2001 Annual Report

March 8th, 2002

e

• Chairman’s Letter and 2001 Highlights

• What’s New in the Annual Report?

• Highlights of Significant Topics

Contents

The GE Model Works… Delivered in 2001 Despite Recession & 9/11

• Great, Diverse Businesses• Powerful Company-Wide Initiatives

Our Best Days Are Ahead… Two Major Agenda Items:• Build a Leaner, Faster, More Customer-Focused GE

– More Front Room / Less Back Room Resources– Faster Execution Through Digital Cockpits– Improve Customer Success with Six Sigma and Digitization

• Accelerate High-Margin, Capital-Efficient Growth– Broaden, Deepen Product Superiority– Expand Services Excellence With Information Technology– Capitalize on Full BD Pipeline– Seize Global Opportunities

“Some companies are different. We believe GE is different, and one of the things that makes us different is that – in good times and bad – we deliver. That is who we are.” J. Immelt, 2001 Annual Report

• Financial Strength + Controllership• Culture of Common Values + Integrity

Chairman’s Letter to Share Owners Pages 1-7

Consistent Excellent Earnings GrowthConsistent Excellent Earnings Growth

Core Set of #1Core Set of #1Franchises in Franchises in

Global DiversifiedGlobal DiversifiedMarketsMarkets

Easily MonetizableEasily MonetizableBusiness InitiativesBusiness Initiatives

Strong BalanceStrong BalanceSheet to CapitalizeSheet to Capitalize

on Change + on Change + OpportunityOpportunity

+ +

GE Portfolio Diversity and Execution on Initiatives Drive Double Digit Results

• Earnings Before Accounting Changes Rose 11% to a Record $14.1B

• Cash from Operating Activities Rose 12% to a Record $17.2B.- Excluding Progress Collections, CFOA Grew 13%

• GE Operating Margin Rose to a Record 19.6%, a 0.7 Point Improvement, Driven by Six Sigma, Digitization, and Services Growth

• ROTC Exceeds 27%

2001 Highlights … Test Case of “Why GE Works”

• More Disclosure• Plain Language• Describing How We Grow Earnings

Discussion of Operations – Individual Business Results Disclosed within Segments• 30% more content; 20% more pages in MD&A• Industrial Businesses From 7 Segments to 12 Businesses• GECS Segments From 6 Segments to 14 Businesses + Balance of Each Segment = 20

Total• Additional Discussion of Drivers of Income Growth

Discussion of Financial Resources & Liquidity – Off-Balance Sheet Arrangements • Structure Overview; Nature of Assets in SPE’s; No Speculation / Employee

Participation• Support Liquidity and Credit Support Commitments; Reserves for Credit Losses• Accounting Gains on Securitization; Non-Consolidation Status

Critical Accounting Policies – New Section and Expanded Discussion • Losses on Financing Receivables• Impairment of Investment Securities• Revenue Recognition on Long Term Agreements• Insurance Liabilities and Reserves• Other Loss Contingencies

What’s New in the Annual Report MD&A

Supplemental Segment Data Increased from 7 to 12 Businesses

• Aircraft Engines

• Appliances

• Industrial Products &

Systems

• NBC

• Materials

• Power

• Technical Products &

Services

Old Disclosure New Disclosure

More Disclosure – Industrial/Service Businesses

Visibility to 14 Larger Businesses

More Disclosure – GE Capital Businesses

• Consumer Services

• Specialty Insurance

Old DisclosureNew Disclosure

• Equipment Management

• Mid-Market Financing

• Specialized Financing

• All Other GECS

• The GE Business Model Works• Long Cycle Strength Offsetting Short Cycle Pressures

'00 '01

Long Cycle• Record Year at Power Systems

– Equipment Sales $15B … Up 47%– Grew Global Energy Services Revenue 16% to

$5.7B

• Medical Systems Earnings Up 15% with Double-Digit Growth in Every Region of the World– DFSS Products Account for 60% Sales

• Aircraft Delivered Revenue & Earnings Growth; Positioned for Difficult Industry Environment

• Very Tough Short Cycle Environment

• Accelerated Cost Out Everywhere … Positioned for Good Profit Leverage on Upturn

• NBC #1 Network in All Key Areas

• Gained Market Share in Appliances with Strong New Product Performance'00 '01

Short Cycle$6.1

$5.2

$7.5$10.

