the units more efficient- "lx)wer-by-the-hour" locomotives. It also includes partial service in suis s s GE Motors made several strategic [xnt of performance guarantees for moves in 1988 to build on its posi-the Union Pacific and Southern tion as the world's leading producer Pacific railroads. In addition, GE 1 0 of electric motors. offers customers sevemi options for [ T '3 GE strengthened its technology remanulitetured equipment. .t + leadership with the intnxluction of Alliances beyond the U.S. lx>rders 1 variable speed, electronically com-have pnxluced the Company's first E ~ ~ ~ mutated motors and controls fbr Dash 8 locomotive order from Can- } l advanced heating and air condi-ada and live successful bids totaling tioning systems that offer greatly 40 kxumotivesbr Australian rail-mcreased clh.. GE and GE Fanuc equipment controls this auto-ciencies. roads. In addition, a new agreement matedprocess for casting engine heads at Ghrs GE Afotors also pnxluced a new with Afitsui will help secure financ-saturn automo6#e plant being budtin Tennessee. line of dishwasher and dryer motors ing Ibr equipment sales to third-for major app liances. In addition, it world countries. GE Fanuc Automation Corporation, introduced a line ofindustrial Orders in 1988 were the highest the 50/50 joint venture between GE motors with industry-leading oper-in recent years. They were led by and FANUC Limited ofJapan,is ating cf ficiencies and continued to Union Pacific's order for more than achieving solid growth. I ex1xuulits designs for the growing Despite consolidation moves by a pools, spas and exercise machines. / 7' N'1. number of maior competitors, GE leisme markets encompassing Fanuc Automation outperformed The business improved its glolud g 7 .' Mr the mat ket during 1988. It gained ~ ~ position with pnxluction mcreases share in several major pnxtuct at twojoint ventures in Korea that areas, particularly in computer l 4 supply industrial, air conditioning numerical controls for the machine and appliance motors to h> cal atxt 9, yy,,, 9,99 tool mai ket. world markets. Emly in 1988,GE Rmuc Auto-GE hiotors also won a major con-mation Canada was established to 1 tract from Font to enter the expand- ~f takeadvantageof theexpanding j ing market for small automotive C;madian market. Another signifi-I q yg y ?! ' branding agreement wkh Wmbus- 'g. ' N - 67 ' c ant achievement was the pnvluct motors. These motors, initially for climate control and engine cooling tion Engineering, a major supplier applications, may later be used for 1 to the pn> cess imlnstries. 1xiwer windows and windscreen sys-tems. They will be pnxtuced in a new 50/50 joint venture with Robert \\\\osch of West Germany. Union Pacific has the world's largest fleet of GE's Dash 8 locomotives, includmg these units in the North Platte, Neb. railroad yard. l6

) Other Operations GElnternationalpromotes the . m y' q - g global cmnpetitiveness of GE's 14 y pi -- [' [N%lj key busm, esses. i Operating through regional cen-g p i ters arxl a country management ~ .j ' ] j system in major markets outside the ~ ) Americas, the GE International g organization achieved significant \\ i ~ advances during l988 in its primary g g* \\ roles of identifying and implement- ~ g I ing global alliances, supporting Qg 4 t major project sales, increasing the 4 2 deployment of global resources and .l D \\ j a promoting an enhanced interna-g gf I ..\\ j j tional awareness within GE. h,' g N 'I \\ \\ l i i Alliances that were announced in / -Ei \\ 1987 began to yield realbenefitsin 1988.The integration of CGR into

, g,,,,,, cg ;,,,s;,y,ce;,,,,, rs,,,gs,cq,;,yg;,,,,,;;;,,,,,,,g s,,;,,,, g,y,;,p,,,g g, GE Medical Systems was completed, capitalize on major opportunities inherent in the 1992 opening of markets within the European creating a strong European pres.

counmunity which has its headquarters tahove)in Brussets seigium. ence for this im[x)rtant global busi-ness. The alliance of GE Electrical 1988.This was led by GE's aircraft working with GE businesses in the Distribution and Control with Fuji engine, medical systems, [x)wer sys-United States to identify opportun-Electric has led to the [xx> ling of tems, materials and aerospace busi-ities for more effective integration sales arxl marketing activities in the nesses. Significant increases were of resources and activities on Ix>th Middle East and Southeast Asia. recorded in Europe, Japan, the Mid-sides of the Ix>rder. In addition, GE Motors started up die East, Southern Asia and the GE Supply sells over $1.1 billion itsjoint ventures with Hyundai and Asia-Pacific region, of electrical products from GE and Daewoo in Korea, and it agreed to To sup[x>rt this growth of world-other companies to conunercial, Ibnn a joint venture with Robert wide activity, GE continues to invest construction, industrial and Bosch of West Germany to make in recruiting, training and deploy-utility customers. automotive motors in Tennessee. ing people from many countries. In 1988, GE Supply began GE Ij hting began operating two With the increasing impact of Euro-innovative marketing, sales and dis-g joint ventures with a Korean part, pean integration and the opening tribution progr;uns to help the ner and announced an alliance with up of markets in the Soviet Union, Company's industrial and lighting 'Ibshiba ofJapan. GE also reached india and China, GE is committed businesses grow in targeted mar-agreement with the Spanish govern. to staymg ahead in the mcreasmgly kets. It sup[x rts other GE busi-ment on terms for a major invest-compeuuve global arena. nesses by being a distributor of ment to manufacture plastic GE Canada is one of the top 60 specialized spare parts to domestic materials in Spain, companies in Canada and GE's and international customers. In early 1989, GE and GEC of the largest international operation. In Ladd Petroleum Corporation was United Kingdom reached agree-1988,it had earnings (in Canadian able to maintain its reserves posi-ments, subject to requisite govern-dollars) of $75 million on sales of tion in 1988 despite continued vola-ment reviews, on a broad set of $ 1.6 billion, tility in oil and gas prices. alliances in appliances, medical sys-About $276 million of those sales One of the nation's 10 largest tems, electrical controls and, poten-were fbr export from Canada. Over independent (non-major) oil and tially, gas turbines. GE Aircraft the past few years, GE Canada has gas pnx.lucers,Iadd provides a Engines had previously teamed up changed its market mix and manu- [x>tential backup supply of petn>- with GEC-Ruston on helicopter facturing operations to emphasize chemical feedstock Ibr GE Plastics engines and on a new small-aircraft new growth op[x>rtunities overseas and its newly acquired Borg-Warner engine. as well as in Canada. businesses. It also supplies over 509 ) There also was major progress in In addition, the ratification of of the natural gas used at GE plants ) increasing international orders in the U.S/ Canada Free Trade Agree-in the United States. ment is expected to open up more op[x>rtunities for GE Camada. It is 17 l

l l Board ofDirectors <A,aFeuma, no,19m i n l

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h }' t a \\ t: .i - a ,t f li.. ?? } }l \\ I ~ ^ . h.; u M.Brewster Atwater,Jr. Richard T. Baker Lawrence A.Bossidy Charles D. Dickey, Jr. Lawrence E. Fouraker Chairmanof the Board, Consuhant to Ernst & ViceChairmanof the Retired Chairman of the Fellow, John E Kennedy Chief Exetutive Ollicer Whinney, public account. Board, Executise Officer Board and Director, SJu>of of Government, and Director, General ants, Cleveland, Ohio, arxl Director, General Scott Pa r Company, dCwd University, hfills, Inc.. c onsumer Director since 1977. Electric Com pany, Philadel ia, Pa. Director WeMge, Mass. hmds and restaurants, Fairfield, Conn. Director since 19 2. Ou t-ctor since 1981. Minneapolis, Mmn. since 1984. Director since 1989. 9 ,y n - 4 $ ' $e ' I f?- m:n e - fpg. (I 4 ~ c. f, " ,q (, Henry L Hillman Edward E. Hood, Jr. David C. Jones Robert E. Mercer Gertrude G. Michelson Chairman of the Board Vice Chairman of the Retired U.S. Air Force Chairman of the Board Senior Vice President-and Director,The Ilillman Board. Executive Officer General and former Chair-and Director, The External Affairs and Company, diversified and Dire (tor, General man of thejoint Chiefs of Goodyear Tire & Rubber Director, R.H. Macy & Co., operations and invest-Electric Company, Staff, Washmgton, D.C. Company, Akron. Ohio. Inc., retailers, New York, inents, Pittsburgh, Pa. Fairfield, Conn. Director Director since 1986. Director since 1984. N.Y. Director since 1976. Director since 1972. since 1980. l* ] { l l - { m. .a m.c j me"n minimumm 14 a w c. m amir-una Lewis T. Preston Frank H.T. Rhodes Andrew C. Sigler Williarn French Smith John F. Welch, Jr. Chairman of the Board President, Cornell Univer. Chairman of the Board, Senior partner.Gibson, Chairman of the Board, and Direttor,J.P. Morgan sit y, Ithaca, N.Y. Dir ector Chief Executive Ofh(cr Dunn & Crutt her, law Chief Executive Officer & Co. Inc orporated and since 19F4. and Director. Champion firm, los Angeles, Calif. and Director, General Morgan Guaranty Trust international Corpoi a-Director sin (e 1986. Electric Company, Company, New York, N.Y. tion, paper and forest Fair field, Conn. Dire (tor Diiet tor sin < e 1976. products, Stamford, Conn. sin < c 1980. Director sin (e 1984. 18

The entire GE family was saddened in December by the Committees of the Board q passing of Thornton E liradshaw, a member of the lloard Audit committee of Directors since 1986. Richard T. Baker, Chainnan i Mr. Ilradshaw was chairman of RCA during the early 1.awrence E. i'ouraker Gertrude G. Mic helson 1980s and successfully led that company through turbu-Barbara Scou Preisket lent times. After the acquisition of RCA by GE, his counsel, 1 ewis T. I'rcuon Frank II.T. Rhodes i wisdom and concern f.or the people oflx>th companies helped create a smooth, humane and highly successful $,"*"t g*e con rngt e man combination. M r. Bradshaw's business acumen and leader-John E Welch,Jr., Vice Chairman ( d'y,1$'[,)r,, Ri ship were widely respected, but, fi>r those who knew him, Henry H.Henley, Jr. the warmth and charm of this decent and wonderful man lienry li. fienle. Retired Chairman of the are what will be most missed, and most remembered. D*I C I". " Rhodes. e5 Board, Chief Executice Frank 11.*i Officer and Director,

11. lirewster Atwater,Jr., chairman arxl chief. executive Waher B. Wriston Clueu, Peatxxiy & Co.,

officer of General Mills, Inc., was elected to the lloard on Management rItNi 1k, N.Y. Director

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l'ebruary 10,1989. Development and >f i New Yo The lloard held 10 regular ineetings in 1988. In addi- $3*i tee tion, the Directors participated on the fi>llowing commit. Waher B. Wriston, Chainnan tees that ax! the Iloard m. its duties' lienry 11. lienley,J r. lien 2r L.Ilitman mmw-.yg f 3 The Audit Committee, which includes only Directors from Davi C.Jacs Genrude G. Michelson f outside GE, held five meetings. This committee reviewed f h the activities and independence of GE's public accountants f,"in tigg m mi,ttee ., tx j and the activities of the Company's internal audit staff. Its lienry i1. i tenlev.. r. 1 d reviews included the Company's financial reporting proc-Ge". rude G. Midieson l.cwis l'. Preston 4y ess, mternal f.mancial controls and compliance with key Gl;, Andrew C. sigler y policies, including those related to the defense procure-operations committee dQd ment process. It also reviewed the investment portfolio of Ilenry 1 liilhnan, Chairman M GE Financial Services. '""* " ^ ' m""a n id ' F \\ ice Chair The Finance Committee met limr times. It examined GE's II. Brewst At ner,J r. Barbara Scott Preiskel Attorney, New York, N.Y. financial position, pension futxling and trust operations' llarhara Scott Preiskel Director smcc 19M. foreign investments, financing commitments with the air-txwis T. Preston l line industry and other matters involving large-scale utili- ^!;h[,C"fl Si [erf n th zation of Company funds. Public Respons.bilities i .Ihe Management Development and Compemation Commil-committee tee, which includes only Directors from outside GE, heki llenry IL lienley,Jr., Chainnan John E Welch, J r., Vice Chairman 11 meetings. In addition to approving changes.m GE.,s 'll Brewster Aiwater,Jr. _9 F;~ inanagement,it reviewed the Company's exempt salary Ric hard T. Baker V f structure and executive compensation programs. e [r "?l I l v The Nominating Committee, which held three meetings, Gertrude G. Mic hehon Lel reviewed candidates li>r the lloard and recommended the 'je'r committee structure and membership for the ensuing year. William French Smith The Operations Committee met five times,includingjoint Technology and science committee sessions with the Audit, Finance, and Technology and Sci. I rank II.T. Rhc xtes, Chair man ence b,ointultlees. It reviewed the C.,ompany s operatmg Edward E. Ih>od.jr., results and plans as well as the activities of GE Medical Vice Chainnan i's Charles D. Dic key, Jr. Systems and C,orporate Research and Development. lawrence E. Fou'ra'ker ^" Walter B. Wriston 'Ihe Public Respmuibilities Committee, at its Iwo meetings, IIenry I.. Ilillman Reus ed Chairman of David C. Jones the Board and Director, reviewed the activities of the General Electric Foundations Robert E'. Mercer n a a enhunwnd hs tb mum ab M. k, k. .., e Director sin (c 19m. The 7echnology and Science Committee held two meetings, bothjoint sessions with the Operations Comminee. Its activities included reviews of GE 1.ighting and NilC. l l 19 1

Nd ?ldg@/l@l[ (As of i'ebruary 10,1989) Corporate Executive Officers Senior Corporate Officers Corporate Staff Officers ]g- ) .c?' Nigel D.T. Andrews 'tc John F. Welch, Jr. r4< Vice President, Business Chairman of the Board anxi 2 j.y Development and Planning Chief Executive Of ficer Lawrence A.Bossidy iM j.51 James J. Costello Vi< e Chairrnan of the Board Vi e President and Comptroller and Executive Oflker . :J Dale F. Frey Edward E. Hood, Jr. - f Vice President and Treasurer; Chairman and President, Vice Chairman of the Board General Electric Investment and Executive Officer Corporation James R. Bunt Vic e President Joseph Handros Dennis D. Dammerman Jack O. Peif for Vice President and ikputy Senior Vice President, Senior Vice President, General Counsel Finance Executive Management Joyce Hergenhan Vice President, Public Relations s Philip A. Lacovera i Vice President and Senior 7 '; .f Counsel, l.itigation and I (s 1, 1 egal Policy Teresa M. LeGrand )

• j l

Vice President, Audit Staff M i - l 1 Phillips S. Peter Vice President, Govermnent Relations Arthur V. Puccini Frank P. Doyle Walter L. Robb Vice President. Em ployee Senior Vice President, Senior Vice President, Relations x cu Ye\\i eI re ilent Relations Research and Development Samuels John M., dent and Semor Vice Presi Counsel, Tax Policy and Mali ld Planning Edward J. Skilco Vice President,Information Technology i3 ) h! Benjamin W. Heineman, Jr. Senior Vice President. General Counsel and Secretary l 20

Operating Management (As of February 10,1989) Financial Services Plastics Medical Systems Aircraft Engines 1 Y 4 hI // Gary C. Wendt Glen H. Hiner John M.Trani Brian H. Rowe President and Chief Operating Senior Vice President, Senior Vice President, Senior Vice President, Officer, General Electric GE Plastics GE hiedical Systems GE Aircraft Engines Fina,ncial Services, Inc.; Robert H. Brust James G. Del Mauro Brian Brimelow crIr i. e

• '#8 f

ric 5 xgucts Capital Cor[x> ration (GECC) Paul L. Dawson Thomas E. Dunham Vice President, GE Plastics - Vice President, hianufacturing Sam Dolfi Leo A. Halloran Senior Vice President, Vincenzo Morelli Vice President, iluman A merica5 Finance Edward R. Kosche, President and Chief Executive Resources Bur Vice President, Sales Officer, General Electric-Lee K, resident Commercial apor Sem. ton J. Klos.ter, Jr-CGR S. A. Vice i or Vice President, General William H. Westendorf Counsel and Sec retary Vice President, hf manufacturing Charles P. Pieper Engine Operations President and Chief Executive Edward C. Bavaria Michael A. Carpenter Joseph G. Wirth Officer, GE hiedical Systems - Vice President, Airline Executive Vice President, GECC; Vice President, Technology Asia Ltd. htarketing President and Chief Executive Of ficer, Kidder, Peatxxly Group P,hilip M Gross Steven C. Riedel W. George Krall y \\ ice President, GE Silicones Vice President, Marketing Vice President, Production y Dennis J. Carey Herbert G. Ra,mmrath Robert L. Stocking James A.Parke la C8 - Senior Vice President Pac f c Ltd'. Vice President, Sales Vice President, Finance GECC Corporate Finance arxlilusiness Development Charles V. Sheehan Jospph M. Sakach, Jr. NBC Frank E. Pickering Chainnan and Chief Executive Senior Vice President' Vice President, Engineering Kidder, Peabody Finance and i ('gh,'"' 7"7""~~7'??TT Robert C. Turnbull Admnustration h ' nal,d Simpson I'"~ Vice President, Military U Engine Operations James H. Oranne '""d"""E Executive Vic e President, GECC w t Silas S. Cathcart we Syascher P Lighting \\ ice President, Pnxtutt Chairman, Kidder, Pealxxty hianagement and Marketing y Grou p Inc.

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"T? II Yl Michael G. Fitt Chairman, President and Chicf 1F *I M- ! Executive Officer, Em[yloyers 'sl 'i l Reinsurance Cor[xiration 4 f O O President and Chief Executive Officer, National llroadcasting y. 4 Company, Inc. j 1i Albert F. Barber p Executive Vice President e Michael G. Gartner John D. Opie President, N BC News Senior Vice President, Albert D. Jerome GE Lighting President, N BC Television William S. Frago Stations Vice President, Marketing nd Sales Edward L. Scanlon Executive Vice President Robert P. Morgata Vice President, Pnxtuction Brandon R. Tartikof f President, NilC Stephen Rabinowitz Entertainment aTKl Vice President Technology NilC Pnuluttions Raymond J. Timothy Group Executive Vice i President 21

Operating Management <Continuno Industrial and Electrical Distribution and Power Systems Aerospace Control Canada / Latin America 1i. t Gary L. Rogers William R.C. Blundell

'L Vice President, GE Electrical Chairman and Chief Executive Distribution and Control Officer, GE Canada g

David M. Engelman Robert T.E. Gillespie t j Vice President, Sales Executive Vice President Motors GE Supply Stephen J. O'Brien J. Richard Stonesifer y ( Vice President, GE Motors Vice President, GE Supply 1 Roger D. Morey John A.Urquhart John D. Rittenhouse Vice President, Sales Ladd Petroleum Senior Vice President. Senior Vice President, Ronald G. Spence GE Industrial and Power GE Aerospace Transportation Systems President and Chief Executive Officer, Ladd Petroleum Systems James B. Feller Michael D. Lockhart David C. Genever Watling Vice President, Aerospace Vice President, Corporation Vice President, GE Power Technology G.~ Transportation Systems Generation Jack A.Frohbleter Aerospace Technology Russell L Noll, Jr. Vice President, Government Factory Automation Thomas E. Cooper Vice President, Pnxf uction Electronic Systems Robert P. Collins .Vice President, Aerospace Eugene J. Kovarik Arthur L. Glenn President arx! Chief Executive rechnology Vice President, GE Power Vice President Defense Officer, GE Fanuc Automation Delivery and Control Systems North America,Inc. Environmental Programs Joel Tenzer Raymond P. Kurlak W. Roger Strelow Vice President, GE Drive Vice President, International Vice President, Environmental Systems Communication and Programs Delbert L.Williamson Strategic Systems Vice President, GE Industry and Charles A.Schmidt ~ ' Licensing / Trading Utility Sales Vice President, Astro-Space a p; Bertram Wolfe Robert G. Stiber j President and Chief Executive Vice President, GE Nuclear Vice President, Aircraft

-1 Ig Officer, GE and RCA Licensing I

Energy Electromcs ,Ie. Management Operation, Inc., w Robert W. Tieken i4 '{ and GE Trading Company Appliances Vice President, Finance and vg information Technology Marketing and Sales l gd - Clyde D. Keaton l Communications and Vice President, Marketing and Sales I 9-Services Paolo Fresco Senior Vice President, Albert J. Febbo , half Y GE International Vice President Automotive { Industry Marketing and Sales Alberto F. Cerruti 'usii Vice President Finance Henry J. Singer and Business Support Vice President, Area Management nd Sales Alistair C. Stewart k" - Vice President, Middle East, Africa arxlSouth Asia Roger W. Schipke L Thomas W. Tucker Semor Vice President, Vice President, Asia Pacific GE Appliances I Richard L. Burke Vice President, Technology, Eugene F. Murphy Pnxluct Design and Senior Vice President, Manufacturing GE Communications and Gerald R. Cote Services Vice President, GE Consumer W. James McNerney, Jr. i ( Service President, G E Information l Bruce A. Enders Services Vice President, Marketing { n

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Statement ofEarnings General Electric Company and consolidated affiliates For the years ended December 31 (in millions) 1988 1987 1986 Revenues-Sales of goods $28,953 $29,937 $28,139 Sales of services 9,840 9,370 7,067 Otherincome(note 4) 675 655 1,016 Earnings of GEFS GEFS earned income from operations (note 5) 10,621 8,196 5,963 Effect of change in tax-rate assumptions for leveraged (172) leases (note 5) Total revenues 50,089 48,158 42,013 Costs and expenses (note 6) Cost of goods sold 21,155 22,359 20,707 Cost of services sold 7,676 7,290 5,425 Interest and other 6r ancial charges (note 8) 4,817 3,912 2,679 Insurance pol:cy hu. der losses and benefits 1,501 1,560 1,439 Provision for losses on financing receivables (note 9) 434 290 558 Other costs and expenses 9,724 8,406 7,760 Unusual expenses, including provisions for business restructuring (note 10) 1,118 '311 Minority interest in net earnings (loss) of consolidated affiliates 61 (4) 7 Total costs and expenses 45,368 44,931 38,886 Earnings (loss) before income taxes, extraordinary item and cumulative effect of accounting changes 4,721 3,227 3,127 3 (Provision) credit for income taxes (note 11) (1,335) (1,108) (1,027) i Effect of change in tax-rate assumptions for leveraged leases (note 5) 392 l Earnings before extraordinary item and cumulative effect of accounting changes 3,386 2,119 2,492 Extraordinaryitem (note 26) (62) Cumulative effect toJanuary 1,1987 of accounting changes initial application of Statement of Financial Accounting Standards No. 96 " Accounting for Income Taxes"(note 1) 577 Change in overhead recorded in inventory (note 1) 281 Net earnings $ 3,386 $ 2,915 $ 2,492 i Net earnings per share (in dollars) liefore extraordinary item and cumulative effect of accounting changes S 3.75 $ 2.33 $ 2.73 Extraordinary item (note 26) (.07) Cumulative effect toJanuary 1,1987 of accounting changes l Initial application of Statement of Financial Accounting Standards No. 96 " Accounting for Income Taxes"(note 1) .63 Change in overhead recorded in inventory (note 1) .31 Net earnings per share $ 3.75 $ 3.20 $ 2.73 Dividends declared per share (in dollars) $ 1.46 $ 1.32 % $ 1.18% The notes to consolidated financial statements on pages 44-70 are an integral part of this statement. 24