2+36%

(14)%

GE Earnings GrowthOp Profit($ in Billions)

GE Capital Pages 53-57, 85

Global Consumer $903 $193 27%GE Financial Assurance 687 123 22Card Services 654 159 32Commercial Equip. Finance 592 96 19Real Estate 486 117 31Aviation Services 470 (5) (1)Mortgage Insurance 395 29 8Structured Finance 385 41 12Commercial Finance 364 83 30Vendor Financial Services 287 46 19Americom (ex. Gain) 254 59 30IT Solutions 11 208 FOther 472 133 39

Sub-Total $5,960 $1,282 27%ERC $(47) $(460) UGE Equity (270) (795) U4th Quarter Americom Gain 642 642 F4th Quarter Charges (656) (656) UCorporate/Other (43) 381 F

Total GE Capital $5,586 $394 8%

2001 V$ V%

Strong Business Performances offset Declines at Equity / ERC

And Well Positioned with Strong Asset Growth

$5.2$5.6

$4.7$4.7$6.0$6.0

ERC & Equity

Corp.

(0.4)(0.4) (0.3)(0.3)(0.1(0.1

))

0.90.9

2000 2001

($ in Billions) Ex. Q4 Americom Gain & Q4 Charges

+27%

Diverse Portfolio Delivers Strong Performance

Earnings Before Accounting Changes

Financing Receivables $174 $143 22%Investment Securities 100 90 11PP&E 29 28 5All Other Assets 122 110 11Total Assets $425 $371 15%

Rest of The Portfolio

+8%

($ in Millions)

($ in Billions) 2001 2000 V%

Cash Beginning Balance $2.0 $7.2 $5.2

CFOA ex-Progress 12.2 13.8 1.6

Dividends (5.4) (6.4) (1.0)Stock Repurchase (2.1) (3.1) (1.0)

P&E Expend. (2.5) (2.9) (0.4)Acquisitions (1.2) (1.4) (0.2)Capital Contribution to GECS 0 (3.1) (3.1)

Change in Debt (1.4) 0.7 2.1 Other 2.3 2.2 (0.1)Progress Collections 3.3 3.4 0.1

Ending Cash Balance $7.2 $10.4 $3.2

• Generated $13.8B CFOA ex-Progress … Up $1.6B• Gave $9.5B Back to Shareowners …Up $2.0B• Invested $4.3B on Industrial Acquisitions and P&E … Up $0.6B• Invested Additional $3.1B in GECS

2000 2001 V$

2001… Cash Results Prove Earnings Quality Pages 46-47, 60-61($ in Billions)

1) SFAS 142 -- Anticipated ~$1B Goodwill Impairment at Q1 2002

2) Use of Off-Balance Sheet Arrangements

3) Post-Retirement Benefits (Pension, Life, & Healthcare)

4) Derivatives

5) Summary of Critical Accounting Policies

6) GECS Comparable Revenues

7) GE Comparative Balance Sheet

8) GECS Comparative Balance Sheet

9) GE and GECS Tax Rate Reconciliation

Highlights of Significant Topics MD&A

• Effective 1/1/02

– Suspend Goodwill Amortization

– No Change to Prior Period Financial Statements

– Evaluate Goodwill For Impairment

– Fair Value vs. Undiscounted Cash Flow Test

Finalizing Assessment for Q1 2002 Implementation

Four Impairments at 1/1/02

ITS $600 $570GEFA Auto-Related 557 399Genstar 30 30Comm’l Direct 26 17

Total $1 213 $1 016

Pre-TaxGoodwill

After-TaxGoodwill

% Total Goodwill4.3%

GE

$12 354

GECS

15 933

Total

$28 287

Goodwill BalanceAs of 12/31/01

FAS 142 - Impairment Pages 48, 78

($ in Millions)

• Improves Returns• Leverages Our Distribution• Transfer Catastrophic Credit Risk• Accesses Segment of Capital Mkts

Use of SPEs for Asset Securitization Widespread &Long Standing in Financial Services Industry

-- Participant in $800B Asset-Backed CP Market --

Why

• Most Economic of Securitization Alternatives

Why SPEs

Receivables – Secured by:

Equipment $7 993

$12 781

Commercial Real Estate 7 445

9 971

Other Assets 6 249

7 761

Credit Card Receivables 6 170 9 470

Trade Receivables 3 138 3 028

$30 995 $43 011

Securitization Gains (After tax)~$ 300~$ 800

2000 2001

Assets Held by SPE’s

($ in Millions)

Off-Balance Sheet Arrangements Pages 62-64GE Capital Uses Special Purpose Entities (SPEs) for Asset Securitizations

GE/3rd PartyAssets Pools

QSPE(Pass ThroughLegal Entity)

Sell Assets

CP Conduit(Edison)

$’sBeneficialInterest

InstitutionalInvestors

$’sCPRated by Major Agencies

• GE/3rd Party Sells Assets to QSPE– Relinquish Control (True Sale Opinion)– GE Services the Assets (Bill / Collect)– Gain on Sale

• Beneficial Interest in the Assets Passes Through the QSPE to the CP Conduit

• CP Conduit (Edison) Issues Commercial Paper Backed by the High Quality Assets– CP Is Rated A1+/P1 by Major Rating

Agencies

• GE Provides:– Credit Support

– Loss Recourse on $14B of Assets– $0.7B Reserve on Book at 12/31/01– $3.8B Performance Guar. on GICS

– Liquidity Support – GECS Lends if Market Disruption– To-date, GECS Never Had to Fund

• High Quality, Investment-Grade Assets• Excellent Asset Diversity and Spread of Risk• Strict Review Criteria by GECS at Acquisition and Ongoing

$’s

Special Purpose Entities Pages 62-64

Asset Backed Commercial Paper – $42B @ 12/31/01

Typical Structure

1998 1999 2000 2001 2002

$15.9

$24.7

$49.8

• Est. Rate of Return on Assets Lowered to 8.5% in 2002• Net Cost Reduction Expected to Decline to ~$500MM NI

Pension Income $1 016 $1 380 $1 744 $2 095 ~$1 450Post Retirement Costs -313 -318 -478 -615 ~ -747 Net Cost Reduction 703 1 062 1 266 1 480 ~ 703After-Tax Impact $ 456 $ 690 $ 822 $ 962 ~ 457% to Net Income 4.9% 6.5% 6.5% 6.8% ~ 2.7%Before Accounting Changes

Trust Assets

Surplus

$21.2$43.4

$50.2

$45.0

$14.6

Asset Performance•Assumed 9.5% Return on Assets since 1991

•10 yr Return = 11%

($ in Millions)

~$43.0

~$11.2

GE Pension Plan Status Pages 49, 70-72

($ in Billions)

Footnote 29 and page 85 of the MD&A sections of the 2001 GE Annual Report states:“GE and GECS global business activities routinely deal with fluctuations in interest rates, in currency exchange rates and in commodity and other asset prices. GE and GECS apply strict policies to managing each of these risks, including prohibitions on derivatives trading, derivatives market-making or other speculative activities. These policies require the use of derivative instruments in concert with other techniques to reduce or eliminate these risks.”