GE GEFS 1988 1987 1986 1988 1987 1986 $28,958 $29,937 $28,139 9,866 9,378 7,072 680 649 1,010 l 788 552 504 10,655 8,225 5,986 (172) 40,292 40,516 36,725 10,655 8,225 5,814 21,160 22,359 20,707 7,702 7,298 5,430 669 645 625 4,177 3,277 2,063 1,501 1,560 1,439 434 290 558 6,250 5,979 5,963 3,484 2,440 1,805 i 1,027 311 91 29 1 (3) 32 (5) 10 35,810 37,309 33,033 9,628 7,653 5,875 l 4,482 3,207 3,692 1,027 572 (61) (1,096) (1,088) (1,200) (239) (20) 173 392 l 3,386 2,119 2,492 788 552 504 (62) (62) l 577 518 281 $ 3,386 $ 2,915 $ 2,492 788 $ 1,008 $ 504 in the supplemental (consolidating data on this page,"GE" means the former basis of consolidation as described in note I to the l consolidated financial statements;"G EFS" means General Electric Financial Services, Inc. and all of its affiliates and associated companies. Transactions between GE and GEFS have been eliminated from the " General Electric Company and consolidated affiliates" columns on the preceding page. Eliminations are shown on page 45. I 25

Statement ofFinancialPosition General Electric Company and consolidated afTiliates At December 31 (In millions) 1988 1987 ] Assets Cash (note 12) $ 2,187 $ 2.543 Marketable securities carried at cost (note 13) 5,779 5,353 Marketable securities carried at market (note 14) 5,089 4,000 Securities purchased under agreements to resell 13,811 12,889 1 Current receivables (note 15) 6,780 6,745 Inventories (note 16) 6,486 6,265 l GEFS financing receivables (investment in time sales, loans and financing leases)- net (note 17) 35,832 27,839 Other GEFS receivables (note 18) 4,699 4,458 Propeny, plant and equipment (including equipment leased to others)- net (note 19) 13,611 12,973 Investment in GEFS Intangible assets (note 20) 8,552 5,748 - All other assets (note 21) 8,039 6,601 Totalassets $110,865 $ 95,414 i Liabilities and equity Short-term borrowings (note 22) $ 30,422 $ 23,873 l Accounts payable (note 23) 6,004 5,728 ) Securities sold under agreements to repurchase 13,864 13,187 i Securities sold but not yet purchased, at market (note 24) 2,088 1,407 Progress collections and price adjustments accrued 3,504 3,760 i Dividends payable 369 319 All other GE current costs and expenses accmed (note 25) 5,549 4,867 long-tenn borrowings (note 26) 15,082 12,517 Reserves ofinsurance affiliates 4,177 3,549 Allotherliabilities (note 27) 6,986 6,325 Deferred income taxes 3,373 3,100 Totalliabilities 91,418 78,632 Minority interest in equity of consolidated affiliates (note 28) 981 302 Common stock (926,564,000 shares issued) 584 584-Other capital 823 878 l Retained earnings 17,950 15,878 Less common stock held in treasury (891) (860) l Total share owners' equity (notes 29 and 30) 18,466 16,480 i Totalliabilities and equity $110,865 $ 95,414 j Commitments and contingent liabilities (note 31) The notes to consolidated fmancial statements on pages 44-70 are an integral part of this statement. k 26 - j

GE GEFS 1988 1987 1988 1987 f 3 f $ 1,554 $ 1,834 633 709 349 858 5,430 4,495 } 5,089 4,000 I 13,811 12,889 I 7,110 6,782 6,486 6,265 35,939 27,931 4,806 4,641 I 4,819 3,980 l 9,360 9,255 4,251 3,718 l 6,964 4,430 1,568 1,318 l 4,621 4,896 3,418 1,705 l $ 41,283 $ 38,300 $ 74,945 $ 61,406 l $ 1,861 $ 1,110 $ 28,731 $ 22,848 2,136 2,615 4,132 3,329 13,864 13,187 2,088 1,407 3,504 3,760 369 319 5,549 4,867 4,330 4,491 10,862 8,037 4,177 3,549 5,481 5,088 1,505 1,237 (641) (620) 4,014 3,720 22,589 21,630 69,373 57.314 228 190 753 112-584 584 1 1 823 878 1,379 1,328 17,950 15,878 3,439 2,651 (891) (860) 18,466 16,480 4,819 3,980 $ 41,283 $ 38,300 $ 74,945 $ 61,406 In the supplenwntal consolidating data on this page,"GE" means the former basis I of comohdation as described in note I to the consolidated financial statements; "G El S" means General Elect ric Financial Services, Inc. and all of its a fliliates aixt associated companies. Transactions hetween GE and GEFS hase been eliminated from the " General Electric Company and consolidated affiliates" columns on the preceding page. Eliminations are shown on page 45. i i ) 1 1 I l 27 3

Statement ofCash Flows General Electric Company and consolidated affiliates For the years ended December 31 (In millions) 1988 1987 1986 Cash flows from operating activities Net earnings $ 3,386 $ 2,915 $ 2,492 Adjustments to reconcile net earnings to cash provided from operating activities Extraordinary item atxt cumulative effect of changes in accounting principles (796) Depreciation, depletion and amortization 2,266 1,913 1,825 l Earnings retained by GEFS l Deferred income taxes 124 37 103 Decrease (incicase) in GE current receivables 123 138 621 Decrease (increase) in GE inventories (209) 375 (317) Increase in insurance reserves 315 669 852 Provision for losses on financing receivables 434 290 558 l Net change in certain broker <lealer accounts (573) (103) (1,298) l All other operating activities 1,236 401 1,124 Cash provided from operating activities 7,102 5,839 5,963 Cash flows from investing activities Property, plant and equipment including equipment leased to others 1 -additions (3,681) (2,277) (2,806) ' -dispositions 470 890 694 Net increase in GEFS financing receivables (6,057) (4,575) (4,203) Payments for principal businesses purchased, net of cash acquired (3,504) (555) (6,730) Proceeds from principal business dispositions 880 6 16 1,386 All other investing activities (1,772) (1,084) (1,821) Cash used forinvesting activities (13,664) (6,955) (13,480) Cash flows from financing activities Net change in borrowings (less than 9041ay maturities) 3,868 2,519 4,536 l Debt having maturities more than 90 days -newly issued 11,324 8,219 9,576 - repayments and other reductions (8,801) (6,883) (6,214) Sale of preferred stock by GECC 600 Disposition of GE shares from treasury 356 361 283 i Purchase of GE shares for treasury (387) (846) (348) Dividerxis paid to GE share owners (1,263) (1,177) (1,058) Cash provided from (used for) financing activities 5,697 2,193 6,775 Total cash flows -increase (decrease) in cash and equivalents $ (865) $ 1,077 $ (742) j i The notes to consolidated fmancial statements on pages 44-70 are an integral part of this statement. 1 n

l 1 GE GEFS i 1988 1987 1986 1988 1987 1986 $ 3,386 $ 2,915 $ 2,492 788 $ 1,008 504 (796) (456) 1,522 1,544 1,460 744 369 365 (788) (552). (504) (215) (158) (158) 339 195 250 (170) 111 629 (209) 375 (317) 315 6G9 852 434 290 558 (573) (103) (1,298) 98 434 226 1,444 207 421 3,624 3,873 3,828 3,491 2,179 1,652' (1,884) (1,698) (2,042) (1,797) (579) (7&l) 118 410 275 352 480 419 (5,943) - (4,627) (3,779) (2,963) (6,i10) (541) (555) (620) 880 616 1,367 19 292 7 (120) (2,007) (1,282) (1,617) (3,557) (635) (6,630) (9,936) (6,563) (6,342) (466) (961) 466 4,249 3,515 4,039 934 396 3,387 10,291 7,818 6,195 (30) (238) (566) (8,771) (6,645) (5,648) 600 356 361 283 (387) (846) (348) (1,263) (1,177) (1,058) (856) (2,465) 2,164 6,369 4,688 4,586 $ - (789) 77_3 $ (638) (76) 304 $ (104) In the supplemental consolidating data on this page,"GE" means the former basis of consolidation as described in note 1 to the consolidated financial statements; "GEFS" means General Electric Financial Services, Inc. and all of its affiliates and associated companics. Transactions hetween GE and GEFS have been eliminated from the " General Electric Company and consolidated affihates" columns on the prneding page. Ehminations are shown on page 45. l 29

Management' Discussion ofEarnings s Overview The consolidated Statement of Earnings (page 24) shows For the first time, General Electric Company's consolidated that revenues were $50.1 billion in 1988 compared with financial statements include the detailed effects of adding $48.2 billion in 1987 and $42.0 billion in 1986. These to the Company's manufacturing and industrial senices amounts are restated because of the change in consolida-businesses the accounts of General Electric Financial Sen.. tion method. The principal com[xments of consolidated ices, Inc. (GEFS). The reason fi>r the required change is revenues are " sales of goods and senices" by GE and discussed in note 1 to the consolidated financial state. " earned income" of GEFS. ments. Among other things, that note also explains how

• GE sales fi>r 1988 were $38.8 billion,1% less than the the terms "GE" or "GE except GEFS" and "GEFS" are used year befi>re. 'li>tal volume of shipments in 1988 was down in this report to help readers uwlerstand the various data.

about 2%, but the effect was partly offset by higher prices l These terms are used frequently in this hianagement in some markets. If sales for the two periods were adjusted 'q Discussion fi>r clarification or emphasis, for business dispositions (which were only partly offset by - Consolidated net earnings li>r 1988 were $3.386 billion, or sales added by acquisitions), GE's sales fi>r 1988 would 16% more than for 1987. Net earnings were not affected ham been up 4% year-to-year. Sales in 1987 were 12% by the change in method of consolidation. This was the m re than in 1986, mainly because ofinclusion in 1987 of Company's second consecutive year of strong double-digit full year of operations li>r businesses acquired from RCA, whereas 1986 sales had included RCA operations carnings growth, hiost businesses contributed to the better earnings. Productivity gains in GE operations were perva-only for sewn nwnths. sive, and GE Plastics and GE NIedical Systems had excel-

• GE's other income for 1988 was slightly above 1987 lent increases in revenues and operating profit. GEFS had fi>110 wing a sharp decrease from 1986. Principal reasons much higher earnings. Consolidated operating profit and for the 1987 decrease were lower income from short-term earnings improved despite a sharp reduction in GE Appli.

investments, which had built up in 1986 preparatory to the ances' profitability because of significantly higher warranty acquisition of RCA, and lower gains from sales of'Ii>shiba expense fi)r certain refrigemtor compressors. See "indus. Corporation stock. Details of GE's other income are in try segments" beginning on page 32 fi>r additional detail note 4. about performance by various businesses of the Company.

• GEFS' earned income from operations for 1988 was Net earnings for 1988 did not include any provisions for

$10.7 billion, up 30% from 198Ts $8.2 billion, which was business restructuring expenses, nor did they include any 37% more than the $6.0 billion fi>r 1986.The principal impact from accounting changes. Net earnings in 1987 reason for these increases has been higher levels of earning were 17% atxive 1986, also as a result of solid operating assets in financing businesses plus increases in premium performance. Ilowever, analysis of 1987 results was com-and investment income ofinsurance affiliates. Yields plicated by two types of transactions that essentially (i.e., prices or interest rates paid to GEFS by its customers equaled each other in net earnings. These were a reduc-fi>r its financing of their needs) were up in 1988 following tion in pre-tax and after-tax earnings caused by unusual declines in 1987 and 1986. Note 5 presents details, and extraordinary expenses ($747 million after taxes), o GE's cost of g(xxis and services sold and its selling, mainly fi>r business restructuring to improve future prof-general and administrative expenses totaled $35.1 billion itability; and an increase in after-tax earnings ($720 mil-lion) from two accounting changes, one involving income taxes and the other involving overhead recorded in inven-l tories, as explained in note 1. t Return on share owners' equity Return on average share owners' equity of 19.4% m. 1988 improved almost one full point from 1987's 18.5%, go og which also was much betterthan that for 1986 - 17.3 %. Share owners' equity is not affected by the new consoli-17.5 dation method. 15.0 12.5

10.0 m

O 1984 1985 1986 1987 1988 30 )

l i in 1988, equal to 90.4% of sales. Excluding the abnonnally GE employee productivity high refrigerator compressor warranty expense provisions (Constant dollar sales per GE employee; in thousands) in 1988, the ratio of costs to sales would have been 89.3%. $140 I Comparable cost and expense ratios to sales for 1987 and 1986 were 90.6% and 91.2%, respectively. An important 125 factor in these impn>ved cost / sales relationships has been 1 j,,g steadily improving pnxluctivity for the last five years as de-picted in the chart on this page. There were no corporate-j 93 level business restructuring expense provisions in 1988 to .y compare with the $1.0 billion provided in 1987 and the 1 so $31 I million in 1986. Over the five years ended in 1987, "q u: GE's unusual business restructuring expenses, the major M 0 objective of which has been to improve cost structures, 1984 1985 1986 1987 1988 aggregated about $2.6 billion. The impact on any one year's net earnings from business restructuring provisions

• " consolidated effective incon was essentially equaled by gains from sales of businesses 28.3%. 1988 compared with 34.3% ye tax rate was m

m 1987 and 20.3%,m that do not fit the Company,s long-term growth strategy and also, m. 1987, by the effect of. he income tax and 1986. (The U.S. federal statutory rate was 34% for 1988, t 40% for 198e and 46% f.or 1986.).Although the decrease inventory accounting changes. .m the U.S. federal statutory rate was the main reason for e GEFS' principal cost is interest expense, which totaled the lower effective consolidated rate in 1988, there are $ 1.2 billion in 1988, a 27% increase from 1987, which was numerous reasons fbr differences between the statutory up 59% from 1986. The increased interest expense ami effective rate. 'Ibgether with other infonnation about rellects the higher level of borrowings that have been used income tax provisions, an analysis of the differences to invest in earning assets involved in a wide variety of between the U.S. federal statutory rate and the consoli-financings made available to third parties.The composite dated rate can be found in note 11. interest rate incurred Ihr GEFS' finance activities was

• D..dends declared totaled $1.314 bilh.on m 1988,or ivi 8.39% m. 1988 compared wn. h 8. I1% m. 1987 aml 8.49%

$ 1.46 per share. At the same time, the Company retained in 1986. The " spread," or difference between interest rates GEFS pays to its lenders and rates it charges to its " " '. nt canungs to supp>n enhanced pn>dudy capa-customers, increased somewhat m 1988 after narrowing in bihty and to provide adequate financial resources for the two previous years. Among GU. S,other costs, the pn>- internal and external growth opporanities. 'l.he fourth-quarter increase of 17%. dividends declared marked the m i vision for losses on f.mancmg receivables of $434 m.llion 13th mnsnuse year of. dividend growth. was up $144 million in 1988. At year-end 1988, GEFS, reserve coverage was equal to 2.63% of financing receiv-ables, up from 2.599 at year-ends 1987 and 1986.The receivable loss provision of $558 million in 1986 was higher than normal because of energy-related write-offs.

• Although relatively small, the interest of minority owners in the equity of consolidated affiliates was much higher for hoth GE and GEFS in 1988 than in previous years. For GE, the increase was due mainly to the impact of the Company's recent aggressive fonnation ofjoint ven-tures and alliances aimed at incicasing global competitive-ness. For GEFS, the increase was principally the result of GECC's selling variable rate preferred stock to third par-ties to augment the equity base.

1 1 31

Industry segments increased deliveries to commercial customers. The strong industry segment revenues and operating profit for the mlume growth in years before 1988 resulted in higher 1 last five years appear on the opposite page. The presenta. pemting profits. The opemting profit of $1.0 billion in 1988 was about 1% below the 1987 level when $72 million tion of consolidated industry segments is in two parts, one fi>r GE except GEFS and one for GEFS. Consistent with of business restmeturing expense is excluded from that prior years, GE revenues and operating profit continue to year, This relatively good (considering the revenues include earnings of GEFS. Revenues and operating profit decline) operating profit performance was the result of fi)r GEFS by the industry segments in which it conducts productivity improvements. New orders of $9.7 billion business are presented separately with appropriate elimi-received during 1988 were up 18%, and the backlog of unfilled orders at December 31,1988 was $12 A billion, of nation of GEFS' carnings as well as the minor effect of transactions between GE and GEFS segments. which about 40% is scheduled for completion in 1989. Broadcasting revenues increased 12% in 1988, Consumer Products is no longer shown as a separate GE industry segment inasmuch as the largest contributor to mainly because of N BC's coverage of the Summer Olym-revenues in that segment (the consumer electronics busi-pic Games. Operating profits were up 8% from 1987.The ness) was sold at the end of 1987. Consumer electronics smaller relative increase in operating profit rellected the results fi>r prior years are now included in All Other,and cost impact and lost advertising volume from coverage of the GE Lighting business is now included in the Industrial the two major political conventions. Profitability in 1988 segment. Additional financial data as well as a detailed from network operations was flat, but 'lY station profit-description of each segment can be found in note 33. ability improved. The comparison of 1987 and 1986 reve-Consolidated operating profit is the principal source of nues and operating profit (both of which increased sub-GE's net earnings, and the relationship between the two st nti Ily in 1987) reflected inclusion of a full year of NBC in GE results in 1987 versus only seven months in 1986. for the last five years is depicted in the chart on this page.

• Industrial revenues were 6% more in 1988 than in Consolidated operating profit was $5.9 billion in 1988, up from $4.5 billion in 1987 and $3.7 billion in 1986. Operat.

1987, which was 2% below 1986. When reviewing trends ing profit in 1987 was after absorbing $ 1.069 billion of in operating profit, it should be recalled that 1987 and unusual expenses ($285 million in 1986), mainly for busi-1986 results were depressed by business restructuring ness restructuring to improve long-range competitiveness. expense provisions ($326 million in 1987 and $95 million There were no similar unusual expenses in 1988. Com. in 1986). Adjusting fiir the 1987 restructuring expenses, ments on each segment follow, operating profit in 1988 was up 279. (Adjusting 1987 and e Aerospace revenues in 1988 were essentially 1986 fi>r business restructuring expense provisions, seg-unchanged from 1987. liigher revenues in 1987 com-nwnt operating profit in 1987 was 6% less than in 1986.) pared with 1986 resulted from including RCA for a full Tiu 1988 operating profit increase was led by GE Light-year in 1987 plus other volume increases. Operating profit ing, which had much-improved margins on modestly in 1988 also was essentially unchanged after adjusting for highenevenues. GE Transponation Systems had a good 1987's restructuring expense ($31 million). That restruc-increase in operating profit and revenues, and GE Motors nd GE Electrical Distribution and Control had better turing expense more than accounted for 1987's slight decrease from 1986. New orders of $5.6 billion received margins on im&st mvenues increases. during 1988 were up 13%, and the backlog of unfilled orders at December 31,1988 was $7.1 billion, of which approximately 50% is scheduled for completion in 1989. Consolidated operating profit and net earnings e Aircraft Engines revenues were 4% lower m. 1988 (in billions) after a number of years of strong increases. The 1988 y,.o dedine came from the effect oflower shipment schedules for military engines that was only partially offset by 4.8 E 3.6 2.4 d m, 4 i, C W segmerd 1.2 opereng ,g 4 q g proht g ~g g# ,h t' O a Net earnings 19M 198 "> 19x6 1987 1988 32

E Swnmary ofhidustry Segments General Electric Company arxl consolidated afIlliates _ For ahe years ended December 31 (In millions) 1988 1987 1986 1985 1984 ihvenues GE l + o Aerospace; $ 5,343 $ 5,262 - $ 4,318 $ 3,085 $ 2,622 - Aircraft Engines - 6,481 6,773 5,977 4,712 ' 3,835 llroadcasting 3,638 3,241 1,888 51 104 Industrial 7,061 6,662 6,770 6,946 6,648. hiajor Appliance: - 5,289 4,721 4,352 3,617 3,650 Materials 3,539 2,751 2,331 2,119 .2,280 Power Systems 4,805 4,995 5,262 5,824 6,289 Technical Pruducts and Services 4,431 3,670 3,021 2,317 2,402 Farnings of GEFS 788 552 504 413-329 AllOther 394 3,176 3,379 1,071 1,762 Corporate Items arxl Eliminations (1,477) (1,287) (1,077) (903) (990) 'li>tal GE 40,292 40,516 36,725 29,252 28,931 GEFS Financing 5,827 3,507 2,594 2,469 - 2,093 Insurance 2,469 2,206 2,017 '1,329 831 Securities llroker-Dealer 2,316 2,491 1,176 Allother 43 21 27 7 9 TotaIGEFS 10,655 8,225 5,814 3,805 2.933 Eliminations (858) (583) (526) (433) (422) Consolidated revenues $50,089 $48,158 $42,013 $32,624 $31,442 - Operating profit GE Aerospace - $ fd0 $ 603 $ 608 $ 437 $ ~ 332 Aircraft Engines 1,000 94d 869 673 460 llroadcasting 540 500 240 20 15 Industrial 798 302 575 658 478 Major Appliances 61 490 462 399 381-Materials 733 507 424 330 446 Power Systems 503 199 354 740 549 Technical Pnxlucts and Services 484 _275 112 22 (8) Earnings of GEFS 788 552 504 413 329 AllOther 168 72 162 376 797 'liital GE 5,715 4,440 4,310 4,068 3,779 GEFS Financing 899 636 (99) 501 444 Insurance 325 172 123 45 3 Securities lituker-Dealer 64 (23) 83 AllOther (261) (213) (168) (122) , g) TotalGEFS 1,027 572 (61) 424 354 Eliminations (802) (562) (513) (420) (339) Consolidated operating profit 5,940 4,450 3,736 4,072 5,794 GE inte:est and financial charges (net of eliminations) (655) (635) (616) (354) (325) GE items not traceable to segments (564) (588) 7 (287) (175) Earnings before income taxes, extraordinary item and cumulative effect of changes in accounting principles $ 4,721 $ 3.227 $ 3,127 $ 3,431 $ 3.294 The notes to consolidated hnancial statements on pages 44-70 are an integral part of this statement. "GE" rneans the former basis of consolidation as described in note i to ihe consolidated financia' statements: "GEFS" means General Electric Financial Services, Inc. and all of its at hliates arul associated companics. Operating profit of GE segments excludes interest and other fmancial charges; operating profit of GEFS includes the effect ofinterest auj discount, whit h is the largest element of GEFS' operating costs. 33

l i l e Major Appliances revenues increased 12% from 1987 upturn in 1988, particularly in gas turbine markets. When following an 8% increase from 1986.The 1988 increase comparing trends in operating profits,it should be came from higher volume (partly offset by lower prices) in recalled that 1987 and 1986 resuhs were depressed by core appliante lines and from trie addition of Hoper Cor-business restructuring expense provisions ($264 million in [x> ration beginning in 1988's second quarter. The sharp 1987 and $173 million in 1986). Adjusting for the 1987 drop in operating profit in 1988 following several years of restructuring expenses, operating profit in 1988 was up gmxl increases was more than accounted for by abnor-9%. Adjusting 1987 and 1986 for business restructuring mally high warranty expense provisions for certain refrig-expense provisions, segment operating profit in 1987 was erator compressors. The problem has been corrected in 12% less than in 1986. currently manufactured products.

• Technical Products and Services revenues increased e Materials revenues were up 29% in 1988 compared 21% in both 1988 arxl 1987. Operating profit increased with 1987, which was 18% more than 1986. Operating sharply in lx>th years, even taking into account the profit for 1988 increased 45% from the previous year fol-

$95 million of business restructuring expense in 1987. GE lowing a 20% gain from 1986. These continuing excellent Medical Systems had substantial gains in 1988 revenues performances have been kxl by strong volume growth in because of the acquisition of European operations (CGR) all plastics prmluct lines. This growth also has been accom-at the beginning of the year. Operating profit also }xmied by better margins. Acquisition of Borg-Warner's increased substantially on higher volume in core lines, par-chemicals businesses at the end of the third quarter of ticularly magnetic resonance and service, as well as at CGR. 1988 not only increased volume but added to operating GE Communications and Senices had gomi margin profit and net earnings after all acquisition costs. improvements although revenues were down somewhat e Power Systems revenues were down 4% in 1988-because of the sale of Globcom early in 1988. the fourth consecutive year oflower revenues. New order e Earnings of GEFS continued to increase in 1988. rates and backlogs continue to be low by long-tenn histori-Comments on GEFS industry segments appear below. Of cal stamlards although there were signs of some potential GEFS' 1988 net earnings, GE Capital's contribution was $600 million,28% more than 1987's $470 million, which was 24% almve 1986. (The 1987 amount excludes the cumulative effect of the income tax accounting change and extraordinary loss discussed in note 1.) e Financing operating profits have increased very sub-stantially since 1986. The level of earning assets and the impact of changes in interest rates on borrowing costs and financing yields are imix>rtant factors in Financing operat-ing profits. Farning assets increased by 30% in 1988 from 1987, which was 29% more than 1986. Financing yields increased in 1988 after declining during 1987. GE Capi-tafs composite annual interest rate increased 43 basis points in 1988. In 1987, the composite annual interest rate Earning assets of financing businesses (in billions) $45 36 27 18 1984 1985 1986 1987 1988 31

decreased 30 basis [x>ints. The operating loss in 1986 was ~ U.S. exports to extemalcustomers the iesult of that year's dramatic decline in oil prices, which (in billions) i resulted in a substantial charge to reflect impairment of ss.o values of centain energy-related investments. 1 40 e insurance operating profit increased sharply in 1988. The principal element of the insumnce segment is y lh ]g Employers Reinsurance Corporation, which has increased business volume and investment income each year since !W h, 2.0 l 1986. Other insurance operations (which are part of GE y 6i - Capital Corporation) also had improved results in 1988 d 1.0 following two years of charges rellecting adverse loss "y' 0 I" N experience. 1984 1985 1986 1987 1988 e Securities Broker-Dealer (Kidder, Pealx>dy) had an operating profit in 1988 fi>llowing a loss in 1987. The l improvement in 1988 reflected higherinvestment banking past five years. Export sales by major world areas for the revenues, lower operating arnt administrative expenses, past three years are shown below. and the absence of unusual expense provisions in 1987 for business restructuring and settlement ofinsider trading ji[ rtstoexternalcustonws ) 1988 1987 1986 charges. e All Other GEFS consists principally of acquisition-hj"yfg;n I SI Si telated interest expense not alk>cated to the segments. Middle le.ast and Alrica 937 762 490 o GE items not traceable to segments aggregated a loss Americas 531 625 476 Gher antas 240 238 124 of $561 million in 1988 and $588 million in 1987. There Total $4,870 $4,024 $3.709 was a small gain in 1986. This caption includes expenses such as the Corix> rate R&D Center and cor}x> rate staffs and income from corponue treasury activities. In 1987 and in addition, ex[x>rts from GE operations in the United 1988, there was much lower income from corponne-level States to GE affiliates offshore were $874 million in 1988, investments and nothing comparable to large gains from $801 million in 1987 and $639 million in 1986. sale of%shiba sax-k in 1986.

• GE made a positive contribution of about $3.1 billion l

International operations to the U.S. balance of trade in 1988. Total exports in 1988 were $5.7 billion, including lxith exixnts from ihe United i e Totalinternat.ional operat. ions (consistmg of all States to external customers and to GE affiliates. ImIx>rts exix>rts from the Um. d States plus the results ofoffshore te from GE affiliates were $ 1.0 billion, and direct imports affih.ates) had. revenues of.$ 10.8 bilh.an and operating from external suppliers were $ 1.6 billion. prol.it o;.$2.1 bilh.on m 1988. Revenues were $9.2 bilh.on and $8.3 billion in 1987 and 1986, respectively; and operating profit was $1.7 billion in 1987 and $1.3 billion in 1986. e GE's exports to external customers totaled $4.9 bil-tion in 1988, up froni 1987's $ 1.0 billion. The chart on this page shows the substantial giowth in GE's exports for the 1 i i 35

Management' Discussion ofFinancial Resources and Liquidity s Overview Statement of Financial Position This discussion of financial resources and liquidity focuses e Marketable securities carried at cost for GE are cash on the Statement of Financial Position (page 26) and the equivalents and are pan of GE's near-term cash manage-Statement of Cash Flows (page 28L As with the Statement ment process to be discussed in connection with cash flows. of Earnings, the content of these two statements for GE GEFS' balance consist 3 primarily of debt securities held by and GEFS is so different that inost of the asset, liability its insurance affiliates in support of their obligation to and cash flow categories do not lend themselves to simple policy holders. combination. This, of course, reflects the differences in the

• Marketable securities carried at market represent nature of the businesses.

primarily the investing and trading [xirtfolio of Kidder, Although GE's manufacturing and nonfinancial services Pealxxly and, to a lesser degree, similar insurance afTiliate activities involve a variety of different businesses, their activities. underlying characteristics are developing, preparing for

• Securities purchased under agreements to resell market and selling tangible pnxlucts and senices. Risk and

(" reverse repurchase agreements") are related to the reward are directly related to the ability to manage those liability account: Securities sold under agreements to actmues. h,nancial levemge comes from realizing an ade-repurchase (" repurchase agreements"). These typically quate return on share owners equity with judicious use of represent highly liquid, short-tenn investments of excess lx>rrowed funds. funds or borrowing of such funds fmm others. At year-GEFS is not a " captive finance company" or a vehide for ends 1988 and 1987, the balances (both assets and liabili- "off-balance-sheet financing" for GE. In fact, vet;y little of ties) were solely those of Kidder, Pealxxly in connection its busmess is directly related to other GE operations. Its with its broker-dealeractivities. pnncipal busmesses pmvide financmg, remsurance and

• GE's current receivables are mainly amounts due broker-dealer services to third parties. The underlying f.mm custmners ($5.3 billion at December 31,1988 and characteristics of these businesses involve the management

$5.5 billion at December 31,1987). Receivables " turned of financial risk. They do not develop, manufacture and over" 7.01 times in 1988 compared with 6.81 times in sell pnxlucts and senices where risk and reward hinge on 1987. (" Turnover" relates receivables to sales and is a customer satisfaction as with, for example, an aircraft measurement of collection efficiency. Higher turnover engine or the delivering of a message over a TV network. indicates faster collections.) GE's trend m this area has been Their risk and reward are related to the ability to provide ' npmving smce 1985 as the result of vigomus manage-u funds at competitive rates coupled with creati. value. nwnt attention to credit and collections. Other receivables added senices. measurements, such as delinquency ratios and amounts These fundamental differences are reflected in the p st due, also have been improving, and the overall condi-measurements commonly used by investors, mting agen-tion of customer receivables remained excellent at the end cies atxl financial analysts. These differences will become f 1988. Current receivables other than amounts owed by clearer in the discussion that follows with respect to the custmners are amounts that did not originate from sales of more significant items in the two financial statements. GE pnxtucts or senices, such as advances to suppliers in connection with large contracts. GE/S&P 500 annual dividends per share increase compared with 1983 60% E' 48 06 ( 24 12 e GE e S&P 500 1984 1985 1986 1987 1988 'l6

e inventories of $6.5 billion at the end of 1988 were Net earnings retained for growth slightly higher than the $6.3 billion at the eixi of 1987. and used for dividends (In dollars per share) . Inventories turned over 4.38 times in 1988 compared with $4.o 4.25 times in 1987. As with receivables, this is a measure-ment of efficient use of resources and has been showing N 3.2 steady improvement in recent years. Principal inventory

q 2A increases were in GE Aiirraft Engines and GE Plastics in anticipation of higher sales. Some of the larger reductions d 1.6 occurred in GE Aerospace and from the sale of the semi-I comiuctor business. In 1988, cost of sales was charged for b

N .8 last-in first-out (LIFO) revaluation of $150 million because " Retained for N N W0 of higher prices. The $324 million increase in the LIFO as revaluation in 1987 was mostly related to the inventory 1984 1985 1986 1987 1988 accounting change discussed in note 1. In 1986, there was a net favorable LIFO adjustment to cost of sales, including a $51 million reduction in LIFO reserves because of e Propert% plant and equipment (including equipment reduced inventory levels mainly in power systems le sed to others) aggregated $ 13.6 billion at December 31, businesses. 1988 and $13.0 billion a year carher. GE's property, plant i and equipment consists ofinvestments for its own pnxiuc-e GEFS' financing receivables grew to $35.9 billion in tive use, whereas the largest element of GEFS' investment i 1988, an $8.0 billion (29% ) increase. Note 17 includes is in equipment that is provided to third parties on operat-extensive information and details about these receivables. ing leases. Details by categories ofinvestment can be found Time sales and loans grew $7.2 billion with all principal in note 19. categories of hians up except "home and recreation financ-GE's total expenditures fi>r new plant and equipment ing." The largest increase ($4.1 billion) was in " retailer during 1988 were $2.3 billion, bringing the total Ior the financing," mainly due to the acquisition of Montgome 7 last five years (excluding the unusually large addition by Ward's credit operations during the year. Investment in acquisition of RCA in 1986) to $10.5 billion. Of that five- " direct financing leases" increased $ 1.0 billion to $8.4 bil-year total,33% was to increase capacity; 25% was to l lion from year-end 1987, and leveraged leases of $2.7 bil. increase pnxluctivity; 13% was to support new business lion were alxiut the same as at the end of the prior year, start-ups; 13% was to replace and renew older equipment; Nonearning and reduced-earning financing receivables and 16% was for such other purposes as improving R&D i were less than 1% of earning assets at the end of each of facilities and safety and environmental protection. Of GE's the last two years. The allowance for losses that is deducted $2.3 billion current year expenditures, about $400 million in arriving at the $35.9 billion balance increased from was attributable to acquisitions of businesses. Current-year $743 million at the end of 1987 to $972 million at year-end depreciation and dispositions of plant and equipment vir-1988. Details of changes in the reserve balance can be tually offset current-year additions. fi und in note 9. These included additions by charging GEFS added $1.5 billion to its equipment leased to operations ($434 million in 1988, $290 million in 1987 and others. Current-year amortization was $665 million. $558 million in 1986) and write-offs of $294 million in e intang.ble assets aggregated $8.6 billion at the end of i 1988, $171 million in 1987 and $46I million in 1986. 1988. The majority of this consolidated total is GE's intan-Overall net loss experience as a percent of average f.manc-gibles, which were $7,0 billion at that date or $2.6 billion ing receivables was 0.81% m 1988,0.62% m, 1987 and inore than a yeanaik.r. ne largest ;x>rtion of GE's bal-2.02% in 1986, a year when large energy-related write-offs were made. At the end of 1988, the reserve coverage on ance (in both gmxlwill and other mtangibles) arose from financing receivables was equal to 2.63% of the receivables balance outstaixling, up from 2.59% at the end of the pre-vious two years. In summary, GEFS' financing receivables are in g<xxl corxlition aral r eserve protection is strorig. i l 37 4

the acquisition of RCA CorJxn ation in 1986. Increases term debt that is due to be paid in 1989, most ofit related during 1988 mainly rellected g(xxlwill from the acquisi-to the RCA acquisition in 1986. GE's total debt at the erxl tions of Ilorg-Warner's chemicals businesses, Roper Cor]xx of 1988 equaled 24.9% of its total capital compared with ration, a TV station in Miami, Fla., and final valuation of 25.1% at the end of 1987. This relationship of debt and CGR medical business assets. equity capital is sound and is within the range of what

• All other assets totaled $8.0 billion at December 31, would be expected of a strong industrially oriented firm.

1988 compared with $6.6 billion a year earlier. These are a GEFS' total lx>rrowings were $39.6 billion at Decem-wide variety ofitems as detailed in note 21. In prior years, ber 31,1988, of which $28.7 billion is due in 1989 and GE's deferred tax asset was included in this category. How. $ 10.9 billion is due in subsequent years. Camparable ever, as a result of the new consolidation, this asset is now amounts at the end of 1987 were: $30.9 billion total; shown as a " negative liability" uruler " deferred iiicome $22.8 billion due within one year; and $8.0 billion due taxes"in the Statement of Financial Position to provide beyond that. The increases were to support the growth in proper consolidation with G EFS' deferred income tax GEFS'carning assets. As noted earlier in this discussion, credit. GEFS' primary business is management of financial risk

• Total borrowings on a consolidated basis aggregated jov tving borrowing money at favorable rates and provid-ng funds to others at higher rates along with creauve

$45.5 billion at December 31,1988. However, borrowings v lue-added senices. GEFS' composite interest rates were must be hx) Led at separately for GE arxl GEFS. The major discussed in connection with the Statement of Earnings. A debt-rating agencies evaluate the fmancial condition of the large ;x>rtion of GEFS' borrowmgs is m the form of com-entities separately because of their distinctly different busi-mercial paper ($24.6 bilhon and $ 18.8 billion at the end of ness characteristics. Using criteria appropriate to each, 1988 nd 1987, respectively). Most of this commercial those major rating agencies continue to give top ratings to paper is issued by G E Capital. Its commercial paper has debt of both GE and GEFS. maturities of up to nine months. The average remaining GE's totalImrrowings were $6.2 billion at the end of terms of GECC's commercial paper were 23 days and 36 1988. long-term lxnTowings were $4.3 billion compared days at the end of 1988 and 1987, respectively. Average with $4.5 billion a year ago, and shon-term borrowings interest rates on GECC's commercial paper were 9.32% were $ l.9 billion compared with $ 1.1 billion at the end of nd 7.73% at the end of those respective years. Ifigher 1987. Short-term borrowings include $ 1.2 billion oflong-1988 rates reflected genemt financial market conditions. "Irverage," the relationship of debt to equity capital, is expected by investors to be much higher in a financial enterprise than in an industrial enterprise. GECC's ratio of debt to equity was 7.67 to 1.00 at the end of 1988 com-pared with 7.98 to 1.00 at the end of 1987.This relation-ship of debt to equity capital is believed to be sound and is appropriate for a highly rated financial senices enterprise. Notes 22 and 26 provide details of short-term and long-term lx>rrowings. Consolidated total assets (In billions) $120 96 72 48 ) 1984 1985 1986 1987 1988 38

Statement of Cash Flows llased on past perfi>rmance and current expectations, in This statement replaces the fiwmer Statement of Changes combination with the financial flexibility that comes with in Financial Position to comply with a new Financial the highest credit ratings, GE is well positioned to continue Accounting Standards lioard requirement. The focus is on making long-term investments fi>r future growth, includ-cash, whereas GE's former statement had a somewhat dif. ing selective acquisitions and investments injoint ventures, ferent orientation on " funds." The new statement empha. to enhance share owner investment. ] sizes cash flows from three broad categories-operating GEFS activities, investing activities and firumcing activities. Inas-GEFS' principal source of cash is financing activities that much as the cash management activities ef GE and GEFS involve continuing rollover of short-term borrowings aixi are separate and distinct, it is more useful to review the appropriate addition of long-tenn borrowings, with a rea- ) separate cash flow statements than the consolidated sonable balance of maturities. Over the past three years, statement. GEFS' borrowings with 90-day or less maturities have G,E increased a total of $ 11.8 billion. New borrowings of GE's cash and equivalents (cash and marketable securities) $24.3 billion having maturities longer than 90 days were l aggregated $ l.9 billion at the end of 1988, a decrease of added during those years while $21.1 billion of such $789 million during 1988. Net cash of $773 million was longer-term lxwrowings were paid off. genemted in 1987, while there was a net cash usage of GEFS' principal appliation of cash has been in invest- $638 million in 1986. ing activities to grow the business. Of the $22.8 billion GE's largest source of cash is its own operations. These of net investments by GEFS over the past three years, have provided an aggregate of more than $11 billion of $14.3 billion was devoted to additional financing receiv-cash over the last three years. The largest ongoing uses of ables. Other principal investments during these yean were l cash by GE are usually expenditures fin new plant and $ 1.7 billion to acquire new businesses as GEFS expamis its equipment, which aggregated $5.6 billion over the past activities and $3.1 billion fin new equipment, which is three years (included in investing activities) and dividends mainly for lease to others. to share owners, which aggregated $3.5 billion during the The difference between cash used fiw new investments last tin ee years (included in financing activities). Thus, and cash provided from additionallxwrowings has been l GE's operating activities have provided more than enough met mainly by generation of $7.3 bill:on of cash from cash to cover these basic corixwate activities and to gener. operating activities for the years 1986-1988 and from issu-ate cash for other endeavors. ance of $0.6 billion cumulative variable preferred stock by In 1986, GE paid $6.4 billion for RCA ($6.I billion GE Capital in 1988. GEFS' cash and equivalents balance excluding RCA's cash on hand at the time).This tuiuired has remained relatively stable throughout the period-lxwrowing $3.4 billion oflong-term debt. Some short-term again in keeping with its business mission. debt also was issued at the time, but it was promptly repaid in summary, based on past performance and current by a combination of dispositions of certain RCA businesses expectations, in combination with the financial flexibility and cash provided from operations. In 1988, GE made that comes with excellent credit ratings GEFS is well i several acquisitions, the principal ones of which required lx>sitioned to continue growing its earning assets and to cash outflow of $3 billion. These acquisitions were paid for produce a gmxt rate of return on GE share owners' invest-partly from cash on hand and partly from new lxwrowings. ment in GEFS. j These acquisitions more than accounted for the $789 mil-I lion rnluction in cash-equivalent balances noted above. ] l { 39

Management \\ Discussion ofSelected Financial Data Selected financial data summarizes on one page some data acquisition. Current total employment levels are now frequently requested about General Electric Company and slightly below where they were at the end of 1985, provides a record that may be useful in reviewing trerxis. although revenues have increased 54% since that year. The data on the opposite page are presented in a different GE's total backlog of unfilled orders at the end of 1988 was fi>rmat than in previous years. The upper portion presents $27.3 billion. Orders constituting this backlog may be can-infijnnation on the basis of the new consolidation. Follow-celed or deferred by customers (subject in certain case, to ing that are certain data that reflect GE opemtions with cancellation penalties). Comments on unfilled orders fi>r various traditional measurements appropriate to the GE Aircraft Engines and GE Aerospace (which together industrial businesses. Finally, there is a section providing make up over 70% of the year-end 1988 backlog) can be key infi>rmation and ratios pertinent to GEFS. Certain found in the discussion of Industry Segments, which additionalcomments arxlinformation fi>llow. begins on page 32. About 49% of the 1988 total unfilled q GE's total research and development experxlitures were orders is scheduled to be shipped in 1989 with most of the j $3.6 billion in 1988. Of this, $ 1.2 billion was from GE's remainder to be shipped in the two years after that. For j own funds and $2.4 billion was from funds provided by comparison, atx>ut 57% of the 1987 backlog was expected customers, mainly the U.S. government. Comparable to be shipped in 1988. amounts fi>r 1987 were: total expenditures- $3.0 billion; Unfilled orders fi>r export of all types of products and Company-fu nded - $ 1.2 billion; and customer-funded - services from the United States were $8.2 billion at Decem- $ 1.8 billion. The increase in customer furxis in 1988 was ber 31,1988, up from $6.0 billion the year befi>re. The mainly for GE Aerospace projects. During the years backlog of aircraft engine orders increased by almost 60% 1984-1988, GE's total R&D expenditures from all sources and made up a large majority of the 1988 unfilled export of funds aggregated almost $ 15 billion. orders backlog. Consolidated worldwide employment at the end of each inflation has not been a significant factor in consolidated of the last five years, segregated between GE and GEFS,is net earnings growth in recent years because of the rela-depicted in the chart below. The table on the opposite tively modest rate of price increases in the economies of page presents the same data with respect to employees the United States and of the principal fbreign countries h>cated in the United States and in other countries. The where the Company has operations. increase in employees in 1986 was because of the RCA Regarding environmental matters, the operations of the Company, like those of other companies engaged in simi-lar businesses, involve the use, disposal and cleanup of l substances regulated under environmental protection laws. While it is extremely difficult to quantify the poten-tial impact of actions regarding environmental matters, particularly remediation efforts that the Company may undertake in the future, in the opinion of management compliance with the present laws governing environmen-tal protection will not have a material effect on the Com-pany's expenditures, earnings or competitive position. Consolidated employment at year end (In thousands) 375 9 300 di 225 4 , 150 0 75 m GEFS 0 + e GE I 1984 1985 1986 1987 1988 40