• Cash Flow

• Fair Value

• Net Investment

FAS133 Hedges

Other Hedges

• Mortgage Servicing Rights and Warrants

• Derivatives Marked to Fair Value Every Quarter• FAS133 Implementation Complete • No Derivatives Trading, Market Making or Speculation Allowed

All Hedges Have Offsetting Underlying Asset and Liability Positions

Marked to P&L Quarterly

Balance Sheet 12/31/01

Other Assets $2.3B

Other Liabilities $3.8B

Derivatives Pages 89-91

• Losses on Financing Receivables– Recognized When Incurred– Financing Receivables ~$179 B– Assets in SPE’s with Recourse $14 B– Critical Element: Estimation of Incurred Losses

• Impairment of Investment Securities– Charge to Ops When a Market Decline Is Other than Temporary– GECS Investment Securities ~$100B– Critical Element: Determination of Permanent Impairment

• Revenue Recognition on Long-Term Agreements– Requires Estimation of Profits– GE Recorded $3.1B of Sales in ’01 from Long-Term Agreements– Critical Element: Estimation of Future Performance and Costs

• Insurance Liabilities & Reserves– Based on Actuarial Techniques– GECS Insurance Liabilities ~$114B– Critical Element: Estimation of Claims Expenses and Timing

• Other Loss Contingencies– Recorded When Probable & Estimable– Critical Element: Estimation of Amount of Loss

Key Areas Requiring Management Judgment & Estimation

MD&A Disclosures Pages 64,66

Critical Accounting Policies

2001 2000 V%

GECS Revenues – As Reported $58.4 B $66.2 (12)%

IT Solutions 4.2 7.1TOHO 1.3 2.5Wards .0 3.2AFS .4 .6All Other (0.6) .8

GECS Revenues – Comparable 53.1 51.9 +2%

GECS Comparable Revenues Pages 48, 53

• Asset Growth Driven by Progress, Investmentin GECS and Pension Asset

• Strong Financial Position

Assets

Cash & Marketable Securities $ 11 326$8 219 – Progress Collections Up $3.4B

Receivables 9 805 9 727 – Turns Increased 0.1 Pts to 10.1

Inventories 8 295 7 146 – Turns Down 0.6 Pts. to 7.9 Driven by ShortCycle Businesses

Plant & Equipment 12 799 12 199 – P&E Additions $2.9B

Investment in GECS 28 590 23 022 – Earnings Less Dividend & Capital Contrib.

Intangible Assets 12 932 12 424 – Increase in Goodwill Related to Acquisitions

Other Assets 25 986 24 028 – Pension Asset Growth $2.4B

Total $ 109 733 $ 96 765

Liabilities & Equity

Borrowings $ 2 509 $ 1 781 – 4.3% Debt to Capital

Other Liabilities 52 400 44 492 – Progress Collections Up $3.4B

Share Owners’ Equity 54 824 50 492 – Retained Earnings Growth

Total $109 733 $96 765

($ in Millions)2001 2000 Comments

GE Financial Position Pages 45, 58-61

Assets

Cash & Marketable Securities $ 107 452$ 96 382 – GEFA Investments Growth ($9B)

Inventories 270 666 – ITS Inventory Management

GECS Financing Receivables 174 032 143 299 – Strong Acquisition and Organic Growth

Plant & Equipment 29 341 27 816 – GECAS Aircraft $3B, Offset by Americom

Intangible Assets 18 717 15 017 – Heller and Other Acquisitions

Other Assets 95 672 87 456 – Reinsurance Recoverables $4B, Real EstateOp Leases $2B, FMV FAS133 $2B

Total $425 484 $370 636

Liabilities & Equity

Borrowings $239 935 $205 371 – Heller Acq. ($21B) & Asset Growth ($14B)

Insurance Reserves 114 223 106 150 – 9/11 $3B & GICS Growth $3B

Other Liabilities 42 736 36 093 – Accounts Payable $3, FMV FAS133 $3

Share Owners’ Equity 28 590 23 022 – Includes $3.1 GE Equity Infusion

Total $425 484 $370 636

($ in Millions)2001 2000 Comments

Asset Growth Driven by Acquisitions and Strong CoreGrowth, Offset by Sales & Securitization

GE Capital – Financial Position Pages 45, 58-61

Tax Rate Page 73