Selected FinancialData 1 (Dollar amounts in millions; per-share amounts in dollars) 1988 1987 1986 1985 1984' 1 General Electric Company and consolidated affiliates _j Revenues $ 50,089 $ 48,158 $ 42,013 $ 32,624 $ 31,442 ' ] Earnings before extraordinary loss and curnulative j effect of accounting changes 3,386 2,119 2,492 2,277 2,239 l Net earnings 3,386 2,915 2,492' 2,277 2,239 Dividends declared 1,314 1,209 1,081 1,020-930 Earned on average share owners' equity 19.4 % 18.5 % 17.3 % 17,5 % 19.0 % Pershare Net earnirtgs 3.75 $ 3.20 $ 2.73 $ 2.50 $ 2,47. Dividend 3 declared 1,46 1.32 % 1.18 1.11 1.02 % Stock price range 47 %-38 % 66 %-38 % 44 %-33 % 36 %-27 % 29 %-24 % Total assets 110,865 95,414 84,818 49,123 43,860 long-tenn Ix>nuwings 15,082 12,517 10,001 5,577 4,818 Shares outstanding-average (in thousands) 901,780 911,639 912,594 910,762 907,360 Share owner accounts-average 529,000 491,000 492,000 506,000 520,000 J Employees at year end Domestic 255,000 277,000 302,000 243,000 255,000 Foreign 43,000 45,000 71,000 56,000 68,000 i Totalemployees 298.000 322,000 373,000 299,000 323,000 j GE data Short-term borrowings $ 1,861 $ 1,110 $ 1,813 $ 1,297 $ 1,047 ~ long-tenn bonuwings 4,330 4,491 4,351 753 753 Minority interest 228 190 189 126 128 Share owners' equity 18,466 16,480 15,109 13,671 12,398 Totalcapitalinvested $ 24,885 $ 22,271 $ 21,462 $ 15,847 $ 14,326 Return on average total capital invested 16.4 % 14.7 % 13.9 % ' 16.2% 17.6 % llorrowings as a percentage of total capital invested 24.9 % 25.1 % 28.7 % 12,9 % 12.6% Current assets $ 15,499 $ 15,739 $ 14,288 $ 12,546 $ 11,552 Current liabilities 13,419 12,671 11,461 8,919 8,607 Working capital $ 2,080 $ 3,068 $ 2,827 $ 3,627 $ 2,945 Propeny, plant and equipment additions (other than by acquisition of RCA) $ 2,288 $ 1,778 $ 2,042 $ 1,953 $ 2,419 i Year-end orders backlog 27,265 22,737 23,943 23,117 22,577 i GEFS data Earnings before extraordinary loss and cumulative effect of accounting change 788 $ 552 S 504 $ 413 $ 329 Net earnings 788 1,008 504 413 329 l Sharc owner's equity 4,819 3,980 2,994 2,302 1,874 Earned on average share owner's equity 18.0 % 18.0 % 19.7 % 19.9 % 19.1 % llorrowings from others $ 39,593 $ 30,885 $ 23,397 $ 16,393 $ 13,402 Ratio ofdebt to cquity (GE Capital) 7,67:1 7.98:1 7.83:1 7.89:1 7.97:1 Earning assets of financing businesses $ 42,173 $ 32,423 $ 25,169 $ 20,169 $ 17,054 Reserve coverage on financing receivables 2.63 % 2.59 % 2.59 % 2.57 % 2.54 % Insunmcc premiums written $ 1,809 $ 1,729 $ 1,704 $ 1,092 $ 637 Securities broker <lealer earned income 2,316 2,491 1,176 See notes I and 26 to the consolidated hnancial statements for information about 1987 anounting < hanges and extraordinary loss, aH notes 2 and 3 for information alxaut at quisitions and related matters. "GE" means the former basis of consolidation as described in note I to the I mnsohdated financial statements: "GEFS" means General Elect ric Financial Services, Inc. and all of its afhliates and associated mmpanies. l Transactions between GE and GEFS have been eliminated f rom the "mnsolidated data." Share data reflect the 2-for I stm k split in Apr il 1987. l

l l

Management's Discussion ofFinancial Responsibility The financial information in this repon, including the Peat Marwick Main & Co. provide an objective, inde-audited financial statements, has been prepared by man-pendent review of management's discharge ofits obliga-i J agement. Preparation of financial statements and related tions relating to the faimess of reported operating results data involves estimates and the use ofjudgment. Account-and financial condition. Their repon for 1988 appears on ing principles used in preparing the financial statements the opposite page, are those which are generally accepted in the United The Audit Committee of the lloard (consisting solely States. These principles are consistent in most important of Directors from outside GE) maintains an ongoing respects with standards issued by the International appraisal-on behalf of share owners-of the effective-Accounting Starxiards Committee. Where there is no sin-ness of the independent public accountants, the Com-gle specified accounting principle or standard, manage-pany's staff of corporate auditors and management, with ment makes a choice from reasonable, accepted respect to the financial reporting process, and of the ade-alternatives, using meth(xis which it believes are prudent quacy of internal financial controls. The committee also for General Electric Company and its consolidated reviews the Company's accounting policies, internal alTiliates. accounting controls, and the Annual Re[x3rt and proxy To safeguard Company assets, it is important to have a material. sound but dynamic system ofinternal financial controls and procedures that balances benefits and costs. One of the key elements ofinternal financial controls has been the Company's success in recruiting, selecting, training and developing professional financial managers. Their responsibilities include implementing and overseeing the John E Welch,Jr. financial control system, reporting on management's Chairman of the lloard and stewardship of the assets entrusted to it by share owners, Chief Executive Of ficer and performing accurate and proper maintenance cf the accounts. A Management has long recognized its responsibility fbr corxtucting the affairs of the Company and its affiliates in Dennis D. Dammerman an ethical and socially res[xmsible manner General Electric Senior Vice President Company is dedicated to the highest standards ofintegrity. Finance Integrity is not an occasional requirement but a continuing commitment which is reflected in key written policy state-February 10,1989 ments. These cover, among other subjects, potentially con-flicting outside business interests of employees, compliance with antitrust laws, and proper domestic and international [ business practices. Management insists on maintaining the highest standards of conduct and practices with respect to transactions with the United States govenunent. There is continuing emphasis to all employees that even the appearance ofimpropriety can erode public confidence in the Company atxt in the government procurement process. Ongoing education, conununication and review progmms are designed to create a strong compliance envi-ronment and to make it clearly understmxt that deviation from Company policies will not be tolerated. 1 42

Independent Auditors' Report 1 To Share Owners and Board of Directors of GeneralElectric Company We have audited the accompanying statement of financial . position of Genem! Electric Onnpany and consolidated a filiates as of December 31,1988 and 1987 and the r related statements of earnings and cash flows for each of the years in the three-year peri <d erxled December 31,' 1988. These consolidated financial statements are the irs;xmsibility of the Ccanpany's management. Our resixm-sibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assur-ance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disch>. sures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We helieve that our audits provide a reasonable basis for our opinion. In our opinion, the aforementioned financial statements appearing on pages 24-29 and 44-70 present fairly,in all material respects, the financial position of General Electric Company and consolidatext affiliates at December 31,1988 and 1987, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31,1988,in conformity with generally accepted accounting principles. As discussed in note I to the consolidated financial state-ments,in 1988 the Company changed its meth<xl ofinclu-sion of previously unconsolidated affiliates; and in 1987 the Onnpany changed its meth(xis of accounting for income taxes arul overhead recorded in inventory. We concur with these accounting changes. b d hA wrde._ Y $- 1 Peat Marwick Main & Co. l i Stamford, Connecticut February 10,1989 t 43

i Notes to Consolidated Financial Statements i s { Summary of Significant Accounting Note Subject Page Note 1 Summary of Significant Accounting Policies j Policies 14 2 GE Acquisitions and Related hfatters 48 Consolidation and financial statement presentation 3 GEFS Acquisitions and Related hiatters 49 In 1988, GE was required to adopt two new Statements of 4 GE Other Income 49 Financial Accounting Standards (SFAS): SFAS No. 94 - 5 GEFS Earned Income 50 " Consolidation of All hiajority-Owned Subsidiaries"; and .6 Supplemental Cost Details (excluding SFAS No. 95 " Statement of Cash Flows."These changes unusual expenses) 50 are in addition to changes made in 1987 to implement 7 Pensions and Other Retiree lienefits 51 SFAS No. 96 " Accounting for Income Taxes" and to 8 Interest and Other Financial Charges 52 modify GE's accounting procedures to include in inven-9 GEFS Allowance for losses on Financing tory certain manufiicturing overhead costs previously Receivables 52 charged directly to expense. 10 Unusual Expenses 52 Consolidation.The consolidated financial statements now l 11 Provision for Income Taxes (excluding 1987 represent the adding together of all companies in which i ext raordinary item and cumulative effect General Electnc Company directly or inch.rectly has a changes in accounting principles) majority ownership or othenvise controls (" affiliated com-P"" .In fhe past, results of financial senices affiliates { 13 Markerable Securities Carried at Cost 55 -

• P"""P '.

"# ices, Inc. (gel 5 or GE h.Enanaal Senices) and. ""ffih 14 GEFS Marketable Securities Carried its a at Market 5a-companies-were included on the equity basis as one h.ne 15 GE Cunent Receivables 55 in Jot 1 earnings and net assets. This was pernussible under 16 GE Inventories 55 pnor rules and, because fmanaal services operations are so 17 GEFS Financing Receivables (investment different in nature from and essentially unrelated to oper- ".tions of other GE businesses, management believed that 18 Ot ie E ece !I f ri r I les hnana,al statements wenunon undentandable if GEFS to firokers and Dealers 57 statements were sWwn sepamte$ It shouh emplia-19 Property, Plant and Equipment (including sued that, using the new consolidau,on procedure, i equipment leased to others) 57 Conso ak net e n ngs and stiam ownen equhy am 20 Intangible Assets 58 unchanged for all periods presented. However, substan. 21 All Other Assets 58 tially more det;ul is reqmred under the new standard than Short Fenn Borrowings 59 / 22 un em es previously m effect. Also as a result of this 23 Accounts Payable 59 change, We Cmnpany adopted an unclassified consoh-24 GEFS Securities Sold but Not Yet dated statement of financial position. Purchased, at Market 59 Man genent bcHeves it is important to preserve as 25 GE All Other Current Costs and Expenses mu 1 5 Po3S w nmy w Pnn Pal finanaaMata 1 Accrued 59 and related measurements to which share owners and 26 longJrerm florrowings 60 %wn hadecmne accusmned medm yean. Acconb 27 GE AllOther Liabilities 62 ingly, ainsolidated huanc,ial statements and notes now are 28 Minority Interest in Equity of Consolidated generally presented in a fonnat that mcludes data gnmped Affiliates 62 hamah as foHows. 29 Share Owners' Equity 63 30 Other Stock-Related Infonnation 63

• GE-this is essentially the fbnner basis of consolida-i 31 Commitments and Contingent Liabilities 64 tion except that it includes some very small financial serv-32 Supplemental Cash Flows Information 64 ices affiliates previously not consolidated. The effect of 33 Industry Segment Details 65 transactions among companies within this group has been 34 Geographic Segment information eliminated. Where appropriate for clarification or empha-(consolidated) 69 sis, p rticularly in the notes, this group of entities also is 35 Quarterly Infonnation (unaudaed) 70 mfened to as "GE except GEFS."
• GEFS-this affiliate owns all of the common stock of General Electric Capital Corporation (GECC or GE Capi-tal) and of Employers Reinsunmce Cor]x> ration (ERC) 44

and 80% of the stock of Kidder, Peabody Group Inc. Virtually all products financed by GECC are manufac-(Kidder, Pealxxly). These alTiliates and their respective tured by companies other than GE. -l affiliates are consolidated in the GEFS columns with the There is no change in method for consolidating compa-l effect of transactions among them eliminated before the nies in which GE or GEFS owns between 20% and 50% consolidated presentation. (" associated companies"). Results of these companies are e Consolidated - these columns represent the adding stillinduded on a one-line basis. together of GE and GEFS. However, it is necessary to Cash flows. SFAS No. 95 now requires a Statement of remove the effect of transactions lxtween GE except Cash Flows in place of the fonner Statement of Changes in l GF;FS and GEFS to arrive at a consolidated total. The Financial Position.Tiie principal result (in addition to con-l "chmmations" used to arrive at these consolidated totals solidation) is to present analytical data of cash flow items are summarized below. rather than the former focus on changes in cash and mar. Eliminations ketable securities less short-term borrowings for GE other { (In millions) 1988 1987 1986 than GEFS. For purposes ofimplementing this standard, rnarketable securities of G except GEFS are treated as Statement of Earnings Sales of goods 5 (5) $ cash equivalents. Certam of the securities so treated have Sales of services (26) (8) (5) maturities ranging between 90 and 365 days; but, as part t Other income (5) 6 6 of GE's cash management program, maturities are sched-l 1i$ uled based on contemplated cash needs for the ensuing ( 12 months. GEFS' amounts classified as " marketable secu- .Fotal revenues (858) (583) (526) nties carned at cost', and " marketable securities carried at Cost of goods sold (5) arket" are not treated as cash equivalents m the State-Cost of services sold (26) (8) (5) Interest and other financial ment of Cash Flows. charges (29) (10) (9) Prior-year statements have been restated or reclassified Other costs and expenses (10) (13) (8) "* "P E* P""#" '"" """ "* to ie presentadons Total costs and expenses (70) (31) (22) required by SFAS Nos. 94 and 9a.. Earnings before income taxes, extraordinary item Pensions and other retirement benefits. Accounting poli-and cumulative effect of cies for pensions and other retirement benefits are dis-accouming changes (788) (552) (504) cussed in note 7. Extraordinary item 62 Income tax accounting income taxes. SFAS No. 96 " Accounting for income (hange (518) Taxes" was issued by the Financial Accounting Standants Net earnings S (788) $(1.008) $ (504) lloard in December 1987. A requirement of SFAS No. 96 Statement of Financial Position is that deferred tax liabilities or assets at the end of each GE current receivables $ (330) $ (37) period be determined using the tax mte expected to be in i bi [Os (1 yffect when taxes are actually paid or recovered. Accord-Investment in GEFS 0.819) (3.980) mgly, under SFAS No. 96 rules, income tax expense provi-Total assets $(5.363) $(4.292) sions will increase or decrease in the same period in which a change in tax rates is enacted. Previous rules regtured Short-term borrowings 5 (170) $ (85) Accounts payable (261) (216) providing deferred taxes using rates in ef fect when the tax long-tcnn borrowings (i10) (II) asset or liability was first recorded without subsequent Totalliabilities (514) (312) adjustment solely for tax-rate changes (except with respect GEFS equity (l.819) (3.980) to leveraged leases). Totalliabihties and equity $(5.363) $(4.292) In conformity with SFAS No. 96 transition rules, the Statement of Cash Flows Company elected to adopt the new income tax accounting Net earnings (operating during 1987.The cumulative effect toJanuary 1,1987 activities) $ (13) $ (213) $ 483 ($577 million, including $518 million for GEFS) of the change is shown in the 1987 columns of the Statement of Fi g s 1 ) Earnings. Also, as required, quanerly earnings reported Tel for 1987 were restated for the effect of this change on interim quarters in 1987 as ifit had occurred atJanuary 1. Restated quarterly amounts can be found in note 35. l 45

1 GE accounting policies Origination, commitment and other nonrefundable fees I Sales. A sale is recorded when title passes to the customer relmed to furxtings are deferred and recorded in earned inc me on the interest method. Commitment fees related oc when senices are perfonned in accordance with to loans not expected to be funded and line-of-credit fees contracts. are deferred and recorded in earned income on a straight-Investment tax ca edit (lTC). The ITC was repealed, with linasis over the period to which the fees relate. Syndica-some transitional exceptions, effectiveJanuary 1,1986. tion fees are recorded in earned income at the time the Ilowever, for fmancial reporting purposes, GE has. related senices are perfonned unless significant contin-deferred recognition of the ITC each year and contmues gencies exist, to amortize ITC as a reduction of the provision for income In 1987, GEFS adopted Statement of Financial taxes over the lives of the facilities to which the credit Accounting Standards No. 91 " Accounting for Nonre-pphes. fundable Fees and Costs Ass (x:iated with Originating or Inventories.The valuer 9f most inventories are deter-Acquiring loans and Initial Direct Costs of Leases," which mined on a last-in first-out, or LIFO, basis and do not modified certain accounting principles that apply to non-exceed realizable values. EffectiveJanuary 1,1987, GE refundable fees and costs associated with lending and leas-changed its accounting procedures to include in inventory ing activities. GEFS' accounting practices with respect to certain manufacturing overhead costs previously charged such fees and costs already confonned substantially to the i directly to expense. Among the more significant types of requirements of SFAS No. 91,and, accordingly, the effect j manufacturing overhead included in inventory as a result of adopting the new accounting standard in 1987 was not i of the change are: depreciation of plant and equipment; material. pension and other benefits of manufacturing employees; Kidder, Pealxxly's proprietary securities and commodi-and certain product-related engineering expenses. The ties transactions are recorded on a trade-date basis. Trad-Company believes this change was preferable because it ing and investment securities are valued at market or provides a better matching of pnxiuction costs with estimated fair value. Unrealized gains and losses on open related revenues in reporting operating results. In accord-contractual commitments, principally financial futures, ance with generally accepted accounting principles, the when-issued securities and forward contracts on U.S. gov-cumulative effect of this change for periods prior tajanu-ernment and federal agency secmities, are reflected in the ary 1,1987 ($281 million after providing for taxes of Statement of Farnings on a trade-date basis. Customers' $215 million) is shown separately in 1987 in the Statement transactions and the related revenues and expenses are of Earnings on page 24. There was virtually no effect from reflected in the financial statements on a settlement-date this change on 1987 results after recording the cumulative basis. Revenues and expenses on a trade-date basis are not effect, ami the pro forma effect on prior-years results materially different. Investment banking revenues from l was immaterial. management fees, sales concessions and underwriting fees Depreciation, depletion and amortization. The cost of are recorded on settlement date. Advisory fee revenue is most manufiteturing plant and equipment is depreciated recorded when sersices arr. substantially completed and j using an accelerated method based primarily on a sum-of. the revenue is reasonably detenninable. the-years digits formula. If manufacturing plant and See " insurance affiliates" on page 47 for inforrnation equipment is subject to abnonnal economic conditions or with respect to earned income of these businesses. obsolescence, additional depreciation is provided. Allowance for losses on financing receivables. G EFS maintains an allowance for losses on financing receivables GEFS accounting policies at an amount which it believes is sufficient to provide ade-Methods of recording earned income. Income on all loans quate protection against future losses in the portfolio. For is earned on the interest method. For loan contracts on small-balance and certain large-balance receivables, the which finance charges are precomputed, finance charges allowance for losses is determined principally on the basis are deferred at the time of contract acquisition. For loan of actual experience during the preceding three years. contracts on which finance charges are not precomputed Additional allowances are also recorded to reflect manage-but are billed to customers, income is recordtd when ment'sjudgment of additional loss potential. For other earned. Accrual ofinterest income is suspended when col-receivables, principally the larger loans and leases, the lection of an account becomes doubtful, generally after the account becomes 90 days delinquent. Financing lease income that includes related investment tax credits and residual values is recorded on the interest ) method so as to pnxluce a level yield on funds not yet recovered. Unguaranteed residual values induded in lease income are based primarily on independent appraisals of 1 the values ofleased assets remaining at expiration of the } lease tenus.

. allowance for losses is determined primarily on the basis of reflect defen al and amortization of cocts (primarily com-management'sjudgment of net loss potential, including missions) of acquiring premiums, and net the effects of - specific allowances for known troubled accounts. certain specialty reinsurance transactions. All accounts or portions thereof deemed to be uncollec-Premiums on short-duration insurance contracts are tible or to require an excessive collection cost are written sqx>rted as earned income over the terms of the related off to the allowance for losses. Small-balance accounts are reinsurance treaties or insurance policies. In general, progressively written down (from 10% when more than earned premiums are calculated on a pro-rata basis or are three months delinquent to 100% when more than 12 determined based on re[x>rts received from reinsureds. months delinquent) to record the balances at estimated Premium adjustments under retrospectively rated reinsur-realizable value. Ilowever, if at any time during that period ance contracts are recorded based on estimated losses and an account isjudged to be uncollectible, such as in the case loss expenses, including both case and incurred-but-not-of a bankruptcy, the remaining balance is written off, reported (IllN R) reserves. Revenues on long-duration Larger-lxdance accounts are reviewed at least quarterly, contracts are reported as earned when due. and those accounts which are more than three months Deferred insurance acquisition costs are amortized as delinquent are written down, if necessary, to record the the related premiums are earned for property and casualty balances at estimated realizable value. business or over the premium-paying periods of the con. Marketable securities. hlarketable securities of Kidder, tacts in proportion to anticipated premium income for j Pealxxty are carried at market value with the difference life insm nce business. Deferred insurance acquisition between cost and market value included in operations. c sts are reviewed for recoverability, and, for short dum-j hlar ketable debt securities held by all other GEFS affiliates tion contracts, anticipated investment income is considered are carried at amortized cost. hlarketable equity securities in m king recoverability evaluations. I ofinsurance affiliates are ca: Tied at market value, and The estimated liability fi>r outstanding losses arxl loss unrealized gains or losses, less applicable deferred income expenses consists of case reserves based on re[xnts and taxes, are recognized in equity. estimates oflosses arul an lilNR reserve based primarily on experience, except where experience is not sufficient, Securities purchased under agreements to resell (reverse in which case industry averages for the particular insur-repurchase agreements) and securities sold under agree-ance pr xtucts are used. Estimated amounts of salvage and ments to repurchase (repurchase agreements). Repur-subrogation recoverable on paid and unpaid losses are I chase and reverse repurchase agreements are treated as deducted from outstanding losses. The liability fi>r future fmancing transactions and are camed at the contract I olicy benefits of the life insurance affiliates has been com-amount at which the securities subsequently w,ll be resold ( pmed minly by a net-level-premium method based on or reacquired. Repurchase agreements relate either to asseptims fm investment yields, mortality and termina-marketable securities, which are carried at market value, tions that were appropriate at date of purchase or at the or to securities obtanxxl pursuant to reverse repurchase time the policies were developed, including provisions fi>r agreements. It is GEFS' policy to take possession of secun,- adverse deviations. ties subject to reverse repurchase agreements. GEFS mon- [ itors the market value of the underlying securities in ( relation to the related receivable, including accrued inter-est, arx1 requests additional collateral if appropriate. Depreciation and amortization.The cost of equipment leased to others on operating leases is amortized, princi-pally on a straight-line basis, to estimated net salvage value over the lease term or the estimated economic life of the equipment. Depreciation of property and equipment for GEFS' own use is recorded on either a sum-of-the-years digits or a straight-line basis over the lives of the assets. investment tax credit (ITC). ITC associated with equip-ment on operating leases and buildings and equipment is defenul and amortized over the lives of the underlying assets. Insurance affiliates. The accounts ofinsurance affiliates are adjusted from accounting practices prescribed by state insurance regulatory authorities to a " generally accepted accounting principles" basis. The principal adjustments 47

f Nota [~ GE Acquisitions and Related Matters. . In June 1986, GE acquired RCA Corporation and its . subsidiaries in a transaction for which the total con-During 1988, GE completed a number of acquisitions sideration to fonner RCA shareholders was $6.4 billion in f Thelargest of these were: cash. RCA businesses included the manufacture and sale j e Roper Corporation, acquired in April for $507 mil-of a wide range of electronic products and related research -l lion cash. Roper's principal businesses were the manufac-and services for consumer, commercial, military and space j ture and sale of gas and electric ranges ext outdoor power applications; the National Broadcasting Company's radio l garden equipment. In December, GE sold Roper's garden and television stations and network broadcasting services; equipment business for $295 million cash. Roper's kitchen and domestic and international message and data commu-appliance business has annual sales of about $375 million. nications sersices. e Borg-Warner's chemicals bus.inesses, acquired in Sep. The acquisition was accounted for as a purchase, arxl tember for $2.3 billion cash. These businesses (annual the operating results of RCA have been consolidated with sales of about $ 1.6 billion) manufacture and sell products those of GE sinceJune l,1986. The purchase price was allocated to the assets and liabilities of RCA based on complementary to GE's plastics businesses. Both of these acquisitions were accounted for as pur-appraisal arxl evaluation studies completed during 1987 .chamith the excess of purchase price over the estimate and to gcxxlwill ($3.7 billion), which is being amortized on of fair values of net assets acquired recorded as goodwill. a straight-line basis over 40 years. See note 20. Unaudited pro fonna results of operations of GE except Business dispositions during 1988 included most of the GEFS for the year 1986, assuming RCA had been acquired GE Solid State (semiconductor) business; seven of NBC's at the beginning of that year, would have been sales of eight radio stations; RCA Global Communications, Inc. $38,997 million, net earnings of $2,471 million and net (a provider ofinternational communications services); and earnings per share of $2.71. These pro forma opemting - Sadelmi-Cogepi, a foreign construction firm. Cash pro-results were prepared in 1986 based on estimates and ceeds from these transactions aggregated atx)ut $700 mil-assuniptions including purchase price alk> cation. Final lion. Aggregate annual sales of these businesses were purchase price allocation would not have changed the pro about $900 million. f rma results significantly. Such pro forma results are not There was no material effect on GE's business from necessarily indicative of the consolidated results that would these 1988 acquisitions and dispositions. ham ten reported if the RCA acquisition had actually On December 31.1987, GE and a French electronics occurred at the beginning of 1986. company, Thomson, S.A., completed a transaction in In accordance with agreements with agencies of the which GE acquired Thomson's medical equipment busi-United States government concerning the RCA acquisi-ness (CGR) and Thomson acquired most of GE's consumer ti n, GE was required to sell its small military vidicon busi-electronics business. The total transaction included cash ness (which sale was completed in 1986). received by GE of about $560 millimt CGR's 1987 sales of Also sold during 1986 were activities involving audio atx>ut $800 million came mainly fmm digital x-ray, mam-tapes and records, carpets, an insurance subsidiary and a mography, computed tomography, ultosound and related p trolio ofsecurities investments. These transactions sales and sersice in Europe and Latin America. GE's con-were for an aggregate cash amount of about $1.4 billion. sumer electronics business included mainly GE and RCA Subsequent event brand television sets, VCRs and audio products with sales of about $3 billion annually GE will continue for some In January 1989, GE reached agreements with General time to receive royalty income from patents related to con-Electric Company plc. (GEC), an unrelated corporation in sumer electronics products. Other related closings, princi-the United Kingdom, to combine European business inter-pally for offshore consumer electronics operations, toni ests in appliances, medical systems, electrical controls and, i place in 1988. CGR's assets and liabilities were included in potentially, gas turbines. Fourjoint ventures are contem-GE's December 31,1987 Statemerit of Financial Position plated with the specific corporate organizations yet to be based on preliminary, estimated data that were reviewed decided. Besides the businesses and resources to be con-and completed during 1988. Consumer electronics' assets tributed by the parties to these ventures, GE will pay to and liabilities were removed from GE's 1987 year-end bal-GEC a cash consideration of approximately f325 million ances. The net asset value of the offshore operations sold ($580 million). Subject to requisite governmental approv-to Thomson in 1988 was carried in "all other assets" at als, completion of the transactions is expected in 1987 year end. mid-1989. j Also during 1987, activities involving a "new products" { division and NBC's radio networks were sold for cash aggregating about $90 million and a note for $3 million. I in addition, GE donated RCA's David Sarnoff Research l Center to a not-for-profit organization in 1987. The effect of these 1987 transactions was not material. 1 48

Note 3 GEFS Acquisitions and Related acquisition"). In October 1986, Kidder, Peatxnly Group Matters Inc. was organized as the holding company parent of Kidder, Pealxxly & Co. Incorporated. InJune 1988, as pan of the management-led acquisition The Kidder, Pealxxly acquisition was accounted fi>r as a of Montgomery Ward & Co., Incorporated (h!ontgomery purchase, and, accordingly, the purchase price was allo-Ward) from Mobil Corporation, GE Capital acquired cated to the assets and liabilities of Kidder, Peatxxty based - hiontgomery Lrd's credit operations comprising hiont-on estimates of fair market values.The excess purchase gomery Ward Credit Corporation (NIW Credit) and certain price over estimated fair value of net assets acquired i related assets (collectively with htW Credit, h1W Credit (gcxxlwill)is being amortized on a straight-line basis over [ Operations) for a cash purchase price of $718 million. 30 years. GE Capital and Kidder, Peatxxly acquired 40% and 10%, If the Kidder, Pealxxly acquisition had occurred onJan-respectively, of hiontgomery Ward's common stock for a uary 1,1986, management estimates that earned income cash purchase price of $4 million and $1 million, respec-and net earnings of GEFS for the year ended December tively. In addition, GE Capital and Kidder, Pealxxly paid 31,1986 would have been $6,691 million and $516 mil-I cash of $82 million and $8 million, respectively, for pre-lion, respectively. Such results are not necessarily indicative ) ferred stock in hiontgomery Ward. The management-led of those that might have occurred had the acquisition acquisition of h1ontgomery Ward was partially financed taken place at the beginning of 1986. There would not by GE Capitalin the fonn of a $275 million subordinated have been any significant pro fonna effect on consolidated loan. net earnings per share from this transaction. The acquisition of the N1W Credit Operations was j accounted for as a purchase, and, accordingly, the pur-FGIC Corporation chase price was alkicated to the assets and liabilities of htW During hiarch 1988, GE Capital increased its investment Credit Operations based on estimates of fair value. The in FGIC Corporation (FGIC) by purchasing common excess purchase price over estimated fair value of net stock and convertible preferred stock of FGIC from certain assets acquired (g(xxlwill) is being amortized on a straight-institutionalinvestors for $74 million in cash. After con-line basis over 20 years. version of all the preferred stock into common stock in l If the preceding transactions had occurred onJanu-September 1988, GE Capital owned 38% of FGIC's out-l ary 1,1988 orJanuary 1,1987, management estimates standing common stock. In November and December that GEFS results of operations fi>r the years ended 1988, GE Capital entered into separate agreements with December 31,1988 and 1987 would have been as follows. four institutional investors providing fi>r the purchase by l (in millions) 1988 1937 GE Capital of an additional 44% of the outstanding FGIC l common stock for $283 million in cash. Although subject Earned income $10,889 $8,702 to regulatory approvals, these purchases are expected to Earnings befor,e extraordinary item be completed during the first quarter of 1989, at which j and cumulauve effect of change m accounting principle 784 579 time GE Cap. l.ita mtends to acquire the remaining out-Net earnings 784 1,035 standing common stock of FGIC. The atx)ve unaudited pro fonna infonnation has been prepared based on assumptions that management deems Note 4 GEOtherincome appropriate, but the results are not necessarily indicative of those that might have occurred had the acquisitions taken Other income of GE except GEFS is summarized in the place at the beginnings of the respective years.The resuhs table below. of hlW Credit Operations have been consolidated with U " "#"'s) 1988 1987 1986 l GEFS since the date of acquisition. There would not have been any significant pro forma effect on consolidated net Royalty and technical carnings per share from this transaction. agreements $ 359 $ 283 $ 232 j M rketable securities and bank i In July and December 1987, GECC acquired the out. stamiing capital stock of D&K Financial Corp <mition Ashhcompanies ( (D&K) and Gelco Corporation (Gelco), respectively, fbr an customer financing 38 52 78 i aggregate purchase price of approximately $535 million. Other invesunents 13 15 (i2 lloth entities are in the business ofleasing vehicle fleets fjt{r st and other equipment. T he acquisitions were accounted Ihr omer sundry items 45 101 269 as purchases. Results of operations of the acquired corpo- $ 680 $ 649 $1.010 rations have been included in GE Capital since their j respective dates of acquisition and are not material. Other sundry items included gains of $8 million in 1987 OnJune 11,1986, GEFS acquired (br approximately compared with gains of $178 million in 1986 from sales of i $600 milh,on m cash and notes an 80% interest m Kidder, portions of GE's long-held passive investment in equity Pealxxly & Co. Incor[x) rated (the " Kidder, Pealxxly securities of Tbshiba Corporation. 49 s

Nota GEFS Earned inccm3 accepted accounting principles, the cumulative effect of a change in tax rates from the rates assumed for a leveraged GEFS earned income is summarized in the table below. lease is recognized in the first accounting peikxl ending on or after the date on which legislation affecting the tax rate (in millions) 1988 1987 1986 becomes law. For leveraged leases, this accou nting effect Time sales, loan, investment and was a reduction in 1986 earned income from financing other income $ 5,986 $ 4,475 $ 3,008 leases, which was more than offset by a decrease in the F,manang leases 870 738 701 1986 rovision for income taxes, as shown.m the following P Operating lease rentals 1,372 536 321 Premium and commission income table. ofimurance affiliates 1,802 1,748 1,582 Commissions arxl fees of securities (In millions) 1986 broker-dealer 625 728 364 Reduction in earned income - financing leases GEFS carned income from operations 10,655 8,225 5,976 Investment tax credit $ 97 Other 75 Effect on investment in leveraged 172 leases of change in tax-rate assumptions (172) Reduction in income tax provision Sale of stock by nonconsolidated Change in investment m leveraged leases 35 affikate 10 Additional effect of tax-rate change 357 $10,655 $ 8,225 $ 5,814 392 The Tax Reform Act of 1986 provided for a reduction in corix> rate tax rates from 46% in 1986 to 40% in 1987 and 34% in 1988 and subsequent years. Under generally D: tails of earnedincome Direct financing leases t.everaged leases Total financing leases from financing leases (in millions) 1988 1987 1986 1988 1987 1986 1988 1987 1986 Deferred income amortized Investment tax credit $ 20 $ 31 $ 68 $ 3 $ 16 $ 46 $ 23 $ 47 $114 Other 676 572 463 103 71 49 779 643 512 696 603 531 106 87 95 802 690 626 Gains on realimi residual values 39 44 32 29 4 43 68 48 75 Earned income-financing leases $735 $647 $563 $135 $ 91 $138 $870 $738 $701 Noncancellable future rentals due from customers for $675 million; 1990-$431 million; 1991 -$276 million; equipment on operating leases as of December 31,1988 1992 - $195 million; 1993 - $111 million; and $281 mil-totaled $1,969 million and are due as follows: 1989-tion thereafter. Note h SupplementalCost Details (excluding unusualexpenses) Supplemental cost details are shown in the table below. Supplemental cost details 1988 1987 1986 (in millions) GE GEFS Total GE GEFS Total GE GEFS Total Empkyyee compensation, including Soaal Security taxes and other benefits $11,690 $1,052 $12,742 $12,139 $959 $13,098 $11,775 $620 $12,395 Selling, general and administrative I expense 6,244 6,244 5,979 5,979 5,963 5,963 Depreciation, depletion and amortization of plant and equipment including equipment leased to others 1,522 744 2,266 1,544 369 1,913 1,460 365 1,825 Company-fumled research and development 1,155 1,155 1,194 1,191 1,300 1,300 Maintenance and repairs 839 839 840 840 803 803 Social Security taxes 751 68 819 727 69 796 725 43 768 Rental expense 700 160 860 657 123 780 564 68 632 Advertising 413 66 479 495 51 546 481 24 505 Taxes, except Smial Security and those on income 374 77 451 289 82 371 288 28 316 50

Note 7 Pensions and Other Retiree Benefits future senice pericxi of employees. Prior-senice cost for changes in pension benefits which are allerable to previous q GE and its affiliates sponsor a number of pension and periods of service are amortized in the same manner. other retiree benefit plans. This note summarizes impor-Actuarial assumptions for the principal pension plans tant financial aspects of GE's obligations for these plans. include 8.5% for both the assumed discount rate used to J Measurements of obligations and costs are based on actu-determine the present value of future benefits and the arial calculations involving various assumptions as to expected long-tenn rate of return on plan assets. The future events. assumed rate of average future increases in pension bene. fit compensation is 6.5E Principalpension plans Employer costs for the principal pension plans in 1988 The principal pension plans are the GE Pension Pian (GE recognized the impact of plan design changes in 1988 anxl Plan) and the GE Supplementary Pension Plan (Supple-continued favorable investment perfi>nnance. Details of mentary Plan). The RCA Retirement Plan (RCA Plan) was cost for the principal pension plans follow. ] merged with the GE Pension Plan at the emi of 1988. Amounts and comments about the GE Plan in this note $sgp ncipalpensionplans include the RCA Plan fromJune 1,1986. Other pension plans are sponsored by domestic and Ioreign affiliates, but Benefit cost for service during the these are not considered to be significant individually or in ye r7 net of employee i ia coninbuuons $ 300 $ 385 $ 349 the aggregate to GE's financ. l posiuon. Interest cost on pmjected benefit The GE Plan covers substantially all employees in the obligation 1,232 1,187 1,074 United States,includinE aEIimximatel 509c of GEFS hwgnized return on plan assets (1,460) (1,293) (1,067) I Net amortuanon (299) (254) (213) employees. Generally, benefits are based on the greater of Net pension cost $ (227) $ 25 $ 143 a formula recognizing career earnings or a fijnnula recog-i nizing length of senice and final average earnings. Bene-Nyct Ire t r((((f[laI $ 2,261 $ 1,237 $ 2,739 fits are furxled through the GE Pension Trust..At the end Recognized return on plan assets (1,460) (1,293) (1.067) of 1988, approximately 218,900 employees were covered, Unrecognized return on plan assets $ 80I $ (56) $ 1,672 approximately 118,000 fi>nner employees with vested rights were entitled to future benefits and approximately Beginning in 1989, employee contributions ($147 mil-149,300 retirees or beneficiaries were receiving benehts. lion for 1988) will no longer reduce benefit costs as contri-The Supplementary Plan is an unfunded plan providing butions will be used to provide additional pension benefits. supplementary retirement benefits primarily to higher-Recognized return on plan assets is detennined by level, longer-senice management and professional applying the expected long-tenn rate of return to the mar-employees in the United States. At the end of 1988, about ket-related value of assets. 3,600 employees were eligible for this plan, and about Funding policy for the GE Plan is to contribute amounts 3,900 retirees or beneficiaries were receiving benehts. sufTicient to meet minimum funding requirements set GE adopted Statement of Financial Accounting Standards forth in U.S. employee benefit and tax laws plus such addi-(SFAS) No. 87 fi)r pension accounting effectiveJanuary 1, tional amounts as GE may determine to be appropriate 1986. SFAS No. 87 requires use of the projected unit credit from time to time. GE made no contribution in 1988 cost method to determine the projected benefit obligation because the funding status of the GE Plan precluded cur-and plan cost. The pn jected benefit obligation is the actu-rent tax deduction and would have resulted in an excise arial present value of the portion of projected future bene-tax. fits that is attributed to employee senice to date. The The funding status of an ongoing plan may be meas-benefit cost for senice during the year is the portion of the ured by comparing the market-related value of assets with pmjected benefit obligation that is attributed to employee the projected benefit obligation. The market-related value ] senice during the year. This cost method recognizes the of assets is based on amortized cost plus recognition of j effect of f uture compensation and senice in pnjecting the market appreciation and depreciation in the Ixn tfolio over 4 future benefits, and it had been used for the GE Plan five years. GE believes the market-related value of assets is befi>re adoption of SFAS No. 87. a more realistic measure than current fair market value in addition, SFAS No. 87 establishes a " transition gain." because the market-related value reduces the impact of This is the excess atJanuary 1,1986 of the current fair short-tenn market Fluctuations. The funding status for the market vaine of plan assets over the plan's projected bene-principal pension plans follows. I fit obligation. This transition gain is being amortized over Funding status for principal pension plans 15 years except that such excess for the RCA Plan was n.u mber 31 On millions) 1988 1987 recogniicd as an asset in accounting for the RCA acquisition, hlarket-related valuc of assets $19,308 $17,663 Pmpnennent owgation 15,473 15,494 Gains and losses that occur because actual experience differs from that assumed are amortized over the average 51

A schedule reconciling the pmjected benefit obligation Note 8 Int:restcnd Other Financi;lChirges for principal pension plans with GE's recorded pension liability is shown below. GE. Interest capitalized, principally on major property, plant and equipment projects, was $11 million in 1988, Reconciliation of projected benefit obligation with pension liability for principal pension plans $23 milhon m 1987 and $38 milhon m 1986, December 31 (in millions) 1988 1987 GEFS. GEFS interest and discount expense re}x>rted in the Projected benefit obligation $15.473 $15,494 Statement of Earnings is net ofinterest income on tempo-i less current fair market value of trust assets (21,502) (20.088) rary investments of excess funds ($285 million, $165 mil-Unrecognized SFAS No. 87 transition gain 1,847 2,000 lion and $53 million in 1988,1987 and 1986, respectively) r c gIl ed and c pit lized interest of $16 million, $4 million and t ience gains 3,303 2. er Unrecognized prior-service cost i14 (265) $8 million, respectively, for 1988,1987 and 1986. Recorded prepaid pension assets 1,177 573 Recorded pension liability $ 412 $ 379 Note Q GEFS Allowance for Losses on The portion of the projected benefit obligation repre. Financing Receivables senting the accumulated benefit obligation amounted to $14,073 million and $13,176 million at the end of 1988 GEFS allowance for losses on financing receivables repre-and 1987, respectively, and the vested benefit obligation sented 2.63% and 2.59% of total financing receivables at was $13,895 million and $12,835 million at the end of year-ends 1988 and 1987, respectively. The table below 1988 and 1987, respectively. These amounts are based on dmws the activity in the allowance for losses on financing compensation arxl ser ice to date. receivables during 1986 through 1988. Trust assets consist mainly of common stock and fixed (In millions) 1988 1987 1986 income investments. Included at year-end 1988 was GE U I" $ 743 $603 $ 492 common stock valued at $ 139 million held in connection Add.".cc atJanuary 1 iuons charged to operauons 434 290 558 with an. dexed portfoh. m o. Net trtmsfers related to companies ) Other unrecognized net experience gains resulted prin-acquired and sold 89 21 14 q cipally from favorable investment performance. Amounts written off (2W) (171) (461) l Unrecognized prior-service cost includes the effect of Balance at December 31 2972 $743 $603 1 January 1,1988 benefit increases to GE pensioners and j 1988 benefit changes affecting active employees. Amounts written offin 1988 were approximately l Principal retiree health care and life insurance plans 0.81% of average financing receivables outstanding during ) the year, compared with 0.62% and 2.02% of average GE and its affiliates sponsor a number of plans providing financing receivables outstanding during 1987 and retiree heahh care and life insurance benehts. GE's aggre-1986, respectively, gate cost for the pnncipal plans, which cover substantially all employees in the United States, was $302 million in 1 0 unoso.iE,en.s 1988, $278 million in 1987 and $84 million in 1986. The Note costs for 1988 and 1987 were significantly higher than for 1986 due to favorable nonrecurring changes in 1986 when GE. Unusual expenses in prior years were provisions for the assumed discount rate used to determine the present corpomte restructuring-$1,027 million in 1987 and value of future life and health benefits was increased. $311 million in 1986. These were for the expenses of refo-l Generally, employees who retire after qualifying fbr cusing a wide variety of business and marketing activities i optional early retirement under the GE Plan are eligible to and reducing foreign and domestic risk exposures. These t participate in retiree health care and life insurance plans. provisions include costs of rationalizing and improving a Health care benefits fbr eligible retirees under age 65 and large number of pnxluction facilities; rearranging pnx!uc-eligible dependents are included in costs as covered tion activities among a number of existing plants; and expenses are actually incurred. For eligible retirees and reorganizing, phasing out or otherwise concluding other spouses over age 65, the present value of future health activities no longer considered essential to the conduct of care benefits is funded or accrued and is induded in the Company's business. costs in the year the retiree becomes eligible for benefits. GEFS. GEFS had provisions of $91 million in 1987 lbr I he present value of future life insurance benefits for ch-gible retirees is funded and is included in costs in the year """'"" **P""** ".".resumunng activities, including amounts related to msider trading charges and business of retirement. restructuring activities of Kidder, Pealxxly. Most retirees outside the Um.ted States ate covered by government health care programs, and GE's cost is not significant. 52 1

Note { } Provision forincomeTaxes(:x luding1987cxtraordinaryit:mcndcumulativaeffectof changes in accounting principles) Provision for income taxes 1988 1987 1986 I (In millions) GE GEFS Total GE GEFS Total GE GEFS Total Estimated amounts payable (recoverable) $ 1,311 $ (32) $1,279 $1,246 $ (212) $1,034 $1,358 $ (831) $ 527 Ikferred tax expense (benefit) from ". temporary differences" (152) 274 122 (71) 231 160 (120) 656 536 Investment credit deferred (amortized)- net (63) (3) (66) (87) 1 (86) (38) 2 (36) Effect of change in tax-rate assumptions for leveraged leases (392) (392) $ 1.096 $ 239 $1.335 $1.088 $ 20 $1.108 $1.200 $ (565) $ 635 e " Estimated amounts payable" includes amounts items making up deferred U.S. federal income tax pro-applicable to foreignjurisdictions of $344 million, visions are substantially different in nature for GE except $197 million and $198 million in 1988,1987 and 1986, GEFS and GEFS. Accordingly, the principal" tem}x>rary respectively. difference" items are summarized separately in the e General Electric Company files a consolidated U.S. following table, federal income tax return that includes GEFS. G EFS' pro-Deferred income tax expense (benefit) vision for estimated taxes recoverable m.cludes its effect on from temporary differences the consolidated tax return. The amount of taxes recover-On millions) 1988 1987 1986 able as re[x>rted by GEFS has been reduced to the extent GE except GEFS of consolidated investment tax credit carryforwards of Tax over lxx>L depreciation 5 34 $ 18 $ 87 $168 million and $275 million at December 31,1987 and Margin on installment sales (1) (16) (33) 1986, resI>ectively. Investment tax credit carryftwwards of Provision for warranties (149) 9 (27) $168 million aml $107 million reah. d.m 1988 and 1987, Provmon for pensions 10a 10 (52) ze Other-net (138) (92) (95) respectively, were reflected as reinstatements of deferred (152) (71) (120) tax balances. GEFS

• Deferred income taxes reflect the impact of" tempo-Financing lease income 287 338 573 r; ry differences" between the amount of assets and liabili.

Deferred commitment fees 2 15 (11) ties for financial re[xnting purposes and such amounts as I"lC]" ',"','[C*l}nses (4) 16 28 7 i measured by tax laws and regulanons. These " temporary adjustments ofinsurance differences" are determined in accordance with Statement affiliates (75) (30) 33 of Financial Accounting Standards No. 96 (see note 1) Financing lease income of commencing in 1987 and are more inclusive in nature St t[aNI 3 (8) I s than "tmung differences as determmed under previously Depreciation of buildings and applit % generally accepted accounting principles. equipment (2) (24) 13 Deferred income taxes for 1986 have not been restated. Operating leases (58) (27) (28) Tax transfer leases 7 (29) 26 Provision for losses (65) (106) (74) Earnings of associated companies 29 4 5 Tax credit carryforwards recognued as restatement (reduction) of deferred income taxes 168 107 83 Other-net (21) (24) 5 271 231 656 $122 $100 $536 "Other-net" includes the tax effects of a nu mber of temporary differences such as those related to various por-l tions of transactions involving business dis [x>sitions and f restructuring expense provisions. i 2

o The U.S. investment tax credit (ITC) was repealed, A reconciliation from the consolidated provision for with some transitional exceptions, elTectiveJanuary 1, income taxes that would have resulted using the U.S. fixl-1986. However, because ofits use of the deferral method eral statutory rate to the actual provision is shown below, l of accounting for the ITC, GE has an unamortized balance Diff,erences between expected U.S. federal statutory remaining. As a result of the accounting change m 1987, tax rate provision and actual tax provision unamortized ITC is treated as a tempmu y ditTerence for On millions) 1988 1987 1986 deferred tax accounting. GE's remaining unamortized frC Expected consolidated tax balance was $149 million, net of deferred tax at year-end provision at statutory rates $1,605 $ 1,291 $1,438 1988, and will be added to income in future years. Increase (reduction)in taxes

• See note 5 fi)r further information about the 1986 resulting from GE GE rni elTect of change in tax-rate assumptions fi>r leveraged I"yl",sior leases.

cumulative cffect of accounting e The U.S. federal statutory tax rate on corporations change)in before-tax income j on an after-tax hasis (268) (221) (232) was 34% in 1988, down from 40% in 1987 and 46% in Varying tax rates of other 1986. Data about " effective tax rates,"i.e., provision fi)r affiliates (principally foreign) (115) (117) (80) income taxes as a percentage of earnings before income Amortization ofinvestment tax i taxes, extraordinary item and cumulative effect of credit (70) (88) (87) Income taxes at capital gains rate (18) (54) accounting changes, fiillow. Varying rates on unusualitems 25 (14) Effective tax rates (before extraordinary item and cumulative Current year effect ofincome tax . effect of accounting changes) accounting change 133 1988 1987 1986 All other-net 25 91 (3I) (428) (195) (498) GE 24.5 % 33.9 % 32.5 % i GEFS 23.3 3.5 (a) increase (reduction)in taxes l Consolidated 28.3 34.3 20.3 resulting from GEFS l Amortization ofinvestment tax (a) Cakulation of an ef fective tax rate for 1986 is not meaningful for (redit on financing and GEFS, which sustained a preaax loss of $61 million in that year and operatingleases (17) (27)- (17) had a credit tax provision of $565 million. A significant factor in Dividends received which are not GEFS' 1986 operations was a required c hange in tax-rate assumP-fully taxable (17) (IS) (20) tion for leveraged leases in accordant c with Ihe Tax Reform Act of income from tax-exempt 1986 as discussed m more detailin note 5. marketable securities (104) (112) (108) Income taxes at capital gains rate (14) (41) Fresh-start provision of insurance affiliates (22) Change in tax-rate assumptions for leveraged leases (note 5) (14) (31) (357) All other-net 64 (12) 6 (110) (209) (537) Eliminations 268 221 232 Actual consolidated tax provision $1,335 $1,108 $ 635 e Provision has been made fi)r U.S. federalincome taxes to be paid on that portion of the undistributed earn-l ings of affiliates and associated companies expected to be remitted to the parent company. Undistributed earnings intended to be reinvested indefinitely in affiliates and asso-ciated companies totaled $1,097 million, $1,318 million and $1,063 million at the end of 1988,1987 and 1986, respectively. It is estimated that fi> reign tax credits would approximately offset the U.S. taxes payable if these earn-l ings were to be distributed. l e Based on the h> cation (not taxjurisdiction)of the business providing gomis or senices, consolidated domes-tic income before taxes, extraordinary item and cumulative effect of changes in accounting principles was $3,936 mil-tion in 1988, $2,710 million in 1987 and $2,516 million in l 1986. The corresponding amounts fi>r fi> reign-based oper-j ations were $785 million, $517 million and $611 million in cach of those years, respectively. Si

Note } } Cash Note {h Nuentories Deix> sits restricted as to usage and withdrawal or used as December 31 (in millions) 1988 1987 partial compensation for short-term lx>rrowing arrange-ments were not material for either GE except GEFS or Raw materials and work in process $ 5,603 . $ 5,515 GEFS. See notes 22 and 26 for related information about Finished g(xxis 2,863 2,546 credit lines arxl compensating balances. Unbilled shi[unents 246 280 8,712 8,341 less revaluation to 1.lFO (2,226) (2,076) 1 } } Marketable Securities Carried at 1.lFO value ofinventories $ 6,486 $ 6,265 Note Cost LIFO revaluations increased $150 million in 1988 pri-Carrying value of marketable securities for GE except jn rily kcause of pyice increases. l.IFO revaluations GEFS was substantially the same as market value at year-increased $324 million in 1987, mostly related to the erwis 1988 anxi 1987. Market value of GEFS'securitics car-cc unting change described in note 1, but decreased ried at amortized cost was $5,537 million and $4,592 mil. $104 million in 1986. Included in these changes were lion at December 31,1988 and 1987, respectively. decreases of $23 million, $22 million and $51 million ] (1988,1987 and 1986, respectively) due to lower inventory j levels. In 1988 arxl 1987, there was a net current year pnce q Note } d GEFS Marketable Securities Carried increase but in 1986 there was a price decrease. Aix>ut 2 at Market 86% of totalinventories is valued using the LIFO method of mventory accountmg. 1 Det ernher 31 (In millions) 1988 .1987 U.S. government arxl federal agency securities $2,433 $1,822 State and municipal securities 215 426 l Corgerate stoc ks, bonds and foreign i securities 2.441 1,752 $5,089 $4,000 j At December 31,1988, the can ying value of ettuity securities canied at market value included unrealized gains and unrealized losses of approximately $ 19 million and $30 million, respectively. A significant portion of securities carried at market value at December 31,1988 was pledged as collateral for bank loans aixi repurchase agreements. In addition, Kid-der, Pealxxly Imrrows arxl lends securities to obtain financ. ing and to facilitate the securities settlement process. 15 as c==a* =c**' - Note Dec ember 31 (in millions) 1988 1987 Receivable from: Customers $5,289 $5,463 Assxiated coinpanies 160 155 Others 1,857 1,374 ) 7,306 6,992 less allowam e for losses (196) (210) $7,110 $6,782 l 55

} 7 EEFS Financing Receivchles (investment in time sales, loans Cnd financing leases) . Note l variety of forms, j d I ans" represents transac eas December SI (In millions) 1988 1987 mcluding time sales, revolving charge _j Time sales andloans and credit, mortgages, installment loans, intermediate-l Commercial real estate financing $ 7,114 $ 6.131 term loans, and revolving loans secured by business assets l $*;j"C'(I[" "d"Sl'i II and mandatorily redeemable preferred stock. The portfo- ) "5 7 llome and recreation financing 1,888 2,01I lio includes time sales and loans carried at the principal l Equipment sales financing 1,826 1,502 amount on which finance charges are billed peri (xlically, i Other 1,208 1,126 and time sales and loans acquired on a discount basis car-26,770 19,560 ried at gross book value, which includes finance charges, l Deferred income - (983) (l,000)

• " Financing leases" consists of direct financing and Time sales and loans-net of

. deferred income 25,787 18,560 leveraged leases of aircraft, railroad rolling stock, automo-biles and other transportation equipment, data processing Investmentin financing leases Direct financing leases 8,433 7,410 equipment, medical equipment, and other manufacturing, leveraged leases 2,691 2,704 power generation, mining and commercial equipment and i1,124 10,114 facilities, As the sole owner of assets under direct financing 36,911 28,674 leases and as the equity participant in leveraged leases, irss allowance forlosses (972) (743) GEFS is taxed on total lease payments received and is enti- $35,939 $27,931 tied to tax deductions based on the cost ofleased assets and tax deductions for interest paid to third-party participants. GEFS also is entitled generally to any investment tax credit on leased equipment and to any residual value ofleased assets. Investments in direct fmancing and leveraged leases j represent unpaid rentals and estimated unguamnteed l residual values ofleased equipment, less related deferred income and principal and interest on notes and other instruments representing third-party participation. Because GEFS has no genera! obligation on such notes l and other instruments representing third-party participa-tion, such notes and other instruments have not been included in liabilities but have been offset against the related rentals receivable, GEFS' share of rentals receivable is subordinate to the share of the other participants who also have a security interest in the leased equipment. Additional detail ofinvestment in financing leases at December 31,1988 and 1987 is shown below. Investment in financing leases Direct Total l financing leases i.everaged leases fmancing leases December 31 (In millions) 1988 1987 1988 1987 1988 1987 Total minimum lease payments receivable $10,109 $ 8,660 $10,745 $11,171 $20,854 $19,831 less principal and interest on third-party nonrecourse debt (7,893) (8.361) (7,893) (8,361) Rentals rmivable 10,109 8,660 2,852 2,810 12,961 11,470 Estimated unguaranteed residual value ofleased assets 1,102 853 817 855 1,919 1,708 Irss deferred income (a) (2,778) (2,103) (978) (961) (3,756) (3,064) Investmentin financing leases 8,433 7,410 2,691 2,704 11,124 10,114 Irss allowance forlosses (121) (115) (74) (137) (195) (252) l less deferred taxes arising from fmancing leases (1,218) (940) (2,406) (2,397) (3,624) (3,337) l l Net investment in financing leases $ 7,094 5 6,355 $ 211 170 $ 7,305 $ 6,525 i (a) Total financing lease deferred income is net of deferred initial direct costs of $33 million and $-17 million for 1988 and 1987, respectively. l l 4 I l 56 1

i i i Experience has ahown that a substantial x>rtion of $26,019 million and $19,914 million, respectively, and the I 1 receivables will la paid prior to contractual maturity. ratio of cash collections to average financing receivables ] Accordingly, the maturities of time sales atxt loans atxl was 72.5% and 72,8W, respectively. Contractual maturities l rentals receivable at December 31,1988 shown in the table of time sales aixi loans and tentals receivable at Decem. ~ below are not to be iegarded as forecasts of future cash her 31,1988 are shown in the following table, J collections. During 1988 and 1987, cash collections were .I Contractual maturities 199I (in millions) Total 1989 1990 1991 1992 1993 and after l Time sales and loans ) Coman rcial real estate financing $ 7,1 I4 89' $ 2 10 $ 432 $ 1,009 $ 2,036 $ 3,308 l Commerciat riulindustrialloans 7,269 1,30a e61 1,007 716 658 2,822 l Retailer financing 7,465 5,360 1,705 3 17 -30 13 10 llome and recreation financing 1,888 744 154 140 125 114 611 Equipment sales financing 1,826 618 505 326 195 111 71 Other 1,208 257 188 59 52 42 610 26,770 8,373 3,553 2,311 2,127 2,974 7,432 Rentals receivable I)irect linancing leases 10,109 2,683 2,197 1,505 1,183 664 1,877 Ineraged icases 2,852 74 119 138 148 154 2.219 12,961 2,757 2,316 1.613 1,331 818 4,096 $39,731 $11,130 $ 5,869 $ 3,95-l $ 3.458 $ 3,792 $11,528 i } 8 Other GEFS Receivables from and { h Property, Plant and Equipment Note Note Payables to Brokers and Dealers (including equipment leased to l others) j Included in other receivables and other liabilities of GEFS i are amounts receivable from and payable to brokers and f nytyng,cr 31 on millions) 1988 1987 dealers in connection with Kidder, Pealxxly's normal trad-ing, lending and borrowing of securities. At December 31, original cost GE 1988 and 1987, amounts consisted of the following. d inmvements $ 260 $ 232 December 3 I (In millions) 1988 1987 iluildings, structures and related eqmpment 4,250 4,127 included in other receivables hlathinery and equipment 12,957 12,616 Securities failed to deliver $ I32 $ 220 Iraschold costs and manufacturing 1)eix>siis paid fi>r securities tx>rrowed 1,226 1,388 plant under construction 1,126 796 Other, principally dearing organizations 32 59 Oil and gas properties 764 80l $1,390 $ 1.667 19,357 l 8,572 Included in otherliabilities GEFS Securities failed to receive $ 451 $ 198 iluildings and equipment 745 485 Deposits received for securities loaned 903 1,056 Eqtupment leased to others l Other, principally dearing organizations 18 74 \\'enides 1.561 1,668 Railroad rolling saxL 1,038 907 $1 A02 $ 1,328 hlarine shipping containers 857 513 Air raft 618 216 { Data pnxessing equipment 355 345 Other 634 408 5.811 4,542 $25,l68 $23.Iii ] Accumulated depreciation, depletion and amortization j GE $ 9,997 $ 9,317 j GEFS 1,560 824 1 $ l 1,557 $10.141 I i l GEFS' accumulated amortization of equipment leased to others was $1,321 million and $658 million at Decem-j ber 31,1988 and 1987, respectively. Amortization during T>7 l.

1988,1987 atxl 1986 was $665 million, $316 million and Not3 ] } AllOther Assets $327 million, respectively. At December 31,1988, GE except GEFS had minimum Decenax r 31 (In miniom) 1988 1987 rental commitments mxler noncancellable operating leases GE aggregating $3,058 million. Amounts payable over the I"y's'j"$1 companies (including i next five years are: 1989- $452 million; 1990- $410 mil-lion; 1991 -$367 million; 1992- $320 million; and 1993 - advances of $29 million and $270 million. $ 15 million) $ 647 $ 826 ( At December 31,1988, GEFS had minimum rental Miscellaneous investments (at cost) Government arxl government. I commitments uixler imncancelable operating leases aggre-guammeed semnties 202 169 l gating $787 million. Amounts payable over the next five Other 175 631 l years are: 1989-$134 million; 1990-$112 million; 1991 Marketable equity securities 72 90 - $95 million; 1992- $65 million; and 1993 -$55 million. Funds held for business development 81 I Irss allowance for losses (100) (75) 996 1,722 prepaid pension assets 1,177 573 Note 2 0 '#* "a'6' ^== *= Re<everasic e"xt"ceri"8 <"><> "" government contracts 752 791 1.ong-term receivables 675 569 Dec ember 31 (In millions) 1988 1987 Television program costs 352 480 Deferred charges 318 416 G<xxlwill $6,423 $3,820 Real estate development projects d3 130 ,,3 71 Other intangibles o"fil 610 Customer Imancmg OWer 205 144 6.984 4,430 4.621 4.896 xxlwill 1,3 I l.,I M) ed im(imed companies Other intangibles (induding advances of$389 million 1,568 1,318 and $184 million) 1,145 755 $8.552 $5.748 Miscellaneous investments (at cost) 393 143 Broker-dealer cash and securities segregated by regulation 383 42 Acctunulated amortization of GE..s goodwill was Deferred insurance acquisition costs 262 235 4 $318 million and $301 million at December 31,1988 and I)eferred charges 225 182 1987, respectively. Accumulated amortization of other Real estate properties ]2 intangibles for GE was $455 million and $365 million at other 3,418 l,705 December 31,1988 and 1987, respectively. The largest GE j i $8.039 $6.601 a g(xxlwill and other intangibles were from the RCA acqm..se tion, for which g<xxlwill is being amortized on a straight-line basis over 40 years. The increase in g(x xlwill since For GE, the estimated realizable value of miscellaneous December 31,1987 was mainly from acquisitions of Roper invest ments was about the same as cost at year end. The Corporation, Borg-Warner's chemicals businesses and aggregate market value of marketable equity securities, W'IVJ-Miami, and final valuation of CGR assets. These which are carried at cost, was $72 million and $86 million lxdances also are being amortized over 40 years. All other at year-ends 1988 and 1987, respectively. Gross unrealized GE intangibles and g(xxlwill are being amortized over gains and losses were eat h $ 15 million at December 31, shorter periods as appropriate, ranging from one year to 1988. 20 years. The National Broadcasting Company (N BC, an af iliate Accumulated amortization of GEFS' goodwill was of GE) capitalizes program costs (including rights to $133 million and $82 million at December 31,1988 and broadcast) when paid or when a program is ready for 1987, respectively. Accumulated amortization of GEFS' broadcast,if earlier. These costs are amortized based u[xm other intangibles was $73 million and $56 million at projected revenues or expensed when a program is deter-December 31,1988 and 1987, respectively. The increase in mined to have no value. j GEFS' g(x dwill since December 31,1987 represented pri-At year-end 1988, NBC had approximately $ 1.24 billion marily g(xxlwill related to auto auctions previously not of conunitments to acquire broadcast material or the rights consolidated and goodwill arising from the acquisitions of to broadcast television programs that require payments Gelco and MW Credit Operations. GEFS' intangible assets over the next five years. are being amortized over various peri <xis not longer than 30 years. GEFS' other intangibles represent principally the value ofinsurance-in force related to Employers Reinsur-ance's property and casualty reinsurance business, which is being amortized on a straight-line basis over its estimated life of appmximately 16 years. 58 l___-_-_.---

Note )) Short-T;rm Borrowing 3 Nota [ Axounts Pcyabl3 Amount and average rate at December 31 December 31 (In millions) 1988 1987 1988 1987 GE (In inillions) A mount Rate Amount Rate Trade accounts $1,939 $2,105 Collected for the account of others 180 279 GE Other 17 231 Notes with trust 2,136 2,615 departments $ 337 8.5'X $ 320 6.6% Athliate bank GEFS lx>rrowings Accounts nd drafts payable 4,132 3,329 (principally foreign) 261 25.7 36-1 35.2 Eliminations (264) (216) Other,induding $6,001 $5,728 current portion of. long-term lx>rrowings 1,263 426 1,861 1,110 GEFS Note M GEFS Securities Sold but Not Yet Commercial paper ,4,591 9.32 18,790 2 ., 77 G e. llanks 1,987 9.34 1,650 8.11 Purchased, at Market Cunent portion of long-term borrowings 790 1,118 I)ecember 3 I (in millions) 1988 1987 Notes with trust departments 990 8.48 965 6.78 U.S. government and federal agency Passlx>oks and securities $ 1,560 $1,000 invesunent State and municipal securities 9 16 certificates 373 32:> Corporate stocks, lxnxis and foreign 28,731 22,848 securities 519 391 Eliminations (170) (85) $2,088 $1,407 $30.422 $23,873 The average balance of short-term borrowings for GE except GEFS, excluding the current imrtion oflong-term Note 25 GE AllOtherCurrentCostsand lx>rrowings, was $ 1,416 million in 1988 (calculated by Expenses Accrued averaging month-end balances for the year) compared with an average balance of $ 1,492 million in 1987. The At year-ends 1988 and 1987, this account included taxes maximum balances in these calculations were $2 A44 mil-amied f $1,568 million and $1,382 million, respectively, lion at the end of September 1988 and $2,018 million at and compensation and benefit accruals of $982 million and the end of June 1987. The average worldwide effective $777 million, respectively, Also included are amounts for j interest rate for the year 1988 was 15%; for 1987, it was pnxtuct warranties, estimated costs on shipments billed to 13%, These average rates represent total short-tenn inter-cusunners and a wide variety of other sundry items. est incurred divided by the average lxdance outstanding, .Ahhough the total unused credit available to GE through banks and commercial credit markets is not readily quanti-j fiable, confinned credit lines of about $ 1,3 billion had been l extended by 48 banks at year-end 1988. Substantially all of [ these lines also are available for use by GECC and GEFS in l addition to their own credit lines (see note 26). The average daily balance of GEFS' borrowings, exdud-ing the current portion oflong-tenn borrowings, was $27,889 million in 1988 compared with $20,I47 million j for 1987.The December 5,1988 balance of $30,385 mil-lion was the maximum balance in 1988.The October 21, 1 I 1987 balance of $23A63 million was the maximum bal-ance in 1987. The aveistge short-term interest rate, exclud-ing the current portion oflong-term debt, was 7.96% for l 1988, representing short-term interest expense divided by the average daily balance, compared with 7.25% ibr 1987, ) l I l 59 I.

e26~ e -'o December 31 (In millions) 1988 1987 GE' $ 4,330 $ 4,491 GEFS - 10,862 - 8,037 Eliminations - (110) (11) $15,082 $12,517 Outstanding balances in long-term lx>rrowings Ihr GE at December 31,1988 and 1987 are as follows. GElong-term borrowings Decrmler 31 (In millions). 1988 1987 7%% Notes Due 1989 $ - $.500 (a) The Company has entered into certain contracts which result in a 6%% Notes Due 1989 500 fixed U.S. dollar interest cost of 7.671 12%% Australian Dollar Notes Due 1985 (a) log (b) Debt originally incurred by RCA but for w hich GE is now the (c) Pn,ligor.napal and interest (7%% cougmn rate) den,on ob 10%% Notes Due 1987-1989.(b) 35 5%% Notes Due 19721991 13 19 pean Cunrncy Unus. In connecuan wah this issue, GE entered 6%% Notes Due 1991 500 500 mio a ja anese yen currency arulinterest-rate swap agreement 7%% E.uro<lollar Notes Due 1991 300 300 uruler'w iich GE assuines a fixed >cn lialnlity (22.2ti2 inillioni) for 5.30% Sinking Fund Debentures Due payment of principal in 1992 ami pays interest in yen to the 1973-1992 28 34 comnwrcial bank counterpart y at somewhat below the six-month 12%% Notes Due 1992 (b) 100 100 LIBOR yen rate. 7% Notes Due 1992 250 250 (d) Notes are yen 35 billion at a fixed exchange rate of yen 180A 1 = $U.S. Loo. 7% per cent. Notes Due 1992 (c) 178 (c) including anmnization of originalissue discount. the effective 5%% Euro-yen Notes Due 1993 (d) 194 194

• t.'".l and interest (9%9 c4" """'"d A 1E 2M ""

'*8" 4 %% Eunsfollar Discount Notes dollars. In connection with th,oupon rate) denormnated in U W nnapa Due 1993 (c). 200 200 is issue, GE entered into currency 9%% Notes Due 1993 (f) 523 and interest-rate swap agreements under which GE assumes (1) a 2%% Discount Notes Due 199I(e)(g) 150 150 fixed Dunh guilder hability (632 million) and (2) a hxed Gennan 7% Eunxiollar Extendible Notes mark liability (373 million) for payment of principalis 1993 and Due 1998 (b)(i) -200 200 pays interest in the respective currencies to the commercial bank 8%% Debentures Due 1985-2004 217 217 counterparts at somewhat below the respective currency three-month LIBOR rate. 8% Eunslollar Extendible Notes (g) Acannpanied by sale of 3,570,000 warrants ex{in,ng December Due 2006(i)(j) 300 300 h 1989 "' punhase shan s of GE nunnion suit, at $4431 lwr 7%% Eunxiollar Extendible Notes eare as ananged for opons on in stocbn onieno pre-Due 200 300 300 8%% Sinlo,6 (i)(k) ciude any dilution imm exerase of the warrants. ng Fund Debentures Due 2016 300 300 (h) Interest rate subjc ct to annual adjustment at the C<nnpany's Industrial development lxnuls 262 225 option beginning in 1989. All other - 310 59 (i) At annual rate adjustment dates, notes are redeemable in whole $4,330 $4,491 or in pan anhe option of the Company or repayable at the opuun of the holders at fat e value plus accrued interest. (j) Interest rate subject to annual adjustment at the Company's option beginning in 1993. (k) Interest rate subject to annual adjustment at the Company's option beginning in 1991. "All other" includes original issue premium and dis- $1,233 million in 1989, $51 million in 1990, $824 million counts, an adjustment to bring i CA lx rrowings at acquisi-in 1991, $572 million in 1992 and $952 million in 1993. i tion date to fair mat ket value, and a variety of bormwings These amounts are after deducting debentures which by affiliates and parent components with various interest have been reacquired for sinking-fund needs, rates and maturitics, long-term borrowing maturities during the next five years, including the portion classified as current, are i 1 l 60'

Outstarxling Matices in long-terin borrowings for GEFS at December 31,1988 and 1987 are as folknys. CEFS long-term borrowings December 31 (in millions) 1988 1987 Senior Master notes (a) $ 181 $ 187 (a) Notes hase a rolling 13-month or 15-month maturity and bear 6.39% Notes Due 1990(b) 50 50 interest based principany on GE Gapital's 180-day open-market 6.51% Notes Due 1990 (c) 72 72 notes. 8% Notes Due 1990 100 100 (b) Pimicipalandinterest(15.00% coupon rate)denominatedin 8.125% Notes Due 1990 100 100 Australian dollars. In connection with this issue, GEFS entered 8.875% Notes Due 1990 200 200 into a U.S. dollar currency and interest-rate swap agreen ent 10% Notes Due 1990 200 under which GEFS assumes a fixed U.S. dollar liability for pay. I.rincipalin 1990 and pays interest in U.S. dollars to the 7.75% Notes Due 1991 250 P h.25% Notes Due 1991 600 [;'"{'" ""k '"""'C'Pd"Y "' E3" "" 'I"' M d"U"' 9.75% Notes Due 1991 98 100 ~ (c) Principal and interest denominated in New Zealand dollars. Gou-11% Notes Dee 1991 200 pon interest is 200 basis points below the New Zealand 90-day 12.75% Notes Due 1991 126 150 bank bill rate reset quarterly. In connection with this issue, GEFS 13.625% Notes Due 1991 150 entered into a U.S. dollar currency and interest-raic swap agree-7.125% Notes Due 1992 250 250 ment under which GEFS assumes a fixed U.S. dollar lialnlity for 8.75% Notes Due 1992 300 390 payment of principal in 1990 arul pays interest in U.S. dollars to 8.75% Notes Due 1992 250 the c$nnmercial bank counterpaity at 6.5 IW on the U.S. dollar 9.50 4 Notes Due 1992 250 250 U"hd"Y- $[";""'g"['"i ((1e(Ininated in Ganadian dollars. In co 3 Zetu (aupon Notes Due 1992 (d) 357 400 9% Notes Due 1993 1,000 nection with this issue, GEFS entered into a lx>und sterling cur-10.25% Notes Due 1993 (e) 143 rency and interest rate swap agreement under which GEFS Zero Coupon Notes Due 1993 (d) 374 400 assumes a fixed gx>und sterling liability for payment of principal Zero Giu[x)n Notes Due 1994 (f) 171 200 in 1993 and pays a floating rate of interest in smund sterling to 12% Notes Due 1994 117 200 the commercial bank counterparties. 9.5% Notes Due 1995 300 (f) Discounted to yield 14.47% Zero Coupon Notes Due 1995 (f) 432 500 (g) No state,d maturity date. Issuer calls and investor puts available at W can knu,als. Pnn,apal demnmnated in Swiss irancs, but j 10-yeannten 7.250% Notes Due 1996(g) 153 153 uhe uhunate reuremenuo no nun e than 053 i Zero Coulmn Notes Due 1496 (h) 551 600 9.95% Notes Due 1998 125 "fi 10.375% Notes Due 2000 (i)(j) 186 200 (h) Discounted to yield 12.04L 10.25% Notes Due 2000(i) 200 (i) Extendible notes. GEFS will reset interest rates at erxl ofinitial 5.50% Notes Due 2001 (k) 385 500 and each subsequent interest period. At each rate-reset date, 11,75% Notes Due 2005 137 200 1.olders may redeem notes at face value plus accrued interest. 9.75% Notet ')ue 2005 (i)(1) 156 200 Extendible notes a re induded in the current portion oflong-term

0) Bu la37W, interest-rate-reset date is withm one year.uun debt when the 8.75% Na:s Due 2007 (m)(n) 500 500 9.375% Notes Due 2007 (i)(o) 106 300

$)INy[;$";,(C(Ifre 8% Notes Due 2011 (i)(p) 250 250 g l applies untit October 9,1992. 6.75% Notes Due 2011 (i)(q) 250 250 (m) Remarketed reset news.The intercst rate will be reset at end of 8.25% Notes Due 2011 (i)(r) 250 250 initial and subsequent interest perimis (2-5 years) pursuant to an 8.75% Notes Due 2011 (i)(s) 300 300 established formula agreed to by GEFS and the remarketing 7.50% Notes Due 2018 (t) 500 underwriter. 8.25% Notes Due 2018 (m)(u) 500 (n) The 8.75% initialinterest rate applies until December 15,1990. Floatmg Rate Notes Due 2(118 (t) 164 (o) The 9.375% initialinterest rate applies until October 15,1990. Other notes due 1983-2024 1,440 1,319 (p) The 8% init,iali,nterest rate applies until Ntarch I,1990. (4) ?" 8.259 un!""II"terC5L rate applies until November 1,1991. N"! lxss unamortized discount (1,136) (1,46G) (r) Ihe tial interest nte apphes unut hlarc h 1,1993. 'li>tal senior 10.538 7,765 (s) The 8.75% initialinterest raic applies until hlarch 4,1993. (t) Reset notes. The 7.50% initialinterest rate applies until hlarch Subordinat3d 15,1991. The interest rate will be reset on hlarch 15th in every 8.125% Notes Due 1988-S" 15 20 third year thereafter to a rate equal to 108% of the three-year 4.85% Notes Due 1990 25 25 treasury rate. 8.125% Notes Due IP91 25 25 (u) The 8.254 initialinterest rate applies until hlay 1,1991. 12.25% Notes Due 1992 78 79 (v) The rate ofinterest payable on each note is a variable rate. The 7.85% Notes Duc 1993 12 12 interest rate is based on the commercial paper rate cach moitth. 8.25% Notes Due 1997 50 50 Interest on the notes is payab;c at the option of GEFS ciths r " "" "d H ""C""' """' U - F Y Other notes due 1988-200l 119 6I Total suiv>rdinated 324 272 'li>tal long-tet m notes $10.862 $ 8.037 i e long-tenn bonuwing maturities during the next five

• In December 1987,GE Capitalinitiated a debt extin-years, including the current portion of notes payable after guisfunent prognun to use the proceeds from the issuance l

one year, are: 1989- $790 million; 1990 - $1,320 mil-of new long-tenn debt to repurchase or redeem approxi-l lion (including $181 million of notes hasing a rolling 13-mately $1. I billion of existing debt at mat ket prices or j month or 15-month maturity); 1991 - $1,226 million; 1992 - $1,472 million; and 1993 - $ 1,610 million. 1 1 l] m

27 CE AllOtherLI:bilities redemption premiums in exccu of the net carrying Not) arnounts. This resulted in an after-tax loss of $62 million - (net of $39 million tax credit) that was reported as an fi>r GE except GEFS, this account includes noncurrent extraordinary item in the consolidated Statement of Earn-compensation and benefit accruals at year-ends 1988 and ings fi>r the year 1987. The extinguishment were com-1987 of $ 1,516 million and $ 1,449 million, respectively, pleted during the first quarter of 1988. Other noncurrent liabilities include amounts fi>r product -

• At thember 31,1988, GE Capital had established warranties, deferred incentive compensation, deferred investment tax credit, deferred income and a wide variety lines of credit aggregating $11,835 million with 182 banks, including $9,805 million of revolving credit agreements fother sundry items.

with 124 banks pursuant to which GE Capital has the right to bonuw funds fi>r periods exceeding one year. In addi-Note % MinorityInterestin Equityof tion, at December 31,1988, approximately $ 1,235 million Consolidated Affiliates of GE's credit lines were available fi>r use by GE Capital. A total of $3,900 million of these lines also was available fi>r Daemtwr 31 (In millions) 1988 1987 use by GE Financial Services. During 1988, GEFS did not borrow under any of these credit lines. GF $228 $190 GEFS compensates banks fi>r credit facilities in the fi>rm GF.FS 753 1 l' of fees or a combination of balances and fees as agreed to $93i $] with the bank.

• At December 31,1988, Kidder, Pealxxty had estab-The increase of $641 million in minority interest in lished lines of credit aggregating $3,968 million, of which equity of consolidated GEFS afTiliates in 1988 was due pri-

$333 million was available on an unsecured basis. llorrow-marily to issuance by GE Capital of six thousand shares of ings from banks were primarily unsecured demand obliga- $ 100 par value variable cumulative preferred stock fi>r net - tions, at interest rates approximating broker call loan rates, proceeds of approximately $600 million. Dividend rates on to finance inventories of securities and to facilitate the this preferred stock during 1988 ranged from 5.70% to securities settlement process. 8.38 1

• At December 31,1988, GE Financial Services had interest-rate swap agreements outstanding in the notional principal amount of $799 million under which GE Finan-cial Services agreed to pay interest at fixed rates ranging from 12.40% to 14.38% in exchange for interest at floating rates (LillOR) on the notional amounts. GE Financial Services also had interest-rate swap agreements in the notional principal amount of $300 million under which GE Financial Services agreed to pay interest at Ih>ating rates (l.IllOR) and receive interest at fixed rates rangmg from 7.81% to 8.321 1

l \\ l I fi2

Neta [ ShsroOwnars' Equity In April 1987, GE share owners authorized (a) an increase in the number of authorized shares of common GE [n derred stock up to 50,000,000 shares ($ 1.00 par sta k from 550,000,000 shares each with a par value of value) is authorized, but no such shares have been issued. $1.25 to 1,100,000,000 shares each with a par value of Authorized shares of common stock (par value $0.63) total $0.63; (b) the split of each previously issued common 1,100,000,000. share, including shares held in treasu ry, into two shares of papa ue o@@ and Q)an cmmnon su)c a w i Shares of GE common stock Ikt ember 31 (in thousaruh) 1988 1987 1986 increase in the number of auMonzed shares of prelerred stock from 2,000,000 shares with a par value of $1.00 per tr isury EI 1I ) .i 1 ) .7) s am ude,M,M shams wMi a [>analue opW [wr Outstamling 902.116 tx)2,953 911,7tH) shjun AU shan data haw been a@.usted fmWus change. rhe effects of translating to U.S. dollars the financial statements of foreign affiliates whose functional currency GE share owners' equity is as follows. is da kd m q m inddd in ohr capital. Cumula-GE share owners' equity tive foreign currency translation adjustments were (In miluons) 1988 1987 1986 $ 137 million, $ 176 million and $31 million of additions to Comrnon stock issued other capital at December 31,1988,1987 and 1986, llalaru ejanuary I $ 584 $ 579 $ 579 respectively. Adjustment for sax L split 5 Italan< e Ik ccmber 31 $ 581 $ 584 $ 579 I Note 30 otherstack-a i t dia<ar-tiaa Other capital llalancejanuary 1 $ 878 $ 733 $ 641 Adjustment for sux L split (5) Suick option plans, appreciation rights atxl perfijnnance units are described in the Company's current Proxy State-lj si rt (39) 145 75 Unrealized gains (losses) on ment. Requirements fi>r stock option shares may be met securities held by insurance within certain restrictions either from unissued or treasury afbliates 18 (33) (6) shares. During 1988, options were granted to 1,347 cm-k

3) on treasury su>ck loyees. As of December 31,1988, a total of 444 individu-(3 3g 33 Oiher 8

als were eligible to receive dass-grant options, and all llalance Ikx ember 31 5 823 $ 878 $ 7Ei ex.empt s;daried em ployees were eligible fi>r special option grants. A total C,2 M [wmns W options exercisable at Ratained eamings ItalanceJanuary I $ 15,878 $14,172 $12,761 the end of 1988 or in the future. Net earnings 3,386 2,915 2,492 Stock option information Average per share Disidends declared (1.314) (1,209) (1,081) llalance December 31 $ 17.950 $15.878 $14,172 Shares subjc< t Option hfarket (shares m. thousands) toopnon prue pru e Common stock held in treasury llalance atJanuary 1,1988 18.613 $33.95 $ 14.13 ) llalanceJanuary 1 $ 860 $ 375 $ 310 Options granted 3,232 43.83 43.83 Pun hases 387 8 16 318 Options exercised (1,578) 22.23 43.48 Dispositions Options sun endered on Employee savings plans (213) (148) (109) exercise of appreciation Stm k options aml rights (91) 2901 45.01 appreciation rights (77) (96) (71) Options tenninated (243) 4;.62 Employee sax L Italance at December 31,1988 19,936 36.41 44.75 ownership plan (11) (39) (l1) Dividemi reinvestment and share ppm base plan (49) (42) (33) Outstanding options and rights expire and the award Conuibution to GE perial li>r outstanding perfi>rmance units ends on various Pension Tn5st (25) (26) daes from Wuary 1,1989 u> Decend>cr 16,1998. Shares Omversion of long-tenn debt (1) (20 (7) available for granting add..monal options at the emi of 1988 inc entive compens.uion were 11,936,568 (15,148,114 at the end of 1987). plans (5) 13 4 llalance lkt ember 31 $ 891 $ 860 $ 375 6:1

Note ] } Commitments and Contingent o Details of" net increase in GEFS financing receiv-Liabilitie3 ables" follow. 'At December 31,1988, there were no known contingent (in millions) 1988 1987 1986 liabilities (including guarantees, pending litigation, taxes increase in loans to and other claims) that, in the opinion of management, customers $(23,731) $(18,990) $(18,795) would be materialin relation to General Electric Company Principalcollections from customers 19,802 15.370 15,321 and consolidated alliliates' financial position, nor were there any material commitments outside the normal I"[o*8'"($,$c;"[g"N,"*"' i (5,031) (3.117) (1,632) course of business. Principal collections on Gnancingleases 3,974 2,291 1,399 Net change in credit card CI" hl*8 (907) (I8I) (72) Note h SupplementalCashFlows $ (5,913) $ (4,627) $ (3,779) Information

• "All other operating activities"in the Statement of
• GEFS'"all other investing activities" includes the Cash Flows are principally adjustments to current and following.

noncurrent accruals of costs and expenses, amortization of g, ,ggg ,gg7 ' ,g3g premium atxl discount on debt, and adjustments to assets such as amortization of goodwill and intangibles. GEFS

• Information about acquisitions and dispositions can

,;;),(*in,, P" 5C8 ' t ta c e be found m, notes 2 and 3. afnliates $(3,188) $(3,769) $(3,565) ' e Cash used in each of the last three years included the 1)isix>sitions of marketabic secunues by insurance p,>ggowing. affiliates 2,334 2,624 2,709 Other (1,153) (137) (761) (In millions) 1988 1987 1986 $(2,007) $(1,282) $(1,617) Interest (paid) having maturities more than 90 days" ( FS (4 ( M (3 (l ( mcludes the followm.g. 5(4,670) $(3,878) $(2,323) Income taxes (paid) recovered (In millions) 1988 1987 1986 (federal, foreign, state and local) Newly issued debt GE $(1,284) $(1,096) $(1,516) Short-term (91365 days) $ 5,916 $ 5,546 $ 4,701 GEFS 251 403 942 long-term senior 3,936 1,927 1,584 long-term subordinated 58 $(1.033) $ (693) $ (601) Proceeds-nonrecourse, leveraged lease debt 381 345 (90) e Details of" net change m certam broker-dealer $ 10,291 $ 7.818 $ 6,195 accou nts" are shown below, Repayments and other reductions (In milh.ons) 1988 1987 1986 Short-term $ (C,220) $ (5,836) $ (4,283) long-term senior (2,284) (526) (956) hfarketable securities of l t -(6) (20) (158) broker-dealer $(l.009) $1,826 $(1,472) I,"n.ng7 erm sulx>rdinated nap I paynents-Securities purchased u r agreements to "g'l N 26 0 a>6$ m Securities sold uruler 5 (8.771) $ (6.415) $ (5,618) agreements to repurchase 677 II7 5,33i Securities sold but not yet pturhased 681 (2,118) 560 $ (573) $ (103) $(1,298) 6l

Nsta ] IndustrySegmentDstalls Revenues (In millions) For the years cruled December 31 Total revenues Intersegment revenues External revenues 1988 1987 1986 1988 1987 1986 1988 1987 1986 GE Aerospace $ 5,343 $ 5,262 $ 4,318 $ 166 $ 78 $ 73 $ 5.177 $ 5,184 $ 4,245 Aircraft Engines 6,481 6,773 5,977 119 48 57 6.362 6,725 5,920 Broenicasting 3,638 3.241 1,888 2 3,638 3,241 1,886 Irulustrial 7,061 6,662 6,770 706 708 763 6,355 5,954 6,007 Af ajor Appliances 5,289 4,721 4,352 5,289 4,721 4,352 hlaterials 3,539 2,751 2,331 40 32 34 3,4 91) 2,719 2,297 Power Systems 4,805 4,995 5.262 126 125 185 4,679 4,870 5,077 l Technical Products arxl Services 4,431 3,670 3,021 161 337 160 4,270 3,333 2,861 Earnings of GEFS 788 552 504 788 552 504 AIIOther 31)i 3,176 3,379 4 16 394 3,172 3,363 l x> rate items and Cor}iminations l El (1,477) (1,287) (1,077) (1,318) (1,332) (1,290) (159) 45 213 Total GE 40,292 40,516 36,725 40,292 40,516 36,725 GEFS Financing 5,827 3,507 2,594 5,827 3,507 2,594 Insurance 2,469 2,206 2,017 2,469 2,206 2,017 Securities llroker-Dealer 2,316 2,491 1,176 2,316 2,491 1,176 AllOther 43 21 27 43 21 27 Total GEFS 10.655 8.225 5,814 10,655 8,225 5,814 Elimi ations (858) (583) (526) (858) (583) (526) Consolidated revenues $50,089 $48,158 $42,013 $50,089 $48,158 $42,013 Assets Property, plant and equipment (including equipment leased to others) (in millions) At December 31 For the years ciuled December 31 Depreciation, depletion and Additions amortization 1988 1987 1986 1988 1987 1986(a) 1988 1987 1986 GE Aeros[w e $ 3,838 $ 3.913 $ 2,253 $ 208 $ 178 $ 311 $ 170 $ 151 $ 11I Aircraf t Engines 5,164 5,066 4,553 234 242 332 251 242 194 ilroadcasting 4,101 3,948 3.464 147 115 388 70 64 31 Industrial 3,729 4,041 4,267 301 274 370 249 315 307 hlajor Appliances 2,284 1,529 1,576 215 118 104 105 93 97 hlaterials 7,130 3,901 3,587 757 378 600 252 202 255 Power Systems 2,531 3,266 3,457 127 118 127 138 162 173 Technical Pnxlucts arxl Services 3,I83 3,873 2,751 203 235 856 168 170 183 Investment in GEFS 4.819 3,980 2,994 All other 1.122 2,n16 2,193 a <2 417 17 62 56 Cor[xirate items arul Eliminations 3.379 2,707 3,316 91 48 175 102 83 53 Total GE 41,283 38,300 34,411 2,288 1,778 3,680 1,522 1,544 1,460 GEFS Financing 41,874 34,163 25,867 1,738 503 701 695 325 337 Insurance 7,819 6,481 5,517 26 3 4 6 4 4 Securities llroker-Dealer 21,891 20.011 22,181 19 60 40 32 28 13 All Other 331 721 258 14 13 19 11 12 11 Total GEFS 74,915 61,406 53 P23 1,797 579 761 744 369 365 Eliminations (5,363) (4,292) (3.416) Consolidated totals $110.865 $95,414 $84,818 $ 4.085 $ 2,357 $ 4.444 $ 2,266 $ 1,913 $ 1,825 (a) huludes $1,638 million auquired with RCA.

o Revenues include income from all sources: i.e., for o Br:adcasting consists primarily of the National GE, Ix>th sales of pnxtucts and services to customers anxi liroadcasting Company (NilC), which is the current leader "other income"; fi>r GEFS, " earned income" as described in in network television. NilC's principal businesses are the note 1. In geneml,it is GE [x>licy to price sales from one furnishing within the United States of network television Company cmn;x>nent to another as nearly as practical to se. / ices to afliliated television stations, the pnxluction of i equivalent commercial selling prices. Somewhat nmre than live and recorded television prognuns and the operation, l one-fifth of GE's external sales are to agencies of the U.S. under licenses from the Federal Communications Com-government, GE's largest single customer. Afost of these mission (FCC), of seven VH F television broadcasting sales were aerospace arxl aircraft engine pnxlucts and stations. The NitC Television Network is one of three services. competing major national commercial broadcast television e Operating profit by imiustry segment is on page 33 networks and serves more than 200 regularly affiliated sta-tions within the United States. The television stations NIlC of this report. owns ml operates are located in Chicago, Cleveland, Den-e Effective with 1988, GE ceased re;x>rting results fi>r ver, Ins Angeles, hfiami, New York and Washington, D.C. the fi>rmer Consumer Pnxlucts segment inasmuch as the Inn >adcasting operanons are subject to FCC regulation arxl largest contributor to revenues in that segment was the station licensing. NilC also had owned arxl openued eight consumer electronics business, which was tnmsferred to nuho hniadcasting statams. Ilmvever, seven of the nulio Thomson, S.A. at the erxl of 1987. Consumer electronics stationswere sokiin van,ous transactions during 1988 with results for prior years are now classified as All Other. The sale of the last one expected in 1989. NilC is currently remaining businesses in the fi>rmer Consumer Products segment are now induded in other segments: Lighting in exparxling its operations,includig investment and pn>- gnunnung activities in cable television. the hxlustrial segment; Denver arxl hiiami television sta-tions in the liroadcasting segment; and licensing activities e Industrialencompasses factory automation pnxtucts, in All Other. Prior data fi>r these segments have been nmtors, electrical equipment for irxlustrial arxl commercial adjusted for comparability. A description of each of the construction, GE Supply Company, trans[mrtation systems Gmnpany's irxtustry segments follows. and lighting pnxtucts. Customers fi>r many of these pnxl-ucts and services indude electrical distributors, original GE equipment manufacturers amt industrial emi users. Rac-tory automanon pnxlucts cover a broad range of electrical e Aerospace pnxlucts aral services encompass electron. and electronic pnxtucts, mcluding drive systems, with ics, avionic systems, military vehicle equipment, automated emphasis on manufacturing and advanced engineering test systems, computer sofiware, armament systems, mis-automation applications. hiotors and motor-related pnxl-sde system components, simulan.on systems, spacecrah. ucts consist mainly of appliance motors and controls but conununication systems, nular, sonar and systems integra-also. dude larger sizes of. motors I.or a broad range of m tion. hiost aerospace sales are to agencies of the Um. d mdustna! users. hiotor pnxtucts are used with. G. l. arxl t te . m States government, principally the Department of Defense also are sold externally. I;.lectncal d.istnbution and control amt the National Aenmaun.cs and S. pace Adnm..ustranon. equipment is sold for installation in commercial,. dustrial m e Aircraft Engines and replacement parts are manulitc-and residential liicilities. GE Supply operates a nationwide tured ami sold by GE li>r use in military and commercial network of electrical supply houses. Transportation sys-aircraft, fi>r use in naval ships and fi>r use as industrial tems indude diesel-electric and electric hicomotives, transit [mwer sources. GE's military engines are used in a wide propulsion equipment, motorized wheels fi>r off-highway variety of aircraft that indudes fighters,immbers, trans-vehides, such as those used in mining operations, and [x>rts and helicopters. CF6 engines are used in the drillin;; devices. Incomotives are sold principally to AlcDonnell Douglas DC-10, the Airbus Industrie A300 domestic and foreign railroads, while markets fi>r other and the lh>cing 747. htore advanced CF6 engine matels pnxlucts include state and urban transit authorities and have been selected to [mwer the lhicing 717 and 767, the industrial users.1.ighti g pnxtucts indude a wide variety Airbus hxlustric A310, A300-600 and A330,and the of lamps -incandesu, fluorescent, high intensity dis-hicDonnell Douglas h!D-11. Of growing importance is charge, h dogen and specialty - as well as wiring devices the CFh156 engme finnily pnxlucedjointly by GE and and quartz pnxtucts. 51arkets and customers are princi-SN ECh1 A of France ami marketed through their CFht pally in the United States, although fi> reign markets also are Internationaljoint venture. Applications indude the serded. These markets are extremelv varied, ranging fn>m ik>eing 537-300,737-400 arul 737-500, and the re-engined th>cing KC-135 military tanker. Advanced CFN156 engine nMxtels ale used for the Airl> tis lixitistiie A320 arul will be offered on the long-range Airbus Industrie A340. GE also pnxtucesjet engines for executive aircraft and regional commuter airlines.

household consumers to commercial and irxlustrial eixi logs continue to be low by long-term historical standards users arul original equipment manufacturers. Through despite sonw improvement during 1988. GE management l most of 1988 the hxlustrial segment also induded semi-continues vigorous efforts to improve cost-competitiveness conductor opeiations, most of which were sold in the and to adapt pnxlucts and marketing to the changing envi-fourth quarter. ronment. Steam t urbine-generators are sold to the electric e Major Appliances includes Lichen and lamxtry equip. utility industry, to the U.S. Navy and, fi>r cogeneration, to ment such as refrigerators, ranges, microwave ovens, private industrial customers. Marine steam turbines arxl freezers, dishwashers, clothes washers and dryers, and propulsion gears also are sold to the U.S. Navy. Gas tur-nxnn air cmxlitioners. These are sold under GE, Ilot}x> int bines are used principally as packaged [x)wer plants fi>r and Monogram brands and, increasingly, under private electric utilities and for industrial cogeneration and brarxis for retailers. Distribution of appliances using the mechanical drive applications. Cent rifugal compressors l RCA brand is planned in 1989. GE microwave ovens aint are sold fi>r application in gas reinjection, pipeline services nx>m air conditioners are mainly sourced from fi> reign and such process applications as refineries and ammonia suppliers while investment in Company-owned domestic plants. Although there have been no nuclear plant orders facilities is fi>cused on refrigerators, dishwashers, ranges in the United States since the mid-1970s and international and home laundry equipment. Acquisition of Roper Cor. activity has been very low, GE continues to invest in [x> ration in April 1988 added to GE's pnxtuctive capacity advanced technology development and to fi>cus its and broadened its pnxtuct offerings, including gas ranges. resources on refueling and serving its installed lx>iling-A large [x>rtion of major appliance sales is to a variety of water reactors. Power delivery products include trans-retail outlets with a significant }x>rtion of sales of certain fonners, relays, electric load management systems, power pnxtucts such as laundry equipment and refrigerators conversion systems and meters, principally fi>r electric util-being for replacement of older pnxtucts. The other princi. ities. Installation, engineering and repair services include pal market consists of residential building contractors who management and technical expertise for large projects, install major appliances in new dwellings. A nationwide such as [mwer plants; maintenance, inspection, repair and senice network sup[x>rts GE's appliance business. rebuilding of electrical apparatus pnxluced by GE arxl e Materials includes high-perfi>nnance engineered plas-others; on-site engineering and upgrading of already tics used in applications such as substitutes for metal and inst lied pnxlucts sold by GE and others; and environmen-glass in automobiles and as housings fi>r computers and tal systems for utih,ues. An alTiliate providing international other business equipment; silicones; superabrasives such as construction services was sold at the beginning of 1988. man-made diamonds; and laminates. Afarket op[mrtuni.

• Technical Products and Services consista of technology ties for many of these pnxtucts are created by functional operations providing pnxlucts, systems and services to a replacement that provides customers with an improved variety of customers. Ilusinesses in this segment include material at lower cost. These materials are sold to a diverse rnedical systems and services, communications and infor-customer base (mainly manufacturers)in the United States mation senices, and certain other specialized senices.

and abroad. Acquisition of the chemicals businesses of h1edical systems include magnetic resonance (h1R) scan-11org-Warner Cor[mration at the end of 1988's third ners, computed tomography (CT) scanners, x-ray, nuclear quarter pmvides GE with a new puxluct - Alls resins, a imaging, ultrasound, and other diagnostic equipment and family of thennoplastic resins used by custom molders and sup[mrting senices sold to domestic and li> reign hospitals major original equipment manufacmrers for use in a vari. and medical facilities. GE Americom, the leading domestic ety of applications, including fabrication of automotive satellite carrier, operates seven domestic satellites provid-parts, computer enclosures, major appliance parts and ing distribution senices fi>r cable television, broadcast tele-pipe. The acquisition also adds technical and manufactur_ vision arxl radio, and voice, video and wideband data ing strength and domestic and offshore marketing facilities services toagencies of the federal government. Conunon and exoettise that complement GE's existing businesses. canier senices of Americom are subject to regulation by hiaterials also includes ladd Petroleum Cor[mration, an the FCC. GE's mobile communications products consist oil and natural gas developer and supplier with operations mainly of mobile aint hand-held two-way radios, cellular mainly in the United States. telephones and land-mobile cellular systems fiir a variety e Power Systems serves worldwide utility, industrial and of busins and government custmnen. Infonnation serv-govenunental customers with pnxiucts for the genemtion, ICC5 ""' provided ioth to internal and external customers transmission ami distribution of elect icity ami with related by GE Infonnation Senices, GE Consulting Senices amt installation, engineering and repair senices. Although GE remains a leader in most power systems prmlucts, domes-tic aml fbreign markets have been declining for a number of years. Wrldwide competition continued to intensify in 1988 with mtentially im[mrtant new combinations by for-I eign ami domestic cony >ctitors. New order rates and back-67

the GE Computer Service operation. These include third-party investors; and conunercial and residential real enhanced computer-based communications services, such estate financing. Acquisition of Montgomery Ward & Co 's as data network services, electronic messaging and elec-credit operations inJune 1988 added to GECC's earning tronic data interchange, which are offered to commercial assets, particularly in credit card operations. GE Capital and industrial customers through a worldwide network; also is an equity investor in certain other service and finan-application software packages; custom system design and cial services organizations and participates in leveraged prognunming services; and indepemient maintenance and buyouts. Although leasing has been a major factor in rental / leasing services for minicomputers and microcom-GECC's growth in recent years, GECC has actively changed puters, electronic test instruments arxl data conununica-its investment [x>rtfolio to place greater emphasis on asset tions equi [nnent. A separate senices com[x>nent provides ownership, management and operation. Vinually all prod-a v..cy of specialized services to government customers. ucts financed by GECC are manufactured by companies RCA Gloixum and assets of The Calma Company were other than GE. sold during 1988-e Insurance consists mainly of ERC, a multiple-line o Earnings of and Investment in GEFS are shown on a property and casualty reinsurer that writes all lines of rein- "one-line" basis in GE's segment data but are eliminated in surance other than title aixt annuities. ERC reinsures consolidation. A separate discussion of GEFS segments property and casualty risks written by more than 1,000 appears below. domestic and foreign insurers and augments its foreign e AllOther for periods prior to 1988 consists mostly of business through subsidiaries located in the United King-former consumer electronics operations (principally video dom and, sinceJanuary 1988,in Denmark. By way of and audio pn> ducts, including operations acquired from other subsidiaries, ERC writes property and casualty rein-RCA in 1986). Odier historical data reflect miscellaneous surance duuugh brokers and provides reinsurance broker-former RCA activities no longer owned by GE and, in 1985 age services. ERC also writes certain specialty lines of and 1984, the remainder of mining activities of GE's for. insunmce on a direct basis, principally excess workers' mer affiliate, Utah International Inc. Ongoing operations cmnpensation for self-insurers, libel and allied torts, and indude a small afliliate that is an equity investor in selected errors and omissions coverage for insurance agents and brokers. It is licensed in all states of the United States, the real estate development projects and a few residual invest. ments of a venture capital corporation, most of whose District of Columbia, certain provinces of Canada and in otherjurisdictions. ERC's business is generally subject to [x>rtfolio was sold in 1987. regulation by various insurance regulatory agencies. lesser insurance activities of GEFS include certain GECC GEFS aff liates that provide private mortgage insurance, life The business of General Electric Financial Services, Inc. reinsurance and, for GECG customers, credit life and cer-ip of hree affiliates that,. tain types of property / casualty insurance, (GEF.S) consists of the ownersh. t together with their affiliates and other m. vestments, consu-

• Securities Broker-Dealer represents Kidder, Peabody, tute General Electric Company's principal financial sen..

which is a major investment banking and securities firm. ices activities. GEFS owns all of the conunon stock of General Electric Capital Cor[x> ration (GECC) and of Principal businesses include securities underwriting; sales Employers Reinsurance Corporation (ERC) and owns 80% and trading of equity and fixed income securities; financial futures activities; advisory seivices for mergers, acquisi-of Kidder, Pealxxty Group Inc. (the other 20% is held by tions and other corpomte finance matters; merchant bank-or on behalf of certain Kidder, Pealxxty officers), For industry segment purposes, Financing consists solely ing; research services; and asset management. These services are provided in the United States and abroad to of activities of GECC; Insurance consists principally of activities of ERC but also includes certain insunure enti, domestic aml foreign business entities, govenunents, gov-ties owned by GECC; Securities Broker-Dealer consists ernment agencies, and individual and institutional inves-tors. Kidder is a member of the principal domestic entirely of Kidder, Pealxxly's operations; and All Other is securities and commmlities exchanges and is a primary mainly G EFS' cor[x> rate activities not identifiable with spe. dealer in United States governmem securities. Certain cific industry segments. affiliates of Kidder, Pealx>dy are subject to the rules and l Additional information alx>ut each GEFS segment regulations of various federal, state and industry regula-i ro[jows, tory agencies that apply to securities broker-dealers,, e Financing activities of GECC include time sales, mdmling the U.S. Securities and Exchange Commission, revolving credit and inventory financing for retail mer-U.S. C,omnuxhty Futures I rading Commission, New York chants (major appliances, television sets, furniture and Su>ck Exchange, Nat onal Assoc.iauon of Secun..nes Dealers other home furnishings, and personal computers); auto- '" E" N "" "I "E.I."I' mobile leasing and automobile inventory financing; home amt recreation financing (principally time sales and dealer inventory financing of mobile homes); commercial and industrial loans and equipment sales financing provided I through leases, time sales and loans; leasing senices for w

Nots M Gzographic SrgmsntInformaticn(consolidstad) Revenues (In millions) For the years ended December 31 Total revenues Intersegment resenues External revenues 1988 1987 1986 1988 1987 1986 1988 1987 1986 i United States $ 16,36 i $ 15,160 $38,828 $ 874 $ 801 $ 639 $ 15,490 $ i1,359 $38,189 Otheratcas of the world 5,576 4,894 4,387 977 1,095 563 4,599 3,799 3,821 Intercompany eliminations (1,851) (1,896) _(1,202) (1,851) (1,896) (1,202) Total $50,089 $ 18.158 $ 12.013 $50,089 $18.158 $ 12,013 Operating profit Assets l For the years ended thember 31 At December 31 1988 1987 1986 1988 1987 1986 United States $ 4,9-11 $ 3,715 5 2,989 $102,327 $89,480 $80,831 Otherareas of the worId 1,009 725 740 8,611 6,027 4,090 Intercornpany eliminations (10) 10 7 (103) (93) (103) Total $ 5,910 $ 4,450 $ 3,736 $110,865 $95.414 $81,818 U.S. revenues include GE ex[x>rts to external customers, foreign operation liabilities, minority interest in equity and and royalty atxllicensing income from foreign sources, GE interest in equity were $6,188 million, $lel2 million GEFS' 1986 and 1987 operations were virtually all in the and $2.311 million, respectively, The amounts were United States and, although GEFS' offshore activity $3,196 million, $111 million and $2,720 million, respec-began to increase in 1988, non-U.S. operations were not tively, at December 31,1987; and they were $ 1,87 I mil-significant, lion, $112 million aixt $2,107 million, respectively, at Revenues, operating profit and assets associated with December 31,1986. foreign operations are shown above. At year-end 1988, U.S. exports to externa! customers (In millions) 1988 1987 1986 Europe $1,805 $ 1,253 $ I,631 l'acific Basin 1,357 1,146 985 Middle East and Africa 937 762 490 Americas 531 625 476 Other at cas 210 238 124 Total $ 4,870 $4,024 $3,709 69

N:ta OutrtirlyInfsrm:tien (untudited) First quarter Second quarter Third quarter fourth quarter __ (Dollar amounts in millions; per-sharc 1988 1987 1987 1988 1987 1987 1988 1987 1987 1988 1987 1987 amounts m dollars) original restated original restated original restated pro forma reported Consolidated operations Net earnings $ 725 $ 624 $1,177 $ 835 $ 720 $ 679 $ 815 $ 703 $ 661 $1,011 $ 868 $ 398 Per share 0.80 0.68 1,29 OS3 0.79 0.74 0.90 0.77 0.73 1,12 0.96 0.44 Dividends dedared Pershare 0.35 0.315 0.35 0.33 0.35 0.33 0.41 0.35 Earningslxfore extraordinary item aixt cumulative effect of account-ing changes 725 343 319 835 720 679 815 703 661 1,011 353 460 Per share 0.80 0.37 0.35 0.93 0.79 0.74 0.90 0.77 0.73 1.12 0.40 0.51 Gonunon sux k mar-Let price - high 47 % 55% 44 % 56 % 44 % 66% 46 % 62 % -low 40 43 % 38 % 49 % 39 53 % 42 % 38 % Selected data GE Sales of pnxlucts and services 7,975 8,315 9.245 9,560 9.306 9,404 12,298 12,036 Gross profit from sales 1,978 2,048 2,365 2,359 2,349 2,022 3,270 3,229 Unusualexpenses (before tax) (308) (58) (54) (607) GEFS Earned income 2,411 2,048 2,465 1,976 2,717 1,970 3,062 2,231 Operating profit 246 214 223 168 230 147 328 43 Unusualexpenses (before tax) (54) (37) Extraordinary item (62) (after tax) For GE, gross pmfit from sales is sales of goods and accounting changes by: first quarter- $24 million (2 cents services less cost of goods arxl services sold, and it is before per share); second quarter- $41 mit!!on (5 cents per unusual expenses. For GEFS, operating profit is as pre-share); third quaner- $42 million (4 cents per share); sented on page 33 of this re}xnt, and it includes unusual and fourth quarter- $31 million (4 cents per share). In order to provide adequate data for comparing 1988 arxl expenses. Second, third and fourth-quarter 1988 net earnings 1987 results by quarter, amounts in the table alx)ve for the induded negative effects ($23 million - 2 cents per share, first three quarters of 1987 are shown before and after the $43 million - 5 cents per share and $231 million - 26 restatements, arxl for the fourth quarter are shown " pro cents per share, respectively) of expenses and accruals for iorma" as they would have been if the entire effect of the abnormally high warranty costs for certain refrigerator accounting change had been recorded in that quarter when the decision to adopt was made. compressors, In the fourth quarter of 1987, the Company elected to Separately, first-quarter 1987 net earnings included the adopt thenjust-issued Statement of Financial Accounting cumulative positive effect ($281 million,31 cents per Starxlards No. 96 pertaining to accounting for income share) to January 1,1987 of changing inventory account-l taxes. The cumulative effect toJanuary 1,1987 on net ing; and fourth-quarter 1987 net earnings included an ) earnings was $59 millien (6 cents per share) for GE and extraordinary loss ($62 million,7 cents per share) on early l $518 million (57 cents per share) for GEFS. In accordance extinguishment ofdebt by GECC. with SFAS No. 96 transition rules, it was necessary to After taxes, unusual items (mainly business resu uctur-restate first quarter 1987 for this cumulative effect even ing expenses)in 1987 plus the extraordinary item were though the decision to adopt could not be made until year-somewhat more than the total positive impact on net earn-end 1987. Also, as required, earnings for each of the ings for the year from accounting changes. interim quarters of 1987 had to be restated as if adoption had occurred atJanuary 1,1987.The effect of these restatements Wa! to tulute total net earnings and earn-ings before extraordinary item atxl cumulative effect of 70

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I' ' ~.i /[ } t-4 pq GE Nuclear Energy b General Cectnc Company Vallecitos Nuclear Center PO Box 450. Va!!ecitas Road Plu;anton. CA 9468 l ' March 15, 1989.' b i L i-U.S. Nuclear Regulatory Commission Washington, D.C. 20555 Attention: Document Control Desk

References:

1). Docket 50-18

2) Docket 50-70

3) Docket 50-73

4) Docket 50-183

~ Gentlemen: 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 1988 Annual Report are. enclosed for the referenced dockets. F Sincerely,. h f. .G. E. Cunni gham Senior Licensing Engineer (415) 862-4330 /ca Enclosures 0 6 L - g ) s}}